Royal Caribbean profit falls 92 percent

Jason · May 3, 2007

By Matt Sedensky, The Associated Press

MIAMI - Royal Caribbean Cruises Ltd., the world's second-largest cruise line, said Tuesday that its first-quarter profit sank 92 percent from the year-ago period, mainly because of higher cruise operating expenses and its acquisition of Spanish cruise and tour operator Pullmantur.

Net income sagged to $8.8 million, or 4 cents per share, for the three months ended March 31 vs. $119.5 million, or 55 cents per share, in the prior year. Analysts polled by Thomson Financial expected earnings of 6 cents per share.

The company, which employs 345 people at a call center in Springfield, said Pullmantur's business is highly seasonal with strong summer months but weak winter months. It also included a two-month lag in Pullmantur's results.

The changes hurt its first-quarter earnings, with Royal Caribbean saying it also will affect second-quarter results.

Revenue for the quarter rose 6 percent to $1.22 billion from $1.15 billion in the previous year. Wall Street consensus estimates put sales at $1.18 billion.

But total cruise operating expenses rose faster, climbing 15.2 percent to $841.3 million from $730.1 million.

The company continued to lament a weak demand environment in the important Caribbean market - a problem besetting the entire cruise industry and hurting net yields.

Success in Europe and Alaska have helped offset problems in the Caribbean. Royal Caribbean announced earlier this year its largest ever deployment in Europe with seven ships visiting in 2008. ``I think we are seeing - frankly everyone in the industry is seeing - the same type of phenomenon,'' Chairman and CEO Richard Fain told investors in a conference call. ``These new markets are opening up really very quickly, and I think everyone is taking advantage of it and there's limitations on how much new capacity we can add.''

jtutak · May 3, 2007

Then why don't they drop the prices???

jacketwatch · May 3, 2007

I wonder how much of that is a numbers game. Afterall 92% is staggering. If a co. had a 92% drop in profits I would think bankruptcy would follow. Perhaps most of that is reflected in the Pullmantur takeover and I would hope they have a cohesive plan for recovery. Anyway I sort of doubt RCI will be announcing bankruptcy anytime soon.