Matson, Inc.

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Messem Inc. Fourth Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After this week's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star, then the one key on your touch-tone telephone. Please be advised that today's conference may be recorded. If you recall all of your assistants, please press star, then zero. I would now like to end the conference over to your speaker host today, Lee Fishman. Please go ahead.

Thank you, Olivia. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer, and Joel Winnie, Executive Vice President and Chief Financial Officer. Slides from this presentation are available for download at our website, www.matson.com, under the Investors tab. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements. within the meaning of the federal securities laws regarding expectations, predictions, projections, or future events. We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release, the presentation slides, and this conference call. These risk factors are described in our press release and presentation and are more fully detailed under the caption risk factors on pages 12 to 21 of our form 10K filed on February 26th, 2021 and in our subsequent filings with the SEC. Please also note that the date of this conference call is February 17th, 2022 and any forward looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these forward looking statements. With that, I'll now turn the call over to Matt.

Okay, thanks, Lee, and thanks to those on the call today. I'll start on slide three with a quick recap of our fourth quarter performance. We finished off a strong year with continued improvement in economic and business trends in our markets, driving overall solid performance in Mattson's ocean transportation and logistics businesses. The year-over-year increase in ocean transportation operating income in the quarter was primarily driven by strong demand for our China expedited ocean services. In our domestic trade lanes, we continue to see strong demand with higher year-over-year volumes, including the benefit of a 53rd week, compared to the largely pandemic-reduced volumes in the fourth quarter of last year. Logistics operating income for the fourth quarter increased year-over-year as a result of continued elevated goods consumption, inventory restocking, and favorable supply and demand fundamentals in our core markets. The supply chain environment remains the key issue in the Trans-Pacific trade lane with a number of supply and demand factors at play that will take time to unwind. I'll come back to this issue when we discuss our China service, but importantly, we remain focused on maintaining our fast, reliable trade lane services and providing high-quality customer service during this challenging period for our customers. I'll now go through our trade lane services, so please turn to the next slide. Hawaii container volume for the fourth quarter increased 10.4% year-over-year and was 11.3% higher than the results achieved in the 2019 period. The increase year-over-year was primarily due to higher retail and hospitality related demand and the benefit of the extra week compared to the pandemic reduced volume in the year ago period. Excluding the benefit of the extra week, volume in the fourth quarter of 2021 increased 5.3% and 6.2% compared to the levels achieved in the fourth quarter of 2020 and 2019, respectively. tourism and the Hawaii economy continued to rebound in the fourth quarter of 2021, despite a softening in airline passenger traffic early in the quarter due to the state's efforts to address the spread of COVID-19 Delta variant. For the full year of 2021, container volume increased 8.2% year over year due to higher retail and hospitality related demand due to the reopening of the Hawaii economy compared to the negatively impacted volume in the year ago period and the results of the pandemic and state's COVID-19 mitigation efforts and the benefit of an extra week in 2021. That was partially offset by volume associated with the dry docking of a competitor's vessel in the second quarter of 2020. Excluding the benefit of the extra week in 2021, volume for the full year 2021 increased 6.9% year over year. Please turn to the next slide where I'll comment on the current business trends in Hawaii. As the chart on the right shows, 2021 was about a return of tourism and its effects on the Hawaii economy. The rise in visitor travel, driven predominantly by U.S. mainland visitors, powered a resurgence in the tourism industry. This led to a rebound in the state's economy and led to substantial improvement in the state's unemployment rate. The governor's request to defer non-essential travel to Hawaii as a response to the Delta 19 Delta variant led to a slowdown in tourist arrivals in the third quarter and the first few weeks of the fourth quarter. But visitor traffic rebounded in early November through the first couple of weeks in December until the Omicron variant negatively impacted tourist arrivals. Heading into 2022, we're cautiously optimistic on further economic recovery in