Matson Inc. to buy 3 vessels totaling $1 billion; profit falls

Dave Segal, The Honolulu Star-Advertiser
·4 min read

Nov. 3—Matson Inc. demonstrated its commitment to its long-term decarbonization strategy by announcing Wednesday it had signed contracts totaling $1 billion with Philly Shipyard Inc. to build three new liquefied natural gas-powered Aloha Class containerships.

Matson Inc. demonstrated its commitment to its long-term decarbonization strategy by announcing Wednesday it had signed contracts totaling $1 billion with Philly Shipyard Inc. to build three new liquefied natural gas-powered Aloha Class containerships.

The news came in conjunction with the state's largest ocean transportation company reporting an expected decline in third-quarter earnings due to lagging China and Hawaii demand.

Matson said the first 3, 600-TEU vessel is expected to be delivered in the fourth quarter of 2026 with subsequent deliveries in 2027. TEUs, or 20-foot equivalent units, are the standard unit of measurement for container capacity.

The company's new vessels will join two Aloha Class ships previously built for Matson by Philly Shipyard that entered service in 2018 and 2019, respectively. The new vessels will be equipped with dual fuel engines that are designed to operate on either conventional marine fuels or LNG, as well as other "green ship technology " features, such as a fuel-efficient hull design and environmentally safe double hull fuel tanks and freshwater ballast systems. While the earlier ships require some modification to operate with LNG, the new ships will be delivered LNG-ready.

"Our existing Aloha Class ships are among the fastest, most efficient vessels in the Matson fleet, " Matson Chairman and CEO Matt Cox said in a statement. "These new Jones Act-compliant vessels will be built specifically for our China-Long Beach Express (CLX ) service, and like their sisterships, are expected to help Matson achieve its 2030 greenhouse gas emissions reduction goal while also providing additional capacity and speed benefiting our Hawaii serv ­ice as well as the CLX."

Matson has established goals to achieve a 40 % reduction in Scope 1 greenhouse gas fleet emissions by 2030 and net-zero Scope 1 GHG emissions by 2050.

The Jones Act requires vessels transporting cargo between two U.S. ports to be U.S.-flagged and built.

Matson's current 854-foot Aloha Class vessels are the largest containerships ever built in the U.S. and are designed to operate at speeds in excess of 23 knots, which helps Matson deliver goods in a timelier manner.

The three new Aloha Class ships will replace three vessels currently deployed in Matson's China-Long Beach Express service, which will in turn replace three older ships in its Alaska service, redeploying bigger and faster vessels into that trade lane.

Matson, in announcing the ship deal, reported that its net income fell 6.1 % to $266 million, or $6.89 a share, to miss analysts' forecast of $7.07 a share. A year earlier, Matson earned $283.2 million, or $6.53 a share. Revenue rose 4 % to $1.11 billion from $1.07 billion in the year-earlier quarter.

On Oct. 17, Matson preannounced preliminary earnings and said they would be in a range of $257.3 million to $262 million and earnings per share to be in a range of $6.67 to $6.79. At the time, analysts had forecast EPS to be $7.28 a share.

Matson said its China volume was down 15.1 % primarily due to lower demand for CLX, CLX + and CCX serv ­ices, as well as due to one less sailing.

Hawaii volume decreased 7.1 % from a year ago primarily due to lower retail-related demand as compared with the pandemic spike in demand experienced in the year-ago period. Matson said during the quarter it saw continued improvement in the Hawaii economy supported by a low unemployment rate and strong tourist arrivals, including an improvement in international tourist trends.

Matson said that in the near term it expects continued economic growth in Hawaii supported by a relatively tight labor market and increasing tourism traffic, but cautioned there are also negative trends from a combination of economic effects that create uncertainty in the economic growth trajectory.

The company said ope ­rating income in its logistics division, which helps companies deliver their products, increased 25.6 % to $20.1 million but revenue fell 5.7 % to $196.3 million.

Cox said Matson saw lower demand for expedited ocean services in the trans-Pacific trade lane last quarter compared with the high levels of freight demand during the pandemic. He said rates likely have peaked in the trans-Pacific trade lane for this cycle and would be in a transitional decline from the pandemic highs.

Last week, Matson said it was keeping its quarterly dividend at 31 cents a share. It will be payable Dec. 1 to shareholders of record on Nov. 10.

Matson's stock fell $3.76 to $71.11 Wednesday before the earnings were released.

Third-quarter net $266 million Year-earlier net $283.2 million