5:00PM Miami – Carnival Corp, the largest cruise line company reported 17% rise in revenue in the fiscal 2008 first quarter and a fall of 17% in net income.

Carnival Corporation cruise liner reported revenues increased 17% for the first quarter ended February 2008 to $3.15 billion from $2.69 billion for the same quarter of 2007. In the quarter the cruise liner carried 1.9 million passengers, 150,000 more than in the similar quarter in the previous year.

Carnival has been a subject of rising worries linked to the slowing consumer spending, slowdown in the U.S. economy, and rising fuel prices. Carnival has sought to add capacity in European and Asian cruise markets where the demand is steady and currency is stronger than in the U.S. markets.

A sharp rise in fuel cost has taken a big chunk of the company earnings, yet Carnival prefers to not hedge future fuel purchases.

Revenue rises but net declines

Net income for the first quarter declined to $236 million or 30 cents per share compared to $283 million or 35 cents per share from a year-ago. Earnings per share for the second quarter are expected to be in the range of 42 cents to 44 cents, down from 48 cents in 2007.

Carnival expects fuel expenses to increase by $532 million compared to 2007 and will reduce full year earnings by 65 cents per share. Carnival paid $499 per metric ton in the first quarter of 2008 compared to $301 per ton in the first quarter a year ago.

“Rising fuel prices, which cost the company $156 million, or $0.19 per share, during the quarter,” said chief executive Mickey Arison.

Net and gross revenue yields (revenue per available lower berth day) in the first quarter increased 6.2% (3.4% on a constant dollar basis) compared to the prior year.

Excluding fuel, net cruise cost per available lower berth day (ALBD) for Q1 2008 increased 1.4% on a constant dollar basis compared to the prior year primarily due to the increase in the number of dry-docks.

Including fuel, net cruise costs per ALBD increased 12.9% (9.8% on a constant dollar basis) compared to the prior year. Gross cruise costs per ALBD increased 11.0% compared to the prior year.

Fuel price increased 66% to $499 per metric ton in the first quarter compared to $301 per metric ton in the prior year, and was slightly below the company’s January 2008 guidance of $505 per metric ton.

Since the previous guidance, forecasted fuel costs have increased $127 million or $0.15 per share.

“Although our strong revenue growth is expected to be offset by a forecasted 45% increase in fuel prices for the year, we still expect higher earnings per share than in 2007. This speaks volumes about our ability to weather difficult economic times, as well as, these extraordinary increases in fuel costs,” added Arison.

Second quarter 2008 outlook

As a result of the strengthening euro and sterling exchange rates, the company now expects a 5.5% to 6.5% improvement in net revenue yields for the full year 2008 compared to 2007, versus December guidance of an increase of 4.5% to 5.5%.

On a constant dollar basis, net revenue yields are expected to increase 2.0% to 3.0%, versus December guidance of a 3.0% to 4.0% increase, primarily due to reduced expectations for onboard spending. The company uses net yield after deducting commissions and transportations costs and other variable costs from the gross yield as a better indication of its revenue model.

The company expects net cruise costs excluding fuel for the full year 2008 to be down slightly on a constant dollar basis. However, based on the forward curve higher fuel prices for full year 2008 are now forecasted to increase fuel expense by $532 million compared to 2007, which reduces full year earnings by $0.65 per share.

For the second quarter of 2008, net revenue yields are expected to increase 6.5% to 7.5% (2.5% to 3.5% on a constant dollar basis) driven primarily by the continued improvement in Caribbean pricing.

Net cruise costs excluding fuel for the second quarter 2008 are expected to be flat on a constant dollar basis. Based on the forward curve, higher fuel prices for the second quarter 2008 are expected to increase fuel expense by $161 million compared to 2007 which will have the effect of reducing earnings by $0.20 per share.