Q1 2025 Matson Inc Earnings Call
Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements within the meaning of the federal securities laws regarding expectations, predictions, projections, or future events.
We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to defer materially from those in the forward looking statements in the press release, the presentation slides, and this conference
These risk factors are described in our press release and presentation and are more fully detailed under the caption risk factors on pages 12 to 23 of our 410K filed on February 28th, 2025 and in our subsequent fileings with the SEC.
Please also note that the date of this conference call is May 5, 2025, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these forward-looking statements.
I will now turn the call over to Matt.
Matt: Thanks, Justin, and thanks to those on the call. Starting on slide 3.
Matt: Our first quarter financial performance was as expected, with significantly higher year-over-year consolidated operating income.
Matt: The year-over-year increase was primarily driven by our China service, which benefited from the carryover of elevated freight rates from the fourth quarter of 2024, combined with healthy freight demand following the traditional post-Lunar New Year period.
Matt: In our domestic trade lanes, we saw higher year-over-year volume in Hawaii and Alaska and lower year-over-year volume in Guam.
Matt: In Logistics, our operating income was lower year over year, primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management.
Matt: Looking ahead, we are lowering our 2025 outlook due to the significant uncertainty regarding tariffs and global trade.
regulatory measures
the trajectory of the U.S. economy and other geopolitical factors.
Matt: I will now go through the first quarter performance of our trade lanes, SSAT, and logistics, so please turn to the next slide.
Matt: Hawaii container volume for the first quarter increased 3.2% year-over-year due to the dry docking of a competitor's vessel.
Matt: Excluding the volume related to the dry docking of a competitor's vessel, Hawaii container volume would have been roughly flat year over year.
Matt: For the full year 2025, we expect volume to be comparable to the level in 2024, reflecting modest economic growth in Hawaii and stable market share.
Please turn to slide 5.
Matt: According to UHERO's February economic report, the Hawaii economy remained stable with a low unemployment rate, strong construction activity, and stable tourism.
Matt: offset by challenging population growth and high inflation and interest rates.
Matt: Hawaii is experiencing solid construction activity from both public and private sector projects including rebuilding efforts on Maui following the wildfires in 2023 with elevated demand for construction workers.
Matt: With respect to tourism, international tourist arrivals continue to be well below pre-pandemic levels, and tourist arrivals to Maui remains on a slow recovery path.
Matt: Moving to our China service on slide 6, we saw significantly higher freight rates year-over-year as the elevated freight rates from the fourth quarter of 2024 carried into the first quarter.
Matt: Matson's volume in the first quarter of 2025 was 1.4% lower year over year.
Please turn to slide 7.
Currently, there is significant uncertainty regarding tariffs in global trade.
Matt: Regulatory Measures, The Trajectory of the U.S. Economy, and Other Geopolitical Factors.
Since the tariffs were implemented in April,
Our container volume has declined approximately 30% year-over-year.
Matt: Given the pronounced market decline in demand in the Trans-Pacific in April, coupled with limited visibility to our container demand,
Matt: We expect container volume and average freight rates in the second quarter to be lower year over year.
Matt: At the moment, it's difficult to know if these lower volume levels are transitory or will persist for a longer time in 2025.
Matt: And the duration of this lower demand period will likely depend on active negotiations taking place across the supply chain and the timing of potential amendments to the tariffs.
Matt: As such, for the full year 2025, we also expect container volume and average freight rates to be lower year over year.
Matt: We continue to work closely with our Asia transshipment partners as our customers look at options to diversify and grow their manufacturing locations.
Matt: Many of our customers moved to a China Plus One strategy a few years ago to diversify their operations, and we expect this trend to continue.
Matt: We will continue to follow our customers as they reposition and expand their manufacturing footprint in response to changing tariffs as part of our catchment basin strategy in Asia.
Matt: During the first quarter, we announced a new direct service connecting Ho Chi Minh to our CLX and MAX Shanghai departures.
