Fuel Surcharge Collections Put Pressure on Matson’s Profit

US-based container carrier Matson reported a drop of over 60 percent in its net income for the first quarter of 2017, reaching USD 7 million, compared to a net income of USD 18.1 million seen in the same period a year earlier.

For the quarter ended March 31, 2017, the consolidated revenue stood at USD 474.4 million compared with USD 454.2 million reported for the first quarter of 2016.

The company’s Ocean Transportation operating income plunged to USD 14.5 million, representing a drop of 56.1 percent from USD 33 million seen during the first quarter of 2016.

Ocean Transportation revenue increased by 1.1 percent during the first quarter of 2017 to USD 370 million from USD 366.1 million reported a year earlier. The rise was primarily due to higher container volume in China and higher average freight rates across the company’s core tradelanes, mostly offset by lower volume in Hawaii, Guam and Alaska.

“Matson’s ocean transportation businesses performed largely as expected in the first quarter, declining year-over-year primarily due to the timing of fuel surcharge collections, lower volume in Hawaii and Alaska, and higher vessel operating expenses related to the deployment of an additional vessel in Hawaii,” Matt Cox, Matson’s Chairman and Chief Executive Officer, said.

On a year-over-year FEU basis, Hawaii container volume dropped by 5.5 percent primarily due to the absence of competitive volume gains in the prior year, and Alaska volume decreased by 4.2 percent attributable to the continued energy sector related economic contraction.

Additionally, China volume surged by 23.4 percent due to stronger demand for the company’s expedited service and an additional sailing during the first quarter 2017, while Guam volume was 6.9 percent lower due to competitive losses.

Matson said that it expects Ocean Transportation operating income in 2017 to be lower than the USD 141.3 million achieved in 2016. In the second quarter 2017, Ocean Transportation operating income is expected to approximate the USD 33.9 million achieved in the second quarter 2016.

“For the balance of 2017, we continue to expect modest improvement in each of our core tradelanes with the exception of Guam where we expect further competitive losses due to the launch of a competitor’s weekly service in December 2016,” Matcon said.

The company’s SSAT terminal joint venture investment contributed USD 4.9 million during the first quarter 2017, compared to a USD 2.6 million contribution in the first quarter 2016. The increase was primarily attributable to improved lift volume.