Carnival Corp. & plc (NYSE:CCL)

The analysis of the financial data over the six-year period reveals notable trends in profitability, cost efficiency, capital investment, and economic value creation.

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a decline from 2018 to 2020, turning negative in 2020 with a significant loss, which continues through 2021 and 2022, albeit with a gradually improving trend. In 2023, the NOPAT returns to a positive value, indicating a recovery phase after several years of negative operating profits.

Cost of Capital

The cost of capital decreases steadily from 23.35% in 2018 to 13.31% in 2022, suggesting a reduction in the company’s risk profile or more favorable financing conditions during this period. However, in 2023, it rises to 15.67%, indicating a slight increase in capital costs possibly due to changes in market conditions or company-specific risk factors.

Invested Capital

Invested capital increases from 2018 through 2020, peaking at 49,017 million USD. Subsequently, it declines over the next three years, reaching 39,428 million USD by 2023. This pattern suggests an initial expansion or capital investment phase followed by a contraction or asset reduction, possibly in response to the negative profitability experienced in the intervening years.

Economic Profit

Economic profit is consistently negative across all years, indicating that the return on invested capital was below the cost of capital. The deficit widens sharply in 2020, coinciding with the substantial negative NOPAT, and although it improves gradually thereafter, it remains significantly below zero as of 2023. This persistent negative economic profit underscores challenges in value creation during the analyzed timeframe.

Overall, the company experienced a phase of deteriorating operating profits and value destruction beginning in 2020, likely related to adverse external or internal factors. Cost of capital trends suggest partially improved financing conditions until 2022, offset by a modest increase in 2023. The fluctuation in invested capital indicates adjustments in asset base likely aligned with operational and financial performance. Recovery signs in 2023 NOPAT highlight an initial positive turnaround, though economic profit remains negative, signaling continued work to achieve sustainable value creation.

The annual financial data exhibits significant fluctuations in profitability and operating performance over the analyzed periods.

Net income (loss)

The net income demonstrates a positive trend in the initial years, with values of 3,152 million USD in 2018 and a slight decrease to 2,990 million USD in 2019. However, a dramatic shift occurred thereafter, with net income turning negative in 2020 at -10,236 million USD. This substantial loss persisted through 2021 and 2022, albeit with a gradual improvement from -9,501 million USD to -6,093 million USD. By 2023, the net loss narrowed substantially to -74 million USD, indicating a near return to breakeven status.

Net operating profit after taxes (NOPAT)

The NOPAT followed a somewhat similar pattern to net income, starting at 3,339 million USD in 2018 and declining slightly to 3,226 million USD in 2019. A sharp reversal occurred in 2020, with NOPAT plunging to -9,312 million USD, reflective of significant operational challenges. While losses continued in 2021 and 2022, the operating profit losses reduced over time from -7,863 million USD to -4,485 million USD. Notably, in 2023, NOPAT turned positive at 2,207 million USD, suggesting a substantial recovery in operating performance.

Overall, the trends indicate that the entity faced severe financial difficulties starting in 2020, likely related to adverse external conditions impacting operational and net profitability. Despite initial sharp declines, a progressive improvement is evident in subsequent years, culminating in a recovery towards profitability by 2023 at the operating profit level and a significant reduction in net losses.

The financial data reveals distinct trends in the income tax expense and cash operating taxes over the examined period, reflecting significant fluctuations influenced by various operational or external factors.

Income Tax Expense (Benefit), Net

This item exhibited an increasing trend from US$54 million in 2018 to a peak of US$71 million in 2019, indicating a rise in tax obligations. The period of 2020 and 2021 shows a reversal into negative territory with values of -US$17 million and -US$21 million respectively, suggesting tax benefits or credits were realized during these years. This could be indicative of losses or deferred tax assets being recognized. In 2022 and 2023, the tax expense returned to positive figures, with US$13 million and US$12 million respectively, but remained substantially lower than the 2018-2019 levels, signaling a partial recovery or stabilization in taxable income.

Cash Operating Taxes

The cash operating taxes followed a similar pattern initially, increasing from US$57 million in 2018 to US$77 million in 2019. Subsequently, this measure also dipped below zero in 2020 and 2021, reflecting negative cash flows from operating tax payments of -US$15 million and -US$17 million respectively, which may align with tax refunds or credits received. Notably, in 2022, the cash operating taxes returned to a positive amount of US$10 million, but a dramatic decline occurred in 2023 with a significant cash outflow reported as -US$358 million. This sharp negative value could suggest a sizeable tax refund, an adjustment, or a one-off tax-related cash inflow that sharply contrasts with prior periods and warrants further investigation to understand underlying causes.

