Royal Caribbean Sees Third Quarter Profit

Royal Caribbean Cruises, the world’s second-largest cruise operator, said third-quarter profit rose 4.2 percent after it added more berths and boosted its full-year forecast as fuel costs dropped more than it anticipated.

Net income climbed to $411.9 million, or $1.92 a share, from $395 million, or $1.84, a year earlier, Miami-based Royal Caribbean said Tuesday in a statement. Earnings exceeded analysts’ estimates.

Chief Executive Officer Richard Fain is sailing more ships outside the United States and cutting jobs as consumers grappling with higher costs and a financial crisis trim spending. Royal Caribbean and larger Carnival promote their trips as less expensive than equivalent land-based vacations.

”The economy is likely to affect people’s willingness to book cruise vacations,” Robert LaFleur, an analyst at Susquehanna Financial Group, said in an Oct. 13 interview. “It’s not all bad news. If the consumer is actually dead, then oil prices are going to be substantially lower, and that’s going to offset the impact of the dead consumer.”

Revenue rose to $2.06 billion from $1.95 billion, beating the $2.04 billion average estimate of 14 analysts surveyed by Bloomberg. Eighteen analysts projected profit of $1.66 a share.

Bookings ”slowed considerably” in September, and have “leveled off over the last couple of weeks, Royal Caribbean said in the statement.

Full-year net income will be $2.73 to $2.78 a share, higher than it had forecast, Royal Caribbean said.

Royal Caribbean shares fell $1.04, or 6.7 percent, to $14.60 Monday in composite trading on the New York Stock Exchange. The shares have plunged 66 percent this year.

Royal Caribbean is discounting tickets to boost fourth- quarter bookings, it said Tuesday. Revenue after operating costs per available passenger cruise days, a measure known as net yield, may fall as much as 5 percent in the quarter, as the dollar gains against other currencies.

Net yield rose 0.7 percent to $219 a day in the third quarter, Royal Caribbean said. Daily cruise costs rose 5 percent.

Royal Caribbean had forecast full-year profit of $2.55 to $2.65 a share in July, including 7 cents in restructuring costs. Analysts had estimated profit of $2.58 a share.

Bunker fuel, used by ships, fell 18 percent in Singapore in the three months ended Sept. 30, to $590.50 per metric ton from $717.50. Royal Caribbean buys contracts that lock in prices to reduce swings in costs for about half its fuel. That hedging increased costs in the third quarter, the company said.

Based on current oil prices, the company said it will pay $686 million for fuel this year, down from the $772 million it previously forecast. It expects to spend $635 million in 2009, down from the $890 million it had earlier estimated. For 2009, the company’s fuel is 39 percent hedged, it said.

The decline in projected fuel costs in 2009 will mean additional profit of $1.19 a share, it said.

Source: Bloomberg News