Financial issues for cruise industry

[4774Papa]

Interesting article on financial issues for cruise industry as well as vaccinations requirement.

 

https://www.fool.com/investing/2021/02/22/dont-ignore-glaring-problem-in-cruise-industry/

 

[Baron Barracuda]

RCG released 4q results this morning.  No surprises, another $1B loss for the quarter.  Cash burn still projected at $250MM/month.  Balance sheet continues to deteriorate.  No word on re-start other than they continue to work with CDC.  

[marieps]

9 minutes ago, Baron Barracuda said:

RCG released 4q results this morning.  No surprises, another $1B loss for the quarter.  Cash burn still projected at $250MM/month.  Balance sheet continues to deteriorate.  No word on re-start other than they continue to work with CDC.  

The fool article is merely a sales pitch for their fee based advice on the top ten stocks right now...here's a hint, NCLH is not one of them.  It comes in the last paragraph.  The article says little we don't already know.   What I do know is RCH's guidance has boosted the stock price 10% today.  Peers are up as well.  Justified?  Probably not.   But it sets the bar a bit higher so when the stock does fall it may still be profitable for those who bought at the right time.

[Baron Barracuda]

49 minutes ago, marieps said:

The fool article is merely a sales pitch for their fee based advice on the top ten stocks right now...here's a hint, NCLH is not one of them.  It comes in the last paragraph.  The article says little we don't already know.   What I do know is RCH's guidance has boosted the stock price 10% today.  Peers are up as well.  Justified?  Probably not.   But it sets the bar a bit higher so when the stock does fall it may still be profitable for those who bought at the right time.

Didn't see RCG post any guidance at all.  Still in wait and see mode.  Jump in stock price might be because results weren't worse.  Also, all the re-opening stocks (DIS, cruise lines, airlines, etc) are up big today on optimism over vaccine progress, fewer cases and herd immunity talk.

[Orator]

3 minutes ago, Baron Barracuda said:

Didn't see RCG post any guidance at all.  Still in wait and see mode.  Jump in stock price might be because results weren't worse.  Also, all the re-opening stocks (DIS, cruise lines, airlines, etc) are up big today on optimism over vaccine progress, fewer cases and herd immunity talk.

The RCL price seemed to move after the comments by Richard Fain following earnings report. He said that future bookings have increased 30% compared to bookings in November-December, 2020.Stock prices are about future earnings not past earnings. 

[marieps]

1 hour ago, Orator said:

The RCL price seemed to move after the comments by Richard Fain following earnings report. He said that future bookings have increased 30% compared to bookings in November-December, 2020.Stock prices are about future earnings not past earnings. 

That's what I saw as well.    They noted a pent up demand.  Anyone who's ever been on these boards can attest to that.

[Baron Barracuda]

3 hours ago, Orator said:

The RCL price seemed to move after the comments by Richard Fain following earnings report. He said that future bookings have increased 30% compared to bookings in November-December, 2020.Stock prices are about future earnings not past earnings. 

Yes, but on CNBC Fain walked back "strong" booking numbers as only being strong when compared to a very weak prior quarter.  Also made some wishy-washy comments on progress with CDC.  While stock prices are a reflection of anticipated future earnings didn't see or hear any good news on the earnings front today.  At this point neither Fain, Liberty or Wall St have any idea when the company will return to profitability or what the long term growth curve looks like.  At this point have to take my cue from the balance sheet which is getting uglier by the quarter. 

[CroozFanatic]

This can't go on forever.

 

Investors haven't given up...yet.  

 

Bankruptcy will happen suddenly, if it does.

 

How did you go bankrupt? Two ways: gradually, then suddenly.

 

We're definitely in the gradually phase.

[rmalbers]

CCL sold an additional 40 million shares for $25 yesterday to raise $1 billion, I assume other cruise companies will follow.  What cruise companies do have is ships for collateral, if they have not used that up already, I know some have a least partially already done that.

[mahdnc]

Amazingly, RCL price broke $96 today.

[4774Papa]

On 2/22/2021 at 6:50 PM, CroozFanatic said:

This can't go on forever.

 

Investors haven't given up...yet.  

 

Bankruptcy will happen suddenly, if it does.

 

How did you go bankrupt? Two ways: gradually, then suddenly.

 

We're definitely in the gradually phase.

Agree,

Cruising should start up by early Summer.  Cruise lines can require vaccines to board. Even with the new strains, the risk to people with a vaccination and in good health is very low.  

[grandgeezer]

On 2/22/2021 at 2:01 PM, marieps said:

That's what I saw as well.    They noted a pent up demand.  Anyone who's ever been on these boards can attest to that.

I would guess a majority of the pent up demand is coming from people who took the fcc from cancelled cruises rather than the cash refund.

[marieps]

3 hours ago, grandgeezer said:

I would guess a majority of the pent up demand is coming from people who took the fcc from cancelled cruises rather than the cash refund.

I was wondering if the analysts on the call are savvy enough to ask what percentage of the bookings are "new money" and what share is revenue already in the coffers getting rebooked thru FCC.   

[LGW59]

3 minutes ago, marieps said:

I was wondering if the analysts on the call are savvy enough to ask what percentage of the bookings are "new money" and what share is revenue already in the coffers getting rebooked thru FCC.   

Of course they are, the can run reports to distinguish from FCC $ to new $ bookings and I would bet the CFO looks at those numbers every day. 

