MATX - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen, and welcome to Matson's Third Quarter 2017 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Fishman. Lee

Lee Fishman

Ruth. you, Thank

available the Officer; are Vice and Officer. Relations presentation Chief on www.matson.com our and the under President Cox, Chief Financial Investor are this from Executive Joel Slides download call me at Matt website today tab. Chairman and for Joining Wine, Senior

fully of today of any forward-looking make on These now will risk or of We to expectations, XXXX, XX-K over that this Matt. differ XX X, in assumptions Before you we the on statements the call no press and to filings forward-looking our under this date are will like that reasonable. events. the caption Please securities risk caution those are the detailed to We with release February the regarding call. remind presentation future meaning from laws federal date. on cause begin, to and forward-looking filed our based forward-looking projections that we Factors to call factors assumptions consider results and are the we the would that conference statements. I in course believe Risk during in the and release, undertake predictions, make statements within you factors I our is of as described of call, obligation this these We November that actual XXXX, the statements this SEC. in XX, could slides materially conference update are turn our expectations press the note the and subsequent to XX XXXX more also Pages Form

Matt Cox

In contributions to expectations afternoon. for those call to timing higher SSAT this Slide our were million per XXXX, stronger lift summary income Hawaii joint Guam. $X.XX compared $X.XX million Matson's in period. venture. generated Alaska, for $XX.X outperformed $XX.X in or or quarter EBITDA year-ago of and surcharge volume our southbound stronger-than-expected quarter We with performance. operating the and of about on of expedited third strength of I due per the thanks in competitive These third Please to Thanks, results. quarterly earned X pressures demand share of terminal our we share lower cargo Lee, in last the the results service, construction-related China the our and our at quarter stronger feel results versus to $XX.X $XX.X year. recent in net a the turn the the million fuel moderated of volume good million by collections and business of

in full in As outlook raising our XXXX later we and Matson's for walk than be are million through $XXX will the the a moderately year financials achieved call. in to outlook higher Joel XXXX. result, EBITDA on the detail

Before moving key the of trade announcements I made to quarter. highlight lanes, couple the on individual a wanted in to

Matson our announced its a upgrade and operations service Defense Pacific excited Department to network, services times in and provide Coast existing development of Kwajalein, our the service. the Okinawa This leverages of part expansion West four announced as this service important we the our Okinawa Like a call to an of further market. the China port we First, expedited that are U.S. faster of days to service, throughout U.S. recently transit Pacific. operating for up represents the an launch support from of is than

the Department look We operating for Pacific. Defense for continue network in build of to to opportunities further the

our expansion part Hawaii. modernization of new our and the the announced order as for Second, hub existing three of of cranes Sand upgrade Island terminal we and cranes our broader in three at a

with the to We and new terminal the Matson's commitment island and which operations infrastructure, reliable long-standing serve vessels in capital most underscores communities in efficient nearly will invest long the $X for billion term. Hawaiian

Now onto lanes. trade individual our

our on X. service Turning Hawaii Slide to

third conditions Matson of volume in the in as While benefited from share, in to show expect growth the a to modest stable of lower but quarter cycle our Oahu favorable to as XXXX, transitions high-rise economic Hawaii construction and XXrd underlying result master-planned continued container from volume contracted full levels week. more projects the Oahu. I market touch year-over-year. construction-related detail we a volume economy be construction than developments in the the on our XXXX, community will container cycle West Hawaii the which cargo Despite year the declined achieved generally slide, in on lower next X.X%

been to in barges. operating continue we of dry-docking once-every-X-years addition, expect undertaking expenses our higher-than-normal we've In a Island XXXX as Neighbor

talk in some GDP, growth forecast as Moving and building that and through XXXX Hawaii. by to the months, been the the changes job and real XXXX for X. three growth UHERO can to in the chart in last We permit job forecast indicators building shows and activity construction real growth. growth. key have highlight challenges current of prior construction see, forecast in the wanted The construction particularly meaningful you UHERO that permit Slide there And

appears developers what that most likely here more that to a be restrained UHERO with is and corroborates eased cycle. the the transition single-family forecasting has to building home reflects elongating conversations pace Our of building development and

arrivals provide very up, Hawaii at with operating visitor perform and meaningful from. home quarter but optimistic of levels pipeline more unemployment the XXXX the about we should years, though, a of for the high our forecast hotels the occupancy. which do down economy single-family in remain Importantly, next earnings couple of well pull-through continues on to call, development in benefit fourth Matson We'll

X. Slide to Turning

to terminal to wanted of industry construction recent to in China regarding service, Hawaii required moving the context the I announcements on containerships provide and additional and Before the color infrastructure.

Pasha modernization to the chronology working To don't long-standing TOTE the of targeted Transportation Kapalama mentioned we've its plan announcement, launch Kapalama Pasha indicated construction release want Container reference. KCT a a of XX, For project Pasha also underscore addendum On included August is infrastructure, service. Harbors happen gantry will its consolidate the like at first. reconfirmed the Kapalama facilities construction that its contract XX that, to all for of Piers X background recent also and Pasha securing essentially in for KCT was step detail it the that in of mentioning will release and announced significant Division Pasha to before Terminal, from anticipates new and two XXXX. or the in Keppel is operations its announced and a Piers customer completion with X, which provide KCT. as space In expand at intention it in four everyone on XXXX. Container of Piers the XXA, with at TOTE cranes. that TOTE Hawaii are complete. Terminal Matson X. the situation, will watching announced we terminals in important into Philly XX, the commentary, Pasha's critical existing for time, at know X you. your convenience, into Piers X KCT the my begin On terminal construction Also XXA entered just that a for for but that And for XXX Pasha's Harbors Shipyard and until the release, announcement AmFELS are a I details of unfold capacity, Island level I current between acres, consolidate on Pier we XXXX and terminal including August vessels. will issued for outlay September is to on what Department with at and possible supporting think following: launch the Pasha confirming plan Sand At its is September Hawaii to contiguous it's plan situation and XX, operate the Harbors a containerships. TOTE the press and In service. on it's XX, establish a set site the of cargo we for X not a

