Q2 2022 Matson Inc Earnings Call
These risk factors are described in our press release and presentation and are more fully detailed under the caption risk factors on pages 13 to 24 of our Form 10-K filed on February 25, 2022, and in our subsequent filings with the SEC.
Please also note that the date of this conference call is August 1st 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 will turn the call over to Matt. Okay. Thanks, Lee and thanks to those on the call.
Starting on slide three.
<unk> performed well in the second quarter with higher year over year operating income in both Ocean transportation and logistics.
The increase in Ocean transportation operating income in the quarter was driven by significant demand for our China expedited Ocean services.
In our domestic trade lanes, we saw higher volume in Alaska, and softer volumes in Hawaii, and Guam compared to the second quarter of last year.
In logistics the increase in operating income was due to strength across all of the business lines as we continued to see favorable supply and demand fundamentals in our core markets.
Please turn to slide four.
I wanted to start off providing our views on the current market environment across the domestic trade lanes logistics and the Trans Pacific Trade Lane.
After which I will walk through our current priorities and then our trade lane performance in the second quarter.
Starting with our domestic trade lanes, we continue to see economic recovery in Hawaii, Alaska, and Guam from the pandemic lows and Hawaii domestic tourism was strong in the first half of the year and we saw increasing international tourist arrivals, but total arrivals are still well below the pre pandemic.
Hi.
<unk> is projecting Hawaii visitor arrivals for 2022 to be 87% at the pre pandemic high in 2019, increasing to 93% in 2023.
A strong recovery in Hawaii tourism industry has led to a rapid decline in the unemployment rate.
In Alaska, we expect the Alaska economy to benefit from the resumption of summer tourism and increased energy related exploration and production activity as a result of elevated oil prices. We continue to see further improvement in the unemployment rate from the pandemic highs.
Guan.
The economy continues to recover from the pandemic low despite the slow return of tourism.
Tourism has increased since the beginning of the year, but it's still about 25% of the pre pandemic level.
We expect further improvement in tourism arrivals from Asia to support the local economy, but the timing remains unclear.
With our positive driver supporting further growth in our core domestic markets weakening economic conditions in the U S and global economies could negatively affect tourism and consumer spending in.
In addition, the combination of high inflation higher interest rates and lower personal income, but at the end of the pandemic era stimulus is likely having a negative impact on household income.
And consequently consumer goods demand for example, in Hawaii, and Guam retail related demand declined in the second quarter and the softness continued in July .
Turning to logistics, we continue to see a solid level of activity across all business lines span Alaska business activities continue to track well with the performance in the Alaska Trade Lane and the trend in our supply chain business is consistent with the demand for our China service.
Rail congestion, particularly on the U S. West Coast continues to be an issue for our transfer transportation brokerage customers and as a result, some of our customers are shifting modes from rail to truck to expedite the delivery of goods.
Our warehousing and it remains busy with their inbound goods and trans load volume exceeding outbound volume.
Please turn to slide five.
Demand for our differentiated expedited China service remains solid.
While some supply chain infrastructure issues that we've mentioned on prior calls are slowly subsiding.
There are uncertainties remain.
China's factory production continues to recover from the COVID-19 related supply chain challenges.
Import commodities are making their way to the factories and the logistics of moving freight from the factory floor to the port have become more fluid.
But as we've seen in the last two years COVID-19 waves had the potential to disrupt this part of the supply chain.
Congestion on the U S. West Coast has improved and first time weights are considerably less than at the beginning of the year, but container dwell times at the terminals remain elevated partly due to ongoing rail congestion I just mentioned.
In the last month or so we've seen some customers up to send U S cargo to the east coast ports to manage risk during the peak season.
The key uncertainties for them are the ongoing rail congestion and the potential for our west coast labor slowdown as the contract between the PMA and the IOW expired on July one.
In recent weeks, we've seen a gradual decline in the trans Pacific freight indices from the highs experienced earlier this year.
This indicates that rates have likely peaked for now at this time, we expect an orderly marketplace for the remainder of the year with our vessels continuing to operate at or near capacity and earning a significant rate premium to the market and well above pre pandemic rate levels.
