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Matson, Inc. Announces Fourth Quarter And Full Year 2019 Results; Provides 2020 Outlook

Matson, Inc., a leading U.S. carrier in the Pacific, today reported net income of $15.6 million , or $0.36 per diluted share, for the quarter ended December 31 , 2019. Net income for the quarter ended December 31, 2018 was $20.6 million , or $0.48 per diluted share. Consolidated revenue for the fourth quarter 2019 was $540.7 million compared with $564.9 million for the fourth quarter 2018.

For the full year 2019, Matson reported net income of $82.7 million , or $1.91 per diluted share, compared with $109 .0 million, or $2.53 per diluted share, in 2018. Consolidated revenue for the full year 2019 was $2,203.1 million , compared with $2,222.8 million in 2018.

Matt Cox , Matson’s Chairman and Chief Executive Officer, commented, “Despite our tradelanes performing largely as expected, our consolidated financial results in the quarter came in below our expectations. Our China tradelane service outperformed against a difficult comparison and we saw a modest rebound in our Hawaii service, but the contribution from our SSAT joint venture fell short of our expectations. Our financial performance for the full year 2019 was mixed with our China and Alaska tradelane services and Logistics making solid contributions, but our SSAT joint venture and Hawaii tradelane service coming in below expectations. Overall, 2019 was an important transition year for Matson as we made significant progress on our investments in our Hawaii tradelane with the delivery of two new vessels, Kaimana Hila and Lurline , and the installation of three new gantry cranes at Sand Island.”

Mr. Cox added, “For the full year 2020, we expect improved consolidated financial performance led by the reduction in fleet deployment to nine vessels in our Hawaii tradelane service and the financial benefits from our other infrastructure-related investments, partially offset by the negative financial impact from COVID-19 on our CLX service, at SSAT and in Logistics of approximately $15 million in aggregate. As of today, we currently estimate the COVID-19 financial impact to Matson to be limited to the first half of the year with most of the financial impact in the first quarter, but the magnitude and timing could change as the situation evolves. We expect net income to be flat and EBITDA to be higher than the levels achieved in 2019. Specifically, we expect EBITDA in 2020 to be approximately $280 million .”

Fourth Quarter 2019 Discussion and Outlook for 2020

Ocean Transportation: The Company’s container volume in the Hawaii service in the fourth quarter 2019 was 1.1 percent higher year-over-year primarily due to positive container market growth. Although Hawaii’s rate of economic growth is expected to continue slowing, recent increases in key economic factors, such as construction activity and visitor traffic, are expected to support continued GDP growth. The Company expects volume in 2020 to be higher compared to the level achieved in 2019, reflecting favorable economic conditions in Hawaii and stable market share.

In China , the Company’s container volume in the fourth quarter 2019 was 4.3 percent higher year-over-year primarily due to larger vessel capacity deployed in the tradelane coupled with strong demand for Matson’s differentiated service. Matson continued to realize a sizeable rate premium in the fourth quarter 2019 and achieved average freight rates that were modestly lower than the exceptional level achieved in the fourth quarter 2018. In the fourth quarter of 2018, the Company experienced unusually strong performance as a result of the U.S.- China trade situation. For 2020, the Company expects to face challenging conditions in the first half of the year as a result of COVID-19, but expects the second half of the year to be comparable to the strong performance achieved in the second half of 2019. Therefore, the Company expects volume in 2020 to be modestly lower than the prior year and average freight rates in 2020 to approximate the levels achieved in 2019.

In Guam , the Company’s container volume in the fourth quarter 2019 was 7.7 percent lower on a year-over-year basis primarily due to typhoon relief volume in the year ago period. For 2020, the Company expects volume to approximate the level achieved last year and expects the highly competitive environment to remain.