Matt: This development is a testament to our brand recognition in Asia and our ability to provide the fastest connecting times out of Vietnam.
Matt: Ho Chi Minh will be our second direct connection in Vietnam, and our expansion is based on the success and customer feedback we received since launching our inaugural direct service connection from Haiphong two years ago.
Matt: As a result, in the near term, we expect higher volume from Vietnam from transshipments as our customers manage their freight in an unsettled environment.
Matt: We believe we are well positioned with multi-year transshipment relationships to scale up the services as expedited freight volume grow in the region.
Matt: We expect the uncertain environment to accelerate the diversification of our catchment basin in Asia. And in addition to Vietnam, we are already carrying freight originating in Cambodia, Thailand, Indonesia, Malaysia, India, and the Philippines.
Please turn to the next slide.
Matt: We believe we're in the early innings of U.S.-China trade negotiations, and expect disruptive conditions in the Trans-Pacific, with ocean carriers blanking China sailings and implementing service changes due to lower volume in response to the tariffs.
Matt: We have also seen some carriers add port calls and increase capacity and allocation in strings from other Asia origins.
Matt: At some point, though, retailers will need to restock their shelves or risk significant inventory issues.
Matt: We also expect that consumer demand for e-commerce goods will continue to grow.
Matt: In the meantime, we remain a trusted supply chain partner to our customers and expect to run our business like we always have with a focus on speed, on-time arrivals, early access to cargo, and customer service.
Speaker Change: As I mentioned earlier, our solid relationship with transshipment partners in the region provide opportunities for further diversification of where our freight is originated.
Speaker Change: And lastly, we have the resources and assets to move quickly to adapt to a changing environment and find opportunities.
Speaker Change: For the last 20 years, our China service has gone through many significant disruptive environments, and time and time again, it has shown to be a critical provider of expedited ocean service to existing and new customers.
Speaker Change: I see this period of uncertainty and disruption as an opportunity for Mattson to do what it does best for its customers.
Speaker Change: meeting the evolving challenges and delivering freight fast and reliably given our competitive advantages.
Please turn to the next slide.
Speaker Change: On April 17th, the USTR finalized its Notice of Action under Section 301 as a follow-up to the President's Executive Order on April 9th.
Speaker Change: The announcement confirmed that new targeted port fees will be applied to Chinese vessel owners and operators and Chinese built vessels.
Speaker Change: Based on our review, we believe that Mattson is part of a group of small vessel operators who received exemptions from the USTR.
Speaker Change: The USTR also proposed additional duties on ship-to-shore cranes, containers, and certain chassis.
Speaker Change: The proposal is open to comment and, depending on its final form, may impact how we procure our equipment.
In summary,
Speaker Change: We also remain negatively impacted directly by lower volume and indirectly by merchandise tariffs paid by our customers.
Please turn to the next slide.
Speaker Change: In Guam, Matson's container volume in the first quarter of 2025 decreased 14.3% year-over-year.
Speaker Change: The decrease was primarily due to lower demand from retail and food and beverage segments.
Speaker Change: In the near term, we expect Guam's economy to remain stable, with a slow recovery in tourism, a low unemployment rate, and some increase in construction activity. As such, for 2025, we expect container volume to approach the level achieved last year.
Please turn to the next slide.
Speaker Change: In Alaska, Matson's container volume in the first quarter of 2025 increased 4.8% year-over-year.
The increase was due to higher northbound volume.
partially offset by an additional sailing in the Uruguay period.
Speaker Change: In the near term, we expect continued economic growth in Alaska, supported by low unemployment rate, jobs growth, and continued oil and gas exploration and production activity.
Speaker Change: As such, for 2025, we expect container volume to be comparable to the level achieved last year.
please turn to slide 12
Speaker Change: In the first quarter, our SSA terminal joint venture contributed $6.6 million, representing a year-over-year decrease of $6.2 million.
