Higher costs cut down the second-quarter profit of Hawaii’s largest ocean cargo transportation firm, Matson Inc., by almost half.
The Honolulu-based company said in a financial report Wednesday that it earned $18.4 million in the three months ended June 30, down 44% from $32.6 million in the same period last year.
Revenue was about flat at $557.9 million compared with $557.1 million in the same comparable period last year.
Higher costs included an $8.2 million negative swing for Matson’s stake in container handling terminal operations on the West Coast, of which $5.8 million was due to a new accounting standard for leases that the company expects to recover in the second half of this year as a gain.
Another significant extra expense was higher vessel operating costs that included lease payments for a ship Matson sold and leased back last year in a move to trim its debt as it invested $929 million in four new ships. Two of the new ships were put into service last year and earlier this year respectively. A third ship is expected to be deployed in November.
Matson sold the MV Maunalei for $106 million and is paying $3.2 million a year to lease it back for up to seven years.
Matt Cox, Matson chairman and CEO, said in a statement that this year is a “transition year” on the path to achieving annual cost savings from investments in the new ships.
Cox said he expects a roughly $30 million financial benefit next year and $40 million a year thereafter from the new ships, which are bigger, more efficient and less costly to operate.
As for this year, Matson projected that its operating income from core ocean transportation activities will be “moderately” lower in the third quarter, and that full-year earnings before interest, taxes, depreciation and amortization (EBITDA) will decrease $18 million to $270 million.
Part of the anticipated decline in EBITDA, a basic measure of profitability, includes some weakness in Matson’s Hawaii cargo business despite stable market share with competitors amid a slowly growing local economy.
In the second quarter, Matson’s Hawaii container volume slipped 2.3% to 37,700 containers from 38,600 containers a year earlier. This business, Cox said, was weaker than expected.
“Containerized freight market volume has not been keeping pace with (gross domestic product) growth,” Matson said in its report.
Matson’s two other big service areas, China and Alaska, showed improvements in the second quarter. Matson’s China container volume was up 2.5% and the company said it continues to realize a significant rate premium for that service. In Alaska, Matson container volume rose 8% due primarily to the timing of two port arrivals.
Shares of Matson stock closed Wednesday at $36.54 before earnings were announced. The stock over the last 52 weeks has closed between $41.98 on July 30 and $30.92 on Dec. 24.
2nd-Quarter net
$18.4 million
Year-earlier net
$32.6 million
ON THE MOVE
First Hawaiian Bank has announced the following promotions:
>> Kurt Murata is the new vice president and business banking officer for the First Hawaiian Bank’s Kapiolani Banking Region. Murata has more than 15 years of financial industry experience and joined the bank in 2006. He also had served as a loan covenant tracking system specialist and credit analyst in the Credit Department at First Hawaiian Bank.
>> Ryan Sakaguchi is vice president and residential lending credit manager for the bank’s Residential Real Estate Division. Sakaguchi has more than 18 years of experience in the residential real estate lending industry, including serving previously as a loan representative in the Residential Real Estate Division of the bank.
>> Russell Shogren Jr. is the new vice president and team leader of the Branch Real Estate Division at First Hawaiian Bank. He has 15 years experience in the banking industry and joined First Hawaiian CreditCorp in 1997 as a commercial banking officer. Now, he manages the division’s loan portfolio.