Carnival FY 2Q17 Earnings Call Notes

Arnold Donald

Haven’t seen any impact from any terrorism incidents in Europe

Got it. So first of all, yes, absolutely, we haven’t been able to measure any kind of impact from the various geopolitical issues and events in Europe and that sort of thing. So we haven’t seen any lost momentum. We see strong momentum in the business all the way through, it’s very early to be talking about first-half of next year. But through the first-half of next year, we’re up on occupancy, up on pricing, against a very tough comparison, because obviously a strong year this year, strong year last year, so lot’s of momentum in the business for certain.

Going to be down a little in capacity in China next year

“So we will be down next year in China a little bit on capacity. And again, that’s not only about China, it’s much about opportunities around the world, because our philosophy is, we always want to optimize and what we generate from our ships. So – but I don’t – China long-term it’s going to be a huge market. We’re extremely excited about our partnership with CSFC that has moved along very nicely. We still have lots of work to do with the trade there in China with distribution system. But again, just please keep in mind, the industry is tiny there. I mean, we’re very, very, very small, and these little moves hopefully. Hopefully the fact that there is less capacity next year. We’ll create the opportunity for yield improvement in China hopefully. But you can’t evenguarantee that, because there’s still a B2B business. “

Carnival Corporations 4Q16 Earnings Call Notes

Arnold Donald – President & CEO

A lot of change happening in Cuba already, but slowly

“No, not that I’m aware but at this point in time obviously there are number of ships going for the first time, including Paradise which we’re excited about as I mentioned in my opening comments. So we are sending larger ships, Paradise probably the largest ship from the U.S. to Cuba going. And so you know, it will happen overtime, they’ve got pace and take their time but again there is a lot of change already occurring there, additional cruise companies are not going to Cuba after RE initial foray with the [indiscernible] Fathom brand and so things are increasing and we’ll just have to continue to work with them and go at the pace they want to go.”

New ships give higher ROIC

“Yes, sure. First of all, the new ships inherently give you a higher return on invested capital in general because of the mix, the scale, the density, the efficiency, just a combination of everything. So you know you’re going to build new ships because they are inherently more efficient and position for stronger return on invested capital in all kinds of environments. So new ships are coming.”

Carnival 3Q16 Earnings Call Notes

Carnival Corporation’s (CCL) CEO Arnold Donald on Q3 2016 Results

Industry cruise capacity in China to rise 31% next year

“Our capacity growth in China is expected to be 26% next year compared to 66% this year. Industrywide growth in china is expected to be 31% in 2017 compared to 100% this year. Those numbers sound big, but keep in mind that the large year-over-year percentage increase is over a very small base. So these growth rates are directionally equivalent to adding less than one 3,000-berth vessels to our China fleet and roughly two 4,000-berth vessels to the industry fleet overall in 2017 in China.”

Booking curves in US look strong

” So no real guidance yet for 2017 on that except what David shared in his comment about where the bookings were for Asia overall. In terms of the North America brands in Europe, again our booking curves look strong, and look good as do our pricings, but you’re asking about third quarter 2017, obviously that’s ways off.”

Ships sailing full in China

“Yes. Right now, our charter activity is strong in China. Our occupancies this year were very good. We anticipated as we said in the opening comments that we would see yield decline, but China is profitable, occupancy levels are high, which means the increased capacity was absorbed in terms of having guests on the ships. The ships are sailing full. And chartering for next year at this point is in process, but solid. We don’t see any consternation around occupancy for next year.”

The Chinese government sees the cruise industry as an important industry

“cruise is in the 5 year plan for China. So that means the government has committed to developing the Cruise industry. The reason for that is pretty self-evident. We’ll employ, overall with port development and infrastructure, and supply chain, and training as well as ship building that will employ millions, and millions, and millions of Chinese. So the government is very interested and they see cruise as an economic engine going forward. So you’ve got the support of the central government and the various provincial municipal governments, so that’s very important”

China is an embryonic market

“Beyond that clearly as we anticipated, as you guys have identified through your assessments and stuff that yields declined, we see China as a unit volume, a unit growth story as ultimately accretive to earnings, which it has been for us and overall helping us optimize yields across the global fleet and it’s working really well. Having said that, there is a gap with distribution. It’s an embryonic market. Distributors are finding their way for the first time in cruise. It is a charter market, a B2B market, so then it reduces possibilities of discontinuities that you might not see if you had a direct to consumer kind of a market.”

No material impact from Zika

“We’ve seen no material impact from Zika. We didn’t get any cancelations or they’re not enough to mention. We didn’t see any impact on booking volume or timing or anything. So we have not seen an impact from Zika. Having said that, you know, could there be a little bit of noise? That is just overwhelmed by the great demand that there is for the Caribbean would have been even greater and hypothetically you can say that, but we have seen nothing to suggest there was impact from Zika.”

