Questor: it is time to sail away from this cruise ship operator in search of a safer harbour (CARNIVAL)

The Telegraph ^ | January 31, 2022 | Russ Mould

[Capt. Tom]

A second consecutive plunge in revenues and a multibillion-dollar loss are hardly a surprise but the last two years leave the balance sheet looking very stretched, so stretched the valuation is less attractive and the risks are higher now that they were in 2019.

As such it is time to admit that a chunk of the money sunk into the shares at nearly £36 a pop is gone and move on.

This may seem perverse at a time when travel restrictions are easing, the prospects for improved bookings for the key summer season are improving and this column continues to look for ways of playing an economic upturn as the pandemic (hopefully) becomes endemic and the threat begins to recede.

But Carnival’s balance sheet could constrain its ability to fully cash in and the benefits that flow through to shareholders.

None of those 2021 figures provide much comfort should anything else unexpectedly go wrong.

That is a drop of $13.2bn from two years ago. But with net debt soaring to $25.5bn, the enterprise value is now $47bn, so the valuation is higher than it was two years ago, even if the company’s finances have weakened and the outlook for the cruise industry potentially changed.

There remains the danger that consumers prove initially reticent to share a big boat with hundreds or thousands of other passengers. Granted, Carnival has more than $9bn in cash and additional borrowing capacity to see it through and the firm is expected to lose only $1bn in 2022 compared to $8bn in 2021. But any delay to the profit recovery could drain that cash and leave Carnival tapping shareholders once more, especially as its 30-year depreciation rate for its ships could be said to flatter stated profits.

We got this one wrong. Time to sail away.

[Capt. Tom]

CARNIVAL the biggest of the big three cruise lines has dropped to second place behind Royal Caribbean and ahead of Norwegian Cruise line. This happened around April of last year.

This negative outlook is more than likely the result of CARNIVAL'S first quarter of 2022 report.

You have to get outside of the Cruise blogs to get a report like this.

The Cruise Lines and Blogs have to present an everything is going to be OK in the long run type of approach to this ongoing saga. -Tom .

[CIB-173RDABN]

Maybe they should sail those ships off the coast of California and use their desalinization plants to sell fresh water to cities along the coast.

And since they generate their own power, how about connecting to the grid and sell electricity as well.

[higgmeister]

Why don't they run these things as passenger ships between coastal points instead of organized cruise ships?   Cut the overhead, less regulation, try to get back in the black.

[DIRTYSECRET]

Prison ships returning illegals to a port in their own countries.

[Capt. Tom]

Why don't they run these things as passenger ships between coastal points instead of organized cruise ships?

These are foreign flagged vessels and because of our PASSENGER VESSEL SAFETY ACT- and our JONES ACT, they wouldn't be able to do that. -Tom

[DugwayDuke]

DIRTYSECRET wrote: “Prison ships returning illegals to a port in their own countries.”

I’m surprised the Biden administration hasn’t chartered these ships to pick up the illegals in their home country and transport them to the US.

[higgmeister]

So what you are saying is that instead of less regulations there are different regulations.   "Government is not the solution to our problem, government is the problem." — Ronald Reagan

[Fai Mao]

I have been on three Carnival Cruises since the week before Christmas.

All three were about 1/2 full as per CDC recommendations currently. Break even for the company is 40% I read that 70% of the income of most cruise lines come from the casino and it was certainly packed! I don’t gamble, but I appreciated all those other people keeping my cost down!

The mask rules are indifferently enforced. The crew were incredibly happy to see me. The ports were beautiful. The negative COVID test paperwork is (Not that we did this, I’m just saying) easy to forge.

We took a 7 day cruise from Galveston last week for $30 per person plus gratuities, taxes and port charges.

Granted, Carnival is the low end when it comes to food and entertainment, but it was still an incredible value. The total for both of use after all the additional fees was about $480. You cannot beat that for a week, all meals and board included.

You just have to be able to pack up and go on three or four days notice.

[Capt. Tom]

All three were about 1/2 full as per CDC recommendations currently. Break even for the company is 40% I read that 70% of the income of most cruise lines come from the casino and it was certainly packed! I don’t gamble, but I appreciated all those other people keeping my cost down!

I am glad you had enjoyable cruises.

It points out to me the economic problem that the cruise lines have. The Cruise Lines have to make a lot more money than breaking even or making a little profit. They have to make a lot more money to pay back the Billions of borrowed money.

The cruise lines are at a disadvantage, since they have alienated the unvaxxed cruisers, and others just won't go under the present conditions. -Tom