Home / News / Matson, Inc. Announces First Quarter 2018 Results And Raises 2018 Outlook

Matson, Inc. Announces First Quarter 2018 Results And Raises 2018 Outlook

– 1Q18 EPS of $0.33 versus $0.16 in 1Q17
– Net Income of $14.2 million versus $7.0 million in 1Q17
– EBITDA of $62.1 million versus $52.3 million in 1Q17
– Raises Full Year 2018 Outlook

HONOLULU, May 1, 2018 /PRNewswire/ — Matson, Inc. (“Matson” or the “Company”) (NYSE: MATX), a leading U.S. carrier in the Pacific, today reported net income of $14.2 million, or $0.33 per diluted share, for the quarter ended March 31, 2018.  Net income for the quarter ended March 31, 2017 was $7.0 million, or $0.16per diluted share.  Consolidated revenue for the first quarter 2018 was $511.4 million compared with $474.4 million reported for the first quarter 2017.

Matson Logo. (PRNewsFoto/Matson)

Matt Cox, Matson’s Chairman and Chief Executive Officer, commented, “Matson is off to a good start to this year with both Ocean Transportation and Logistics exceeding expectations for the quarter.  Our year-over-year improvement in Ocean Transportation was primarily the result of lower vessel operating costs, a higher contribution from SSAT, higher volume in our Alaska service and the timing of fuel surcharge collections, partially moderated by lower volume in China and continued competitive pressure in Guam.  In Logistics we saw improved performance in almost all service lines.”

Mr. Cox added, “For 2018, we continue to expect improvements in each of our core tradelanes with the exception of Guam and China.  In Guam, we expect to face continued competitive pressure, and in China we continue to expect modestly lower volume coming off an exceptionally strong 2017.  As a result of the first quarter performance, we now expect Matson’s 2018 operating income to be modestly higher than the level achieved in 2017.”

First Quarter 2018 Discussion and Outlook for 2018

Ocean Transportation: The Company’s container volume in the Hawaii service in the first quarter 2018 was 1.9 percent lower year-over-year due primarily to lower eastbound volume as westbound volume was essentially flat.  The Hawaii economy continues to be strong, supported primarily by healthy tourism activity and low unemployment.  The Company expects flat-to-modest volume growth in 2018, reflecting a solid Hawaii economy and stable market share.

In China, the Company’s container volume in the first quarter 2018 was 22.2 percent lower year-over-year largely due to two fewer sailings and lower volume during the Lunar New Year period.  Matson continued to realize a sizeable rate premium in the first quarter 2018 and achieved average freight rates moderately higher than the first quarter 2017.  For 2018, the Company expects pricing to remain as favorable and to approximate the average rate achieved in 2017 and volume to be modestly lower compared to the levels achieved in 2017.

In Guam, as expected, the Company’s container volume in the first quarter 2018 was lower on a year-over-year basis, the result of competitive losses.  For 2018, the Company expects a heightened competitive environment and lower volume than the levels achieved in 2017.

In Alaska, the Company’s container volume for the first quarter 2018 was 10.1 percent higher year-over-year, primarily due to an increase in northbound volume mainly related to the dry-docking of a competitor’s vessel and one additional sailing.  For 2018, the Company expects volume to be modestly higher than the level achieved in 2017 with improvement in northbound volume, partially offset by lower southbound seafood-related volume due to a moderation from the very strong seafood harvest levels in 2017.

As a result of the first quarter performance and the outlook trends noted above, the Company expects full year 2018 Ocean Transportation operating income to be modestly higher than the $128.8 million achieved in 2017.  In the second quarter 2018, the Company expects Ocean Transportation operating income to approach the level achieved in the second quarter 2017.

Logistics: In the first quarter 2018, operating income for the Company’s Logistics segment was $2.3 millionhigher compared to the operating income achieved in the first quarter 2017 due to improved performance across almost all of the service lines.  For 2018, the Company expects Logistics operating income to be moderately higher than the $20.6 million achieved in 2017.  In the second quarter 2018, the Company expects operating income to be moderately higher than the level achieved in the second quarter 2017.

Depreciation and Amortization: For the full year 2018, the Company expects depreciation and amortization expense to be approximately $132 million, inclusive of dry-docking amortization of approximately $36 million.

EBITDA: The Company expects full year 2018 EBITDA to be lower than the $296.0 million achieved in 2017.

Interest Expense: The Company expects interest expense for the full year 2018 to be approximately $23 million.

Income Tax Expense:  In the first quarter 2018, the Company’s effective tax rate was 42.0 percent, which includes a non-cash tax adjustment of $3.3 million resulting from a reduction in the alternative minimum tax receivable under the Tax Cuts and Jobs Act.  For the balance of 2018, the Company expects its effective tax rate to be approximately 28 percent.

