Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the Matson Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

to Fishman, conference Vice like speaker to now Lee today, President would hand over the your I of Finance. ahead. go Please

Lee Fishman

Thank Brittany. you,

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

statements statements during within assumptions and I the future would meaning predictions, presentation will the and like the that course actual expectations begin, the you we to expectations, of press risk we this Federal caution that Before slides conference are make our forward-looking you results events. the remind to those consider forward-looking in the of regarding reasonable. that Securities call, this We from differ to We release, Laws cause could believe materially call. or projections factors the in

presentation these in this XX These more to risk Pages the in statements. today filed described our under assumptions are and XX on that note with Please date call forward-looking this date. we fully on the of XXXX, obligation factors as SEC. August update release of our filings is XXXX, are Form and caption Factors no XX, our and XX, detailed any XX-K of are the Risk February and to that also statements subsequent on forward-looking conference make based undertake We press

turn the Matt. call now over I’ll to

Matt Cox

well and thanks U.S. environment X. on Logistics and economic business growth. segments on start performed and Slide a challenging Okay, call. Ocean to the everyone despite sluggish thanks Transportation I'll business Matson’s Lee,

primary sequential demand, to transportation, the quarter in the saw service consolidated generated year-over-year freight our decline were rates, quarterly second within lower our income. China the and volume operating For contributors freight which but ocean higher

primarily due volumes and management. the In transportation from operating to to year-over-year, brokerage lower year in and lower Alaska supply saw Logistics, also income ago period. year-over-year contributions decreased We Hawaii, chain Guam compared

of I our will now performance Logistics. and quarter SSAT tradelane, go through the second

slide. the manage volume volume second demand to for please to X.X% to retail quarter in to lower levels. in continued weaker lower was next X.X% achieved the So Volume primarily turn consumer quarter of decreased XXXX. Hawaii due customers retail inventories related as year-over-year, container the our second than XXXX volume the

visitor total arrivals growth visitor During second in in offset modestly partially the arrivals the second visitor were quarter, with of below of arrivals quarter the XXXX. domestic international just year-over-year, arrivals. increased a quarter decline visitor Total in XXXX

Please Slide turn X. to

expect low rates the tighter and to interest weakness unemployment second interest continued Hawaii continued rate. rise continued the in half from economic of countered to pressures. growth arrivals For trends. XXXX, we improvement responds unemployment and visitor subdue the projects low a higher of and rate. Unemployment visitor in tourism total in by little improvement higher in as the relatively visitor a domestic supported continue rates, projections a expected economy to credit arrivals is UHERO the to strength show May the international economy, effects by effects in XXXX, UHERO’s in inflationary by be growth supported of continued to

second Index XXXX. service to Shanghai Nearly Containerized second lower of the year quarters quarter docking CCX and premium the in decline Matson one no CCX quarter Moving capacity to in in due realize to to of to lower of the dry X. significant the service volume the volume less was Inouye Daniel the K. was in quarter, due CLX+ China Slide CLX rate our in sailing. Matson’s XX.X% primarily continued the on the ago XXXX year-over-year, related service of period. Freight three the the the year-over-year over

lower were the that achieved than but in of We quarter ago achieved XXXX. above period, year the rates those second well freight

increase a computers, we we and tablets, saw other demand freight electronic e-commerce devices. of phones e-commerce that in and our and turnover Electronic carry of quarter, on be the The from wide vertical demand replenished increased During from a generally are freight goods or consist items basis. customers. a garments need goods to high modest e-goods e-goods range timely

Matson, we year. continue a to peak the lower of in vessels turn Please muted carefully expect Currently the face in We reductions to full in relatively services but manage near to are our demand demand. earlier in inventory for retail we better Slide China in season. the consumer our deployed during solid expect modest traditional X. season, be position to inventories further But marketplace, transpacific retailers are experience and capacity a than the levels peak the seeing tradelane in with

economic normalized unmatched Absent Regardless and remainder for the the we to hard a reflecting the we level economic U.S., the dynamics in improve significant stocking the services. and of premium expect reliable environment, as to trade and destination more earn services demand to retail of landing ocean continue to inventory the and Transpacific consumer fast of rate transitions levels. SCFI, gradually marketplace to a expect our year

