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Strong second quarter performance was primarily driven by the China service, where freight rates exceeded expectations due to tight market conditions and robust demand in e-commerce, garments, and e-goods.

The China service benefited from customers pull-forward of seasonal goods to derisk upcoming tariff discussions and uncertainties related to the Iran conflict.

Southeast Asia expansion has become a key strategic priority, with regional cargo now representing 20% to 25% of China service volume, significantly higher than early 2025 levels.

Management attributes the success in Vietnam and Thailand to a differentiated service model that targets the top 5% of the market requiring high speed and reliability.

Hawaii and Alaska trade lanes performed largely as expected, though Hawaii faced headwinds from higher energy-related inflation and a shift toward lower-spending domestic tourists.

The company maintains a healthy balance sheet and strong cash flows, allowing for the return of $307.3 million to shareholders through dividends and repurchases over the trailing 12 months.

Full year 2026 consolidated operating income is expected to be higher than 2025, supported by a resilient U.S. consumer and a stable Transpacific trading environment.

Third quarter Ocean Transportation operating income is projected to be approximately 45% higher year-over-year, driven by both higher freight rates and improved volume compared to a muted 2025 period.

Fourth quarter demand is expected to reflect a traditional seasonal falloff, contrasting with the elevated demand seen in late 2025 following the U.S.-China trade agreement.

The new Aloha Class vessel program remains on schedule, with the first vessel, Makua, expected for delivery in Q1 2027 to provide additional capacity for peak season.

Management assumes a stable trading environment where neither the U.S. nor Chinese governments seek to disrupt trade through the end of the year.

The Iran conflict has impacted fuel prices across all markets, resulting in an under-collection of fuel costs in the low teens of millions of dollars as of Q2 end.

Management expects to fully recover the elevated fuel costs by the end of the year through existing recovery mechanisms.

Capital Construction Fund (CCF) balance decreased by $311 million over the last 12 months due to milestone payments for the new Aloha Class vessels.

SSAT joint venture contribution is expected to be lower than the $32.5 million achieved in 2025 due to lower lift volume and higher operating expenses.

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Management clarified that the lower Q4 outlook is due to a return to traditional seasonality rather than a collapse in trade.

The comparison is difficult because Q4 2025 was unusually strong following a specific trade agreement that eased tariff uncertainties.

International carriers have successfully managed capacity to match demand, preventing large backlogs while maintaining high utilization.

Matson expects to step rates down historically after the peak season ends in October, which is reflected in their guidance.

Southeast Asia cargo yields a slightly lower margin than China direct cargo due to connecting carrier costs and equipment positioning.

Despite higher costs, the service achieves a significant premium over market rates by serving customers who previously relied on airfreight.

The new vessels have similar daily operating costs and fuel burn to current ships but offer larger capacity.

Profitability gains will be driven by incremental utilization of the larger capacity, particularly during Q2 and Q3 peak periods.