Capital and Vessel Dry-docking Expenditures:  In the first quarter 2018, the Company made maintenance capital expenditure payments of $13.1 million, capitalized vessel construction expenditures of $57.7 million, and dry-docking payments of $4.6 million.  For the full year 2018, the Company expects to make maintenance capital expenditure payments of approximately $68 million, vessel construction expenditures (inclusive of capitalized interest and owner’s items) of approximately $388 million, and dry-docking payments of approximately $18 million.

Results By Segment

 

Ocean Transportation — Three months ended March 31, 2018 compared with 2017

Three Months Ended March 31, 
(Dollars in millions) 2018 2017 Change
Ocean Transportation revenue $ 379.3 $ 370.0 $ 9.3 2.5 %
Operating costs and expenses (354.8) (354.7) (0.1) 0.0 %
Operating income $ 24.5 $ 15.3 $ 9.2 60.1 %
Operating income margin 6.5 % 4.1 %
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1)
Hawaii containers 35,700 36,400 (700) (1.9) %
Hawaii automobiles 16,800 13,800 3,000 21.7 %
Alaska containers 17,400 15,800 1,600 10.1 %
China containers 11,900 15,300 (3,400) (22.2) %
Guam containers 4,900 5,400 (500) (9.3) %
Other containers (2) 3,100 2,100 1,000 47.6 %
_______________
(1) Approximate volumes included for the period are based on the voyage departure date, but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages in transit at the end of each reporting period.
(2) Includes containers from services in various islands in Micronesia and the South Pacific, and in Okinawa, Japan.

Ocean Transportation revenue increased $9.3 million, or 2.5 percent, during the three months ended March 31, 2018, compared with the three months ended March 31, 2017.  This increase was primarily due to higher fuel surcharge revenue and higher volume in Alaska, partially offset by lower volume in China and lower revenue in Guam.

On a year-over-year FEU basis, Hawaii container volume decreased by 1.9 percent primarily due to lower eastbound volume; Alaska volume increased by 10.1 percent primarily due to an increase in northbound volumes mainly related to the dry-docking of a competitor’s vessel and one additional sailing; China volume was 22.2 percent lower primarily due to two fewer sailings and lower volume during the Lunar New Yearperiod; and Guam volume was 9.3 percent lower due to increased competition.

Ocean Transportation operating income increased $9.2 million during the three months ended March 31, 2018, compared with the three months ended March 31, 2017.  This increase was primarily due to the favorable timing of fuel surcharge collections, lower vessel operating costs, a higher contribution from SSAT, and higher Alaska volume, partially offset by lower volume in China, lower revenue from Guam and higher terminal handling costs.

The Company’s SSAT terminal joint venture investment contributed $10.5 million during the three months ended March 31, 2018, compared to a $4.9 million contribution during the three months ended March 31, 2017.  The increase was nearly equally attributable to improved lift volume and one-time items.

Logistics — Three months ended March 31, 2018 compared with 2017
Three Months Ended March 31, 
(Dollars in millions) 2018 2017 Change
Logistics revenue $ 132.1 $ 104.4 $ 27.7 26.5 %
Operating costs and expenses (127.9) (102.5) (25.4) 24.8 %
Operating income $ 4.2 $ 1.9 $ 2.3 121.1 %
Operating income margin 3.2 % 1.8 %

Logistics revenue increased $27.7 million, or 26.5 percent, during the three months ended March 31, 2018, compared with the three months ended March 31, 2017.  This increase was primarily due to higher highway and intermodal brokerage revenue.

Logistics operating income increased $2.3 million for the three months ended March 31, 2018 compared with the three months ended March 31, 2017.  The increase was due primarily to higher contributions from highway brokerage and freight forwarding.

Liquidity, Cash Flows and Capital Allocation

Matson’s Cash and Cash Equivalents decreased by $6.1 million to $13.7 million during the three months ended March 31, 2018.  Matson generated net cash from operating activities of $29.9 million during the three months ended March 31, 2018, compared to $4.0 million in the three months ended March 31, 2017.  Capital expenditures, including capitalized vessel construction expenditures, totaled $70.8 million for the three months ended March 31, 2018, compared with $24.2 million in the three months ended March 31, 2017.  Total debt increased by $46.5 million during the three months to $903.6 million as of March 31, 2018, of which $867.1 million was long-term debt.

For the twelve months ended March 31, 2018, Matson’s Net Income and EBITDA were $239.2 million and $305.8 million, respectively.  The ratio of Matson’s Net Debt to last twelve months EBITDA was 2.9 as of March 31, 2018.

As previously announced, Matson’s Board of Directors declared a cash dividend of $0.20 per share payable on June 7, 2018 to all shareholders of record as of the close of business on May 10, 2018.

 

Source: Matson
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