MATX - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen and welcome to the Second Quarter 2018 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 Director Strategic Development and Investor Relations, Lee Fishman. begin. may you Sir

Lee Fishman

Shelby. you Thank

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

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 XX, 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 July 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

Matthew Cox

our X Within transportation, level coming results turn opening those call. lower in service Please logistics lines. for from partly income of Okinawa ago the the continued $XX.X quarter We per quarter, the Matson across in the from with quarter by we $XX performance approaching a from transportation lower last in earned compared ocean and on had quarter the achieved a year net year with million, thanks SSAT. generated or and in last in and all revenue to Guam, EBITDA to Thanks, share, strong share new or its $X.XX service the quarter of second million contribution good period. my of $XX.X operating second year. of Lee, vessel In $X.XX per results remarks. $XX with costs versus the we saw Slide million strong offset million

for are the outlook the the outlook first XXXX raising year, in logistics. our ocean outlook transportation of XXXX, on Moving based performance and onto for half we the maintaining our for

expect ocean full than the we higher we half year-over-year the we income XXXX, operating first second $XXX.X and For the in in modestly year logistics saw achieved to approximate in in the the improvement XXXX year. of million increase to transportation year-over-year XXXX, half of expect be the the

in operating lower on income the into million million we For prior later in expect the go more third logistics moderately achieved outlook $X.X year last the than this on period. transportation quarter quarter income in than Joe will achieved to modestly XXXX, to be the detail third financials $XX and year operating presentation. be higher and ocean the

services. Now on Lane to our trade

year, for Hawaii for economic volume continued on prior favorable in categories. and the with Slide an product underlying the to construction in Turning some the According tourism activity XXXX economic metrics of the trend breaking medium-term. latest variances in relatively a strength expect an Slide no half strong offset is of Hawaii, and Hawaii quarter. inflation completion as the conditions. a year-over-year XXXX economic achieved With quarter flattish by activity favorable The activity year-over-year also low conditions share to remains X of X. in the continues supported Despite market economic UHERO year, industry, which share construction market new of economic level now growth but beyond. meaningful suggest XXXX global as stable to our in year, flat provides first level relatively service the by Hawaii high result forecast of UHERO a approximate unemployment. we volume a key to plateau Based a related economic towards on result projects expect view the respect the environment. was growth overview improvement the to and projects in UHERO’s the versus reflects by continue volume indicators remain to second on in forecast are Matson's and working prior in maintained conditions well low container stable the ground.

dry-dock East Matson’s to in X, in was due a a Slide on Moving China on our Despite quarterly average return we bound during X.X% period. XXXX. year the in a quarter modest the the average rate largely versus of voyage experienced volume service quarter prior to SCFI the lower year-over-year decline higher the second XXXX quarter, second

to differentiated we Transpacific the capacity achieved be relatively achieved levels in strong is XXXX. to exceptional average expected for than backdrop, expedited for an service largely voyage freight volume For expect year, comparison remain macro this modestly return the to negative dry-dock level that in expect for we last demand. demands the the Despite due continue lower in with approximates XXXX XXXX. to Matson’s excess Volume XXXX, to of rate highly remain

our this impact. the sensitive is earnings other trade have this items, been or on today there year tariffs no implemented inventory but the last earnings from lane that to Since any fulfill our trade impact rest selected to action on cannot has have each our seasonal implemented full virtually tariffs the as expect implemented, not suggest CLX and call up the call post an trade China the U.S. We CLX tariffs demands. vessels be ramp to time supply chains for of

Guam essentially strategy fight our primarily second XX.X% APL. the Slide in declined year-over-year, of to to XXXX in quarter retain to is to year-over-year; X, business. container volume due single continue every competitive to to flat further Turning customers market container our losses overall The Matson’s was

long we our performance in significantly Guam, better to on-time retain ties, an expect record, shorter and strong history market time, customer a with transit Given outsized share.

