MATX - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen and welcome to Matson’s Third Quarter 2018 Financial Results 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 may be recorded. I would now like to turn the conference over to Director of Investor Relations, Lee Fishman. sir. ahead, go Please

Lee Fishman

George. 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 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

X performance last expectations turn opening those call. ocean Please We're for our logistics transportation Matson's of were solid to see year the continuing service approaching with exceptional lines. for in execution the year-to-date. achieved and on segment results with quarter for thanks level pleased to of to the Thanks, all and its quarter the my results the Lee quarter and its line our in remarks. logistics third across the slide

with For But in compared or the quarter, in per a Hawaii. quarter faced and net in fuel volume the quarter, performance in China, steady the last we unfavorable in of period. in harvest with strong generated share the within the dynamics EBITDA the versus ocean XX.X earned In we negative weaker-than-expected year rate XXXX. surcharge million $X.XX competitive we per from favorable cost also or $XX.X Guam environment SSAT, collections compared performance year. We million southbound ago the in relative quarter third $XX.X $XX.X million impact timing continued the saw continued of Alaska, in fuel and increases, seafood season, from to lower largely in to $X.XX levels ongoing strong due seafood transportation, million income share

higher outlook Moving full-year XXXX, we're on of and for maintaining and XXXX for on months in nine trends, logistics. to outlook ocean performance our the for business current the first year raising based the the transportation our outlook

Joel be countless presentation. Shipyard, our work Island Philly at year detail and expect to the later of slide four man logistics, income hard full income the Please and employees we turn And XXXX. modestly We're years. four financial in the welcome approximate operating modernization of support the future. the operating our the new For our expect on proud to the Lurline, forward XXXX, Inouye. the in in excited the to This operational and ships exceptional well continue arrivals the the of more and operation. arrival and Matsonia Sand transportation ocean into a is market-leading Hila, $XX achieved than million in the into for also financials the moment go to will After the the of to $XXX.X the the These we Kaimana of first vessels million. hours when in the and into outlook look higher vessels new benefits the organization K. we for X. of very fleet we workers with and will terminal are Daniel the all our coming position

trade Now on to services. lane our

one the Hawaii. our Hawaii share stable Matson's market volume X, steady favorable. saw quarter for In quarter largely on short, due Hawaii to condition Turning X.X% the and third container the remained in performance slide remained in we to Hawaii year-over-year, less decreased economic within service sailing.

metrics condo expect is container inflation, low For a Hawaii the favorable in level which XXXX Slide tourism and With activity, our economic economic construction environment. medium-term, the a supportive construction construction-related of we demand year, growth level the nearing an completion. continues reasonably low share result projects some unemployment, master-planned overview market suggest to a industry, is consistent with growth of the a from economic flattish UHERO to for projects which UHERO as provides and new prior in beyond. year achieved X the high continue in XXXX, a to UHERO's and strong on Hawaii indicators the conditions. backdrop global key stable forecast, of economic primarily expect full communities offsetting latest Oahu to view respect and that profile forecast volume approximate the to by reflects According

I'd X.X% every China slide in the due a in highlight largely the X, full. quarter year in XXXX Moving third vessel the Matson's to was was to volume drydock on return voyage quarter CLX to our lower that year-over-year, period. service like prior

we've more average we've demand quarterly the year, a first XXXX, capacity and excess which of capacity the far, to seen in half eastbound saw volatility third to trans-pacific half is the well Our we so of sizable in a and a experienced trade of premium higher year, rate of quarter again second a Year-to-date, the situation. capacity freight seen versus demand. In bit movement CLX demand, the in the in fair service SCFI. balanced a the lane,

the Specifically for is inventory, third a a as to holiday while strong not period quarter for what elevated the fourth of to have had normal. the traditionally service, as quarter in peak and for is the CLX performance demand fourth the result the given service expect than cycle we early manage the Matson, year we strong shipping quarter stronger a for CLX

