Matson, a leading U.S. carrier in the Pacific, today reported net income of $199.1 million, or $5.89 per diluted share, for the quarter ended September 30, 2024. Net income for the quarter ended September 30, 2023 was $119.9 million, or $3.40 per diluted share. Consolidated revenue for the third quarter 2024 was $962.0 million compared with $827.5 million for the third quarter 2023.
“Matson had a very strong third quarter that exceeded our expectations with higher year-over-year operating income in both Ocean Transportation and Logistics segments. Within Ocean Transportation, our China service was the primary driver of the increase in consolidated operating income year-over-year. We saw a traditional peak season with strong freight demand leading to significantly higher year-over-year freight rates for both the CLX and MAX services. A resilient U.S. economy and a stable consumer demand environment coupled with tighter supply chain conditions supported these elevated freight rates. In the near term, we expect freight rates to moderate with normal seasonality, but remain elevated as long as the underlying economic, supply chain, and geopolitical conditions persist. As we close out the year and prepare for 2025, we remain focused on continuing to deliver a differentiated value proposition as compared to air freight with CLX and MAX services as the two fastest and most reliable expedited ocean services in the Transpacific.”
Mr. Cox added, “In our domestic tradelanes, we saw higher year-over-volume in Alaska, while Hawaii and Guam saw lower year-over-year volume. Logistics operating income in the third quarter increased year-over-year due to higher contributions from supply chain management and transportation brokerage.”
“Looking ahead, we expect our China service freight rates in the fourth quarter to be significantly higher than the levels achieved in the year ago period, but lower than the average rates achieved in the third quarter as the peak season demand eases. For our domestic tradelanes in aggregate, we expect full year volume to approach the levels achieved in 2023, absent a significant change in the trajectory of the U.S. economy. For Ocean Transportation in the fourth quarter 2024, we expect operating income to be meaningfully higher than the $66.4 million achieved in the fourth quarter 2023. For Logistics, we expect operating income in the fourth quarter 2024 to be modestly higher than the level achieved last year. As a result, we now expect Matson’s consolidated fourth quarter 2024 operating income to be meaningfully higher than the $75.3 million achieved in the fourth quarter 2023.
Third Quarter 2024 Discussion and Outlook for 2024
Ocean Transportation: The Company’s container volume in the Hawaii service in the third quarter 2024 was 2.2 percent lower year-over-year. The decrease was primarily due to lower general demand. Hawaii’s economy continues to grow slowly with stalled growth in statewide tourist arrivals due to declines in Maui tourism following last year’s wildfires and the sluggish pace of recovery in Japanese tourist arrivals which have been impacted by weakness in the yen to the U.S. dollar exchange rate. The Company expects volume for the full year 2024 to be modestly lower than the level achieved in 2023, primarily due to low-to-no growth in tourism, continued challenges in population growth and lower discretionary income as a result of higher inflation and interest rates.
In China, the Company achieved significantly higher freight rates in the third quarter 2024 compared to the year ago period. The Company’s container volume in the third quarter 2024 also increased 2.6 percent year-over-year due to two additional sailings. The elevated freight rates were primarily due to a traditional peak season with strong freight demand leading to significantly higher year-over-year freight rates for both the CLX and MAX services. A resilient U.S. economy and a stable consumer demand environment coupled with tighter supply chain conditions supported these elevated freight rates. In the near term, the Company expects its China service freight rates in the fourth quarter to remain elevated and to be significantly higher than the levels achieved in the year ago period as long as the underlying economic, supply chain, and geopolitical conditions persist. Regardless, the Company remains focused on continuing to deliver a differentiated value proposition as compared to air freight with CLX and MAX services as the two fastest and most reliable expedited ocean services in the Transpacific.
In Guam, the Company’s container volume in the third quarter 2024 decreased 9.4 percent year-over-year. The decrease was primarily due to lower demand from retail and food and beverage segments. In the near term, the Company expects the Guam economy to remain stable with a low unemployment rate, but slow growth in tourism. For the full year 2024, the Company expects volume to be lower than the level achieved last year.
In Alaska, the Company’s container volume for the third quarter 2024 increased 1.4 percent year-over-year primarily due to higher retail-related demand. In the near term, the Company expects continued economic growth in Alaska supported by a low unemployment rate, jobs growth and lower levels of inflation. For the full year 2024, the Company expects volume to approximate the level achieved last year.
The contribution in the third quarter 2024 from the Company’s SSAT joint venture investment was $6.9 million, or $5.6 million higher than the third quarter 2023. The increase was primarily due to higher lift volume. For 2024, the Company expects the contribution from SSAT to be higher than the levels achieved in 2023 due to an expected increase in lift volume.
As a result of the outlook trends noted above, the Company expects fourth quarter 2024 operating income for Ocean Transportation to be meaningfully higher than the $66.4 million achieved in the fourth quarter 2023.
