Thursday, April 19, 2001

Earnings fall
at A&B

An accounting change
is blamed; operating
profits are higher

By Russ Lynch

Operating profits at Alexander & Baldwin Inc.'s biggest subsidiary, Matson Navigation Co., slipped in the first quarter of this year, thanks to some serious rate competition, low growth in its container volume, no growth in automobile shipments and poor results from two partnerships.

A&B But property sales more than made up for the shortfall from Matson in the company's overall result.

"Matson did have soft results in the first quarter," W. Allen Doane, A&B president and chief executive officer said today in an analysts' conference call carried live on the Internet.

He said the Hawaii economy so far has held up well "but there are some signs of an impending slowdown that look like they're real signs."

He said container volume was up only slightly, about 2 percent, from the first quarter of 2000. Fuel prices have been "pretty much neutralized" by a 4.25 percent fuel surcharge and Matson put a "healthy" 3.5 percent general rate increase into effect in February, Doane said.

But there has also been increased competitive activity, he said.

Matson's operating profit of $17.5 million in the latest quarter was down 12.1 percent from $19.9 million in the 2000 quarter. Matson revenues of $196.6 million were down slightly from a year-earlier $200.2 million.

Matson put two ships back into mainland-Hawaii service last year, bringing its fleet to eight ships, the same level as several years ago.

Doane answered one question expected from analysts before they could answer it: How will Matson be affected by plans of Pasha Hawaii Transport Lines to get into the West Coast-Hawaii automobile freight business with specially built ships?

Doane said Matson has long-term contracts with car-makers. It has a contract with Daimler-Chrysler to carry all its Hawaii-bound vehicles through April 2004, a contract with Ford to haul for westbound cars until June 2004 and a General Motors contracts to handle all its eastbound and westbound automobiles through December 2005.

A&B's total first-quarter net income declined 15 percent compared to last year's, but the company told securities analysts today that the difference was due to an accounting change last year that added $12.3 million to the net for the first-quarter of 2000 but did not come from operations.

Taking that change out of the year-over-year comparison shows a big increase in net and operating profits, A&B said, although it took particularly strong performance from its real estate business to overcome the profit decline at Matson.

The total corporate net profit for the latest quarter was $22.4 million, or 55 cents a share, down from $26.4 million, or 63 cents a share, in the year-earlier quarter.

Excluding the accounting change, connected with dry-docking Matson ships, the net for the first quarter of 2000 would have been $14.2 million. That would place the latest quarter's result higher than the 2000 quarter by $8.2 million or 58 percent.

Art "In terms of real estate, we really did have a tremendous quarter," said Doane, although he said a lot of it came from a pace of acquiring properties which will be hard to maintain.

Real estate sales alone brought in 27.5 percent of A&B's operating profit in the latest quarter, a profit of $12.2 million, compared to only $701,000 in the year-earlier quarter.

Property leasing activity brought in an operating profit of $8.7 million in the 2001 quarter, up from $7.2 million in the 2000 quarter.

A&B also had an increased operating profit from its food business, $5.1 million this year compared to $2.1 million. Much of that was from a one-time distribution from a sugar transportation cooperative, the company said.

Doane said soaring natural gas prices affected costs at California & Hawaiian Sugar Co., the California based refiner and marketer in which A&B holds a 36 percent interest.

A&B's total operating profit for the latest quarter was $44.4 million, up 45 percent from $30.6 million in the 2001 quarter. Despite its slip, Matson produced 39 percent of the total corporate operating profit in the latest quarter.

First-quarter operating revenues of $275.8 million were up 18.8 percent from $232.2 million last year.

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