Carnival Corporation & plc. reports that fuel costs decreased by US$26 million, or 4.8 percent, during the three months ended August 31, 2014 compared to the previous year.
Bunker fuel expenses amounted to $518 million between June and August, having been $544million during the corresponding period in 2013.
Fuel expenses for the nine months ended August 31 were down by US$90 million, or 5.4 percent, to $1,569 million compared to $1,659 million last year.
Bunker fuel consumption during the three-month period fell by 10,000 tonnes, or 1.2 percent, to 797,000 tonnes, down from 807,000 tonnes the previous year. The figure was 8,000 tonnes lower than the June guidance forecast level of 805,000 tonnes.
During the nine months ended August 31, Carnival consumed 2,400,000 tonnes of fuel compared to 2,447,000 tonnes during the prior year period, which represents a decrease of 47,000 tonnes, or 1.9 percent.
The average fuel cost per metric tonne consumed between June and August fell by $24 per tonne, or 3.6 percent, to $650 per tonne, down from $674 per tonne during the corresponding period in 2013. The latest quarterly figure was $23 lower than the June guidance price of $673 per metric tonne.
During the nine months ended August 31, the average fuel cost per metric tonne was down by $24, or 3.5 percent, to $654 per tonne, down from $678 per tonne in 2013.
Fuel consumption per available lower berth day (ALBD) in the third quarter of 2014 declined by 2.4 percent to 0.041, down from 0.042 the previous year.
Net gains on fuel derivatives during the third quarter were $15 million compared to $64 million in 2013. For the first nine months of the fiscal year, net gains were $10 million compared to $5 million during the corresponding period in 2013.
Please find below Carnival's fuel price and fuel consumption forecast for 2014.
Fuel price and fuel consumption forecast
Fourth quarter 2014:
Fuel price per metric tonne: $635
Fuel consumption (metric tonnes): 800,000
Full year 2014
Fuel price per metric tonne: $650 ($665 in June guidance; $653 in March guidance)
Fuel consumption (metric tonnes): 3,200,000 (3,210,000 in June guidance; 3,230,000 in March guidance)
Financial results
In its overall results for the third quarter of 2014, Carnival posted a non-GAAP net income of $1.2 billion, or $1.58 diluted earnings per share (EPS) for the third quarter of 2014 compared to non-GAAP net income for the third quarter of 2013 of $1.1 billion, or $1.38 diluted EPS.
U.S. GAAP net income, which included net unrealized gains on fuel derivatives of $15 million, was $1.2 billion, or $1.60 diluted EPS. For the third quarter of 2013, U.S. GAAP net income, which included impairments net of unrealized gains on fuel derivatives of $139 million, was $934 million, or $1.20 diluted EPS.
Revenues for the third quarter of 2014 were $4.9 billion, compared with $4.7 billion the prior year.
Commenting on the results, Carnival Corporation & plc President and Chief Executive Officer
Arnold Donald said: "Strong close-in demand and higher onboard spending helped drive significantly better than expected third quarter results and 15 percent year-over-year earnings improvement. Our Asia operations performed particularly well during the quarter, driven by a double-digit yield increase in our China program, further solidifying our industry leading presence in this important emerging cruise market. Our continental European operations also enjoyed strong yield and profit improvement in the quarter, reflecting continued progress for the Costa brand. In addition, our summer Caribbean product successfully attracted nearly 20 percent more guests than the prior year, reinforcing the popularity of the world’s largest cruising region."
Outlook
Based on the strength of third quarter net revenue yields and current booking trends, Carnival has increased its expectations for full year 2014 net revenue yields on a constant dollar basis to be in line with the prior year, from its previous guidance of down slightly.
Excluding fuel, the company expects full year net cruise costs per ALBD to be slightly higher compared to the prior year on a constant dollar basis.
Taking the above factors into consideration, Carnival has increased its forecast for full year 2014 non-GAAP diluted earnings per share to be in the range of $1.84 to $1.88, better than both June guidance of $1.60 to $1.75 and 2013 non-GAAP diluted earnings per share of $1.58.
At this time, cumulative advance bookings for the first half of 2015 are ahead of the prior year at higher prices. Over the last quarter, fleetwide booking volumes for the first half of 2015 have been running ahead of the prior year at higher prices.
"The sustained improvement in booking trends as we have progressed through the year combined with yield increases in the second half of 2014 builds confidence that we will see continued yield growth in 2015 and beyond," said Donald. He also noted that new product initiatives and innovative marketing campaigns implemented across the brands over the past year are driving the improvement in consumer demand and pricing trends.
For fiscal 2015, net cruise costs excluding fuel per ALBD are expected to increase approximately three percent due primarily to a significantly higher level of dry-dock days scheduled next year to install new air emissions technology as well as other technology designed to improve fuel efficiency. The company expects the exhaust gas cleaning system or scrubber technology will be installed on approximately 70 percent of its fleet by 2016, thus enabling it to meet the 2015 stricter air emissions standards as well as mitigate escalating fuel costs that will result from the new requirements. Carnival anticipates the new regulations will result in higher fuel costs in 2015 of approximately $0.10 per share, with that increase expected to be reduced by half in 2016 and mostly offset in 2017 based on the system roll-out.
Also, in 2016, Carnival says it will revert back to a "more normalized dry-dock schedule", which is expected to offset approximately half of the increase in 2015 net cruise costs excluding fuel.
"Our implementation of the air emissions technology is a sound investment in our company’s future and more importantly it will benefit the environment for years to come," said Donald. "These technology investments are laying a solid foundation towards sustainable earnings improvement. Combined with our other strategic initiatives designed to foster revenue growth and contain costs, we are gaining momentum towards our goal of achieving double digit returns on investment over time," Donald added.
Fourth quarter 2014 outlook
Fourth quarter constant dollar net revenue yields are expected to be up 1.5 to 2.5 percent compared to the prior year.
Net cruise costs excluding fuel per ALBD for the fourth quarter are expected to be lower by 1.0 to 2.0 percent on a constant dollar basis compared to the prior year.
Based on the above factors, Carnival expects non-GAAP diluted earnings for the fourth quarter 2014 to be in the range of $0.15 to $0.19 per share versus 2013 non-GAAP earnings of $0.04 per share.
