Matson ships coming to Hawaii last year delivered slightly fewer containers and many fewer automobiles, but gains in other lines of business drove profits up 32 percent for the largest ocean cargo carrier serving the state.
Honolulu-based Matson Inc. earned $70.8 million last year on $1.7 billion of revenue compared with $53.7 million in net income on $1.6 billion of revenue the year before, the company announced in a report Tuesday.
Much of the profit jump was due to higher rates for Matson’s China service, lower fuel costs and reduced legal expenses.
Matson said West Coast port congestion, which dragged on for months and is only starting to be resolved after a tentative labor agreement announced Friday, led shippers to pay more to put goods on Matson ships from China because Matson is a domestic carrier that was largely unscathed by the labor difficulties.
"We’ve just seen an extraordinary expansion of our premium relative to the (China cargo) market," Matt Cox, Matson president and CEO, said Tuesday in a conference call with stock market analysts.
Cox expects the backlog of international ships at West Coast ports will take two to four months to clear while Matson might encounter only minor schedule disruptions because it has a dedicated terminal in Long Beach, Calif., with a joint-venture partner.
"We run a smaller and simpler operation that allows us to manage port congestion more effectively," he said.
Another benefit Matson received last year was a dramatic drop in fuel prices. The company repeatedly reduced its customer fuel surcharge in recent months, but the timing of the changes meant that Matson collected more from surcharges than it spent on fuel for several months last year. The opposite typically happens when fuel prices rise.
In Hawaii, Matson cargo volume did not grow. The company brought 138,300 containers into the state last year, which was 200 fewer than the year before. Automobile volume fell 13 percent to 70,600 from 81,500 in the same period.
Cox said the company made a difficult decision to quit doing business with some carmakers that leveraged bids from Matson and its competitors to a point where not much money could be made.
"Those losses don’t meaningfully impact our financial performance," he said. "There wasn’t a lot of profit left in those cars for us."
Matson projects that Hawaii cargo demand will rise perhaps 2 percent this year, which is fairly robust for the state, though competitor Pasha Hawaii is expected to take up some of the added cargo with a new ship.
One negative impact on Matson’s Hawaii business last year was $4.6 million in penalties and other expenses related to molasses that leaked into Honolulu Harbor from its terminal in September 2013. There was $3 million of similar expenses in 2013.
Yet all legal expenses for Matson were higher in 2013 because of a $10 million settlement relating to allegations that the company overbilled the Department of Defense for fuel surcharges on military household goods shipments.
The settlement happened in the fourth quarter of 2013, which dropped Matson profit for that period to $7.3 million. In last year’s fourth quarter, Matson earned $27.8 million.
Shares of Matson stock closed Tuesday, before earnings were announced, at $37.95 near a 52-week high of $38.46 reached Feb. 18. The 52-week low for the stock was $23.07 on May 5.
