Matson Inc. Q1 2023 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 14 through 24 of our Form 10-K filed on February 24th 2023, and in our subsequent filings with the SEC.
Thanks, Lee and thanks to those on the call.
Despite being down from the extraordinary pandemic driven demand level over the last two years <unk> Ocean transportation and logistics business segments performed well in a challenging business environment.
For the first quarter within Ocean transportation, our China service generated lower year over year volume in freight rates, which are the primary contributors to the decline in our consolidated operating income.
We also saw lower year over year volumes in Hawaii, Alaska, and Guam compared to the year ago period.
Logistics operating income decreased year over year, primarily due to lower contributions from supply chain management and transportation brokerage.
I will now go through the first quarter performance of our trade lanes SSAT and logistics. So please turn to the next slide.
Hawaii container volume for the first quarter decreased <unk>, 8% year over year, primarily due to lower eastbound volume.
For the quarter, we saw muted growth in westbound volume and we saw a steadier level of retailer retailer related freight demand consistent with pre pandemic trends.
Volume in the first quarter of 2023 with 0.9% higher than the volume achieved in 2019.
Please turn to slide five.
Hawaii's economic economy continues to grow from strong tourism trends and low unemployment, but it's slowing.
Heroes March projections continue to show economic growth in 2023 supported by continued strength in total tourism at a relatively low unemployment rate.
You hear all projects weakness in domestic tourist arrivals from weakening macro economic conditions to be countered by continued improvement in international tourist trends.
Unemployment is expected to rise a little.
As the economy responds to the effects of higher interest rates to subdue inflationary pressures despite.
Despite your heroes view of continued economic growth in the near term, we expect muted freight demand in the medium term the trajectory of economic growth in the state remains uncertain given the negative trends as a result of higher inflation and higher interest rates.
Moving to our China service on slide six Matt.
<unk> volume in the first quarter of 2023 was 35, 4% lower year over year, primarily due to no cc ex service in the quarter and lower demand for our <unk> and <unk> plus services.
Nearly two thirds of the year over year volume decline was related to the Ccs service in the year ago period.
<unk> continued to realize the significant rate premium over the Shanghai Containerized freight index in the first quarter of 2023.
We achieved freight rates that were lower than in the year ago period, but higher than those achieved in the first quarter of 2019.
Please turn to slide seven.
In the first quarter, our retail customers continue to conservatively manage the inventories amid weakening consumer demand.
Increasing interest rates and economic uncertainty.
As we noted on our fourth quarter earnings call in the weeks post lunar new year, we saw late demand for our China service and as a result, we decided not to sale of the <unk> plus vessel from Shanghai for a few weeks.
Currently in the Trans Pacific business conditions are mixed with general improvement in trade lane capacity and some improvement in retailer inventories.
Regarding trade lane capacity, we have seen more short term capacity management in the form of blank sailings.
With that our scope with expedited ocean, we have seen one competitor terminate its west coast bound service.
On the demand side, we continue to see conservative inventory management by our retail customers in light of the economic uncertainty.
Given the conservatism and inventory management.
Retail inventories could become quite tight to the extent computer consumer demand stabilizes or firms up which could drive incremental short term demand for our expedited services.
Looking ahead for us.
The second quarter, we expect our CLEC and <unk> plus services to reflect freight demand levels below normalized condition.
With lower year over year volumes, and a lower freight 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.
Regardless of the economic environment, we expect to continue to earn a significant rate premium to the CSI, reflecting our fast and reliable ocean services and unmatched destination services.
Please turn to the next slide.
This slide is a summary of our China service offerings in the last couple of years and what we expect in 2023 2024 and beyond.
Our expedited service in the transpacific have evolved through and beyond the pandemic to meet the demands from our customers.
Out of the pandemic, we gained the <unk> plus service as a permanent fast transit service into southern California that complements our highly differentiated <unk> offering.
The Madison brand was enhanced during the pandemic with our <unk> plus and <unk> offerings. As we responded quickly to our customers' needs and provided reliable ocean and terminal services during a difficult period with port congestion and supply chain issues going forward, we will continue to uncover.
Growth opportunities in the trans Pacific by leveraging our brand and success with the CLS Ax or <unk> plus service.
