Two sticky messes cut into Matson Inc. profits by more than half in the fourth quarter, though Hawaii’s largest ocean cargo transportation firm still increased full-year earnings.
Honolulu-based Matson said Tuesday expenses from a federal lawsuit over fuel surcharges and a molasses spill at Honolulu Harbor in September cost the company $11.7 million in the fourth quarter. The impact reduced profit for the October-December period to $7.3 million from $15.6 million in the same period a year earlier.
However, the company said good results from core operations — mainly shipping cargo to Hawaii — drove profit for all of last year to $53.7 million from $45.9 million in 2012.
"In summary, 2013 was another solid year for Matson,"Matt Cox, company president and CEO, said on a conference call with stock market analysts.
Revenue for Matson rose to $411 million from $398 million in the year-over-year quarterly period, and to $1.64 billion in 2013 from $1.56 billion in 2012.
Yet there were some pockets of weakness in Hawaii shipping volumes last year that diminished Matson results along with the lawsuit and molasses spill.
Cox said resolving litigation over fuel surcharges was a difficult decision but represented "the most prudent path forward."
| FOURTH-QUARTER NET
$7.3 million
YEAR-EARLIER NET
$15.6 million
|
Matson reserved $10 million to settle the lawsuit filed in federal court in California by a whistle-blower on behalf of the federal government alleging that Matson overbilled the Department of Defense for fuel surcharges on military household goods shipments.
Matson previously said it believed the lawsuit was without merit. The settlement was proposed through nonbinding mediation and approved by the company’s board of directors Sunday, though it still needs federal government approval.
Another hit to fourth-quarter earnings was $1.7 million spent on response costs, legal expenses and third-party claims for the molasses spill that killed 26,000 fish. That followed $1.3 million in spill-related costs Matson incurred in the third quarter.
The company said it can’t estimate potential future costs, penalties, damages or expenses tied to the incident that stemmed from a leaky pipe.
Fourth-quarter earnings also were hurt by weakness in Hawaii container shipments, which slipped 3 percent to 33,900 in the quarter from 35,100 in the year-earlier quarter.
Matson further reported a 2 percent decline in Hawaii automobile shipments and a 3 percent decline in Guam container shipments in the quarter.
Those drops were offset by an 11 percent increase in container volume in Matson’s China service and new results from a Micronesia/
South Pacific service acquired last year.
Matson said the decline in Hawaii container volume, which also occurred in the third quarter following improvements in the first half of last year, was due to Hawaii’s construction industry lagging behind the rebound in other segments of the local economy.
Cox said that a multiyear growth cycle is just getting underway for Hawaii construction and shipping that should benefit Matson, though the benefit is expected to be modest because competitor Pasha Hawaii Transport Lines is due to put a second ship into service later this year.
Matson advised that operating income from its core business this year through March will likely be half of what it was in last year’s first quarter due to fuel surcharge timing, lower Hawaii container volume and lower China freight rates.
For all of 2014, Matson is expecting core operating income that is near or slightly better than last year.
Shares of Matson stock closed Tuesday at $24.60 before the earnings announcement. The 52-week high and low marks for the stock were $29.24 on Aug. 22 and $21.85 on April 17.