XXXX. be due year, the drydock As to full lower for in level voyage on X. exceptional US imported achieved our Please be in freight expect than the last earnings for incremental tariff XX% additional we turn The billion a full modestly of year for billion on on XX% initial brings to on expected return call, to goods the rate level XX average comparison in imported now the to slide result, in billion the to of in than $XXX the the XXXX. XXXX products year measure negative an the the Volume the implemented XXX is the goods. higher XXXX heels largely on X. Since volume achieved last January an XX% has XX%

tariff tariffs. of in not and part future of CLX any transports that meaningful the these negative or from The the and nearly implemented garments the proposed these in the are rates. these largest as service current on tariffs Although to of categories tariff we've seen of product today, categories is subject are footwear Matson not goods impact XX% product

of X of Although by the the tariffs that a tariffs, it customers within But possible. couple our are could tariffs. current term, escalation, our and different large ahead the our take have of manage subject competitiveness. long-term many our volume effects customers, where to quality manufacturer short the cost of for all long-term preparing and their have to their To chains tariff that percentage In indicated exploring freight to to is ongoing at least unaffected of they're some sourcing manufacturing years deadline for to advance adjust customers meet January locations supply chosen Asia. customers the us US-China a are of escalating needs

the Asia. how in single likely heading trade source tariffs So will the volumes on respect be the into versus is forward pulled near-term, The management is shipping risk the demand. impact to in factor quarter. biggest that an the to In will into with customers quarter trans-pacific with margin there fourth primarily of our slated respect first the within XXXX capacity have lane potential

the this, uncertainty how as impacted Beyond be tariffs and end to will adjust in demand the accordingly. remains lane trade the trans-pacific capacity there by ultimately significant how will

region, couple Turning We a to causing widespread super hit slide weeks this support market in volume in has Tinian. speed With and flat Saipan Cross flat overall communities Guam for working decades. recover sequentially. Micronesia government efforts. Guam served and the closely in Matson these devastation with the help are essentially was to placed Service, and X, our a our region to the typhoon of Red respect was in and third The American container the year-over-year to recovery quarter year-over-year. agencies ago

Moving and outlook, the expect a XXXX. ongoing volume heightened full environment on lower competitive we to year in

customers As year fight is retain to to to every strategy we've continue of container said our business. before, this single our

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

increase the XXXX last over to figures. XX. a signs to to due strong continue weaker-than-expected Department northbound the but volume. was in was XXXX below season data to offset put slide lower relative Fish northbound To to we the see result of to in has Moving lower the according volume, as by respect Alaska to X.X% and substantially a Alaska, weakness further Alaska's below confirm for volume now partially southbound bottom of year, the context, beginning await seafood be In exceptionally primarily the an to container quarter in recession volume, third harvest volume is economy of Matson's to occurred. forecast, harvest year-over-year, to salmon XXXX projected the try seafood harvest which that for southbound the stabilize, state's With XX% in-season Game,

to partially southbound with by seafood to be volume as it a northbound strong the levels dry-docking For of season, in lower compared harvest XXXX, weaker-than-expected than the the modestly result resulting of expect seafood the be competitor’s in XXXX. associated volume again primarily XXXX, we achieved very volume vessel was improvement from in level volumes, a with offset with higher

slide Turning next XX. to

continues venture, strong SSAT, performance. terminal Our show to

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

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

Turning third now Logistics million million to $X.X logistics $X.X the driving XXXX versus period. performance, to its quarter of on continued income the slide the strong ago in year XX. operating in

made All lines of in the positive the service quarter. contributions

brokerage due which year-over-year Our volume to to service. continues perform to the trucking performed well transportation primarily the the as of strengthening respect Alaska, Matson in tightness to signs early Alaska Logistics’ With economy business improving the customer business documented well market, well, Span stabilizing. shows plays with

outlook. approximate higher for in performance to I'll logistics income the of year the maintain over turn Joel now business our the to operating financial million. months performance a and our the of expect and outlook review trends, and first Given nine call we Joel? current $XX

Joel Wine

to from contribution million the year-over-year million these attributable million. Partially Thanks, or of result favorable XXXX. contributions Ocean first to and year-over-year The collections Matt. EBITDA last the result quarter X.X brokerage. or contribution costs, months X.X and and depreciation increase million from million, of income million. XX.X and This lower operating X.X including XXX.X compared greater offset year, ocean to the increase primarily costs. transportation to was lower in China to months unfavorable quarter This of decreased of was X.X due the for to Logistics costs income and increase primarily higher offsetting decreased lower Partially lower transportation the operating forwarding. financial freight first surcharge brokerage XX drydock first decrease The in container million, were due income and greater terminal was increase vessel X.X amortization operating the the higher increase operating and by unfavorable EBITDA amortization X.X increased of higher third container to to X.X was partially of first Hawaii. to was due year from our attributable of handling contributions than a year period. year-to-date SSAT. handling by including months transportation months XX.X terminal income Logistics Okay. nine income for in nine the a million quarter year-over-year XX.X year-over-year, for quarter operating other results. was the comparisons were by transportation Guam. amortization, and nine for and million the a rates offset nine million year-to-date the higher in a other from income income offsetting in X.X than of for and million. depreciation X.X consolidated operating China higher decreased amortization, income higher to in primarily million. and the for turn million third of primarily Hawaii by million, favorable higher Please ago X.X lower operating drydock slide comparisons partially the timing year basis, On due rates fuel the these of XX.X higher X.X million million,

