Carnival Corp. & plc (NYSE:CCL)

Over the analyzed periods, net operating profit after taxes (NOPAT) initially demonstrated a gradual decline from 3,339 million US dollars in 2018 to 3,226 million in 2019. Subsequently, there was a sharp negative shift occurring in 2020, with NOPAT recorded at -9,312 million, continuing to remain negative through 2021 and 2022 at -7,863 million and -4,485 million respectively. A recovery trend appears in 2023, where NOPAT returns to a positive figure of 2,207 million US dollars.

The cost of capital shows a notable downward trend from 22.81% in 2018 to 13.09% in 2022, suggesting a decreasing hurdle rate for investments over these years. In 2023, there is a slight increase to 15.39%, indicating a modest rise in the required return on capital.

Invested capital rose from 35,074 million US dollars in 2018 to a peak of 49,017 million in 2020. Thereafter, it declined consistently, reaching 39,428 million by 2023. This trend reflects an expansion phase up to 2020 followed by a reduction in capital investment or divestitures in subsequent years.

Economic profit, which accounts for the cost of capital, was negative throughout the entire period. The deficit widened substantially starting from -4,663 million in 2018, deepening to -17,054 million in 2020, and slightly recovering yet remaining significantly negative through to 2023, ending at -3,862 million. This persistent negative economic profit indicates that the invested capital did not generate value above its cost during these years.

Overall, the data reveals a period of financial distress particularly evident from 2020 to 2022 characterized by negative operating profits and high economic losses despite declining cost of capital. The recent improvements in 2023 suggest some recovery, yet economic profit remains negative, implying challenges remain in creating shareholder value relative to invested capital.

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 Trends

The economic profit exhibited a consistently negative trend throughout the six-year period. Beginning at -4,663 million USD in 2018, it worsened slightly to -4,723 million USD in 2019. A sharp decline was observed in 2020, with economic profit plunging to -17,054 million USD, likely reflecting significant financial challenges. In subsequent years, the negative economic profit gradually improved but remained substantially below the initial levels, concluding at -3,862 million USD in 2023. This pattern indicates persistent losses with some recovery post-2020.

Invested Capital Trends

Invested capital increased steadily from 35,074 million USD in 2018 to a peak of 49,017 million USD in 2020. Following this peak, a downward trend emerged, reducing invested capital to 39,428 million USD by 2023. This suggests an initial phase of capital expansion or acquisition, followed by a period of capital reduction or asset divestiture in later years.

Economic Spread Ratio Patterns

The economic spread ratio, always negative, reflected poor returns relative to the cost of capital throughout the timeframe. Starting at -13.29% in 2018, it worsened to -12.32% in 2019. The ratio then deteriorated markedly in 2020, reaching a nadir of -34.79%, before improving incrementally year-over-year to -9.8% in 2023. This trajectory parallels the economic profit trend, with the worst performance coinciding with the 2020 period followed by a gradual recovery.

Overall Analysis

The financial data demonstrates significant operational and financial stress peaking in 2020, during which both economic profit and economic spread ratio reached their lowest points. Invested capital growth prior to 2020 may have contributed to increased losses if associated assets did not generate sufficient returns. The gradual recovery from 2021 through 2023 suggests effective cost control, divestiture of underperforming assets, or improvements in operational efficiency, though the company had not restored positive economic profit by 2023. Persistent negative economic spread ratios imply ongoing challenges in generating returns above capital costs.

Economic Profit

The economic profit displayed a significant decline from 2018 through 2020, reaching its lowest point at -17,054 million US dollars in 2020. Although losses began to reduce after 2020, the economic profit remained negative through 2023. By 2023, the economic loss had decreased substantially to -3,862 million US dollars, indicating an improvement compared to the peak losses seen in 2020 and 2021.

Revenues

Revenues followed a sharp downward trend starting in 2019. From 20,825 million US dollars in 2019, revenues plunged drastically to 5,595 million in 2020 and further dropped to 1,908 million in 2021. This steep contraction was followed by a gradual recovery in the subsequent years, with revenues rising to 12,168 million in 2022 and increasing further to 21,593 million in 2023, nearly surpassing the pre-2020 levels.

Economic Profit Margin

The economic profit margin exhibited a marked deterioration from 2018 to 2021. Starting at -24.7% in 2018, the margin worsened significantly, reaching an extreme low of approximately -764.53% in 2021. This indicates that losses were disproportionately higher relative to revenues during that period. Post-2021, the margin showed signs of recovery, improving to -84.35% in 2022 and further to -17.89% in 2023, reflecting a reduction in the scale of economic losses as profitability moved closer to sustainable levels.