Logistics: In the third quarter 2024, operating income for the Company’s Logistics segment was $15.4 million, or $1.5 million higher compared to the level achieved in the third quarter 2023. The increase was primarily due to higher contributions from supply chain management and transportation brokerage. The Company expects operating income in the fourth quarter of 2024 to be modestly higher than the level achieved last year.
Consolidated Operating Income: The Company expects Matson’s fourth quarter 2024 consolidated operating income to be meaningfully higher than the $75.3 million achieved in the fourth quarter 2023.
Depreciation and Amortization: For full year 2024, the Company expects depreciation and amortization expense to be approximately $180 million, inclusive of dry-docking amortization of approximately $27 million.
Interest Income: The Company expects interest income for the full year 2024 to be approximately $47 million. This includes the receipt on April 19, 2024 of $10.2 million in interest income earned on the federal tax refund related to the Company’s 2021 federal tax return.
Interest Expense: The Company expects interest expense for the full year 2024 to be approximately $8 million.
Other Income (Expense): The Company expects full year 2024 other income (expense) to be approximately $7 million in income, which is attributable to the amortization of certain components of net periodic benefit costs or gains related to the Company’s pension and post-retirement plans.
Income Taxes: In the third quarter 2024, the Company’s effective tax rate was 21.2 percent. For the fourth quarter 2024, the Company expects its effective tax rate to be approximately 22.0 percent.
Capital and Vessel Dry-docking Expenditures: In the third quarter 2024, the Company made capital expenditure payments excluding vessel construction expenditures of $58.0 million, capitalized vessel construction expenditures of $1.6 million, and dry-docking payments of $2.9 million. For the full year 2024, the Company expects to make other capital expenditure payments, including maintenance capital expenditures, of approximately $110 to $120 million, new vessel construction expenditures (including capitalized interest and owner’s items) of approximately $77 million, expenditures for LNG installations and reengining on existing vessels of approximately $85 to $90 million, and dry-docking payments of approximately $35 million.
Results By Segment | ||||||||||||
Ocean Transportation — Three months ended September 30, 2024 compared with 2023 | ||||||||||||
Three Months Ended September 30, | ||||||||||||
(Dollars in millions) | 2024 | 2023 | Change | |||||||||
Ocean Transportation revenue | $ | 798.7 | $ | 669.4 | $ | 129.3 | 19.3 | % | ||||
Operating costs and expenses | (571.8) | (551.2) | (20.6) | 3.7 | % | |||||||
Operating income | $ | 226.9 | $ | 118.2 | $ | 108.7 | 92.0 | % | ||||
Operating income margin | 28.4 | % | 17.7 | % | ||||||||
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | ||||||||||||
Hawaii containers | 36,200 | 37,000 | (800) | (2.2) | % | |||||||
Hawaii automobiles | 8,400 | 10,100 | (1,700) | (16.8) | % | |||||||
Alaska containers | 22,200 | 21,900 | 300 | 1.4 | % | |||||||
China containers | 40,000 | 39,000 | 1,000 | 2.6 | % | |||||||
Guam containers | 4,800 | 5,300 | (500) | (9.4) | % | |||||||
Other containers (2) | 4,700 | 4,300 | 400 | 9.3 | % |
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(1) | Approximate volume 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 Okinawa, Japan. |
Ocean Transportation revenue increased $129.3 million, or 19.3 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023. The increase was primarily due to significantly higher freight rates in China, higher freight rates in the domestic tradelanes and higher volume in China.
On a year-over-year FEU basis, Hawaii container volume decreased 2.2 percent primarily due to lower general demand; Alaska volume increased 1.4 percent primarily due to higher retail-related demand; China volume was 2.6 percent higher due to two additional sailings; Guam volume decreased 9.4 percent primarily due to lower demand from retail and food and beverage segments; and Other containers volume increased 9.3 percent.
Ocean Transportation operating income increased $108.7 million, or 92.0 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023. The increase was primarily due to significantly higher freight rates in China and higher freight rates in the domestic tradelanes, partially offset by higher vessel operating costs.
The Company’s SSAT terminal joint venture investment contributed $6.9 million during the three months ended September 30, 2024, compared to a contribution of $1.3 million during the three months ended September 30, 2023. The increase was primarily driven by higher lift volume.