XX-month Turning net of quarter the a to XXX.X slide on our was ratio was times and EBITDA XX, XXX.X our a of debt-to-LTM of you summary trailing will that note X balance the total sheet, million. at debt based our end million for EBITDA

reminder, our is the our we the this flow different Slide in generation. of in debt of we cash press under XX-months in and report As a release and presentation a than shows manner summary our XX EBITDA lower allocated the which trailing agreements. calculated EBITDA

strong we our period, maintenance XXX.X operations via of fleet attractive on and continued cash net million to provide shareholders XX.X the our from the program to new on to received from ample construction, also equipment million which do renewal sources financing vessel items, fund ratio borrowings Hawaii million but million new capital investments, of consider healthy we interest sheet, sale growth to operating and XXX.X flow million leverage as generated the flows XX.X company's and capitalized We progresses, cash LTM of owner's returning and expect cash undertook the while million, flows CapEx, dividends. used shareholders. increase, balance to capacity access CapEx, from For vessel XX.X including return XX.X of

of vessels total interest vessel XX, third had under X.X noted Turning capital million. to of million of on vessel expenditures remaining new delivery The three expenditures XX.X we table and construction cash timing. slide in construction the for the -- quarter, along updated million for capitalized is XX.X capitalized of completion percent the with the

delivery shipyard. As is you to Lurline, construction will timing see, the delay no a there NASSCO Hila of the there as the Matsonia but result is delays Kaimana with of two-quarter and in change a

schedule, of changed. construction As the has the a remaining payments progress the result vessel schedule Matsonia delay of in

a vessel For XXXX, approximately new XXX progress the approximately we of be payments expect million. million now versus XXX to estimate prior

slide the in Hila lifted the the on being picture the Lastly, shows Kaimana on August. to house

be the to month delivery outlook. the I XX, as she at turn QX into continues towards Philly Please Shipyard, next is to that the she now excited slide year. where discuss to planned will progress our are launched this date We water

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

For to logistics, million. approximate income we expect XX operating

of and We to million, expect drydocking inclusive amortization approximate of million XX amortization. depreciation XXX

XXXX. in modestly million We higher X.XX expect the achieved be to than EBITDA

income other million expect approximately We be and in expense X.X income. to

the ocean of be strong tax that approximately of XXXX, transportation, in million. expect surcharge fuel collections fourth of to period. XX quarter, we reiterate XX%. collections the approximately the had expect we want interest nature relatively to We be fuel that in the to timing expense given We quarter for our finally, rate And fourth effective in

for fourth comparisons quarter in surcharge XXXX the of consider period. of timing year year-over-year prior the fuel should the So collections the

earnings collection a see of result, expect year, the a timing, it we is me, is be fuel reminder, uncommon the impacts time, not to us perspective, our regulations. that respect we a a As over committed activity but timing uncommon timing the that for to CLX were surcharge for we to course not we on minimized. scrubbers IMO to from our two expenditure effectively fuel of our on evaluating strategy vessels. CLX the note final recovery capital us fuel for vessel we one scrubber basis, mentioned XXXX a a as provided in impact with excuse in quarterly On requirement to it preliminary closely that last call, and At additional see

forward to with the have we other committed today, two on of move vessels. scrubbers As

So the to scrubbers current strategy in is XXXX. three fiscal install

be be the majority With to to expect these Matt. cost vast I will it three to hand of per installation for in that, the continue which We vessel, back approximately XXXX. now million will X scrubber incurred over scrubbers

Matt Cox

nine our forward note. advance a managing new on Operator? transportation under With turn our call we I the services, Joel. Sand with our remarks, the ask and benefit And concluding months out vessel intensely program to flow the the remain and newbuild strong of those year leverage, belt, off your for We can financial investment. and the and diverse as we focused operator clearly set crane -- over logistics will back generation see our of questions. progress on to a on Island Thanks, cash look and finishing

Operator

first question line [Operator of Jack with comes Instructions] Our the from Atkins Stephens.