So harbor discussions first, modernization users. of the Sand plan container and that terminal of the that a pleased agreed-upon Island publicly decade the and Harbors for planning was over Kapalama result among all we're reconfirmed previously

more operation KCT Sand before, service to the other forward acres completed. is look to through infrastructure We most on Hawaii we Hawaii in for cost-effective As – than approximately XXX and after efficient to I nearly Island our committed of and at operation mentioned fleet customers. investments provide are our modernize contiguous $X billion carrier any to continuous

would and it piers be and until available unload or to the XXXX Piers operation Second, and are these unable is a consolidate we X, This interim XXA Further, while at to accommodate to expected stated when of start at XXXX to larger new while has or would X be indicated improving operations. Harbors terminal operating cranes would gantry room observed make to of renovating X will are operate for TOTE an scale This difficult the to cargo locations. to that customer TOTE TOTE's they and an for XXXX be publicly timing entrant deliveries X that and these TOTE's KCT would at at in mobile Piers cranes commence timing stated to operate with new that inconsistency basis and piers in modern it appear we Piers install X now is XXXX. clear the that up. cargo capacity at cannot full obstacle access to vessel potential XXXX, X, or after for XXXX as TOTE believe any Pier yard X X made it has its operations on its a Pasha to be

capacity to appear our duplicative at by say, designed not future there observed in uncertainty the new market top continuous is current in anyone adding is capacity the in Regardless and to served piers, we Hawaii. a that and of endeavor. to would to market further Matson in situation, what is will and Lastly, existing await be market positioned container volumes of market of KCT to and we and the vessel be continue Piers that leader cost as be KCT economic. that to position on cranes incremental this to and as well amount capital this sums X we satisfy Furthermore, will of else, transpires, large details. and believe expect a was related and we than extremely investing of Needless better maintain infrastructure costly fair long-standing such, X project an

Okay.

third able an service a vessels on year-over-year additional X. service as China this third our offering to on cargo Slide stronger year from demand higher was voyage were to for of our dry-docking service return our on scheduled and primarily the quarter one China. in its due load the eastbound Matson's in we in to XXXX volume quarter moving Now with XX.X% expedited

average September record in experienced quarter quarterly Our higher third volume and China XXXX. the vessels eastbound saw versus eastbound rate

enable improvement, highly demand. differentiated Pacific. advantage Matson's vessels, us the potential with For we the balance carriers multiple have international undermine international for a the of expect market better that view in the continued transit supply service Longer XX,XXX note of ultimately the a may XXXX, number new and of carriers we we although a and term, of demand strong recently over for lot alliances max to TEU large efforts ordered sources carriers which consolidation

Turning to Slide X.

competitive Matson's third in flag the year-over-year Guam quarter weekly that APL's losses to service expected, containership volume As of XXXX. further frequency to in December declined due increased to

of retain retain And strong We from X-day our an L.A./Long to ties customer's Oakland customer our market. and long share Beach, Guam, in X- continue fight to advantage every to to a single outsized owing of to and service we container history the expect business.

As highly that specific or this marketing situation, provide a able – be share more we market to any expect market beyond not goal. competitive comments market we're to

quarter. X.X% to container Plus, due to was an additional year-over-year had Matson's that Moving Alaska, season now for XXXX impacted In a primarily volume northbound higher into that southbound fell the volume. third positively X. sailing the better-than-expected Slide our seafood we quarter

volume For weaker the the expect to to quarter approximately as northbound Alaska's last contraction economy. – level of stronger level expected related ongoing offset in southbound the volume full year the XXXX, be volume by we due same to year primarily energy-based now third the

on scrubbers relief dry-dock Alaska our expenses. expect addition, operating the and diesel complete, vessels of serving lower vessel installation three In gas with exhaust we

Turning now XX. to Slide

quarter joint XXXX. the third terminal SSAT lift million compared primarily year-over-year volume. Our quarter to to contributed $X.X increase higher XXXX venture was million the third $X.X The due in in

income to higher operating XXXX, in XXXX. make expect to For Ocean to contribution SSAT we made Transportation year the full our a that it continue

shipping but X, global expect flows change, joint any the expect to short-term Alaska. to We with to believe adjusted alliances operational we West benefits leveraging new related don't the our continue impact relationship from SSAT Matson APMT of benefit terminal SSA material long-term via SSAT and between chains are We venture. container operator Matson terminals. financial its with replaced as launch to as there On Coast Tacoma supply serving this October long-term are by

Slide Turning now XX. Logistics on to

freight challenging economic Logistics a XXXX generated from months versus from quarter results in Third operating period. Even benefited two Alaska year full facing the prior Span the forwarding quarter headwinds better-than-expected of slightly in Alaska, results. while operations

be are outlook now our XXXX I outlook. affirming for to operating of Joel million. income approximately call Joel? the We will full turn for year over and Logistics financial performance our our $XX a review to

Joel Wine

Thanks, Matt.

our results financial to Turning Slide on XX.