the Now resulting moving for volume, Slide Matson’s the Alaska container a lower quarter the start X.X% In was lower delay volume of onto to X. year-over-year, seafood due XXXX season. southbound primarily from in second

confirm We recession beginning to of a bottom economy stabilize, data await some continue has the to signs further see to that in Alaska's but occurred.

very XXXX than seafood to volume achieved by moderation volume to in in seafood be partially northbound harvest the strong related level due with higher in improvement XXXX. For XXXX we from volume expect be offset levels a southbound modestly to the lower

and X. were Turning AEDC Anchorage bottom near what The is the on recession Development XXXX believes will this outlook. hearing by we Slide to our in Anchorage's Corporation Economic or from are the and The year be with economy no they consistent recently early three AEDC its that view customers. released longer ground

IMOXXXX Slide few interest for XX, regulations. to strategy in the outlining spend Regulations, minutes in wanted Turning I these light our the a of increased to

and the guidelines. Aloha Following Kanaloa the with four IMOXXXX new be XXX% of our compliant Matson class receipt will vessels,

is with Alaska this include we of and uncertainties key We Also, fuel, we the the engines. of scrubbers of relatively scrubber infrastructure our it's there fuel the in our infrastructure could vessel LNG X.X% maintenance following. conversations service, evaluate constructed operating in vessels risks Coast. case Coast installation available lead evaluating is our vessels residual ports us on is be on of distillate some there the when because a a Prolonged some with to X.X cost this will business unclear Based and currently is short suppliers, on major our vessels, higher For fuel currently with West how and existing payback the post-XXXX number to to no period. unclear may technology, for of a based to three performance strong West continue experience it operational. the to options the the available be are use soon lower on

to the on strategy CLX current the scrubber in Our invest is technology string.

vessel evaluating to we are and ships. dry-dock two year XXXX sisters committed the while on is We closely the the first XXXX on it next installing scrubbers are in scrubber

near the scrubber reevaluate For the CLX we evaluated they on string, as to dry-dock will based the scheduled regularly dates. time options vessels their on the remaining installation and two time. us allow present prevailing will This tools

we and its expect, want sense best keep would you evaluate customers. As long-term Matson to options that open solutions the for to make our

XX, next show performance. our joint terminal strong to continues Slide to SSAT venture, Turning

XXXX higher compared $X.X the contributed the increase lift For year-over-year in SSAT year The quarter prior million $X.X to second was to attributable period. volume. million

be to higher There from year's few the in this continue to we XXXX, support launch our volumes of West transportation achieved reputation ocean operating to supply alliances factors contribution the West West SSAT operator and in expect were recent coast new are SSAT's as the For shipping SSAT's full-year container flows including in the income on ongoing view strength and level to global adjusted as a the benefits key of last XXXX. than on chains coast. U.S. terminals. Coast between best import and export U.S.

logistics versus to a million driving ago $X.X lines period. Slide $X continued the XXXX service in on income across second million all now operating Logistics’ quarter Turning XX. to performance in year strong

strength in economy improvement market, the Alaska performed service. Span showed customer show to the which Alaska as business of signs year-over-year With to continued the stabilizing. the in tightness Matson brokerage transportation Our to well, placed logistics due primarily early well-documented trucking respect business

the outlook year-over-year the in income income half improvement of the first million. first operating $X.X year, year logistics performance our operating Given for in are now the XXXX of of strong approximate in the half second of to XXXX, raising half improvement year full in we year-over-year in this we the expect

now Joel. in quarter XXXX. third the over to a to logistics for the we operating I third Joel review quarter higher expect income level performance with that achieved outlook. be call the And For than XXXX, our and financial turn will the our moderately of

