Matson(US:MATX)2020-08-09 09:31Financial Data and Key Metrics Changes - Matson's Ocean Transportation operating income for Q2 2020 increased by $22.6 million year-over-year to $42.3 million, primarily due to higher contributions from the China service, including the CLX+ service [43] - Logistics operating income for the quarter was $8.9 million, which is $2.4 million lower than the prior year period, mainly due to lower contributions from transportation brokerage and freight forwarding [39][45] - EBITDA for the quarter increased by $21.3 million year-over-year to $86.2 million, driven by higher consolidated operating income [45] Business Line Data and Key Metrics Changes - Ocean Transportation performed well, with significant strength in the China service, which saw a 68.1% year-over-year volume increase due to the introduction of the CLX+ service [23] - Hawaii container volume for Q2 decreased by 4% year-over-year, primarily due to near-zero tourism and temporary retail store closures [18] - In logistics, operating income was impacted by lower retail-related volumes due to COVID-19, particularly in transportation brokerage and freight forwarding [39] Market Data and Key Metrics Changes - The westbound container market in Q2 was down approximately 15% year-over-year, significantly affected by COVID-19 mitigation efforts [20] - In Guam, container volume decreased by 12.5% year-over-year in Q2, primarily due to lower demand for retail-related goods [31] - Alaska's container volume for Q2 decreased by 9%, but northbound volume was better than expected due to the gradual reopening of the local economy [33][35] Company Strategy and Development Direction - Matson aims to maintain exceptional customer service and on-time delivery while exploring new business opportunities like the CLX+ service [60] - The company is focused on diversifying revenue streams across geographies and services to mitigate risks associated with economic downturns [60] - Matson plans to continue the CLX+ service through peak season and potentially make it a permanent fixture based on customer demand [27][60] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the economic recovery trajectory, emphasizing the uncertainty surrounding reopening plans and the broader economy [59] - The company remains focused on generating free cash flow and paying down debt, deferring non-essential capital spending [15][59] - Management expects to exceed the high end of the $40 million to $50 million range of operating results improvement for the year [12] Other Important Information - The company has implemented various operational and financial actions to navigate the pandemic, including reducing port calls and discretionary costs [11] - Matson's terminal joint venture SSAT contributed $3.7 million in Q2 2020, a significant increase from the prior year period [37] - The effective tax rate for the quarter was 26.3%, with total debt at the end of the quarter amounting to $890 million [46][50] Q&A Session Summary Question: Can you discuss the CLX+ service and its potential permanence? - Management indicated that the CLX+ service was introduced due to increased demand and has been well-received, with plans to continue it if customer support remains strong [67][70] Question: Do all markets still make sense in a post-COVID world? - Management affirmed that all business lines are currently profitable and poised for recovery, although they are being conservative in their outlook for core markets [73][74] Question: What are the expectations for Hawaii's economic activity? - Management speculated that the current low-single digit westbound activity reflects the economic outlook, with expectations of continued challenges due to tourism restrictions [83][86] Question: How does the $40 million to $50 million in cost initiatives break down? - Management clarified that the initiatives include both cost reductions and revenue growth opportunities, with the CLX+ service being a significant contributor [88][89] Question: What is the CapEx outlook for the second half of the year? - Management did not provide specific guidance but indicated that significant projects like scrubbers and terminal upgrades will continue, with potential increases in CapEx due to growth in the CLX+ service [90][91]