Freight slowdown
sinks A&B
earnings 37%

Property leasing and sugar
refining also are down, but
agribusiness and property
sales show a profit

By Russ Lynch
Star-Bulletin

A slowdown in mainland-Hawaii freight hauled by its big Matson Navigation Co. subsidiary dragged third-quarter earnings at Alexander & Baldwin Inc. down 37 percent from a year earlier to $13.8 million.

A&B also had lower results at its California & Hawaiian Sugar Co. refining business and in property leasing but made money in property sales and Hawaii agribusiness.

The net profit for the three months ending Sept. 30 was equal to 31 cents a share, down from 48 cents a share in the 1997 third quarter.

The company today reported an operating profit of $16.2 million in the latest quarter from Matson, down 34 percent from $24.4 million in the 1997 third quarter. A&B said freight volume was down because of the continuing contraction in Hawaii's economy and because a new barge competitor grabbed some peak summer business in moving household goods.

Lower freight rates also played a part.

Third-quarter container volume was down 8 percent from the year-earlier period and automobile shipments were down 13 percent.

Matson implemented a new mainland-Hawaii schedule in mid-September, using six ships rather than eight, and says the change will cut annual costs by about $10 million.

The mainland-Hawaii ocean freight business has excess capacity and despite its schedule cut, Matson still has 50 percent more sailings than its biggest competitor, Sea-Land Service Co., the company said. When Hawaii's economy turns around, Matson will quickly increase its service, the company said.

A&B's property leasing business produced an operating profit of $5.8 million in the latest quarter, down 5 percent from $6.1 million. The operating profit from property sales in the third quarter, $1.6 million, was up 23 percent from $1.3 million in the 1997 quarter, led by residential and commercial property sales on Maui.

The company's food products business generated an operating profit of $7.6 million in the latest quarter, down 36 percent from $11.8 million in the 1997 period. Lower sugar prices pulled the profit down but an increased volume of sales lessened the damage.

A&B is moving to recapitalize C&H and sell a majority of the business to Citicorp Venture Capital Ltd., but the unsettled state of the financial markets makes the timing uncertain, the company said.

"In spite of good progress in raw sugar production and residential property sales, the lack of growth in Hawaii continues to depress Matson's freight and auto shipments," said R.J. Pfeiffer, A&B board chairman, president and chief executive officer. "The current outlook for Hawaii does not suggest that an improvement in the economy will occur in the near future," said Pfeiffer, who came out of retirement when John Couch stepped aside from the top posts in July because of medical problems. A&B's revenues in the latest quarter, $326.4 million, were only slightly ahead of the $326 million reported for the 1997 third quarter.