Matson Inc. (NYSE: MATX) said that in 2020 it expects to reap approximately $30 million in financial benefits from new vessels and other infrastructure investments and $40 million annually thereafter.
Matson reported net income of $36.2 million in the third quarter of 2019, compared to $41.6 million in the same period last year. Revenue was $572.1 million, compared to $589 million in the same 2018 period.
Matson is calling 2019 a "transition year," with several significant investments nearing finalization.
Matt Cox, Matson's chairman and CEO, said results in the third quarter "came in as expected. Within ocean transportation, our China trade lane service performed well, but we saw continued weakness in our Hawaii market and experienced softer-than-expected volume in our Alaska service. Within our logistics segment, we continued to perform well with positive contributions to operating income from nearly all of the service lines."
He said the company was maintaining its 2019 consolidated income outlook. It expects operating income for its ocean transportation business to be "approximately 25% lower than the $131.1 million achieved in FY 2018 after adjusting 2018 result for full year impact of vessel sale-leaseback." It says it expects operating income for its logistics business to be 15-20% higher than the 2018 level of $32.7 million.
Cox noted a new ship, Lurline, is nearing completion at the General Dynamics NASSCO shipyard in San Diego, and a sister ship is on track for delivery in the third quarter of 2020. Matson also had two new ships built at the Philly Shipyard delivered in 2018 and 2019.
Matson says after Lurline is delivered, the company will be able to operate its services to Hawaii with nine instead of 10 ships. That will be a "significant step towards realizing our previously-mentioned approximately $30 million in financial benefits in 2020, when compared to 2019, driven primarily from the reduction in Hawaii fleet deployment to nine vessels."
Matson has upgraded its Sand Island terminal in Honolulu and has three new cranes in service. Demolition of four older cranes has begun, and additional infrastructure work is proceeding.
Matson said Hawaii's gross domestic product is continuing "on a slowing growth trajectory despite resilience in key economic factors, such as construction activity and visitor traffic. However, the containerized freight market volume has not been keeping pace with GDP growth." The company expects volume in 2019 to be lower compared to the level achieved in 2018.
Matson operates an express service from China to the U.S. West Coast. It says shippers continue to pay premium rates to use the service, and it expects volumes this year to be similar to those it enjoyed in 2018.
In Alaska, Matson said its container volume for the third quarter of 2019 was flat year-over-year.
Matson's logistics revenue was 11% lower in the third quarter of 2019 than in the same period last year, but operating income was up 14%. The company said the increase was driven primarily by Span Alaska, a company it acquired in 2016. Span Alaska consolidated two leased warehouses into a single, larger facility in Anchorage and expects to reap significant operating efficiencies with the new facility.
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