Carnival’s Latest Business Update Sails Past Expectations

Carnival Cruise Line has posted its second-quarter results, which are significantly better than expected. The upswing can largely be attributed to the high demand for cruises in North America this summer and beyond, skyrocketing bookings, impressive occupancy rates, and a positive outlook for the third quarter of 2023.

However, while the numbers look good, not everyone is convinced just yet, as rising costs have put a damper on what would have been a record-breaking profit.

Carnival’s Financial Performance

Carnival Corporation announced its second quarter performance today, June 26, and has achieved results considerably better than expected across its nine cruise brands, including Carnival Cruise Line, Princess Cruises, Holland America Line, Costa Cruises, P&O Cruises, P&O Australia, Cunard Line, AIDA Cruises, and Seabourn.

Shaking off the shadows of the previous quarters, Carnival Corporation has posted a net loss of $407 million, considerably better than the projected loss of $425 to $525 million for the second quarter of 2023. The company’s adjusted EBITDA is $681 million, towards the top end of the March guidance range.

This means that Carnival has managed to bring down its losses and boost its operating profits before taxes, interest, etc.

According to CEO Josh Weinstein, “We reached a meaningful inflection point for revenue this quarter, with net yields surpassing 2019’s strong levels, and we achieved positive operating income, cash from operations, and adjusted free cash flow.”

Revenue for the second quarter of 2023 touched a record high of $4.9 billion, supported by high demand and increased bookings. This also led to the company’s customer deposits surpassing the previous record and reaching an all-time high of $7.2 billion, a surge of 26% over the prior quarter.

Rising Costs Could Prove Troublesome

Carnival’s financial numbers may be on an upward trajectory, something CEO Weinstein is undoubtedly partly responsible for, but this doesn’t mean that Carnival is anywhere near the money-making machine it once was. 

Rising costs have been important in keeping the profit margin much smaller than what Weinstein would like. Fuel prices are on an upward trend, and the company also had to invest in health and safety measures in addition to meeting increased operating costs.

Increased staff training and maintenance spending, higher food and beverage costs, and mandatory sanitation protocols have escalated expenses.

Read Also: What Cruise Lines Does Carnival Own?

In addition, the corporation is still grappling with substantial debt acquired due to the COVID-19 crisis. While the company has successfully resumed operations and is making significant strides in boosting revenue, it is also grappling with the costs of managing, servicing, and, eventually, repaying this debt. 

One area which Carnival needs to keep its focus on, and which it has done successfully so far this year, is bookings and occupancy rates. 

Carnival Riding High on Demand and Occupancy

Carnival’s financial rebound owes much to the soaring cruising demand, especially in North America. Bookings made during the quarter have set a new record for all future sailings and surpassed the first quarter’s booking volumes, which were previously the highest. 

Record-breaking onboard spending, increased cruise pricing, and growing capacity have also contributed to Carnival’s financial health.

As per Weinstein, “We are already executing on our strategy to grow revenue by taking up ticket prices, even while maintaining record onboard spending levels, building occupancy and growing capacity.”

“Based on continued strength in pricing, we delivered outperformance in the second quarter and raised our expectation for revenue in the second half, which, coupled with the interest expense benefit we are capturing from de-leveraging, will bring another $275 million to the bottom line for the year,” Weinstein added.

The overall occupancy rates are expected to hit 100% for this year as well as next year. The third quarter of 2023 may even reach occupancy levels of 107%, proving that the company is on a clear upward trajectory.

Setting Sail for a Brighter Future

The robust performance in Q2 and the continued momentum have led Carnival to raise its expectations for revenue in the second half of the year. 

Looking forward to the third quarter of 2023, the company expects adjusted EBITDA to increase more than three times what it achieved in the second quarter at $2.05 billion to $2.15 billion. Adjusted net income could increase from $0.95 billion to $1.05 billion.

In the long term, Carnival has introduced the SEA Change Program. This program aims at sustainability, increased EBITDA, and higher Return on Invested Capital (ROIC), focusing on reducing carbon intensity, improving financial performance, and ensuring sustainable investment returns.

Carnival’s strong performance and optimistic future projections offer a beacon of hope. The high demand, occupancy rates, and effective financial strategies show that the company is setting sail toward a brighter future. 

The recent success of Carnival Cruise Line’s fleet and the introduction of Mardi Gras, Carnival Celebration, Carnival Venezia, and Carnival Luminosa has been critical in exciting guests and push-up bookings.

These fresh additions are popular and often fully booked, significantly supporting Carnival’s climb back to stability. The company is once again leaning on its flagship line for a steadier financial future.