Joel Wine

a to for quarter the due increase operating of was highway primarily other decreased primarily X.X amortization million, the favorable costs was from X.X EBITDA million Hawaii contributions amortization, ago year in primarily year costs, On operating income higher revenue million over Guam. million increase This and million. increase comparisons income first costs vessel half transportation and million. and year-over-year of by partially Partially X ago Logistics million dry-dock The to higher dry-dock highway is due partially for of consolidated amortization our offset offset higher in lower the million period. increased depreciation lower results higher or year-over-year first X.X lower contributions in lower other vessel income brokerage. revenue from partially and income higher depreciation X.X transportation XX rates of contribution EBITDA million, increased X.X to favorable attributable results XX.X and to million of expense income to including of unfavorable were due and XX.X Slide year-to-date income to primarily and operating million This financial results. is and basis, by operating Thanks, the offsetting X.X attributable Ocean the contribution year-over-year by the forwarding. million, lower quarter or terminal amortization, container second decrease expense XX.X freight to income second favorable operating X.X million. for quarter Logistics the and higher XX handling SSAT, to lower million. or operating the of these handling higher SSAT. to X.X year six by X.X over brokerage in million these and decreased lower a costs including higher X.X from the for year-to-date operating months ocean year-over-year of Guam. Matt. for quarter Please and due consolidated for The period. in was the X.X and terminal income the turn year-over-year and year was comparisons operating offsetting increase million

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

LTM and note our the at end million, an debt of will was to of debt million. based EBITDA LTM that times net on ratio our quarter was X.XX You XXX total the EBITDA XXX.X

cash capitalized also million than As new flow XX.X which dividends from manner including our operations Slide of XXX.X borrowings months in other X.X million which XXX.X of allocate the million for under on LTM shareholders lower period, we a our summary CapEx while of net debt cash and returning share to generate items in million owner's reminder, received XX agreements. maintenance undertook CapEx, flow via press of of EBITDA is interest and from we repurchases. XX.X generation, shows vessel and EBITDA a in on the release XXX.X XX this and use we million million our flow calculated report the trailing cash presentation we different

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

Slide to Turning XX.

capitalized we the completion is note in builds first the construction capitalized the quarter, capital vessel vessel vessel at vessels XX%. on million. continue of for noted we of million slide, and July XXX.X and XXX.X X.X as to second interest million For total had expenditures new expenditures four completion progress make on that chart the our Inouye XX Daniel of new good nearing of is new will The the percent of on you K.

had Inouye forward we delivery a XX, we at quarter. are on to shipyard quarter, vessel Philadelphia this June is event Daniel major of rechristened the the at end the of looking K. the and that During

Slide updated Turning our in to outlook. XX

full expect the the achieved XXXX. XXX.X we For million higher in ocean operating modestly XXXX, to transportation than be year for income

logistics, in second of income year the X.X million. the operating For the year-over-year year-over-year increase dollar to amount improvement of in the the in of half of approximate the expect first year the we half

amortization We of approximate of XX million dry-docking and amortization. million to depreciation expect inclusive XXX

to We expense expect X.X other in income, income. approximate million

expense effective finally, two be in to million We remaining the approximately the to rate XX expect interest XX%. approximately we and expect be year, our tax quarters

want period. quarter be quarter achieved in in year ocean to expected is the the that quarter nature ago income. and higher collection modestly account expect be fuel transportation surcharge quarter an third to the XXXX achieved given XX had of million fuel strong year operating unfavorable versus period. third fuel fourth expect the the also transportation, operating surcharge collections also to collections of million lower third in than the other and total in ago XXXX, to due higher of that million this the quarter X.X of income, of in X.X to we comparison primarily moderately year of in fuel last For versus Logistics We approximately income timing expense than the period be we XXXX, of reiterate relatively ocean costs

China also service surcharge collections of the that I through that risks comment So XXXX back that. that uncertainties trade outlook could should for the consider China over the and war given to like applies to everyone between and between United year-over-year outlook turn prior for SSAT, Matt. the ties States. quarter it countries. business’s Matt comparisons year. fourth our I in flows not fuel direct This, trade previously also arise two walked would account to remind additional With the that from the does a to for for any will

