WAILUKU – A U.S. Geological Survey study 4 years in the making and released this week describes the effects of taking millions of gallons of water daily from "the Four Streams" of Na Wai Eha that originate in the West Maui Mountains.
USGS also presented a complex matrix showing the amounts of stream water needed to return to each of the Central Maui streams to revitalize flora, fauna and aquatic life; to recharge the aquifer and to promote taro growing. The report also details the amount of water necessary to resume mauka-to-makai, or mountain-to-ocean stream flow, something not seen for more than a century of stream diversions to irrigate sugar crops.
"The idea is to give people and the commissioners the tools to understand the effects of a decision to divert water and adjust those diversions," said USGS hydrologist Delwyn Oki, who presented the findings of his 176-page report to about 50 people in Maui Economic Opportunity’s classroom Tuesday night.
The Last Sugar Mill in Hawaii HC&S Puunene Maui CLICK HERE for larger imageAlexander & Baldwin, Inc. (ALEX)
Q1 2010 Earnings Call Transcript
May 4, 2010 5:00 pm ET
Executives
Suzy Hollinger – Director, IR
Stan Kuriyama – President & CEO
Matt Cox – President, Matson Navigation Company, Inc.
Norb Buelsing – President, A&B Properties, Inc.
Chris Benjamin – SVP, CFO & Treasurer; General Manager, HC&S
Analysts
William Horner – Stephens Incorporated
Sloan Bohlen – Goldman Sachs
Sheila McGrath – KBW
Brendan Maiorana – Wells Fargo
Tom Wilson – Wilson Capital Management
Tom Spiro – Spiro Capital Management
Presentation
Operator
Good day, ladies and gentlemen. Welcome to the first quarter Alexander & Baldwin earnings conference call. My name is O'Meara and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will be conducting a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.
I would now like to turn this conference over to your host for today’s call, Ms. Suzy Hollinger, Director of Investor Relations. Please proceed.
Suzy Hollinger
Thank you, operator. Aloha and welcome to Alexander & Baldwin's first quarter 2010 earnings call. On the call with me today are Stan Kuriyama, A&B's President and CEO; Chris Benjamin, A&B's CFO and also General Manager of HC&S; Norb Buelsing, President of A&B Properties; and joining us from Matson's headquarters in Oakland is Matt Cox, President of Matson Navigation Company.
Before we commence, please note that statements in this call and presentation that set forth expectations or predictions are based on facts and situations that are known to us as of today, May 04, 2010. Actual results may differ materially due to risks and uncertainties such as those described on pages 17 through 26 of our 2009 Form 10-K and our other subsequent filings with the SEC. Statements in this call and presentation are not guarantees of future performance.
Slides from this presentation are available for download at our website www.alexanderbaldwin.com. You will see an icon at the top of the website to direct you to the appropriate section for download.
This slide provides an agenda for our presentation, after which we will take your questions. We will start with Stan who will comment on the performance for the quarter.
Stan Kuriyama
Thank you, Suzy. I'm pleased to report that A&B posted a solid first quarter and a positive start to 2010. Net income was significantly higher in the first quarter at $17 million or $0.42 per share compared to earnings in the first quarter of 2009 of $3 million or $0.07 a share.
As you'll note from this chart, operating results for all segments improved in the first quarter of 2010 with the exception of real estate leasing. Consolidated operating profit was $42 million in the quarter compared to $17 million a year ago. However, our first quarter '09 operating profit was impacted by a $6 million workforce reduction charge that did not recur in the first quarter of 2010.
Let me now brief you on the quarter highlights from each of our business units. In ocean transportation, our China service is benefitting from the recovery in both volume and rates. Volumes in particular were significantly higher than a year ago and rates are higher on a sequential basis. Matt will have more details for you later in the presentation.
Hawaii container volumes and rates were relatively flat in the quarter compared to last year. While we believe that material increases in volumes and rates are unlikely for the rest of the year, we are pleased that the Hawaii trade seems to have bottomed. Guam's performance was also stable for the quarter. Overall, operating profits in our ocean transportation business continue to benefit from the vessel deployment changes, workforce reduction, and other cost cutting and operating efficiencies implemented over the past two years.
First quarter operating results for MIL benefitted from a large movement for the Department of Defense, as well as from prior year's cost cutting measures. Some stabilization in MIL's intermodal business also occurred in the quarter. In real estate, we continue to observe demand and favorable pricing for quality commercial properties as evidenced by our sales of Mililani Shopping Center in January. This sale drove quarter results for this segment, as well as for the overall company.
Leasing, however, was challenged by several factors; the downward reset of market rents, lower occupancies in our Mainland portfolio, and the time lag between sales and acquisitions of properties in our 1031 exchange program. Norbert would be addressing this further in our presentation.