The increase was primarily due to higher lift volume.
for 2025.
Speaker Change: We expect the contribution from SSAT to be lower than the $17.4 million achieved last year without taking into account the $18.4 million impairment charge at SSAT during the fourth quarter of 2024.
Turning now to logistics on slide 13.
Speaker Change: Operating income in the first quarter came in at $8.5 million, or $800,000 lower than the result in the year-ago period.
Speaker Change: The decrease was primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management.
Speaker Change: For 2025, we expect operating income to be lower than the level achieved in 2024 due to a challenging environment for all of our business lines.
Joel: I will now turn the call over to Joel for a review of our financial performance.
Joel.
Joel: Thanks, Matt. Please turn to slide 14 for a review of our financial results.
Joel: For the first quarter, consolidated operating income increased $45.2 million year-over-year to $82.1 million, with ocean transportation increasing $46 million and logistics declining $800,000.
Joel: The increase in ocean transportation operating income in the first quarter was primarily due to significantly higher freight rates in China and a higher contribution from SSAT, partially offset by higher direct cargo expense and operating overhead costs.
Joel: The decrease in logistics operating income was primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management.
Joel: We had interest income of $9.4 million in the quarter, or $600,000 higher than last year, primarily due to higher balances of cash and cash equivalents.
Joel: Interest expense in the quarter decreased $500,000 year-over-year due to the decline in outstanding debt.
Joel: Net income increased 100.3% year-over-year to $72.3 million and diluting earnings per share increased 109.6% year-over-year to $2.18 per share.
Diluted weighted average shares outstanding decreased 4% year-over-year.
Please turn to the next slide.
Joel: This slide shows how we allocated our trailing 12 months of cash flow generation.
Joel: For the LTM period, we generated cash flow from operations of $820.2 million, from which we used $39.7 million to retire debt.
182.8 million on maintenance and other CapEx
Joel: $161.2 million on new vessel CapEx including capitalized interest and owner's items
Joel: $65.5 million in cash deposits and interest income into the CCF, net of withdrawals for milestone payments, and $13.5 million on other cash uploads, while returning $263.7 million to shareholders via dividends and share repurchase.
Joel: Please turn to slide 16 for a summary of our Sherry Purchase Program and Balance Sheet.
Joel: During the first quarter, we repurchased approximately 500,000 shares for a total cost of $69.2 million.
Joel: Turning to our debt levels, our total debt at the end of the first quarter was $390.8 million, a reduction of $10.1 million from the end of the fourth quarter of 2024.
Joel: With that, let me now turn to slide 17 and walk through our outlook for the second quarter of 2025 on the left-hand side of the page.
Speaker Change: Based on the outlook trends Matt mentioned earlier, we expect ocean transportation operating income to be meaningfully lower than the $109 million achieved in the second quarter of 2024.
Speaker Change: We also expect logistics operating income to be lower than the $15.6 million achieved in the second quarter of 2024. As such, we expect consolidated operating income in the second quarter to be meaningfully lower than the prior year.
Speaker Change: On the right-hand side of the slide, we have our expectations for full year 2025.
Speaker Change: Starting with ocean transportation, we expect year-over-year operating income to be lower than the level achieved in the prior year with the amount dependent on the impact and timing of the global trade and macroeconomic uncertainties we have discussed on this call.
Speaker Change: For logistics, we also expect operating income to be lower than the level achieved in the prior year due to a challenging environment for all business lines.
Speaker Change: As a result, we now expect consolidated operating income to be lower than the level achieved in the prior year.
Speaker Change: In addition to this full-year operating income outlook, we expect the following for the full year. Depreciation and amortization to approximate $200 million, inclusive of $26 million for dry docking amortization.
Speaker Change: interest income to be approximately $31 million and interest expense to be approximately $7 million. Other income to be approximately $9 million.
Speaker Change: an effective tax rate of approximately 23 percent and dry docking payments of approximately 40 million.
