Royal Caribbean Reports Higher Third Quarter Profit of $399 Million

Royal Caribbean Reports Higher Third Quarter Profit of $399 Million
By Theresa Norton Masek

Royal Caribbean Cruises Ltd. (RCCL) reported net income of $399 million, or $1.82 per share, versus $350.2 million, or $1.61 per share, in 2010. Results include a $0.08 per share mark-to-market revaluation loss on the company's WTI fuel option portfolio. Absent the revaluation charge, third quarter earnings per share totaled $1.90.

RCCL said revenues improved to $2.3 billion in the third quarter of 2011 compared to $2.1 billion in the third quarter of 2010 as a result of capacity increases and yield improvements. Net yields for the third quarter of 2011 increased 5.3 percent (2.6 percent on a constant-currency basis).

The company said it experienced particularly strong demand for its Caribbean and Alaska products during the third quarter with both markets experiencing increases in excess of 15 percent in ticket yields and Alaska yields reaching a historic high.

Costs in the third quarter of 2011 remained under tight control with net cruise costs (NCC) excluding fuel increasing only 0.7 percent on a constant-currency basis (2.5 percent on an as-reported basis).

Bunker fuel pricing for the third quarter was consistent with earlier calculations at $608 per metric ton and consumption was 333,000 metric tons. During the quarter the company booked a $0.08 per share mark-to-market revaluation loss on its WTI fuel option portfolio. This loss partially offsets the revaluation gains the company recorded earlier in the year.

For 2011, constant-currency yield growth expectations are unchanged at 2 percent to 3 percent. Recent strengthening of the U.S. dollar has reduced full year 2011 as-reported Net yield expectations slightly to an increase of approximately 4 percent.

For the fourth quarter, the company expects net yields to increase 3 percent to 4 percent on both an as-reported and a constant-currency basis. Close-in demand was strong in the third quarter, but the company does not anticipate this strength will continue for the seasonally weaker fourth quarter.

For the full year, the company expects NCC excluding fuel to increase 2 percent to 3 percent on an as-reported basis and 1 percent to 2 percent on a constant-currency basis. The comparable figure for the fourth quarter is expected to be approximately 4 percent on an as-reported basis and 3 percent to 4 percent on a constant-currency basis.

RCCL said it does not forecast fuel prices and its fuel cost calculations are based on current at-the-pump prices, net of hedging impacts. Based on today’s fuel prices the company has included $204 million and $761 million of fuel expense in its fourth quarter 2011 and full year 2011 guidance, respectively.