Given the vessel changes in the CLEC string in the next couple of years, we expect the annual run rate of volume for the CLS Ax to be approximately 60 to 65000 containers until the three new Aloha class vessels are in service in 2026 and 2027.
As the new Aloha class vessels enter the trade Lane, we expect to see Alex capacity to increase approximately 500 containers per vessel per voyage.
Or the <unk> plus service, we expect the annual run rate of volume to also be approximately 60 to 65000 containers.
Please turn to slide nine.
In Guam Madsen's container volume in the first quarter of 2023 decreased 10, 9% year over year. The decrease was primarily due to lower retail related demand.
Volume in the first quarter of 2023 was three 9% lower than the level achieved in the first quarter of 2019.
In the near term, we expect muted freight demand in Guam. Despite continued improvement in the economy with increasing tourism and a low unemployment rate.
There were also negative trends as a result of higher inflation and higher interest rates that create uncertainty in the economic growth trajectory.
Please turn to the next slide.
In Alaska Madsen's container volume for the first quarter of 2023 decreased four 8% year over year. The decrease was due to lower export seafood volume from <unk>, primarily due to three less sailings.
Lower southbound volume, primarily due to lower domestic seafood and household goods volume.
Partially offset by higher northbound volume due to two additional sailings.
Compared to the first quarter of 2019 volume in the quarter was 27% higher.
The Alaska economy continues to show good growth and improvement in key indicators from the depths of the pandemic.
In the near term, we expect continued economic growth from continued job growth and increased energy related exploration and production activity. However, there are negative trends as a result of higher inflation and higher interest rates that create uncertainty in the economic growth trajectory.
Please turn to slide 11.
Our terminal joint venture SSAT declined $35 $8 million year over year to a negative one $8 million.
The lower contribution was primarily due to lower other terminal revenue and lower lift volume 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 Transpacific trade Lane.
For the second quarter of 2023, we expect volume to reflect the challenging environment in the Transpacific trade Lane, we also expect significantly less detention and demurrage revenue than the year ago quarter.
Absent an economic card lending, we expect SSAT to trend to pre pandemic profitability levels beginning in the second half of the year.
Turning now to logistics on slide 12.
Operating income in the fourth quarter came in at $10 9 million or $5 $5 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 lower demand in the transpacific trade Lane and a lower contribution.
Transportation brokerage.
In the near term, we expect a mix of activity across the logistics line of business. We expect continued growth in Alaska to be supportive of our freight forwarding demand.
We expect supply chain management to track, our China service, so a challenging environment in the second quarter as I discussed previously.
For transportation brokerage, we expect near term challenges with lower freight demand driven primarily by retail customers continuing to manage down inventories excess capacity and declining <unk> fees.
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 first quarter results.
For the first quarter consolidated operating income decreased $393 $9 million year over year to $38 7 million with lower contributions from ocean transportation and logistics of $388 4 million and $5 $5 million respectively.
The decrease in Ocean transportation operating income in the first quarter was primarily due to lower freight rates and volume in China, and a lower contribution from SSAT, partially offset by lower operating costs and expenses, including fuel related expenses, primarily related to the discontinuation of the Ccs service.
The decrease in logistics operating income was primarily due to lower contributions from supply chain management and transportation brokerage.
We had interest income of $8 2 million in the quarter due to higher cash investment rates on our cash and cash equivalents and cash deposits in the CCF as compared to no interest income in the prior year period.
Interest expense in the quarter decreased $3 million year over year due to the decline in outstanding debt in the past year. The interest expense in the first quarter also includes the premium paid to retire two debt securities in the first quarter.
The effective tax rate in the quarter was 23, 1% compared to 21, 1% in the year ago period.
Please turn to the next slide.
This slide shows how we allocated our trailing 12 months of cash flow generation.
For the LTM period, we generated cash flow from operations of approximately $1 billion at $94 7 million from which we used $137 9 million to retire debt $145 million on maintenance and other capex $53 4 million on new vessel, capex, including capitalized interest and owners' items.
$623 7 million in cash deposits and interest income in the CCF net of withdrawals for milestone payments.
$27 4 million on other cash flows cash outflows, while returning $413 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 first quarter, we repurchased approximately <unk> 7 million shares for a total cost of $42 $1 million, including taxes.
