Bloomberg News

Carnival Posts Net Loss After Concordia Accident in Italy

March 09, 2012

Carnival Corp. (CCL), the world’s largest cruise-ship operator, posted a $139 million first-quarter loss, after the grounding of its Costa Concordia off Italy killed at least 25 persons.

The net loss equaled 18 cents a share, and compared with net income of $152 million, or 19 cents, a year earlier, Miami- based Carnival said today in a statement. Excluding some items, profit was 2 cents a share. Analysts projected a loss of 6 cents, the average of estimates compiled by Bloomberg.

Fallout from the Concordia, which ran aground off the Italian island Giglio in January, will extend through 2012, the company said. Carnival’s troubles grew when another Costa Cruises ship, the Allegra, was towed to shore to the Seychelles islands in the Indian Ocean after catching fire on Feb. 27, and 22 guests on the Carnival Splendor were robbed on land in Mexico.

“This has been a most difficult and challenging time for our corporation,” Chairman and Chief Executive Officer Micky Arison said in a conference call today. “The cruise industry remains incredibly safe and maintains one of the best safety records of any form of recreational travel in the world.”

Sales for the quarter ended Feb. 29 rose 4.8 percent to $3.58 billion. Analysts had projected $3.56 billion on average.

Carnival fell 1.7 percent to $30.42 at 1:49 p.m. in New York. The shares had declined 5.2 percent this year before today, while the Standard & Poor’s 500 Index gained 8.6 percent.

Concordia Captain Francesco Schettino and eight other employees are being investigated by Italian authorities for their role in the sinking.

Post-Crash Forecast

Carnival forecasts modest improvement in its North American business, while the European operation is expected to show slightly lower yields because of slowing economies, according to the statement. Cruise customers shouldn’t count on price cutting, the company said.

“This is all good news and confirmation of the resiliency of the cruise industry,” Felicia Hendrix, a Barclays Capital analyst in New York, said in a note. “Bookings are improving.” Hendrix has a hold rating on the stock and Barclays has done investment banking work for Carnival in the past year.

Excluding the Costa Cruises line, the company forecasts full-year 2012 net revenue yields, in constant dollars, to be in line with the prior year. Including Costa, the company forecasts a decline in net revenue yields of 2 percent to 4 percent.

Costa Brand

This quarter, the company forecasts profit of 5 cents to 9 cents a share, excluding items. For the year, Carnival sees earnings of $1.40 to $1.70 a share, excluding items, compared with December guidance of $2.55 to $2.85. About 65 cents of the full-year reduction is from the Costa brand, which is expected to lose $100 million this year.

Charges in the first quarter included $29 million for the Concordia, $34 million on the Allegra and a $173 million goodwill impairment on the company’s Ibero line, which Carnival attributed to slower capacity growth due to the Spanish economy.

The first quarter typically accounts for 10 percent of annual profit, Rachael Rothman, an analyst with Susquehanna Financial Group in Bala Cynwyd, Pennsylvania, wrote in a report yesterday. The greater concern is bookings. European cruise prices have weakened since the Concordia accident, with second- quarter rates falling 15 percent, she said.

Insurance Proceeds

Costa curtailed its marketing in the wake of the Concordia accident and will resume in several weeks, company officials said in the conference call. Bookings for the brand were half what they were in the previous year, for the three-week period ending March 4, an improvement from the almost 90 percent decline in the four weeks after the crash.

Carnival expects to recover $515 million in insurance proceeds for the Concordia, which has been deemed a total loss, the company said in the statement. Six bids have been received to salvage the ship, a process that could take a year, Costa said in a separate release today.

The Allegra, which was for sale prior to its accident, remains on the block although at a lower price now, Carvival officials said in the conference call.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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