Carnival Corp. & plc (NYSE:CCL)

The financial analysis reveals notable fluctuations in key profitability and capital metrics over the six-year period.

Net Operating Profit After Taxes (NOPAT)

The NOPAT experienced a decline from 2018 to 2019, decreasing slightly from $3,339 million to $3,226 million. A sharp downturn was observed in 2020, with a significant negative value of -$9,312 million, reflective of a substantial operating loss. Although negative values persisted through 2021 and 2022, there was a gradual improvement with NOPAT losses decreasing to -$7,863 million and -$4,485 million respectively. By 2023, NOPAT returned to positive territory, reaching $2,207 million, signaling a recovery in the company's operational profitability.

Cost of Capital

The cost of capital showed a decreasing trend from 2018 to 2022, moving down from 23.23% to 13.26%, indicating a gradual reduction in the expense of securing capital over this period. However, in 2023, there was a reversal with an increase to 15.6%, suggesting a possible shift in market conditions or risk perception affecting capital costs.

Invested Capital

Invested capital grew steadily from $35,074 million in 2018 to a peak of $49,017 million in 2020. Thereafter, it declined consistently to $39,428 million by 2023. This trend may reflect strategic divestments, asset sales, or adjustments in capital deployment following the losses experienced during the same timeframe.

Economic Profit

Economic profit remained negative throughout the period, indicating the company consistently failed to generate returns above its cost of capital. The deficit worsened significantly in 2020 and 2021, reaching -$17,162 million and -$14,685 million respectively. Some improvement was noted in 2022 and 2023, with economic losses narrowing to -$10,339 million and -$3,945 million, but profitability had not yet returned to positive levels by the end of the period.

Overall, the data illustrate a period of significant operational challenges predominantly in 2020 and 2021, followed by signs of recovery towards 2023. The decline in invested capital alongside improving NOPAT and economic profit suggests the company undertook efforts to stabilize its financial performance amid fluctuating capital costs.

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 demonstrated a consistently negative performance throughout the observed period. Starting at -4,809 million USD in 2018, it deteriorated sharply in 2020 to a loss of -17,162 million USD, reflecting increased operational challenges. Subsequent years show gradual improvement, with losses decreasing to -3,945 million USD by 2023, suggesting a recovery trend, though the figure remains significantly below breakeven.

Invested Capital

Invested capital increased from 35,074 million USD in 2018 to a peak of 49,017 million USD in 2020, indicating expansion or increased asset investment during that period. Following this peak, invested capital continuously declined to 39,428 million USD by 2023, which may reflect asset divestitures, impairment, or strategic capital reductions aligning with cost control or restructuring efforts.

Economic Spread Ratio

The economic spread ratio remained negative throughout all years, consistent with the negative economic profit. It started at -13.71% in 2018 and worsened significantly to -35.01% in 2020, coinciding with the peak deterioration in economic profit. From 2021 onward, the ratio improved steadily, reaching -10.01% in 2023, which, while still negative, points to a reduction in the firm's losses relative to invested capital and suggests improved operational efficiency or profitability margins.

Economic Profit

The economic profit exhibits a consistently negative trend throughout the observed periods, indicating sustained losses. Notably, the losses deepen sharply in 2020 and 2021, reaching peak negative values of -17,162 million and -14,685 million US dollars respectively. After these years, there is a marked improvement with losses decreasing significantly by 2023, settling at -3,945 million US dollars, suggesting a gradual recovery process.

Revenues

Revenue figures demonstrate substantial volatility over the years. Initial revenue growth is observed from 2018 to 2019, increasing from 18,881 million to 20,825 million US dollars. However, revenues plummet drastically in 2020 and 2021 to 5,595 million and 1,908 million US dollars respectively, reflecting possible operational disruptions. From 2022 onwards, revenues recover considerably, reaching 12,168 million and further rebounding to 21,593 million US dollars by 2023, nearly matching pre-2020 levels.

Economic Profit Margin

The economic profit margin remains negative across all years, indicating inefficiencies in profit generation relative to revenues. The margin deteriorates drastically during 2020 and 2021 to -306.73% and -769.65%, respectively, which correlates with the sharp decline in revenues and increased losses during these periods. Subsequent periods show significant improvement, with the margin improving to -84.97% in 2022 and further to -18.27% in 2023, aligning with the observed recovery in revenues and reduction in economic losses.