Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Matson Inc (MATX, Financial) reported a strong third quarter with higher year-over-year operating income in both ocean transportation and logistics.
- The China service saw significantly higher freight rates, contributing to increased consolidated operating income.
- Logistics operating income increased due to higher contributions from supply chain management and transportation brokerage services.
- The company raised its outlook for 2024 based on strong third-quarter performance and expected strength in the China service.
- Matson Inc (MATX) has extended charters for its six ships in the Max service into 2026 and 2027, ensuring stability in its fleet operations.
Negative Points
- Container volume in Hawaii decreased by 2.2% year-over-year due to lower general demand and slow recovery in tourism.
- Guam's container volume decreased by 9.4% year-over-year, impacted by lower demand from retail and food and beverage segments.
- The Hawaii economy is projected to grow slowly, with challenges in tourism and population growth affecting volume expectations.
- Higher vessel operating costs partially offset the increase in ocean transportation operating income.
- Matson Inc (MATX) anticipates a moderation in freight rates in the fourth quarter as peak season demand eases.
Q & A Highlights
Q: How are ocean freight rates expected to trend in the fourth quarter compared to the third quarter, and what factors are influencing these expectations?
A: Matthew Cox, CEO, explained that while a moderation in rates is expected from the third to the fourth quarter, they anticipate rates to remain significantly higher than the previous year's fourth quarter. This is due to a combination of traditional seasonal patterns and structural changes such as increased e-commerce and air freight conversion. However, uncertainties like the IL A contract renewal and geopolitical factors could impact these expectations.
Q: What is the status of the charter agreements for the CLX and Max services, and what impact will this have on costs?
A: Joel Wine, CFO, stated that Matson has extended charters for six ships in the Max service into 2026 and 2027. While the charter market remains tight, they expect a modest cost benefit of around $8 million in 2025 compared to 2024. The primary focus was securing vessels that meet their service requirements.
Q: How sustainable is the current level of import demand, and what factors are contributing to it?
A: Matthew Cox noted that the strong import demand is supported by a robust U.S. economy and consumer spending. Structural factors such as the growth of e-commerce and air freight conversion to expedited ocean services are also contributing. Additionally, some customers are de-risking by shifting cargo to the West Coast due to uncertainties like the IL A contract renewal.
Q: Is there any consideration for reintroducing the CCX service given the current volume trends?
A: Matthew Cox mentioned that while there are no immediate plans to resurrect the CCX service, Matson continuously evaluates growth opportunities. Key considerations include the ability to provide a differentiated service competitive with air freight and securing suitable vessels for charter.
Q: How is Matson positioned in relation to the evolving e-commerce market, particularly with companies like Shein and Temu?
A: Matthew Cox highlighted that while companies like Shein and Temu currently rely heavily on air freight, Matson sees potential for conversion to expedited ocean services, especially if the de minimis trade exemption changes. Matson is in regular discussions with e-commerce players and is well-positioned to capitalize on these market dynamics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