We're well positioned to help customers speed goods to market with the fastest and most reliable ocean services in the transpacific and unparalleled destination services on the U S West coast.
As a result, we continue to expect to operate the <unk> service through October peak season. This year, our Ccs service with Oakland is the first call has addressed the need for our customers in the last 12 months to get freight to markets during a period of difficult congestion conditions at the southern Cal.
<unk> reports with.
With congestion conditions expected to subside further the need for this service beyond the October season is likely to diminish however.
However, if there is enough demand for the <unk> post the October peak season than we will have the option to continue to service well into 2023.
Please turn to slide six where I'll go through the current priorities.
First and foremost we're focused on maintaining vessel schedule integrity, and providing high quality service for our ocean transportation and logistics customers as the environment continues to evolve we continue to expect the post pandemic environment to be an evolving journey and we will adapt.
<unk> has done to support the lifeline communities that we serve.
Second we're focused on organic growth opportunities and long term investments that leverage our existing operations to this and we're making good progress on the evaluation of the Alaska fleet replacement.
We're currently leaning towards upsizing, the CLEC service with three new LNG ready Aloha class vessels, we expect to get a head start on funding that re fleeting program on a tax advantage basis with the sizable cash deposit into the capital construction fund before the end of the third.
Quarter, Joel will go into more detail on the new vessels in the CCF in a few moments.
Third we want to maintain our investment grade balance sheet, we view, our balance sheet as a competitive advantage to capitalize on inorganic growth opportunities as they emerge and regardless of where we find them in the cycle.
We will remain disciplined in evaluating acquisitions that meet the key criteria. We've outlined previously on earnings calls and in my shareholder letters.
And lastly, we're committed to returning capital to shareholders with excess cash flow, which we define as cash flow after funding our maintenance capital expenditures long term investments and dividend.
In the last 12 months, we've generated significant cash flow, which we've used to return over $450 million in capital to shareholders in the form of dividends and share repurchases.
Going forward, we expect to be a steady buyer of shares.
I'll now go through the second quarter performance of our trade lanes SSAT and logistics. So please turn to the next slide.
Hawaii container volume for the second quarter decreased one 5% year over year, primarily due to lower retail related demand.
The Hawaii economy continued to show improvement in the quarter supported by strong domestic tourist arrivals and modest improvement in international tourist trends.
Moving to our China service on slide eight.
<unk> volume in the second quarter, 2022 was 11, 7% higher year over year due to four more eastbound voyages than the prior year.
Freight demand in the quarter was driven by e-commerce garments and other goods Matson continue to realize a significant rate premium over the Shanghai Containerized freight index in the second quarter of 2022 and achieved average freight rates that were considerably higher than the year ago period.
Turning to slide nine and.
In Guam <unk> container volume in the second quarter of 2022 decreased 7% year over year. The decrease is primarily due to lower retail related demand.
Moving now to slide 10 in Alaska, <unk> container volume for the second quarter 2022 increased 12, 2% year over year. The increase was primarily due to higher northbound volume primarily due to higher retail related demand and an additional sailing and <unk>.
Seafood volume from the Alaska Asia Express.
Turning next to slide 11.
Our terminal venture SSAT contributed $24 $7 million in the second quarter 2022, compared to $12 $8 million in the prior year period.
The higher contribution was primarily result of higher other terminal revenue.
Turning now to logistics on slide 12 operating income in the second quarter came in at $23 $1 million or $10 $2 million higher than the result in the year ago period.
The increase was primarily due to higher contributions from all services as we continue to see favorable supply and demand fundamentals.
In our core markets and with that I will now turn the call over to Joel for a review of our financial performance. Okay. Thanks, Matt. Please turn to slide 13 for a review of our second quarter results.
For the second quarter consolidated operating income increased $279 $2 million year over year to $493 1 million with higher contributions from Ocean transportation and logistics of 269 million and $10 2 million respectively.
The increase in Ocean transportation operating income in the second quarter was primarily due to considerably higher average freight rates and higher volume in China, and a higher contribution from SSAT, partially offset by higher fuel related expenses net of fuel related surcharge recovery and higher operating and operating costs and expenses primarily.
Due to the <unk> plus and <unk> services.
As Matt noted the increase in logistics operating income was primarily due to higher contributions from all services.