volume container freight operating higher from The operating increased million operations joint increased expenses fuel higher container improved Transportation contribution reduction million. due offsetting rates were Span freight to inclusion terminal a as to SSAT. higher container primarily Hawaii average in depreciation in collections, primarily and SSAT $XX.X was investment quarter million XX.X% $XX.X Alaska favorable quarter volume, due The by income volume. amortization. to Alaska's favorable comparisons income higher the result increased of freight handling for of contribution and of million forwarding $XX.X slight the and lift surcharge in and intermodal primarily full Third a timing $X.X year-over-year a year-over-year Logistics $X.X income by higher in lower year-over-year offset venture EBITDA to increased million operating due by volume. Partially in year-over-year increase year-over-year and XX.X% Ocean and Guam. company's these higher increase to volume rates Hawaii China,

Turning XX sheet. a to of Slide summary balance our for

a the will at You our of of the manner and the flow shows end total summary ratio $XXX.X million, debt-to-LTM EBITDA which our note quarter X.X was debt that Slide generation. allocated was in our net times. we cash XX

approximately on withdrew XX For and used while $XXX of from $XXX.X of undertook million approximately cash shareholders the months, share capital $XX $XXX.X net from generated via we and dividends CapEx million construction CapEx fund $XX new vessel million operations our we borrowings last million, flow which million from returning also and maintenance repurchases. to

During executed average open whereby $XX.XX the per quarter, shares price approximately market we we at of repurchase share third XXX,XXX repurchased an share. an repurchases

our normal maintenance million reminder, LTM to been a our to has being $XX dry-dock period. As of CapEx $XX heavier-than-normal than range year per due million this higher a

ample continued balance cash investments fleet operating progresses, renewal leverage our financing increase as access provide vessel expect construction, growth to capital attractive capacity our to shareholders. new we While Hawaii strong program to healthy sheet, flows to consider fund and sources and return

Turning to Slide XX.

new year-to-date – We the vessel of see breakout the year, will vessels XX related our have first update cash table capital slide, the the capitalized the top new an included expenditures a quarters the of and payments. the month In in regarding interest you to and three at last the periods. for of top

vessel interest we our to payments. new milestone find you'll years think on expect we the of capitalized couple next we as forward, useful Going increase this progress breakout as over

of vessel For Philly for capitalized graving at the of Class continue The With of first in of expenditure million outlook. slide full total estimated the excluding to the me the vessel million. and discuss expect interest and At our the the Aloha and vessels $XXX.X for interest third over turn slide, This construction bottom now third vessel remain quarter fourth to shown the on you to vessel progress are ship of the track XX vessels. all Shipyard. all the $X.X capital see capitalized Aloha quarter, XXXX remaining dates. million delivery $XXX cash that, the expenditures of four payments XX% we dock Class year current of in and in first our second, constructed, this capitalized will is of vessel third had we pictures for Slide new delivery the let new

As Logistics in performance continued our and in year-to-date stronger-than-expected Matt results SSAT particular, indicated, feel our solid we China, results, the with about good our in coupled businesses businesses. Alaska

And expect our higher million expect of we to EBITDA with, million, capital $XXX million spending, on of increased depreciation XXXX outlook. about increase Given total a to to based approximately now amortization $XXX $XX are than modestly in this, dry-docking amortization. dry-dock full raising on $XX our year year consolidated XXXX. this million full we the achieved start To and of by we be inclusive year

approximately to We XXXX. operating million be operating to million income expect XXX Ocean income the $XX than – lower Logistics and $XXX.X in Transportation be achieved

construction expect We we to capital approximately and for tax approximately I expenditures, dry-docking of over million; back be of XX%. continue effective year interest, to million; expenditures approximately remarks. of final approximately and rate With call our of expect $XX payments capital for the we inclusive the to the be will $XXX million. vessel interest turn and year million, maintenance $XX to XXXX dry-docking full respect for expenditures, expense expect to full approximately $XX capitalized Matt now

Matt Cox

Joel. Thanks,

in competitive post-XXXX fulfill and confident grow anyone. now freight that to to in than am I the our at ships we're the our XXX% making business infrastructure move the environment new remains While moment, investments to Hawaii unclear better mission and

also capital to We to in shareholders the dividends share return form continue buybacks. of and

creation for lead remain generation forward, And the prospects, long-term Looking call turn with strong your back in the flow I concluding our will statement, continued questions. that that our operator confident I will for to and shareholders. ask value to cash

Operator

Stifel. [Operator Instructions] first from Ben question Your comes Nolan with

Ben Nolan

materially and I be less far in last that But the like three should pretty XQ The is have reason hopefully quick. year? the you're there was Is up of looks thus it just than it go year-over-year. good. flat a first Alaska, volume, should relatively quarters, be said that – one through for you things I a what they'll the But noticed questions pretty – handful of of terms

Matt Cox

the that catch, seen of behind of economy we given southbound better-than-expected I now. is. seafood northbound seafood us really. view the our have I Most was volumes I was us previous the above-planned mean, below where Matt. continue movements, to come it's year harvests, related are it think Not largely behind and the those the better Ben, mean, to now. largely are in performance one

was about that up at that about So point at end kind thinking at level. to the we're going this of

Ben Nolan

Okay.

a levels the sort would XQ year's something last year this little year, that, seafood... So were the have they that later of last inflated year's, to like relative in

Matt Cox

is that the seafood that by influenced eight sustain levels reality species granted of order year, seafood. Yes, the of to to is times quotas certain they're so the or at also – and different nine different levels the are – move maintain in

So each there's of caught number that of what when factors influenced are catch certain and a are by is. amount the species

