Horizon Lines: Cautious growth

Charlotte: Chastened by a tough experience on the transpacific America’s Horizon is cautious on international expansion. 

Horizon operated a five vessel US flag service in the China-US trade in 2011 that also provided a US to Guam service. However, the service incurred significant operating losses during the downtown, largely due to the volatile transpacific freight rates and high fuel prices, and was discontinued in December 2011.

“The downturn has taught us lessons about the competitiveness of the international trades and to be mindful of those lessons as we explore new growth opportunities beyond the US domestic markets,” says president and ceo Sam Woodward, who has been in the job since July 2012. 

Horizon owns a fleet of 13 fully containerized, US flag, Jones Act qualified vessels. Ten vessels are operated in its regular liner service network while the other three ships are deployed for season surges and drydock replacement vessels. 

There are no plans to add to the fleet at the moment, Woodward says. However, this June the company announced plans to convert the power plants on two of its steam turbine cargo vessels to modern diesel engines capable of burning conventional liquid fuels or liquefied natural gas (LNG). The project’s goal is to reduce fuel consumption and lower emissions. The project would include an integrated repowering solution encompassing main engines, supporting components, and LNG storage tanks for these two initial ships, with the potential to expand the initiative to more ships in Horizon’s fleet in the future.

Horizon is the only ocean carrier serving all three noncontiguous US domestic markets of Alaska, Hawaii, and Puerto Rico from the continental United States. 

“Of the three primary markets we serve, we see Alaska experiencing steady growth, Hawaii recovering nicely and Puerto Rico stabilising after several years of negative GDP growth,” Woodward comments. 

In addition to serving the US domestic markets, Horizon also serves the US to the Micronesia Islands through its partnership with Mariana Express Lines Limited (MELL).  This partnership connects the US West Coast with the Pacific islands of Majuro, Pohnpei, Chuuk, Yap, Palau and Saipan.

Under this arrangement, Horizon serves as MELL’s dedicated shipping agent for the container service providing US sales, vessel connections and logistics support. The partnership with MELL has been an area of growth for both companies since commencing this arrangement this past December.

“Our relationship with MELL has proven beneficial for both carriers and is a model for further growth in the Pacific islands and other areas,” comments Woodward. 

This year Horizon is on track to significantly exceed 2012 results, with 2013 adjusted EBITDA projected between $85m and $97m, compared with $66m in fiscal 2012.

Part of this improvement came in reducing its vessel lease expenses by around $13.8m 

Another cost saving initiative implemented in 2013 is our reduction in our vessel lease expense by approximately $13.8 million lower over 2012 figures via the acquisition of three of our Jones Act qualified vessels off of charter on January 31 this year.

Woodward joined Horizon from Traffic Tech Inc, an international freight forwarder, where he held several executive leadership roles. He also served as a managing director of Bengur Bryan & Co, a middle market investment bank, where since 2008 he headed the firm’s Transportation and Business Process Outsourcing Practice. From 2004 to 2008, Woodward was Chairman, President and CEO of Gemini Air Cargo.   Prior to Gemini, Woodward was president of SAW Investment Services, his own investment firm, where he oversaw investment and management services in the US freight- and logistics-based technology markets. [22/11/13]

 
 
NEED TO KNOW:  Horizon Lines
North Carolina based containerline primarily focused on linking to distant parts of the US. 13 ships in the fleet, some of which are set to be converted to use LNG as a fuel.

 

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