Interest expense declined $1 million year over year due to lower outstanding debt and lastly, the effective tax rate in the quarter was 22, 4% compared to 22, 6% in the year ago period.
Slide 14 shows how we allocated our trailing 12 months of cash flow generation for the LTM period, ending June 30, we generated cash flow from operations of $1 $43 6 billion from which we used 600 beds.
We used $65 million to retire debt $277 5 million on maintenance and other capex, including $99 5 million of early buyout and operating lease termination payments.
$26 3 million on new vessel, capex, including capitalized interest and owners' items in.
And $18 $5 million on other cash outflows, while returning $457 $5 million to shareholders via dividends and share repurchase.
Please turn to slide 15 for a summary of our share repurchase program and balance sheet.
During the second quarter, we repurchased approximately one 6 million shares for a total cost of $138 1 million.
Year to date, we have repurchased approximately two 3 million shares for a total cost of $206 7 million at.
At the end of the second quarter, there were approximately $1 2 million shares remaining in the share repurchase program.
Turning to our debt levels, our total debt at the end of the quarter was $596 6 million.
Please turn to the next slide.
This slide 16 summarizes the status of our key vessel.
Capital expenditure projects, starting with the re fleeting and the vessels for the Alaska Trade Lane, we're leaning towards the option to construct three new LNG ready Aloha class vessels and move three older <unk> vessels into the Alaska service.
The estimated total cost for three LNG ready Aloha class vessels is approximately $1 billion before owner's items.
This investment option, but allow us to upsize the CLEC service by approximately 500 containers of capacity for each of the three new vessels and expect this additional trade lane capacity to be a meaningful EBITDA contributor when the vessels are placed into service later this decade.
As Matt mentioned earlier, we intend to contribute cash to the capital construction fund or CCF for the new Shipbuilding program before the end of the third quarter. This year. So that we can apply the reduction to our 2021 federal and state tax filings.
We expect our CCF cash contribution to be approximately $500 million and lead to a refund of a significant portion of the $242 million and taxes paid last year in 2021.
Going forward, we expect to continue to add cash to the CCF before and during construction on the vessels to take full advantage of the CCF tax benefits and lower our cash taxes.
On an LNG installation projects, the Daniel K Inouye and Monica remain on track for next year with a Daniel Daniel K Inouye scheduled to enter Drydock in the first quarter of 2023 and the moniker is scheduled to enter dry dock in mid year 2023.
We continue to evaluate LNG installations on the kimono Gila to learn lean and then Matt Sonya, although no decisions have been made at this time.
If we move forward on these LNG installations than the come on a hela would be the next vessel in line after the moniker and that project would occur in 2024.
Lastly, we are reiterating reiterating our capex range for 2022 of $160 million to $180 million.
With that I'll now turn the call back over to Matt Okay. Thanks, Joe.
Last two years have been anything but predictable as the pandemic challenge to our industry and supply chain worldwide. We will continue to navigate our business through this evolving environment by doing what we've always done and that is to maintain service reliability provide high quality customer service and allocate your capital to its highest <unk>.
Best use to create value over the long term and with that I will turn the call back to the operator and ask for your questions.
Thank you please compile the Q&A roster.
Now first question coming from the line of Jack Atkins from Stephens. Your line is now open.
Okay, great good afternoon, and congrats on another.
Great quarter guys. Thanks.
Thanks, Jeff.
I guess, Matt if we could maybe start I'd love to kind of get a little bit more color on all July if it is possible I'm guessing you don't want to give a lot of details just because it's still sort of.
Early in the quarter, but I mean is there a way to maybe think about.
July relative to are you seeing trends accelerate decelerate versus what you saw in the <unk>.
In the second quarter or maybe if you want to talk to it relative to normal seasonality I'm just sort of curious if you can.
To help us frame up what you're seeing in July because to your point things are pretty volatile out there.
I do think things are changing and we called that out in our pre release and maybe we can add a little bit of color here Jack to it I think when you when you see the the transpacific markets, but maybe I could just talk in general about.
Ship wage just as one perspective in <unk>.
You'll recall in the fall of last year, we saw over 100 vessels waiting at anchor or offshore waiting to get into the ports of La long Beach, we still have about 100 ships that are.
