Carnival Corp. & plc (NYSE:CCL)

The analysis of the annual financial indicators reveals significant fluctuations over the observed periods, suggesting a complex operational and financial environment.

Net Operating Profit After Taxes (NOPAT)

Initially, NOPAT showed moderate positive values, peaking slightly in the 2018 fiscal year. However, there was a marked decline beginning in 2020, resulting in negative figures for three consecutive years through 2022. The 2023 data shows a return to profitability, albeit at a lower level than the pre-2020 years.

Cost of Capital

The cost of capital exhibited a downward trend from 2018 into 2022, decreasing from 23.42% to 13.34%, indicating a potentially reduced risk perception or lower financing costs over this period. In 2023, the cost increased again to 15.7%, suggesting a reversal in this trend, possibly due to external market conditions or company-specific risk factors.

Invested Capital

Invested capital increased steadily from 2018 to 2020, reaching its highest level in 2020. Subsequently, there was a consistent decline each year through 2023, which may reflect asset disposals, impairments, or strategic shifts in capital allocation.

Economic Profit

The economic profit consistently stayed negative throughout the entire period, starting from a loss of 4,874 million US dollars in 2018 and worsening substantially in 2020, aligning with the large NOPAT losses. Although there is an improvement trend post-2020, including a notable reduction in economic loss by 2023, the company has not yet returned to generating positive economic profit, indicating ongoing challenges in value creation above the cost of capital.

Overall, the financial trends indicate a period of significant stress beginning in 2020, with operating profits and economic value heavily impacted. The recent signs of recovery in operating profit and reduced economic losses are encouraging but still reflect difficulties in exceeding the cost of capital. The fluctuating cost of capital and reduction in invested capital highlight adjustments in the company's capital structure or market environment, which will be critical to monitor in subsequent periods.

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 of the company demonstrated a consistently negative trend throughout the analyzed period, indicating ongoing challenges in generating returns above the cost of capital. Starting at a deficit of $4,874 million in 2018, the loss deepened significantly in 2020 to a peak negative value of $17,210 million. Following this nadir, there was a gradual improvement observed over the subsequent years, with the economic loss narrowing to $3,982 million by 2023. This improvement suggests partial recovery or cost containment efforts are having an effect but profitability remains well below breakeven.

Invested Capital

The invested capital exhibited an overall upward trend from 2018 through 2020, increasing from $35,074 million to $49,017 million. This growth reflects either expansions or increased capital expenditures during this timeframe. However, after 2020, invested capital began a steady decline, reaching $39,428 million by 2023. The reduction in capital base in recent years could indicate divestments, asset sales, or a more conservative investment posture in response to adverse performance or market conditions.

Economic Spread Ratio

The economic spread ratio, representing the spread between return on invested capital and the cost of capital, consistently remained negative for all periods analyzed. It deteriorated further from -13.9% in 2018 to a low of -35.11% in 2020, mirroring the severe economic profit losses that year. Subsequent years showed an improving trend, with the spread narrowing to -10.1% by 2023, signifying a reduction in the gap between returns and capital costs, although it stayed substantially below zero, indicating continued value destruction.

Summary

Overall, the financial indicators point to substantial operational and profitability challenges over the observed period that were most acute around 2020. The severe negative economic profit and spread ratios coupled with the peak in invested capital at that time suggest a period of intense financial stress, possibly linked to adverse market or operational factors. Since 2020, there has been a gradual improvement in economic profit and spread, along with a reduction in invested capital levels, indicating efforts toward financial recovery and capital management. Despite these improvements, the company continues to operate at an economic loss, with returns insufficient to cover the cost of capital.

Revenue Trends

There is a notable decline in revenues from 2019 to 2021, with a sharp reduction from 20,825 million US$ in 2019 to 1,908 million US$ in 2021. In the following years, revenues show a strong recovery, increasing to 12,168 million US$ in 2022 and further to 21,593 million US$ in 2023, nearly reaching pre-2019 levels.

Economic Profit Trends

Economic profit consistently remains negative throughout the period under review. The losses deepen substantially in 2020 and 2021, with economic profit plunging to -17,210 million US$ and -14,728 million US$, respectively. There is a gradual improvement in 2022 and 2023, with economic profit narrowing to -10,372 million US$ and -3,982 million US$, respectively, indicating a partial recovery from prior losses but still remaining below breakeven.

Economic Profit Margin Trends

The economic profit margin follows a similar trajectory to economic profit, remaining negative across all years. The margin worsens dramatically in 2020 and 2021, reaching extreme negative values of -307.59% and -771.93%, respectively, reflecting substantial inefficiencies relative to revenues during those periods. By 2022 and 2023, the margin improves significantly to -85.24% and -18.44%, respectively, suggesting a movement toward better operational and financial performance but still indicating economic losses relative to sales.

Overall Analysis

The data indicates a period of significant financial distress around 2020 and 2021, characterized by a sharp drop in revenues and a marked increase in economic losses and margin deterioration. This could be indicative of severe operational challenges or external factors impacting performance. The subsequent years show a strong recovery in revenues and an associated improvement in economic profit and margin, although profitability has not yet been restored. The trends point to ongoing efforts to stabilize financial health and improve economic efficiency, but with continued economic deficits recorded at the end of the period.