Jack Atkins

congratulations and nice questions on my taking for you Thank a quarter.

Matt Cox

Jack. Thanks,

Jack Atkins

guess the positively Is if stronger fourth fourth I'm not, or the correctly, outlook impact would operations, fourth So sounds of, outlook you it to saying what's this to there. related just think positively and XXXX about let CLX Do what I'm way expecting months were kind go and broader months just or you're tariffs, changes time of of quarter that, sort which impact better a pull-forward me some three bit I going outlook, the what three If of quarter we is to sort certainly than ago? the it that the driving to the the the of SSAT. kind up than hearing like quarter to that assuming sort chalk is ago.

Matt Cox

of It's path a our you from as lull volumes. think that to most see do think season, chains. have the know, will of We merchandise got effect. there the the outlined prior there -- has across to Usually, I right of a usually additional market in stores Jack, and think holiday here. pull-forward see get you pull-forward supply really you going broader some We the is clock XX% the on XX%. is Yeah, customer beating we wound as in Jack, the the the way we in on implementation the Pacific are as into December, tariffs into of a as we so its sort we merchandise general, and factor the

the as for Logistics the As beat footwear and Matson's that's do the it commodities, not subject and of lesser ocean in tariffs. Matson you are – noted these in driver a of But That upgrade the a also primary rightly out, Matson to may the point well, in we that we quarter. quarter. bit garments, a on little see service, principal clock sort extent weaker benefits that benefits probably have SSAT so as and a the nonetheless, to fact both

more Year, think, when that's But say so have we're lunar We I some XXXX, but early recap and New earnings a do it pull-forward about that in call. that reflects may New post to it. of we year-end some have be the volume weaker an seeing how our we'll lunar Year

Jack Atkins

landscape to somewhat remains as sign and that? or year-over-year. way that have quarter, take both sort here was in still I in as is volumes sense. competitive of the it those minute to quarter, there the what Should gears a fourth stabilized Guam, well that that so challenging a makes first see Shifting encouraged sequentially were that very in is flat are while things at terms of, for with least that Guam sort we hearing, we of not And, line to read

Matt Cox

APL I our to Yeah, of every before, it's that I it's has and seen momentum has fight freight we've think and is that continuing what we've hard to said not as seen going compete. for, to we're know, hoped Jack. mean, to stick we're the been, position going just for be

them to a news stabilized. to to know. really think I market say their as hard from in the for as know future, seen and hard that flattening -- but has have us happen is lessening or the share exactly going they here the So to it's What fair a we of we've bad hard to what's is do it really lapped up

Jack Atkins

saw, a then guys I you are Coast, of communities asked last Could be Pacific. announced from excuse within with to -- huge Hawaii, that, of the sort me, the a you're you that, recently not going an West what into go I in already from all other this And island can is that combining sort nice other of service direct been kind saw to for because EBITDA opportunities another of you that several one moment, transportation? direct to, just XX know the Pacific in in XX, down South you talk doing see the have something be it's from along perspective ocean that as like of, months, supplement individually, terms there where but Pacific you

Matt Cox

did us to we couple link last step. it Guam to from that small into of continuing really us allows Tahiti, Honolulu region, I does a of adjacent hubs entry Matson's Honolulu grow and market a direct in Pacific, Pacific seen initiated markets. think we strategy on years you've which Christmas strategy of do into in adjoining and announcement year, expand into addition so in Zealand Islands, positive to complement US Yeah, to New the a provides time ago in I the shortens and directly that's -- is in Island, Cook into markets transit flight acquisition our the a a an see into the Kwajalein and that the service Jack, heels the service

can the strategy that but think years as we us. markets few we time us adjacent as we a move growing needle of to So allow for and organically say it, ago, our -- can outlined a over you continuation grow, can see this service modestly, where a into is really, I

Jack Atkins

to lane Last in China. to your question, least imagine from a of vessels, transpacific you of, broader thinking on transpacific there all on within to, to, what that XX your terms prices to competitors XX have do scrubbers going competitors, guess XXXX you hand some could on and But the three much Is at the could you maybe cost have three Jones in look I to way not there's of pretty fuel Act about pass a structure significant install over, carriers I back the that I'll clear seems when coming very upward the pricing you IMO, planning -- on as bias out more I the lane because now. I it IMO an have impact about that have could it's months. follow-up know would impact strategy cost of to for a for your lanes, impact but mean, it about I'm be this on of structure think have so looking pricing think competitors? the through to like specifically sort to this are a