Awaiting anchor.
20 ish in La long beach, but as we know a lot of that congestion has moved around into different ports like the port of Savannah, New York, New Jersey, Huston Vancouver, a little bit in Oakland. So we saw the same number of shifts, but just more distributed to different places.
We do channel checks, we see a lot of our customers and these had been reported in their earnings calls with relatively heavy levels of inventory a number of our customers have implemented inventory control measures as they seek to work through some of the inventory that they have in hand as the market has shifted.
If you look at the fundamentals and the supply and demand across the Pacific just kind of narrowing into our scope I think what we've seen are that.
Chips are.
Full.
That just about every ocean carrier has are sailing from various Asia origins full of cargo there has been movement downward in the spot rates in the transpacific those of have have definitely come in in the last two to four weeks I would say.
They are adjusting.
Slowly.
And they are moving but theres no bottoming are falling off a cliff we're seeing an overall in the way. We the word we used was orderly. So we're seeing rates decline from their peaks, but overall, we described the market as orderly so thats.
The best way I can describe it and to your point about July the trends that we saw at the end of June and we're calling out are continuing into July .
Okay, Alright, I got it.
I guess maybe.
Looking about transpacific in general and the additional capacity that you put in there that you've chartered in there over the last couple of years.
Obviously very timely.
When you made those decisions.
When we think about the kind of the cost structure of that additional capacity relative to rate.
I wouldn't expect you to kind of help us think through that on this call, but you know.
I guess, if we were to see rates return.
Im trying to think if we were to see rates kind of returned back more towards.
2019 level during 2020 levels.
With those additional without additional capacity is still be profitable.
Yes, here's what I can say about that check.
First of all.
The <unk> plus.
The second string we introduced we think is here to stay we remain very confident that as the market normalizes and we expected the market to normalize at some point and barring any other further geopolitical or external shocks.
We do see a normalization process is starting and will continue to occur and again just to repeat ourselves we remain very confident in the market.
Trans Pacific markets that we operate in Shanghai, <unk> bow into Southern California will support a second expedited service of the <unk> caliber.
And with regard to.
We did make a call out on our <unk> service third service.
We expect it to remain busy through the peak season in October .
We'll take a look and see how the market develops this is in Oakland first call.
A the market wants to go, especially due to the lack of congestion.
La long beach for a direct call into those ports. So this is this service if.
If things remain in place are likely to cause us to consider.
Winding that down but have it ready should there be any other dislocation or if we find ourselves in an environment, where there continues to be elevated congestion, we could operate that well into 2023. So we have a lot of optionality here with regard to the CLS. We remain very confident that we're going to continue to earn a significant premium over the market and for it to be profitable.
Okay. Okay, that's great I guess shifting gears.
To the.
The new Aloha class vessels that you guys are moving forward with.
Is there any sense for kind of rough timeline on when those ships would.
Be delivered is that you said later this decade.
I'm sure there are a lot of.
Potential variables there at this point given up our additives, but when would you expect those ships to.
To.
Can be delivered to you guys. So we're.
We're in discussion with several shipyards at this point in time.
With regard to price and availability of slots and delivery dates. So we don't really have a good.
Specific timeframe for you, but I would say probably.
Sometime in the second half and early part of the second half of the decade 'twenty six 'twenty seven those are the kind of.
Timeframes that we're looking at and of course there'll be delivered.
Give all three to a single yard, which is most likely the outcome there'll be delivered sequentially. So that'll happen over a couple of year period. Okay.
That's great one one more question for me and I'll jump back in queue and hand, it over to Ben but.
As it relates to.
Scrubber installation is it really maybe think about what percentage of your capacity or just your vessels at this point have scrubbers installed or will have scrubbers installed.
Bye Bye, let's say the end of the end of next year.
Yes, Jack it's Joe.
These shifts that are LNG available, we're looking at the LNG installations, but all of the remaining shifts.
Almost all of them have scrubbers. Okay. So we are benefiting from the differential right now between low sulfur and high sulfur content fuel.
Yes, okay.
Makes a lot of sense, okay without those are very timely investments so great.
Hand in hand, it back thanks again for the time really appreciate it okay. Thanks, Geoff Thanks Jack.
