Matson Inc (MATX) Q1 2021 Earnings Call Transcript

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Matson Inc (MATX -2.02%)
Q1 2021 Earnings Call
Apr 27, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day thank you for standing by. Welcome to the First Quarter 2021 Financial Results Conference Call. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Lee Fishman. Please go ahead, sir.

Lee Fishman -- Senior Director of Strategic and Corporate Development

Thank you, Leya. Joining me on the call today are Matt Cox, Chairman and Chief Executive Officer; and Joel Wine, Executive Vice President and Chief Financial Officer. Slides from this presentation are available for download at our website www.matson.com under the Investors tab.

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 differ materially from those in the forward-looking statements, in the press release, the presentation slides and this conference call. 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 21 of our Form 10-K filed on February 26, 2021, and in our subsequent filings with the SEC.

Please also note that the date of this conference call is April 27, 2021 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.

And with that, I will now turn the call over to Matt.

Matthew J. Cox -- Chairman and Chief Executive Officer

Thanks, Lee, and thanks to those on the call. I'll start with a quick recap of our first quarter results. So please turn to Slide 3. Matson's off to a strong start to 2021 with continued solid performance in Ocean Transportation and Logistics. The year-over-year increase in operating income for ocean transportation in the first quarter is primarily driven by continued exceptional demand for both the CLX and CLX+ services. In our other core tradelanes, we continued to see steady demand for sustenance and home improvement goods, lead to higher year-over-year volumes. Logistics operating income for the first quarter increased year-over-year as a result of continued elevated goods consumption and inventory restocking in addition to favorable supply and demand fundamentals in our core markets.

In my nearly 40 years in the business, I have not seen an environment like this with international tradelanes operating at capacity and widespread supply chain congestion leading to pressures the U.S. ports, terminals, rail, yards and warehouses. At Matson, we remain focused on maintaining reliable tradelane services and helping customers in both ocean transportation and logistics, work through this very challenging period.

I'll now go through our tradelane services, so please turn to Slide 4. Hawaii container volume for the first quarter increased 0.6% year-over-year. The increase was primarily due to higher demand for sustenance and home improvement goods, partially offset by one less westbound sailing and the negative impact from low tourism activity as a result of the pandemic. Volume demand in the quarter was influenced to some degree by the economic recovery across the state and the associated improvement in tourism data and employment, plus the benefit of additional stimulus payments. In March, we lapped the first shelter-in-place in Hawaii, which resulted in a surge of home good and essential goods purchases.

I'll now go through the current business trends in our Hawaii service. So please turn to the next slide. The Hawaii economic recovery is under way with continued improvement in tourism, unemployment remains elevated and is expected to recover with improving tourism trends. With eased visitor travel restrictions and increased vaccinations on the mainland, tourism to the Hawaiian islands picked up in the first quarter and is expected to accelerate into the summer as vaccinations become more widespread. The continued recovery in tourism is expected to lead to gradually improving economic conditions in the state, but the economic recovery trajectory continues to remain uncertain.

Historically, tourism has not been a driver of containerized freight demand but it is possible that the rebound of tourism coupled with an improving local economy may lead to modest containerized freight demand. To give you a sense of the volume trend one month into the second quarter, our westbound container volume in April increased approximately 19% year-over-year, which included the benefit of an additional sailing. Normalizing for the additional sailing, April volume increased approximately 16%. During the month, we continue to see elevated consumption and home improvement demand. Recall that last year at this time, our volume in Hawaii began to see the negative effects but the more widespread shelter-in-place orders, near zero tourism and the effects of temporary retail store closures.

Moving to our China service on Slide 6. Matson's volume in the first quarter of 2021 was 218.6% higher year-over-year. We experienced very strong pre and post Lunar New Year's periods compared to last year, where we saw in an elongated post Lunar New Year slowdown period due to China's COVID-19 mitigation efforts. Our China services continue to realize a significant rate premium in the first quarter 2021, and achieved average freight rates that were considerably higher than the year ago period. Volume demand in the quarter was driven by e-commerce and other high demand goods. A number of demand factors remain favorable, including continued supply chain constraints, continued consumption of goods in lieu of services and the beneficial effects of additional stimulus payments. The elevated consumption trend has led to relatively low levels of inventory for retailers.

