By Kaveri Niththyananthan
LONDON -- Cruise operator Carnival (LON:UK:CCL) Corp. PLC Thursday reported a 3.2% drop in third-quarter net profit, dragged lower by higher fuel costs and a strengthening dollar.
But it warned that advance bookings for the remainder of 2008 and the first half of 2009 are running slightly behind year-ago levels.
Chairman and Chief Executive Micky Arison said in a statement, "Although bookings have slowed compared to the strong booking levels of a year ago, pricing is holding up well given the current difficult economic environment."
Current occupancy levels are slightly behind the historically high levels of last year, but remain well ahead of 2006, Mr. Arison said.
The Miami-based company said net profit for the three months ended Aug. 31 was $1.33 billion, or $1.65 a share, compared to $1.38 billion, or $1.67 a share, in the same period a year ago despite demand holding up as consumers traded down to cruises from more expensive foreign holidays.
Revenue for the period, which also includes onboard purchases and other income, was $4.81 billion, up 11% from $4.32 billion last year.
With seasonal distortion usually associated with the leisure industry, analysts place greater emphasis on third-quarter results as a better indicator for full-year earnings projections.
Carnival's third-quarter per share results topped a consensus forecast of $1.58 a share by 15 analysts polled by the company.
Vice Chairman and Chief Operating Officer Howard Frank told analysts the company was trying to capture higher yields by sticking to higher prices, even if demand was slowing. Carnival would lower prices only if demand continued to slow further, he said.
The company said it was seeing some softening in demand in the North American short-cruise market as a result of recent hurricanes, with first-time passengers reluctant to making bookings.
Analysts raised concerns over significant capacity increases in Europe, in light of "fast slowing economies." Mr. Frank said bookings levels were strong and the only region it saw declines was in Spain, where there was a weakness of its brands. He said no capacity would be added in Spain but there would be extra in Italy and Germany.
Carnival expects full-year diluted earnings per share to be between $2.79 and $2.81, at the higher end of previous guidance of $2.70 to $2.80. However, fourth-quarter diluted earnings per share are expected to be in the range of 36 cents to 38 cents compared to 44 cents in 2007 due to higher fuel costs.
Fuel costs for the full year are expected to increase by $678 million compared to 2007. The strengthening dollar is expected to reduce fourth-quarter earnings by $33 million compared to June guidance.
Citigroup said results were better than expected and lower fuel prices were positive but could be partially offset by slowing bookings and a stronger dollar.
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