Matson (MATX) 2 Aug 212021 Q2 Earnings call transcript

Good day and thank you for standing by. Welcome to the Second Quarter 2021 Financial Results Conference Call. At this time all participant lines 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. now today, hand Lee would to conference I speaker your Fishman. Instructions] like the to over [Operator Please go ahead.

Thank you, Tina.

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

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

thanks quarter call. and those Lee, second quick a start I'll recap Thanks, results. of our the with on Okay. to

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extremely volume tourism. COVID-XX lows a economy reopening Hawaii period higher please state's to ago the I dry increase believe trade this lane. the freight compelling year restrictions Hawaii to that was including in ago company the the the China services. value the I'd volume pandemic an growth XXXX in achieved second The when to our service. volume higher related includes initiatives I'll the future the vessel. Slide in our volume will to X. year set a go XXXX period X.X% the Total for container and container through through our business our to associated of the on as compared very of note of like All well increased in I recent services, current quarter of result to result trends due in lane year-over-year. of due now efforts period. mitigation compared proposition than the offerings docking for so trade hospitality freight in go second other quarter competitor's demand turn up the now provide retail the X.X% ocean with primarily was Hawaii and air

of approximately to visitor at has the local improvement accelerated January, next turn the the The XXXX the were in rebound Hawaii's are of for please since level the of economy. economy year. state metrics. Domestic a in material this COVID-XX key also statistics year in vaccinations improvements expected a in XX% the So to arrivals statistics year visitor of numbers in XX% industry with second across compared and driven further to the number improvements tourism beginning in to has tourism According visitor sharp leading travel June and reopen State economic the the half continued to slide.

westbound our X.X% we seen unemployment since recovery, trend declined July recognize elevated to drive XX.X% level will quarter, be improvements economic For one the a XXXX. may XX% the to in from and reopening container optimistic To in demand. the primarily into well above increased in remains further of and tourism due X.X% XXXX. it the give example to retail the but rate volume volume in several year-over-year, continue but approximately related unemployment to that has of and cautiously unemployment rate January you GDP of businesses the month years achieve higher sense third hospitality We're

Moving the CLX+ volume and CLX+ from of had number garments, our trade was continue other that savings incremental service by in year in year-over-year, X increased and in the to year that, and to our of recall we e-commerce, considerably X, period. the capacity China volume to the result than voyages as extra eastbound demand Matson's on three realize ago the six incremental volume service lane. by Matson was rate China the in XXXX the primarily were freight XX.X% in CLX loaders, second rates second higher from quarter Volume higher the in were a a of quarter in driven to which The average voyages XXXX period. CLX+ goods. due total higher premium Slide achieved the increased year-over-year, service addition service in significant ago quarter seven from

levels, and approximately key by retail. supply lane congestion trends for inventory trade continued a of year-over-year so continue it mentioned loader. remain second the higher to challenging Retail ocean an remains our including demand the transpacific for demand an quarter the demand e-commerce please volume, benefit Currently, expedited increased third drive quarter elevated. I've turn elevated and on business environment, services. in container slide very sustained for particularly the I'll consumption consumption XX% inventory eastbound current XXXX X. factors see strong We July extra remains and into with comment and The replenishment trends trends, continues, the now to low chain

and next our and supply CLX, chain Year quarter a of in vessels place We expect capacity in expect supply operating New lead CCX until the at services the in Lunar the remain Lunar least XXXX. at conditions to demand level to of year. high New we demand least the until CLX+ and Consequently, be Year first at to

second competitor's increased as Guam, compared XX.X% as well to XXXX pandemic COVID-XX is to issues. Matson's to quarter volume second result was the islands X, due year-over-year than quarter the remains achieved container the a constrained. in ago demand primarily period to retail in remains schedule Turning slowly attributable of in Slide the Guam year in mitigation related volume a higher Consequently, the tourism as The XXXX economy as measures in The period. uncertain. XX.X% trajectory volume the results the higher the economic low recovering

month container year-over-year. volume increased westbound the of July, XX% For our approximately

retail quarter demand for period was now Slide The due volume Moving to of primarily higher to related efforts. increased Alaska ago volume higher of and container volume addition from increase the partially service, volume Express Asia as to result southbound Matson's to less northbound second the year northbound compared XXXX one year-over-year. Alaska, sailing. the COVID-XX the XX.X% in XX, low in Higher due state's a offset by the mitigation the of pandemic