Historically there’s an election slowdown

“Also, we’ve anticipated a bit of an election slowdown, as historically there’s always been a little fall off in booking volumes around election time. And so there could be some of that, but in our case again, right now we’re doing so well, and we’re so far ahead and the pricing is strong. We’ve got great close-in pricing right now and so it’s been very good. But relative to what the other companies, other cruise lines, I wouldn’t have a comment, but other than to say I’m sure it’s a combination of the relative moves they made in deployments and stuff, but I have no idea.”

There’s always something going on

” every year there’s geopolitical tensions. There’s some kind of disease consternation. There’s macroeconomic malaise. There’s isolated or concentrated over-capacity in the cruise industry. Every year in some markets around the world, those things happen and it’s part of our business. So we manage that. We anticipate it. We change deployments. We do good revenue management practices, manage around it and that’s basically it. So to us it’s normal business. I wish it wasn’t that way. Every now and then hopefully we’ll get lucky and there won’t be those incidents because we think we would do better”

Carnival FY 4Q15 Earnings Call Notes

Carnival’s (CCL) CEO Arnold Donald on Q4 2015 Results

Don’t see any reason to change our fuel hedging strategies

“but so far, with forward pricing, we haven’t seen an opportunity to do anything that we think makes sense. Obviously, nobody really knows, as is evidenced by what happened the last couple of years. But we constantly review it. But at this time, we see no reason to do anything different.’

Excited about China

“I think, first of all, as you are well aware, there are over 100 million outbound tourists in China already and today, cruise is capturing less than a million of those tourists and that number is going to grow dramatically in terms of the total number of outbound tourists and the fit for cruise is far greater than, less than 1%. So there’s plenty of demand.”

“so we are very excited about China. It is today only 5% of our capacity. There may be discontinuities at times as you try to get distribution lined up with that pent up demand, but it’s all, from our perspective, very manageable. But a very great market, a strong future market, a contributing market today to the bottom line and to our whole approach on developing relative scarcity around the world.”

David Bernstein

What happens to fuel and currency will have a big impact on profits

“And really the fourth is fuel and currency. I mean, if you’ve got a crystal ball that we could use, I would love to have it, but I will tell you, we take the current spot price of fuel and the current currency rates and we bake them in and they do change.’

Carnival FY 3Q15 Earnings Call Notes

Arnold W. Donald – President and CEO

Public relations effort is outperforming

“Our public relations effort continues to outperform. We generated positive media impressions in the first half of this year that almost equalled our positive impressions for all of 2014, which were already well above the historical highs. In the first half, our brands generated 75% of the entire cruise industry’s positive coverage, and as that even includes the recent announcement regarding Cuba, another industry first by our Company.”

Brands separate but synergistic

“So the reality here is, our brands are very different from each other, they compete in different typographic markets, but they can learn from each other and common itineraries and common regions of the world and intelligence in terms of what’s happening with booking curves and reactions, especially since they all tend to extend chasing newer cruise than chasing different newer cruise individuals because of the typographic profile, but they are all chasing newer cruise. So we’ve had benefit to date which is why we have had some of the outstanding operating results we’ve had and this too will allow us to capture even more benefit, regardless of the environment.”

Book now if you are thinking about booking a cruise for next year

“I think the simplest statement we can make is for those who are considering cruising next year is, better to book now, because this is the best time for them to book.”

China yields may be down, but we’re growing our capacity

“China yields may come down a bit but they’re going to be return accretive because of the significant increase in capacity.”

No falloff in demand related to the stock market

“We did not see any falloff in demand related to stock market or general economic fluctuations, none whatsoever.”

No plans to change energy hedging practices

“At this point in time we have seen no advantage to unwinding those collars or anything to that effect. When we looked at it once earlier this year, we would take them and then if we had done it, we would have lost on both ends, unwinding and then setting new collars. And so at this point wouldn’t have any particular plans to change but we review it constantly.”

David Bernstein – CFO

Expecting a good year in 2016

“I want to provide you with some color on 2016. Although it’s early, 2016 appears to be shaping up to be another good year. We are forecasting capacity to increase 3.7%. For 2016, we are expecting to see constant currency net revenue yield improvement. I will provide guidance on the December call when we have more visibility.”

Europe is probably the most challenging region currently

“Overall, Continental Europe is probably more challenging. When you think about all of the economic difficulties and the geopolitical issues and the growing refugee concerns, that’s the area that has had the most challenges in terms of pricing for 2016”

Carnival Cruise FY 2Q15 Earnings Call Notes

Building next generation ships

“we finalized the contract with Meyer to build four, state-of-the-art ships designed to provide an exceptional vacation experience tailored to our guest’s preferences.

