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Shares in Costa Concordia owner collapse

Shares in Carnival down 17%, wiping £1bn off company’s stock market valuation, after cruise ship capsized off coast of Italy

Shares in Carnival, the company that owns the cruise ship that capsized off the coast of Italy over the weekend, lost almost a fifth of their value on Monday.

The FTSE 100 company, which owns the Costa Concordia via an Italian subsidiary, saw its shares collapse by as much as 30% when the stock market opened before later recovering to £18.62, a fall of 17%.

The share price collapse, which wiped more than £1bn off Carnival’s stock market value, came after the company warned that it was “not possible to determine” the full cost of the disaster. Carnival said the Costa Concordia would be out of action until at least November and put initial estimates of the cost at m (£62m).

However, analysts said the costs are likely to be far greater. “This tragedy will be a black mark on the cruise industry and a negative headline for Carnival. While it is too early to measure the impact on bookings, financials and legal consequences, the Concordia represents 1.6% of fleet capacity and 10.2% of Costa capacity. Given the extensive damage reported, it appears possible that the ship is a constructive total loss,” said Tim Ramskill, analyst at Credit Suisse. “If the industry already didn’t face enough challenges (fuel price volatility, capacity absorption, and weakness in the European economy) this unfortunate event will reverberate on the group over the near-term. While these accidents are extremely rare, the extensive media coverage will likely curtail some booking activity and pressure pricing during the critical season.”

Wyn Ellis, an analyst at Numis Securities, said: “There will, justifiably, be questions about the adequacy of management and emergency operational procedures on board which may have longer term cost implications.” He said the tragedy has happened at a “key point in the booking cycle,” as holidaymakers typically book European cruises for summer holidays several months in advance.

Ian Rennardson, at Jeffries, warned that the disaster, which killed at least six people and injured 60, may spark a collapse in cruising. “All of Carnival’s ships meet or exceed current health and safety laws. But people could be put off cruising, at least for a time. Looking at booking patterns after major air crashes shows that booking patterns return to previous levels relatively quickly.”

He also warned that the company’s five other ships of the same design may have to be taken out of service for safety checks. “This, if it were to happen, would clearly have a larger negative effect on forecasts. Carnival does not insure against loss of revenues or earnings from its ships. It does have protection & indemnity (P&I) insurance that covers crew and guest injury claims as well as shipwreck removal, pollution and damage to third-party property. It also has hull and machinery insurance. Carnival has quantified its excess on its insurance as m.”

Micky Arison, Carnival’s chairman and chief executive, whose family owns 47% of the company, said: “At this time, our priority is the safety of our passengers and crew. We are deeply saddened by this tragic event and our hearts go out to everyone affected by the grounding of the Costa Concordia, and especially to the families and loved ones of those who lost their lives. They will remain in our thoughts and prayers.”

Arison, who also owns NBA basketball team Miami Heat, is the 75th richest person in America according to Forbes magazine with a net worth of .5bn. Arison collected m in pay and bonuses from Carnival in 2010. His pay for 2011 is due to be made public next month. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds