Friday, December 10, 1999

Kauai coffee
cost A&B
$12 million

Low prices this year
have hurt the business

By Russ Lynch


A&B Alexander & Baldwin Inc. said today it will take an after-tax charge of about $12 million in the current quarter to account for a write-down of part of its investment in its Kauai Coffee Co. subsidiary.

The company said the move was needed because the estimated future cash flows of the business are less than the carrying value of the assets on A&B's books. Coffee prices this year have been the lowest in recent history, A&B said. The weakness in Asia's economy also hurt the specialty coffee market.

Kauai Coffee's 3,400-acre plantation is the largest in the state but it has not achieved the sales volume it needs to cover its costs, A&B said in July when it laid off 28 of its 80 coffee workers.

The charge will cut into fourth-quarter earnings, A&B said today, but the extent won't be known until the final accounting is done. A $12 million charge would be equal to about 28 cents a share. Before today's announcement, the average estimate among three Wall Street analysts who follow the company is 43 cents a share for the fourth-quarter.

The company's stock fell 12 cents today to close at $22.12 in Nasdaq trading.

A&B also announced today that it has appointed Frank E. Kiger as the general manager for Kauai Coffee. Kiger joined the A&B subsidiary in 1996 as manager of the coffee factory, after 20 years with McBryde Sugar Co., another A&B subsidiary on Kauai. Kiger was named manager of operations at Kauai Coffee earlier this year. The company eliminated a marketing vice president position and gave Kiger those responsibilities as well as the overall management task.

Last year, Kauai Coffee produced more than 4 million pounds of coffee, slightly more than half Hawaii's total production.

Commenting on the write-down, W. Allen Doane, A&B president and chief executive officer, said that, combined with other actions, it should pave the way to future profitability.

For the first nine months of this year, the parent A&B made a net profit of $57.6 million, up 41.5 percent from the profit of $40.7 million in the equivalent part of 1998. A&B's food products segment, of which coffee is a part, made an operating profit of $8.3 million in the latest nine months, down 39 percent from $13.6 million from food operations in the 1998 nine months.

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