As of April 26, we had <unk> 7 million shares remaining in the REIT.
Purchase program.
Since we initiated our share repurchase program in August of 2021 through April 26 of this year, we have repurchased eight 3 million shares or approximately 19% of our outstanding shares for approximately $650 million.
Last week, our board of directors approved adding 3 million shares to the existing program and extended the program end date to December 31 2025.
As we have said before we are committed to returning excess capital to shareholders and plan to continue to do so in the absence of any large organic or inorganic growth investment opportunities.
Turning to our debt levels, our total debt at the end of the quarter was $476 7 million all of our outstanding debt is fixed rate.
Our $650 million revolving credit facility is our only floating rate instrument and it is undrawn as of quarter end.
As of the end of the first quarter. The average interest rate on the outstanding debt was 2.0% to 4% with.
We reduced outstanding debt principal in the quarter by $40 8 million of which $14 4 million was through regularly scheduled amortization and the balance of $26 4 million was through the repayment in January and March of two titled <unk> Securities.
I am now going to walk through an update on the capital construction funds. So please turn to the next slide.
As we mentioned on our fourth quarter earnings call in February we deposit of $100 million in cash into the CCF and flex the accounts receivable to reduce our taxable income in 2022 weeks.
We currently do not expect to make additional cash contributions to the CCF until 2026.
The cash balance in the CCF at the end of the quarter with $623 7 million.
Based on the remaining milestone payments of roughly $949 million.
Nearly two thirds of the program has been funded into the CCF.
Note that the two thirds figure excludes interest income on cash deposits that may be earned in future years.
The restricted cash in our CCF is currently held in the U S Treasury obligations fund with daily liquidity.
At the end of the first quarter Securities held within the fund had had a weighted average life of 35 days.
We continue to expect a tax refund this year of approximately $119 million for the cash deposit into the CCF last year that was applied to the 2021 tax year.
We expect the refund to be used for general corporate purposes and to be included in cash and cash equivalents on the balance sheet.
And lastly, we expect to make our next milestone payment from the CCF in the second quarter and the amount of approximately $50 million with net with that I'll now turn the call back over to Matt. Okay. Thanks, Joe Please.
Please turn to slide 17, where I'll go through some closing thoughts.
We expect the consolidated operating income in the second quarter of 2020 through to be higher than the first quarter.
Normal seasonality trends are returning to our domestic trade lanes and logistics as mentioned previously in the second quarter, we expect to see freight demand for our China service below normalized conditioned.
In the near term, we expect continued economic growth in Alaska to be supportive of improved freight demand.
And in Hawaii, and Guam, we expect muted freight demand.
But we recognize the potential economic overhang that could negatively affect volumes in each of these core domestic markets.
As I mentioned previously in the second half of the year in the Trans Pacific, We expect improved trade dynamics as the market transitions to a more normalized level of demand.
In closing Madison performed well in the first quarter it was better than any first quarter in <unk> history before the pandemic.
Although there is currently a lot of economic uncertainty, we feel very good about our balance sheet situation, our market positioning and ocean transportation and logistics and the Companys potential earnings generation compared to pre pandemic levels.
The pandemic highlighted the benefits of our Ocean service and logistics units to help our customers through a difficult period of supply chain infrastructure congestion.
Within the Trans Pacific our efforts to maintain service reliably and focus on our customers high level of demand significantly expanded our China service and elevated the Madison brand going forward, we're in a great financial and operating position to leverage the madsen brand to capitalize on growth opportunities.
Entities as they emerge.
And with that I will turn the call back to the operator and ask for your questions.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
The first question comes from the line of Jack.
Jack Atkins from Stephens Jack Please go ahead.
Okay, great. Good evening guys. Thank you for taking my question.
Sure Jack.
Matt if I could if I could maybe start with with something you said in your closing comments and I. Appreciate now that things are beginning to at least stabilize somewhat here you guys are providing a little more commentary on sort of your.
Forward projections, but as you think about the second quarter and the comment that operating income on a consolidated basis would be higher sequentially I guess could you maybe comment.
Give us some high level thoughts on what will be driving that.
Seasonality would suggest that your volumes in Hawaii would pick up a little bit maybe the same in Xiamen.