In Alaska , the Company’s container volume for the fourth quarter 2019 declined 0.7 percent year-over-year. The Company experienced slightly lower northbound volume and modestly higher southbound volume compared to the levels achieved in fourth quarter 2018. For 2020, the Company expects volume to be modestly higher than the level achieved in 2019, with higher northbound volume, including volume in the first quarter related to the dry-docking of a competitor’s vessel, and slightly lower southbound volume compared to the levels achieved in 2019.

The contribution in the fourth quarter 2019 from the Company’s SSAT joint venture investment was $5.0 million lower than the fourth quarter 2018. The decrease was primarily due to higher terminal operating costs and lower lift volume. For 2020, the Company expects the contribution from SSAT to be lower due to lower lift volume primarily driven by the negative effects of COVID-19, partially offset by improved operating cost efficiencies.

As a result of the business outlook noted above, the Company expects full year 2020 Ocean Transportation operating income to be higher than the $90.8 million achieved in 2019. In the first quarter 2020, the Company expects Ocean Transportation operating income to be approximately breakeven versus the $9.4 million achieved in the year ago period. The vast majority of the estimated $15 million COVID-19 financial impact is factored into the Ocean Transportation operating income outlook for the first quarter 2020.

Logistics: In the fourth quarter 2019, operating income for the Company’s Logistics segment was $1.5 million lower compared to the operating income achieved in the fourth quarter 2018. For 2020, the Company expects Logistics operating income to be lower than the level achieved in 2019 of $38.3 million . In the first quarter 2020, the Company expects Logistics operating income to be lower than the $8.1 million achieved in the first quarter 2019. The full year 2020 and first quarter 2020 operating income outlook includes a modest negative financial impact from COVID-19.

Depreciation and Amortization: For the full year 2020, the Company expects depreciation and amortization expense to be approximately $135 million , inclusive of dry-docking amortization of approximately $25 million .

Other Income (Expense): The Company expects full year 2020 other income (expense) to be approximately $2 million in income, which is attributable to other component costs related to the Company’s pension and post-retirement plans.

Interest Expense: The Company expects interest expense for the full year 2020 to be approximately $33 million .

Income Taxes: In the fourth quarter 2019, the Company’s effective tax rate was 22.4 percent. For the full year 2020, the Company expects its effective tax rate to be approximately 26.0 percent.

Net Income, Operating Income and EBITDA: The Company expects net income in 2020 to be flat year-over-year and expects consolidated operating income and EBITDA in 2020 to be approximately $143 million and $280 million , respectively, including approximately $15 million negative impact from COVID-19.

Capital and Vessel Dry-docking Expenditures: For the full year 2019, the Company made other capital expenditure payments of $91.2 million , capitalized vessel construction expenditures of $219.1 million , and dry-docking payments of $25.9 million . For the full year 2020, the Company expects to make other capital expenditure payments, including maintenance capital expenditures, of approximately $110 million , vessel construction expenditures (including capitalized interest and owner’s items) of approximately $75 million , and dry-docking payments of approximately $15 million .

Ocean Transportation revenue decreased $2.0 million during the three months ended December 31, 2019, compared with the three months ended December 31, 2018. The decrease was primarily due to lower fuel-related surcharge revenue and lower freight revenue in Guam , partially offset by higher freight revenue in Alaska and Hawaii .

On a year-over-year FEU basis, Hawaii container volume increased 1.1 percent primarily due to positive container market growth; Alaska volume declined 0.7 percent with slightly lower northbound volume and modestly higher southbound volume; China volume was 4.3 percent higher primarily due to larger vessel capacity deployed in the tradelane; Guam volume was 7.7 percent lower primarily due to typhoon relief volume in the year ago period; and Other containers volume decreased 16.0 percent.

Ocean Transportation operating income decreased $3.6 million , or 16.8 percent, during the three months ended December 31, 2019, compared with the three months ended December 31, 2018. The decrease was primarily due to a lower contribution from SSAT, higher terminal handling costs, and the timing of fuel-related surcharge collections, partially offset by a higher contribution from the Hawaii and Alaska services.