I'll now comment on current business trends, so please turn to Slide 7. The key demand factors I mentioned for the first quarter continued into the second quarter with April 2021 eastbound container volume higher year-over-year by approximately 151%. Significant supply chain congestion continues particularly in and around the ports of California. We expect these conditions will mostly -- most likely persist through the second quarter and into the traditional peak season. We also expect demand in the Transpacific tradelane to remain favorable with elevated consumption trends to continue beyond the second quarter and for retail and e-commerce demand to remain strong. With retail inventories at relatively low levels of sales, our large retail customers are experiencing stock-outs on essential goods and creating a just-in-time management environment to meet everyday consumer demand.

As such, we expect significant demand for our expedited CLX and CLX+ services to remain throughout the peak season into late October. Matson continues to offer a highly differentiated, fast and reliable set of Transpacific ocean services to help existing and new customers manage through this congested environment. The CLX and CLX+ services are the fastest and second fastest in the tradelane respectively and combined with our competitive advantage in destination services makes an extremely compelling value proposition when compared to air freight and other ocean freight services. Our competitive advantages include having our own and owning our own equipment, and have an unparalleled combination of SSAT terminal operations and the off-dock facility at Shippers Transport for industry leading truck turn times and next day container availability.

As we discussed on fourth quarter earnings call, since the summer of last year, we embarked on a capital plan to purchase containers and chassis to meet the elevated container volume demands throughout all of 2021. So we're well prepared to meet our customer needs if the congested environment we're currently in continues beyond the peak season.

Turning to Slide 8. In Guam, Matson's container volume in the first quarter 2021 increased 2% year-over-year primarily due to higher demand for sustenance and home improvement goods, partially offset by lower tourism activity as a result of the pandemic. The Guam economy remains in a downturn as tourism levels remain depressed and tourism-related businesses activity remains incredibly low. The economic recovery trajectory remains uncertain and it's largely dependent on the recovery in tourism. For the month of April, our westbound container volume increased approximately 25% year-over-year, where we saw the continued elevated consumption in home improvement demand. In April of last year, volume was impacted by reduced tourism and the temporary closure of retail stores during the pandemic.

Moving on now to Slide 9. In Alaska, Matson's container volume for the first quarter 2021 decreased 4.9% year-over-year. The decrease was driven primarily by lower northbound volume due to one less sailing this year, and volume related to TOTEs dry-docking in the year ago period, and lower southbound volume, partially offset by the AAX volume. Normalizing for one less northbound sailing this year and the two dry-dock volume last year, Alaska volume increased approximately 2.5% year-over-year.

I'll now go through the current trends in Alaska, so please turn to Slide 10. The Alaska economy continues to slowly recover from the pandemic lows but remains challenged until the pandemic subsides and the unemployment rate improves. The state's unemployment rate is slightly higher than the national average. The jobs recovery has been negatively impacted by the slow return of retail business where retail was the hardest hit industry in the pandemic. So although the economy is in recovery mode, the recovery trajectory remains highly uncertain. Tourism will continue to remain challenged in the near-term with no cruise tourism activity this summer. There has been a modest pickup in oil production and exploration activity with the improvement in oil prices. Any improvement in this area is expected to have a direct and indirect positive impact on the state economy.

With respect to our southbound tradelane and the AAX services, the A fishing season had a delayed start in the first quarter of 2021 due to an outbreak of the virus at several large fish processing facilities in Alaska's Aleutian Islands but activity ramped up in the last month of the first quarter and it's extending into the second quarter. In April, northbound container volume increased approximately 11% year-over-year, where we continue to see higher volume assistance and home improvement goods. Recall that April of last year, volume in the first half of the month was relatively steady, a gateway to materially weaker demand in the second half of the month, due to the temporary closure of retail stores during the pandemic.

Turning next to Slide 11. Our terminal joint venture, SSAT, contributed $9.2 million in the first quarter 2021 compared to $4 million in the prior year period. The higher contribution was primarily the result of higher lift volume. SSAT lift volume benefited from the significant year-over-year increase in import volume into the U.S. West Coast from China. We continue to see strong import volume into the U.S. West Coast and expect SSAT to be a beneficiary of this elevated volume.