The service could you maybe kind of give us some puts and takes in terms of what what is going to be driving the higher operating income sequentially for you.
Yes.
<unk>.
The big part of it in your question, it's really returning to more normal levels of seasonality typically and as you know.
<unk> from our business.
Typically we see the first quarter being the weakest and the second is typically.
The second weakest in our strong next quarter. So the second and third quarter tend to be our strongest and those are really around seasonal patterns of.
In the case of the transpacific trades, the normal selling cycles in the holiday periods.
And how are customers demand levels in terms of retail sales and other drivers are reflected so our own seasonality is really reflected in our customers' selling patterns and the domestic trade lanes, you see a little bit at the same where you see more people travelers in economic demand in those two middle quarters.
By and large and so I think we're seeing seasonality being the bigger factor.
Of course, we and so.
It isn't that we don't think much of a stretch to say that the second quarter.
It's going to be higher at almost always has been if you look back in our history. So those are thats the main driver Jack.
Okay Matt.
I appreciate that and I guess.
Sort of talk to your customers and kind of get a feel for.
What's going on within their business to think about.
How you should plan for the future.
What are you hearing from from your customers around their expectations for the.
The peak shipping season in the transpacific.
We think we're going to be back to more normal replenishment patterns by that time or is it still.
Too early to make that call yes of.
Of course, our customers share some of the same uncertainties that we live in others, there's the macro.
We're all watching issues around continued rising interest rates and some of the knock on effect of the regional banks is associated with those rate increases.
Whether it will enter a recession or what we.
<unk> continue to be front of mind for our customers.
Those are driving what I think are more cautious.
During patterns and so.
What we're seeing is a level of caution.
Not to be overstocked.
Personally feel that we are making our customers are that is making improvements in <unk>.
Managing through their inventory overhang I don't think its done yet, but I think.
We're making steady progress on that I think in our Trans Pacific trade, we continue to see <unk>.
Strong demand for our expedited product most of which is coming out of the air I think if you look at E Commerce and other things that typically go by here, we're seeing very strong volumes of E. Commerce as our customers are trading out of airfreight and moving it into our expedited product. So I think that's a welcome sign.
And I think that continues that trade down into our expedited ocean.
We will continue to see support even in a period of economic uncertainty. So those are those are some of the factors I think that are driving our demand patterns.
Okay, no that that helps Matt.
I appreciate the longer term.
Your commentary around the.
Volume dynamics in that.
Trans Pacific trade for you guys.
If I kind of think about that youre sort of on that run rate. Currently in terms of that 60 to 65000 container for each service level. If we sort of think about what you did in the first quarter and kind of annualize that out.
So I guess as you sort of think about.
Your business today.
Do you feel like that the business.
Is kind of on more of a.
Sort of a normal I hate to use that word, but a quote unquote normalized run rate basis now I mean, I know the economy is still challenged right rates arent, great, but I mean.
So all of that sort of pandemic.
Fueled congestion do you feel like that that's kind of come out and we're seeing more of a more of a baseline run rate for the business as we sit here today.
Yes, it's a great question Jack.
From my perspective, I think the answer is we were pleased to see the level of demand in the transpacific trade that we saw in the first quarter.
It differed or hope that there would be a continued trade down out of air freight as our customers are trying to manage their transportation spend so we're.
We were pleased to see the level of the expedited market, allowing us to keep our <unk> plus shifts rare.
Relatively full during the quarter, except for the few weeks of the lunar new year period.
And so I think to a certain extent.
We feel good about our positioning in the market.
With the caveat that there continues to be a lot of uncertainty about.
Whether we're going to go into a recession or something else, but I would say.
Absolutely.
Said in our prepared comments absent.
A recession.
I think we are starting to see the benefit of normalized trade volumes.
I think the other thing if you just look at the Trans Pacific capacity not specific to <unk>.
From a contextual standpoint.
I think <unk> seen.
The the lows have been reached we hit bottom.
<unk> freight rates have trended back up yes.
Significant amount, but at least we've hit bottom. We're also seeing the international Ocean carriers doing a relatively good job of managing capacity.
Primarily as I mentioned in my prepared comments through the use of blank sailings so that they are.
We're deploying capacity to meet the market demand, but without a significant overhang and putting capacity in the market. So.
