Hawaii’s biggest ocean cargo transportation firm has found a very profitable opportunity amid the economy- crushing coronavirus pandemic: China.
Matson Inc. more than doubled its long-established service from China to the mainland in recent months, and on Wednesday reported that the move helped drive a 78% increase in profit during the three months ended June 30 despite reduced domestic business.
The Honolulu-based company said it earned $32.8 million in the period, up from $18.4 million in the same three months last year, while revenue slipped to $524 million from $558 million.
Jack Atkins, a managing director and stock analyst at Arkansas-based financial services firm Stephens Inc., characterized Matson’s second-quarter achievement as “phenomenal.”
The dramatic profit gain was largely from a move to charter six ships Matson used to more than double its China service, where customer demand has been strong for personal protective equipment, cleaning products, electronics for working from home and many e-commerce goods.
Matson, which has offered service from China for 15 years, also moved one of its bigger new ships, the Daniel K. Inouye, out of the mainland- Hawaii trade lane, where business has decreased, to further boost capacity in its China service.
“It was a business that was desperately needed,” Matt Cox, Matson chairman and CEO, said on a conference call with stock analysts. “Make no mistake, we will look for opportunities created by the recession that we’re now in the middle of.”
Part of the opportunity in China is from a loss of air cargo service offered by passenger airlines suffering from travel bans and weak demand.
Cox said Matson plans to maintain its expanded China service through the peak shipping season that runs through October, and a goal is to make the expanded service permanent.
Another factor benefiting Matson finances in the second quarter was cost-reduction measures that included neighbor island barge service cutbacks, pay cuts for top-earning employees and a hiring freeze implemented to help offset business declines in domestic cargo markets.
In Hawaii, Matson said westbound container volume in the second quarter fell about 15% because of the near shutdown of tourism and closure of many retailers.
However, the company said it picked up extra Hawaii business because competitor Pasha Hawaii Transport Lines had one of its vessels out for maintenance. As a result, Matson’s cargo volume in Hawaii was down only 4% in the second quarter compared with a year earlier.
In Matson’s other two major markets, Alaska and Guam, cargo volume for the company was down 9% and 12.5%, respectively.
Cox said the company expects a third-quarter profit that exceeds the $36.2 million it earned in the July- September period last year, and that the company will seek other opportunities to grow its business during a difficult time.
“We are not jumping in our foxhole and putting our helmets on and waiting until the end of this recession,” he said.