Carnival Corporation & plc: Fiscal 2023 Form 10-K Summary
Reporting period: Fiscal year ended November 30, 2023. The filing is an annual report, not a standalone fourth-quarter filing; separate Q4 results are not clearly provided in the supplied text.
Business context
Carnival Corporation and Carnival plc operate as a single economic enterprise under a dual-listed-company structure. The company is the largest global cruise operator, with nine principal brands, 92 ships and approximately 257,930 lower-berth passenger capacity at November 30, 2023. Guest cruise operations completed their return to full operations during 2023.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $21.593 billion | $12.168 billion | +$9.425 billion |
| Operating income (loss) | $1.956 billion | $(4.379) billion | +$6.335 billion |
| Net income (loss) | $(74) million | $(6.093) billion | +$6.019 billion |
| Basic and diluted EPS | $(0.06) | $(5.16) | Improved |
| Net cash provided by operating activities | $4.281 billion | $(1.670) billion | +$5.951 billion |
| Total debt | $31.339 billion | $35.615 billion | Down $4.276 billion |
| Liquidity | $5.4 billion | Not clearly provided | Includes $2.4 billion cash and $3.0 billion revolver availability |
- Passenger ticket revenue was $14.067 billion, or 65% of total revenue; onboard and other revenue was $7.526 billion, or 35%.
- Occupancy reached 100%, compared with 75% in 2022. Passenger cruise days increased to 91.4 million from 54.6 million, and passengers carried rose to 12.5 million from 7.7 million.
- Operating margin was approximately 9.1% in 2023, compared with approximately negative 36.0% in 2022. Net margin remained slightly negative at approximately negative 0.3%.
- Interest expense increased to $2.066 billion from $1.609 billion despite lower debt, primarily because of higher average interest rates.
- Capital expenditures totaled $3.284 billion, including $1.9 billion for newbuilds and $1.4 billion for ship improvements, information technology, buildings and other improvements.
- Cash used in financing activities was $5.089 billion, including $7.660 billion of long-term debt repayments and $2.961 billion of long-term debt issuance.
- Working capital was negative $6.2 billion, largely reflecting $6.1 billion of customer deposits collected in advance of sailings.
Material changes versus the prior comparable period
- Revenue more than doubled as more ships returned to service and occupancy recovered to historical levels.
- The company moved from a $4.379 billion operating loss to $1.956 billion of operating income, but remained slightly unprofitable after interest and other nonoperating expenses.
- No ship and other impairment charges were recognized in 2023, compared with $440 million in 2022.
- Operating cash flow improved from $1.670 billion of cash used in 2022 to $4.281 billion of cash generated in 2023.
- Debt declined materially from its first-quarter 2023 peak; management reported a $4.6 billion reduction from that peak and continued debt refinancing and repayment efforts.
- Fuel expense declined by $110 million to $2.047 billion, despite higher fuel consumption, due primarily to lower fuel prices and changes in fuel mix.
- Customer deposits increased to $6.1 billion from $4.9 billion, supporting liquidity but also increasing current liabilities.
Guidance, outlook, risks and unusual items
- Management expects another year of record revenue in 2024 and reported the best booked position on record for both price and occupancy entering 2024. The filing does not provide a clear 2024 revenue, earnings or EBITDA range.
- Management intends to continue refinancing and prepaying debt, reduce interest expense and work toward investment-grade leverage metrics. Dividends are not expected for at least the next few years.
- The $2.1 billion New Revolving Facility is expected to replace the existing revolving facility when it matures in August 2024. The company expects substantially all remaining credit-card reserves to be returned during the first quarter of 2024.
- Scheduled 2024-2028 cash requirements total $32.992 billion, including $29.597 billion of debt payments and estimated interest and $3.395 billion of newbuild capital expenditures. The company also had $3.0 billion of undrawn export credit facilities for newbuilds.
- EU Emissions Trading System costs are estimated at approximately $51 million in 2024, based on a $75-per-metric-ton allowance cost. FuelEU Maritime requirements become effective in January 2025.
- The OECD global minimum tax could affect the company beginning in 2026; management estimates a potential annual impact of approximately $200 million before mitigating actions.
- Key risks include substantial leverage and refinancing needs, variable interest rates, fuel-price volatility, inflation, geopolitical disruptions, pandemics, adverse weather, climate regulation, cybersecurity, supply-chain interruptions, labor availability, foreign-exchange movements and competition.
- Material or unusual matters include $111 million of debt extinguishment and modification costs, the company’s appeal of a $110 million Havana Docks judgment plus fees and costs, and continuing COVID-19-related class actions that management believes will not materially affect the consolidated financial statements.
- Sustainability progress included a 14.0% reduction in GHG intensity per lower-berth kilometer and a 14.1% reduction per available lower-berth day from the 2019 baseline. Shore-power capability covered 64% of the fleet, and eight LNG ships were in operation at year-end.
Most important facts for investors to verify
- Whether strong 2024 booking trends convert into sustained pricing, occupancy and onboard-revenue growth.
- Quarterly cash generation and the pace of debt repayment relative to approximately $31.3 billion of total debt and substantial near-term maturities.
- Compliance with debt covenants, including minimum liquidity and interest-coverage requirements beginning in 2024.
- The actual cost of EU ETS and future FuelEU Maritime compliance, including fuel, shore-power and capital-investment requirements.
- Whether the company achieves positive full-year net income after approximately $2.1 billion of annual interest expense.
- Potential exposure from litigation, environmental matters, cyber incidents, geopolitical disruptions and future pandemics.
- Progress and funding for new ships, Celebration Key and other capital projects, including the $3.395 billion of newbuild commitments through 2025.