Yahoo Finance Carnival warns higher fuel costs will hit profit
Cruise ship operator Carnival has warned that high fuel costs and currency movements will weigh more heavily on its full-year profit than previously thought.
FTSE 100 company Carnival trimmed its profit forecast to between $4.15 and $4.25 (£3.13 to £3.20) per share for the full year, compared with earlier guidance of $4.20 to $4.40, as the rising cost of fuel offsets stronger sales growth and higher pricing.
Third quarter profit forecasts also fell well short of analyst expectations, sending shares in the company down by nearly 10pc.
The gloomy outlook overshadowed decent second quarter results, in which underlying profit - which excludes one-off costs - increased by a quarter to $489m and sales rose 10pc to $4.36bn.
Carnival's share price has been somewhat subdued over the past six months on concerns that the cruise operator faces a triple whammy of higher fuel prices, overcapacity in the sector and hurricanes in the key Caribbean market during the fourth quarter.
Earlier this month analysts at Morgan Stanley flagged up the rising price of crude oil and the strong dollar - the currency which oil is traded in - making buying fuel more expensive.
Carnival has hedged its fuel supplies only to the end of the year, the broker added, meaning the business could be at the mercy of the markets when it seeks fresh supplies.
Analysts at Shore Capital, meanwhile, reckon an increase in capacity in the cruise ship market will become a big concern next year.
Many cruise liners have beefed up their fleets in recent years and will continue to do so, with Carnival alone set to add more than 5pc to its portfolio of ships in 2019 and 2020, according to Shore Capital's Greg Johnson.
Carnival has a dual listing in London and New York and operates 25 ships, serving 4.7 million guests.
Its brand portfolio also includes Princess Cruises, Holland America Line, Seabourn, Cunard, AIDA Cruises, Costa Cruises, P&O Cruises and Fathom.
Its latest ship, Carnival Horizon, was christened by American rapper and actress Queen Latifah. It features an onboard brewery, a water park, an IMAX cinema and SkyRide, a suspended open-air cycling experience.
