The backbone of Hawaii’s consumer goods lifeline, shipping, remains in solid shape despite major damage to the state’s economy, Matson Inc. announced Tuesday.
Hawaii’s largest ocean cargo transportation firm said its ships serving the state were much lighter in April because tourism has almost completely ceased but that the flow of food and other sustenance goods for residents has risen amid the coronavirus pandemic.
Matt Cox, chairman and CEO of Honolulu-based Matson, said consumption of home food and essential goods led to higher cargo volume in Hawaii during the first quarter.
“The majority of our Hawaii service volume consists of highly recurring sustenance goods, and we expect to maintain a good level of demand for this type of volume in this pandemic environment,” Cox said on a conference call with stock analysts.
Hawaii government officials estimate that 80% of all goods consumed in the state are imported, and 98% of that comes by ship.
In March, untrue text messages widely spread by residents claimed that a Hawaii shipping shutdown was in progress, which contributed to panic buying that was already taking place.
Cox said Tuesday that Matson is focused on ensuring the consistency and quality of service as a lifeline to the state and other remote places the company serves, which include Alaska and Guam.
“This has never been more important than the pandemic environment in which we operate today,” he said.
However, Matson is taking measures to offset revenue losses linked to parts of its business that have taken hits.
Cox said changes could be made to Matson’s neighbor island barge service, port call frequency and shipping terminal hours of operation.
Some changes already made at Matson include a hiring freeze, deferred maintenance and pay cuts ranging from 10% to 30% for the company’s 100 highest-paid employees.
Cox said the company expects to save $40 million to $50 million this year from cost reduction efforts aimed at helping the company’s bottom line while maintaining high-quality service.
During the first three months of the year, which included only a couple of weeks of negative coronavirus-related impacts, Matson saw revenue slip 3.5% to $514 million from $532 million in the same period last year while profit tanked 70% to $3.8 million from $12.5 million.
Hawaii cargo volume, however, edged up 1.7% primarily due to increased volume of home food and essential goods for residents as they were largely restricted from leaving home other than for essential work, grocery shopping and exercise.
In April, Matson’s Hawaii cargo volume fell 12%, which Matson largely attributed to the chokehold on tourism. For the second half of April, the decline was 19%.
“We are now seeing the effect of near-zero tourism, as well as the impact from the temporary closure of retail stores,” Cox said.
Cox expects that Matson’s Hawaii cargo volume downturn for April to June will be in the mid- to high-teen percentage range and represent the worst quarter of the year.
Joel Wine, Matson’s chief financial officer, said the company expects a second-quarter profit.
One service area now benefiting Matson is China, where its container volume rose 4% in April after a 6.5% decrease in the first quarter.
Cox said Matson is carrying a lot of personal protective equipment, cleaning products and electronics for home-working. He also said Matson is benefiting from the loss of China-U.S. passenger jet service that includes cargo transported in the belly of planes.
To boost capacity for its China service, Matson has chartered an additional ship next week and plans to shift one of its biggest and fastest ships, the Daniel K. Inouye, from Hawaii service to the China trade lane in late June.
“Without a doubt, this economic downdraft will present a number of challenges for us,” Cox said. “But our experience in managing the company through prior recessions puts us on a relatively strong footing to adapt quickly and find opportunities.”