Matson, Inc. · NYSE:MATX
Matson — Investor Day (August 2019)
56 slides from Matson's investor day presentation, Aug 14, 2019
Slide 1: 2019 Investor Day
2019 Investor Day August 14, 2019 Oakland, California
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements made during this presentation that set forth expectations, predictions, projections or are about future events are based on facts and situations that are known to us as of August 14, 2019. We believe that our expectations and assumptions are reasonable. Actual r
Slide 3: Agenda
Agenda Introduction & Corporate Priorities Matt Cox, Chairman and CEO Financial Overview Joel Wine, SVP and CFO Operations & Fleet Update Ron Forest, President Sand Island Investment Update Vic Angoco, SVP, Pacific Update on Commercial Markets John Lauer, SVP and Chief Commercial Officer Update on M
Slide 4: Introduction & Corporate Priorities
Matt Cox, Chairman and CEO Introduction & Corporate Priorities
Slide 5: Matson's Mission & Vision
Matson’s Mission & Vision Our Mission To move freight better than anyone Our Vision To create shareholder value by: Being our customers’ first choice Leveraging our core strengths to drive growth and increase profitability Improving the communities in which we work and live Being an environmental le
Slide 6: Current Priorities
Current Priorities Priority Commentary Complete Hawaii service fleet renewal Lurline christened June 15th; on track for delivery in 4Q19 Matsonia construction started on building ways Daniel K. Inouye and Kaimana Hila performing well Upgrade Sand Island terminal Expect the three new cranes to be in
Slide 7: Financial Overview
Financial Overview Joel Wine, SVP and CFO
Slide 8: Matson's Performance Since Separation
See Appendix for a reconciliation of GAAP to non-GAAP Financial Metrics (1) Net Income in 2017 includes the benefit of a one-time, non-cash adjustment of $154.0 million related to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”). (2) Net Income in 2018 includes a non-cash tax expense of $2
Slide 9: Matson's Performance Since Separation (continued)
See Appendix for a reconciliation of GAAP to non-GAAP Financial Metrics Matson’s Performance Since Separation (continued) Cash Flow from Operations and EBITDA (6/30/19) 0% 20% 40% 60% 80% 100% 120% $0 $50 $100 $150 $200 $250 $300 $350 2012 2013 2014 2015 2016 2017 2018 LTM CFFO / EBITDA CFFO and EBI
Slide 10: Balance Sheet and Capital Structure Summary
Balance Sheet and Capital Structure Summary Balance Sheet Total Debt-to-EBITDA (1) See Appendix for a reconciliation of GAAP to non-GAAP Financial Metrics EBITDA on an as-reported basis, which is lower than the EBITDA calculated under the debt agreements. Total debt / EBITDA per debt agreement coven
Slide 11: Capital Allocation Strategy
Capital Allocation Strategy FY 2019 cash flow priorities: Maintenance capex New vessel payments Sand Island terminal Phase I upgrade Capital allocation in FY 2020 through FY 2022: Maintenance capex and scrubbers Reduce leverage to the “low-2xs” Organic growth Acquisitions Next major capital demand i
Slide 12: Actual and Estimated Other Capital Expenditures
Actual and Estimated Other Capital Expenditures ($ in millions) Actual and Estimated Other Capital Expenditures (including maintenance capex)(1) (1) Cost and timing of projects subject to change. Key Projects: Sand Island cranes and related infrastructure Cost ~ $60 million Timing: 2018 to 2020 6 sc
Slide 13: 2019 Outlook
2019 Outlook FY 2019 Outlook Items Full Year Third Quarter Operating Income: Ocean Transportation Approximately 20% lower than the $131.1 million achieved in FY 2018 after adjusting 2018 result for full year impact of vessel sale-leaseback Moderately lower than the 3Q18 level of $48.7 million Logist
Slide 14: A Look at 2020
A Look at 2020 NOTE: Numbers used in this slide include previously disclosed: (i) approximately $30 million of total benefits from the 4 new vessels, the magnitude and timing of benefits subject to change based on fleet configuration and in-service timing; (ii) the expected financial pay-back benefi
Slide 15: Operations & Fleet Update
Operations & Fleet Update Ron Forest, President
Slide 16: Operations and Fleet Update