It's good to see the behavior that we saw really frankly at the beginning of the pandemic.
Ocean carriers withdrew capacity with the expectation that there would be a freight recession, which then when there wasn't reintroduce.
<unk> introduced that capacity so it's good to see the ocean carriers.
<unk>.
Managing their their capacity.
For the current level of demand that's somewhat encouraging but again, there's still a lot of macro risks out there, but what we've seen is as encouraging frankly.
Okay. That's great I guess last question and I'll hand handed over but I guess looking outside of the Trans Pacific, which has been sort of key focus here for the business for the last couple of years and thinking about Hawaii.
That Jones Act Lane.
Matt I guess as you look out over the next couple of years, where do you think.
I understand that there are obviously issues around the economy and lending standards and things like that but then as you sort of think about the long term construction cycle.
In Hawaii.
Do you think we're kind of getting to a point, where we're going to need to see increased levels of construction activity.
Obviously not in 'twenty, three maybe not even 24, but do you feel like there is sort of a there's.
Theres a wave building there at some point it feels like it's been a while since we've really seen elevated levels of construction activity in Hawaii, just sort of curious longer term. If you feel like that's a potential volume catalyst.
A couple of years.
Yes, So let me <unk>.
Pretend to have a politician and answer a question you didn't answer a question you didn't ask okay.
But I will eventually get paid.
My question, which is I continue to feel good about the overall state of the Hawaii economy long term I think it will continue to be a desirable tourist destination I think the military has made big investments there I think given.
So the geopolitical political.
Uncertainties in <unk>.
Challenges the Pacific will remain an area of focus into the future.
And I think for those reasons, we will see relatively healthy, although mature, but still healthy levels of economic demand in Hawaii. So we feel long term good about it.
We also acknowledge that it's a relatively mature market and will grow with the states GDP I think there will be a subset task to get to your question of Capex capital spending capital spending.
Renovations of hotels.
And new hotels.
Improvements in.
Military spending, including a large drydock that is going to be built over the next few years and Pearl Harbor. So I think youll continue to see growth in spending in the Hawaii market over the next few years.
Okay, Matt Thanks for the time really appreciate it and I'll hand, it over okay. Thanks, Jeff.
Please hold for the next question.
The next question comes from the line of Ben Nolan from.
Steve.
Dan. Please go ahead.
Please hold for the next question.
The next question comes from the line of.
Jake lacks of Wolfe research.
Please go ahead.
Hey, thanks for the time.
Hi, Jake.
So you know the premium for spot rates were still above pre pandemic levels. In <unk> do you think there's further pressure on your premium versus Shanghai Containerized freight index to come or do you think the premiums at a structurally higher level now for some reason.
Yes, I would say that we are seeing.
Higher.
Matt since two expedited service offerings.
Sure.
We're seeing higher freight rates.
On the <unk>, which is the only service that.
Existed pre pandemic, we're seeing higher freight rates than we had seen pre pandemic.
And they are they remain at a sizable.
Premium to the Sci Fi.
And we're seeing good level of demand for our expedited service offerings.
And so.
I think that we're going to see a jump between commentary about matching in the commentary about the Pacific but.
I continue to believe in the transpacific entire Trans Pacific Trade Lane relatively.
Good management of capacity.
The.
Demand begins to improve as we as we get into the second half of the year, owing primarily seasonality factors. So I see the overall market being relatively orderly from our capacity management standpoint.
And I think Madison continues to believe that we're very well positioned.
The freight rates that we're seeing now will.
We will continue to be very strong relative to the <unk>.
Got it so I guess, what I'm trying to understand do you think there is.
More of a lap your rates typically lag the Shanghai <unk> do you think there's more of a lag to calmer.
Yes.
First of all I don't know Jake, but what I believe is.
We're getting priced off of airfreight, a discount to airfreight products R. R.
Freight rates move somewhat independent of the Sci Fi now and are based on our savings relative to the airfreight equivalent prices and so we're not immune from the <unk> and the cycle of course were down with the cycle, but we've landed or at least at the moment landed at a rate significantly higher than pre pandemic.
And significantly higher than the rest of the market and would expect that to remain the case. So I don't know if theres, a lag or not I just think we've landed at a good spot.
