Carnival the Cruise People Crucify CEO. What about Board of Director Culpability $CCL

Carnival Corporation (NYSE:CCL) CEO Micky Arison aged 63 and a director since 1987 and chairman since 1990 has suddenly resigned. No successor immediately apparent. In case you do not read the news Carnival has had a spate of embarrassing problems such as engine room fires, cruises ships sinking killing 22 lives and steadily declining profits for the past three years. That will do it.

Carnival knows when to pour a fresh drink at the bar but it does not know how to refresh its leadership. Micky Arison was the head honcho for 23 years and left after several disasters. The board of directors is also long in the tooth and probably has not challenged anything from management for a long time. There are only two directors who came on after 2010. Everyone else is shall we say established.

The most recent board appointment is a politically correct female. Debra J Kelly-ennis 56. She was President and Chief Executive Officer of Diageo Canada, Inc., a subsidiary of Diageo plc, a global spirits, wine and beer company, from 2008 to June 2012. So the consumer goods background makes sense. She of course knows nothing about ship engines or seamanship.

The appointment immediately prior was in 2010 for Sir Jonathon Band, age 63. Sir Jonathon Band served in the British Navy from 1967 until his retirement in 2009, having served as First Sea Lord and Chief of Naval Staff, the most senior officer position in the British Navy, until 2009. He has been a non-executive director of Lockheed Martin UK Limited since May 2010. I get the Lockheed Martin appointment. Senior military officer upon retirement steps into the arms business. Resume wise a very good fit for both. Was Carnival doing someone a favour and giving sir Jonathan Band a supposed easy one. The skill level of a warrior sailor is not what a cruise ship line needs. How embarrassing for a career sailor to watch one of his ships sink and the captain turn tail and get off the boat first. Not exactly Royal Navy was it.

The remaining directors have been there much too long and if Micky Arison needs to go they should also. So the first order of business is to recruit a new credible CEO and to rebuild the team. that should include large scale changes at the board level. Net money flow and up tick/down tick are slightly negative. Short position is 2.82% of float with a very small cover bias. Dividend is 2.86% BTW Micky Arison has been a net seller all this calendar year so his heart has not been in it.

Nominations are now open. Need someone from the travel business who knows how to build. but in the mean time watch for a caretaker financial engineer who will test the waters for a leverage buyout.





Carnival Cruise Line hides costs of Costa Concordia disaster in SEC annual report filing. $CCL

Costa Concordia {Malta 2008}

Image by Marc-John Photographic via Flickr

Carnival Corporation (NYSE:CCL) released their annual report and buried the projected costs of the Costa Concordia disaster. close scrutiny of the SEC documents indicates they will take a hit between $155-million  and $175-million against fiscal 2012 net income because of the wreck of the Costa Concordia. They then make the comment that they have significantly curtailed marketing expenses since the untimely disaster. The last juicy tidbit is that management does not expect any long-term consequences from the disaster.

The manner of disclosure while technically legal is not investor friendly. Carnival management clearly wants to wipe the dodo off their shoes. Corporate management psychologically does not believe this is their fault and they want to position themselves in a no-fault zone. Very similar to the Captain who abandoned ship before passengers and crew were completely evacuated. Just do not take responsibility. The corporate culture does not reward responsibility or accountability; or so it seems.

The marketing spend curtailment could not possibly be a significant offset against the losses. If anything they will need to spend significant amounts to repair their brand. As to no long-term effects, think lawsuits, think about the problems involved in removing fuel from an unstable wreck and then think about the visuals of a partially sunken vessel.

This is a black swan event for Carnival. Carnival needs to call it for what it is.

George Gutowski writes from a caveat emptor perspective.

Carnival emergency disclosure begs many questions about Costa Concordia $CCL

English: The "Costa Concordia" in Pi...

Image via Wikipedia

Carnival Corporation and PLC (NYSE:CCL) issued a supposed Reg FD disclosure about the financial impact of the Costa Concordia sinking. The press release went out on Martin Luther King day when markets are closed. The ship is expected to be out of commission for the rest of this fiscal year. If you look at media pictures of the ship lying on its side that’s not a surprise. What Carnival did not quantify was the impact in dollars. They did offer some information on insurance and deductibles. They also admitted that they are self-insured for loss of use. This means EPS will take a hit as a normally productive asset disappears.

Somewhere the CFO has the information as to what that ship brought in. They are chosing not to identify it.

How do you salvage a large boat of this nature. Discovery channel will probably be filming a documentary chronicling the whole sordid affair and creating a recurring PR nightmare as the cruise market is constantly reminded of the disaster. 

Carnival is also silent on how the Captain and navigation crew/systems could allow such a disaster to occur. This question will be closely followed by how does Carnival manage the selection of their captains and ship officers. The Mediterranean is well known navigationally. Rock outcroppings, currents, depths and other critical navigational issues are well documented. How did this happen?

Carnival has some huge questions that need to be answered. What are they doing about it?

George Gutowski writes from a caveat emptor perspective.