Shares in cruise operator Carnival (CCL) fell 1.2% to £11.65 after it sunk to a deep annual loss due to the impact of the pandemic.
Revenue in the year to 30 November 2020 fell 73% to $5.6 billion from $20.83 billion the year before, while the firm swung to a $10.25 billion pre-tax loss compared to a $3.06 billion profit in the prior year.
Travel, and in particular cruises, has been one of the hardest hit sectors during the pandemic, and Carnival has continually had to cancel and extend suspensions of a number of departures as the restart of its operations keeps getting pushed back.
CARNIVAL BURNING THROUGH $600 MILLION A MONTH
The company’s monthly average cash burn rate for the fourth quarter of 2020 was $500 million, which it said was slightly better than expected due to the timing of capital expenditures. Carnival expects the monthly average cash burn rate for the first quarter of its 2021 financial year to be approximately $600 million.
As of January 14, 2021, none of Carnival’s ships were operating with guests onboard and the company said ‘significant events affecting travel, including COVID-19 and our pause in guest cruise operations, have had an impact on booking patterns.’
It added, ‘The full extent of the impact will be determined by our gradual return to service and the length of time COVID-19 influences travel decisions. We believe that the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a material negative impact on our financial results and liquidity.’
PENT UP DEMAND
Carnival wasn’t all downbeat in its outlook however, and said that with the ‘aggressive actions we have taken, managing the balance sheet and reducing capacity’, it is ‘positioned to capitalize on pent up demand and to emerge a more efficient company.’
The firm insisted that maintaining a strong balance sheet has historically been one of its key strengths, and that while it has more than doubled its total debt from $11.5 billion to $24.4 billion as it looks to stay afloat, it strengthened its capital structure through equity, raising $3 billion during 2020 and strengthened its balance sheet through the early conversion of convertible debt.
‘All of these efforts are in line with our primary financial objective going forward, to maximize cash generation. As we return to full operations, our cash flow will be the primary driver in our efforts to return to investment grade credit over time, creating greater shareholder value,’ Carnival added.
