Royal Caribbean Swings To 2Q Loss On Charges, Lower Revenue

Royal Caribbean Cruises Ltd. (RCL) swung to a second-quarter loss amid charges and lower revenue, as the cruise-ship operator posted its second straight quarterly loss amid a prolonged slump in travel spending.

The company also issued a weak third-quarter view and lowered its full-year outlook, while boosting its expectation of the effects of the H1N1 virus on its earnings.

Shares were down 6.7% at $15.30 in premarket trading. The stock has lost roughly a third of its value in the past year, though it has tripled from an all-time low in March.

For the year, Royal Caribbean expects net yields to fall about 14% this year, lower than its April view of a 12% to 13% drop, and cut its earnings target to 70 cents to 80 cents a share from $1.35.

The second largest cruise-ship operator by market by share behind Carnival Corp. (CCL) last month said bookings and prices met expectations globally except in Spain, though strengthening fuel costs and foreign-exchange effects remained a concern. Royal Caribbean said it mitigated much of the ongoing fuel-cost increases through hedging and paring other expenses.

The company, whose brands include Celebrity, Pullmantur and Azamara, reported a loss of $35.1 million, or 16 cents a share, compared with a prior-year profit of $84.7 million, or 40 cents a share. The loss included 5 cents in costs related to the H1N1 virus and about 11 cents due to currency adjustments and hedging ineffectiveness.

In April, the company predicted a loss of up to 5 cents a share.

Revenue decreased 15% to $1.35 billion. Analysts polled by Thomson Reuters most recently were looking for $1.41 billion.

Net yields, or revenue per available passenger cruise days, decreased 18%, in line with the company's estimates, and would have fallen 14% on a constant-dollar basis.

Net cruise costs, were down 12%, or 8.5% on a constant currency basis, and also within expectations.

Based on lower fuel costs, the company said it would increase its hedges in 2010 to 50%, which is equal to its current hedging plan for this year, and has hedged about 45% of forecasted 2011 consumption.

For the third quarter, the company expects earnings of 95 cents to a $1, while analysts were looking for $1.46. The H1N1 virus is expected to lower earnings by 27 cents this year, with 18 cents realized in the third quarter.

-By Tess Stynes and John Kell, Dow Jones Newswires; 212-416-2481; [e-mail]