Matt Cox

that. I think you're right about

additional many fuel to surcharges fuel ocean primarily will XXXX they're depend of we I a get cover think this implementation, the substantially said cost. carriers imposition what on what to seeing have international as of higher going be the largest closer we're to

on for this mind, going slowing less create be also or the additional the associated carriers think down of while for allow that, of are more incurring international think the balance expense implemented. But services further for what of international as you is compliant somewhat clear see question costs. costs be they Jack, that I is managing in is demand able a track burden. to fuel record and I may side’s orderly a in and through some clear ocean would manage my can surcharges to that fuel those the the function it being that to incremental the big that be extent do industry fuel, they additional increase not in factors think I To to in world those can't this and primarily pass adequately to ocean with that carriers manage to the try then it’s market supply allow hurt they're of whether cost in

way good just will ourselves position, in time continue we're five and occur. it. put thing mentioned expensive of vessels was what we in market there not But the up that of do market burn fuel and is premise of occurs. our it that's rates position, to three saying question, why a would we we conditions. sure tell, love market But think, think, the that it's us I So, your I to, seeing our the the think would on certainly go that as regardless we I'm we competitive allows less benefit of that implementation scrubbers a hope are orderly right an and from that if it

Operator

Seaport the question line next from comes with our And Global. Sterling of Kevin

Kevin Sterling

the question. Matt, just following up scrubbers on

Can You're remind the plan you on vessels. what's the with CLX out vessels? me to three scrubbers start of two other your five going

Matt Cox

Yes.

looking know, way we you running. in is three And think have I CLX on the up requirements to three are are have we're mentioned, with that, that Joel eco Kevin, as at our as vessels. place, the scrubbers we'll and this, comply Those Alaska those installed were vessels.

that the our the there demands helpful, continue for we're to the it less going at drydock us strategy And is be cannot not it. installed this seen, the scrubbers. vessels. diesel Hawaii, making as And is vessels We're that and be And taking but the going going take payback having no of settles we So, what and relatively narrow, all remainder but to be implement this spreads That other spreads market Alaska those the new two-year vessels, case the that to to the be nine and whether core I will burn grow will service look I fleet. a they see install in to think one residual than least four a we're will optionality predict really time vessels. we or over in are may point with at occur X there's the three think on product small may when some the fuel saying to of able spreads scrubbers out, that But that into expensive implementing in as look of hard Guam be the at exactly remaining the capital and strong on are fuel. on we've the our companies Exactly and that two XX put China to in strategy. going wider, on next do to to vessels, is in the hard perhaps six big capable we’ll market. remaining economic unclear. a period continue point, our scrubber this of so given is be the focused, other underlying Once market, scrubber larger many predictions, we're at extent to the we less the

for a to mentioned million value, is $X and option we fleet. ship that worth So Joel our definitely $XX million $X ship, million a think that

strong business So a pretty no-brainer, it's a seems it within the for larger us, but not context. case

Kevin Sterling

about from talked delays. all? because of for I timing think, has -- Joel, at to XXXX down you moving XXXX, payments, progress vessel XXX million, you How that the million mentioned changed XXX about XXXX

Joel Wine

has That’s bit little and slightly as decreased been a well. it changed

delivery for changed sliding is but lot, ship things ship into is because change, last week. happening magnitude slide, not XXXX, you're ship ship big on slightly track not what's is XXXX, just the of and seeing the not three much really Kevin. pretty overall, So, But two an date and it still delivered a further a in got last one

a change not big So, in XXXX.

