Royal Caribbean Cruises Ltd. (RCCL) announced net income for the first quarter 2007 of $8.8 million, or 4 cents per share, compared to net income of $119.5 million, or 55 per share in the same period last year. The company blamed the fall in profits on its acquisition of Spanish company Pullmantour. It also said the first quarter 2006 results included a one-time net gain of $36 million from the partial settlement of a lawsuit. The company also reaffirmed its full year 2007 earnings per share guidance of $3.05 to $3.20. Revenues for the first quarter 2007 increased to $1.2 billion from revenues of $1.1 billion in the first quarter 2006.
RCCL said Pullmantur's business is highly seasonal, with strong summer months but weak winter months. In addition, the company is including Pullmantur results on a two-month lag. RCCL said these changes significantly diminished the company's reported earnings in the first quarter and are expected to do so in the second quarter. The company said it expects greater improvement in the third and fourth quarters. RCCL also said demand has been weaker than expected, especially in the Caribbean, but that cost controls have helped offset the revenue decline.
"After a strong fall performance, close-in bookings in the first quarter required more aggressive price promotions than we experienced throughout the last year," said Richard Fain, RCCL chairman and CEO. "On the other hand, cost performance was better than our prior guidance due to cost control initiatives."
The softer Caribbean pricing is expected to continue through the spring and is of a somewhat greater magnitude than forecasted back in February, the company reported. "However, the revenue picture for the balance of the year appears more encouraging. Although it is too early to provide specific predictions for the upcoming fall/winter season, load factors and pricing are both ahead of same time last year for the fourth quarter and into the first quarter of 2008," Fain said. "While we are disappointed that the revenue environment is more challenging than anticipated, I am very proud of the way our management team is mitigating the effect through improvements in efficiency."
Collectively, the company will have a 12.2 percent increase in capacity in 2007, driven by Pullmantur, the April delivery of Liberty of the Seas, and a full year of Freedom of the Seas. For the full year 2007, the company now forecasts that net yields will increase in the range around 2 percent compared to 2006. For the second quarter 2007, the company currently forecasts net yields to be flat, and on a comparable basis to decrease in a range around 1 percent. For more information, visit http://www.rclinvestor.com/.
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About the author: Eric Lam is a Cruise Consultant of Best Cruise Spot LLC, www.bestcruisespot.com
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