Tue 22 Jul 2008 08:05

Bunker costs hit Royal Caribbean


Cruise operator cuts 400 jobs as part of a cost-saving initiative.



Royal Caribbean Cruises Ltd., the world's second-largest cruise operator, has announced that it will cut 400 jobs as a result of higher bunker prices and decreased earnings.

Despite a rise in demand for cruises and onboard spending in the last quarter, a 55 percent increase in bunker prices during the same period lead to an overall drop in earnings.

Net income for the second quarter fell to $84.7 million, or 40 cents a share, in line with Wall Street expectations. In the same period last year, the company earned $128.7 million, or 60 cents a share.

Meanwhile, revenue for the quarter ended June 30th rose to $1.58 billion from $1.48 billion a year ago.

As a consequence of the rise in fuel prices and lower net income, the company has announced a significant cost savings initiative that is expected to reduce spending by approximately $125 million annually.

"Too much of our profitability is being eroded by the increase in fuel prices. This is unacceptable and we are evaluating everything we do to find ways to do it more efficiently and effectively," said Richard D. Fain, Chairman and Chief Executive Officer.

"While our brands continue to attract premium prices even in this difficult environment, it is imperative that we find ways to reduce our costs," continued Fain.

As part of the restructuring, the company has revealed that it is eliminating approximately 400 shore-side positions. In addition, the company has discontinued some non-core operations, including The Scholar Ship, an educational partnership aimed at college students studying aboard cruise ships. The company expects to incur charges related to this restructuring of approximately $15 million, or $0.07 per share, in the third quarter 2008.

"This is a difficult period for virtually all businesses, but we are determined to improve our operating results through tight cost controls, while preserving our outstanding guest experience and continuing to strongly support our travel agent partners. We will also continue to make measured strategic investments, especially in growing the international operations of our business," Fain said.

Royal Caribbean said it expects third quarter earnings per share, including the restructuring charges, to be $1.65 to $1.70, nearly unchanged from forecasts at the start of the year except for the direct increase in fuel costs. Full-year profit for the year has been forecast at $2.55 to $2.65 a share. Analysts were expecting a third-quarter profit of $1.81 a share and a full-year profit of $2.79 a share.

Based on current bunker prices, the company has included $772 million in fuel expenses in its full year 2008 guidance. This figure is $86 million, or $0.40 per share, higher than at the time of its previous earnings guidance.

Assuming the company's fuel costs correlate with movement in the price of WTI, the company says a $10 change in WTI per barrel, would equate to an $11 million change in the company's fuel expense for the third quarter and a $20 million change for the full year.

Royal Caribbean also estimated that at current oil prices, its bunker expenses for 2009 would be approximately $890 million net of existing hedges and that a $10 change in the WTI price would change the expense by $59 million or $0.28 per share.


Martin Vorgod, CEO of Global Risk Management. Martin Vorgod elevated to CEO of Global Risk Management  

Vorgod, currently CCO at GRM, will officially step in as CEO on December 1, succeeding Peder Møller.

Dorthe Bendtsen, KPI OceanConnect. Dorthe Bendtsen named interim CEO of KPI OceanConnect  

Officer with background in operations and governance to steer firm through transition as it searches for permanent leadership.

Bunker Holding's executive management team, from left to right: CCO Anders Grønborg,  COO Peder Møller, CEO Keld R. Demant and CFO Michael Krabbe. Bunker Holding revamps commercial department and management team  

CCO departs; commercial activities divided into sales and operations.

Image of a bunker delivery being performed by Peninsula's Hercules 8000 tanker vessel. Peninsula extends UAE coverage into Abu Dhabi and Jebel Ali  

Supplier to provide 'full range of products' after securing bunker licences.

A screenshot taken from Peninsula's homepage on October 4, 2024. Peninsula to receive first of four tankers in Q2 2025  

Methanol-ready vessels form part of bunker supplier's fleet renewal programme.

Stephen Robinson, pictured on his appointment as Head of Bunker Strategy and Procurement at Tankers International. Stephen Robinson heads up bunker desk at Tankers International  

Former Bomin and Cockett MD appointed Head of Bunker Strategy and Procurement.

Chart showing percentage of off-spec and on-spec samples by fuel type, according to VPS. Is your vessel fully protected from the dangers of poor-quality fuel? | Steve Bee, VPS  

Commercial Director highlights issues linked to purchasing fuel and testing quality against old marine fuel standards.

Ships at the Tecon container terminal at the Port of Suape, Brazil. GDE Marine targets Suape LSMGO by year-end  

Expansion plan revealed following '100% incident-free' first month of VLSFO deliveries.

Hercules Tanker Management and Hyundai Mipo Dockyard sign bunker vessel agreement Peninsula CEO seals deal to build LNG bunker vessel  

Agreement signed through shipping company Hercules Tanker Management.

Illustration of Kotug tugboat and the logos of Auramarine and Sanmar Shipyards. Auramarine supply system chosen for landmark methanol-fuelled tugs  

Vessels to enter into service in mid-2025.


↑  Back to Top