Matthew Cox

logistics managing of year. we remarks, a half of our transportation our Okay on second program building To advance for progress we operator back cash focused questions. the our generation flow leverage And build this Operator. and our Island with that, will Sand year. intensely set from and We diverse look forward first into the to conclude upon on Joel half and ask results performance of and the services, and new the this I investments remain your prepared set thanks. had turn good we crane the to call as vessel

Operator

from [Operator Jack Atkins Thank first from And you. question Instructions] Inc. our comes Stephens

now open. is line Your

Jack Atkins

Hawaii areas there markets you So of maybe maybe comment just a curious kind are and I and of for where out? so us seeing a volume you more growth, bit are different economy sort help you little with mean bit of with of sort where of could minute a could from start for about moment, the could - Matt parse sort of Hawaii backdrop. flat strengths the are that serving had fairly challenging if you sort we end you I if of it if sort of strong, seeing kind the trade of

Matthew Cox

Jack. Yes. try I can

state hotel strong a record in I economy are clearly is we unemployment at think below levels, arrivals is the the at overall the levels. surplus, at averages, performing record national high the look visitor is when are occupancy level; at

one economy economic as general is then military very tourism; noted has just cycle. one pillars; the is, significant I military So times and a was has fundamental industry. tourism, based steady of is there and early would this say three a on in been government as have we the many building amount

to market be Moana advanced example to Honolulu underway four aware Collinear before central likely the and are get built home years. have we in continue that example, are cycle the plans potentially term, that cranes the to more We new of building West count we few family we the as We in are in Oahu to in are capped, for projects area cranes changing. medium look get West an the longer urban built, likely next ourselves projects but are we single but see to likely somewhat construction in the Oahu, continue plateaued. have that over that seemed pricing projects of where isn’t or hotel for And we developments so and Ala we and talked potential about that high-rise total in is are but see see projects luxury oriented area for construction know moving products find the there around, to area, construction

containerized not a the producing plateau is level, So growth we overall significant as are in now. volume guess at a economy I right

you can color best give the Jack. that’s So I

Jack Atkins

the sort to couple was didn’t showing we definitely next that growth the that at if thought construction of in some a quarters year-over-year economy core softer underlying out that bit in maybe was basis now Hawaii little Hawaii of in the the maybe economic I point sort you of see a was of begin helps. and of sort offsetting the that be demand sort Okay know strength that the and can maybe if bottom up. would may where growth on

Matthew Cox

Yes.

The when Hawaii economic saying right contractors design on work freight and in that a are are they bidding lot our with to they but we of many were work, are bidding They busy me customers. way, cycles. other part and general is of for Jack to new late projects into whom not speak put turn even on largest the volume to this way are this continue working of going good that’s

are that, going segment. unfortunately it’s by us encouraged overnight we not So turnaround on but that to for

Jack Atkins

your that alright as Okay any helps not their coming to business, part signs there CLX States you is months, you thank they seeing ahead guess your really you forward in to or the of policy you the down I’m maybe just terms of that there Matt, be changes trade could shifting months in United whether up XX of I about any road out? to it's anything in that gears will curious pulling And that any then projections on changes rhetoric showing you. are telling you of make flows. six are some customers terms interest inventory talk mentioned the think Matt

Matthew Cox

Yes. It’s question Jack. a good

built that expedited alternatives in, peoples think hearing we the still ocean little service. have were very expedited still not needs, in are air there around who’s people the much, there are I business still is a orders, market freight late world participate

there but field look are we if we hearing to port And so that from around definitive escalates large that you seen of are loud nor do. dialogue and as implemented out seeing like not both are customers is we that. published observing some for we the the increases volumes that tariffs very your and strategies were are play example the we wonder you trade widely some sides. June point on much, that nonetheless impact that have much very Whether But in about at in year-over-year

going the our universe. the We affect market, and timing the So there little are year. between broader but broader in full to the and maybe now that market confident remain some effect end of to very of we be may the

