CRUISE INDUSTRY

Revenues up, but expenses take Norwegian to a second-quarter loss

 
 
The Norwegian Breakaway, Norwegian Cruise Line's newest ship,  made its New York City debut in May.
The Norwegian Breakaway, Norwegian Cruise Line's newest ship, made its New York City debut in May.
Dimitrios Kambouris / Getty Images for Norwegian Cruise Line

hsampson@MiamiHerald.com

With a new ship sailing in New York City, Norwegian Cruise Line Holdings saw revenues shoot up in the second quarter, but expenses — especially related to refinancing transactions — drove the company to a loss.

The Miami-based cruise operator on Monday reported a net loss of nearly $9 million. Adjusted net income, which excludes $70.1 million in refinancing expenses, was $60.2 million, compared to $36 million in the second quarter of 2012.

That adjusted net income equals about $.29 per share, which beat analyst expectations of 27 cents per share and the company’s own forecast.

Adjusted net cruise costs, not counting fuel, increased 4.8 percent because of drydock maintenance and updates on two ships and expenses related to introducing the Norwegian Breakaway.

Higher passenger ticket prices, the addition of more capacity with Breakaway and increased spending aboard ships pushed total revenues up about 10.5 percent to $644.4 million. Net yields, or the net revenue per capacity day, increased 3.5 percent. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, increased nearly 13 percent to more than $152 million

“We had good pricing, considering the situation in the marketplace,” said Kevin Sheehan, Norwegian Cruise Line’s president and CEO, in an interview.

Publicity over mishaps involving competitors’ ships, including the February fire aboard the Carnival Triumph and May blaze on Royal Caribbean International’s Grandeur of the Seas, has led to sluggish bookings and lower prices for the industry. Sheehan said the company has also not seen the boost expected after the 4,028-passenger Norwegian Breakaway launched in its home port of New York City in May.

Based on the rush of bookings that followed the introduction of the Norwegian Epic in 2010, Sheehan said during an earnings call that he “expected that same sort of halo effect.”

“What happened was we didn’t see it,” he said.

Tim Conder, a Wells Fargo analyst, said in a note to investors Monday that it appears that Carnival’s pricing in the Caribbean is bottoming out.

“It appears NCLH like RCL continues to see limited close-in pricing ability and some modest [fourth-quarter] pressure in the Caribbean due to the Carnival Triumph incident,” he wrote, using the stock symbols for Norwegian and Royal Caribbean.

But Sheehan said he believes the negative coverage is starting to ease up and that the past few weeks have been a “little bit better.”

Norwegian now expects yields to increase 4-5 percent for the full year, a tighter estimate than the previous forecast of 3.5-5.5 percent. Adjusted earnings per share are now expected to fall between $1.30-$1.40, a slight change from the previous guidance of $1.20-$1.40. The cruise operator also said costs are expected to increase 5-6 percent for the full year, slightly changing the previous forecast of a 4-6 percent cost increase.

The company’s next new ship, Norwegian Getaway, will start sailing in January from its year-round home port of Miami.

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