Carnival Corporation & plc Q1 2013 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Felicia Hendrix - Barclays Capital - Analyst : Howard, thank you for the detail that you gave us. And you did mention that your guidance does anticipate some impact from the Dream, but I wanted to talk more about just specific costs that you might have. You know, you kind of just walked us through the detail behind your earnings. I'm just wondering. Specifically, is there anything in there for -- the Dream is going to be out of service a little bit. Anything in there? Today, there was the incident with the Legend. Then also, given these three events in such a short time period, just wondering what the cost, incremental cost impact might be from your marketing and your promotional activities, and more broadly how we should think about your marketing budget over the next 12 months.

Question: Felicia Hendrix - Barclays Capital - Analyst : Okay. And then for both of you I guess, just on maintenance CapEx, I think it's been running around $700 million, $750 million. Is that a number we should see increase?

Question: Felicia Hendrix - Barclays Capital - Analyst : Okay. So just to understand, David, you said the maintenance CapEx has more recently been running around $600 million but you've been giving us a number around $800 million.

Question: Felicia Hendrix - Barclays Capital - Analyst : Okay, so is it possible that that kind of absorbs maybe the incremental costs you might see from refurbishing your fleet? Or will it be incremental over that?

Question: Felicia Hendrix - Barclays Capital - Analyst : Okay thank you.

Question: Harry Curtis - Nomura Securities - Analyst : Of the $800 million that you mentioned, how much of that is pure refurbishment or pure maintenance CapEx versus sort of incremental refurbishment? What I'm trying to get at is, in other industries that we look at, we look at maintenance CapEx as a percentage of revenues to capture kind of the utilization. And given your high occupancy, you're pushing these assets really hard. And so what I'm trying to get at it, as a percentage of revenues, are you spending as much on these ships as you did 10 years ago?

Question: Harry Curtis - Nomura Securities - Analyst : Well, the follow-up is if you could give us some sense of how many more days in drydock you have built into your forecast this year and next and how does that compare to the last two to three years?

Question: Harry Curtis - Nomura Securities - Analyst : I guess where I'm going with this --

Question: Harry Curtis - Nomura Securities - Analyst : What I'm trying to get at is planned drydocks, how that's likely to grow in 2013 and 2014. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Harry Curtis - Nomura Securities - Analyst : Okay. So I guess the last question is, based on your maintenance CapEx estimate which you built-in for drydock, you're pretty comfortable that there is plenty of room there for whatever else may happen to your fleet.

Question: Greg Badishkanian - Citigroup - Analyst : My two questions are how aggressive do you think you'll need to be over the next few weeks, the next few months in terms of pricing to encourage bookings? And have any of your competitors responded so far?

Question: Greg Badishkanian - Citigroup - Analyst : Great, thank you.

Question: Tim Conder - Wells Fargo Securities LLC - Analyst : Howard and everyone, thanks for the color that you can give us on the outlook with the ships. But any quantification at this point or number of ships that will require major impact? You said you're reviewing the whole fleet, but any color, especially in the Carnival and Costa brands?

Question: Tim Conder - Wells Fargo Securities LLC - Analyst : Okay. And then, when you have a little bit more color over the next several weeks, do you anticipate doing another update type of call at that point in time?

Question: Tim Conder - Wells Fargo Securities LLC - Analyst : Okay. Shifting to -- for my second question, shifting to another question here on Europe, comparing to your commentary that you gave in December, can you maybe give us a little bit more color on the UK, Germany, and then Italy and the southern issues I guess for the overall continent?

Question: Tim Conder - Wells Fargo Securities LLC - Analyst : So, David, your comment is that Europe tougher than thought collectively or Italy -- was that, David, was a comment you made there?

Question: Tim Conder - Wells Fargo Securities LLC - Analyst : Okay, thank you gentlemen.

Question: Robin Farley - UBS - Analyst : I just wanted to get a little more color. I know you talked about the change in yield being half due to European demand and half due to the Carnival brand. And so just when you're looking at your yield guidance for the second half of the year, you have that positive. Can you give us a little color on what your assumptions are for -- does the Carnival brand turn positive in the second half of the year? And then also, when you look at Europe, are the European sourcing brands positive in the second half of the year, kind of with or without Costa? Or is the positive in the second half of the year all just the strength of North American brands outside of the Carnival brand that is offsetting declines? Just trying to get a sense of what those pieces look like in the second half.

Question: Robin Farley - UBS - Analyst : Okay, great. Thank you.

Question: Alexia Dogani - Liberum Capital Ltd. - Analyst : I just had two questions as well. Just firstly just the maintenance CapEx spend of the $700 million to $800 million, I know that question perhaps has been asked, but I want to explore it in a different way. Can you split the spend between the hotel aspect, so how much you invest to bring the product up to the new shape and the core operational elements? And following on from that, the $0.05 of the maintenance cost increase this year, you said this will continue for the next two years. So year three, should we expect that sort of spend to disappear, if you like? And then my second question is whether you can give us a bit of a feel on how emerging markets are performing and what percent of your capacity is allocated in 2013 and what trends you're seeing there, both from the revenue and the cost side? Thanks.

Question: Alexia Dogani - Liberum Capital Ltd. - Analyst : Okay thank you.