Jack Atkins

your volume on I increased so that maybe there to forward, way and rate, about just and on question overall Last loud depending to more a upon it up it’s perhaps an trying the that sense. will thinking over, Hawaiian makes tariffs (Ph) main terms defiantly opportunity, imports see it out U.S Act] is is trade trade to a continues maybe is that their from [Jones but if overtime follow-up that, we there with import turn just source front, continue China from a the that of were maybe and think to perspective. an from helps question Okay opportunity ramp things in land

Matthew Cox

direct underlying are know it’s the the Yes year. part as stays way of into and previous through sourcing it’s impact And way moving two lines three effectively what cost have a which on you China They question Long is from rides We or that LA, good service and ways, is have very directly into emerge its patterns commodities could right that of Network - one that on depending ship that change do the from at might around our Honolulu. second tariff ONE the is makes cargo product the in a question that from moves Jack, of Hawaii. ONE Shanghai and China tax is that service. to combination weak Japan on Beach product. the Japanese in Today it the comes Hawaii that this

hard to at reflected speculate perhaps of is on So get point those to Jack. and really margin in it’s thinking are the there, this little a the primary none two ways that our

Jack Atkins

Okay. Thank I Matt. the color. you appreciate

Matthew Cox

Jack. bet You

Operator

Nolan our next comes question from Thank you. Stifel. Ben of And

Your line is open. now

Ben Nolan

you was you So, like balanced going some what be might to pricing market of there in it transpacific any the think a total of weeks leave that shrinking do something were I you by the the the a be to thinking of back the and up aggregate announcements optimistic get or that exposure market that volume size there think? just potential participants closer able and pick to trades. would their on Does few in transpacific a trade, X% couple CLX of is more that or may to be ago

Matthew Cox

There have alliances made are have least year’s good Ben. you peak. some points at capacity this going in and Yes, two reductions that into

differentiate market comments circle and Matson’s I the them I start then with back think to will market divide will and just Matson. the from let two then into me and just I

seen So capacity we good transpacific, those alliances but some least saw what have a seen a remains there market, net have broader at deployed in two as we we of year. introduced is mentioned last but I capacity, capacity result this point APL of a through the true one market that think it measure one the spot But net that after way we think the withdrawing have capacity. in earlier, reduced part your is seen reductions we SCFI reduction one, in above and carriers markets capacity, was spot which their it we is increases is also even to

is market stronger rates terms spot for always Matson. a think of healthy I So freight in

regardless Effectively help could that Now rest the Matson. year. are rates I market said transition to that be will over by spot into rate, cycle, full earlier, of to our going this as I but may impacted to which be the go the of we we as

is trade So to going deescalated, here. where be of the margin then really and point but it what hopefully helpful this get our it does play will volume on nobody is knows at out go, course limited, and this war could

broader economics. and to So in could on of out have there factors play that the the yet number market impact is Matson’s a margin

Ben Nolan

flat so the CLX assumptions are of from side Okay we to full circle for should that using the marine the thinking effectively there, in just transportation sort think you of through go for year-over-year service you how it then rate or when general, your are assuming or rate guidance about…

Matthew Cox

previous we were second the so freight in the noted that were while the last year-over-year rates down quarter, year. market rates year, up Matson’s Yes sorry I’m over

were So to higher and mix expedited we rates our product. actually and given our able obtain

guiding as or last for again the was well. think to approximately are and year year half For good same same the second as we a of rates the pretty last I us year year

So satisfactory are these to us. rates

Ben Nolan

of just mix that of I there questions. anything so you of appreciate product Okay list what but you are it’s appear And moving Jack’s coming guys then When into inverse your - vulnerable list that's that normally is made when of at it is relates that you has on that anything helpful. that there look some thus right, good nothing things at from as that your be explicitly China are you far. following in so to tariffs especially far look or specialize the

Matthew Cox

China it’s easily dye, and whole bunch mean easy there of market list skilled a overnight the subsequently of included, single I key that first and the that a There but Shanghai fabric, there about as U.S. sourcing a that and there that in think in I commodities. things lot are a were thing it's Yes, that is things were not general, button, garment the other these tariffs not for be trade, the there not customers the there there garments a can't move zipper, the included, commodities their it’s is or run network is we for they in there short to is in are in models. suppliers, just is replicated supplier of assemblers, is the in of is the example change

don't this hopeful come resolution the but again, to we little to exactly we of out, can sides is how a know matter. So but both again, impact, play going see