Turning now to logistics on Slide 12. Operating income in the first quarter came in at $6.1 million or $1 million higher than the result in the year ago period. The increase was primarily due to higher contributions from transportation brokerage and supply chain management where we saw elevated goods consumption and inventory restocking, in addition to tight supply and demand fundamentals in our core markets. In April 2021, we saw transportation brokerage continue to benefit from elevated container volumes in Southern California, in line with the trends in the U.S. West Coast import volume at Span Alaska, our freight forwarding business remained steady and tracked our northbound volume trends in our Alaska Ocean business. Widespread supply chain congestion at ports, terminals rail yards and warehouses has created a very challenging environment, and many of our business lines are actively helping customers manage through the chaos. As I've said before historically, during periods of disruption, we tend to perform better helping our customers navigate the difficulties because we own and control the assets and have years of experience in managing freight in challenging times.

And with that, I will now turn the call over to Joel for a review of our financial performance. Joel?

Joel M. Wine -- Executive Vice President and Chief Financial Officer

Great. Thanks, Matt. Now on to our first quarter financial results on slide 13. Consolidated operating income increased from $13 million in the year ago period to $120.2 million with higher contributions from both ocean transportation and logistics. The increase in ocean transportation operating income in the first quarter was primarily due to a higher contribution from the China service and a higher contribution from SSAT, partially offset by a lower contribution from the Alaska service and higher depreciation. The year-over-year increase in the China service contribution was a result of significantly higher average freight rates and higher volumes in the CLX service and the contribution of the CLX+ service. As you may recall, we initiated the CLX+ service in mid-May of last year. The increase in volumes in the CLX service is primarily due to the strong pre and post Lunar New Year periods compared to last year, which was negatively impacted from the COVID-19 mitigation efforts in China, which Matt previously discussed. Plus the year-over-year increase in capacity of the CLX string with the addition of the Daniel K. Inouye in June of last year.

The year-over-year increase in SSAT equity income was primarily due to higher lift volume. The lower contribution from the Alaska service is primarily due to lower northbound volume due to one less sailing this year, and volume related to TOTEs dry-docking in the year ago period. The year-over-year increase in depreciation was due primarily to the Matsonia entering service in the fourth quarter last year and to a lesser extent, the depreciation of scrubbers installed on vessels that occurred last year.

Interest expense for the quarter was $7.3 million or $1.2 million higher than the fourth quarter. The increase was driven by one-time expenses associated with the previous debt amendments on the revolving credit facility and Note Purchase Agreements.

Lastly, the effective tax rate in the quarter was 23.7%. The first quarter tax rate is lower than the fourth quarter rate in the range we provided in the preliminary earnings release on April 15th, due to discrete items.

Slide 14 shows how we allocated our trailing 12 months of cash flow generation. So last 12 months ending March 31st, we generated cash flow from operations of $484.1 million from which, we use $226 million to retire debt, $116.9 million on maintenance capex, $78.7 million on new vessel capex, including capitalized interest and owner's items, and $31.3 million on other cash outflows, including $15.4 million in financing costs related to the two Title XI transactions in the second quarter of 2020. All these things while returning $39.8 million to shareholders via dividends.

Turning to Slide 15 for a summary of our balance sheet, you will note that our total debt at the end of the quarter was $698.9 million and our total net debt was $687.1 million. During the quarter, we reduced total debt by $61.2 million. At the end of the first quarter, our leverage ratio per the recently amended debt agreements was 1.25 times. The outstanding revolver balance at quarter end was $25 million. Regarding the debt amendments on March 31, 2021, we maintained our $650 million facility size and return to LIBOR margin grid what we had in 2017, but with an increase in the base leverage level to 3.5 times and a maximum leverage level of 4.0 times for mergers and acquisitions.

On the private notes, there is a 25 basis point coupon step up if the leverage ratio is between 3.25 and 3.50 times. All-in-all, these amendments are a positive outcome and reflect Matson's strong financial position and cash flow profile and provide us ample capacity to make growth invest -- to make growth investments moving forward.

Lastly on capex. We are focused on the reliability of our operations and providing the quickest cargo availability to our customers in this current congested environment. To sustain these high service levels in our China service and throughout our entire network, we expect a moderate increase in the 2021 equipment capital expenditures from what I outlined on our last quarterly earnings call.

With that, I'll now turn the call back over to Matt.

Matthew J. Cox -- Chairman and Chief Executive Officer

Thanks, Joe. We're off to a very good start to 2021 in both of our business segments. There is no shortage of disruptive activity at key points in the supply chain infrastructure, but we are focused on what we can control and do best and that's ensuring the reliability of our services and working with customers to help manage through this difficult environment.