Thank you and our next question comes from the line of Ben on with Stifel. Your line is now open.
Alright, great guys.
Sure.
I've got a couple.
Wanted to start with.
Going back to the transpacific appreciating that.
Rates are coming down.
Quarter the market, but.
I am curious.
You guys have a pretty differentiated service.
Are you seeing sort of a linear pattern with respect to sort of how you think of your rates or given the sort of the unique thing that you provided you are seeing any degree of maybe pricing support.
The broader market that might not be able to realize.
Yes, I think it's a little of both Ben I think you know.
Having followed our story for a while.
The premium to the market expands and contracts in different market style. So it never really remains completely fixed.
I would say that as transpacific spot rates have come down we are watching closely the spread and where we have held our rates have held stronger than the overall rates, but we are not immune from taking rate adjustments as we need to and expect to.
And competitive in the market with a significant premium to the overall market. So it isn't a fixed service and it may also be that our CLEC service may take may be able to bear a greater premium than one of our other services. So we.
We look at it week to week, but we've been pleased with the overall pace, but we do expect rates or rates to go down in sympathy with the market, but at significantly higher absolute levels of freight rates.
Okay and sort of in that same vein.
Assuming that at some point the market.
Returns back to normalized levels in terms of freight rate do you think that structurally you are.
Your premium is any different than it used to be.
And that I mean first of all I guess you'd have more more cargo to spread it around but then the other hand you have so many many more customers do you think it's more defensible, perhaps then.
Pre pre Covid, yes.
I do Ben I think what's happened here is that.
We have been able to stand out in an environment because of the collection of assets important terminal operations in the way, we run our business and an expanding through the pandemic.
The credibility of our brand with our customers both in the U S and forwarders and China has is never hire.
It's been outstanding.
The go to when they have a piece of cargo has to go because of a late order or production problem or their business model can sustain a higher level of freight rates might be in airfreight alternative. So there is no doubt in my mind that our brand has expanded and I think it will give us greater opportunities overtime, but we also expect to live within cycles in the.
That will remain a fact of life.
Continue to believe Ben at this point that the entire trade in Madison included is going to end up at <unk> freight.
Freight rate level that is higher than going into the pandemic I think things have shaken out and.
I continue to expect that rates will be higher than where we went into the cycle.
Okay. That's helpful and then just a couple.
One more.
We'll see if Jack has another one or not but.
On SSAT.
The number was down relative to first quarter.
Although I think.
Volumes into the West Coast ports, I am not mistaken were equally as good maybe even a little higher I'm curious sort of what was a little bit different.
In terms of your contribution there.
Jack.
Really two factors there were some revenue and cost that fell from one quarter to another.
Then just sort of the timing of where they fell but I'd also say that some of the congestion, particularly in Oakland the throughput there hasnt been as much throughput here towards the latter part of the second quarter as there was in the first quarter. So there was some there was some impact about our terminal being able to actually move the freight in a fluid way. So it's really a.
And those two things that led to Q2 to be coming down over Q1, if you look at kind of the average of those two.
Where were the average would be for the whole six months period, and then let me just amplify one point you made which is that what we've seen in the second quarter on the West Coast ports is significant increase in.
Containers that are bound for the U S rail network and in many cases, we have seen at the two main western railroads have limited.
The amount of <unk>.
Containers are sending into the inland because as has been reported there inland terminals are jammed and they are not going to take on their railroad network additional.
Rail containers that can't be discharged at their inland terminals and so there has been a little change in the amount of cargo that is flown because of those factors that are actually continuing and expect it to continue as we go into this year's peak season, So maybe a little too much inside baseball, but just to give you a context.
Yes.
Appreciate all the context that I can get.
Yes.
Last one for me.
Im curious a little bit on span.
Uh huh.
Span Alaska, you guys did that acquisition a few years ago seems like it's worked out pretty well.
But I haven't heard or or haven't gotten as much color on the competitive landscape I'm curious sort of if.
That's a market you've been able to gain share organically and sort of how youre thinking about.
That that business.
Strategically in.
From where you sit now few years later.
Sure.
On the competitive landscape been it hasnt changed much so we've got.