Ben Nolan

just Joel. quick for me lastly And helpful. that’s then Okay, really

of where came looks any thinking back and a in like had below the rate for year, color where the bit below there. you been tax Your it we guide half kind of

Joel Wine

in adjustments signs There level were in relatively items drove XX%. below really were our that expected some that that immaterial were quarter this Ben about that

this just is XX% So hit this is is tax adjustments what that for this quarter quarter. at

Ben Nolan

Thanks. Alright. quarter Okay. guys. Nice

Matthew Cox

Ben. Thanks Okay.

Operator

question Securities. our Global from comes And Sterling Seaport Thank you. next Kevin from

is line open. now Your

Kevin Sterling

Thank. Good and afternoon Joel. Matt

break to obviously that there. on driving where mean could tight, the know truck very really it market modal maybe is strength that kind what from down just truck touch logistics of is extremely while them is I inner brokerage, but Just both, I upside, nice that coming you

Matthew Cox

lines The rail Kevin say forwarding answer that business, the business, our our Asian business. [NPO] its Alaska acquired warehousing way that year, to I truck each our is would was better of business span than so and previous freight our (Ph) business, relatively newly of brokerage

were cylinders in firing the on logistics all we business. So,

course, brokerage, the just dollar increase the part so most significant biggest clearly of by the the to where our business. for the most are lines business. Of the rail of amount truck, year-over-year you have each waiting were in truck businesses - is rail I relative as because of and done significant by that But of percentages know and lines they existing brokerage and businesses

Kevin Sterling

Got just say credit glad of success. all you Jerome to taking I’m don’t the want for Holland your all I you. didn't him and

Matthew Cox

good he? talent doesn’t has He

Joel Wine

He has job great a there. done

Kevin Sterling

he have is, your was resist. out like back know have up? if your CLX I China I been In what volumes been in they we dry-dock XXXX, volumes, couldn’t multiple were return

Matthew Cox

in those I still as think we dry-dock you the course volume year we somewhat follow note carry I us in of the things, and Act which saw that extraordinary the in was incremental amount that Asia ownership our in Year first Jone’s post know XXXX we half But of volume. of a dry-dock, Kevin dry-dock saw of we two slower than would lunar allow XXXX. to once had New XXXX that in also we our had cycles

Year post - New had factories In many we weeks and workers later. lunar Year the had them to of factories a few a provinces the typically post the back come go XXXX closed and traditionally but relatively only lunar we the know, volume, extra western period. New literally or home short not you As

So slowdown post lunar more I was Year. would a New say XXXX traditional

fewer the the XXXX also despite noise to New more had XXXX, which accounts dry-dock of for And traditional difference. lunar voyages, a or Year compared we in so some that

Kevin Sterling

add maybe the seems a Thanks competitor anything in Okay. you dive on It and could base new touch is in, third coming to competitive there? Hawaii. landscape down there that about

Matthew Cox

carrier and to think no to seemed off, Kevin have more no, stable are I information we two gone a there’s aware there new things we traditional, back market. are quiet

they Northwest, of and know two is are landscape. out materials survive been primarily rougher the we but focus compete there operators to Pacific have and in primarily volumes that down course, Of on that materials, longer nothing continue the construction really we beyond to those they carry can a which with transit, of barge competitive coming note because construction there the

Kevin Sterling

you all of will you And much new where you look be or is Got vessels know you eight we they the and of kind everyone pretty install thank compliant compliant mentioned ball as do stand, behind are like IMO the your competition with new are? you. XXXX guys some of okay, they at scrubbers,