We continues remain to continue businesses uncertain. economic the reopen, as state improving in to recovery but economic trends the trajectory see

the increased to due container northbound primarily month approximately year-over-year For higher demand. retail X% July, our related volume of

joint Turning lift prior of China. volume the in higher Coast our to was and U.S. venture compared XXXX a result West contributed as the the year-over-year next from year result higher contribution The second terminal primarily import of Slide quarter significant period. million $X.X into to $XX.X in million increase volume the XX, SSAT

beneficiary to import strong We expect the volume this be into volume. Coast U.S. a and SSAT West to of see elevated continue

continues performed Ongoing a many yards our of where million result that, the fundamentals rail trends July in chain in remained chaos. primarily northbound higher years well congestion supply our Historically, line for consumption At XX, volume. of we our in and inventory trends tracked freight review and brokerage, our benefit transportation call in steady performance. lines periods also than that my and saw turn this to elevated volumes ports, from in to and our to and slightly period. was our second Turning for Alaska helping operating managing fuel the times import to Coast markets. Span disruptive continue and favorable are to will year ocean business business. $X brokerage own at chain like Slide to higher the better goods in And owing than to The I quarter at volume due core terminals, restocking Joel, the the on logistics control addition supply saw now business California, of and forwarding In in we a Joel? U.S., businesses income customers environment increase management now and and Alaska turbulent million the freight during the assets. forwarding ago with we came partner, our to supply container own $XX.X contributions elevated Southern have financial experience over warehouses many freight transportation actively demand from XXXX, manage through with West our in in or

Okay. Thanks, Matt.

$XXX.X $X contributions on financial in due quarter ago million and results costs Transportation Slide second to service from a higher our in was respectively. higher higher higher contribution terminal and service consolidated and higher in and freight in costs, income by volumes contribution from million of operating a the handling year-over-year and SSAT $XX.X to of Ocean to the in but the the operating million Ocean Transportation period six rates vessel primarily rates depreciation. result CLX to freight China increased Now million quarter higher contribution increase contribution Logistics and partially $XXX.X from The higher and service Hawaii China the significantly higher average $XXX.X the year CLX+ The average XX, increase due voyages. was operating higher second higher a from million on from services and offset incremental income

income year-over-year primarily $X.X chain the want logistics, the due was to purchase year contribution operating out in to which one-time facility associated quarter forwarding first and first operating revolving and with increase decline the revenue had margin in brokerage, the debt a volume increase was than or CLX first the to increase the for due quarter the increase supply extra income vessel quarter to vessels to in year depreciation and higher primarily increases. loaders. scrubbers had costs the Matt due on primarily the of terminal the entering installed primarily lift quarter were incremental the contributions logistics, equity The primarily year-over-year million due this costs in last to was the transportation a credit relative a extra $X.X extra than the quarter lesser agreements was volumes Interest cost in freight depreciation management. service in previously from to I increase discussed. extent quarter. expenses loaders due point of primarily overhead on lower including volume note first amendments and in income operating three debt higher do from to second compared also that also increases transportation and fourth year. We the was annual SSAT full costs margin to quarter The The of The outstanding year-ago higher higher and lower forwarding. brokerage the versus freight loaders lower to The last year of million that cost in was was during operating completed year-over-year due in during handling expense period. Matsonia the which due

how cash generation. XX XX.X%. quarter in allocated we the months tax rate flow our Lastly, Slide was trailing shows effective XX the of

flow cash on like we second cash approximately filing. at $XX months from of million retire on and in June and For the other capitalized $XX.X flow including out $XXX.X to dividends. interest outflows million in see cash our operations XX, from million tax CapEx, ending which made vessel via $XX.X would $XXX.X new CapEx used which XX shareholders maintenance bottom to of $XX.X the the on to million million will payments returning point $XXX we I generated that Matson statement you quarter XX-Q million the million debt, items cash owners while in last

a summary will Turning for quarter debt sheet, $XXX.X of $XXX.X debt total to XX our total net the and was end the at was that Slide our of note you balance million. million our

During On the facility. $XX.X million. the per debt funded which of on agreements outstanding end borrowings operating the we with by the was quarter, paid no we the reduced million ratio total we debt the approximately second recently and of revolving At quarter, $XX.X revolver. a amended and Maunalei July combination our approximately X.Xx, terminated the on balance had the X, credit hand we cash on and lease on leverage

a $XX million of update is the the of we payments that million the $XX provided. balance costs be to our result for wanted cash of expect lower and previously million of expenditures XXXX our second installation Slide key a XXXX the the of $XX where and maintenance have approximately items, the and reacquired no to accretive As operating scrubber given of we we $X.XX On we in year. CapEx respectively. quarters change and EPS cash transaction in $X There use this and see and we update transaction, an in XX, last for vessel $X.XX we and XXXX capital few half what the to XXXX million expect in we by few of

trade dry support of containers, an the AAX like $XX equipment such new our CLX+, We reefers availability increase and services to million new increase in lane chassis, across our equipment network. and and CCX to of expect as entire

XXXX, payments payments million on three in into $XXX main $X termination expect acquire we to island and lease million to barge new expect neighbor We the assets from slip lastly, in buckets. approximately XXXX