Agribusiness results improved in the quarter with losses declining by $800,000. However, we didn’t plan on harvesting any sugar in the first quarter, meaningful performance comparisons can't be made until the second quarter. As Chris will describe later, we continue to expect significant improvement for the full year and we recently learned federal grant monies will be made available to help us accelerate our bioenergy research at HC&S.
Photo by Maui Tropica CLICK HERE for more Maui Sugar Cane images
By AUDREY McAVOY HONOLULU
Hawaii’s last sugar plantation could start producing jet fuel for the Navy.
Federal agencies on Wednesday announced they would spend millions of dollars to study producing advanced biofuels from sugarcane grown at Hawaiian Commercial & Sugar’s fields on Maui.
The Office of Naval Research is budgeting $2 million annually for the project through 2015, with a focus on producing diesel and jet fuel from sugar.
The Department of Energy is spending $2 million a year to have the University of Hawaii study energy crop development and energy conversion technologies.
HC&S General Manager Chris Benjamin says his company will be a "working laboratory" to test the potential of biofuel production.
"This federal funding represents a vote of confidence in Hawaii and in the future of HC&S," Benjamin said in a news release. "It is a significant step toward our goal of transforming HC&S into a large-scale energy farm, playing a key role in securing Hawaii’s energy future."
The company, a unit of Alexander & Baldwin Inc., said its vast fields, access to water, farming infrastructure and labor force make it an ideal candidate to produce biofuels on a large scale.
HC&S has long diverted water from East Maui streams to irrigate its fields in arid Central Maui. But this practice is currently facing challenges.
Taro farmers have petitioned the state’s Commission on Water Resource Management to restore more flow to the streams, and prevent HC&S from diverting its usual volumes of water. The case is pending before the water commission.
Sen. Daniel Inouye, D-Hawaii, who met Wednesday with HC&S and U.S. Department of Agriculture officials about the project, said the research could benefit biofuel development efforts not just in Hawaii but also across the country.
"The sugar industry’s infrastructure in Hawaii … will be put to good use producing a variety of biofuels," said Inouye in a statement issued by the department.
Hawaiian Commercial & Sugar Company (HC&S) today announced that it is at the center of significant new Hawaii-based research initiatives on biofuels, working closely with the University of Hawaii and various federal agencies to realize the promise of expanded production of clean, renewable energy.
In today’s announcement, HC&S noted support from Sen. Daniel K. Inouye in detailing annual federal funding of at least $4 million that will be made available through two separate programs, one funded by the Department of Energy (DOE) and the other by the Navy’s Office of Naval Research (ONR), to conduct research at HC&S.
The DOE funding of $2 million annually will be directed to research on energy crop development and energy conversion technologies to be conducted by the University’s College of Tropical Agriculture and Human Resources (CTAHR). The ONR funding, also $2 million annually, will support complementary crop and technology assessments, as well as an evaluation of long-term resource requirements for biomass production. In announcing the ONR portion of the funding, US Department of Agriculture Deputy Secretary Kathleen Merrigan said the USDA would direct the research initiatives, providing $2 million per year through 2015, to help Hawaii accelerate sustainable biofuel feedstock production.
Feb. 9 (Bloomberg) — A global sugar shortage, which drove prices to the highest level in three decades, may peak in the third quarter this year on demand from the U.S., Mexico, India and Pakistan, according to U.S.-based Tropix Capital Management.
Maui Cane Tassels CLICK for larger image.“As we enter the second quarter, we enter the inter-crop period for South Brazil when export supply is minimal,” Sean Diffley, founder of the hedge fund and former head of sugar trading at ED&F Man Holdings Ltd., said by email. “Countries like Russia will return to the market in force. The acutest part of the deficit may not be apparent until the third quarter.”
India, China, Indonesia, Pakistan, Egypt and Russia are among countries planning to buy sugar to cool domestic prices, worsening a deficit that may reach 11.92 million tons in the year ending April 30, up from 8.32 million tons predicted in October, Kingsman SA said yesterday. The shortfall may be 5 million to 6 million tons this season, according to Tropix.
“The world stocks-to-use ratio should reach 20 year lows in the second half of this year,” said Diffley, who worked for 16 years at ED&F Man, one of the biggest sugar trader.
India, the biggest user, may need to import an extra 2.5 million to 3 million tons this season to meet a 7 million ton deficit, according to Kingsman. Pakistan, Asia’s third-biggest user, plans to purchase 1.25 million tons by June. The country “apparently bought 100,000 tons” from Cargill Inc. in the past few days, Michael McDougall, a Newedge USA senior vice president said yesterday in a report from an industry event in Dubai.
