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.



Christian Vandvig Finnerup, Dan-Bunkering. Dan-Bunkering appoints Christian Vandvig Finnerup as US managing director  

Finnerup transitions from Singapore role to lead American operations.

Hai Gang Wei Lai vessel. SIPG orders Wärtsilä systems for new LNG bunker vessel  

Shanghai International Port Group orders integrated cargo handling and fuel systems from Wärtsilä.

Chris Seide, Integr8 Fuels and William Kanavan, Pentarch Offshore Solutions. Integr8 Fuels signs MOU with Pentarch for bunker services at Port of Edrom  

Integr8 Fuels and Pentarch Offshore Solutions have signed an agreement to develop bunker fuel services.

Eagle Vellore vessel. MISC orders two LNG dual-fuel Suezmax tankers as part of fleet renewal  

Malaysian shipowner expands dual-fuel fleet with newbuilds backed by long-term charters.

Eunice Low, Oilmar DMCC. Oilmar DMCC appoints Eunice Low as marine fuels trader in Singapore  

Low joins firm's Singapore trading department with a decade of industry experience.

HMM container ship. HD Hyundai secures $1.46bn order for eight LNG dual-fuel container ships  

South Korean shipbuilder reports highest container ship order volume since 2007 supercycle.

Arctic black carbon emissions urgency graphic. Clean Arctic Alliance urges IMO action on black carbon after 'disappointing' COP30  

Environmental coalition calls for Arctic shipping fuel regulations ahead of December 5 deadline.

Egypt's Ministry of Petroleum and Mineral Resources and Suez Canal Authority MOU Signing Ceremony. Egypt's petroleum ministry and Suez Canal Authority sign MOU for LNG bunkering facility  

Ministry and canal authority to develop LNG supply station in Port Said.

Legend of the Seas main engine startup. Meyer Turku starts first main engine on Legend of the Seas cruise ship  

Finnish shipbuilder fires up Wärtsilä engine ahead of 2025 Royal Caribbean delivery.

Malik Energy Leadership Development Programme group photo. Malik Energy launches internal leadership development programme  

Marine fuel supplier rolls out training initiative for managers across its supply and energy divisions.





 Recommended