Norwegian Cruise Line Holdings (NCLH) stocks reached the lowest point since November 2020 after the company released a business update, including fourth-quarter and full-year 2021 financial results. The results have been heavily influenced by the fast spread of Omicron and the effect it has had on bookings and canceled sailings.
Other reasons that account for the stocks dropping to just over 19 dollars per share on Thursday include a wider-than-expected loss, revenue that came up short of forecasts, cash burn which is expected to increase, and of course, a general unease towards travel stocks due to Russia’s invasion of Ukraine.
Norwegian Cruise Line Holding’s Disappointing Financial Results
As the travel industry and the cruise industry continue to recuperate their losses, the financial results as presented by NCLH show that the end is not in sight yet. Although COVID-19 is on the backfoot and slowly but surely becoming less of an issue, the past months have certainly put a damper on NCLH’s business results.
That being said, it’s not all bad news for the cruise company, far from it. Since late July 2021, when Norwegian’s ships started to return to service, the company has welcomed more than 230,000 guests onboard the company’s three brands.
“We launched our Great Cruise Comeback in late July 2021 and in five short months, the teams at Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises have restarted operations on 75% of our capacity, safely carrying over 230,000 guests and delivering the unique vacation experiences that our award-winning cruise brands are famous for,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd.
The company expects to have 85% of its capacity operating by the end of the first quarter of 2022. The entire fleet is expected to be back in operation during the early part of the second quarter of 2022.
NCLH has also seen COVID-19 infections go down onboard its ships and recorded infection rates far lower than what was seen ashore, which has been the main reason for less restrictive health measures. at was seen ashore. Despite that, the effect of the Omicron variant has caused Norwegian’s stocks to drop to the lowest point in 16 months.
Bookings and Sailings Badly Affected During Fourth-Quarter 2021
Bookings for the first half of 2022 lag behind the expected numbers. Although Norwegian showed promising results during the first half of the fourth quarter, the second half started showing the effects of Omicron, primarily for close-in voyages in the first and second quarters of 2022. CEO Frank De Rio expects these numbers to recover for the second half of 2022:
“These last few months have also had their share of challenges caused by the impacts from the Delta and Omicron COVID surges, but despite these challenges which were mostly out of our control, our booked position and pricing remain strong, particularly for the second half of 2022 and into 2023, demonstrating the strong fundamental demand for our cruise offerings,” said Del Rio
The Omicron variant also caused the postponement of restarting several vessels, the cancelation of cruises onboard others, and a self-imposed occupancy limit of just 51.4%. This will harm the cash burn rate for the company.
While the burn rate was projected to be 350 million for the fourth quarter, it was lower at only 345 million, but the projections for the first quarter of 2022 are now at 390 million. This comes due to the costs involved with restarting more ships than previously expected.
As of December 31, 2021, the Company’s total debt was $12.4 billion. The company’s liquidity was $2.7 billion, consisting of cash and cash equivalents, short-term investments, and a $1.0 billion commitment available through August 15, 2022. NCLH expects to be cash-flow positive during the second quarter of 2022.
What Does 2022 Look Like for NCLH?
The invasion of Russia into Ukraine has put global travel stocks in a perilous position. Coupled with rising gas and fuel prices, the cruise industry as a whole will be seeing some difficult times, even though tourism numbers are recovering.
However, bookings for the second half of 2022 do look strong. Once the entire fleet is operational again from summer onwards bookings, look to be at the same or higher levels than the record-breaking 2019, with higher pricing.
“Momentum continues building as we approach 85% of our capacity expected to be in operation at the end of the first quarter. We are keenly focused on executing our financial plan on the path to our next significant milestone as we expect to achieve positive Operating Cash Flow in the second quarter,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd.
Although there are positive signs in terms of bookings and guests sailing onboard, the past months have taught us that something unforeseen is just around the corner.
The current unrest in Europe due to Russia’s invasion of Ukraine shows just that, something that will not only have a negative effect on fuel prices, which have already gone of nearly $100 since 2020, but could also affect cruises in the Black Sea and Eastern Mediterranean.