Royal Caribbean’s ceo Richard Fain stated he was “deeply disappointed” to report a breakeven 2008 fourth quarter. Weak demand, currency changes and higher fuel costs led to Royal Caribbean Cruises Ltd’s 1 cent per share profit in the fourth quarter, down from 33 cents from the same quarter in 2007.
The penny profit falls short of Wall Street’s 7 cents per share estimate. The company’s 2009 forecast projects net yields down 9-13 percent, with earnings expected in the range of $1.40 per share. Analysts had been forecasting $1.67 per share. A loss of 30 cents to 35 cents per share is projected in the first quarter of 2009. Yesterday, Barclays Capital lowered its 2009 earnings estimate for Royal Caribbean from $1.98 per share to a loss of 92 cents per share and initiated a 2010 estimate of negative $1.22. That news caused Royal Caribbean shares to plummet 15 percent.
Going forward Royal Caribbean said the revenue outlook for 2009 remains weak, with both ticket sales and onboard spending affected by the economy. “Forecasting demand is as tough as it has even been in my 20 years at Royal Caribbean,” said Fain. The line stated it was using “substantial discounts” to rev up sales and that the line’s average passenger now books 4 months in advance. ‘The fourth quarter was an extremely difficult operating environment and we expect even more challenges in 2009,’ said Fain.
Still Fain said he was pleased with how the company responded early to the “approaching storm.” Cost containment and other actions largely offset higher than anticipated fuel and insurance expenses — net costs (excluding fuel) will fall 5-7 percent in 2009. The line stated that they are 58 percent hedged in fuel. Fain said he is “encouraged” by recent bookings during wave period.
One thing that’s likely to raise eyebrows among die hard Royal Caribbean cruisers is Fain’s statement that the line has reduced costs without compromising the guest experience. The line caused an uproar last year when it began charging for steak in its dining rooms and recently announced a charge for room service after midnight. Royal Caribbean said that 20-25 percent of its revenue is from onboard sales. With falling yields and stock price and enormous expenditures for new cruise ships odds are the company will only increase onboard charges.
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