Interim report Q1 2012: Winter success continued - strong growth in the first quarter

5/16/2012 2:29 AM EST

Highlights of the first quarter

· Pre-tax loss reduced by NOK 18 million from the 
same period of 2011
· Cruise nights for Hurtigruten Norwegian coast up 
15.5 per cent 
  - round-trip cruise nights up by 22.6 per cent
  - port-to-port cruise nights down by three per cent
· Strong price trend in the first quarter, up by 22 
per cent
· Capacity utilisation increased from 57.8 per cent 
in the same period of 2011 
to 62.3 per cent
· Refinancing of debt completed, ending the 
restructuring period


Winter success continued 
- strong growth in the first quarter
The Hunting the Light commitment in the winter season 
is proving a big success. Cruise nights increased by 
no less than 15.5 per cent from 2011, an even bigger 
rise than in the two preceding years which also 
showed strong progress. Hurtigruten has previously 
used price as an instrument for increasing traffic in 
the winter. It proved possible in 2012 to secure a 
price increase of no less than 22 per cent. This 
shows that Hurtigruten has a good winter product. 
Progress has been particularly strong in the UK 
market, which delivered a level of cruise nights on a 
par with Germany during the first quarter. That has 
not happened before. Product development is 
continuing by highlighting the distinctive features 
of the various seasons. First off the mark is the 
spring, with the Arctic Awakening concept. A new 
concept tailored to the season will be tested during 
the autumn.
	
Explorer products/MS Fram had fewer cruise nights in 
the first quarter compared with last year, but the 
price level was somewhat higher. Results for MS Fram 
were slightly down from 2011. Results for the 
Spitsbergen business were weak, and NOK 3 million 
lower than in the same quarter of last year.
	
Higher prices, more cruise nights and increased 
public procurement income along the Norwegian coast 
boosted the group's revenues for the quarter by NOK 
136 million to NOK 723 million. As expected, 
operating costs also rose substantially. More cruise 
nights boost the need for shipboard personnel, and a 
high pay settlement in 2011 for certain functions has 
significantly increased payroll costs. The rise in 
oil prices was also substantial, and contributed to a 
big increase in fuel costs during the quarter. 
Operating costs totalled NOK 764 million for the 
quarter, up by NOK 82 million from 2011.
	
The operating loss before depreciation and impairment 
(EBITDA) came to NOK 31 million, an improvement of 
NOK 64 million from the year before. Net financial 
expenses rose slightly, primarily because of foreign 
exchange changes. The pre-tax loss for the first 
quarter was NOK 172 million, an improvement of NOK 18 
million in the same period of 2011.


Outlook
Combined with the new public procurement contract 
from the Norwegian government, increases of about 16 
per cent in cruise nights and 22 per cent in prices 
yielded a satisfactory result for the Norwegian coast 
business. Hurtigruten's Hunting the Light winter 
concept has been a success since its launch in 2007, 
with strong growth in this season every year except 
during the financial crisis in 2009. Hurtigruten 
differs in this area from the rest of the cruise 
industry, which reduces its prices sharply in order 
to maintain volume. Product development continues for 
the other seasons based on experience from the winter 
season. The Arctic Awakening spring concept has been 
launched this year on all the ships.
	
Bookings for the rest of 2012 reflect a more 
challenging market. Volume is roughly unchanged from 
2011, but prices are higher. Germany, which 
previously contributed the bulk of Hurtigruten's 
growth along the Norwegian coast, is delivering a 
lower volume than last year. The British market shows 
a strong increase. Booking figures for the past month 
indicate a more positive trend after a number of 
measures were initiated around Easter in both Norway 
and Germany.
	
Developments in the port-to-port sector remain 
unsatisfactory, although the number of cruise nights 
increased by three per cent in the first quarter. 
Port-to-port traffic correlates closely with 
operating regularity, which was not good during the 
quarter. January was particularly weak, since two 
ships had to be docked because of technical problems. 
As regularity improved during the quarter, the number 
of port-to-port cruise nights also rose. Expectations 
attach to the marketing campaigns which were launched 
in Norway for the port-to-port market during the 
spring of 2012. Capacity for port-to-port travel in 
the summer has also been increased by the 
introduction of MS Finnmarken.
	
The board is gratified that it proved possible to put 
a good long-term financing package in place for 
Hurtigruten during the first quarter, even though the 
capital market was difficult. This refinancing marked 
the termination of the extensive restructuring 
process initiated in 2008. 

Results for the first quarter were in line with the 
board's expectations. Market conditions have now 
become more challenging, but measures have been 
adopted to reduce the impact of this downturn and to 
ensure continued growth in the number of cruise 
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