Matson, Inc.

Good day, and thank you for standing by. Welcome to the Maxine Forth Quarter 2022 Financial Results Conference Call. At this time, all participants on a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker for today. Lee Fishman, please go ahead.

Thank you, Lisa. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer, and Joel Winney, 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 26 to 37 of our form 10Q filed on November 3rd, 2022 and in our subsequent filings with the SEC. Please also note that the date of this conference call is February 21st, 2023 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. I'll now turn the call over to Matt.

Okay. Thanks, Lee, and thanks to those on the call. I'll start on slide three. For the fourth quarter, Matson's differentiated ocean service performed well in a difficult business environment. Matson's in a solid financial position with low leverage and currently $622 million in cash deposits in our CCF for the new vessel program, while returning $445 million in cash to shareholders in 2022 through dividends and share repurchases. For the fourth quarter within ocean transportation, our China services achieved lower year-over-year volume and freight reach, which contributed to the decline in our ocean consolidated operating income. We also saw lower year-over-year volumes in Alaska, Hawaii, and Guam compared to the year-ago period. In logistics, operating income decreased year-over-year primarily due to a lower contribution from supply chain management consistent with lower demand in the Trans-Pacific trade lane. I'll now go through the fourth quarter performance of our trade lanes, SSAT, and logistics, So please turn to the next slide. Hawaii container volume for the fourth quarter decreased 13% year over year, primarily due to lower retail and hospitality related demand compared to the elevated pandemic levels in the year ago period and the effect of one less week. Excluding the 53rd week in the year ago period, volume in the quarter decreased 7.9% year over year. Volume in the fourth quarter of 2022 was 3.2% lower than the volume achieved in 2019. We saw retail customers continue to manage inventories to weaker consumer demand levels despite continued improvement in the Hawaii economy. Hawaii tourism during the quarter remained relatively strong, including a modest improvement in international tourist trends, although there was a little bit of softness in December. For the full year, container volume decreased 5.8% year over year, primarily due to lower retail-related demand compared to the elevated pandemic levels in the prior year and the effects of one less week. Excluding the 53rd week in 2021, volume declined 4.4% year over year. Please turn to slide five. Throughout the year, the Hawaii economy continued to recover from the pandemic with increasing tourist arrivals and a decline in the unemployment rate. Excuse me. Tourism was predominantly driven by domestic arrivals, but the industry did see some modest improvement in international tourist arrivals in the second half of 2022. In the latter half of 2022, we saw our retail-related customers manage their inventories down to a lower consumer demand levels. Through the first seven weeks of 2023, we have seen a steadier level of retail-related freight demand consistent with pre-pandemic trends. UHERO's December projections continue to show economic growth in 2023 supported by continued strength in tourism and a low unemployment rate. However, the economic growth trajectory is uncertain given the negative trends as a result of higher inflation higher interest rates, and the end of the pandemic and era stimulus helping personal income. Moving to our China service on slide six, Matson's volume in the fourth quarter of 2022 was 47.2% lower year over year, primarily due to lower demand for our CLX and CLX Plus services. The discontinuation of the CCX service in the third quarter of 2022 and one less week. Excluding the 53rd week in the year-ago period, volume declined 42.1% year-over-year. Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index in the fourth quarter of 2022, but achieved average freight rates that were lower than in the year-ago period. For the year, Volume was 11.7% lower primarily due to the lower demand for the CLX and CLX Plus services and one less week, partially offset by incremental volume on the CCX service. Excluding the 53rd week in 2021, volume declined 9.4% year over year. Please turn to slide seven. On a November earnings call, we indicated that we expected the fourth quarter of 2022 and the first quarter of 2023 to be challenging in the Trans-Pacific trade lane as retailers' inventories adjusted to consumer demand levels as ocean liners reduced vessel capacity to meet these lower demand levels. We did see this happen, and we continue to see vessel capacity adjust as retailers continue to right-size inventories amid weakening consumer demand, increasing interest rates, and economic uncertainty. In the weeks ahead of Lunar New Year, we saw a modest improvement in demand for our CLX and CLX Plus services compared to December, but in the weeks post-Lunar New Year, we saw light demand for our CLX service, and as a result, we decided not to sale the CLX Plus vessels from Shanghai for a few weeks. In the regions in which we operate in China, we are seeing businesses and factories reopen and life returning to normal from the most recent COVID-19 wave. Looking ahead, for the first quarter and the first half of the year, we expect our