Hawaii. UHERO's December forecast for 2022, which accounts for the near-term effects of the Omicron variant, shows further improvement in the unemployment rate and continued growth in GDP and construction jobs. Tourism is also expected to continue to improve with an increase in contribution from international visitors later in the year. Environmental waves of COVID-19 variants present the possibility of further economic slowdowns or disruptions in tourism. While the Hawaii economic recovery has occurred significantly, improved significantly from the depths of the pandemic, Uhiro continues to expect that a full return to pre-pandemic conditions may take several more years. To give you a sense of the volume trend one month into the first quarter, our westbound container volume in January was approximately flat year over year. Tourism to the state was negatively affected by the Omicron variant wave, which led to a softening in demand for retail and hospitality related goods. We're also seeing a sluggish trend in building materials, so we'll have to see how this and the tourism trend following Omicron play out in the near term. Moving to our China service on slide six. Matson's volume in the fourth quarter 2021 was 32.7% higher year-over-year, primarily due to the volume from the Extra California-China Express service, or CCX service, and the benefit of an extra week. The total number of eastbound voyages in the China service, including the impact of the extra week, increased by nine year-over-year, of which eight were from CCX voyages and one from CLX. Excluding the benefit of the extra week, volume in the fourth quarter of 2021 increased 24.8%. Freight demand in the quarter remained strong as we continued to see sustained and elevated consumption trends and low inventory levels drive increased demand for our expedited ocean services. Mattson continued to realize a significant rate premium over the Shanghai Containerized Freight Index in the fourth quarter of 2021 and achieved average freight rates that were considerably higher than in the year-ago period. For the full year 2021, container volume increased 55.4% year-over-year, primarily due to the incremental volume on the CLX Plus, the addition of volume from the CCX, higher volume on the CLX as a result of increased capacity in the trade lane and the benefit of an extra week. The total number of eastbound voyages for the year, including the impact of an extra week, increased by 41 over the full year 2020, of which 20 were from the CLX Plus voyages, 13 from the CCX voyages, one from the CLX, and seven from extra loaders. Excluding the benefit of the extra week, volume for the full year 2021 increased 52.7%. I'll now comment on current business trends, so please turn to slide seven. For January 2022, eastbound container volume was lower year over year by approximately 20%, primarily due to the timing of sailings. As our sailing schedule normalizes in February, we expect volume in the first quarter to be higher year over year, primarily due to the contribution of the CCX service, which we did not have in the year-ago period. In January, we experienced strong pre-Lunar New Year demand for our expedited services, and we expect a similar environment for our trade million services in the post-Lunar New Year period as larger factories in China return to production earlier than in normal post-Lunar New Year periods. The Trans-Pacific trade lane is currently experiencing supply chain congestion due to a combination of factors. Consumption trends remain elevated, and retail and e-commerce demand remains strong. Supply chain constraints remain at critical points for both ocean and overland transportation. As an example, as of yesterday, there were 72 container ships awaiting a berth at the ports of Los Angeles and Long Beach, down from the high of 109 in early January. This recent decline in the number of vessels waiting for a berth may be a function of how fleets adjusted to year-end holiday and the Lunar New Year period. While this slowdown is welcome, it may be only temporary. The Omicron wave stressed many key areas in the supply chain, and it will take some time for the effects of this wave of the pandemic to subside. Inventory replenishment continues to be very challenging, particularly for retail customers as evidenced by the trend in U.S. retail inventory sales ratio shown in the chart on the slide. We expect these supply chain congestion conditions to remain largely in place through at least the October 2022 peak season, and we expect elevated demand for all of our expedited ocean services for most of the year. As such, we expect to keep the CCX service in place until at least through October 2022 peak season. Turning to slide 8, in Guam, Mattson's container volume in the fourth quarter 2021 increased 14% year-over-year, primarily due to higher retail-related demand compared to the pandemic-reduced level in the year-ago period. The volume in the fourth quarter of 2021 was 18.8% higher than the result achieved in the 2019 period. For the full year of 2021, container volume increased 15.9% year over year, primarily due to