Norwegian Cruise downgrades 2023 profit target on higher costs, Israel war

By Granth Vanaik and Doyinsola Oladipo

(Reuters) -Norwegian Cruise Line Holdings on Wednesday warned of a hit to its annual profit from elevated fuel costs and booking disruptions due to the escalating Israel-Hamas conflict and a lingering impact of the wildfires in Maui.

Higher expenses linked to food, fuel and labor have continued to strain profits of cruise operators, which are now also expecting an impact from the ongoing military conflict in the Middle East that started on Oct. 7.

Norwegian Cruise cut its full-year adjusted profit forecast to 73 cents per share from 80 cents, while peer Royal Caribbean Group last week warned of a 3-cent-per-share impact to its annual profit from the Israel-Hamas war.

“We are prudently moderating short term expectations and keeping a close eye on rapidly evolving global macroeconomic and geopolitical events,” said Norwegian Cruise Line Holdings CEO Harry Sommer.

The company said it had redirected and cancelled all trips to Israel and to the surrounding region for the remainder of 2023. Meanwhile, its unit, Oceania Cruises was making changes to its 2024 itineraries, and canceled stops in Israel, Reuters reported on Tuesday.

The Israel conflict, coupled with a slowdown in bookings to Hawaii as a result of the Maui fires in August, has impacted the fourth-quarter occupancy levels and led Norwegian Cruise to downgrade its full-year occupancy expectations.

“While exposure to Hawaii and Israel (ports of call) is expected to impact short-term performance, underlying demand appears robust,” M Science analyst Michael Erstad said.

The cruise operator expects a fourth-quarter adjusted loss of 15 cents per share, compared with analysts’ average estimate of a break even, according to LSEG data.

Shares of the company were marginally down in volatile early trading.

Its third-quarter revenue of $2.54 billion narrowly beat analysts’ expectations, and adjusted profit of 76 cents also topped expectations.

(Reporting by Granth Vanaik in Bengaluru and Doyinsola Oladipo in New York; Editing by Shinjini Ganguli)