believe positive to Beach. I brand the demonstrated -- XX-hour changes place in Prior of years availability we our unparalleled built and Matson over few bonded XX CLX want China in our reliability period, a forces fastest pandemic the history the years at service, last of minutes dock Transpacific to are ocean Customs the unique elements with for cargo facility service in over on Long transit a U.S. that the business. spend off as few demand have for a China we the our important service the taken with

high and that at service destination. a effort ensured service touch this We both origin customer premium had

footwear. a viewed relatively to key Coast. Our were minute customer garments get accessories, last as also is means items the e-goods cost U.S. and groups and by customers fast, efficient The to West CLX

services of we during pandemic, an initiation extremely brand the Matson our in address new to the During challenging China enhanced environment customer needs. the with

freight the in viewed initiated high service to many + of the capacity where we services demand may May to option CLX our customers which was days for freight, freight. the air a seven additional air by due XXXX driven came for coupled of value with customers lower our five you air as is versus to transit proposition initially These demand CLX. and This of the loss cost appreciate best As significantly quickly recall to consistency. reliability next

lower July high and XXXX a to Southern reduced also need the temporary this expedited congestion of demand result port port of a the the in significant initiated We CCX California. and address of of ocean overall September CLX service market a to the in CLX+ We year ended last in of challenges for level demand the of given in the for the Coast services service congestion. West called due as combination improvement

Across from our demand services COVID e-goods. this and range in of supplies time, to period e-commerce of saw a related we wide

we've saw also pandemic, loads geographic significant freight seen expanded increase We in e-commerce customers and areas a of reliable our for an highly origination existing these XX commerce. book years. are business as e-goods looking distant and Post demand coming of with the from China This last we've a area cross-border within consistent verticals of over the built that service. expedited garments and complements ocean

sales Census an the for to air quarter and the total driver the X% Bureau, e-commerce U.S. to grew to of penetration in retail sales meet growth market freight is approximately of approximately our customer Based in first year-over-year. we in service. is U.S. continued of According the our for total growth demand important capacity e-commerce China Expectations the be on vertical e-commerce forward, XX% enough outpace are expect sales. U.S. demand Going e-commerce there the currently. retail to conversations,

Most Matson significant as operations of of chosen to with they've have business sailing with exclusively that pre-pandemic our freight already used aligned customers shipping their our schedule. continue a portion air their

capacity Matson are that air air business We and as will of with advantageous to remain economically of Matson’s reliable majority is relative this confident regardless freight. service freight the

a XX consistency the around that and of fastest to fastest provides two service. and transit the second marketplace proposition continued in we've our whereby coupled chains The differentiator drive niche their attributes with customer service Over service and our success carved service. significant customers a destination expedited unique of value our last creates is the build supply our unmatched and unparalleled flywheel ocean services China service years, a reliable

Please XXXX, the the a Guam, XXXX. level turn we volume expect due in The In was decrease of second lower Slide second than XXXX quarter low in with year-over-year. Guam X.X% in levels. Matson's decreased In container rate demand. X. and of a half improvement economy low continued primarily XXXX from to Volume was tourism higher modest the the in achieved increase general unemployment second the quarter second to quarter of of X.X% the in

due domestic volume. The Alaska lower benefit volume and and from household Matson's container Alaska, second-half decreased the a Please higher. to the we next seafood second lower prices. economy to related to turn unemployment of In of volume X% and export energy due the year-over-year. XXXX, increased result and primarily was northbound the production to for activity continue the quarter Compared goods In XXXX, sailing volume quarter seafood was XXXX service, AAX X.X% lower as exploration second quarter to slide. of less from oil expect in of elevated to lower to volume, volume one the decrease due the low

XX. Please turn Slide to

lower The $XX.X was declined the significantly the million terminal due diverged contribution port demerge Transpacific year-over-year and in revenue to to Our due consistent volume a demand lift less revenue primarily volume. SSAT and with to easing lower congestion tradelane. in $X.X million. lower lower joint lower negative SSAT saw lift venture, quarter

