June 20, 2019 / 11:33 AM / 4 months ago

UPDATE 3-Trump's Cuba cruise ban, weak Europe demand dent Carnival's forecast

(Adds details from conf. call, analyst comment; Updates shares)

June 20 (Reuters) - Carnival Corp cut its full-year profit forecast on Thursday, anticipating a hit from the Trump administration’s sudden ban on cruises to Cuba and weakening demand in Europe, sending its shares down nearly 13% to a six-month low.

Carnival is the latest cruise operator to warn of the financial impact of the restrictions on recreational travel to the lucrative Caribbean island, a move that has forced companies to reroute their cruises, usually booked months in advance.

“Cuba has gone for the foreseeable future and not in the plans for next year,” Chief Executive Officer Arnold Donald said on post-earnings call with analysts.

“That higher-yielding itinerary is off the table. And companies like us and others will have to adapt to see what they can generate.”

Compounding Carnival’s woes was soft demand for the company’s European cruise brands due to a weakening economic environment and disruptions caused by the “yellow vests” protests in France.

Travelers from continental Europe made up nearly 19% of Carnival’s total passengers in 2018, with cruises in European and Mediterranean comprising about 27% of its itinerary.

Carnival’s guidance may cause investors to switch to rivals Norwegian and Royal Caribbean that have fewer cruises operating in Europe, Stifel analyst Steven Wieczynski said.

Shares of Norwegian Cruise Line Holdings Ltd and Royal Caribbean Cruises Ltd were down about 2%.

Donald said the United Kingdom has been among the better performing European markets, despite uncertainty around Brexit.

Carnival said it now expects 2019 adjusted earnings in the range of $4.25 to $4.35 per share, down from an earlier forecast of $4.35 to $4.55.

The company forecast a 10 to 12 cent hit to full-year earnings from lower net revenue yields, a measure of spending per available berth.

Miami-based Carnival said the Cuba travel ban would have a 4 to 6 cent per share impact on 2019 earnings, with another 8 to 10 cents blow from changes to itineraries caused by a mechanical fault to its Carnival Vista ship.

Carnival said it had to add an extra sailing day to the slow-sailing ship’s cruises and will bear the related expenses.

The company’s total revenue rose 11% to $4.84 billion in the second quarter ended May 31, beating analysts’ average estimate of $4.53 billion, according to IBES data from Refinitiv.

Carnival’s shares were down 10.3% in late morning trading on a day when the broader markets have rallied.

Reporting by Uday Sampath in Bengaluru; Editing by Shinjini Ganguli and Sriraj Kalluvila

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