Carnival Corp reports $4.4 billion loss due to Covid-19 pandemic

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Carnival Corp reports $4.4 billion loss due to Covid-19 pandemic

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WHAT HAPPENED?

Carnival Corporation (NYSE: CCL) announced summary preliminary financial information for Q2 on 18th June 2020 for the period ended May 31, 2020. Reports a $4.4 billion net loss.

SO WHAT?

Carnival Corporation & plc is a British-American cruise operator. It is the largest cruise company in the world with 104 ships across its nine cruise lines. The Company’s geographic areas include the United States, Canada, Continental Europe, Asia, Australia, New Zealand, and the United Kingdom.

Leisure travel is affected badly due to the global health crisis. Carnival Corporation reported a $4.4 billion net loss for the quarter, which includes $2.0 billion of non-cash impairment charges.

The second-quarter results

  • The preliminary Q2 statement shows an 85% decline in revenue from last year.
  • The adjusted earnings per share computed by the company for Q2 2020 was negative $3.30, far below $0.66 reported last year.
  • Revenue reported by the company in Q2 was $0.7 billion lower than $4.8 billion in the previous year.
  • Reported adjusted net loss of $2.4 billion for Q2, lower as compared to $0.46 billion of profit last year.
  • Carnival has made arrangements for the disposal of 6 ships from the fleet in the next 90 days and plans to downsize its fleet further by making more such deals. The company is said to be working on potential sales of non-ship assets.
  • Carnival expects $250 million per month of operating and administrative expenses once all its ships are in” paused status”.  Presently, 62 ships are in paused status.
  • The company seeks various measures to reduce its operating expenses and capital expenditures. Talks about the implementation of a combination of layoffs, reducing salary and benefits, and hiring freeze across the organization.
  • The company also reported it has $7.6 billion available for liquidity and plans to further enhance liquidity through refinancing scheduled debt maturities.
  • The company has suspended the payment of dividends on, and the repurchase of, Carnival Corporation common stock and Carnival plc ordinary shares to improve its liquidity.
  • The monthly average cash burn rate estimated by the company is approximately $650 million.
  • CCL stock dropped 5.26% on Monday to $17.83.
  • The company expects a loss for the second half of 2020.

The report also talked about Carnival’s response to the COVID-19 outbreak, taking health and safety measures, and returned over 260,000 guests to their homes.

Approximately 21,000 crew members are still stuck and the company expects their return by the end of June.

Due to COVID-19, novel coronavirus disease, a nationwide lockdown was implemented which led to the suspension of all cruise activities for 3 months now.

CDC, Centers for Disease Control and Prevention, announced a No Sail Order for cruise ships on 9th April 2020 extending it till 24th July 2020.

NOW WHAT?

The cruise giant said that it cannot predict when will it commence normal business operations and is unable to announce earnings forecast.

Carnival expects to resume operations in phases, “The Company expects to resume guest operations, after collaboration with both government and health authorities, in a phased manner, with specific ships and brands returning to service overtime to provide its guests with enjoyable vacation experiences.” as per the report.

Carnival announced various incentives and flexibility options for payments to encourage new bookings.

The company is seeing an increase in demand for bookings in 2021; approximately 60% of the bookings for 2021 were new bookings. The company saw an improvement in booking volumes for the six weeks ending 31st May  2020, compared to the prior six weeks.

The Cruise Lines International Association (CLIA), world’s largest cruise industry trade association, announced on Friday that their member cruise line, which includes cruising giants such as Royal Caribbean(NYSE: RCL), Carnival Corp., and Norwegian Cruise Line(NYSE: NCLH), will extend its voluntary cruise suspension and cancel all cruises from USA ports until September 15, 2020.

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