FEBRUARY 24, 2016—Matson, Inc. (NYSE: MATX), a leading U.S. carrier in the Pacific, reported net income of $26.6 million, or $0.60 per diluted share for the quarter ended December 31, 2015. Net income for the quarter ended December 31, 2014 was $27.8 million, or $0.63 per diluted share. Consolidated revenue for the fourth quarter 2015 was $494.8 million compared with $443.5 million reported for the fourth quarter 2014.
For the full year 2015, Matson reported net income of $103.0 million, or $2.34 per diluted share compared with $70.8 million, or $1.63 per diluted share in 2014. Consolidated revenue for the full year 2015 was $1,884.9 million, compared with $1,714.2 million in 2014.
Matson President & CEO Matt Cox, said, “2015 was an exceptional year for Matson. Financially, it was the best year in our history. Strategically, we substantially grew our ocean transportation platform with the acquisition of the Alaska trade and we reinforced our position as the service leader in Hawaii, Guam, China and Micronesia.”
Cox added, “In 2016, we expect to continue to deliver strong operating results, although modestly lower than the record level achieved in 2015. Matson's core businesses are well-positioned to generate significant cash flow to pay down debt, fund growth initiatives, including our new vessel investments, and return capital to shareholders via both dividends and share repurchases. The integration of our Alaska operations continues to progress well and will remain a focus this year. Our investment in Alaska is supported by the attractive cash flow and earnings generation characteristics of the business and is on track to achieve our earnings and cash flow accretion expectations.”
Fourth Quarter 2015 Discussion and 2016 Outlook
In the fourth quarter 2015, the Hawaii trade experienced modest westbound market growth and, as expected, Matson achieved meaningful volume gains as it deployed additional vessels in response to a competitor's service reconfiguration. Matson believes that the Hawaii economy remains healthy and expects the continued progress of the construction cycle in urban Honolulu to generate modest volume growth. As a result, for the full year 2016, Matson expects its Hawaii container volume to be moderately higher than 2015.
In the China trade, despite freight rates for other ocean carriers reaching historic lows, Matson achieved average freight rates that approximated the strong rates achieved in the fourth quarter 2014. And, as expected, Matson's China volume in the fourth quarter 2015 was moderately lower due to one fewer sailing, the absence of the extraordinarily high demand experienced in the fourth quarter 2014 during the U.S. West Coast labor disruptions, and market softness. In 2016, international vessel overcapacity is expected to persist with vessel deliveries outpacing demand growth and putting continued pressure on international ocean carrier freight rates. Matson expects its expedited service to continue to realize a sizeable premium and maintain high vessel utilization in 2016, albeit at average freight rates that are significantly lower than 2015.
In Guam, economic activity in the fourth quarter 2015 was stable and Matson achieved modest volume growth as the expected launch of a new competitor's bi-weekly U.S. flagged containership service to Guam was delayed until early 2016. For the full year 2016, Matson expects to experience competitive volume losses to this new service.
In Alaska, volume for the fourth quarter 2015 was about 14,200 containers. In 2016, Matson expects Alaska volume to be modestly lower than the total 67,300 containers carried by Horizon and Matson in 2015. Matson intends to operate a base deployment of three containerships in Alaska and expects to complete the installation of exhaust gas scrubbers on those ships in 2016. Matson’s integration of the Alaska operations is progressing well and is expected to be substantially complete by the end of the third quarter 2016. Selling, general and administrative expenses related to the Horizon Acquisition are not expected to materially exceed the incremental run-rate target of $15.0 million per year in 2016. Further, the Company continues to expect to achieve its earnings and cash flow accretion targets for the Horizon Acquisition by mid-2017.
Matson’s terminal joint venture, SSAT, continued to benefit from improved lift volume during the fourth quarter. For the full year 2016, Matson expects SSAT to contribute profits modestly lower than the $16.5 million contributed in 2015, primarily due to the absence of factors related to the clearing of international cargo backlog in the first half of 2015 that resulted from the U.S. West Coast labor disruptions.
For the full year 2016, Matson expects that Ocean Transportation operating income to be modestly lower than the $187.8 million achieved in 2015. In the first quarter 2016, Matson expects operating income to be about 25 percent lower than the first quarter 2015 level of $43.9 million.
Logistics: Volume declines in Logistics' businesses extended into the fourth quarter 2015 and Matson achieved an operating income margin of 2.5 percent. Matson expects 2016 operating income to modestly exceed the 2015 level of $8.5 million, driven by volume growth and continued expense control.
Interest Expense: Matson expects its interest expense in 2016 to be about $19.0 million.
Income Tax Expense: Matson expects its effective tax rate for the full year 2016 to be about 39.0 percent.
Capital Spending and Vessel Dry-docking: For the full year 2015, Matson made maintenance capital expenditures of $46.9 million, scheduled contract payments for its two vessels under construction of $20.9 million, and dry-docking payments of $25.7 million. For the full year 2016, Matson expects to make maintenance capital expenditures of about $65 million, scheduled new vessel construction progress payments of $67.2 million, and dry-docking payments of about $60 million. For the full year 2016, Matson expects depreciation and amortization to total about $133 million compared to $105.8 million in 2015, inclusive of dry-docking amortization of about $35 million expected in 2016 and $23.1 million in 2015.