MATSON, INC. ANNOUNCES THIRD QUARTER 2022 RESULTS

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PR Newswire

HONOLULU, Nov. 2, 2022

3Q22 EPS of $6.89
3Q22 Net Income and EBITDA of $266.0 million and $377.4 million, respectively
Year-over-year decrease in consolidated operating income driven primarily by lower volume in China service
Repurchased approximately 1.1 million shares in 3Q22
Signed $1 billion in vessel construction contracts for three new LNG-ready Aloha Class containerships

HONOLULU, Nov. 2, 2022 /PRNewswire/ -- Matson, Inc. ("Matson" or the "Company") (NYSE: MATX), a leading U.S. carrier in the Pacific, today reported net income of $266.0 million, or $6.89 per diluted share, for the quarter ended September 30, 2022. Net income for the quarter ended September 30, 2021 was $283.2 million, or $6.53 per diluted share. Consolidated revenue for the third quarter 2022 was $1,114.8 million compared with $1,071.6 million for the third quarter 2021.

"Matson's differentiated ocean services performed well in the third quarter 2022, but the Company achieved lower year-over-year consolidated operating income as we saw lower demand for expedited ocean services in the Transpacific tradelane compared to the high levels of freight demand during the pandemic in the year ago period," said Chairman and Chief Executive Officer Matt Cox. "Within Ocean Transportation, our CLX, CLX+ and CCX services achieved lower year-over-year volumes which contributed to the decline in our consolidated operating income. As we mentioned on our second quarter earnings call, we believed rates had likely peaked in the Transpacific tradelane for this cycle and would be in a transitional decline from the pandemic highs. Additionally, due to less demand for expedited ocean services and easing port congestion in Southern California, we decided to end our temporary CCX service in early September, about six weeks earlier than expected. Currently, we expect the next two quarters to be challenging in the Transpacific tradelane as retailers' inventories adjust to current consumer demand levels and as ocean liners reduce vessel capacity to meet lower demand levels. To this end, for the remainder of this year and into the first quarter of 2023, we expect to experience lower year-over-year freight demand and a lower rate environment for our CLX and CLX+ services, but we expect to continue to earn a significant rate premium to the Shanghai Containerized Freight Index due to its differentiated, reliable and fast ocean services."

Mr. Cox added, "In our domestic ocean tradelanes, we saw continued strength in Alaska with higher year-over-year volume and lower volumes in Hawaii and Guam compared to the year ago period. The year-over-year decline in Hawaii volume was impacted by the pandemic spike in demand experienced in the year ago period, and volumes for the quarter were higher than the pre-pandemic third quarter of 2019. In Logistics, operating income increased year-over-year with strength across all of the business lines as we continued to see favorable supply and demand fundamentals in our core markets."

"Yesterday, we signed $1 billion in vessel construction contracts for three new LNG-ready Aloha Class containerships," said Mr. Cox. "We currently anticipate the delivery of the first vessel to be in the fourth quarter of 2026 with subsequent deliveries in 2027. These Jones Act vessels will be built specifically for our CLX service with state-of-the-art green technology features and a fuel-efficient hull design, and are expected to help Matson achieve its 2030 greenhouse gas emissions goal. These vessels will also bring additional capacity to the CLX when placed into service, and we expect the additional capacity to be a meaningful contributor to net income, consolidated operating income and EBITDA."

Third Quarter 2022 Discussion and Update on Business Conditions

Ocean Transportation: The Company's container volume in the Hawaii service in the third quarter 2022 was 7.1 percent lower year-over-year. The decrease was primarily due to lower retail-related demand as compared to the pandemic spike in demand experienced in the year ago period. During the quarter, the Company saw continued improvement in the Hawaii economy supported by a low unemployment rate and strong tourist arrivals, including an improvement in international tourist trends. In the near-term, Matson expects continued economic growth in Hawaii supported by a relatively tight labor market and increasing tourism traffic, but there are also negative trends from a combination of economic effects that create uncertainty in the economic growth trajectory. These negative trends include weakening economic conditions in the U.S. and global economies and lower household discretionary income as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income.