Question: Lena Thakkar - HSBC Global Research - Analyst : I understand the comments around costs. I just wanted to get a feel of -- given everything that's been said on the $0.10 impact from the Triumph and some of the one-offs that you outlined at the previous set of results, should we be thinking of net crew costs actually going down next year, all things being equal from here, or is there anything else we should be aware of going into the next financial year? And then just on the revenue guidance, I know you can't break it down by brand, but I wonder if you could tell us if your guidance still factors in positive yields in North America ex-Carnival?

Question: Lena Thakkar - HSBC Global Research - Analyst : Okay. Just to follow-up on the yield question, I guess the question is more getting at have the recent issues caused an impact on just the Carnival brand or all of the North American brands? So is this isolated to one brand and therefore does the guidance still assume yields up for everything else apart from Carnival in North America?

Question: Lena Thakkar - HSBC Global Research - Analyst : Okay, thank you.

Question: Jaime Katz - Morningstar - Analyst : Can you guys talk a little bit about how you might change your kind of marketing message to comfort consumers maybe? And then also I know you guys didn't offer any information on the immediate impact the week after the Triumph but if you have any color on the magnitude of impact on bookings? I know they bounced back. That would be helpful.

Question: Jaime Katz - Morningstar - Analyst : Okay.

Question: Jaime Katz - Morningstar - Analyst : And then any comment on that immediate impact like the week after the Triumph, or do you not want to speak to that?

Question: Jaime Katz - Morningstar - Analyst : Right. Any magnitude that you'd like to offer?

Question: Jaime Katz - Morningstar - Analyst : Okay, thank you.

Question: Jaime Katz - Morningstar - Analyst : Excellent. Thank you.

Question: James Hardiman - Longbow Research - Analyst : My first question -- last year, following the Concordia issue, your localized strategy seemed to be to try as much as possible to hold price and basically weather the storm on the occupancy side. Now, whether or not that's exactly what happened, I think the rationale was solid with the hopes to isolate the pricing fallout to the one brand. I was hoping you could maybe compare and contrast your strategy going forward this year, Concordia versus the Triumph and the subsequent incidents. You know, pricing versus occupancy as well as sort of general marketing.

Question: James Hardiman - Longbow Research - Analyst : Great. And then second, somewhat related question, given your localized brand strategy, sort of big picture, how many of your customers do you think actually make the connection between the brand that they use and the umbrella Carnival brand? Obviously, you did a great job with Concordia last year really isolating that fallout to Costa. Obviously, the Carnival line of ships is much bigger for starters, but is it going to be dramatically more difficult this year, just given the brand associated with the various issues is also the overarching Company brand?

Question: James Hardiman - Longbow Research - Analyst : Excellent, thanks guys. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Assia Georgieva - Infinity Research - Analyst : My first question is whether you expect any impact to your new builds in terms of price or delivery date if you do need to do redundancies on those as well.

Question: Assia Georgieva - Infinity Research - Analyst : Okay, great. And my second question is, given how many moving parts there are to the European booking picture, EAA brands, ex Costa and with Costa, could you give us a sense as to the level of bookings for Q3, given obviously the key quarter for Europe this year versus the same time last year? And this is with Costa, with everything.

Question: Assia Georgieva - Infinity Research - Analyst : Okay, thank you Howard.

Question: Jamie Rollo - Morgan Stanley - Analyst : The first question, it might be a hard one to answer because few of these get reported I guess, but in a normal year, how many ship incidents do you normally have across the Group please?

Question: Jamie Rollo - Morgan Stanley - Analyst : Okay, no, I understand. The other question was on the $0.05. I didn't fully understand exactly what that was. Was that your best estimate of the sort of revenue cost of the safety review, or does it include any lost revenue from more time in drydock? I got the impression that number could go up a fair amount depending on the review. Is that correct?

Question: Jamie Rollo - Morgan Stanley - Analyst : And just as an ancillary to that, if I may, is there were a figure you could possibly give us for what you spend on sort of safety spend or safety checks, whether it's drydocks, repairs, maintenance? What's the annual sort of budget for that please?

Question: Jamie Rollo - Morgan Stanley - Analyst : Yes, no, I understand. Thank you very much. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: James Hollins - Investec Inc. - Analyst : Two questions from me. The first is on the strategy. I've heard a bit of sort of industry chatter around Asia and I was just looking for an update that you could give on particularly for out of your Singapore office, the sort of demand you're seeing out of Asia, whether I should be expecting sort of a more aggressive move of itineraries of ships over to that market in the medium term or whether I should be waiting longer for that to happen. The second one was on commission and transport costs. Those costs per ALBD I have down at about 11% per ALBD in the quarter. I think they've been down 10% or 11% in Q3, Q4 last year as well. Is there something particular going on there? Is this a level that can continue, given particularly its size and your cost structure? Thanks very much

Question: James Hollins - Investec Inc. - Analyst : Okay. And can you give sort of any guidance on what it might be down? Obviously, it depends on what level of air-sea passengers you have, what level it might be down. I assume down for full year 2013 as a whole per ALBD. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: James Hollins - Investec Inc. - Analyst : Okay. I was just trying to get to sort of how aggressively sort of negative you been on, on gross yield, given that is coming down. But it sounds like you won't be giving me that.

Question: James Hollins - Investec Inc. - Analyst : Okay, thanks.