Ocean Transportation — Nine months ended September 30, 2024 compared with 2023 | ||||||||||||
Nine Months Ended September 30, | ||||||||||||
(Dollars in millions) | 2024 | 2023 | Change | |||||||||
Ocean Transportation revenue | $ | 2,067.6 | $ | 1,837.3 | $ | 230.3 | 12.5 | % | ||||
Operating costs and expenses | (1,704.1) | (1,608.9) | (95.2) | 5.9 | % | |||||||
Operating income | $ | 363.5 | $ | 228.4 | $ | 135.1 | 59.2 | % | ||||
Operating income margin | 17.6 | % | 12.4 | % | ||||||||
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | ||||||||||||
Hawaii containers | 105,900 | 108,600 | (2,700) | (2.5) | % | |||||||
Hawaii automobiles | 23,400 | 29,300 | (5,900) | (20.1) | % | |||||||
Alaska containers | 62,500 | 62,200 | 300 | 0.5 | % | |||||||
China containers | 106,700 | 105,800 | 900 | 0.9 | % | |||||||
Guam containers | 14,300 | 15,100 | (800) | (5.3) | % | |||||||
Other containers (2) | 12,700 | 12,800 | (100) | (0.8) | % |
______________________ | |
(1) | Approximate volume 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 Okinawa, Japan. |
Ocean Transportation revenue increased $230.3 million, or 12.5 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023. The increase was primarily due to significantly higher freight rates in China and higher freight rates in the domestic tradelanes, partially offset by lower volume in Hawaii.
On a year-over-year FEU basis, Hawaii container volume decreased 2.5 percent primarily due to lower general demand; Alaska volume increased 0.5 percent; China volume increased 0.9 percent primarily due to one additional sailing; Guam volume decreased 5.3 percent primarily due to lower general demand and one less sailing; and Other containers volume decreased 0.8 percent.
Ocean Transportation operating income increased $135.1 million, or 59.2 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023. The increase was primarily due to significantly higher freight rates in China and higher freight rates in the domestic tradelanes, partially offset by higher vessel operating costs.
The Company’s SSAT terminal joint venture investment contributed $8.5 million during the nine months ended September 30, 2024, compared to a loss of $1.9 million during the nine months ended September 30, 2023. The increase was primarily driven by higher lift volume.
Logistics — Three months ended September 30, 2024 compared with 2023 | ||||||||||||
Three Months Ended September 30, | ||||||||||||
(Dollars in millions) | 2024 | 2023 | Change | |||||||||
Logistics revenue | $ | 163.3 | $ | 158.1 | $ | 5.2 | 3.3 | % | ||||
Operating costs and expenses | (147.9) | (144.2) | (3.7) | 2.6 | % | |||||||
Operating income | $ | 15.4 | $ | 13.9 | $ | 1.5 | 10.8 | % | ||||
Operating income margin | 9.4 | % | 8.8 | % |
Logistics revenue increased $5.2 million, or 3.3 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023. The increase was primarily due to higher revenue in freight forwarding, supply chain management, and transportation brokerage.
Logistics operating income increased $1.5 million, or 10.8 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023. The increase was primarily due to higher contributions from supply chain management and transportation brokerage.
Logistics — Nine months ended September 30, 2024 compared with 2023 | ||||||||||||
Nine Months Ended September 30, | ||||||||||||
(Dollars in millions) | 2024 | 2023 | Change | |||||||||
Logistics revenue | $ | 463.9 | $ | 468.4 | $ | (4.5) | (1.0) | % | ||||
Operating costs and expenses | (423.6) | (429.3) | 5.7 | (1.3) | % | |||||||
Operating income | $ | 40.3 | $ | 39.1 | $ | 1.2 | 3.1 | % | ||||
Operating income margin | 8.7 | % | 8.3 | % |
Logistics revenue decreased $4.5 million, or 1.0 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023. The decrease was primarily due to lower revenue in transportation brokerage.
Logistics operating income increased $1.2 million, or 3.1 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023. The increase was primarily due to a higher contribution from supply chain management.
Liquidity, Cash Flows and Capital Allocation
Matson’s Cash and Cash Equivalents increased by $136.3 million from $134.0 million at December 31, 2023 to $270.3 million at September 30, 2024. As of September 30, 2024, the Company’s Capital Construction Fund was $635.4 million consisting of cash and cash equivalents and investments in fixed-rate U.S. Treasuries. Matson generated net cash from operating activities of $593.1 million during the nine months ended September 30, 2024, compared to $399.1 million during the nine months ended September 30, 2023. Capital expenditures (including capitalized vessel construction expenditures) totaled $184.7 million for the nine months ended September 30, 2024, compared with $187.5 million for the nine months ended September 30, 2023. Total debt decreased by $30.0 million during the nine months to $410.6 million as of September 30, 2024, of which $370.9 million was classified as long-term debt.1 As of September 30, 2024, Matson had available borrowings under its revolving credit facility of $644.2 million.
During the third quarter 2024, Matson repurchased approximately 0.4 million shares for a total cost of $48.1 million. As of the end of the third quarter 2024, there were approximately 1.0 million shares remaining in the Company’s share repurchase program. Matson’s Board of Directors also declared a cash dividend of $0.34 per share payable on December 5, 2024 to all shareholders of record as of the close of business on November 7, 2024.