And with that, I will turn the call back to the operator and ask for your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from the line of Ben Nolan from Stifel. Please go ahead.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

Thank you. Hey, Joe, Matt. So I have couple of questions here. The first relates I guess, to the charter business for CLX+, maybe actually three different questions as it relates to that. We've obviously been seeing the charter rates coming up a lot, I mean people are paying $40,000 a day for narrow beam Panamax ships, that a year ago only cost $8,000, and having to do so for two-and-half to three years. Can you talk a little bit about what your coverage is there and how much cost inflation you think there might be? And then also, sort of along with that, are you still running six ship -- having six ships for the fireship deployment.

Joel M. Wine -- Executive Vice President and Chief Financial Officer

Okay. Ben, I'll take a crack at the first couple of elements there and Matt will supplement. So, I think your main question was around the trend that we're seeing in the charter market and how much coverage we have. And no doubt all equipment, not just vessels, but all equipment across supply chains have increased in terms of demand given how congested things are. So you're seeing in the charter market is not unprecedented in terms of increase of cost relative to other key equipment items for us as well. But I would say from an overall cost perspective still, the biggest cost is terminal-handling in terms of our additional strengths from China and fuel is also a larger costs in the charter itself. So it does matter, certainly if the charter rate goes up, but we still have very, very profitable sailings even with these higher vessel charter rates that you're seeing in the market today. So that's from an overall coverage and profitability perspective.

In terms of availability, we think it's really important to have that six vessel, the normal voyage for our CLX+ when everything is working smoothly would be 35 days, but to have the additional sixth vessel, just in case we need that to make sure that we have our departures on time at scheduled, and Ningbo and Shanghai is really important to us. So I think you still look for us to continue with that philosophy, we're having six vessels for that service. And as I think we've reported to you and talked about, at this point in time, all six of those vessels are chartered into early 2022 and early 2023.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

Okay. No, I appreciate that, Joel. And then next, I guess all my questions here are, when we think about, and Matt you talked about the congestion and it's been talked about all over the place and on the West Coast, really all over the place. But you do have the sort of advantage of your own terminal space and a lot of other things. But are you guys experiencing any level of issue yourselves in terms of your own assets and your own fleet? Is it a function of that congestion, are you able to 100% sort of bypass it?

Matthew J. Cox -- Chairman and Chief Executive Officer

Yeah. I would not say a 100% bypass it. What I would say is that, we have the ability to control as you pointed out our network. We got out early on ordering additional container equipment and chassis and other things kind of before everyone else realize the potential strength of this market and we have been acquiring additional containers and chassis and other equipment ahead of when we've needed it. And that has put us in really good shape because of this and many other cases you see ocean carriers in the Transpacific trade not again being able to take bookings or taking bookings, but not have containers to be able to fill or to fill their ships and lots of containers are in the wrong places that is, are struggling to get back to the origin markets in China to fill up again. We also see care -- other international ocean carriers are continuing to have to blank or cancel sailings because they can't, literally can't get their vessels back on time for that next loading in a deployment. We have faced -- we have not lost a single booking because we've not had a container and nor have we had a voyage that we've missed since the beginning of the pandemic. So while we've had some of the same issues of congestion, we're much better positioned to management and it's resulted in a standout differential between our ocean services and everyone else's.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

All right. I appreciate it. And then last real quick for me and I'll turn it over and maybe get back. Normally in June, you guys have like clockwork increased your dividend by a penny. The world's a little different now in terms of actually for you guys being a whole lot better. Any -- and I appreciate that it's a Board-level decision, but any thoughts at all as to sort of how you're thinking about the dividend or maybe capital deployment in general?

Joel M. Wine -- Executive Vice President and Chief Financial Officer

Ben, yeah, thanks for the question. So I'm not going to comment specifically on the dividend, of course, we'll have something to say in that in June after we have our Board meetings. But big picture, Ben, I'd say -- I'd reiterate our capital allocation philosophy. It's important to us to maintain our equipment and our core capital expenditures, so that we never could disappoint customers, as Matt just talked about, always have availability and make those internal investments. We're looking for continued organic growth in investments, we're looking for M&A investments and those things don't happen in any kind of material size. We will focus on paying down debt and if there is excess capital on top of that, we'll look at dividend increases, we'll look at share buybacks and even special dividends. So you heard us say that for a while and I just want to -- I want you to hear us continue to say that that's our core philosophy, and I think we're going to stick with it.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

All right, good enough. Surprise, surprise, I guess. All right, I appreciate it guys.