Speaker Change: Moving to slide 18, the table on the slide shows our CapEx projections for the full year of 2025.
Speaker Change: Compared to what we previously provided on our fourth quarter call in February, our range for maintenance and other capital expenditures has been lowered by $20 million to $100 to $120 million for full year 2025.
Speaker Change: Our estimate for expected new vessel construction milestone payments in 2025 remains unchanged at $305 million.
Speaker Change: Again, milestone payments for new vessel construction are expected to be paid from our capital construction fund, which already covers approximately 91% of the remaining obligations, excluding future interest income and accretion earned on cash deposits and Treasury securities.
Speaker Change: We currently expect our next cash contribution into the CCF for milestone payments to not be until 2028.
Speaker Change: In the second quarter, we expect to make approximately $36 million in milestone payments from the CCF.
Speaker Change: And then in the third and fourth quarters, we expect to make milestone payments at approximately $71 million and approximately $118 million, respectively.
Speaker Change: With that, let me turn the call back over to Matt for closing remarks.
Matt: Thanks, Joel. Please turn to slide 19 where I'll go through some closing thoughts.
Speaker Change: We are navigating, like many, in an unsettled and rapidly evolving environment.
Speaker Change: For the last two decades, we've operated our expedited ocean service through significant periods of uncertainty and disruption.
Speaker Change: and we've come out of those periods better for it as we demonstrate what we do best for our customers which is to be a trusted supply chain partner with a consistent, reliable and fast service.
Speaker Change: We believe we are in the early innings of U.S.-China trade negotiations. An expected deal to be reached, although timing is unclear. At some point, the largest and second-largest economies will find a way of working together. The stakes are too high for both countries.
Speaker Change: Despite the current uncertainties, we remain quietly confident in our long term prospects due to the diversification of our business and cash flows.
Speaker Change: our focus on serving niche markets where we're an integral part of the supply chain.
and the strength of our balance sheet.
Speaker Change: Our businesses are durable and capable of withstanding short-term fluctuations while creating long-term shareholder value
Speaker Change: We remain committed to maintaining the reliability of our vessel operations and providing high quality service to our customers and the communities that rely on us.
Speaker Change: Mattson has over a hundred and forty years of operating history and has historically performed well during periods of supply chain disruption given our competitive advantages in the reliability of our services.
Speaker Change: We remain committed to looking for growth, either organically or via acquisition, and are prepared to act quickly if an opportunity presents itself during this period of uncertainty.
Speaker Change: And last, we expect to continue to return capital to shareholders through dividends in our share repurchase program.
Speaker Change: Our share repurchase program remains a core tenet of our capital allocation strategy, and we continue to expect to be steady buyers of our shares.
Speaker Change: And with that, I will turn the call back to the operator and ask for your questions.
Speaker Change: Certainly, and our first question for today comes from the line of Daniel Embrough from Steven Zink. Your question, please.
Yeah, hey, good evening guys. Thanks for taking our questions.
Speaker Change: Maybe a couple, starting on the ocean side, you know, obviously a lot of moving pieces here, quarter to date.
Speaker Change: Matt, but if we think about Vietnam and the catch mid-basin you've built out, just curious how much capacity is down there? I think you said you set up a second direct service in the quarter. I guess if we think about the infrastructure down there being less familiar, how much volume could you pick up if those two direct services really ramped?
Speaker Change: relative to offsetting maybe what's coming out of China as we just think about you know what you're building and the ability to maybe expand into new markets to offset the China weakness.
Speaker Change: Yeah, good question. Thanks, Dale. The first thing I would say today
out of Vietnam.
approximately 20% of our current volumes week by week.
Speaker Change: with the recent introduction of Ho Chi Minh is originated in Vietnam.
