Caribbean Cruises Ltd, said its second-quarter profits decreased
21% from 2005, but CEO Richard Fain said he was pleasantly
surprised by what he termed better-than-expected results.
dropped to $122.4 million, from $155.2 million in the same quarter
last year, with the company citing continued softness in the
Caribbean, surging fuel costs, and a compressed booking
Royal Caribbeans stock
price took a 4% dive after the results were released.
The company reported
an 8.3% revenue increase over the same period last year, to $1.3
billion from $1.2 billion, due mostly to higher onboard earnings
and strong pricing.
As was true in the
first quarter, fuel was the main culprit, absorbing the strong
revenues. At-the-pump prices averaged $460 per metric ton, compared
with $337 per metric ton in 2005. Actual fuel costs increased $34
million. The company has hedged 58% of its fuel for the second half
of this year.
Net cruise costs
increased 14.4%. Fuel accounted for 5.4% of the increase, and the
remaining 9% was due mostly to expenses for the Celebrity Century
revitalization and other refurbishment projects, the inaugural of
the Freedom of the Seas, timing of market expenses and inflationary
firm AG Edwards analyst Tim Conder downgraded both Royal Caribbean
and Carnival Corp. to hold from buy after the call, citing
near-term limitations on visibility related to bookings and
on-going escalations in fuel costs. He also noted a much more
cautionary tone from Royal Caribbean management.
Jake Balzer of Guzman
& Co., on the other hand, reaffirmed an outperform rating. He
said that despite rough waters near term, he continued to view
cruising as having attractive long-term fundamentals, and cited the
industrys demographic drivers and value proposition relative to
He also said that
Royal Caribbean is a more aggressive industry player than
To contact the
reporter who wrote this article, send e-mail to Johanna Jainchill
at [email protected].