XXXX, relatively For of in volume challenging the Transpacific reflect the lift second-half tradelane. environment a we to expect

million Operating and the the lower in from to the Transpacific chain or to logistics million logistics In was mix across ago on a in lines near-term, XX. period. year lower we at The business. Turning $XX.X second contributions Slide of brokerage result quarter decrease the in came $X.X expect income primarily of activity the than management. due supply now

forwarding transportation excess chain expect challenges management with capacity supportive our We expect term growth demand, and fees. supply declining accessorial brokerage, expect for we continued China freight freight to track to near Alaska we be demand, lower in of service,

with a financial performance. will the over turn for call that, I And to of review Joel? Joel our

Joel Wine

to second our review results. of turn slide Please your Matt. for thanks, XX quarter Okay,

Ocean in partially and Transportation second costs related lower and For operating $XXX.X operating was the surcharge Logistics lower including lower $XX.X related decreased income primarily the second CCX collections. the income and expenses million due and Transportation expenses of SSAT, contributions to China in quarter decrease and a million to Ocean lower from fuel related $XXX.X service of rates from and volume lower discontinuation fuel operating freight of to the costs fuel contribution and timing respectively. in offset $X.X million quarter, primarily The year-over-year with million the consolidated by

in in higher cash decrease operating rates supply brokerage on interest The interest ago period. due due year-over-year as and $X.X million investment cash our million $X.X in XX.X% and CCF rate no from to transportation the lower cash to equivalents tax primarily to chain the The the was contributions outstanding period. income due compared logistics prior of We XX.X% the debt. income the compared in management. quarter effective quarter had decreased year in in to deposits the in income was cash year Interest in and to expense decline the quarter

to turn flow of allocated we cash next shows our slide how months the XX This trailing Please generation. slide.

and debt, million For items, $XXX million vessel other owners for million from including cash used we flow the million from deposits CapEx, via operations capitalized CCF, million of income cash for outflows approximately of we retire on maintenance shareholders and interest million $XXX.X the dividends in $XXX.X which $XXX.X and payments. period, $XXX.X to million milestone in on new CapEx generated while cash and to share other withdrawals repurchase. $XXX.X returning $XX interest LTM net

our balance to share a sheet. and turn slide XX Please of summary program for repurchase

the second total million approximately shares repurchased we taxes. for million, $X.X cost quarter, a $XX.X including of During

XXth of or XX% of first initiated in cost $XX.X shares XXXX, repurchase our approximately shares have year, of we of the cost program of the a $XXX million. a For total our this months share over $X.X million through of year, we six for repurchased Since we for August total million. repurchased stock June million $X.X

committed to to As to we growth the of and any opportunities. shareholders in to absence large so do plan investment before, we are capital have excess returning continue said

of the end end Turning quarter to CCF debt reduction $XX.X the walk $XXX.X through was million. slide. quarter first the was cash quarter. million, debt please on end of an financial at a items, our total of $XXX.X to update few so balance the turn the the next at from in the to The the now going our a second million levels, of I'm

CCF build $XX an for program. During from the the vessel the approximately million new made payment we quarter,

restricted of roughly the years. excludes remaining Based that in the on income is million in of deposits CCF. program that thirds milestone today, future thirds nearly the figure the payments on $XXX cash by two cash earned may interest funded two be Note

We the next in expect next second to make quarter payment our year. milestone of

cash We that applied continue of was tax to refund last CCF the corporate million the XXXX for deposited a general year year. expect to approximately tax $XXX the into

foreign that corporations Lastly, third the quarter, the in income level lower rate Derived That Revenue Foreign effective quarter due or Code. to Internal deduction an is of The services XX%. related deduction XXXX for tax from tax the Income in available refinement second XXX of Section provided expect rate the tax to countries. under we the primarily U.S. of compared FDII is further Intangible generate to expected to approximately FDII

fourth the turn that, effective over Matt. call tax roughly back XX%. the expect now rate to quarter, I'll revert to For to we the With

