Carnival Cuts 2019 Profit on Cuba Travel Ban, Weak Europe Demand

The Carnival cruise ship Ecstasy leaves the port in Miami, Florida, September 18, 2015. REUTERS/Joe Skipper

Carnival Corp cut its profit forecast for the year on Thursday, anticipating a hit from the Trump administration’s sudden ban on cruises to Cuba and weakening demand in Europe over political uncertainty, sending its shares down over 7%.

The company’s profit warning also dragged down Carnival’s rivals, Norwegian Cruise Line Holdings Ltd and Royal Caribbean Cruises Ltd, about 3%.

Carnival is the latest company to warn of the financial impact of the U.S. ban on forms of recreational travel to the Caribbean island, a move that sent cruise operators scrambling to reroute their cruises, usually booked months in advance.

“The suddenness of the regulatory change to this high yielding destination has led to a near-term impact on revenue yields,” Carnival said in a statement.

Revenue yields are an important metric for cruise operators, and measures spending per available berth.

Carnival said its full year earnings will take a 10 cent to 12 cent hit from lower net revenue yields, also due to expected cheaper ticket prices for its European cruises. “Recent booking trends have been impacted by ongoing geopolitical and macroeconomic headwinds affecting our Continental European brands,” Chief Executive Officer Arnold Donald said.

The Miami-based company said the ban on travel to Cuba would have a further 4 cent to 6 cent per share impact on its full-year earnings, while changes to cruise itineraries for its Carnival Vista ship, sailing at a slower-than-usual cruising speed, would have an 8 to 10 cent impact.

Carnival had to add an extra day of sailing for the slow-sailing ship’s cruises and will bear the expenses for the additional day.

Overall, Carnival said it now expects 2019 adjusted earnings in the range of $4.25 to $4.35 per share, down from an earlier forecast of $4.35 to $4.55.

The company’s total revenue rose 11% to $4.84 billion in the second quarter ended May 31, beating analysts’ average estimate of $4.53 billion, according to IBES data from Refinitiv.

[reuters]

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