Overall, the data portrays an environment of considerable tax-related volatility over the six-year span. The movement from positive to negative tax expenses and cash taxes from 2020 onwards may reflect the impact of external economic factors, regulatory changes, or internal losses. The substantial negative cash operating tax figure in 2023 is a prominent outlier that markedly differs from past trends, highlighting a need for a deeper review to ascertain the reasons behind such a significant cash tax flow reversal.

Total Reported Debt & Leases

There is a significant upward trend in total reported debt and leases from 2018 to 2022, increasing from approximately $10.7 billion to $35.9 billion. This represents more than a threefold rise over this period. However, in 2023, a noticeable reduction occurred, bringing the debt down to around $31.9 billion. The substantial increase through 2022 suggests heightened leverage or increased borrowing, followed by some deleveraging or debt repayment in the most recent year.

Shareholders’ Equity

Shareholders' equity experienced a declining trend during the period, dropping from about $24.4 billion in 2018 to $6.9 billion in 2023. The decline was particularly steep between 2019 and 2022, with equity falling nearly by 70%. The reduction in equity indicates a possible decrease in net assets, which could result from accumulated losses, dividend payments exceeding earnings, or other equity-reducing events.

Invested Capital

Invested capital showed an initial increase from $35.1 billion in 2018 to a peak of about $49.0 billion in 2020. After reaching this peak, invested capital declined consistently through 2023, dropping to approximately $39.4 billion. The peak in 2020 followed by a decline suggests changes in the company’s asset base or capital structure, reflecting possible asset disposals, depreciation, or adjustments in working capital.

Overall Insights

The data reveals a period marked by increased borrowing and reduced equity, resulting in elevated financial leverage. While debt surged until 2022, some repayment or restructuring actions in 2023 led to a partial reduction in liabilities. Simultaneously, the decline in shareholders' equity points to weakened net asset positions. The fluctuations in invested capital align with these changes, indicating active management of capital resources amid shifting financial conditions.

Economic Profit

The economic profit consistently remained negative throughout the observed periods, indicating that the company failed to generate returns above its cost of capital over these years. Beginning at -4,852 million US dollars in 2018, the negative economic profit deepened notably in 2020, reaching a nadir of -17,193 million US dollars. Subsequently, there was a gradual recovery trend, with the deficit shrinking to -3,970 million US dollars by 2023. This pattern suggests significant financial challenges peaking around 2020 with improvement in more recent years, although profitability has not yet turned positive.

Invested Capital

The invested capital showed an increasing trend from 35,074 million US dollars in 2018 to a peak of 49,017 million US dollars in 2020, indicating expansion or increased asset base during this period. From 2021 onwards, there was a steady decline in invested capital, decreasing to 39,428 million US dollars by 2023. This reduction may reflect asset disposals, capital restructuring, or a strategic shift toward decreased capital intensity in recent years.

Economic Spread Ratio

The economic spread ratio was negative in all reported years, reflecting returns below the firm's cost of capital. It declined sharply from -13.83% in 2018 to a low of -35.08% in 2020, corresponding with the period of greatest economic loss. Thereafter, a clear improvement occurred, with the ratio recovering to -10.07% in 2023. Despite the improvement, the negative spread ratio indicates ongoing challenges in value creation, although the narrowing gap signals movement towards better operational efficiency or profitability.

Revenues

Revenues exhibit significant volatility across the analyzed periods. From 2018 to 2019, revenues increased moderately from 18,881 million US dollars to 20,825 million US dollars. However, in 2020, revenues fell sharply to 5,595 million US dollars, representing a substantial contraction. This downward trend continued into 2021, when revenues reached a low of 1,908 million US dollars. Subsequently, revenues recovered considerably in 2022 to 12,168 million US dollars and further increased in 2023 to 21,593 million US dollars, almost reaching pre-2020 levels.

Economic Profit

The economic profit follows a consistent negative trend throughout all periods, indicating ongoing economic losses. In 2018, economic profit was -4,852 million US dollars, which slightly worsened in 2019 to -4,908 million US dollars. The economic loss deepened markedly in 2020 to -17,193 million US dollars, followed by a smaller but still significant loss of -14,714 million US dollars in 2021. The losses began to reduce in magnitude in the subsequent years, falling to -10,361 million US dollars in 2022 and further improving to -3,970 million US dollars in 2023.

Economic Profit Margin

The economic profit margin demonstrates a deteriorating pattern in line with economic profit figures. It was negative but relatively moderate in 2018 (-25.7%) and 2019 (-23.57%). In 2020, it deteriorated significantly to -307.3%, indicating that economic losses vastly exceeded revenues for that year. The margin further declined dramatically to -771.16% in 2021, reflecting extreme inefficiency or loss generation. From 2022 onward, the margin improved substantially, reaching -85.15% and -18.39% in 2023, which aligns with the corresponding recovery in revenues and reduction of economic losses.