CLX and CLX Plus services to reflect freight demand levels below normalized condition with lower year-over-year volumes and a lower rate environment. Absent an economic hard landing in the U.S., we expect improved trade dynamics in the second half of 2023 as the Trans-Pacific Marketplace transitions to a more normalized level of demand. We will continue to manage volume in the CLX and CLX Plus at freight rates commensurate with the premium services we provide on the ocean at the terminals and at shippers transport. Currently, freight rates for our CLX and CLX Plus services are above pre-pandemic levels. Regardless of the economic environment, we operate the two fastest and most reliable ocean services, and as a result, we continue to expect to earn a significant rate premium to the Shanghai Containerized Freight Index. Please turn to the next slide. In Guam, Mattson's container volume in the fourth quarter of 2022 decreased 14% year over year. The decrease was primarily due to lower retail-related demand. There was no impact from the 53rd week in the year-ago period. Volume in the fourth quarter of 2022 was higher than the level achieved in the fourth quarter of 2019. For the full year, container volume decreased 3.7% year over year, primarily due to lower retail-related demand. In the near term, we expect continued improvement in the Guam economy with increasing tourism and a low unemployment rate. However, there are negative trends as a result of higher inflation, higher interest rates, and the end of the pandemic era stimulus helping personal income that creates uncertainty in the economic growth trajectory. Please turn to slide nine. In Alaska, Matson's container volume for the fourth quarter of 2022 decreased 7.7% year over year. The decrease was due to lower northbound volume, primarily due to one less sailing and one less week, and lower southbound volume, primarily due to lower domestic seafood volume and one less week, partially offset by higher export seafood volume from AAX. Excluding the 53rd week in the year-ago period, volume declined 5.3% year-over-year. Volume in the fourth quarter of 2022 was higher than the level achieved in the fourth quarter of 2019. For the full year, volume increased 8.6% year-over-year. The increase was due to higher export seafood volume from AAX, higher northbound volume primarily due to higher end excuse me, higher retail-related demand and volume related to a competitor's dry docking partially offset by one less week and higher southbound volume primarily due to higher domestic seafood volume. Excluding the 53rd week in 2021, volume increased 9.3% year over year. Turning next to slide 10, the Alaska economies continues to show good growth and improvement in the key indicators from the depths of the pandemic. In the near term, we expect the economy to benefit from low unemployment and continued job growth. The federal infrastructure bill is expected to lead to additional jobs in the near and medium term. The state's economy is also expected to benefit from increased energy-related exploration and production activity as a result of elevated oil prices. However, there are negative trends as a result of higher inflation, higher interest rates, and the end of the pandemic era stimulus helping personal income that creates uncertainty in the economic growth trajectory. Please turn to slide 11. Our terminal joint venture, SSAT, contributed $1 million in the fourth quarter of 2022 compared to $21.3 million in the prior year period. The lower contribution was primarily due to lower other terminal revenue, lower lift volume, and higher operating cost. SSAT saw significantly less detention and demurrage revenue in the quarter due to easing port congestion and lower lift volume consistent with lower demand in the Trans-Pacific trade lane. For the year, SSAT contributed $83.1 million or an increase of $26.8 million year over year. The increase was primarily due to higher other terminal revenue. For 2023, we expect the first half lift volume to reflect the challenging environment in the Trans-Pacific trade lane. Absent an economic hard landing, we expect SSAT to trend to pre-pandemic profitability levels in the second half of the year. For the year, we expect significantly lower detention and demurrage revenue due to the easing of port congestion in Southern California. Turning now to logistics on slide 12, operating income in the fourth quarter came in at $12.8 million, or $2 million lower than the result in the year-ago period. The decrease was primarily due to a lower contribution from supply chain management consistent with the lower demand in the Trans-Pacific trade lane. For the full year, operating income was $72.4 million, or $22.6 million higher than 2021. The increase is primarily due to higher concentrations from transportation brokerage and freight forwarding. In the near term, we expect a mix of activity across the logistic lines of business. We expect continued growth in Alaska to be supportive of freight forwarding demand. We expect supply chain management to track our China service, so a challenging environment in the first half of the year as I previously discussed. And we expect our transportation brokerage business to weaken from the highs achieved in the pandemic period as freight demand normalizes, modal shifts amid markedly improved rail congestion conditions, and over inventory retail customers continue to manage down consumer goods. I will now turn the call over to Joel for a review of our financial performance. Joel.