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In China, the Company's container volume in the third quarter 2022 decreased 15.1 percent year-over-year. The decrease was primarily due to (i) lower demand for the CLX, CLX+ and CCX services and (ii) one less sailing. Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index ("SCFI") in the third quarter 2022 and achieved average freight rates that were higher than in the year ago period, but below the pandemic high freight rates achieved earlier this year. With less demand for expedited ocean services and easing port congestion in Southern California, the Company ended its temporary CCX service in early September, about six weeks earlier than expected. Currently, the Company expects the next two quarters to be challenging in the Transpacific tradelane as retailers' inventories adjust to current consumer demand levels and as ocean liners reduce vessel capacity to meet lower demand levels. To this end, for the remainder of this year and into the first quarter of 2023, the Company expects to experience lower year-over-year freight demand and a lower rate environment for its CLX and CLX+ services, but Matson expects to continue to earn a significant rate premium to the SCFI due to its differentiated, reliable and fast ocean services.

In Guam, the Company's container volume in the third quarter 2022 decreased 1.8 percent year-over-year primarily due to lower retail-related demand. In the near-term, the Company expects the Guam economy to continue to benefit from a recovery in tourism, but 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.

In Alaska, the Company's container volume for the third quarter 2022 increased 10.6 percent year-over-year primarily due to (i) higher export seafood volume from Alaska-Asia Express ("AAX"), (ii) higher northbound volume primarily due to higher retail-related demand and volume related to a competitor's dry-docking and (iii) higher southbound volume primarily due to higher domestic seafood volume. In the near-term, the Company expects the Alaska economy to benefit from increased energy-related exploration and production activity as a result of elevated oil prices, but 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.

The contribution in the third quarter 2022 from the Company's SSAT joint venture investment was $23.4 million, or $10.4 million higher than the third quarter 2021. The increase was primarily driven by higher other terminal revenue.

Logistics: In the third quarter 2022, operating income for the Company's Logistics segment was $20.1 million, or $4.1 million higher compared to the level achieved in the third quarter 2021. The increase was due primarily to higher contributions from all services as the Company continued to see favorable supply and demand fundamentals in its core markets.

Results By Segment

Ocean Transportation — Three months ended September 30, 2022 compared with 2021


	Three Months Ended September 30,
(Dollars in millions)	2022			2021			Change
Ocean Transportation revenue	$	918.5		$	863.5		$	55.0	6.4	%
Operating costs and expenses		(603.3)			(501.6)			(101.7)	20.3	%
Operating income	$	315.2		$	361.9		$	(46.7)	(12.9)	%
Operating income margin		34.3	%		41.9	%

Volume (Forty-foot equivalent units (FEU), except for automobiles) (1)
Hawaii containers		37,700			40,600			(2,900)	(7.1)	%
Hawaii automobiles		11,300			12,600			(1,300)	(10.3)	%
Alaska containers		24,100			21,800			2,300	10.6	%
China containers		39,500			46,500			(7,000)	(15.1)	%
Guam containers		5,400			5,500			(100)	(1.8)	%
Other containers (2)		6,000			5,400			600	11.1	%


(1)	Approximate volumes included for the period are based on the voyage departure date, but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages in transit at the end of each reporting period.
(2)	Includes containers from services in various islands in Micronesia and the South Pacific, and Okinawa, Japan.

Ocean Transportation revenue increased $55.0 million, or 6.4 percent, during the three months ended September 30, 2022, compared with the three months ended September 30, 2021. The increase was primarily due to higher fuel-related surcharge revenue, higher average freight rates in China and higher volume in Alaska, partially offset by lower volume in China and Hawaii.

On a year-over-year FEU basis, Hawaii container volume decreased 7.1 percent primarily due to lower retail-related volume; Alaska volume increased 10.6 percent primarily due to (i) higher export seafood volume from AAX, (ii) higher northbound volume primarily due to higher retail-related demand and volume related to a competitor's dry-docking and (iii) higher southbound volume primarily due to higher domestic seafood volume; China volume was 15.1 percent lower primarily due to lower demand for the CLX, CLX+ and CCX services and one less sailing; Guam volume was 1.8 percent lower primarily due to lower retail-related demand; and Other containers volume increased 11.1 percent.

Ocean Transportation operating income decreased $46.7 million during the three months ended September 30, 2022, compared with the three months ended September 30, 2021. The decrease was primarily due to lower volume in China, higher operating costs and expenses primarily due to the CLX+ service, and higher fuel-related expenses, partially offset by higher average freight rates in China and a higher contribution from SSAT.

The Company's SSAT terminal joint venture investment contributed $23.4 million during the three months ended September 30, 2022, compared to a contribution of $13.0 million during the three months ended September 30, 2021. The increase was primarily driven by higher other terminal revenue.

Ocean Transportation — Nine months ended September 30, 2022 compared with 2021

Nine Months Ended September 30,

(Dollars in millions)

2022

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