So all volumes. this last year's in those influenced year's are versus

Ben Nolan

to residential. normal Okay. Matt, rises begin up All how Hawaii left mentioned how And see I terms to you'd right. square shifting back of something more of before in Fair that – construction the just to In from high the high off? to residential away enough. trying rises the was now the – the maybe cycle you on I take the construction where numbers. does your the what experience, to expect Like, pick what's the – here? this is long cycle

Matt Cox

different every Hawaii construction the mean, has kind of a XX I years over shape. Yes, last taken cycle in

least very last real we at much haven't cycle Oahu we Island that Islands is has So this centered home restrain unlike saw in construction. Honolulu and cycles resort where to I significant would in that shortage this has long commercial and And estate chronic the you've would cycle. the of of one, because absent cycle primary difficulty point, a really in the – this housing to has the in construction seen seen been mean so single-family been by I Oahu, I growth, in state. also primary real primarily what Hawaii, the note efforts largely Neighbor in across and say up permitting Neighbor the center and in That been

announced challenges, is anecdotally through view that Court went think ceremony went XX just of I the series on That groundbreaking has for Koa been I the a number just several years to example, times. and Ridge, one that, West which for So would projects mention Oahu, in has Supreme coincidentally books – over a the project a today. up of the legal is

now they finish ebbing we that these of get are things feel except we're So up long we those been so downtown talking continuing that based difficult I but We these it could contribute on years – And that a going a the see confident who an Kakaako – we've is out several from seen of to sort to of very peaking these decade perhaps projects of there's good Where Hawaii ongoing. the now. earnest that to economy for the to of be in projects begin mentioning, that. still to are will couple the and ourselves – in as are think Oahu but across think line. urban until West we've to expect, build-out maybe high-rise see not the now after about seem a this in is to downshift, news developers projects do these ultimately sector, couple and

So these we the not Oahu moving of moving to looking we're XXXX forward projects. projects. ways. to we're But of before those mentioned be of we measurable before – probably to things end appear But start see moving long slow, calls the in in and if both nonetheless, previous in projects so kind that West are

Ben Nolan

and ground for to in lost up to you've a the what Okinawa extremely I mean, business now, Guam? of more traction to, perhaps And you're the helpful. for over, up business, little me, able or finding I relative it doing months that turn you the the guess, a Okay. side I for been I'll X.X where make U.S. of sort into quickly That's flag you're What's Guam. head-to-head – are so guess, couple last far? some make you're months, bit go what, trying gaining

Matt Cox

Pacific aspiration grow generally, objective continuing Pacific. similar U.S. we've and the I had we've an support network of to We've which of acquired think had expanded Military. Yes, the South is a why we in mean, around long continuing to into I the Alaska, leverage why our

that and on off great moving would with the exciting – single an gotten was I our We're very we but And in that volume, a are to part added would won't us. these military, government. of – will question, contribution pleased Okinawa shippers not whether We're response our the cargo or say margins nonetheless, second answer both are So say incremental the would we've add marks hitting overall entirety I from your its network clear losing. that it's that every exactly and the cargo, for we're start. But and to are replace say household I we're U.S. there. this Guam more back to our results.

grow. So again, a Okinawa. with pleased we are very more to with There's we're room lot where

We there there a for also which as story long of Ben, if – will a be U.S. think long that you movement know I time, followed talked about we've have, strategically, you will to our the the a the – Okinawa for or building facility we're to in new of replace positioning and in Guam, existing well, series ones. ourselves Marines from of as Okinawa forces specifically others but DoD facilities

do And a, this we so market. long as very attractive a term, see

important in the we world place. and Korea potential candidly, see as As an remains as the Japan unsettled markets markets

Operator

question next Steve Company. & Sidoti from with Your O'Hara comes

Steve O'Hara

Just two quick questions.

business mean, SSAT, JV. contracts, and for terms it's these it seen year-over-year Or growth new the mean, going maybe upside pretty the see something on on that – are here normalized been et I good And you of of cetera? the based the In is dependent forward terms more benefit where of more from trends up in I volumes? terms you've in maybe my year-over-year from

Matt Cox

is access Yes, fixed we're that Steve, space joint they mentioned a largely network. as cost because terms with SSAT, paying and largely sensitive so or venture – volume have of is it we its for in contribution leasing

section their So network. a is the contributor Coast. They They have through over strategic on of consolidation to into to more bit best among that marine part also And it terminal as manage put be customers. used flows of the longer these it carrier a of among operator attuned own the everywhere. terminals, SSAT cargo carriers, four least there's to there's operate or of ocean their the as West general own alliances in this volume they the very to well. ocean three, automation. last labor no that those a They're at can ocean invested huge margin marine is carriers, feeling or to as

– these be, capabilities well four resettling its year Those of And alliances SSAT venture and in terms are positioned extremely three, joint to the to financially has founding. so since was then turning additional to from volumes able there reputation the will freight be what best been as likely, of volumes. a into accommodate its

And So have It's bullish it this is on also earnings but carriers. are as at we we all going perspective our definitive these our call we're of a flowing we'll are more earnings We'll better about seeing when, at now terminal what could SSAT's through have not cargo further and this, of is feel but excited we about be feel if good year-end But most We now. network, when about call, very to of that. view there see largely acquisition within a where it we I position. think suggests about that we're likely long-term the remain volumes international this stay. the Maybe unclear. year least year-end to the it's that positioned. that to potential. hard – do for ocean if It's predict this,

Steve O'Hara

I did about think do Okay. down just rate? little back maybe the based? was ago? And a I'm you years share slippage then Hawaii. that it's same volume mean, market the largely you you've from few Or – kind some give just in market the on of a gained