Speaker Change: We have the ability to increase that volume to the extent that there are
Thank you.
pretty significantly. We're in regular dialogue with our
Shanghai. So we have we have pretty good
Speaker Change: ability to size that up if that's where the market goes. I you know, I think it's interesting as we reflected on it, because Vietnam itself, of course, has grown very rapidly. In part is, in my prepared comments, we're we're talking about
Speaker Change: The increase in China plus one strategy that was implemented under the first Trump administration as people tended to de-risk. And Vietnam...
Speaker Change: has grown rather significantly, but Vietnam has some of the same issues.
Speaker Change: As many fast-growing Asian economies, they've got shortages of power, they have shortages of labor, both in the North and South.
Speaker Change: to what extent the country itself can scale over such a short period of time. But as I said in my comments, we're going to follow our customer. If our customers are able to shift some of their production there, we will be following them. So maybe I've over-answered your question, but we do have the ability to scale.
Speaker Change: The only other thing I would say is Ho Chi Minh, our newly...
Speaker Change: started service also has pretty good connection into Cambodia where we're quite a bit of production is has been growing rather quickly as well so as I said we're going to follow our customers as as this evolves
Speaker Change: That's helpful, and these trans-shipments that are going through Shanghai show up in the China containers. Maybe just a clarifier, that down 30 on the quarter-to-date China volumes, is that directly out of China, or is that including the positive effect of seemingly some probably more growth out of Vietnam?
Yeah, I think...
Speaker Change: I'm going to start with you, Matthew. So, there was some uncertainty of volume in that period, as there was some uncertainty with regard to whether tariffs were going to be rolled back and even the temporary ones were
Speaker Change: It was not obvious exactly how long those were going to stay in place. So we saw reductions out of all origins initially. In the weeks that have followed, we've seen
volume out of Vietnam.
Speaker Change: grow, again, partly because of the addition of our Ho Chi Minh service, but we've seen them grow back to sort of the general levels that we experienced before the discussion of tariffs.
Speaker Change: Great, and then maybe last one for me. Sorry for being more near-term here, but I know you're not want to quantify many pricing movements historically But given the volatility and also the increased disclosure around 2Q volume so far Can you talk about rates and maybe how those have developed? What kind of rate pressures?
Speaker Change: or actions have you seen in the market in response to these, you know, tariffs and subsequent volume drop-off?
Speaker Change: Yeah, so I would say it's been it's been a little bit all over the place I think what you've seen and I'll touch on market
dynamics.
Speaker Change: And then I'll comment on MAPSID, but I think what we've seen at the international ocean periods of
have blanked a significant amount of sailings.
Speaker Change: in response to the lower, as they attempt to resize their fleets for the lower shipments and capacity that is in demand.
Speaker Change: We've seen some ocean carriers hold the line on rates as they have they have seen
Speaker Change: We've also seen some cases where we've seen lower rates in the market and those are tracked through the SCFI So you can kind of see but it's interesting. We've kind of
Speaker Change: Since it's all happening in real time, the market is still in the early parts of readjusting to whatever the new normal is. So it's quite disrupted. I would say from Matson's perspective, and we said this in, or Joel said it,
and lower volume.
Speaker Change: out of, for the second quarter and for the full year. So we expect, again, not to be immune to these. We still command a very significant premium to the market, but our rates will move in sympathy with the overall market direction.
Speaker Change: Great, I appreciate all the color. I'll hop back in the queue. Thanks. Okay, thank you.
Speaker Change: Thank you. Our next question comes from the line of Jacob Lakes from Wolf Research. Your question please. Hey Matt, hey Joel, thanks for your time.
Yep.
Jacob Lakes: So, with China volumes down so dramatically, does it make sense at some point to start temporarily cancelling some MAX sailings similar to what we see during Lunar New Year?
Jacob Lakes: Yeah, it's a very good question. I think our view. I think there's a duration question here. I think our brand.
Jacob Lakes: is to not blank any sailing at any point in time.
because it's our view that...