A small number of competitors there good good strong competitors and it's been a it's been a pretty disciplined market, where we all compete on service and quality and so the key for us and what the reason the acquisition made so my sense is that we can integrate in between our ocean services and the span services really deliver more reliability and speed for our customers and that's how we.
Try to compete so market share is don't change dramatically, we haven't seen that but it's just going out and and just on the margin being quicker and better and more reliable than the competition Thats our strategy and in integrating the two businesses together has worked out really well for us. So we're very happy with the acquisition. The team is doing a great job in and the focus on customers has been really good so overall.
That's kind of the dynamics that we see in that market and it's what we expected when we bought the business.
Alright I appreciate it.
Let's see if Jack you've got another one if not I'm going to go ahead and queue up again, so I will say.
Thank you and as a reminder to ask a question with Westar, one one and we have a follow up question from Jack Atkins from Stephens. Your line is open.
Okay, Great I appreciate Ben.
Passing it over.
Just a couple of additional questions on my end.
There was some.
Unrest I guess at the Port of Oakland was it last week a week before around AB five.
Some protests there so I guess two part question, Matt did that impact your operations at all.
Hello, welcome them as an important part for you and then secondly, what are your thoughts on AB five and does that create.
Some additional kind of longer term congestion problems.
With the West Coast ports would love to kind of get your thoughts on that and I'm sure you've kind of thought through that to some degree yes, yes, I have a couple and answer your question. The first part yes.
So the port disruption that took place in Oakland.
Is now done.
<unk>.
Protesters have have.
Dissipated and things are back to normal.
We were impacted.
There were a couple of days, where the port was close in its entirety and it started at one terminal in Oakland and kind of moved its way around individual terminals closed medicines was the last to close but the protesters all gathered in front of our gate and we were closer day, we were we were able.
To work with protesters they've got some life some live cattle off the vessels because it needed food they needed food and water.
But beyond that really cargo did not move.
We were able to work with our customers to get some of their freight diverted down to southern California to continue to meet their own sailing requirements, but we were impacted only really moderately and that.
Cargo that was held back was picked up the following week. So it was really a relatively small item although disruptive for us.
As to the larger question here.
Really good question.
There is a role for an independent operator in the state of California. Those rules have been made more difficult by the imposition of 85.
Some of our trucking partners are suggesting that the truckers themselves move out of state.
I want to continue to serve the market, we're waiting to see how this all shakes out.
And so I would say we do support.
The idea of an independent operator within the bounds of the law. So we think there is a role for that in California, a continuing role for that okay. Okay. Great. Thanks for that Matt and I guess, maybe one last question for me, which kind of bigger picture macro question, but I would just be curious.
Curious as you and your team talked to talk to your customers what are they telling you about.
The direction of their business.
That makes you kind of form an opinion about the health of the economy, whether it's it's in your Jones Act markets or just kind of.
In the broader U S economy are you feeling like things are accelerating are they are they <unk>.
Rating somewhat would just would be curious to kind of get your.
Get your sense for what's going on just in the broader economy yeah.
I'll give you a few anecdotes and right now it tends to be rather industry specifics. So when we talk to our auto parts customers. They see things is booming and we will continue to boom.
Auto manufacturing segment. For example has has continued steps to significant demand and held back by micro chips and lots of other little items. So that's strong if you look at garments.
Hear a different story, which is that.
And these are again reflected in some of the big box earnings calls that we heard many of whom are our customers directly or indirectly through wholesalers and do they have implemented.
Temporary inventory control mechanisms purchase orders are getting pushed out.
As those.
Those customers are getting a handle on working off surplus inventory warehouses are full customers are facing issues and picking up their freight because a lot of cargo had moved earlier.
And people wanted to make sure that they had adequate inventory. So I would say theres a little bit of an inventory hangover for the big box guys. We're still seeing again strong flows across the Pacific All the ships are full we're getting into our peak season. So if I had to get today I'd say, we'd have a moderate peak season and.
<unk> market, but there are challenges and I think customers or end customers themselves are being more cautious with respect to starting inventories and not getting not making their situation. Further we can definitely feel anecdotally customers talking about concerns about that but in logistics, we're seeing alternatively very.