Operations and Fleet Update Hawaii Fleet Renewal Fleet Transition Plan IMO 2020 and Fuel Strategy SSAT Joint Venture
Slide 17: Hawaii Fleet Renewal
Hawaii Fleet Renewal Two vessels already delivered and performing well. The first Kanaloa Class vessel will be delivered later this year. Vessel Delivery Estimate % Completed(1) Milestone Payments Remaining as of 6/30/19 ($ in millions)(2) Daniel K. Inouye Delivered 100% $4.3(3) Kaimana Hila Deliver
Slide 18: Aloha Class Vessels
Aloha Class Vessels Greater capacity results in better freight management Meeting or exceeding design speed (23.5 knots) Faster vessels provide more slack in schedule Achieving expected cost savings Lower maintenance and dry-dock costs Lower fuel consumption per TEU than existing ships Meeting envir
Slide 19: Hawaii Fleet Efficiency
Hawaii Fleet Efficiency Source: Management By the end of 2019, we expect to be in a 9-ship deployment. 10.0 9.3 9.1 9.2 9.5 9.0 9.2 10.0 10.7 10.6 10.1 9.8 9.0 0.0 3.0 6.0 9.0 12.0 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E Fleet S
Slide 20: Vessel Recycling Program
Vessel Recycling Program Vessel Recycle Date Status(1) Fairbanks 2016 100% Complete Lurline 2017 100% Complete Mauna Loa/Kea(2) 2018 100% Complete Navigator 2018/19 100% Complete Consumer 2018/19 80% Complete Maui 2019 10% Complete Producer 2019 In Bid Process Matsonia 2019/20 Planned Recycling Kaua
Slide 21: IMO 2020 and Fuel Strategy
IMO 2020 and Fuel Strategy IMO 2020 regulation: all vessels worldwide restricted to 0.5% sulfur content fuel Current options available to Matson to comply with IMO 2020 regulations: Matson will be 100% compliant with IMO 2020 regulations. 0.5% Distillate Expensive Prolonged use could lead to higher
Slide 22: SSAT Joint Venture
SSAT Joint Venture Matson owns a 35% interest in SSA Terminals, LLC (SSAT), the leading U.S. West Coast terminal operator SSAT provides terminal and stevedoring services to carriers at 8 terminal facilities Overview Updates and Opportunities OICT crane modernization New and upgraded cranes to be abl
Slide 23: SSAT Joint Venture – Seattle Terminal Plan
SSAT Joint Venture – Seattle Terminal Plan Matson’s move to T-5 is part of the first phase in the Seattle terminal plan. SSAT is currently operating at (with JV partners): T-5 T-18 T-30
Slide 24: Sand Island Investment Update
Sand Island Investment Update Vic Angoco, SVP, Pacific
Slide 25: Overview of Honolulu Harbor
Overview of Honolulu Harbor Matson currently occupies Piers 51C, 52 and 53 Roll-on / Roll-off (Ro-Ro) operation at Pier 32/33 across from Piers 52 and 53 Load-on / Load-off (Lo-Lo) operation at Piers 51C, 52 and 53 Barge operation typically done at Pier 51C The Annex pasha SAND ISLAND 51A 51B 51C 52
Slide 26: Sand Island Investments Overview
Sand Island Investments Overview Phase I: $60 million crane program (announced August 2017) Three new gantry cranes and retrofit of three existing gantry cranes Demolition of four existing cranes Requires electrification and other related infrastructure upgrades Phase II: Yard and gate upgrade Lane
Slide 27: Sand Island Investments Overview (continued)
Sand Island Investments Overview (continued) Matson is conducting Ro-Ro and Lo-Lo operations at two different pier locations Adds the expense of shifting vessel (e.g., fuel, labor, tugs and pilots) Terminal is congested, which is leading to increased inefficiencies and operating costs Existing crane
Slide 28: Sand Island Investments – Phase I
Sand Island Investments – Phase I Pursued a plan to minimize costs, disruptions and risks. Action item Status / Proposed Timing Purchase and install 3 new gantry cranes Cranes arrived in April 2019 Two of three cranes commissioned Expect cranes to be in service by the end of 3Q19 Upgrade the power s
Slide 29: Sand Island Investments – Phase I (continued)
Sand Island Investments – Phase I (continued) Staging Area Current Work Areas Cable trench for panzer belt Power Distribution Center (PDC) Crane tiedowns Cabling to electrify 51C (currently runs on diesel) Crane vault Complete New cranes – 2 of 3 cranes commissioned
Slide 30: Sand Island Investments – Phase I (continued)
Sand Island Investments – Phase I (continued) Cranes entering Honolulu Harbor.
