A&B expects flat quarter


POSTED: Saturday, March 21, 2009

Alexander & Baldwin Inc., the Honolulu-based parent of Matson Navigation Co., said yesterday that weakness in its transportation sector and work-force restructuring costs will negatively impact its first-quarter earnings.

The company, scheduled to report its financials on April 30, now expects an approximate break-even quarter. A&B's earnings prospects were diminished by a downturn in the global economy and the transportation sector's traditional seasonal weakness, said Allen Doane, A&B's chairman and chief executive.

A&B's net income is expected to include two commercial property sales, which are currently in escrow, as well as a work-force restructuring charge of $5 million to $6 million related to a 10 percent nonunion work-force reduction announced in January. A&B said its results may be further impacted by market conditions and timing.

“;Historically, our first-quarter results are lower than performance later in the year due to normal transportation patterns,”; he said. “;Through the first two months of the year, however, cargo demand and freight movement have been lower than expected.”;

Matson Navigation's eastbound volume from China is down 20 percent and westbound volume to Hawaii has fallen 12 percent from the same period in 2008, Doane said. The company's logistics volume also dropped by 24 percent through February, he said.

A&B already was anticipating a first-quarter slowdown when it released its full-year earnings after a dismal quarter ended Dec. 31. During the fourth quarter, the company reported that its profits were down 34.3 percent. The company also experienced a 7.6 percent drop in revenue and a 6.9 percent drop in net income. In anticipation of future earning challenges, A&B took earlier steps to strengthen its cost and capital structure.

“;Our cost-reduction initiatives will be implemented throughout the year to improve earnings, while we maintain our strong balance sheet and cash flows to pursue acquisitions and investments that create sustained value in future years,”; Doane said.

The company said in January that the 10 percent work-force reduction, which involved approximately 60 employees, is expected to save $8 million annually. A&B offered severance packages for those who voluntarily resigned through yesterday. The ocean carrier will now begin involuntary cuts if warranted at its main offices in Honolulu and the neighbor islands, Guam, Phoenix, the West Coast and its Oakland headquarters, said Kevin L. Halloran, vice president of corporate development and investor relations.

The company also has pared $50 million from its $325 million 2009 capital budget and has renewed a long-term debt facility to better match financing to the investments that it makes in long-lived assets. Later this month, A&B will create greater efficiencies by shifting to a nine-ship fleet from a 10-ship fleet in its ocean services segment, Halloran said.

“;The other ship will be laid up as a reserve vessel,”; he said.