Norwegian Cruise Lines targets profitability in 2022

After the publication of third quarter results on Wednesday, Norwegian Cruise Lines (NYSE: NCLH) said it was not yet profitable, but would be by the second half of 2022. Consumers prove they still want to travel and Norwegian bookings remain strong despite temporary setback caused by the delta variant of the coronavirus.

The cruise line’s cumulative reserved position for 2022 is in line with what it experienced in 2019 – which was a record for the company at the time – and it does so at higher prices, even including the impact of credits it grants to passengers for canceled cruises at the height of the pandemic.

Image source: Getty Images.

A heavy debt anchor

The cruise ship industry was hit much harder than most other businesses during the pandemic, as it was. forbidden to navigate, even after the reopening of virtually all other industries.

Just to stay afloat, cruise lines have taken on significant debt that they are now trying to pay off. Norwegian’s long-term debt load rose from $ 6.8 billion at the end of 2019 to over $ 11.8 billion at the end of September. Her total debt is now $ 12.4 billion and she has $ 1.9 billion in cash and cash equivalents in the bank.

The cruise line also said it had just made a $ 1 billion pledge until August 15, 2022, to help provide it with additional cash. Although he has not yet taken the money and has no intention of doing so, if he uses the funds, they will be converted into an unsecured note maturing in April 2024.

This is why a return to profitability is so important to Norwegian.

A long time to leave the port

The cruise line said total third-quarter revenue was $ 153 million, below Wall Street consensus estimates of $ 198 million, and reported an adjusted loss of $ 2.17 per share. , worse than the 2.09 dollars per share expected by analysts.

President and CEO Frank Del Rio said, “While consumer concerns over the Delta variant led to a slowdown in bookings during the third quarter, net booking volumes improved over the past six months. weeks and we continue to see strong future demand for cruises, particularly for the second half of 2022 and beyond, when our full fleet is expected to be back in operation at normalized occupancy levels. “

Norwegian has 11 ships of its three brands – Norwegian, Oceania and Regent Seven Seas – all back in the water, accounting for around 40% of its capacity. By the end of the year, it expects to reach 75% of its capacity and the entire fleet will return to sea by April 1, 2022.

It is the result of the delta variant that hit and caused a slowdown in bookings at the start of the third quarter, affecting the fourth quarter and the start of 2022. During the last six weeks of the period, however, consumer demand returned, which bodes well for the second semester.

Profitability is just above the horizon

The sudden deceleration in bookings was likely the reason Norwegian was forced to make that extra billion dollars in cash available. He reported that he was burn money at a rate of $ 275 million per month in the third quarter, and while that’s less than the $ 285 million per month he had previously guided to, any new variant outbreak could upend his plans.

Anticipated ticket sales for the quarter were $ 1.7 billion, including the long-term portion, which includes approximately $ 750 million in future cruise credits it issued, up $ 300 million. of dollars on a net basis compared to the end of the second quarter, even including approximately $ 100 million of sales recorded in the quarter.

Norwegian Cruise Line shares opened lower after the company’s earnings release as the market expected better, but the storm appears to be passing for the travel and tourism industry and this cruise operator should find clearer navigation from here.

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