China service expected to lift Matson profit

Another giant wave of profit is expected to hit the balance sheet of Matson Inc. as the local ocean cargo transportation firm continues to ride swells of demand for service from China.

The Honolulu-based company announced Thursday that it expects to earn around $160 million from operations in the three months ended June 30.

Matson’s specific second- quarter profit estimate of $156.9 million to $163.6 million is nearly double the $87.2 million the company earned in the first three months of this year.

The estimated second- quarter profit also is nearly double what Matson earned for the whole year in 2019 — $83 million — and approaches its $193 million profit in 2020.

Matson has been capitalizing on exceptional demand for expedited premium serv­ice from China for over a year now in response to increased demand for goods amid the coronavirus pandemic, including personal protective equipment, cleaning products, home improvement supplies, electronics for working from home and many e-­commerce goods.

In the second quarter, however, Matson also said that demand began to pick up significantly in Hawaii and other domestic trade lanes as economic activity rebounds in tandem with COVID-19 case reductions and relaxed restrictions.

The company reported that its Hawaii container volume increased 10% in the second quarter, primarily due to higher retail and hospitality-related demand due to the reopening of the local economy, compared with a year earlier when the state had heavier COVID-19 mitigation measures in place, including restrictions on tourism.

“In Hawaii, we experienced elevated westbound freight demand as the state’s tourism and economy rebounded sharply from the pandemic lows,” the company said.

During the first quarter Matson’s cargo volume for Hawaii rose a scant 0.6%.

In Matson’s two other major domestic markets, second-quarter volume rose 15% in Alaska and 36% in Guam.

For Matson’s China serv­ice, volume jumped 59% over a year earlier.

Matson, which has served China for about 15 years, boosted its service there in May 2020 by initially chartering extra ships and then leasing six ships that now run weekly and command premium cargo rates. Then in August, Matson added stops in Alaska to pick up seafood for delivery in Asia as a way to make more money on the return trip to China from California.

Matt Cox, company CEO, said in a statement that he expects the elevated demand and full Matson ships serving China will continue at least through March.

In response to the booming business, income and outlook, Matson recently agreed to spend cash to buy back a ship, increase its stock dividend and repurchase stock.

The company said Thursday that it has agreed to pay $95.8 million to reacquire a ship, the Maunalei, that it sold in 2018 and had been leasing back. Matson sold the ship for $106 million in order to reduce its debt three years ago despite a higher long-term cost to lease the ship. Now Matson anticipates that its operating costs will fall by $6 million in the second half of this year by owning the ship.

Matson increased its dividend by 30% last month and said it intends to buy back up to 3 million shares of stock that could amount to around $190 million based on recent share prices.