This was part of our largest strategic partnership announced in March with Meyer in both Germany and Finland and with Fincantieri area in Italy to build nine ships over four year period from 2019 to 2022 and keeping with our measured capacity growth strategy.

These next generation ships will be the most efficient ever build with a total guest capacity of 6,600 through an innovative design pairing incredible cabins with even more innovative use of the ship public spaces.

Adding price per berth, in line with our existing order book, these ships will significantly enhance the return profile of our fleet. Moreover these next generation ships will pioneer a new era in the use of sustainable fuels through our green cruising designs, representing the first cruise ships to be powered FC by LNG”

A lot of macroeconomic difficulties in Europe

“As we had said before in the notes, there is a lot of macroeconomic difficulties in Europe. The economy seems to be bouncing along at the bottom”

Biggest competition is land based travel because we get 1/2 of all people who cruise

“First of all for us our business is pretty straightforward and so we consider our competition to be land based vacation. We have very differentiated product offerings versus the other cruise companies.”

“One of every two people cruise in the world, cruise with us and anything that generates interest in cruising automatically helps us and frankly it helps the other companies as well. So that is the focus of it and we think we’re seeing some success, there are some variables in any given year in any given market at any given time.”

First time cruisers up a lot especially from China

“first time cruisers are up dramatically, now there is a number of things that contribute to that beyond this year, I guess last year we were 3.4 million first time cruisers whereas the year prior we were like something like 2.7 or 2.8 or something. But there are number of things that drive that, number one we have got lot of first time cruisers elsewhere in China”

Industry capacity growing in 4-5% range

“Yes I think first of all overall the capacity growth for the industry is in the 4% to 5% range and our capacity growth along with vessels that we take out of service is going to be less than that. So we are totally focused on measured capacity growth.”

We’re still low penetrated in overall vacation market

“And we feel that with China in particular but even without China and the existing markets that that level of growth as long as we’re creating demand because we’re still relatively low penetrated as an industry as cruise industry in the overall vacation market that there is ample opportunity to create the relative scarcity to get yields off over time and to have them be up and still the greatest vacation value there is while providing the greatest vacation experience there.”

Carnival Cruises FY 1Q15 Earnings Call Notes

Capacity up 2%

“Our capacity increased almost 2%. The North American brands were up 3%, while the European, Australia and Asian brands also known as our EAA brands, were flat. Our total net revenue yields in the first quarter were up 2%.’

Fuel hedges can go against you too

“Your point about the fuel, yes, the fuel price did move. But one of the things the fuel collars or the fuel derivatives offset a big chunk of the fuel price movement. And the reason that that happened was while the brent fell, our fuel price did not fall by as much as brent because when we did our December guidance, the [crack] [ph] spread was 75%, roughly speaking and at this point in time it’s 81%. So brent fell by far more, 6% or so more, than the price of the fuel that we purchase and so that’s why it wasn’t a perfect 50% offset there.”

It’s tough to measure advertising’s direct impact

“the reality is that following advertising’s direct impact is always a difficult challenge. What we can measure is the level of communication. Web site hits, impressions, conversations around the brand. That we can measure. And so we know we had a lot more conversations generated about cruising. There is no question about that. We would hope that over time that translates to greater demand and ultimately bookings and higher yield”

If you give your customer what they want they’ll buy it

“t’s not so much change in consumer behavior as much as us listening to our guests and giving them more of what they want. And if you give them what they want, they will buy it.”

Carnival Cruise Lines 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

We’ve turned a corner

“This is an exciting time for our corporation. Last quarter we indicated that we felt like we were turning the corner and our third quarter confirmed that we have. The 15% earnings improvement achieved in the third quarter and the increased guidance expected an even stronger improvement in full year earnings is truly a credit to our global team.’

Technology initiatives to reduce fuel consumption

“we have a series of technology initiatives in progress related to energy efficiency in areas like propulsion, lighting and air conditioning to name a few that we will continue to roll out during the resulting accelerated dry dock schedule. These initiatives have a quick payback period as we continue to steadily reduce few consumption in the years to come.

It is gratifying to say we have reduced our fuel consumption by another 5% this year and 25% since 2007, meeting our stated goal of delivering a 20% reduction in carbon emissions ahead of schedule while saving more than 1 billion gallons of fuel and $2.5 billion of fuel cost during that period.”

The Chinese government is promoting the cruise industry

“The Costa brand, as I mentioned, in the introduction here was the first brand to do so in China. And things take time to develop and we have been successful in developing our business there and others have come in now as well. What’s changed in addition to that, first was it just takes time to develop a market. But what’s changing in addition to that is that the government has it as a priority now.

