BENGALURU: Carnival Corp cut its annual profit forecast on Friday, as higher fuel costs pressure the cruise operator’s margins amid rising geopolitical tensions.
Attacks on oil and transport facilities across the Middle East and disruptions to energy flows through the Strait of Hormuz, which carries about a fifth of global oil flows, since the Iran war outbreak, have disrupted global supply and pushed up oil prices.
The spike threatens Carnival’s profits as it is the only major US cruise line that typically does not hedge fuel.
Carnival expects full-year adjusted earnings per share to be about USD2.21, below its previous expectation of up to USD2.48.
US-listed shares of Carnival fell nearly 5 percent in early trading and were down 17 percent so far this year.
The company said its guidance assumes Brent crude averages USD90 a barrel for the rest of April and May, USD85 in the third quarter and USD80 in the fourth quarter, based on fuel purchased in March and early April rather than current spot prices.
The company said on its earnings call that it will not speculate on any impact from the current geographical conflict, adding that it has minimal exposure to the region.
“A higher-for-longer fuel cost scenario will affect Carnival, but the company has the scale and liquidity to handle these fluctuations,” said John Kempf of credit firm Fitch Ratings, adding strong bookings across the sector show cruise demand remains resilient despite economic uncertainty.
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