Matt Cox

Please Okay, where to Joel. through closing some thanks, turn thoughts. Slide I'll go XX

operating season. lanes expect and during the be quarter. second We Normal the expect full seasonality And our peak service as we income of trade third XXXX the returned traditional to to have logistics. higher quarter to previously be domestic near consolidated the than trends mentioned, our China in

expect also first level quarter income fourth XXXX We quarter achieved in operating in of year. the to this of the approach consolidated the

levels. the first the freight year, service For well pre-pandemic both half rates and above in CLX earned CLX+ we of the

of expect to second-half to we the continue pre-pandemic rates above year, levels. well freight the earn For

solid the year environment. performance business In the closing, the a despite in half had Matson first of challenging

our market earnings and Ocean potential as Joel Logistics Our and mentioned. vessel shape on generation. balance company's sheet and new we're and our is positioning in two about funded great just feel program, very nearly I thirds the Transportation good

release therefore our quarter levels pandemic fourth February. with in We financial in earnings post are consistency beginning of evaluating annual to outlook demand return the our see the and are of our

questions. I that, your back the With you. for will All operator the turn right to thank call and ask

We will to as question now session conduct the answer reminder the question a and ask

Operator

you. right, All thank

[Operator Q&A will question by Ben roster. the Stifel. first answer from question Please while the right, conduct we stand line and We the Nolan, comes now Instructions] All of compile session. our

now line open. is Your

Ben Nolan

usual, clarity the to a point enough we new I reached the some is, of and inverse that on feels sort normal labor on it still to are really, pricing you for question going is we've weird Thank of stability the did my business you. is guys, extremely but Hi yes? things I background CLX+ most a you're think okay, and freight, question I like flattening have well first pricing airplane, like is have apologize this have we the seen with Coast and/or CLX relates and there noise the important Shanghai reached in me some as the there. or as on West how guess there index, do on if feel say, normalization. obviously Does around the you guys it

Matt Cox

a point great question answer from of Ben. I Yes think is short to -- your the our it's view, yes. question We

we've pandemic of was seen In we our service the that into move able much when and of elements of expedited Matson expedited it’s that of the pre-pandemic products. changed cargo the think pandemic to in at the demand out period something we air course expedited a I higher outlined the at rates. the been CLX ocean our than where freight during now service, had previously in market lot fill look moving

as demand feel of for level consistently that of think two firmness on and service result I expanded market expedited for the that that that in level of demand fill result our based pandemic the the us and mentioned We our as pricing allow growing there's of the will has services. reasons to that demand we So offering. a feel expedited a our

customers those a said free so short the answer now. to conversion look from We've into but expedited if recession the that. that an we there's confident able could to there's So efficiency even around that economics believe is could frankly do that our mix expert our for yes, feel it, compelling we are ocean the air is

your So question. that's how I'd respond to

Ben Nolan

thanks your leads the next question. to I appreciate on sort for and of that, it candor Well, that

little We the if from? some competitors, others the get a we offered or model have you or businesses any seen those of leave I bit they've opportunities up out services, and some the walk some of varieties pick your that to away know, that of of business. Do there don't are gain maybe will maybe, expedited share tweak business of think

Matt Cox

answer I'll two that ways. think in I

would we view of the the can fact the I over fastest opportunities say thing Trans to relatively margin years our segment reliable and and share or may services, in would there we is and the – or the the services last there fulfilled. on CLX there we small. time, is operate of our is most expedited with and that market gain, first may in the as retain to over it gain it over and vessel lion's say in The Pacific, we expedited frankly see I either offering going vessel there will larger smaller we're CLX+ incremental the a Will consistently second as be we a remain that replace time fastest if XX in rest a invented expand, capacity are

and doctor it expedited against about our as in Matson US Beach. for shippers the all operating bonded facility and but of replicated only come at can't Off be competitors our talked makes full full we've our model other can to steam of facility, Long including benefits up it of speed difficult them with So Customs try or combination to transport. elements before

regardless to that in happens market on what position retain leading we're of we're So, the going margins. the that reasonably confident

Okay, I Thank appreciate it. you.

Ben Nolan

man. Thanks man. Thanks Okay.

Operator

All Thank you right. One much. so moment.