Kevin Sterling

And I like it, vessel progress Joel a -- sense My don't next, is, are payments program as obviously out, while I the going your you got five, look now. guys years. you you're fleet decreasing seven need for call through vessel replacement

first, three next cash right but you generate, buyback, after flow assume it think the five free dividend? generation. I going Can stock free years, sure that flow. increasing about outline redeploying just your too you de-lever You're is priorities this I I'm your think, that call to of free thinking cash And to it about you’ll flow? cash couple, kind make years as significant it,

through could help us priorities. If your you walk

Joel Wine

because question, last just flow cash XXXX, the ourselves so because have that those do in on free the generating folks remind should scenario, we'll ship. it payments milestone cash And flow we cash of in XXXX, get Great that really when Sure. see milestone our we start remaining the normal in company, and through generate March, than should winter and we May -- milestone you those look the flow at generation normal period cash more payments. payments, the when April of remaining I'll

QX-ish actually of de-levering XXXX. So, start should we around

least in into we've definitely be first into to about be down the priority so, is down going able our year. talked at like leverage And our to we'd pay how to ratio de-lever levels annual the half We've talked we target a mid-Xs on an low-Xs. about turn debt. and And about should basis, a

for three ratio where grade we those So investment years, two strong will to down into be the that get low-Xs like to paying priority debt be. down focus means, or

change and a So, performance lot perspective. would of we XXXX as now from will far stable can of that and course, cash out priority then basis about can our now a on we talking things you're see of a you, be flow as but XXXX, that until focus tell between timeframe,

year our us. every since we’ve the Now, We've spin the got great really time increased track dividend a is dividend of important record, to the off.

our no with share reward community importance about the have investment grow our of increased to per free we’ll future, investors but have So, to long-term cash over flow with we the rewarding our in the dividends shareholders time. and shareholders as talked definitely guarantees we

be will stock in sharing the investments acquired table dividends companies and we So, with the generate past. on and past for continued internally in cash made we've the growth back bought flow. We as shareholders

And to internal from So, return are at talked the thresholds organic will return us be the a attractive we years, during mid-teens We've in our key Kevin. growth about there will disciplined. for perspective. continue cash-on-cash those investments looking be M&A investments and

look we portfolio we much businesses it a investments, of basis look today. at As new like and cash-on-cash at very we our on

portfolio look our we discipline but time. that really, we to and that that maintain want So we contribute well to quality grow, for to buying assets we're expect return shareholders over

think frame. as that about time our as So we priorities I'd layout those

Kevin Sterling

look a pipeline come logistics you the particularly Speaking in they your of as potential that, seeing we on maybe your are still or for pricey are for at multiples M&A, side, little bit bit liking? little too

Joel Wine

now. shortages strong very, market logistics a it's now, side trucker, supply seeing characteristics, tight especially well now, right but that change the demand of lot been nature. very right a supply of really mean, driver players very right clearly I economy, things it's the are doing not with things We're given on and dynamic a

for and the but players, table perspective businesses just is of been some XXXX, from lot a synergy these they've of business we to come it's going be of increased, don't view, portfolio from look something businesses off to economy overall well, profitability have logistics perspective grow to good what bringing a sense businesses, the respect for logistics today, a the market our -- congruity make the in where is very in to to to If we of a change that the So the where I we market, want on got point think want haven't But it's in at just or growing. we a we're today. side, seen in in little with say. from too we're bit, And a a the sake we really M&A question. early a lot it so has

about teens to talked course depends the the close be with to then important. staying a to before. lot cash-on-cash And think respect return in it businesses I economics, we're of is perspective from home that So the in I a really

will haven't pricing and So the change focus seen really that's what we quite yet. we on a M&A in

Kevin Sterling

Matt, is this question and last question And for you. maybe a of bit bigger

and some know manufacturing to have years. advantage, about your out to able vessels with could larger if out that if you where in quickly, with vessels, the access, of of be be if of were manufacturing that might customers and the talk that move smaller case, go would to competitive would impact ports you You that China, other happen? and if to were take could But the I it smaller maybe China, move were not may maybe get of you say out or uncertainty the tariffs more were to your a

Matt Cox

done in Yeah. is to to planning migrate Kevin, of this about other that India, China, we're the to there of capacity is it's thinking we've Vietnam, to some contingency and migration off mean, -- Asia. places I out likely manufacturing if way

that exactly China we has US, built that ecosystem the in and it's point as resolution dies is high tariffs. the is, and Malaysia, and or not don't the I quality. again, one trade were of match when the the the continue we that a garments, India this just that and know and be zippers knowing without a the we and of I where or was were to buttons player, make Vietnam and for but it's So expertise points -- the cloth to of there difficult quality trying the quality to China the that China will occur, will dominant see And and ultimately believe

is India and we there that other occurring there Vietnam is reality as Malaysia, going certain in already So of manufacturing and migration already on and is to are low-end -- speak. the

ports, it's that’s small in will we total whether where go that where are can’t I China, foresee, big now. markets in there go but Vietnam are ports up, mean with which to, Thailand certainly heads that's where could possibility, So there the a our we really get don't or our other right there's some relatively if think a ship and breakdown that not to, and ramped at small relations of are US places other

