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Fri 20 Jun 2008, 10:35 GMT

Carnival's Q2 bunker costs rise by $158m


COO says fuel rise is 'simply not sustainable' as 2008 fuel costs are expected to rise by $752m.

Miami-based Carnival Corporation & Plc, has posted flat second quarter profits as soaring bunker costs offset strong revenue growth and prompted the company to lower its full-year forecast.

The world's biggest cruise operator earned $390 million, or 49 cents a share, compared with $390 million, or 48 cents, a year earlier. Net income exceeded the company's forecast of 42 cents to 44 cents and the average analyst estimate of 41 cents.

Sales rose by 17 percent to $3.38 billion from $2.9 billion, however this was offset by rising bunker costs which cost the company $158 million in the latest quarter.

Chairman and CEO Micky Arison said "Our North American and European brands continue to perform well in the current difficult economic environment and we were pleased with our second quarter results. We enjoyed strong revenue growth supported by solid cost controls, however higher fuel prices cost the company $158 million, or $0.19 per share, during the quarter."

According to Carnival, marine fuel costs jumped by 59 percent to $530 per metric ton in the second quarter of 2008 from $333 per metric ton. This was in line with the company's March 2008 guidance of $528 per metric ton.

Based on current bunker spot prices, forecasted fuel costs have increased $224 million, or $0.27 per share, since the previous March guidance. Full-year fuel costs are now forecast to increase by $752 million compared to 2007, which reduces full year 2008 earnings by $0.92 per share.

In a conference call with analysts, Chief Operating Officer Howard Frank said "If not for the dramatic increase in fuel prices, 2008 would have been a year of solid earnings growth.''

Speaking about the recent surge in the price of marine fuel, Frank said "We don't believe fuel prices will continue to rise at this level. It's simply not sustainable."

Carnival now estimates that full year earnings per share will be in the range of $2.70 to $2.80 compared to its previous guidance of $3.00 to $3.20.

For the third quarter and based on current spot prices for marine fuel, Carnival expects fuel expenses to increase by $241 million compared to 2007, which would reduce earnings by $0.30 per share. As a result, the company expects earnings for the third quarter of 2008 to be in the range of $1.56 to $1.58 per share, down from $1.67 per share in 2007.

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