the higher retail-related demand compared to the pandemic-reduced level in full year 2020. For 2022, we're cautiously optimistic on further economic recovery in Guam, as we expect improvement in tourism traffic as the year progresses, but we also recognize the potential negative effects on visitor traffic and other economic factors that future COVID-19 variant waves could have on the economic recovery. For the month of January, our westbound container volume increased approximately 36% year-over-year, primarily due to the timing of a sailing which was approximately half of the year-over-year increase and the higher volume of retail and hospitality-related goods compared to the pandemic-reduced volume in the year-ago period, which reflected COVID-19 travel restrictions. Guam began to loosen COVID-19 restrictions in the middle of January 2021 and further loosened them in February 2021, after which we saw a significant improvement in volume trends in the year-ago quarter. Moving now to slide nine, In Alaska, Mattson's container volume for the fourth quarter 2021 increased 10.2% year-over-year and was 31.1% higher than the results achieved in the fourth quarter 2019. The increase year-over-year was primarily due to the increase in AAX seafood volume and the benefit of an extra week and higher southbound volume. Excluding the benefit of the extra week, volume in the fourth quarter 2021 increased 6.3% and 26.4% compared to the level achieved in the fourth quarter of 2020 and 2019, respectively. For the full year 2021, container volume increased 7.7% year-over-year, primarily due to the increase in volume from the AAX service, higher northbound volume primarily due to the higher retail-related demand, compared to the pandemic reduced level in the year-ago period, higher southbound volume, and the benefit of an extra week. Excluding the benefit of the extra week, volume for the full year 2021 increased 6.7%. I'll now comment on the current business trends in Alaska, so please turn to the next slide. In the near term, we expect improving economic trends in Alaska, but the recovery trajectory continues to remain uncertain. The jobs market continued to improve off the pandemic low, and there are some bright spots for incremental gains in the near term, but there are also some long-term challenges ahead. There's an expectation for further employment growth in 2022, driven by a rebound in travel to the state and increased oil and gas activity from the majors as a result of higher oil prices. The federal infrastructure bill signed into law in November is also expected to lead to more employment growth though it may not be a meaningful driver in 2022. The challenges to employment growth are continuing signs of labor shortages with the combination of a declining working-age labor force and an unfavorable trend in net migration out of the state. In addition, the state fiscal position and the decline in federal pandemic relief payments present uncertainties for the trajectory of of the economic recovery in the near term. For the month of January, our northbound container volume was approximately 23% higher year-over-year. Approximately half of the year-over-year volume improvement was due to volume associated with the dry docking of a competitor's vessel. The balance of the year-over-year growth was primarily driven by elevated retail-related demand. Turning next to slide 11, Our terminal venture, SSAT, contributed $21.3 million in the fourth quarter 2021 compared to $10.9 million in the prior year period. The higher contribution was primarily a result of higher other terminal revenue and higher revenue per lift. For the full year 2021, SSAT contributed $56.3 million compared to $26.3 million in the full year 2020. The increase was primarily driven by higher lift volume as a result of the significant year-over-year increase in import volume on the US West Coast and higher other terminal revenue. And currently, we continue to see elevated import volume into the US West Coast, which we expect to translate into a relatively high contribution from SSAT. Turning now to logistics on slide 12, operating income in the fourth quarter came in at $14.8 million, or $5.2 million higher than the result in the year-ago period. The increase was primarily due to higher contributions from supply chain management and transportation brokerage, where we saw elevated goods consumption and inventory restocking in addition to favorable supply and demand fundamentals in our core markets. For the full year 2021, operating income was $49.8 million, or $14.3 million higher than the result in the full year 2020. The increase was primarily due to higher contributions from supply chain management, transportation brokerage, and freight forwarding. We're currently seeing continued elevated container volumes in Southern California, which will be a benefit to some of our lines of business. The contribution from our supply chain management business is expected to continue to track with the performance of our China service. I will now turn the call over to Joel for a review of our financial performance. Over to you, Joel.