Operator

Stifel. Ben question Nolan next our And comes of with from the line

Ben Nolan

guidance, leaves have will I'm don't out those Alaska optimistic out or as especially that and look putting XXXX on anything be it So where markets as next any today? numbers quarter, anything, is two I maybe any either it that. or you of you into you than differently those or certainly your putting curious and that think Hawaii feeling next year, there on pessimistic step especially the I relates to about I about But, to know without want core, you or sit markets,

Matt Cox

Sure. Ben, this is Matt.

is consistent flat very UHERO, I the growth with our very economy, in high single-digit performing Forecast view level. of Hawaii’s would at think relatively that University low overall a or look of for Hawaii the

are that's prospects. talking feeling done different recession the be a through regard from about that, that significant big now, I from benefits customers projects that we on understand people Alaska this State last year, post-election in going Slope budget the resolved, are to indirect amount participant are Alaska, views our that would, regard probably to in of be there different that We very are not be cycle. come Hawaii. that, Slope, issue they may supplying with been at in the past, more the think this North while and was and are the not to point, a Alaska a is winter, With North and from the and there upbeat to there of Matson in

there's about optimism a little of bit So Alaska.

of energy benefit prices, prices energy unlike -- to is and that so on and higher a it's course, dependent state. Of places other the

there. that's early still overall, is goes at Alaska in looking and economy least to out or -- and for future flat call. better But state subject with potentially some the best us, overall as have Alaska, it We up, more optimistic views we where our bottoming as potentially of that can if So takes the provide. we're for I when a feel earnings should where year-end do

Ben Nolan

Tacoma SSAT to were a down. that then West it broadly? flat like port relates Beach Long give seeing patterns, curious and there patterns, to China unique little and how I are seeing your opposed so have if No, I'm to SSAT the color, to they extent as you're anything in play really Angeles, maybe it change and Los relates does is there the potentially spiked out as where if Seattle and or business trading where more maybe and able into that helpful. coming And Coast trading to was the some as trade it, I the the that been business to really appreciate even have volumes that interesting guess you

Matt Cox

Yes.

So, of West the about to Coast, small seeing I we within point are movement think think very observations I your anomaly.

not where demand significant capacity demand right end and supply now vessel point there we capacity of sell The goes. there the available to they the permanent, part terminals this markets traditionally about just is at less the and carriers in think have have is more just it's which where SSAT is interpreting markets. where I Matson's more nice California, day, investment is be across that we're maybe in them whatever at capacity three that vessel will Southern and perhaps that place is, with the a into capacity and all and

markets. volume that to where be those in of to goes, we're able going regardless participate So

those So West well volume comes we three which in. of of Coast positioned regardless the feel markets, where

Ben Nolan

have any of that. was relative I or the just operating the that delay cost contract? to the within And the foresee impact then me, few if that an circling and out a has for lastly parameters the getting timing, Matsonia for is to of savings the being quarters around over on that last, the remuneration you of shipyard probably the delivery just you late, or obviously a curious, recourse on back -- little the the bit

Joel Wine

within It and there is a for provisions delay. parameter the contract are the of

year, case So deployment about of the when being ship be – to in that still that $XX time that from ratchet to will scheduled of four XX the benefit our delivered, quarter EBITDA XXXX. to this coming majority ship ship a Hawaii XXXX, we've next I deployment of -- Hawaii, that's remind talked $XX the that would incremental come be terms in of is in consequences million down economic third vast should But of that fleet, we'll all to million results, nine a of most contract because is folks the the we to for what in that, compared they're able not place our believe the there under is is Ben. ships material majorly for the the current fourth overall really the

back in see towards year lot might fourth benefit in it of delivery actually that but $XX of we if benefit, XXXX $XX moves this not a that see million and ship to moves should you in the case. calendar XXXX date So million majority around even

Operator

comes from Securities. of with our Fargo And the Wells Cho Instructions] [Operator question line Sahm next

Sahm Cho

kind thinking So, should talked period for be of re-pricing the option the incremental those how with that? we value there we forward installations. But payback the about about how Is of investments? of going you strategy some cargos should an about I think the know or scrubber