The Company’s SSAT terminal joint venture investment contributed $3.0 million during the three months ended December 31, 2019, compared to a contribution of $8.0 million during the three months ended December 31, 2018. The decrease was primarily due to higher terminal operating costs and lower lift volume.

Ocean Transportation revenue increased $25.3 million , or 1.5 percent, during the year ended December 31, 2019, compared with the year ended December 31, 2018. The increase was primarily due to higher freight revenue in Alaska , higher freight rates in Hawaii , and higher revenue in China , partially offset by lower container volume in Hawaii and lower fuel-related surcharge revenue.

On a year-over-year FEU basis, Hawaii container volume decreased 1.4 percent primarily due to negative container market growth and weather-related impacts in the first quarter of 2019; Alaska volume increased by 0.4 percent primarily due to higher northbound volume, partially offset by northbound volume related to the dry-docking of a competitor’s vessel in the year ago period and lower southbound volume; China volume was 3.9 percent higher primarily due to stronger volume post Lunar New Year; Guam volume was 1.5 percent lower primarily due to typhoon relief volume in fourth quarter 2018; and Other containers volume increased 3.7 percent.

Ocean Transportation operating income decreased $40.3 million , or 30.7 percent, during the year ended December 31, 2019, compared with the year ended December 31, 2018. The decrease was primarily due to higher terminal handling costs, higher vessel operating costs (including Maunalei lease expense), and a lower contribution from SSAT, partially offset by a higher contribution from the Alaska service.

The Company’s SSAT terminal joint venture investment contributed $20.8 million during the year ended December 31, 2019, compared to a contribution of $36 .8 million during the year ended December 31, 2018. The decrease was primarily due to higher terminal operating costs and the absence of favorable one-time items in the year ago period, partially offset by higher lift volume.

Logistics revenue decreased $22.2 million , or 15.1 percent, during the three months ended December 31, 2019, compared with the three months ended December 31, 2018. The decrease was primarily due to lower transportation brokerage revenue.

Logistics operating income decreased $1.5 million , or 16.5 percent, for the three months ended December 31, 2019, compared with the three months ended December 31, 2018. The decrease was due primarily to a lower contribution from transportation brokerage.

Logistics revenue decreased $45.0 million , or 7.7 percent, during the year ended December 31, 2019, compared with the year ended December 31, 2018. The decrease was primarily due to lower transportation brokerage revenue, partially offset by higher freight forwarding revenue.

Logistics operating income increased $5.6 million , or 17.1 percent, for the year ended December 31, 2019, compared with the year ended December 31, 2018. The increase was due primarily to higher contributions from freight forwarding and transportation brokerage.

Liquidity, Cash Flows and Capital Allocation

Matson’s Cash and Cash Equivalents increased by $1.6 million from $19.6 million at December 31, 2018 to $21 .2 million at December 31, 2019. Matson generated net cash from operating activities of $248.8 million during the year ended December 31, 2019, compared to $305.0 million during the year ended December 31 , 2018. Capital expenditures, including capitalized vessel construction expenditures, totaled $310.3 million for the year ended December 31, 2019, compared with $401.2 million for the year ended December 31, 2018. Total debt increased by $102.0 million during the year to $958.4 million as of December 31, 2019, of which $910.0 million was classified as long-term debt.

Matson’s Net Income and EBITDA were $82.7 million and $264.3 million , respectively, for the year ended December 31, 2019. The ratio of Matson’s Net Debt to last twelve months EBITDA was 3.5 as of December 31, 2019.

As previously announced, Matson’s Board of Directors declared a cash dividend of $0.22 per share payable on March 5, 2020 to all shareholders of record as of the close of business on February 6, 2020.

Teleconference and Webcast

A conference call is scheduled for 4:30 p.m. EST when Matt Cox , Chairman and Chief Executive Officer, and Joel Wine , Senior Vice President and Chief Financial Officer, will discuss Matson’s fourth quarter results.
Full Report

 

Source: Matson, Inc.

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