Jacob Lakes: 4-8 weeks when a lot of inventory runs out that our customers had tried to preload or whatever the individual circumstance of our customers, cargo is going to need to move. There's a lot of activity going on right now.
As we understand, between the manufacturers...
Jacob Lakes: to cover the cost of these tariffs. Our customers are loath to have empty shelves to the extent that they can help it. And we think that a significant amount of cargo will be moving at the last minute. And we've seen lots of...
changing patterns of demand.
Jacob Lakes: as all of this capacity and supply and demand come into balance. And so it is really our goal to...
Jacob Lakes: When our customers look back at this very disrupted period, to know Matson in our franchise stands for on-time arrival, no blank sailings, if economic circumstances
Jacob Lakes: Come to pass that we need to evaluate that then we'll evaluate it we cross that bridge But that's not at all where our heads are at right now
Speaker Change: Got it. That all makes a lot of sense. Thanks. And I know it's just been a few days here, but have you seen any changes from the elimination of the de minimis exemption from last week and any changes you expect to see?
Speaker Change: Yeah, I mean, I think we we understood and you may have seen the announcements of
discontinued its direct
Speaker Change: shipments from China, those are all, I guess their strategy is really to
Speaker Change: from outwardly looking in to more of an Amazon-like model where they're gonna have cargo that is going to be available in the U.S. and to be shipped from U.S.-based warehouses and distribution centers, different from air freighting. So there's been a significant reduction, as we understand it.
Speaker Change: in Air Freight Demand and Carriage associated with Timu's change in business model. So I think we do see more.
Speaker Change: More of that air cargo now converting into ocean and that may be a long-term opportunity for us as E-commerce, you know continues to grow so that's the most obvious one that we've that we've understood This happened just over the weekend with the ending of the de minimis exemption
Guys, thanks for your time. Okay. Thank you. Thanks Jake
Speaker Change: Thank you. And our next question comes from the line of Omar Nukhtar from Jefferies. Your question, please.
Thank you. Hey, guys. Good afternoon.
Speaker Change: Good discussion, and a couple of questions, or a couple of follow-ups from my end, and maybe just on this last point of the de minimis exemption, I know it's still very early, but do you think maybe perhaps longer term, indeed,
Speaker Change: that this could be an opportunity to grab market share, perhaps more permanently, from air freight. Is that kind of the thought process? I know it's, again, still early, but is that kind of the thinking here long-term? Yeah, I mean, I think the de minimis exemption...
Speaker Change: In my personal view, it's not going to be negotiated away with an eventual settlement with China. I think that's just, that's not coming back.
Speaker Change: and a certain portion of that e-commerce, just like our other e-commerce category, we're gonna get a shot at a portion of it wants to or needs to move quickly to replenish.
Speaker Change: for Air Freight, and that market itself will need to, the capacity will need to move and get reoriented. So yeah, but I think that change is here to stay and will produce more opportunity for the ocean carriers.
Okay, thank you. And then just a follow-up.
Speaker Change: Yeah, just back to the 30% decline you've seen in China volumes, you know, since the tariffs were announced in April.
Speaker Change: Obviously, everything is moving very quickly. It's only been maybe four or five weeks since that Liberation Day. From maybe your vantage point, have you noticed any – I know you were talking about Vietnam in the prior question.
Speaker Change: From your perspective, have you noticed any changes from, say, on the China volume specifically, from, say, the first couple of weeks of April when things seem to have come to a standstill globally to now maybe over the past week or two, have you noticed any changes specifically on the China-US?
Speaker Change: Well yeah I can make some general comments and I want to be careful not to bring my 30% forward these are just sort of the average few weeks but what we understand are there are significant
Speaker Change: activities underway between our retail customers and the importers or manufacturers of this product. As I mentioned earlier about resetting pricing, what can move at what price, how does the burden get shared between those three actors and ultimately gets passed through to the end consumer.
And as more time has passed...
in having these negotiations, more cargo will begin to move.
