Royal Caribbean Cruises LTD. (RCC) reported web revenue of $81.7 million, or $0.42 per share, on revenues of $821.7 million for its second quarter ended June 30, 2001, in comparison with web revenue of $108.3 million, or $0.56 per share, on revenues of $680.7 million for its second quarter final yr.
Outcomes had been impacted by an 8.8 p.c lower in web income yields, mixed with the cancellation of eight weeks of sailings as a consequence of technical mishaps aboard 4 RCC vessels. “That was one hell of a 3 months,” commented RCC CEO Richard Fain, citing each the “vital lower in yield” stemming from a 30 p.c capability growth throughout a interval of financial weak spot, in addition to “the extraordinary spate of technical issues… an distinctive string of unhealthy luck.” “You’ll be able to think about how irritating it’s when all of these items occur throughout such a brief period of time,” he continued, summing up the broader trade/financial image by stating, “This was a troublesome three months and it’ll find yourself being a troublesome yr – all of us knew we needed to take a success in some unspecified time in the future, and that there could be a interval of issue, however that’s scant consolation when it’s important to stay via it.”
Second-quarter outcomes would have been $0.07 per share much less had it not been for a one-time acquire of $14 million from the receipt of insurance coverage proceeds associated to unspecified claims. Excluding the impression of the insurance coverage claims and mechanical failures, web revenue was $93.7 million, or $0.49 per share, down 13.5 p.c from 2000. Together with all objects, web revenue decreased 24.6 p.c in comparison with final yr.
Regardless of these declines, RCC’s earnings exceeded analysts’ 2Q expectations of $0.31 per share, precipitating a 12 p.c rise in RCC’s share worth on the day the outcomes had been introduced. Moreover, a number of monetary analysts upped their RCC score to “Purchase” or “Robust Purchase.”
RCC reported web revenue of $134.2, or $0.70 per share, on revenues of $1.5 billion for the primary six months of 2001, in comparison with web revenue of $213.8 million, or $1.11 per share, on revenues of $1.4 billion for the primary six months final yr.
Trying ahead, RCC executives stated they had been snug with analysts’ consensus goal of $1.65 for the total yr, forecasting that yields would lower throughout the third quarter and enhance dcring the fourth, equating to an total two to 3 p.c lower in yields throughout the second half of 2001.
RCC will mitigate the full-year impression of yield decreases with an aggressive cost-containment initiative, which is anticipated to lower complete working prices per potential passenger cruise day by one p.c. CFO Richard Glasier stated the next cost-cutting procedures had been carried out: (1) to chop gas consumption, itineraries have been revised to optimize velocity between ports, expertise has been utiiized to extra effectively management onboard local weather, and the hulls have been scrubbed and propellers polished to scale back drag; (2) Onboard staffing prices have been minimize by enhancing worker productiveness via higher scheduling; and (3) SG&A bills have been minimize by consolidating two name facilities into one; by reviewing any place left open by a departing worker to see whether or not it may be left unfilled; by consolidating the brand new vessel design and development supervision; and by reducing journey prices by chopping down on out-of-town conferences.
Price-cutting procedures had been counterbalanced, nonetheless, by higher-than-normal gas bills, and by startup prices related to the brand new Royal Celeb Excursions operation in Alaska, stated Glasier. Along with the pricier gas market, Glasier famous that RCC vessels had been more and more utilizing fuel turbine propulsion, which requires a better grade of gas. “Traditionally gas prices have been two to 2.5 p.c of our revenues. This yr they’re three to 4 p.c,” stated Glasier.
On a region-by-region foundation, the corporate declared the “peak Bermuda season, Alaska and Europe particularly difficult.” RCC President Jack Williams famous, “Our development was considerably outpacing trade development throughout the second quarter, which mixed with softer market circumstances, pressured us to decrease our costs.”
RCC elevated total capability 31 p.c throughout the second quarter (48 p.c for Celeb Cruises; 25 p.c for Royal Caribbean Worldwide (RCI)). In Europe, stated Williams, RCL capability elevated 68 p.c, with the market additionally “impacted by the continued Mideast disaster and the Hoof and Mouth Illness scare.” Alaska capability elevated 34 p.c (50 p.c RCI; 16 p.c Celeb) amid “very aggressive pricing”; whereas the seven-night Caribbean sector noticed a 15 p.c capability enhance; and the short-cruise market (each within the Caribbean and West Coast) jumped 26 p.c.
Of these sectors, solely the seven-night Caribbean market moved in a constructive route, with single-digit yield enhancements courtesy of the market’s constructive reception of RCI’s Voyager-class ships and Celeb’s Millennium-class vessels.
Williams additionally famous strikes made to enhance efficiency within the firm’s “new markets” sector, which is comprised of the Aruba cruises and the “Celeb Voyages” program on the Celeb aspect; and for RCI, the “Royal Journeys” program, cruises from Seattle and Gulf ports, plus the South American program and the Europe for Europeans program aboard the Splendour of the Seas. “A few of these packages wanted modification, some wanted elimination,” he stated. “The Gulf ports are performing fairly properly and we can be including extra capability there subsequent yr. The Aruba program has been eradicated, whereas the Royal Journeys program has been modified, and is exhibiting enchancment in load components after modification.” (Australia/New Zealand cruises had been extra closely emphasised, and subsequent yr, the Royal Journeys vessel, the Legend of the Seas, will stop its Athens-Mideast Indian Ocean repositioning to Asia, and can merely sail an Alaska-West Coast-Hawaii-Australia/New Zealand run).
Lastly, Williams addressed considerations in regards to the “teething issues” of the brand new onboard administration system on the Radiance of the Seas. A graph offered by RCC confirmed that the vessel scored dramatically beneath the fleet common by way of buyer satisfaction following its introduction. “We did in reality have just a few bumps within the highway,” confirmed Williams, “however now the ship is now exceeding the fleet common on a weekly foundation, and it is without doubt one of the greatest performing ships within the fleet.”
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