A glut of cargo ship competition in China took a toll on Matson Inc.’s first-quarter net income.
The Hawaii-based ocean cargo transportation firm announced in a financial report Wednesday that it earned $18.1 million in the January-March period, down 28 percent from $25 million in the same quarter last year.
Matt Cox, company president and CEO, largely attributed the results to a weakening of what had been extraordinarily strong demand Matson enjoyed last year for its China service.
“Market conditions in the China trade have deteriorated further in 2016 as international ocean carriers have continued to lower rates in an attempt to attract cargo in this heavily oversupplied trade lane,” he said in a statement.
The number of containers Matson carried on its China route fell 18 percent to 11,800 in the first quarter from 14,400 a year earlier.
Cox, however, added that Matson still commanded a rate premium, albeit a significantly smaller one, in the China market and that the company expects its service there will remain “solidly profitable.”
In Hawaii, Cox said Matson expects to benefit from market growth led by construction in the strengthening local economy, while the company’s service in Alaska is still being integrated under a plan on track to be completed in the third quarter.
The Alaska service was added in mid-2015 when Matson acquired the business from Horizon Lines. The Alaska service — which runs between Tacoma, Wash., and three Alaska ports: Anchorage, Kodiak and Dutch Harbor — helped Matson increase first-quarter revenue to $454.2 million from $398.2 million a year earlier.
More cargo delivered to Hawaii also contributed to the revenue gain. Matson said it recently added an 11th ship to its Hawaii service from the West Coast. The number of containers carried in this lane of Matson’s business rose 8 percent to 36,200 in the first quarter from 33,400 a year earlier.
Hawaii automobile deliveries also were up, rising 9 percent to 17,300 vehicles in the first quarter from 15,900 vehicles a year earlier.
Matson service in Guam and the South Pacific had relatively small changes.
Matson gave investors a head’s up that its second-quarter results could be on par with last year, when the company had about $25 million in extraordinary expenses related to the Alaska service acquisition and a legal settlement for a molasses spill in Honolulu Harbor.
For the full year, Matson said it expects its operating income from ocean transportation will be about 15 percent to 20 percent lower than last year, as the company endures rate erosion in the China market.
“For the remainder of 2016, the company expects increasingly challenging market conditions in the transpacific trade with underlying market rates at historic lows amid chronic overcapacity,” Matson said in the earnings announcement.
Shares of Matson stock closed on Wednesday at $37.53 before the earnings announcement, which is modestly above a 52-week low of $35.70 on Aug. 25. Matson’s 52-week stock price high was $52.82 on Nov. 6.
