Timing of Bunker Surcharge Payments Helps Pacific Shipper's Bottom Line

"Performance improved in all of our business lines" in 2014, said Cox.

Pacific shipper Matson, Inc. (Matson) reports it had seen profitability in its Ocean Transportation segment increase markedly in the fourth quarter (Q4) of 2014, as bunker costs fell faster than freight rates.

"The sharp decline in bunker fuel prices also had a positive timing impact on our results, as fuel surcharge collections outpaced fuel expenditures late in the third quarter and continued into the fourth quarter," said Matt Cox, President and CEO of Matson.

Matson has repeatedly dropped bunker surcharges during Q4 2014 and Q1 2015 but the lag between these surcharge reductions and what it described as a "sharp decline" in bunker prices paid by the company had a favourable effect on results.

Cox said he expected Q1 2015 results to match the strong performance seen in Q4 2014, thanks in part to the continued situation with the timing of fuel surcharge collections.

"The Company expects operating income for the first quarter 2015 to approach levels achieved in the fourth quarter 2014 due to higher freight rates in the China trade, the timing of fuel surcharge collections, and modest volume growth in our core trade lanes," he said.

The comments were delivered as part of the company's 2014 results announcement in which Cox said "2014 was a good year for Matson, punctuated by a strong fourth quarter."

"Performance improved in all of our business lines, buoyed by demand for our expedited China service, modest market growth in Hawaii and Guam, and continued improvements in Logistics operations and SSAT."

Both the company's segments, Ocean Transportation and Logistics, saw higher revenue in 2014 compared to 2013, helping to drive a 23.4 percent year-on-year jump in EBITDA to $209.0 million and a 31.8 percent jump in net income to $70.8 million.

Ocean Transportation revenue was up 4 percent year-on-year in 2014 to $1.28 billion, while the segment's operating margins increased to 10.3 percent from 7.7 percent over the same period.

Cox said his company was aiming to deliver a modest improvement on 2014 results this year, adding "looking to 2015, we see a year of opportunity and challenge."

Matson's results were hit by a $10 million "litigation charge" relating to its July out of court settlement with the U.S. government, which last year accused the company of over-charging bunker surcharges.