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Matson lifts
A&B earnings
Matson's $33 million
profit in the third quarter
boosted its parent
Shipper Matson Navigation Co. did more than just haul cargo back and forth to the West Coast during the third quarter. It also carried the load for parent company Alexander & Baldwin Inc., which chalked up a 14.3 percent gain in net income that eclipsed the earnings-per-share estimate of one analyst by 9 cents.
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"It's not a huge surprise that the company beat my estimate by that much, but I'd say the key here is margins, margins, margins," said San Diego-based analyst Nicholas Aberle of Caris & Co. "Matson Navigation has done a tremendous job of increasing its operating profitability, and it's clearly evident in these numbers that Matson raised the bar and carried the company on its back."
Matson, which has been forced to add a containership into its eight-vessel Honolulu-West Coast routes because of the Southern California labor shortage, increased operating profit 31 percent to $33 million from $25.1 million despite rising fuel costs. Matson's revenue in the quarter rose 12 percent to $215 million from $191.6 million.
Allen Doane, president and chief executive of A&B, said Matson's investment in the shipping business has increased by 40 percent in the past year with the addition of two new ships to its fleet. The most recent new ship was the $110 million, 712-foot MV Maunawili, which arrived in Honolulu on Sept. 12. Its sister ship, which also cost $110 million, entered Matson's Hawaii service in October 2003.
"Matson's results always should be considered in light of the substantial amount of capital we have committed to that business," Doane said.
The subsidiary's container volume rose 6 percent in the period while auto volume increased 8 percent.
Aberle said the strength of Hawaii's economy is powering Matson's success.
"Obviously, demand is robust right now and the Hawaii economy is firing on all cylinders and Matson is reaping the benefits," Aberle said.
A&B's $82 million in net income through the first three quarters of the year already has exceeded the $81.3 million the company earned in all of 2003.
"Alexander & Baldwin is having an outstanding year," Doane said. "Matson and A&B Properties are achieving results that have exceeded our expectations."
The company's transportation logistics services, a strong performer all year, continued that trend last quarter as operating profit rose 57 percent to $2.2 million from $1.4 million and revenue gained 64 percent to $99.5 million from $60.8 million.
A&B's real estate performance leveled off after a strong first half of the year. The property leasing unit saw operating profit rise 11 percent to $10.1 million from $9.1 million, with revenue edging up 3 percent to $20.9 million from $20.3 million. Occupancy at its mainland properties fell 1 percentage point to 95 percent and Hawaii occupancy remained flat at 90 percent.
Property sales were below the pace of the first two quarters with the unit's operating profit slipping 4 percent to $2.5 million from $2.6 million, though revenue rose 12 percent to $11.6 million from $10.4 million. For the first nine months, operating profit was up 65 percent and revenue ahead 50 percent.
"Hawaii's real estate market has recovered in dramatic fashion, but the resulting demand and competition for Hawaii real estate have made it more difficult for us to find attractive investments," Doane said.
A&B did make two key investments last quarter by purchasing a high-rise condominium site near downtown Honolulu and increasing its investment and ownership in the Kukuiula project, a thousand-acre master planned residential resort community on Kauai.
The company's food products division saw revenue rise 14 percent to $38.3 million from $33.6 million while operating profit gained 50 percent to $600,000 from $400,000. A&B attributed the gains to higher raw sugar production and sales, and continued higher power sales.
A&B is keeping its dividend at 22.5 cents a share. It will be paid Dec. 2 to shareholders as of Nov. 11.