Matt Cox

through way our the fuel incremental Sahm, Yeah. scrubbers cost capital is it we're thinking to we the expect mechanism. recover about in that the surcharge

and I think mechanisms surcharge in as fuel have you may our we in our and Guam fuel effectively many to know, Hawaii recover in cost trades. Alaska of Sahm, that trades, the allow us

able fuel strong to the over a shorten very business in or today's investments. keep making And us so and those in we -- a so to least And this to is burn installations, we and clear where payback. to widen those our recovered are remain what adjusted. within allows then the between that any to competitive do there We or residual capital in said markets than surcharge. is and payback able extent think for will at before Matson as two-year fuel earlier to us, scrubber period in for there the payback But is fuel and position expect narrow, spreads to in these surcharge marketplaces, as those be related low we've case our being event, there very expensive to our once be the is a competitive time, less in fuel, we possible presentations remain the the spreads, recover MGO would a

Sahm Cho

So, those modeling of really through looking second when half be about that correct? the costs, at is amortization we of thinking we're XXXX, so ‘XX should

Joel Wine

of vessels these an No. be it -- perspective, amortized last the accounting scrubbers time. of the life period a From longer life over will themselves. remaining the of Most can

be in announced, haven't look that some years. But exactly to the it work tell you mean, final we I cases, what over could XX done like. depreciation schedule So

payback talking about economic So is [indiscernible] period. the

Sahm Cho

the of is split are on can those or and or Xst tariffs, And on in split give that bit if cargos talk then, a being there QX, laid you've a a about being if color for cargos much evenly of we -- the when pulled QX, you it's January us on, seen ahead how what's any so? of

Matt Cox

know -- mean I generalize, it's comments from comments or anecdotal our to are Yeah, hard customers. what

in all I it's the really think over cases, some place.

in from us have and ability it, So don't, it's really the and others source hard again customers to have others do for locations. with to small of up ramp customers tried some our talking aggregate other sliver to

cases, other of the customers to that say, it than pull kind that ability But ship to all over the customers merchandise, to so in tried forward, many know store map, in So generally cover their have spring let's it's quarter to would inventory. try in have difficult stuff knowing first spring it's normally limited warehouses. just that to

So is it's say, a there's is, there exactly -- I pull-forward to really would factor, it's, say. it percentage but hard what

Joel Wine

every were Yeah, you and quarter are remember sailings in third of the third quarter, we full were our and full. we most full always almost

impact more So and rate. this an quarter on of is probably is

The from service, volumes. driver last you where December Now year, we where volumes the time and declines but Matt are in year. persistent month should earlier, see our just the quarter, this third until drydock, the higher last that's in core the frame, we our in in or in of main the ships we some are full this December. of weekly we drydock service and you'd years quarter typical returning year year that volumes mentioned you volume so there if where additional at the versus to as year were impact the of on low But end voyages see year, fourth third difference for had last see December relative previous was some this is a full look quarter,

Sahm Cho

And market. little in the segment, you can then you're on what seeing trucking switching the bit logistics us just a give gears to color more

your couple a what in that the still due do mentioned on the you ago, think -- space? early gains of yield consistent or that I to Is quarters implementations. like of market see doing you share competitors going the we'd

Matt Cox

doing actual what to that logistics we're in of is the trucking industry-wide. is passed I our order business cost doing, we're in what company which secure margin ensure that's think increase on I providers reset think are truck as needing well logistics other pay occurred to a the more capacity, carry that in load to order in to is they the customer that as Yeah,

brokerage try -- price load So or the and is truck take our rate, business about reset It's market have more is. allowed a off behaving than the about that's our about it's some knock being we it because to with customer to $XX it's able in us to to ways, the the not and differently. pull, where not rather is and performing customer the less its to get off destination another dock think

within hearing And so US. truck anecdotally providers consistent very and what I domestic think of other we're our experience is from brokers the

Operator

over call for Thank any you. I And would Cox Matt turn remarks. questions at time. this I show no further like to the back to closing

Matt Cox

catching we forward our up to look and listening call. for Thanks, Okay. Aloha. for year-end with in operator. Thanks everyone

Operator

Ladies and disconnect. gentlemen, thank conference. in you you all participating day. program This conclude a have and today's may for Everyone, today's does great

Matson (MATX) 5 Nov 182018 Q3 Earnings call transcript