Carnival profits hit by spike in oil price

Carnival, the US cruise ship giant that acquired P&O Princess, warned yesterday that the sharp rise in fuel costs would hit its profits in the second quarter.

Carnival, the US cruise ship giant that acquired P&O Princess, warned yesterday that the sharp rise in fuel costs would hit its profits in the second quarter.

The warning spooked investors despite the group's optimism that demand for cruises would continue to soar. Shares in Carnival fell 4 per cent to 2,921p.

Howard Frank, the chief operating officer, said the spike in the oil price would wipe out "positives such as a stronger booking environment and an overall strong vacation market". He added: "That offsets the benefit that we're getting from the better pricing in the market."

Carnival estimated that its earnings per share would be 45 cents to 47 cents during the next three months, less than the 49 cents most analysts had pencilled in.

It said the price of fuel had risen 23 per cent higher than average prices over the past three quarters. Unlike airlines, Carnival cannot hedge the type of fuel it uses ­ mostly bunker fuel ­ against the oil price rising.

The company, which is nearing the end of its peak booking period, said advance booking levels for the rest of the year were "well ahead" of last year, even after allowing for a 9 per cent capacity increase.