China Drought
China, the biggest consumer after India, may have a deficit of 3.3 million tons this year after drought and cold weather cut yields, the Guangxi Bulk Sugar Exchange Center said last month. Thailand, the second-biggest exporter, may produce 7.2 million tons in the year started in November, less than the forecast.
“There’s a real rationale to be invested in sugar, at least until March,” when the Brazilian harvest begins, Hussein Allidina, head of commodity research at Morgan Stanley, said in an interview in Dubai. Prices will extend gains as a deficit was expected to last through the season ending Sept. 30, he said.
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.
According to a recent Congressional Budget Office report, the increased use of ethanol is responsible for a rise in food prices of approximately 10 to 15 percent.
Why?
We’re turning corn into fuel — a highly inefficient one, at that — instead of food.
The Mackinac Center for Public Policy points out that "mixing food and fuel markets for political reasons has done American consumers no discernable good, while producing measurable harm."
However, perhaps summing up the issue most succinctly is Mark J. Perry, professor of economics and finance at the University of Michigan-Flint:
Anytime you have Paul Krugman agreeing on ethanol with such a diverse group as the Wall Street Journal, Reason Magazine, the Cato Institute, Investor’s Business Daily, Rolling Stone Magazine, the Christian Science Monitor, The New York Times, John Stossel, The Ecological Society of America, the American Enterprise and Brookings Institutions, the Heritage Foundation, George Will and Time magazine, you know that ethanol has to be one of the most misguided public policies in US history.
But Brazil seems to have made it work. Using just 1 percent of its arable land, Brazil produced 6.57 billion gallons of sugar ethanol last year, roughly half the annual oil production of Iraq. Ethanol accounts for about 50 percent of Brazil’s automotive fuel. General Electric and Brazilian aircraft maker Embraer are working to develop ethanol suitable for powering commercial aircraft, with a test flight possible by early 2012. Most importantly, Brazil relies on imported oil for only 10 percent of its energy needs today — due in large part to its ethanol industry.
So, what’s Brazil doing right?
The answer is simple. Unlike the United States, Brazil makes its ethanol from sugar, which yields over eight units of energy for each unit invested, whereas corn-based ethanol yields a paltry one and a half units of energy for each unit invested.
Attorney for taro farmers calls recommendations ‘ludicrous’ By CHRIS HAMILTON, Staff Writer
POSTED: December 13, 2009
WAILUKU – In what appears to be a blow to East Maui Native Hawaiian taro farmers and environmentalists – and a potential much-needed win for struggling Hawaiian Commercial & Sugar Co. – the state Commission on Water Resource Management staff has recommended that water diverted by HC&S be restored to only one of the 19 streams it uses to irrigate its sugar crop.
The staff findings are only recommendations, but Native Hawaiian Legal Corp. attorneys said on Saturday that they believe the seven-member commission will rely heavily on the staff assessments and recommendations when it renders its decision, most likely during a public meeting scheduled for Wednesday in Paia.
The meeting will begin at 10 a.m. at the Paia Community Center with a staff presentation and time for questions from Water Resource Management Commission members, Chairwoman Laura Thielen said on Saturday. Thielen is also director of the state Department of Land and Natural Resources.
The public will get a chance to testify beginning at 1 p.m., and Thielen said she expects her fellow commissioners to reach a consensus that evening or the next day, depending on how many people want to speak.
Thielen said she received the 56-page report, signed by Deputy Director Ken Kawahara, last week.
Thielen said she thinks that the staff "did a very good, very thorough job," but she will listen to other commissioners’ questions and public testimony before making a decision on how she will cast her own vote on the issue. She also noted that the Native Hawaiian groups did get more than 12 million gallons of water a day restored to streams in the same watershed last year through an almost identical commission process.
Amid all the chatter and bluster of isle politics, there arise from time to time truly historic occasions. One of those is coming down on Maui next month.
On Oct. 15, the state Commission on Water Resource Management will hear closing arguments on the future of the Central Maui watershed. The 9 a.m. contested case proceeding should pack the Iao Congregational Church’s Konda Hall, so interested citizens will want to get there early. No public testimony will be taken.
To draw attention to this fateful session, a public "river walk" will be held this Friday afternoon from Iao Valley to Market Street in Wailuku. At the end of the walk, the Native Intelligence store will host water rights speakers during Wailuku’s "First Friday" festivities. Later the same day, commission staff members will travel to the Paia Community Center to seek public input from 5 to 9 p.m. on East Maui water issues.
The contested case proceeding takes as its prologue a startling "proposed decision" the commission’s hearings officer issued in April. At that time, Lawrence Miike recommended that the commission partially restore the historic flows of Central Maui’s famous "four waters" – the Waihee, Waiehu, Iao and Waikapu streams.