And it's owing to our highly differentiated product.
Got it Okay and then.
Volumes in the quarter were a lot better than normal seasonality.
Whereas share gains given the competitor, leaving the market or broader demand improvement and then can you just sort of give us a sense on how these trended through the quarter and into April .
Yes.
I can say.
Relative to the share question I think we have taken share, but primarily from airfreight competitors because of our value proposition there of moving at a fraction of the cost of airfreight.
And so that's where I think we've taken share and Thats our primary competitive space.
If we were fortunate in that our customers are looking to manage inventories carefully.
They work through their surplus in that which will need to move from the regular ocean markets will lead to move in an expedited fashion.
But again I think if you look at our traditional customers, who are airfreight managing down in an environment, where they're trying to reduce their transportation spend so I think those are the big factors.
We see driving our current pricing and positioning and demand.
Yeah.
Got it and then just one clarification you made comments about normal seasonality returning to the business is that.
Only on the domestic trade lanes do you think that applies to <unk> as well I think it applies to China as well.
Yes.
Alright, great. Thanks for your time.
Okay, Jay Thank you.
Please hold for the next question.
The next question comes from the line of Ben Nolan Stifel. Ben. Please go ahead.
Okay can you guys hear me this time, we can yes. Thanks.
Okay.
Like decades behind with respect to my technological acumen.
The I have I have a handful of Jack did a pretty good job of asking most of Mylan, but.
The.
One of the things I was thinking about and then we went back and looked at the fleet list is.
You guys have on your <unk> plus service I think there's six vessels that are committed to it to those.
One I think maybe you already did come off contract the others in a month.
They are too.
Is there is there any ability or room to maybe flex down that or maybe re price some of that in such a way that it.
Reduces some of your operating expenses given the softer.
International market.
Yes, so we.
We are in we are now into a five ship deployment. We can't go further down and maintain a weekly service. So five becomes the 35 day rotation that gives us that weekly service into the Shanghai Ningbo markets that we need.
So with regard to swapping out charters.
Why don't I, let Joe talk about the charter durations in and some of the other side.
To your question, Yes, Ben we've got so right now the five that are running the service today. One charter comes up here in June and then three come up in 2025 and then the last one comes out in early 2026. So it's very unusual once you're committed to two or three years whenever they're lying charter contract as a swap out of that that can be expensive.
And that would be an unusual thing to do so the way we're thinking about it is we have one charter to reset here in the next couple of months in the Q2 and then we will have.
And then three more to do in 'twenty five and wanted to do in early 'twenty six.
Okay.
It's fair to think that the one that I don't know I guess it depends on when your when you originally set it up but is there any room for.
Our cost reduction on the when it comes up in July there is I mean, we.
We were in such a hot market, obviously wanted to maintain vessel capacity and the rates were.
For the vessel charter periods of time, similar to where freight freight rates were at that time and so it was all about just procuring that capacity and not missing a sale and which is why we took a 6% shift to make sure we didn't miss sailings in that blank sailings. So all that was very profitable at that time, but today's charter rates are below where we think some of those tariffs before so as each of these.
There could be an opportunity to reduce some of the daily rate charter the daily charter okay.
Yes.
This is Matt then the other point to make which I think Joel made but just to clarify we do believe that in 2025, we will likely reset depending on what the market conditions are then we're paying a little bit more than market. When we look back the money. We earned during the pandemic priced totally justified the pricing that we received but we are in.
New market now.
And we do think that opportunity in the future as we look forward to the reset of those charters at today's rate would create a benefit to the company, but at that point in time.
Sure sure.
No.
Well.
I guess, while we're while we're talking about cost.
You guys have always been pretty good at controlling costs, but.
Environment, where you don't quite make as much money as you did in youre not pressed to grow as fast or are there are there other things and we're also seeing inflation that maybe brings cost more to the forefront here.
Or are there other areas, where maybe youre thinking about you can be a little bit more efficient.
Yes.
I think.
The answer is yes, there are I think to your question.
Part of the question.
We did not see a significant run up in our head count our operations overseas overhead.
As we flexed up during the pandemic and so on.
Our increases in people costs or head count itself was maybe one two to three percentage per year. During this and we have we have plenty of people. In these next few years of retirement age that we think we're going to be able to.