Strong activity across all of our domestic market. So it's really a mixed bag Jack depending on who you're talking to but I think the fed's intended effective trying to slow the economy down and we're all watching certain segments of course interest rates and housing market and others starting to have the effect that they are desiring, but it's really hard to tell exactly in again.
Customers are kind of all over the place at this point.
Okay, well I really appreciate the insights Matt. Thanks, Thanks again.
Thanks.
Thank you and we have a follow up question from Ben Your line is open.
Alright, I appreciate that.
Their mall with Jack and I here.
Wanted to really quickly ask about the.
How are you thinking about the dividend, obviously, you've been pretty active on the share repurchase program, that's causing maturity count to come down which is helping less class to flow through the dividend and curious if you think that going forward.
There's you bumped it a couple of times, but do you think that Theres more room.
A room to go.
While still keeping a sustainable.
Yeah, Ben So the answer is we're going to take the same approach, we've always taken which is be judicious with the increase in dividend to make sure that we can pay for it and really derisk ourselves ever have to bring it down and increase it as we see increases in our free cash flow. So admittedly in this environment.
Farmers have been really really strong.
We don't know, we don't know whats going to what the next 12 or 24 months are going to look like we still feel like theres any very strong cash flow, but it's not the exact environment right now at a size and a long term basis. So we're taking a cautious approach, but that's how we've always looked at it and we just wanted to be very confident when we increased the dividend by any amount that can be very very sustainable and consistent.
In the future. So that we're really not going to change that approach that doesn't answer your question about how much you might increase in the future, but but because we can't really answer that right now, but we'll take the same judicious approach as a business.
The best I can say about it.
Okay, I appreciate that and not surprised that that's your answer.
My last question honestly is.
Yeah.
You talked a little bit about the IOW negotiations and then still not having been resolved.
No.
You, probably you might know have better insight than I do on it but that remains to be seen how.
How it all plays out and curious of your customers are starting to push.
A little bit harder to make sure that they're on your ships.
Just in case, there's a work slowdown or something else that there are you starting to see any change in <unk>.
Customer behavior or anything of that sort as it relates to what could potentially happen on the west coast.
Yeah.
Ben the to me the most prominent action that has taken us a lot of our customers.
Had over the last six months, a directed cargo to other ports beyond those on the U S West Coast and Thats why when we mentioned some of the congestion that's moved from L. A long beach to other ports on the East coast and in Vancouver in Houston, and so on is really a result of their planning around.
<unk>, taking their imports and moving them to different distribution centers as a way to partially mitigate the risk of an impact on the U S. West Coast I would say most of our customers have done their planning. So we have not seen a dramatic increase immediately before the expiration of the contract.
And demand on the margin perhaps.
But we certainly haven't since to get on our vessel. It's more for the same reasons that people have used us for all the reasons that they use us and we haven't seen a significant.
Significant spike to.
To this point.
Okay, and then I'll I'll call. This a a follow on to the last question.
If there is a resolution.
Do you expect that there could be.
Some of that some of that trade or some of the some of that volume has shifted to where Houston savanna, New York wherever you think it would come back.
Is that sort of where where the volume wants to flow or do you think that some of those some of those trends have become a little bit more permanent.
I think it's a little of both I think what we will see when the contract is renewed and ratified by the membership that we will see a return of.
Three or four 5% of.
That cargo that would naturally flow that direction, but I would caution for some of the same reasons that.
In part it will depend as much on whether that individual retailers has space in their warehouse network in southern California versus other locations and whether the western railroads are going to be able to handle the cargo that moves in their network in a timely fashion. So as we've said from the beginning this is all connected but I do to answer your question directly I do think there'll be.
Some cargo that moves on the margin, but it will really be cut.
Customer by customer specific based on looking at their own supply chain that will define that.
Alright, I appreciate it thanks guys.
Okay. Thanks, very much thank you Ben.
And again to ask a question. Please press star one one.
And Im showing no further questions at this time I would now like to turn the call back over to Matt.
Closing remarks.
Okay, well thanks for tuning in today, we look forward to catching everyone on the third quarter call Aloha.
Okay.
Ladies and gentlemen that does conclude the conference for today. Thank you for your participation you may now disconnect.
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