Matt Cox

at and soft. looked we the We our not remained year. in this Yes, expectation August, mean, was started has it obviously softening in to earlier see closely. I very This relatively

what Of hundreds the of customers. to course, focused of we cause were talked We've market. determining were on very the

in the see along. a the any of continues are think We it's view market our this – relatively of customers Most been surf storms, so There've a demand or rate. this not low people ups market at unemployment given stable really And like difficulty feeling a continues chug see our continuing money closely are unusual perform share continue well. good the we construction-related of where downs Caribbean our and far a to of pretty the industry in relatively the that materials some we issue. Most for construction to This economy most dramatic make and and there market. – of is also seeing segment be maintaining share I And the don't customers quarter-over-quarter. by a see hiring tourism very to to a product. in in share are continuing in been but somewhat We was I as largest share. we is, difficulties economy are sun people And doing here think level. the very and given the it's

unusual position seeing. continue concerned cycle and And So it. thing that that bit share not clearly, about feel we is to the the think we're happens, largest but shape. to. It's in we're is in finger terrific a overly that a we like a the But construction shifting transition it is can single point we our

Operator

from comes question with Mike next Wells Your Fargo. Webber

Mike Webber

make put competitive delve awaiting, I of questions guys job bit It's know always the I tightly volume. to that jump of well, I like curious, don't relative but an the staring some But pretty if I this Hawaiian more guess, chart, X. about just kind data. it's of and the – at the from, with what data chart does massive I do just as construction job through before you're odd growth Real rest now eagerly fact job sure you of growth growth permitting keep construction into the I you? we guess, that you it expecting Slide revision. today? Joel, seem outlier, the to positive out your that wanted I'm go And Matt, you of ask growth a I'm a an has they're on from to And correlated where are

Matt Cox

as terms in was crack Obviously, live perspective. first volumes moving were it phase. in nearing his give construction that were lot the take We freight and are we me these certain level. let what I'll of to mean, toss Honolulu. watch at high-rise to a I of seeing their at we over projects Mike, a I along think things Joel then

number a mentioned, the the started we putting as August – we construction-related of seemed same of all growth construction construction you sites and construction the where And different cranes, baseline. number for first saw behind reduction activity, horizon. especially And correlated was looked urban the construction construction from cranes West as I And had the of or any see weren't of then saw a that's moving employment. we in lastly, it what not we obviously around we And these a right growing meaningful that new while As then Oahu as this Honolulu. noticed in neatly to around to we removal cranes up if all were shipments. but come sudden was in quickly directly time,

same revised time. about forecast kind of us it at So downward the looking or this at came upon were we as

turn reasons, So it to but over to forecast. wasn't any perspective. know I the has previously if I'm see Joel to going he additional it don't

Joel Wine

we'd correlated it, me, been you a year-over-year Mike. building noise a actual construction perspective, with Mike, correlation from jobs. permit The short have had in volumes at – always excuse term data our has changes lot data say when always most the Stephen of Sure. look in

jobs activity at leading correlate the our business current a really tend not good it's is issue job the short-term But indicator. good does in only is the construction, so with actually volumes. to that very measure construction is of period, how terms in that happening most a of And and much

we basis. see this. saw surprised coming Matt as But down look our the and this in I'm coming at cranes data down of at just most we you out as year. not when is it kind that a necessarily Kakaako played weren't to volume area data to activity It surprised So said, recent correlated this quarter-over-quarter

Mike Webber

remarks guess progression it's Yes, very maybe this or lay an seems won't real idea It and guys ago, for third ago X striking it terms from and look guess, and real guys get get six on, to but two, trade. addressing had new in you months you all – can spec a player six prepared we've your And the Then curious, or so in the got today might Matt, points okay, line from the because about a behind until and inconsistencies revision your and when guys is more of ago, job like you certainly just moving But the of when they you're of fair in but Hawaiian around a not assess last a real in can't do is of kind begin six was they to significant it combined that back TOTE, there get a I talking you about good months of Hawaii. more are prepare one, than just unchallenged events then month, kind sure either where going months competitor there business, and just access duopoly a away that? we're data last to a time for XXXXs weak in now. I and eventually. you to kind it if months but think with for it's just access, four competitor as risk player, risks how we this I'm entity a you competitor, kind player Matt, frequently. months out were orders, be simply a the I real anything else, a at did ago? it's happen if pretty this helpful it. say you something to

Matt Cox

we of plan, modernization, expect of say the have you And things, in Yes, various let first. capital, to have have growth terminal do second Matson we course, expansion, is one we I answer your that have we would have organic to me we think lanes. a question trade

we existing So of value, flow, strategies and earnings are price that appreciation. to going have growth share hopefully, deliver cash all our think we

have we existing an so And strategy.

imagine are the our strategies you of to which the existing is you say which in things Hawaii, predict is elements out. story of other evolves because in come to competitive us would for as difficult and to outcome new out, as pointed and do, us one we So did, effected by – an

strategies in to it continue having And in detail, we continue certain gone through every some became in if that that And Matson's a our Hawaii So single we process any XX that place enhance a the us, time it as result to about situation the be mind to which we positions we looking in determine or modified that to post-XXXX one market. market really on in clear competitive needed which of comment trade one have what competitive feel to of operates. less every of a spent be most a at markets and environment. competitive good few Hawaii Hawaii our the have the next the market on say in strategies that in moment, all including may, over But landing growth modern, – not. in most the would and is comprehensive have the I'll more maybe effective, further we lowest most in I position the be years, cost, value-creating,