Matthew Cox

start. understanding in Well Alaska our will I market. the

or vessels; through Coast competitor obtain ocean NGL, Express to primary working on is are their they understand trying in to LNG Ocean on their we Totem currently is West two which diesel convert to the earning order vessels have and there Our strategy that. TOTE fulfill to LNG a

construction; understand, remaining are our about have understanding their to under on the ready day to be they them the near-term explicit think conversion our they are don't vessels So vessels. one. are In evaluating engines strategy we - I allows to those conversion those But again, Alaska Pasha of term they are has vessels any That primary compliant older LNG compliant an Pasha, is announcements for construction to of and longer is doing Hawaii, burn that of with the of LNG. our and under fuel. said be them made idea to competitor potentially market. two which allow understanding the And

as it understand be our this in is XXXX no market post will So understanding the time. that that least understand disruption we be we at is market what to will point there to service and the market at

Kevin Sterling

all I congrats a That quarter. and Thanks. had on solid Okay.

Matthew Cox

Okay you. Kevin. Thank

Joel Wine

Kevin. Thanks

Operator

next comes Sidoti. from from And O'Hara you. Steve question our Thank

open. now is line Your

Steve O’Hara

wasn't a that Hi wanted on expected. good ask the to afternoon. question now or just to due is having more I business performance. versus the if logistics expectations just is right improvement was than some is issues it sure due to maybe Hi that better the market fact performing your

year that level seem is a comes you talk I about mean So you at, there should guess more? back, sustainable last can I operating is asking of think it that would be upside I’m that little this

Matthew Cox

I Sure, can. yes

second as the raising some I are the the will are year emerging our quarter into the U.S. year, think the now logging it are strong a saw market, devices the effectively we seen for economy, really of of prices were the of electronic in say that that end when the first time last see of traditional we the withdrawing that the trend reset that we into trends in to diesel, look year. first year, market, all across At place we the seeing enough pricing as beginning we relatively saw were we a of that season lots sectors. congestion we confident the as the this some especially in we trend, a but disrupted the at the trend, on into were of ability peak the creating we half now of to move of and in not causing a rails end happens remain into the were quarter confident as expect modal half

a duration passed is harder it has So little whether as Steve, to how it’s the long legs to XXXX. say

elements long in have factors operate remain. put be so continue work the might low industry. remains the goes prices given the levels to environment. economy current as in place it shortage which will will those will trucking that as people the those the a so rate, is willing of that were of fuel the higher, remain otherwise to the remain strong, where logging, no unemployment Where the but indication people in relatively pricing economy guess, at we factor fuel in for anybody's to and originally that won't, Some Again, or significant extent electronic

expecting not the of are call, to time. some making we we - a for in but are little remain these a some it's market XXXX So dynamics

Steve O’Hara

economy that then differential performing and maybe and construction be station, you is the maybe below originally? not basically seems to think bit looks mean I in just it ocean talked you little Thank you about a and Okay. came like I know that moving your I expectations good results the was well, but expectation great, to was the the between not Guam and but Hawaiian

Matthew Cox

when our about and approach quarter, where that's ocean set Yes, we said Steve year's out. came to expected I transportation the full we the to think expectation and level first last for I we year think we

in that have I we economy our we is think seen. expected. We So kind high Hawaii of to about where what the level. And be we a and came is expected flattish feeling

We there, by expect in and to strong right and just Guam, highly environment about what contested we competitive were expected but an that was continue pleased we its is fortunately shipping as up, fewer and have to capacity China has Alaska been because SSAT, we volumes okay. the strong knowing good lot, market, economy less carry of of out a performance been a dry-dock it’s that [indiscernible] plugging

the logistics has think it’s transport the bit which up ocean said up earlier is about up we as really little came beyond I shaping the side So expectations. our big a side, on and step where we performed on

Steve O’Hara

maybe Okay about then on you too for you talk through - options kind the compliance, to for it’s early or are considering of that? lastly ranges options, those and the cost can about you ran the just talk