Matthew J. Cox -- Chairman and Chief Executive Officer

Hey we're steady if nothing.

Joel M. Wine -- Executive Vice President and Chief Financial Officer

Thanks, Ben.

Operator

And your next question comes from the line of Steve O'Hara from Sidoti & Company. Please go ahead.

Stephen O'Hara -- Sidoti & Company -- Analyst

Just moving to the commentary about April. Can you just kind of remind me, I know April was kind of a big month in terms of the changes that happened in the market, but is that -- is there a way to normalize the thinking in terms of what you're seeing now for the quarter? I mean I would assume that April was kind of a big dip across the board, maybe beside from China, but is there a way to think about how that normalizes through the quarter?

Matthew J. Cox -- Chairman and Chief Executive Officer

Yeah, it's a good question, Steve. This is Matt. I think what our views, of course, we're lapping some of the bad news early in the second quarter. And so, obviously, the second quarter will show likely some favorable comps, but mostly due to lapping the bad news. And our up -- for the domestic trades, our expectations are that we're at the beginning of a recovery and that the stimulus, the progress of the vaccinations in the U.S. continued good progress toward getting to -- back to a normal. I think it's going to create an environment for growth in our domestic trades. I think again, our expectation is just that that growth will be relatively modest, but we're still encouraged by the combination of the stimulus and people ready to get out and travel and traveling international especially with some of the outbreaks in different parts of the world and many countries nothing as far along in their vaccination programs as the U.S., that the U.S., Hawaii and Alaska and other places will be relatively safe places to go before people are ready to travel internationally.

So again, we like the macro, but we're -- too more being cautious a little bit, Steve, on how much that additional tourism translates exactly into additional freight volumes in this part of the cycle.

Stephen O'Hara -- Sidoti & Company -- Analyst

Okay. And then maybe just on China, I think that you guys go to rate negotiations or rates get renewed around May, and I'm just wondering, is it the same process for CLX and CLX+ and is there any early thinking on that in terms of what you're hearing from customers and things like?

Matthew J. Cox -- Chairman and Chief Executive Officer

Yeah. So we -- yeah you right, the beneficial cargo owner or BCO contracting cycle typically goes from sort of May 1 to April 30 those conclusion, those are largely done at this point. Matson realized a significant increase in that portion of our business that is BCO. And for the non-vessel operating common carriers, more quarterly or monthly changes in pricing. Those have been -- those are well over half of our overall book of business and those go up and down on market supply demand fundamentals. So we've seen relatively large increases in that piece of business. So both sides, the BCO and the NBO sides of our businesses have been taking rate increases and we're pleased with the progress that we've made there.

Stephen O'Hara -- Sidoti & Company -- Analyst

Okay. And then just maybe, I am -- maybe just make sure I understand. So, I mean in terms of the rates that were in place kind of last year, you talk about what on the kind of rate portion or rate renegotiated portion of the business. Are those relatively stable? So if you negotiated the rate kind of ahead of things, kind of coming apart with the shipping environment, would those rates have stayed largely the same or would there have been any benefit during the year? I guess I'm just wondering, was that a benefit as well last year on that portion of the business or was that more muted and then maybe you see a bigger benefit this year given the renegotiation?

Matthew J. Cox -- Chairman and Chief Executive Officer

Yeah. So the first thing I would say is the annual contracted freight is quite a bit less than half of our overall market today and last year as well. I would say, typically the dynamics you saw it was up and unique to Matson, but typically, of course we honored the freight rates that we put in place last April. But it's often the case that our customers contract for less than all of the freight that they have in their possession. And when our customers who had annual contracts offer to give us more than the minimum quantity commitments embedded in our contract, we politely decline and either direct it them to an NBO or agree for anything amounts the minimum -- amounts in our contract period or amounts at a higher rate. So there was, to your point, some benefit of that was realized in to the previous year and the previous contract cycle. So we will see an increase. And so -- and of course customers were looking for larger volume commitments in the annual contracted process and we took a pretty cautious approach to expanding that portion of our overall book of business. So we do expect to see pretty healthy increase year-over-year compared to last year going into the second quarter and beyond.