efficiencies fuel us terms the our difficult position the of that unit to ability to in ever in fuel. and of and burn predict, been the our clean and cost best which cheaper outcome, for regardless So is we're we've

optionality the to have do that. We

absolutely position answer strategies. your current feel of our question, certain So our to we the and second market in

again, don't market. market that going what's here a is to to this happen Mike, your the We've the for answer question, served back range which existing There So by observations of capacity. outcomes. the well short first know, be – made is, the could we record, some in

is if and at to think do know big in if for a us mind, there prove still find out that question order a and at to than Shipyard happen, certain at uneconomic happen. this compete of don't this is is looking – to to it position a the playing time. in Philly the the amount time. stretch will time, to more occurs. observe I I to see many It probably be gets out of settle mean it an a point, Whether short announced see built oversupply it's best an carriers size the of size may market, market for unclear. is in And out uncertainties there market. And is chronic the not I'm Matson in what observing XX% having the but to inconsistencies would market. capacity So and, my if forever. capacity figure over of going looks I play And so least to We is now it needs. that will all It's and of is are order doesn't sustainable also But in that this still I out the order. that like us all occurs trying the that don't capacity a market a for any the But that not mark. to

about as I Mike. can that, far as So that's go on

Mike Webber

if in point. around the ago? it And be? the was at probable more higher I it risk question say, not six next the today year, likely in the question than, – Right. the earlier is – this what is this there this it So I answer the was meeting, more board if months scenario today you're guess is guess is asked, would than is is a

Matt Cox

Clearly, kind my to more whether people speculate. more to it's story but off less you're as out. all, in and the market of of then the to can't far me have to it evolving. first in asking continues we rule me come is But or likely, to it seem Well, mind, positions as

Mike Webber

hinted vertical quarter, terms guess, for the Okay. frankly, of, what unquestioned the most follow wherewithal of, a – captive guess, you the ransom competitors the the second to of get to and board? and follow of I've effectively, kind of kind that or with the your any for of capital cost at traction And that given Does scenarios I the that, mentioned or term. of and basically dominant sense? kind all you And market for right can't, last this where position that idea advantage do kind but in asked I you you someone tries Fair integration think of lack you enough. now, does – do market the guess I to ahead up things maybe in I enjoy question make maybe of part better prepare hold does on up in of getting of that can and your you're to a I guess that that on to the,

Matt Cox

vertical asking a by shipyard. we way if question be of Well, interested not in or... owning integration that your would whether you're or Is

Mike Webber

Yes, Yes, of much pretty simpler putting way much, yes. it.

Matt Cox

into to can I well, would get XXX% you that can our board shipbuilding to Yes, tell – never certainty observe recommend that I that with we industry.

So that even ours. an more is business than difficult

not be something interested would we'd that doing. in be So

Operator

Stephens. question next Your from Atkins with Jack comes

Jack Atkins

is roll we're to those in delivery, be delivery how we XXXX that about through last from coming question, we thinking late time is in into past of XXXX a and Joel, people to think Or XXXX improvement delivery to intervening into I out for going say, well. that sense. new XQ delivered, the this just quarters, think that see So that? vessel their about about between about XXXX, the guys of the are the of How I early vessel insight Should until into in I'm a in as wait they're should to those that profitability lot and laid delivered think model makes the XQ accretion have last into intervening and the be in out sort XXXX XXXX. potential I'm your sort trying and in of XXXX, XXXX? guys should my think out, modeling vessels the now sort But trying guess as if sort the to first next vessels? us fairly we once sort you of you Matt given helpful have models the of we ratable once need the either vessels just of from for sort accretion year first business or about accretion of fully guess first how of new should

Joel Wine

Sure. that. I'll Jack, take

new vessel part a step or them the only that's half one that's in as each more on the So But benefits X, less X, are delivered. of X, will come function, vessels only the from X, perspective, of of the – equation.

have. The the retirement of – other the that existing our of is steamships equation seven part of the we

benefits. be there'll So

per there the plans of those the goes they – amortization as terms on going to As of in our off expense away, and you're accretion benefits D&A our scrapped those see vessels are remaining move current side. that some books

So – up. those sync and two exactly don't things

So and vessels seven second, come as when in place. retire the fourth won't the exactly we when the be third first, times ship obviously

XXXX of to vessels in Street we The times it's more smaller outlook. overall 'XX, So and Jack. scrap movements. and talking be of scrapping between immediately, and those. a visibility investors will I and now each come. right But all the that our more we the the vessels be more new we'll vessels, little about those movements We'll of you now, XXXX, And to Each bit think hard when be that sketch these XXXX biggest definitive of in all will when get as closer deliveries give

you gives those but little events. we'll get granular this to more a closer at of as we guidance point, that bit get So

Jack Atkins

when like? – deployment, the in [indiscernible] on volume able you sort the you plan this schedule And maybe think guys given will you XXXX? what schedule deployment? year? are Okay. just guys efficient I'm bit dry-docking a thinking the being of a for – sort looks Joel. sailing current initial Hawaii of continues to sort That's sort little update earlier you be just helpful, that versus about Are and to of in then the sort schedule more of current of the will sailing wondering just underperform about – a a remind you when us of you in could kind could just us just XX-ship And

Joel Wine

and very here XX-ship heavy actually Jack, our a cycle, a for we're very end Sure. Current XXXX. in end we're you dry-docking this the question, at because the deployment. last we're weeks. couple just And in an – at XXXX currently, of in end, thank that dry-docking will And

is and evaluating we XX-ship look deployment a of a that be at less deployment type more complete, once then dry-docking And can so or we'll XX-ship throughout XXXX.