Slide 31: Sand Island Investments – Phase I (continued)
Sand Island Investments – Phase I (continued) First crane off-loaded from ship to temporary rails. Crane is jacked up to turn the wheels.
Slide 32: Sand Island Investments – Phase I (continued)
Sand Island Investments – Phase I (continued) Crane set to be sloped down the temporary rails on to the Pier 52 crane rails.
Slide 33: Sand Island Investments – Phases II and III
Sand Island Investments – Phases II and III Phase II Automated and expanded gate Other yard layout improvements to address inefficiencies and improve electrical redundancy at site Phase III – opportunity to optimize auto / rolling-stock operations Expand into 51A and 51B when Pasha moves to KCT New
Slide 34: Update on Commercial Markets
Update on Commercial Markets John Lauer, SVP and Chief Commercial Officer
Slide 35: Hawaii Service
Hawaii Service 3.5 calls per week into Hawaii with inbounds from LA, OAK and SEA 9-ship fleet will provide a fixed schedule Dedicated neighbor island barge service Overview of Service Matson’s Focus Prepare for 9-ship fleet Maintain best-in-class service integrity Market Overview Competitors: Pasha
Slide 36: Hawaii Economic Indicators
Hawaii Economic Indicators Hawaii Economic Indicators Market Commentary Westbound container volume driven primarily by consumption and replenishment, population growth and construction Tourist arrivals at record levels, but visitor expenditure has declined – impacts consumption and replenishment Pop
Slide 37: China-to-Long Beach (CLX) Service
China-to-Long Beach (CLX) Service Weekly service from Ningbo/Shanghai to Long Beach A premium service providing an alternative to deferred air freight and other ocean carriers Dedicated terminal space in Long Beach with off-dock container yard Door-to-door services in coordination with Matson Logist
Slide 38: Guam Service
Guam Service Weekly service to Guam as part of CLX service 3-to-5 day transit advantage from U.S. West Coast Overview of Service Matson’s Focus Maintain superior service and on-time performance Fight for every piece of freight Market Overview Competitors: APL (U.S. flagged service) Trans-ships in Yo
Slide 39: Alaska Service
Alaska Service Overview of Service Matson’s Focus Capture additional NB volume opportunities as economy improves Market Overview Primary competitors: TOTE Barges Air freight rates are very high relative to the cost of goods being shipped NB volume growth tied to Alaska’s economy – economic condition
Slide 40: AEDC 3-Year Outlook
AEDC 3-Year Outlook Industries most affected by the oil-recession are on the rebound “Robust activity on the North Slope is an encouraging sign of optimism among producers.” – AEDC, July 31, 2019 State fiscal certainty and sustainability an important step to driving economic growth Economic recovery
Slide 41: Update on Matson Logistics
Update on Matson Logistics Jerome Holland, AVP Strategic Planning, Matson Logistics
Slide 42: Matson Logistics Overview
Matson Logistics Overview Transportation Brokerage Domestic and international rail intermodal services Long-haul and regional highway trucking services Less-than-truckload and expedited freight services Freight Forwarding Warehousing and Distribution Over 1.5 million sq. ft. across 4 buildings in at
Slide 43: Matson Logistics