Our next Jack comes with the of from Atkins Inc. question line Stephens

open Your Jack. line now is

Jack Atkins

Okay, offering Congrats would pre-pandemic for if and between to air on great. way on than a taking there pound I left obviously questions a my flight. per thanks travels guess you guess a your guys. that wishing like XX about where that freight the think and was off Matt of I back could Is know I the yours. maybe about Thank think as you Ben you to quarter. differential up pick roughly? I safe him more sort But great basis, expedited and How maybe think service freight frame times expensive XX if of mean it ocean was-- air today? on you up kind I an

Matt Cox

four that offering Yes, way The Jack, the at XX% to is remain it we the economics can sure way if you recently, but in cost ocean the and it But XX% days you our air I of five the the transit. compelling equivalent of expedited said know between in look it more adds freight.

some discount freight So about a equivalent. the cargo a to air to choice an at their is move conscious a making customer opportunity of dramatic at least

know that the we it's that's air compelling a economically this and to recession over cargo Gives occurs, ways even believe stay. it economically why years said has as you compelling. migrated So us think is here few from of believe just more freight if last we to level we in when confidence that remains or some

Jack Atkins

Okay.

in you roughly terms you help would be back quarter. year. your way maybe would to probably right just Would year-over-year, about third at full the full that about then CLX full if containers think in that third the sailing about? be something capacity is the comment we you the flat to guess Now XX,XXX helpful. quarter think when think last imply that that in us services around roughly Could just of expect that's think very I I capacity And or roughly at were

Matt Cox

although a what service. probably less for I said Yes, mid-XXs, XX,XXX Jack, XX,XXX it’s to little annually we in the mean it’s each

you quarter XXX, does the XX%. would end So of get the more higher know than that be third but

XX be say would So I'd mid the pretty the upper in high number thirties up- a in to

Jack Atkins

may maybe Okay, comp be –

Matt Cox

-- on And day on ships that any are sailing of time. which depends given a little in XX exactly bit period

Jack Atkins

comparable to so roughly makes quarter. If it just if -- second that, so the think about Okay, sense. that I

Matt Cox

Yes, This as very yes. Yes. roughly. well. mean, I quarter full past we were

Jack Atkins

the shifting to I know looks Could there it in westbound we're you do in Maybe quite would at. of for of kind to of like Okay, what demand, about you rate that kind you're level time kind you're Hawaii for your we've of this about of guess, and that demand moment. feel seeing maybe you talk bottom Hawaii a seen westbound that a helps. demand, the Would it's maybe year, like the bouncing the you're kind of I run terms if of on gears characterize to Hawaii there? think some that a kind been since situation rate you volume something how run sort services? along

Matt Cox

hear seen I describe and any I mean, goes been you we is fundamentals steady. think I dramatic would say bumps. don't our say described seen significant it. I nor have as I weakness Yes, how would we've as we she relatively reported as have would steady the

isn't demand be we but adequate it kind as high as would be, of It's the acceptable. it. sideways moving to freight expected see think Our is way going we I to and it's quite

large they're still not management, going among a to there's lot and active customers our inventory inventory management Hawaii think the in market. I of oversupply

she steady as this think bet is at best we goes point. So our

Jack Atkins

bit maybe you Matt, then optimistic of or the construction sort could Hawaii? pick feel up We a that? look on of to back Hawaii make little And Okay. activity higher like that horizon beyond. that it's you would guess demand level that makes XXXX projects get in may to about just any out, anything demand maybe more I you you of a sort it's trends as there know whether Is

Matt Cox

more continues people we’re it's go place they holiday. as Yes, I are for mean would know, to recovering be, desirable significant macro, I economy. would that be say U.S. they catalysts, not obvious there you -- and be I to would Hawaii, very

up. tailwind, underpinning to the of be see U.S. of see think That's should the significant level there, of We pivots be catalysts those the as military growth and with there'll Pacific spending If low spending, we there but of it. the take really kind see a but will steady. do I including neither to prior consistent We way military lot that fundamentals be look overtime unemployment that's a small going history. at small you the

Jack Atkins

business. Okay. I And challenging of the sort last the maybe my help of and in is for think maybe that well seasonality with how should when are with of about us Hawaii seem guess lower through relatively there helping environment really business the operating up it I a what's Alaska me, like operating Alaska then income of before of question seasonality service maybe it the services business back, earnings. broader of we XX the I hand really excuse would related step consistent you're the you doing of that kind because seasonality about CLX China think freight income complementary the the within quarter-over-quarter kind in obviously logistics I considering nice saw mean U.S. I to and guess drive and that that seasonal tracking or think to driving