$XX leased in I First, that level the mentioned, in the buyout our we CapEx Loa the earnings other already and the of fourth million Maunalei we quarter the to of paid thirdly about second which to maintenance in $XX year also On related our equipment related is we February, expect to XXXX. related second be barge of network. million is $XX million million next the at to is to quarter indicated Mauna in $XX million call that $XX

year elevated With levels and some high next CapEx may of turn needs a be Matt. efforts equipment than in update, CapEx XXXX as sustain payments XXXX equipment over environment that now availability to persists longer spent Our into congested result to the I'll trickling the on back if XXXX year call of in the expected. calendar our

on that solid services Transportation new engaging customers first reliability we Thanks, the Ocean to Joel. year. We're Logistics ensuring through are focused current of half businesses ocean and and Matson's complexities the in a had our environment. manage of with and our existing the maintain

remained with and We post-pandemic on through will And operator finding the to evolve. your vigilant also for the new continues the organic opportunities acquisition call to or back either questions. turn ask that, environment as I

from [Operator is Nolan first Stifel. question with Instructions] Our Ben

think only temporary in of be do demand a your that customers area and that the little the -- for able guys, to beyond what outlined are more is you through you the you're But and the what hi thing your CCX before bit of or give the an good minute. Long talk business, it addition, CCX Year. from footprint that I can doing This that recent some sort well. it's, going CLX+ about the here. from a that Beach, bit hearing Oakland got Oakland. New into we've bear a about as on you little demand how that simply first of maybe initially talk initially through a few, the maybe permanent I evolution China you specifically you're most what know little to point something maybe congratulations customers Yes, do me the and for thought expanding so you're quarter think bit a with to I've about want a I At hearing the customer [indiscernible]. confidence

Ben. Thanks, Sure. Okay.

there's So pressure the and of cargo frankly as now in is ship every we the a right all transpacific lot approached, in use ocean world deployed and trade in that's somewhere global and trades effectively clearly the carrying in available world. the

a able but reserve leverage have of in the do arrival, have part be Matson's of vessels chassis the that and And for possible to highly a berth and be ports they couple of we strengths both to services us had differentiated unique construction the have so assets, to Matson to access on container have our if are, controlling we facilities. have adequate equipment off-dock to criteria

so So CCX a itself that not truly just result that. in that we're putting that but service, one the a out and differentiates was of marketplace generic our

We own have dedicated Oakland. berth our in

the from Ningbo into transit Shanghai, We will time fastest have Oakland.

able to ships so have goal we value differentiated and has super when will which will service, arrives. result highly a as something chartering a waiting enduring zero truly access that's a customers. And We of think to service, to our get soon be differentiated bunch to level to is on it avoid arrival be but it produce as a as market

We have to Oakland warm offering. our a very seen reception

extended market of voyage about you XXXX, regard New beyond Year question requires thinking to our mean it. have to significantly With can Lunar we and asked be CCX. I oversubscribed demand Ben duration demand the on the will be that I is that the the think that this if think We relative sustained. the service first the

the it understanding based sales longer, is can what market on additional we're the hearing but what And that economy, at all our wants stimulus, we're Lunar the that. New and Year, macro it from metrics, of ratios, saying we do to inventory so think we own least needs if through customers,

those are just questions a couple us answered. to your So, of

those all expensive Okay. utilized, get lines, really it's of along party your spare all are And or of ships it's third your assets. to effectively now appreciating spare

tapped For businesses creative, in terms kind moment? the new services add distinctive moment, for the to of out innovative, are of able being you or

extremely the say Matson's to if to is all yes. as effectively available isn't the effectively Until rates out vessels strong are that think market that and demand changes answer the that Yes, become point charter I given -- point at of and are the one-off to moment all charter you as charter vessels vessels voyages other basis, deployed or market puts change, some dry-dock at and chartered time but to that effectively loaders Matson's a we than, in for conditions of reevaluate market say, this this chartering extra others existing won't the let's in use. future on owned but other fleet elevated return

Okay.

So, all flow we is, okay, shift of that to are let lot me hear one you and good, do Joel, the suspect that and more through I do volumes, might sort like the things just elevated but things a to the of sort you in through go normal look much are where have under will a is I I'm walk with elevated rate lot you with past. different think have of these cash what's you be, what me thoughts from moving Chinese here. great sure parts. on businesses of it There but than business the levels Can But some were this. a of likely free maybe keep to you than freight. higher used you volumes environment, guys expedited different somewhat that they but stair-step of me at sort

you and free flow, think seeing cash cash right flow the of, announced, generated at the unusual therefore I look our quarter. second Ben, our observation, make and generated. nothing just to what cash the paying terms would taxes it's flows about that. be to about there's we cash Yes. proportionately We're if in going now you're I we've talked

