Matson(MATX) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated operating income decreased by $42.6 million year-over-year to$335.3 million, primarily due to a $46.7 million decline in Ocean Transportation, partially offset by a$4.1 million increase in Logistics [28][29] - Interest income was $1.3 million, up from no interest income in the prior year, while interest expense increased by$0.5 million due to premium payments and deferred fee write-offs [30] - The effective tax rate decreased to 20.4% from 24.4% in the previous year [30] Business Line Data and Key Metrics Changes - Ocean Transportation saw lower volumes in CLX, CLX+, and CCX services, contributing to the decline in operating income [7][8] - Logistics operating income increased to $20.1 million, driven by strong performance across all service lines [26] - Hawaii container volume decreased by 7.1$1 billion in vessel construction agreements for three new LNG-ready Aloha Class vessels, aimed at enhancing capacity and profitability [9][36] - The company is focused on maintaining a disciplined capital allocation strategy while investing for long-term growth [44] - The company aims to reduce greenhouse gas emissions from its fleet by 40% by 2030 [38] Management's Comments on Operating Environment and Future Outlook - Management expects challenging conditions in the Transpacific tradelane for the next two quarters due to lower demand and inventory adjustments by retailers [13] - The company remains confident in its ability to provide value through differentiated services despite macroeconomic uncertainties [42][48] - Management anticipates a gradual recovery in tourism and consumer spending in core markets, although risks remain due to inflation and interest rates [18] Other Important Information - The company repurchased approximately 1.1 million shares for $88.4 million during the third quarter [32] - Total debt at the end of the quarter was$538.1 million, with a prepayment of $50.4 million on outstanding principal [33] Q&A Session Summary Question: Consideration of Capacity Adjustments - Management indicated that they have already removed 25% of capacity by terminating the CCX service and believe current capacity is appropriate for market demand [54][56] Question: Customer Inventory Destocking - Management noted that customers are adjusting inventories, leading to lower cargo movement, but expect some level of cargo flow to continue [58][59] Question: Hawaii Lane Demand - Management expressed that demand in Hawaii is generally more stable due to reliance on ocean freight for daily goods, with continued strong demand expected [61][62] Question: Impact of Declining Rates - Management acknowledged that the impact of declining rates will be more pronounced in the fourth quarter, following the termination of the CCX service [65] Question: Cost Adjustments in Response to Rate Softening - Management confirmed that cost reductions are primarily focused on the elimination of the CCX service, with no significant adjustments planned for other services [69] Question: SSAT Contribution Normalization - Management expects the contribution from the SSAT joint venture to moderate due to lower volumes and congestion, but still anticipates adequate returns [73]