Carnival’s Arison Steps Down as CEO After Cruise MishapsChristopher Palmeri
Carnival Corp., the cruise operator beset by mishaps at sea this year, said Micky Arison will step down as chief executive officer next week after 34 years while remaining chairman. The stock rose the most in almost two years.
Arison, 63, Carnival’s largest shareholder, will hand the job on July 3 to Arnold W. Donald, a director for 12 years, the company said in a statement today. Arison, son of founder Ted Arison, said he suggested splitting the roles to align the world’s largest cruise operator with best practices. The company didn’t conduct an outside search, he said on a conference call.
Arison steps aside after mishaps at sea led to worldwide publicity and forced the Miami-based company to cut prices to fill berths. An engine-room fire on the Triumph in February left 3,100 passengers stranded at sea for days with limited food and toilet service. Separate incidents forced at least two other Carnival ships to cancel voyages and refund fares.
“It’s not their ideal choice, but a better one than keeping the autocratic, insular Micky Arison on the job,” said Jeffrey Sonnenfeld, a management professor at Yale University, citing the new CEO’s lack of cruise-industry management experience.
Donald, 58, founded and led Merisant, which makes the tabletop sweetener brands Equal and Canderel. He held senior management roles at Monsanto Co. over more than 20 years, including president of the consumer and nutrition unit and president of its agricultural division.
Arison, whose family owns 29 percent of Carnival stock, has “lots of skin in the company and must believe that the hand-picked successor is the best person for the job,” said D. Daniel Sokol, an associate professor who teaches corporate law at the University of Florida in Gainesville.
Donald may bring fresh perspectives to Carnival’s practices and processes, Steven Wieczynski, an analyst with Stifel Nicolaus & Co., wrote in a report to clients. He said the change may also pull Arison, who is also owner of the Miami Heat basketball team, out of the media’s spotlight.
“Investors we have spoken to in recent months, particularly in light of the company’s recent mishaps, expressed it could work to the company’s advantage to bring about change in the executive suite,” said Wieczynski, who recommends buying the stock.
Carnival rose 5 percent to $34.89 at the close in New York, the biggest one-day gain since September 2011, after also reporting results that beat analysts’ estimates. The shares have declined 5.1 percent this year, while the Standard & Poor’s 500 Index has gained 11 percent.
Second-quarter profit topped estimates that had been lowered by analysts in the wake of the Triumph incident. Bookings for the remainder of the year are running behind 2012, at lower prices, the company said.
Howard Frank, Carnival’s vice chairman, said on the call the company’s troubles this year would reduce profit by 50 cents a share, compared with what the company expected before any of the incidents, citing lower revenue and increased repair and marketing costs.
The Carnival brand continues to see lower bookings, Frank said, and it may be two to three years before that line sees business return to previous levels.
For the quarter ended May 31, Carnival reported net income almost tripled to $41 million, or 5 cents a share, from $14 million, or 2 cents, a year earlier, when the company was still dealing with the fallout from the shipwreck of its Costa Concordia off the coast of Italy.
Excluding unrealized losses on fuel derivatives, profit fell to 9 cents a share from 20 cents, while exceeding the 7-cent average of estimates compiled by Bloomberg.
Sales fell 1.7 percent to $3.48 billion in the quarter ended May 31. Analysts had projected revenue of $3.56 billion.
Carnival last month lowered its profit forecast for the second half of 2013, saying revenue per customer fell after the price cuts. The company reiterated its full-year profit will total $1.45 to $1.65 a share.
The company has made other personnel changes including naming a new head of corporate communications last week.
“There isn’t much encouraging news in today’s earnings release, other than, perhaps, new blood at the top,” Nomura Securities analyst Harry Curtis said in a research note.