Be able to manage our head count costs first of all because they didn't go up much and second because it's just regular retirements of course, we're now back into a somewhat normal environment, where we have programs that have been in place for for a while.
Around looking at ways to become more efficient in every year, we identify hundreds of different projects in which we will look for ways to be smarter about the way, we spend money and working with our key partners and vendors look for ways to reduce costs that will happen that did not really happened during the pandemic years as our whole focus.
Was on being able to carry the market given the extraordinary level demand. So we're getting back to sort of regular order.
We will not be slow steaming.
One of our models.
I think we're not going to slow steam because in our transpacific trades in particular, but all our trades in general.
We're in a significant premium to the market in part because we are faster and more reliable and that more than justifies the premium that we receive over the market more than pays for hire additional operating costs.
Having our own fleet of chassis and dedicated terminals in all of the other elements that.
Low us to be the go to carrier 30 cockpit, we think continue to be justified, but notwithstanding that in the outgoing inflationary cost pressures and those things we're going to be after our regular order.
Weekend and week out of looking to be as efficient as we can.
Okay and then last for me you guys mentioned a couple of times in the prepared remarks.
You usually do but.
Looking for growth opportunities and I think you specifically called out the Trans Pacific.
As part of that.
I'm curious if again in this in this market, where maybe theres a little bit less competition.
And whatnot I mean are you beginning to see.
A little bit more in the way of low hanging fruit either organically or organically.
Yes, I'll comment I'd like Joel to comment as well I think.
When we look back at.
And that was part of the reason why we put our sort of chart on the progression of that.
Specific services I think what we've been able to do over time is to prove to ourselves that we can grow now.
Now if we're at the bottom of the cycle, we're hoping that some of the stresses that are being put out others create opportunities I think we're really well positioned to.
To pull the trigger on acquisitions as they occur. We are also seeing the ability over time to grow organically into adjacent markets. So we're going to continue to look for ways in which to grow whether thats, our seafood export business with the <unk> and some of the services between China and.
New Zealand at other kinds of things, we're going to continue to look for ways to.
Look at markets as opportunities present themselves. It is not obvious yet that we're at that point, but I don't know Joel what are your thoughts, yes, I think thats exactly right I think the band I think you're also alluding a little bit too like the trends in the M&A market are we seeing more companies maybe that has to transact and I think it's almost the opposite things are really quiet right now on the M&A front because there is so much economic uncertainty.
There is of course still the financial markets and many sectors are basically closed. So so therefore theres less companies that that are looking to transact on the sell side buyers are still waiting for you just haven't seen enough clarity for things to pick up yet so theres less actual activity out there right now because I think a lot of companies want to enter this period of time.
Decent balance sheet. So it's not like they have to do something they can wait it out so I don't think there is.
Some wave of deals coming our way to fit our profile.
And our approach in general is just to maintain discipline and be steady and be focused so I am not sure big wave of new deals with <unk> with.
<unk> matter to us anyway, but we're not we're not seeing one com anytime soon.
Yeah, I appreciate that and I.
I think I said on the last one was the last one but I had one other that came to mind.
It appears as though there is some pretty good progress being made on the west coast with respect to labor.
But.
It doesn't seem like it's quite good.
Quite resolved yet.
I know in the past that had been something of a tailwind for you guys are you seeing any impact at all from people.
Looking for.
Little security with the mats business versus everybody else.
I don't think we've seen it I don't think that's been really a factor in our demand levels and talking with our customers I don't think we've come across anybody who said hey, we're going to work shifting our freight to you because you could do things other people can't do as it relates to potential labor disruption, which we hope does not occur.
As you've read I've read in the trade press that steady progress is being made and we would direct any inquiry too.
Two the PMA the Pacific Maritime Association.
Remember, but we we've all agreed to deflect the PMA to the updating on behalf of all the.
Ship owners so.
Yes, so so far we haven't seen that as much of a factor at all.
Okay, Alright, I appreciate it thanks guys.
Okay. Thanks, Ben.
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At this time I would like to turn it back to the speaker for any further comments, Matt Cox.
Okay. Thanks, operator, hey, thanks to everyone for participating today, we look forward to catching up with everyone next quarter. Thank you.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Okay.
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Yes.
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