dependent at exactly moved we're But a into general then time. We've some into which when deployment past any given X-ship planned volumes first upon that. deployment, the couple delivered. a to but look back if we XX-ship after We out to it this would move vessels summer, point had plan, is Hawaii always it got haven't at are a our we

will around that X-ship And through the and delivered one deployment business XX-ship XXXX our at that quarter time Hawaii upon in decisions at depending make time. XXXX, then period we'll end looking year. volumes first back third of versus the The be of of next

Jack Atkins

Okay.

into bit. here. Okay. an call following about Matt, you're us in market early Transpacific That's months and dynamics little the the update seen you bit A maybe Hanjin Transpacific moderating We've the Joel. peak lane could months curious sort here bankruptcy? of pretty couple as supply-demand broader of your of of season of spot next within other wade going thinking how outlook month, XX market viewing last, give of a the a little questions of just it, X.X a after market of pricing a sort bid you're sort over XX the season eventful of how sort sort Just to year? sort helpful,

Matt Cox

talk I on little will in so a I'll Matson's and place about bit Jack, I market. guess then, broader market Yes, that the generally comment

period ocean larger be carriers. of agreed consolidation amazing most of instead carriers carriers. and merge for are, acquired middle-sized So or with losses, I of better larger to was announcing them think an clearly, things the by They're it profits the international are as –

largest undermine of We on into think number alliances, trades. orders think, be, to concerned we we depending a market cascaded So ship and the of series and them full are trades reduction by a that, do could the Transpacific Asia-Europe positive these series the a seems next of of little and the of ordered deployed the the carriers, years. as TEU lot those the have for carriers over were north-south reforming in mentioned, new of the I numbers assets the of from these delivery very recovery couple XX,XXX-plus have That how and factors.

worse absolute they two or be. in – more year trade to the I season, weaken China a In the is cycle. as sense so ago, want them think continue pricing into better we they the where So move the would traditional in were think would I but see at are not point my to probably than this exactly things guess slack a we

So we're seeing I think what that's all now. kind of

capacity and pattern. So rates historic probably far, we've season. gotten would do more have we cyclical slack will carriers My a they withdrawn expect in the as is expectation freight not fall so, to into

in added definitive market product the and demand not some end in right sweet uncertainty place of absolutely China So to some disproportionately uncertainty much has that and are policies the has for date. has That of still cleaner. spot. in most service market down which shut polluters, the bit say be a – the about productive capacity the Matson's there We that. that towards production worst capacity, down There's China environments government factories little on continuing change in as cracking is shutting demands of to the is of of are Chinese really some is been to and environment the product just know terms allows around government actions there the that remarkable taking the them into polluting in China, the is technology that in environment. with in as investing the a our the factories the because at needed in more the a Congress that looking our market, – are down and polluting that goal with terms factory playing around cleaner or is increased for government

and one So being we most together factor have terrific record that's long with track reputation reliable. and the the fastest of

overall lot a commentary, Joel a chains as seen an little supply in stronger market's in year-over-year, expected – his play the mentioned than of seen we good we've role customers. So while continue bit financial important our and freight improved rates, we've of to the

gratified we're very by So that.

Jack Atkins

Great. year last segment. a turn Logistics over. this a strong and just But question year. Okay. the Obviously, One I'll question very it on

very encouraging. income guidance gone Span course, in underlying also, guidance, to or the for look has the very it had which which economy, But And pointing been the as when fourth acquisition, quarter, then the well. operating there implied has quarter XQ. the in at I of You've from sort accretion of strengthening down fourth the the freight

how hear is that. down So guys of business. just there? markets just of your slowing Just about, brokerage talk your freight they're how highway the sort and in sort thoughts going strengthening on curious you you just if maybe there viewing is issue curious maybe impact that to then Or the your business rounding and could a to business? are And intermodal

Matt Cox

this market and we've question, that indicated Jack, results. given that that our – see across I good clearly Span We quarterly cycle aside has we've other growth, some we the our a carriers – of margin good pressure, at quarter's other factors think their of core have if think fair look look seen it's bit Yes, you Alaska carriers. earnings the if and driven I seen pretty the you put part and Alaska thanks. seen volume in scale I Logistics We've a business, Span same think in and business growth, of seen as

new going growth firming agree constrained for of going next into supply forth year. see as as service our the margin We with also truck and and others and given and regulations so is pricing – do on so that a to be

Matson are business profitable Matson good. our a lines feel and more we have Logistics, that, of is. but we'll announce fulsome where growing. we of that healthy, So we'd Each separately of view like don't

between for focus see been side Logistics synergies Jack, year, terrific improving business are focus organic we're year. next looking to a think and growth, likely know into But to together. on we and to ocean we're forward Our it in going the to intermodal margins on be continue has as working organic our the And and we is and you now, business next truckload on the side on to going while, as our focus growth.

Jack Atkins

lower a right And the of maybe sort year-over-year? Logistics Just operating fourth what quarter, the fourth just bit in income it that? to Great. would quarter Okay. be then think is sort in that driving is of

Matt Cox

a started Yes, think $XX I we million about – clip. mean, I the we year continue at

a and year-over-year weakness the seen bit seeing rail have expansion some in of side. truck Alaska brokerage the on We economy, we're and little

I'll maybe with ask so the quarter, And comment that on specifically fourth to regard question. to Joel? Joel

Joel Wine

Sure.

