RCCL says coronavirus impact is regional right now

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The Spectrum of the Seas in Hong Kong last year.
The Spectrum of the Seas in Hong Kong last year.

Royal Caribbean Cruises Ltd. (RCCL) said it is too early to estimate how much the coronavirus outbreak will impact its 2020 earnings. 

“Obviously, the biggest issue of the day is the Wuhan coronavirus,” said RCCL chairman Richard Fain during the company's Q4 earnings call Tuesday. “Unfortunately, no one knows how this outbreak will play out, and we don’t know how it will impact us. … There are still too many variables and uncertainties to give an estimate of the ultimate impact.” 

So far, RCCL has canceled eight cruises out of China on the Spectrum of the Seas through March 4. Those cancellations will have an estimated impact of 25 cents per share, the company said.

RCCL said the “fluidity of the situation” is such that it did not include any further financial impact related to coronavirus in its 2020 guidance, except to say that the outbreak and efforts to contain it “are expected to negatively affect our results.”

“While we expect this to be temporary, the situation is highly fluid and the overall impact cannot reasonably be estimated at this time,” RCCL said, adding that it would update its guidance “as the situation stabilizes and we can reasonably estimate its impact.” 

RCCL said that 6% of its full-year capacity is in China, but that only the Spectrum is based there now. “The Spectrum was doing very well before the outbreak,” Fain said. “We still continue to feel positive about and committed to long-term growth in China.” 

Fain said so RCCL so far has not seen a slowdown in bookings in other parts of the world. CFO Jason Liberty said that Wave season was off to an “excellent start.”

“Bookings over the last three months are outpacing last year, and Wave is off to an excellent start for all four brands,” Liberty said, adding that the second week in January was a record-breaking week for bookings overall with pricing ahead of last year. RCCL said Wave season was “very robust” with strong demand particularly from the U.S. and European markets. 

However, RCCL said that net yields are expected to be down slightly this quarter due to “the unprecedented bushfires in Australia, and recent activity in Hong Kong and the Middle East, each having a negative impact in the first quarter.” 

The first quarter is also being negatively impacted by the discontinuation of Cuba sailings and “a tough year-over-year comparable as we are lapping the inaugural seasons of two new ships during the first quarter of 2019.” 

“But the strength of the core products has more than compensated,” Liberty said. 

RCCL reported record 2019 income of $1.9 billion, up from $1.8 billion a year earlier, despite several headwinds.

“This result was achieved despite a series of extraordinary events, including the drydock incident in the Grand Bahama shipyard, the cancellation of the cruises to Cuba and an unusual hurricane season, all of which negatively impacted the company’s results for the year,” the company stated. 

RCCL said earnings were driven by the consolidation of Silversea’s operations, the new cruise terminal in Miami, the Perfect Day at CocoCay opening, new ships and strong demand for its core products. 

The fourth quarter of 2019 was hit hard by the Cuba policy and Hurricane Dorian, RCCL said, with net income down over the same period of 2018, from $315.7 million to $273.1 million. 

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