Expanding to Alaska and resolving claims over a 2013 molasses spill put a big dent in second-quarter profit for Matson Inc., though Hawaii’s dominant ocean cargo carrier said its core business performed well.
Honolulu-based Matson earned $9.9 million in the three months ended June 30, down sharply from $18.1 million in the same period last year.
Matson, which announced the financial results Tuesday, said the profit decline was primarily due to $13.5 million in higher-than-anticipated expenses related to its May 29 acquisition of Alaska shipping operations from Horizon Lines Inc., and $11.4 million to resolve state claims related to the roughly 233,000-gallon molasses spill that killed more than 26,000 fish and other marine life in Honolulu Harbor in September 2013.
The $11.4 million molasses spill expense includes $5.9 million paid to the state and $5.5 million to be spent removing molasses tanks and converting other equipment at Sand Island. The molasses equipment work, according to a Matson estimate, could eventually be as much as $9.5 million.
Aside from the two extraordinary pretax expenses, Matson said the core pieces of its shipping business that serves Hawaii, China, Alaska, Guam and the South Pacific delivered “solid” results.
“Matson’s core business has performed well,” Matt Cox, company president and CEO, said in a conference call with stock analysts. “The second quarter was an eventful one for us.”
Matson stock closed Tuesday at $40.50 before the earnings announcement. Shares in the company over the last 52 weeks have closed as high as $43.36 on July 17 and as low as $24.51 on Oct. 13.
The second quarter included one month of business from Matson’s new Alaska service of four weekly sailings between Tacoma, Wash., and three ports in Alaska: Anchorage, Kodiak and Dutch Harbor. Matson reported carrying 4,800 Alaska containers in June.
The new service helped Matson increase total revenue to $447.6 million in the second quarter from $436.4 million in the same period last year.
Matson said it also got more revenue from higher freight rates in its China service, though volume on this line of business dipped 2 percent to 15,400 containers in the quarter from 15,700 containers a year earlier.
Volume was up in the South Pacific and down in Guam, where business is relatively light compared with other Matson routes.
In Hawaii, Matson said it got a better return on the freight it carried, though cargo volume was down.
Matson reported carrying 34,500 Hawaii containers in the quarter, down 1 percent from 34,800 a year earlier. Automobile volume slid 9 percent to 17,800 vehicles from 19,600 in the same period, though Cox said the drop due to losses of large commercial customers had an insignificant financial impact.
Matson had been bracing for extra direct competition in Hawaii from its remaining major competitor, Pasha Group, which acquired Horizon’s Hawaii cargo operations that included four ships on May 29. But Pasha removed one vessel from service and altered its route schedule.
Pasha, which historically operated one ship in Hawaii, built a second ship, the Marjorie C, and put it into service in mid-May. Matson expected that move to add 5 to 10 percent of new cargo capacity. However, Pasha placed one Horizon ship into inactive reserve and ceased a Horizon route that served Tacoma in favor of doubling the frequency of its service from Los Angeles to twice a week. That prompted Matson to increase its deployment of ships from nine to 10 to pick up available customers with its service that includes a Seattle port.
Pasha said in a statement that cargo can still be delivered to its ships from the Tacoma area via rail and road, and that its adjustments still provide customers with greater frequency and capacity.