Matthew Cox

various today’s spreads all that short regard $X certainly being exist, various connection do in are they in can we say Yes. to taking options is million scrubber, shipment get before had it's it's things is and compliant other that at scrubbed it we spreads about engineering will the wider. economic cost how and whether out And I refined it the you can experience we are the to with Alaska we talked just we cost understand systems, case buying partly between piping With other got vessel talk the a a that that and it. hard to difficult relatively not differentials, a be the to types let’s it and converting scrubber at fuel the needs per work, us but happened will to the mean if the be that the much use pricing, spread but look be spreads for have the going scrubber. of that can of installation know that marketplace, is there know for in the they be just run million of look result about so in fuel we know in admitted That good $XX to between the to to vessels those the and really today's fuels those economic how close will payback. a of strong is in product operating are are we them cost

that I million at period way while we the $XX short So just is you are million, to also relatively look at would $X investment payback that add, on it. looking

Steve O’Hara

much. you very Thank Okay.

Matthew Cox

bet. You

Joel Wine

Steve. Thanks

Operator

comes And from from question our [Operator Webber next Wells Security. Instructions] Fargo Michael

now Your line is open.

Unidentified Analyst

on [indiscernible] guys for Hey actually is Mike. this

of we the the be presentation Ben’s thinking talks year of should net QX levels, be thinking SSAT JV about against rest trending On rest but be to end XXXX other reductions. XXXX higher to should full how the measures the relative of XXXX? How basically kind should of how out reporting the the than regards your year with the we and and your question exceptional the year to transpac the about about

Matthew Cox

Yes.

can I some make guess being comments. think specific I without I general

Some relatively of stable. that we the resulted and increase going of in from reformation three and reduction alliances, to the year-over-year four year's and dynamic the see as was to and increase in see the last the business we that alliances SSAT of so from result a volume volumes elements

The other come the is thing locations. can perspective volume multiple SSAT from that an from

product, another that let’s country venture. So example still one for sourced there can goes into economics China, that renders that say that in sourced is from a on from container if volume through item is that a and tariff joint SSAT China Asian turns be

no still So China it. XXX gorilla. There a about is question while is pound

countries be impactful from over differences of other less be SSAT. which Some sourced would the could for time

Unidentified Analyst

of market kind do kind of sort quarters, or it a the last see for acknowledge for two that you like guys to when piece do of Guam helpful. a justly looks continue we about competitive that share we recognize going where of and do are to expect into and there that’s then it you And when steady - market dynamics to trade, fight think have long-term state you were in almost But share see you that kind Got going. that you there, business. just settle

Matthew Cox

really decides it done know really when to hard to share will us acquire our to for his be primary freight and hard it's so trying Yes. lowering up rates to It’s them. really but by predict, it's it's competitor

but hard to it's end. try is night (Ph) when will So a in [doubt] this were be, that to around so to it the a little determine and

Unidentified Analyst

really dates are? guess you IMO quickly dry-docking, guys remind then just two once XXXX. those last and CLX with vessels can you they that us regards evaluating are on The what Sure I to plan

Matthew Cox

first two are one we that scrubbers add three is timeframes the other or would we remaining XXXX, that dry-docking to XXXX of XXXX those remaining commented in would already dry-docking vessels. saying as the we looking that, earlier Well that XXXX sister timeframe. vessels two we of the two have ships XXXX, we there said will be the be at remain, that look would what at conjunction the two total two those is a with the in Potentially to

period our continuing away, that So time. evaluate what options look that is to it about that but plus are are is XX at months we saying we of over and

Unidentified Analyst

Thank much it. you Got very guys.

Matthew Cox

Okay.

You bet. Thanks.

Operator

Thank for I turn to any further Matt the call remarks. you. And back to Cox now would like

Matthew Cox

to catching third quarter with up on everybody listening our We call. in. thanks Okay everyone well for Aloha. forward look

Operator

Ladies today’s program. for participating conference. thank concludes today’s you in This and gentlemen

You may Everyone disconnect. day. great have a all

Matson (MATX) 1 Aug 182018 Q2 Earnings call transcript