The Chinese government has a plan for development of a cruise industry in China and that means, you are getting tremendous support and opportunity to participate led by the various governments whether it’s the Central Government or the provincial or the municipal governments like in Shanghai and Tianjin. And so all of that bodes well, we are beginning to gain momentum. Distribution system is learning how to market a product such as a cruise product. You are beginning to see players in China look at building the domestic brand, which we think will be real powerful at to developing that market.’

The brand has recovered very quickly, but of course we’d like it to recover faster

“Well, real quickly, in terms of the overall feeling about the brand. I would say that the recovery is probably the little faster than we had a right to believe it would be, but at the same time, it’s not nearly fast enough for all of us’

Optimistic about both North America and Europe going into 2015

“I would just say that we have seen the lengthening in the booking curve and higher prices in the first half of the year so far in North America. And while we’ve seen somewhat latent of the booking curve for the first half of next year in Europe, the prices are comparable pricing, so that’s probably what you are reacting to.

Having said that, I wouldn’t describe that broadly as North America being stronger than Europe or vice versa. Some of it has to do with the comparisons year-to-year and just a mix. So we’ll see how it goes. We are optimistic about both markets going into 2015.”

Continue to pursue fuel savings

“But, obviously, we will continue to aggressively pursue not only through the Department of Technologies but also managing deployments and managing the ships on itineraries from a fuel consumption standpoint, as well as all the practices onboard.

And so we will continue pursue fuel savings as we have in the past.”

We’re expecting quite a bit of growth in Asia and China

“Just one additional comment on the — on Arnold was answering, keep in mind that we’re expecting quite a bit of growth in the emerging markets particularly, Asia and China. So that should be able to profitably absorb a lot of that capacity and the other more established markets will see it more measured capacity increase.”

Carnival Cruise Lines 1Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

Turned a corner

“So, first of all, it feels like we’ve turned a bit of a corner. We achieved not only better than expected results for the second quarter, but we also achieved year-over-year earnings growth.”

favorable pricing trends in Europe and NA

“We were pleased to see our European brands revenue yields turn positive in the second quarter and particularly encouraged by the favorable pricing trends emerging not only in Europe, but in North America, as well”

Carnival trying to hold price at the expense of occupancy

” for the better part of the last year, Carnival Cruise Lines has been following a new revenue management tactic, holding price and giving up a few percentage points of occupancy.”

Efficiency improvement can come from leveraging scale, coordinating between brands

“I wanted to know we have a focus on it and where it emanates from is just coordination and communication and then single sourcing in some instances are limited sourcing, multi sourcing, you know, across the brands and just leveraging the scale that we have.

The brands individually have done good jobs at managing their costs. Some of the brands have done outstanding jobs. And we want to mine those best practices, deploy them across the fleet and across the brands.”

78 million passenger cruise days

” we fill 78 million plus passenger cruise days a year and $1 more per day is worth $78 million to us. So, the details matter and the discipline and the fine tuning matters.”

Booking patterns improved in Europe, expect to see something similar in the US

‘if you look at Europe in particular, the booking patterns have improved. So, people are booking further ahead than they did the prior year. Occupancy is up, yields are up, so that’s all very positive stuff. We expect to see similar trends, in due course, on a consistent basis in North America, as well.”

Carnival 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Brand recovery pretty much complete

“brand perception is most of the way back, consideration among brand loyalist have previously recovered and now the new to cruise is back, and we are working to complete perception recovery among switchers.”

Continue to drive brand through promotion including social media

” And so obviously, we want to drive demand, and we will do that through promotion period. So that’s advertising through social media, or whatever, and we will continue to invest in that.”

Opportunities to cut costs and grow revenue, revenue is the real opportunity though

“our opportunity is scale. We have 78 million passenger cruise days a year. We have 10 million guests a year. And on the revenue side, small moves on the revenue side produce substantial cash flow and operating earnings opportunity for us. And so we are going to do both, we are going to walk and chew gum, but the big opportunity is clearly on the revenue side.”

Wont see big industry capacity increases this year

“I won’t say, ships are moving out, but it’s highly unlikely we’ll see the level of capacity increase next year that we see in this year.”

Pulse advertising

“And so we’ll examine it. I’m a personal believer and pulsing that you advertise for a period of time, then you take a little break and you advertise. We have 10 brands. We can manage that over but we’ll see how it works out and I don’t have any preconceived notions. I want to hear from the brands in terms of what they think is having the greatest impact and evidence they can provide to that.”

Seeing strength in Europe

“And I will say in general, in Europe, we do as I mentioned earlier on the call, with the booking curves being moved out we see strength in Europe. And again, it’s reflected in our guidance, but we actually see a strong performance collectively in Europe this year.”