Agribusiness result expected to improve this year
By HARRY EAGAR, Staff Writer
POSTED: February 4, 2010
Alexander & Baldwin’s agricultural sector lost $27.8 million in 2009, primarily at Hawaiian Commercial & Sugar Co., and the whole corporation’s profits fell to $44.2 million from the $132.4 million of 2008.
Gross revenue fell $475 million from the $1.88 billion of 2008 to $1.4 billion last year.
Net income in 2009 was $1.08 per share, the company reported Wednesday, down from $3.19 the year before.
The results from the agricultural segment had been expected. Drought pushed sugar production down to 126,800 tons, which was 28,400 tons less than the unprecedentedly low production in 2008 and 75,000 tons under what would be expected in a normal year.
The agricultural results would have been even worse, but Gay & Robinson on Kauai quit making sugar, although it plans to continue growing cane for ethanol. G&R and HC&S were the last members of a cooperative. G&R’s withdrawal terminated the membership, which resulted in a $5.4 million gain not from operations for HC&S. Without that, A&B’s agricultural losses would have been about 20 percent higher.
Last week, A&B’s board announced it would continue to operate HC&S through the end of this year, but no commitments beyond that were made.
Although Kauai Coffee, which is included in A&B’s agriculture results, enjoyed better prices and higher income in 2009, the segment’s turnover fell $17.3 million to $107 million.
A&B President Stan Kuriyama said: "The company’s modest profit in 2009 was hard earned in a very difficult operating environment for all of our lines of business."
However, property sales were doing well at the end of the year, and Kuriyama said A&B’s cost-cutting and new investments "will position us well in 2010 as the markets we serve begin to recover."
The company is now aiming at Hawaii real estate for its best growth prospects.
Sales of improved property were strong, but that was the only part of A&B’s businesses that was not under strain.
Not only was traffic down at Matson Navigation, A&B’s biggest subsidiary and usually its biggest moneymaker, but rates even in its China service were falling. Occupancies were higher and rents lower in its property portfolio.
"Despite the challenging earnings environment, the company generated positive operating cash flow, while improving its overall financial condition. Our strong balance sheet, ample liquidity and modest debt position leave us well positioned to take advantage of market opportunities," Kuriyama said.
He said he expects the agribusiness segment to enjoy a "major improvement" this year. World sugar prices have been high. HC&S usually sells its crop forward, and it missed most of the run-up in 2009. As those advance sales are completed, it can hope to sell sugar at the highest market prices in decades.
However, "adequate access to irrigation water must be maintained to ensure ongoing operating viability over the longer term," he said.
HC&S is anxiously awaiting a decision from the state Commission on Water Resource Management on the amount of ditch water it will continue to have access to from East and West Maui streams.
Kuriyama said real estate’s future looks promising.
"We are seeing more rational pricing in Hawaii real estate assets, and with two modest ‘Project X’ investments over the past two months, we have resumed making non-1031 investments in the state," he said.
A 1031 investment is a sale of one income-producing property and purchase of another with the proceeds, which brings powerful tax advantages. Project X investments are new-from-the-ground-up developments.
The movement of containers between Hawaii and the West Coast is an indirect indicator of the overall economy, and in 2009, Matson’s total was 136,100, down from 152,700 in 2008. Automobile shipments were down slightly to 83,400, but most of those were rental cars moving in and out, since new car sales in the islands dropped by half.
Matson’s revenue, which was more than a billion dollars two years ago, was down to $888 million.
Operating profit dropped by 45 percent to $58.3 million before taxes and other charges.
Transportation logistics services revenue dropped from $436 million to $320 million, and operating profit dropped 64 percent to $6.7 million.
In recent years, real estate leasing has been an expanding sector for A&B and normally its most stable sector. A sign of the weakness of the Mainland economy comes from occupancy rates. They softened in 2008 to 95 percent, then fell down to 85 percent in 2009.
Nevertheless, revenue for 2009 was down only slightly to $107.8 million, with operating profit down 10 percent to $47.8 million.
Sales in new developments fell to $6 million from $217 million, and sales of improved property were slightly higher at $103.6 million, so that operating profit fell from $86.6 million to $39.1 million. Only 18 units were sold in A&B’s Hawaii developments (some in joint ventures).
Transportation logistics services revenue dropped from $436 million to $320 million, and operating profit dropped 64 percent to $6.7 million.
