Carnival sinks to a $4.4bn quarterly loss

Leisure giant Carnival has plunged into the red and warned of more losses to come, after the Covid-19 pandemic halted its cruise operations.

The owner of the Carnival and Princess brands reported second-quarter net losses of $4.4bn, compared to profits of $451m profit a year earlier. On a six-month basis, the loss was $5.2bn against a profit of $787m in 2019.

Second-quarter losses per share were $6.07 against earnings per share of $0.65 for the same period of 2019.

Carnival was unable to operate any cruises for the majority of the second quarter and has taken significant write downs on the sale of ships.

Excluding these one-off charges, the preliminary second quarter net loss came in at $2.4bn, down from a profit of $457m a year earlier.

As lockdown measures around the world start to ease, the company intends to resume some operations on a phased basis, with initial sailings from “a select number of easily accessible homeports”.

But it still expects to make a loss in the second half, and warned it was unable to “definitively predict” when it would return to normal operations.

“As a result, the company is currently unable to provide an earnings forecast,” it continued. “The pause in guest operations is continuing to have material negative impacts on all aspects of the company’s business. The longer the pause continues, the greater the impact on the company’s liquidity and financial expectations.”

By1300 BST, the dual-listed stock had fallen heavily, losing 7% in pre-market trading on Wall Street and falling 9% in London to 1,157.5p.

Customer deposits as of 31 May were $2.6bn, $474m of which related to cruises planned for the second half of the year. Cumulative advanced bookings for 2021capacity currently available for sale were, Carnival said, “within historical ranges at prices that are down in the low to mid-single digits range”.

Carnival ended the second quarter with $7.6bn of available liquidity, and said it expected to further enhance that, including by refinancing scheduled debt maturities.

Michael Hewson, chief market analyst at CMC Markets, said: “Carnival has already shelved most of its 2020 cruise season as a result of the pandemic. The company does have plans to restart US operations on 1 August, though in the current environment, this deadline could well slip.

“Coming so soon after the company posted record profits at the end of last year, the change in outlook could not be starker.

“The company also has a lot of questions to answer in how to restore customer trust after the company was criticised for its handling of the initial coronavirus outbreaks on board its cruise ships.

“While 2021 bookings are looking good, these have been at heavily discounted prices, with the company’s biggest problem being at the moment cash flow, or rather the lack of it.

“All-in-all these are awful numbers for Carnival, as well as the cruise line sector in general, and with concerns about a second wave likely to increase as we head towards the end of the year, the outlook for the sector looks highly uncertain.”