(Alliance News) - Carnival PLC on Friday swung to an interim loss as its operations halted due to the coronavirus pandemic, but painted an optimistic picture for investors which including restarting operations in August.
Shares in Carnival ended 4.5% higher at 986.00 pence in London on Friday and are up 8.9% at USD15.88 in New York.
Earlier this year, Carnival warned that the docking of its ships because of coronavirus will have a "material negative impact" on its finances.
Carnival said Thursday it expected to dispose of 13 ships and to take delivery of five of nine originally ordered as the cruise company adapts to reduced demand for its cruises.
For the half-year ended May 31, revenue came in at USD5.52 billion, down 42% from USD9.51 at the same time the year before. Carnival swung to a net loss of USD5.16 billion from net income of USD787 million the year prior.
In the first half, Carnival posted an interim loss per share of USD7.34 from basic earnings per share of USD1.14.
In its second quarter, which covers the three months to the end of May, Carnival swung to a net loss of USD4.37 billion from net income of USD451 million. Revenue in the second quarter plummeted to USD740 million from USD4.84 billion in the second quarter the year before.
In the second quarter, the company posted a loss per share of USD6.07 from earnings per share of USD0.65 the year before.
The Miami-based cruise ship operator expects to resume guest operations in August with its AIDA cruise business first from three German ports as previously announced.
This will make AIDA the first of Carnival's nine cruise brands to return to guest cruise operations. AIDA will implement further safety and protective measure such as health questionnaires before boarding and temperature checks for guests and crew.
Physical distancing guidelines will also be in place and there will be increase sanitising of all cabins and public areas along with other steps to prevent the spread of Covid-19.
Carnival paused all guest cruise operations in mid-March and will implement a phased return with specific brands and ships returning to service over time.
Capacity will be reduced by ship delivery deferrals and 13 ship dispositions while future capacity will be moderated by a phased re-entry of Carnival ships, removal of fleet capacity, and delays to new ship deliveries.
Carnival plans to accelerate removal of ships in its 2020 financial year for ships it had expected to sell in later years. It sold one ship in June and has agreements to dispose of five further ships plus preliminary agreements for another three - all of which should leave the fleet within the next 90 days.
This is in addition to the previously announced sale of four ships, and means that 13 are set to leave the fleet - equating to a 9% drop in capacity.
Moreover, only five of Carnival's nine ships originally set to be delivered in financial 2020 and financial 2021 will be delivered before the end of its 2021 financial year. Instead, these are expected later in financial 2022 and 2023.
Since pausing guest operations, Carnival has taken steps to preserve its cash and obtain more financing so as to maximise liquidity. It has shrink its administrative expenses by USD1.3 billion and is expecting to cut newbuild capital expenditures by USD1.3 billion for 2020. Since March, it has also raised more than USD10 billion via financing transactions, including some in the past three weeks.
This includes borrowing a USD2.8 billion aggregate principal amount in two tranches under its first priority senior secured term loan. It also negotiated debt holiday amendments deferring some principal repayments due through March 2021.
Carnival has USD8.8 billion of committed export credit facilities available to fund ship delivered previously planned through 2021.
During the guest operations pause, Carnival's monthly average cash burn rate in its second half amounts to an estimated USD650 million.
The company said its guest operations pause is still materially hurting all aspects of its business and the longer this pause continues the more its liquidity and financial position will suffer. It is still expecting to post a net loss on a US GAAP and adjusted basis for the second half of 2020.
Demand for 2021 sailings remains "despite substantially reduced marketing and selling spend" and of booking in the first three weeks of June, close to 60% of 2021 bookings were new bookings - the rest being guests applying future cruise credits from cancelled bookings.
"As of June 21, 2020, cumulative advanced bookings for the full year of 2021 capacity currently available for sale remain within historical ranges at prices that are down in the low to mid-single digits range, on a comparable basis, including the negative yield impact of [future cruise credits] and onboard credits applied," said Carnival.
As of May 31, the portion of customer deposits stood at USD2.6 billion, mostly future cruise credits.
Carnival President & Chief Executive Officer Arnold Donald said: "We have been transitioning the fleet into a prolonged pause and right sizing our shoreside operations. We have already reduced operating costs by over USD7 billion on an annualised basis and reduced capital expenditures also by more than USD5 billion over the next 18 months.
"We have secured over USD10 billion of additional liquidity to sustain another full year with additional flexibility remaining. We have aggressively shed assets while actively deferring new ship deliveries. We are working hard to resume operations while serving the best interests of public health with our way forward informed through consultation with medical experts and scientists from around the world."
By Anna Farley; annafarley@alliancenews.com; Updated by By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Carnival (CCL)