P&O Princess Cruises Q3
P&O Premier Cruises (POC) has reported net income of $150.6 million, or $0.22 per share, on revenues of $778.1 million for the third quarter ended September 30, 2000, compared to net income of $142.7 million, or $0.21 per share, on revenues of $666.3 million for the third quarter of 1999.
POC also reported 2,287,456 passenger cruise days in the third quarter of this year, compared to 1,812,432 last year, and a fleet-wide occupancy rate of 101.5 percent this year, compared to 102.8 percent last year.
The increase in cruise days was attributed to the introduction of the Ocean Princess and the Aurora as well as to the acquisition of two ships in the German market, the Aida and the Arkona.
Gross revenues increased by 16.8 percent, while net yields year-over-year were down one percent according to POC.
POC said that trading conditions for the fourth quarter are proving to be challenging, anticipating yields to be down four percent for the full year due to an expected 13 percent decrease in yields in the fourth quarter year-over-year.
POC also said that the unsettled situation in Israel had led to cancellation of calls there and reduced bookings for the sailings affected. The company estimated the total effect in the fourth quarter to be in the range of $2 -$3 million.
Fuel costs for the full year are expected to be $30 million above those of 1999.
POC also said that competitive pricing conditions in the Caribbean and Transcanal markets in the fourth quarter are continuing into the first quarter of 2001. However, while yields are expected to be down in the first quarter, POC said it expected yields to be significantly better than the fourth quarter of this year.
Meanwhile, the financial markets' reaction has been a steady decline in POC's ADR's from $18.00 on October 23, when they were first listed, to $14.19 at press time.
Analysts surveyed by Cruise Industry News cited the newness of the POC listing, combined with the negative forecasts for the fourth quarter of this year and the first quarter of next year, plus general industry issues of soft pricing and higher fuel costs as contributing factors to the declining evaluation of POC's ADRs.
(Coincidentally, after Princess made its forecast for the next two quarters, the shares of Carnival Corporation and Royal Caribbean Cruises also went down. Analysts said that the different forecasts by the big three cruise companies created uncertainty in the market.)
POC is also impacted by the London stock exchange and company CEO and President Peter Ratcliffe said "we have to communicate to our UK investors what the cruise industry is and explain our business model."
In 2001 Princess Cruises will introduce the 2,600-passenger Golden Princess in the North America market while redeploying the 1,200-passenger Sky Princess to Australia, so that capacity growth for Princess will be about five percent in 2001.
In the U.K., P&O Cruises will have no year­ over-year capacity increases from May 2001, while the 1984-built, 1,200-passenger Sky Princess is replacing the 1956-built, 1,000-passenger Fair Princess in Australia.
Overall, POC anticipates a nine percent capacity increase fleetwide in 2001 compared to 2000 when the company said the capacity increase will be 22 percent by year's end.
Also in 2001, 65 percent of the total capacity will be deployed in the North American sector, 23 percent in the U.K., seven percent in Germany, and five percent in Australia.
Within North America, Princess Cruises said its capacity was deployed as follows: Alaska (20 percent); Caribbean (34 percent); Europe (11 percent); what it calls "exotic trades" including Mexico (23 percent); and the Panama Canal (12 percent).
According to Ratcliffe, the U.S. market generates 75 percent of the company's earnings. He also said that returns in the U.K. were similar to the U.S. P&O Cruises increased its capacity by 45 percent in the U.K. in 2000 with only a one percent impact on yield, Ratcliffe said.
POC has only been in the German market since last November and expects to bring returns up to a U.S. level, according to Ratcliffe.
In Australia, meanwhile, POC expects to post a loss for the year.
For the nine months ended September 30, 2000, POC reported net income of $277.7 million, or $0.41 per share, on revenues of $1.9 billion, compared to net income of $266.5 million, or $0.39 per share, on revenues of $1.6 billion for the first nine months of 1999.
POC reported 6,498,377 passenger cruise days for the first nine months of this year, compared to 5,363,842 passenger cruise days for the first nine months of last year.
POC's objective is to stay the course in the U.S. to be a "destination-oriented cruise line for experienced travelers," according to Ratcliffe. "We will never be bigger than Carnival or Royal Caribbean in the Caribbean," he said.
Along with industry trends, Ratcliffe also expects that Princess will test more new homeports in the U.S. "It is a way to grow the market," he said.
In related news, Ratcliffe also said that the new 2,600-passenger Star Princess, which Princess only last month announced would be based in Los Angeles starting in March 2002, will now sail in Alaska during the summer.
The L.A. program will be launched by the Sea Princess in the fall of 2001, sailing from September to December. Princess brochures had previously listed the Sea Princess sailing three- and four-day cruises from Port Everglades. "That listing was clearly an error," Ratcliffe explained. "We are not a party cruise line."
According to Ratcliffe, the new POC is "always looking for business opportunities on a global scale." But any acquisition candidate has to have a good market position and have competitive ships and furthermore, must fit into POC's business model.
"The U.S. market will grow to carry a double-digit annual passenger load," Ratcliffe said. "The question is how fast it will grow."
Ratcliffe also said that there is no doubt that the industry will globalize. ''We are a major player in the U.S. and will be a major player in the global market," he said. "We have a global advantage, a large percentage of our business is outside the U.S., and we also have a strong international management team."
Also in 2001, Princess will roll out a new marketing campaign, revamping its positioning. The focus will be on how Princess treats passengers as individuals.