RCCL reports Q2 results, unveils 'cost savings initiative'

Royal Caribbean Cruises Ltd. said it turned an $84.7 million profit during the second quarter of 2008, a 34% decline over second-quarter 2007.

Revenue for the quarter was $1.6 billion, compared with $1.5 billion in second-quarter 2007.

Net yields improved by 1%, RCCL said. Net cruise costs per available passenger cruise day increased by 6.7%, versus guidance of an increase of 7% to 8%. Most of the increase was due to fuel costs; fuel prices increased by 55% during the quarter, RCCL said. Excluding fuel, net cruise costs per available passenger cruise day increased 2%.

The company also unveiled a cost savings initiative that includes eliminating 400 shoreside positions and eliminating some noncore operations. The company said the initiative would reduce spending by about $125 million a year.

"Too much of our profitability is being eroded by the increase in fuel prices," CEO Richard Fain said in a statement. "While our brands continue to attract premium prices even in this difficult environment, it is imperative that we find ways to reduce our costs."

RCCL said that the company "continues to enjoy healthy demand for its products, and its revenue expectations have not changed materially." It said it expected net yields to increase 3% to 4% for the full year 2008.

UBS equity investment analyst Robin Farley said that investors would be happy to hear that RCCL is focusing on cost, but said the company would "need to deliver."

"A historic criticism of [RCCL] is that it has not been as focused on the expense side of the equation," she wrote in a note before RCCL's earnings call on July 22. "Even excluding fuel costs, RCCL has not achieved a reduction in expense per day in the last five years."

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