Speaker Change: We also had noted in the trade press that some of the largest customers in the market
Speaker Change: There are, and so our view is that we will, I don't think we'll see a normalization until the tariffs are set at a more permanent level, which, you know, it's hard to know exactly how long that process is going to take.
Speaker Change: But there is cargo moving and more cargo is moving for two reasons. One, as we get into the more traditional busier times of years, I would just give you one example. For example, if you're
Speaker Change: and the formalization of the tariffs, which we hope happens soon.
Speaker Change: Got it. Very good. Well, thank you. I'll pass it back. Okay. Thank you. Thank you, Omar.
Speaker Change: Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line at Ben Nolan from Stiefel. Your question, please.
Ben Nolan: I appreciate it and and also appreciate you guys being forthright with respect to sort of how all of this is happening. So first of all can you maybe talk through are there anything that
Ben Nolan: you know maybe a toggle that can be pulled to to help offset you know the impact of what's going on here.
Ben Nolan: Yeah, I think, Ben, the question for us is what's the duration of this and what does it look like when we get back? So we've done what I think every company in the United States has done, which is
Ben Nolan: are spending levels. We're doing everything we can, and while we determine where the new, once things settle out.
that we could undertake.
And, you know, certainly...
normalization occurs, there's likely to be
Ben Nolan: that this goes on. So I think we don't want to downsize and reduce our ability if we can't put it back in place relatively quickly. And I think we get brand points.
Okay.
Ben Nolan: And I think I know the answer, but is it possible, I know you said 30% volume decline in April.
Ben Nolan: Is it possible to contextualize what that would mean with respect to your operating income in the marine transportation business?
Ben Nolan: Ben, it's Joe. I'll take that one. So we won't give anything specific, but the 30% decline, you can look at our numbers, that's a year-over-year phenomenon that we quoted in April.
Ben Nolan: So, the best way I can contextualize it for you is say, look at our second quarter numbers last year, assume April's down 30% year-over-year, and then make your own estimates of what you think the rest of the quarter will be for our China business, and then, of course, layer on it what you think the...
Ben Nolan: The incremental contribution would be, and that would be the consolidated operating income impact of it. So that's the best way to think through it and conceptualize it.
Ben Nolan: But the only other thing, Ben, this is Matt, that I would say is, at this point, we don't know if this 30% won't gradually get better. We don't know if China and the U.S. may pause these tariffs or take a big step backwards or to some other level before the end of the quarter, and that may cause some changes.
Ben Nolan: Frankly, everyone's crystal ball is a little cloudy at this point, but as Joel mentions, that's the approach that you should take algebraically to try to figure out how we might look.
Ben Nolan: You talked about 20% of the volume that's running through China originating in Vietnam. Is there any thinking about maybe running a direct shipment from Vietnam?
Yeah, I think...
I think, Ben, we think...
Ben Nolan: feeder strategy with our trusted partners, feeder partners in the region, give us the ability out of Haiphong and Ho Chi Minh to have the fastest service to the US West Coast.
So, do we have the ability to move?
Ben Nolan: ships around certainly we do by definition we do but I think we have we can have our cake and and eat it too in the sense that we still will have the fastest connections in Haiphong and Ho Chi Minh
Ben Nolan: through our feeder network and still retain the capacity to depart from those ports on which we have, you know, very long-standing relationships and they provide us simply outstanding service.
Ben Nolan: Let me answer it a different way, too. There is significant...
congestion at the large ports in Vietnam.
Ben Nolan: and we have we don't have long-standing relationships so our own vessels may go there and we may not be able to move as effectively or as reliably as we do these smaller ports for the feeder vessels that we're currently operating so that's just another way to say the same thing
All right, y'all.
All right, I appreciate it guys
Speaker Change: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to management for any further remarks. Okay, well thanks for your attention today. We look forward to connecting with you at the end of the next quarter. Thank you.
Speaker Change: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.