Paying less for fuel and capitalizing on labor difficulties that jammed West Coast shipping ports earlier this year helped Hawaii’s largest ocean cargo transportation firm earn a record first-quarter profit.
Honolulu-based Matson Inc. reported earning $25 million in the January-to-March period.
That net income eclipsed the company’s $3.4 million first-quarter profit last year and $9.1 million in the same quarter the year before. Prior to that, earnings aren’t comparable because Matson was a subsidiary of Alexander & Baldwin Inc.
Shares of Matson stock closed Monday, before the earnings report was released, at a near all-time high of $41.40. The stock’s peak was $42.85 on April 28. Matson stock began trading in July 2012 at $27.83, and first moved above $30 in November.
"Our businesses are performing well," Matt Cox, company president and CEO, said in a statement announcing the earnings. "As expected, Matson carried strong momentum into the first quarter of 2015."
The biggest change in Matson operations during the quarter was a $23.6 million reduction in operating costs largely due to lower fuel prices compared with the same period last year.
Saving a lot of money on fuel, however, isn’t expected to continue — unless fuel prices drop more — because Matson decreased customer fuel surcharges in recent months to where the surcharges are now balanced with fuel prices that leveled off.
On the revenue end, Matson took in $398.2 million in the first quarter, up from $392.5 million a year earlier.
The higher revenue was largely driven by customers paying more to put cargo on Matson ships traveling from China to the West Coast where international cargo carriers faced delays getting their ships into port.
Matson was largely unaffected by the West Coast port delays because it has its own terminal operations. As a result, customers flocked to the opportunity to bypass the mess that engulfed other carriers.
"We saw just tremendous demand for (Matson’s China) service in the face of ongoing difficulties, creating a terrific environment for us," Cox told stock analysts on a conference call following the earnings announcement.
Matson’s West Coast terminal business generated a $3.4 million operating profit in the first quarter compared with $200,000 a year earlier.
Container volume on Matson ships serving China rose 5 percent in the quarter — to 14,400 from 13,700 a year earlier — while rates rose "significantly."
Container shipments overall for Matson, which also operates in Hawaii, Guam and the South Pacific, slid less than 1 percent to 56,100 in the quarter compared with 56,200 a year earlier.
In Hawaii, container volume rose less than 1 percent to 33,400 from 33,300.
Hawaii automobile shipments plummeted 31.5 percent to 15,900 in the first quarter from 23,200 a year earlier due to some auto manufacturers shifting their business to a rival. However, Matson said the loss had no meaningful impact on its earnings because there was hardly any profit left in carrying cars due to intense competition.
Cox told stock analysts that he expects Hawaii’s construction industry will generate more demand for shipping over the next two years. However, Matson projects that its Hawaii container volume will remain flat this year as rival carrier Pasha Hawaii Transport Lines puts a new ship into service.
Pasha, which operates one ship, has scheduled the second ship’s inaugural departure from San Diego for Thursday, with an arrival in Honolulu six days later.
Cox said the new ship will increase shipping capacity by 5 to 10 percent in the market where Matson operates nine ships.
Matson and Pasha plan to become considerably bigger next month when a pending acquisition of another rival, Horizon Lines Inc., is projected to be completed. Matson is acquiring Horizon’s business in Alaska while Pasha is acquiring Horizon’s business in Hawaii.
One lingering negative issue for Matson continues to be molasses that leaked into Honolulu Harbor from its terminal in September 2013. The company said it spent $200,000 on legal and other expenses related to the spill in the first quarter.
The company agreed in October to pay $1 million in fines and restitution for spilling 233,000 gallons of molasses that killed more than 26,000 fish and other marine life.