Matt Cox

on Yes track I there, think you're Jack. right the

the as as same get more moving, two our regard seasonal peak construction services, we do you those we've season. during into our the active we is more are really track there's got, services to significant as know, expect quarters. which And Alaska, with summer think to the chain middle season supply supply services, parallels chain it relates our cargo very I as China traditional season

the traditionally spike see, months. middle up a do we warmer those, or so the year And of during the

And on some ways that the cycle in also which that a is But are traditional of outside say bit seeing, we on. are other new North the materials. we Slope construction a margin I'd and activity relatively little providing moves pipe to segment more we focused that the more for

within would largely those welcome that years and few those continuing. expansions And our portfolio we see over you are so mentioned two as verticals to last the Matson Logistics I say

Jack Atkins

time Okay. and Thanks congratulations. again for the guys

Matt Cox

Jack. Thank Okay, Jack. you,

Operator

our we please you. stand comes All Q&A question [Operator roster. Our of compile Wolfe everyone, of from right, right, Jacob All line Instructions] by next Research. the while Lacks thank

open. now is line Your

Jacob Lacks

Hi, for thanks time. the

Matt Cox

Hi, Jake.

Jacob Lacks

or there. guess, your Coast back Is an this labor in I the to at wanted and West So, demand some guess that to quarter think are labor was now Canada. given you this entirely value right shift uncertainty just the back you seeing talked There to I or earlier And the Coast volume seeing now I come on helping we're in tentative question you uncertainty is earlier? the do levels the agreement? proposition then West

Matt Cox

Yes.

West So Coast that SSAT or went with seen differently was try cargo lower to reflected agreement, move the of congestion services volumes not customers see at you of the think our diversion which other the Coast disruption labor their all the We the look We of delay loading your to question. if that other of of water I benefited and I root West the labor ocean over carriers because venture to Panama to the the regard lot other the joint any ports avoid the know the through did in cargo. of related from in to had renewal contract. if international you the a

in saw ratified of now which peak relatively freight the that we ratified muted contract it to the as any of volume will migrate first the the back, cargo Coast, we're half as now, on from to be what the balance lost. being it will of expect and that but the be generally is view Our process some permanently relates of that year's second-half in not in year. of we in changes just we're because this the dramatic sort the year we're season West expecting of But

to would question or think just the we've to I it's benefited whether So Coast. by truck the team be uncertainty, pick move say wants from market about to go expedited to -- say which to another wants to But as interior method that’s I we go to points. up it ourselves It the would that's discharged, SSAT. as soon West to any no. able of of and to it is -- that most your but the -- answer

view stuff was our last on was there's a that pretty and So reliably just and services from. not was more that in It benefited quarter. e-commerce core the moving E-goods cargo we've over the that lot of of that our

Jacob Lacks

just helpful. it a material That's assumes in pretty down on And in step four guidance, then Q. earnings

So do the is that seasonality for just you what do think little you driver more of a biggest is think business pronounced since the adding? and

Matt Cox

would you you're back the expect into expect Yes, week the it's factor for think going the, first admittedly selling all and if different holiday two say of services, be just October. I the look than seasons. Matson's seasonality we on the in you a we're, available or and right, holiday water you or little you know, know to although be know pandemic, bit the shipments I the and delivered seasonality Christmas we to at were that continue Will

it's so unique do that to more and historical patterns or more of demand market to nothing to are really And matching has reversion almost a really reaction. with just a factors

Jacob Lacks

time. the appreciate I Great.

Matt Cox

very Jake. much. Okay, Thanks

Operator

thank so you Alright, much.

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

Matt Cox

look on earnings next want just for I thanks say up We call to joining forward to quarter's catching the operator. thanks, Okay, today. call. everyone Aloha. with

Operator

conference call. today's This Thank participating. right. concludes you All for

now disconnect. You may

Matson (MATX) 1 Aug 232023 Q2 Earnings call transcript