Looking ahead, the Honolulu-based liner carrier said it expects the $197.6 million acquisition of Span Alaska to close early this month.
Honolulu-based liner carrier Matson, Inc. reported profits of $18.0 million for the second quarter of 2016 compared with $9.9 million for the second quarter of 2015.
Operating revenues totaled $467.7 million for the quarter compared with $447.6 million for the same 2015 period.
Ocean transportation volumes for the second quarter of this year rose to $370.9 million from the $346.7 million in the corresponding period in 2015. However, logistics revenues slipped from $100.9 million in the second quarter of 2015 to $96.8 million for the quarter.
Matson President and CEO Matt Cox said the company’s core businesses delivered operating results and cash flows in line with its expectations for the quarter.
“Our Hawaii trade produced solid results benefitting from an 8.4 percent increase in year-over-year volume while we deployed 11 ships during the quarter in order to maintain adequate capacity to serve our customers amid continued market growth,” Cox said. “In Alaska, I’m pleased to report that our integration is substantially complete and we remain on track to achieve our earnings and cash flow accretion expectations for this business.”
Matson is currently focused on its subsidiary Matson Logistics, Inc.’s agreement to acquire the forwarder and consolidation company Span Alaska for $197.6 million. Last week, Matson said it received a notice of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The carrier expects the acquisition of Span to close in early August after satisfaction of other customary closing conditions.
Cox said the acquisition of Span underscores Matson’s long-term commitment to Alaska and solidifies its position as a critical freight transportation provider in the state. Matson entered the Alaska market last year when it acquired the Alaska business of Horizon Lines for $469 million.
Matson said its Hawaii service in the second quarter of this year achieved 8.4 percent container volume growth compared to the second quarter 2015, resulting from competitive gains and modest market growth.
In addition, Matson said it continues to believe Hawaii’s economy is healthy and expects construction activity to be a primary driver of market growth. “For the full year 2016, the company continues to expect its Hawaii container volume to be moderately higher than 2015; however, with substantially all of that relative increase having occurred in the first half 2016, the company expects second half 2016 container volume to approximate the level achieved in the second half 2015,” Matson said.
Meanwhile, in Alaska, the carrier noted its container volume for the second quarter of this year was moderately lower than the level carried by Horizon Lines and Matson in the second quarter of 2015. For the second half of 2016, Matson anticipates the challenging macroeconomic and freight environment in Alaska will result in modestly lower container volume compared to the corresponding period in 2015.
On the China to U.S. trade, where Matson operates a service, COX said, “Market conditions in the China trade remained at depressed levels
during the quarter which hurt our year-over-year results when compared
to the exceptional demand that benefitted our premium expedited China
service last year.”
In China, Matson’s container volume fell 9.7 percent year-over-year due to continued market softness and the absence of the exceptionally high demand experienced in the second quarter of 2015 during the U.S. West Coast labor disruptions. Matson said it realized a sizeable rate premium for its expedited service in the second quarter of 2016, but as expected, average freight rates were lower than the second quarter of 2015 due to the challenging market conditions in the transpacific trade and historically low underlying market rates amid chronic overcapacity. For the remainder of 2016, Matson expects its rate premium in China to endure but at rates significantly lower than those achieved in the second half 2015.
Cox said the company is continuing to evaluate the ordering of two new vessels for the Hawaii trade and is considering making them “ConRo” ships that would be capable of carrying both containers and roll-on/roll-off (RoRo) cargo.
Matson is in discussions with shipyards about building the vessels and there are currently three or four yards across the U.S. that could build such ships, Cox said.
Most likely, the ships would be more expensive than the $209 million that Matson is paying for each of the two 3,600-TEU “Aloha Class” containerships that it has on order from the Aker Philadelphia Shipyard. Work on those two ships began last October and these ships are expected to be delivered in the third and fourth quarters of 2018. They will be the largest Jones Act containerships ever constructed.
Cox noted that the company has some RoRo capacity on existing ships, but that those ships are likely to be retired after 2020.
Matson is installing scrubbers on three diesel powered ships it operates in the Alaska trade.
Cox noted the work is completed on two of the ships. The third is being outfitted with a scrubber this fall at a shipyard in China.
With ships out of service during the installation of the scrubber, Cox said costs have been higher because the company has had to put a steam vessel into rotation as a temporary substitute. But he also said most of the cost of fuel can be recovered through a fuel surcharge.
Matson’s Q2 profits soar 82%