Matson Logistics Note: Acquired Span Alaska in 3Q 2016. Operating Income (OI) and OI Margin (6/30/19) All service lines have performed exceptionally well in the last 18 months. 0% 1% 2% 3% 4% 5% 6% 7% 8% $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 2012 2013 2014 2015 2016 2017 2018 LTM Operating Income Ma
Slide 44: Matson Logistics Current Market Dynamics
Matson Logistics Current Market Dynamics Matson’s Focus in 2019 Transportation Brokerage Softer freight demand Capacity-rich environment Mix shift from spot towards contract Lower intermodal volumes Adding to 53’ intermodal program Business development team Investments in IT to improve work flows an
Slide 45: Update on Span Alaska
Update on Span Alaska Tom Souply, President of Span Alaska
Slide 46: Span Alaska Overview
Span Alaska Overview Receives LCL freight in Auburn, WA for consolidation and shipment to Alaska Network of terminals enables transport of freight to all major population centers in AK Matson’s largest northbound freight customer Acquired Pacific Alaska Freightways, Inc. (“PAF”) in September 2015 wh
Slide 47: The Span Advantage
The Span Advantage Grew volume and profitability during Alaska recession Secured new accounts Extreme focus on customer retention New emphasis lanes – intra Alaska Award-winning trucking division 2018 and 2019 YTD Success Serving every major metro in Alaska with direct service and expert handling Lo
Slide 48: New Span Alaska Service Center in Anchorage
New Span Alaska Service Center in Anchorage Estimated project cost = approximately $26 million (including land) Construction began July 2018 and expect facility to be ready in Q4 2019 54,000 SF, 88 loading doors 179 trailer spots, 8,100 SF covered flat deck loading area 4-bay vehicle maintenance sho
Slide 49: Span Alaska
Span Alaska Heightened competitive environment, but certainly manageable Smaller competitors facing financial pressure Several key competitors aligned with ocean carriers Carlile / TOTE Lynden / AML Current Market Dynamics Complete new facility in Anchorage Intensified sales focus Sales team focused
Slide 50: Concluding Remarks
Concluding Remarks Matt Cox, Chairman and CEO
Slide 51: Concluding Remarks
Concluding Remarks In the late innings on the new vessel build program. When Lurline enters service will step down to a 9-ship deployment End of the steamship era when Old Matsonia is replaced by Lurline Majority of financial benefits of the new vessels around the corner Honolulu terminal investment
Slide 52: Concluding Remarks (continued)
Concluding Remarks (continued) We are very well-positioned in the markets we serve. Hawaii: Remain the market leader Alaska: Will benefit from improving Alaska economy China: Maintain highly differentiated service offering Guam: Competing effectively with APL SSAT: Very well-positioned; new Seattle
Slide 53: Questions & Answers
Matson. Questions & Answers
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Slide 55: Appendix – Non-GAAP Measures
Appendix – Non-GAAP Measures Matson reports financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company also considers other non-GAAP measures to evaluate performance, make day-to-day operating decisions, help investors understand our ability to incur and
Slide 56: Appendix – Non-GAAP Measures
Appendix – Non-GAAP Measures For the years ended December 31, ($ in millions, except ROIC and ROE) 2018 2017 2016 2015 2014 2013 2012 Total debt $ 844.6 $ 856.4 $ 857.1 $ 738.9 $ 429.9 $ 373.6 $ 286.1 $ 319.1 Less: total cash and cash equivalents (24.0) (19.6) (19.8) (13.9) (25.5) (293.4) (114.5) (1