$XX year-to-date, would is million. we're so Jack, year, million which imply fourth year's $X Logistics million looking quarter quarter. about $XX the saying So million at has And last done that for and $X.X for fourth you're

a to out million pointing difference. $X.X you're So about

business. performing be said, going described, about significantly. in million. But to going out we don't feel that that feel nothing just than good what Matt think We worse The There's we about Could so that we're last embedded still outlook, business to is good even declining be bit we where could to look pointing year-over-year them good And we we're basis. feel we be trends expect our a the than it be. on is well that be ground it – a when less obviously, and $X.X little you firm year. at

Operator

with Oppenheimer. from Ian Your question comes next Zaffino

Ian Zaffino

How maybe study here. route. if might Hawaii guess, plan respond, how as do increase I the to of think be be, of kind the increased. we a case might would on Guam competition? the competition use question you Competition could maybe respond So a And also game on this you

You're typically defending volumes. your

defending it? What's to price. think how [indiscernible] do way and just You're sort the of you about it respond and you

Matt Cox

phenomenon. in XX XX-XX think XX long I'll years Horizon last last from I about to on about period to in I of difficulties, over a is history, see Guam mean, the say market at of and have or you market. a financial was Guam that about look services whatever, have so it. I ago this, been the five market, market And a direct, you'll West would the leaving is citing beginning, they Matson. time. sure pulled the this market XX just you for XX, them resulted I'm Those the Ian, X-carrier share or Ian, recall, we way the years as years out if the the the APL want listening temporary know, We Guam it a speak always, well. as of to think Yes, entire little But call, obviously, Coast from I in believed hello that bit But

in announced the and with since in market, them Somebody else and did. then years been APL were competing two fact, the entering they they come would with to important market, but ago that differences. we've

So to service a their it the all first to being That Coast go from Guam. way better Japan direct goes relayed then that the a Asia Guam, service. doesn't is advantage. But instead, into or direct and is leaving not West terrific it is terrifically – service – with from Korea us that the

XX-XX very that market at end with the was owing Matson ends to you primarily is an if our the similar share so up historically better going times, however were And our say in market transit. to to it transit is with outside up, belief

So customer additional would our or lower-price than potentially to – offering with the existing market to you is APL imagine, going – retain the a know we results any service of We're prices and and made APL. gain to we're for order regard can then in, reduce conceding cargo not attempting in actions, the who customers pricing better dramatically but competitive that respond as clear to to container. we've share and fight every single

construction primarily longer and has kinds who sustain low-value on goods We life. interested that or food can fresh than are be certain there like that that whatever more have code-dated trading of more or not meat cargo a who would transit definitive service, or or materials also stuffs or a are price observed someone things produce

we've in stable the transit. along longer as ways seen can or the fall lines some So those or products long that margin take market low very

transit size. Let's a state, the given can transit Once a in frozen frozen or poultry. it say, longer it's sustain long

part as at for not a Irish behavior going as you of is fight. This our So And much and We're share. much I fight freight. going we're fight. concede would we going We're to were I it is to Hawaii, can. if it, retain like as good say. see enjoy happen can something our That And we same. I'm to to the to and

part that true. is also of it So

Operator

from comes O'Hara question next & Sidoti Company. with Steve The

Steve O'Hara

as you that? D&A? Just close I pretty removed noncash expect there from and are Or be guess would to charges where they should the in curious of on – ships retired, be are terms to the they

Joel Wine

depreciated pretty the the No, dry-docking. is depreciated are from but amortization from life, old last period not what's a steamships, their fully much fully useful Steve,

down it much the economic exactly when each last wind was scrap how will that are depending upon large the final shouldn't that if your is steamships on question. from and retired – when But event – of scrapped, relative much them very books to the we they how be a when dry-docking. So

Steve O'Hara

said to the are $XX swing then to you year. I just you you be look year. this big no, you looks a expected XXXX, pretty the mean, million, I itself, helps. Yes, think, a dry-docking that lighter around And $XX looking million. that's average on think, from like million is if And guys back, the it mean, I $XX for I

I $XX pretty refreshed or mean, million? go With it positive that a fleet would the seem to $XX impact million, go new back operating lower? would to Or on have fleet, that might it income.

Joel Wine

Yes, are dry-dock numbers or amortization Steve, you payment the numbers? citing, the

Steve O'Hara

it the was XXXX, want in it I was $XX $XX million. XXXX, million; like in, $XX think to looks XXXX, it I million; say, back amortization

Joel Wine

$XX last year, million The three right. were million. and Yes, years $XX then last $XX and million

million because through we've in those to five $XX depending X.X heavy back gets no, years over XXXX upon is XXXX, dry-dock revert and ship. years had So the the numbers of down and that each those won't embedded payments away right the amount or depreciated years capitalized and

they take numbers scrapped, down vessels, levels, the those So years. XX any immediately steamships once vessels, delivery XX, back the not won't the Stephen. steam have new the first four we – get of to modern But the the four for will old we revert five dry-docking

that give question Atkins we'll the by the more or And of we XXXX a numbers. immediate what's visibility events, kind see be to new to XXXX. which basis. We'll XXXX of the thinking to but and steamships more vessels some exactly happening the with you are won't give and you'll and in as on at of investors going to board coming updates help XXXX-ish, get down what closer XXXX in on it numbers Jack those and those come with other these track will be scrapping important so XXXX those run-off earlier, And and on quarterly asked that's the

Operator

questions I'm this back the I conference Matt to showing further turn to now time. Cox. at like would no

Matt Cox

today. for year-end call. with Well, our with thank Look up Aloha. forward participating to you you us catching on

Operator

Thank and for a wonderful this today's gentlemen, and your you participation, have Ladies concludes conference. day.

all may disconnect. You

Matson (MATX) 3 Nov 172017 Q3 Earnings call transcript