outflows revenue the growth. bit see but a is little based nothing and unusual growing is working capital regular, is big receivables nothing dry for than service you'll capital, more those docking higher fund dramatic. adding on did a in levels, have to required working with dry When grow which docking consistent which new that's are We investment company payables. the more of lines in and We your increases schedule fluctuate ships, pretty number

level and rate now cash volume see a outflows, benefit. capital little you cash of and working will things a So outflows a levels bit get on you'll in the right normalize, stabilize

in we working those here, in is see QX. the words, other you'll negative CCX So as receivables capital launched to one fund investments

free all time upon took positives, But to level, biggest a big spill proportional that on they're is you picture really capital we're should like type the of this some the will and maintenance going flow why outlook cash taxes, regular some working CapEx is but relatively be investments not over update fulsome then, overall, proportional free things and is the flow what for I that. is, to will EBITDA this be which that's there'll year into that of are quarter be expect sorts from other the year detail really be So for depending but I we be here mean this to except Ben. what deck the and driver on of projects on that. and to similar determining But this next it's some all a that for getting actually CapEx cash year next generation drivers stay in of will what those of purchases those the and should we cash the basis, give close equipment think to EBITDA, where scrubber of year EBITDA. is And think and/or that and giving items, I pretty where still things the CapEx here question you're deducts the so, seeing

Okay.

as much me way, sort you that slightly normal. new are is current just of, your of you're this to that a elevated different the at when that look comment let attribute maybe rates would you EBITDA hey, how saying versus So

disclose with respect if [indiscernible] beyond what we last look so you to at has can't our, rising XXX, would rate number rate on precision that's that. but rates know obviously Ben, Yes, any be we impact I you the months, as the mean been that of with environment the more a XX comment over and

right. all Okay,

of has bit et ago The more you kind now you flat than a so announced we had that about to Joel, program. you how think had of I then money was So it of previous month to I maybe serious, share feel at I year program, past, was to buyback our going course what the and the, know was a aggressive. the sort a shares normal About I that? X said you spend when of are have of me be or but have. lot to say the in cetera. it. you going rising lined wasn't Is buyback despite address million talk through be a growing getting bit point many wanted price few money here and you part a just Can told where share business. sort little just going you like here, we're business it were, you there we're go ago, and a little It cheap numbers of sort to we to I just for really making you,

just we've timeframe not the happening important to Ben that of most the buying and I'd say we're thought that is the accelerated. thought. methods in in opportunities message. really of growth capital returning our changing, think various earlier plan, in has just we'd we happened in because It's overall that's plan our it looking is business performance are shareholders earlier had, than I 'XX, the but at sticking shares a just strong We 'XX back probably bit so Yes. really be right now with

get is the instance, from about best be it. but it’s to it's been overall this so and way capital will back on for judicious that accelerated shareholders, So want share at conditions of think It's to buyback, the perspective, I we our not think timing been subject about to just approach changing. a it, be returning market philosophy do to

but shifted someone had this available [indiscernible] air how but means, additions Okay. how back. a I'm question is it that comfortable freight. from the came on And belly people to the behalf I I hopefully to else last people the want bit that there asking air on become capacity some freight who air back no a as of -- travel any is still then, one, me even not more queue, the one was in to the normal and to on have are as confident the guess else little begin more maybe by been and or in and supply business. point realize has and some you doesn't there becomes chains this or more that question permanently airlines Switchback there go available, At bit I freight and to switched passenger of over to is, what little we're

is Matt. Yes, it's a question, great This Ben.

the had for of chains on it and the to end move get element is we're is in of consumption. frustration trying way an now their There before. vessel products extreme world, of full warehouses markets we our airplane the all network, customers if now our full, insufficient thinking every world elements. on every chains here mentioned supply And is congestion I to how on the every earlier, is their and the I behalf to retail in congestion rail network, there air is there rail supply freighter customer U.S. and China is as trucking of the congestion demand there labor through is -- think

and the customer a stock, expectation of this safety amount that think word which explosion left a where obviously will. of aren't I know or markets inventory think what those and don't that but to that's I change soon, when we gradually see see customers gets there end really expedited course quick services. clear it's of and with you'll is, think anytime changing of regard into reassessing better e-commerce of happening we're importantly, products favors the I the with it eventually I unwound, stocking environment delivery is behavior But a any eventually signs

convinced up the the we chain this frustrating not the to to get end there service in all, like meantime, offerings be so, we remain normal where to and it's old to environment. unclear. we're we new working our normal when help when first hard favor and that going highly it's navigate it's customers going And Matson exactly, supply of and And

CEO over now back closing to call Matt for turn will Cox, remarks. I the

everybody thanks Well, Okay. up call. for quarter listening the third catching with and on we Aloha. to look everyone forward

does today. conference you, again conclude today’s Thank joining call. for us This

may You disconnect. now