Stephen O'Hara -- Sidoti & Company -- Analyst

Okay. All right, thanks. I'll jump back in queue.

Matthew J. Cox -- Chairman and Chief Executive Officer

Okay. Thanks, Steve.

Operator

[Operator Instructions] We have a follow-up question from the line of Ben Nolan from Stifel. Please go ahead.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

I wanted to ask this earlier but I didn't want to monopolize I think. Just quickly talking about the logistics business and there were some commentary in there, the Span Alaska business was going -- it should be experiencing some of the similar volume increase relative to the first quarter as the whole Alaska market does. And I'm trying to think through what that might mean for the logistics portion of your business. And can you remind me what -- how much of the logistics, let's say, operating income comes from Span versus the traditional brokerage business?

Joel M. Wine -- Executive Vice President and Chief Financial Officer

Hey Ben, it's Joel. It's about roughly, roughly half the spend, and it's not meaningfully different between operating income and EBITDA.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

Okay, that's helpful. And then again, sort of sticking with the logistics side of the business and focus a little bit more on the truck and intermodal brokerage. I mean, obviously things are pretty -- it's wild at the moment. Can you maybe talk through what you're thinking there from a corporate strategic standpoint? I mean, is that an area where you guys are trying to gain share or increase your exposure or maybe vice versa? How do you think about that part of the business from a long-term perspective?

Matthew J. Cox -- Chairman and Chief Executive Officer

Yeah. First of all, we see it as highly complementary to our ocean service business and as a portion of our business is that which is handled by Matson Logistics that moves that cargo to the West Coast to Hawaii, Guam, Okinawa then similarly, that portion of our China freight, that is destined for intermodal inland location, Chicago, Memphis, Atlanta is carried on Matson Logistics. So that peripheral -- that benefit both sides. We also -- a new benefit is as we grow in Alaska in the North Slope, Matson Logistics handles all the lower 48 logistics and enhance it off to Matson Ocean Transportation services into comp. So lots of network synergies there.

We've also seen tremendous growth organically. We've been able to bid successfully into a lots of new business and that has helped us grow. And we tend to be more nimble in our logistics business than a lot of our competitors, and are able to find solutions, especially in congested environment and you've heard us say this that our President of Matson Logistics, Rusty Rolfe will say, in chaotic environments, we tend to stand out and find solutions for our customers that set us apart. So, we like the return on invested capital elements of the business. We want to grow the business, we want to grow organically. We'd like to grow via acquisition as long as we were able to find businesses at reasonable valuations and multiples. We're not going to overpay, but we really have a good long-term belief in growth, the growth prospects of logistics over time.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

Okay, that's helpful. And then lastly from me, and this is the honest to goodness, last one. I might have missed it, did you give any color as to sort of what you're expecting for SSAT in the second quarter?

Matthew J. Cox -- Chairman and Chief Executive Officer

I don't think we said anything with regard to the second quarter, but we did say that we expected a very, very busy environment in volume to continue to benefit the joint venture. Obviously that SSAT is a business with relatively large fixed costs and a more volume that you could put over those terminals. It has a very healthy impact to the margins and so we're expecting that business to perform well. I mean we implied that Matson's business group was going to stay busy through Lunar New Year, end of -- toward middle to late October at least, and we expect SSAT to perform well over that same time for a period for the same reasons.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

Right. So implicitly at least do good as you did in the first quarter, is that fair?

Matthew J. Cox -- Chairman and Chief Executive Officer

Yeah, we didn't put a number on it, but we think it will perform well.

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

Right, OK. I appreciate it, thanks.

Matthew J. Cox -- Chairman and Chief Executive Officer

Okay, thank you, Ben.

Operator

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Matt Cox, Chairman and CEO. Please go ahead, sir.

Matthew J. Cox -- Chairman and Chief Executive Officer

Okay, thank you for participating in today's call. We look forward to catching up with everyone at our second quarter earnings call. Please stay safe. Aloha.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Lee Fishman -- Senior Director of Strategic and Corporate Development

Matthew J. Cox -- Chairman and Chief Executive Officer

Joel M. Wine -- Executive Vice President and Chief Financial Officer

Benjamin Nolan -- Stifel Financial Corp. -- Analyst

Stephen O'Hara -- Sidoti & Company -- Analyst

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