[4774Papa]

We would be new bookings and I believe many new booker are very ready to cruise again.  We have a TA from Rome to Florida on Reflection booked for October, it was a transfer from Connie that also went from Rome to Florida in October.  We have been looking harder in 2022 since we have a safari in East Africa in July.

[Croooser]

I have a non cruising friend who speculated that the cruise lines will continue to receive interim financing from the lenders because the lenders already had a lot of capital at risk with the cruise lines before covid that they did not want to have to write off. A variation on the "too big to let fail" notion. Now, at some point, the lenders will need to decide if they are sending good money after bad.

 

So far, the speculation seems to be that once they are permitted to sail again, that the cruise lines will be profitable and able to pay down this debt that has been generated. Whether that thinking holds will likely depend on the next several months as well as the longer term.  Wait and see and hope for a good outcome especially for the crews who likely are in a world of hurt without the support of stimulus payments, etc.

 

 

[Baron Barracuda]

Consider that in 2019 a record year for RCL they earned $2B.   Last year thanks to covid they lost almost $6B and their debt increased by almost $8B.  Interest expense 4q '19 vs 4q '20 rose from $90MM to $275MM for an annualized increase of $700MM.  For '21 situation will only worsen with cash burn currently running $250MM/month.  Even when cruising resumes they'll initially be operating with fewer ships operating with lower loads.  Just to pile on, fuel costs have begun to spike (although they are 50% hedged for '21).  Given the above, the prospect of returning to their '19 level of profitability seems far down the road.  

 

 

 

[ipeeinthepool]

3 hours ago, LGW59 said:

Of course they are, the can run reports to distinguish from FCC $ to new $ bookings and I would bet the CFO looks at those numbers every day. 

 

3 hours ago, marieps said:

I was wondering if the analysts on the call are savvy enough to ask what percentage of the bookings are "new money" and what share is revenue already in the coffers getting rebooked thru FCC.   

 

6 hours ago, grandgeezer said:

I would guess a majority of the pent up demand is coming from people who took the fcc from cancelled cruises rather than the cash refund.

 

The RCL financial guy addressed these questions during the earnings call and I think the FCCs are playing a very large roll.  They indicated that RCL had $1.8 Billion in customer deposits but a little over 50% were FCC deposits and even more concerning was that around 30% were non-refundable deposits. 

 

Although RCL is trying to paint all of the new bookings as good news, half the people may not have had any good options.   The third with non-refundable deposits didn't have any other choice,

[rmalbers]

Ya, the FCC's were running at 65% vs. cancel  (RCG CEO-CNBC), that number is from last summer and is the last one I heard.  It's probably still a good round figure to use.  It's going to take a while for that to move thru the system, especially if they sail with 50-70% occupancy.

[marieps]

5 hours ago, LGW59 said:

Of course they are, the can run reports to distinguish from FCC $ to new $ bookings and I would bet the CFO looks at those numbers every day. 

By analysts I mean financial analysts, from the brokerage houses.  Of course Jason Liberty knows the numbers.  He's a former KPMG accountant.  I was wondering if Wall Street knows what to ask for.  From what Ipee and Malbers posted...seems RCG was transparent.

Edited February 25, 2021 by marieps

[marieps]

4 hours ago, 4774Papa said:

We would be new bookings and I believe many new booker are very ready to cruise again.  We have a TA from Rome to Florida on Reflection booked for October, it was a transfer from Connie that also went from Rome to Florida in October.  We have been looking harder in 2022 since we have a safari in East Africa in July.

Enjoy your safari, Papa.  It's on our bucket list.  

[4774Papa]

10 hours ago, marieps said:

Enjoy your safari, Papa.  It's on our bucket list.  

Thanks, we are excited about it.  However, it appears that the one issue with doing our safari in July is the COVID-19 testing prior to flying back to the USA via Europe.   Our safari starts in Nairobi and ends in Arusha, Tanzania.   Flying out of Kilimanjaro International Airport we must have a COVID-19, negative of course within 72 hours of departure.   KLM says that quick tests (4 hours) are available at the airport, so we could just plan for one extra day after our safari, however, Tanzania requires a PCR test that takes 72 hours for results (some say that results can take even more).  The tourist industry for safaris is trying to persuade the government to eliminate the PCR test and go with the quicker test, which is approved by the USA and European countries for travel.  We shall see how it works.

[TeeRick]

16 hours ago, Baron Barracuda said:

Consider that in 2019 a record year for RCL they earned $2B.   Last year thanks to covid they lost almost $6B and their debt increased by almost $8B.  Interest expense 4q '19 vs 4q '20 rose from $90MM to $275MM for an annualized increase of $700MM.  For '21 situation will only worsen with cash burn currently running $250MM/month.  Even when cruising resumes they'll initially be operating with fewer ships operating with lower loads.  Just to pile on, fuel costs have begun to spike (although they are 50% hedged for '21).  Given the above, the prospect of returning to their '19 level of profitability seems far down the road.  

 

 

 

Sobering numbers!  It is hard to imagine why some average investors think that buying their stock is a good deal.

[docruth]

TeeRick,

 

I don’t know about buying Royal as a equity stock investment, but DH tells me that the screens show folks are making a lot of money trading options. Bad news, stock price flies down, good news, the stock flies up, no news, no price movement so options expire with zero value. Over and over, weekly, monthly, quarterly and LEAPS.

 

The hedge funds are probably having a field day with RCCL. Now when some of the bigger lines go to liquidation, the volatility will probably skyrocket, then we’ll see even more fireworks.

 

[wrk2cruise]

Sold this morning at $99.    Will probably buy again on the next cycle.