Federal grant, port
business boosts A&B

The company’s profit soars 39.1
percent in the first quarter

Alexander & Baldwin Inc., hitting on all cylinders in its ocean shipping, real estate and food operations, boosted net income 39.1 percent in the first quarter to trounce analysts' earnings estimates.

The parent of Matson Navigation Co. credited the robust quarter to increased volume in West Coast ports from its stevedoring joint venture, a one-time $5.5 million federal payment for weather-related lost sugar production and real estate sales that closed earlier than expected.

Net income was $37.7 million, or 86 cents a share, compared with $27.1 million, or 63 cents, a year earlier. The consensus of four analysts surveyed by Thomson Financial was 59 cents.

Revenue rose 6.9 percent to $365.8 million from $342.3 million a year earlier.

"All in all, it was a great start to the year," said Allen Doane, president and chief executive of A&B. "Although we continue to expect that 2005 results will better than 2004, we also remain cautionary in our outlook -- especially about any tendency to extrapolate the pace of the first-quarter improvement into expectations for the full year."

Matson's operating profit jumped 60 percent last quarter to $29.7 million from $18.6 million, primarily due to Matson's minority ownership in SSA Terminals LLC, improved Hawaii and Guam yields and lower overhead expenses. Matson's revenue rose 5 percent to $206.2 million from $196.5 million.

A&B's logistics services unit, which arranges transportation for shippers through rail, ground and air, tripled its operating profit to $3 million from $1 million and boosted its revenue 30 percent to $96.1 million as a result of increased volume and higher rates.

Matson, facing the threat of competition from start-up shipper OceanBlue Express Inc. and needing to replace its service to Guam by February 2006, solved both predicaments during the quarter when it reached a $365 million deal to buy two new containerships from Kvaerner Philadelphia Shipyard.

Analyst Jamelah Leddy of Seattle-based McAdams Wright Ragen said A&B outpaced her expectations. Leddy, whose numbers weren't included in Thomson's analyst survey, had projected first-quarter earnings per share of 41 cents and revenue of $366.3 million. Leddy's numbers didn't include the $5.5 million federal grant.

"Probably the largest area of outperformance relative to my expectations is property sales," she said. "But this company is very difficult to predict because property sales can be so lumpy."

A&B's combined operating profit for its real estate sales and leasing divisions was off about 5 percent from the first quarter of 2004. However, Doane noted that the year-ago quarter was "exceptional."

Operating profit at the company's real estate sales unit dropped 13 percent to $16.5 million from $19 million. Revenue rose 14 percent to $45.9 million from $40.1 million a year earlier. Still, the sales in the first quarter were higher than Leddy had expected because of several sales that closed early.

"It's actually quite nice to be following a company that surprises you with front-loaded sales or earnings results," Leddy said. "So often you hear about companies trying to make up for disappointments later in the year."

Sales last quarter included the Ontario Pacific Business Centre, in Ontario, Calif., for $17.8 million; Northwest Business Center, in San Antonio, for $6.3 million; and 5 1/2 floors at Alakea Corporate Tower, a Honolulu office condominium, for $5.5 million.

The company's real estate leasing division saw its operating profit in the first quarter rise 13 percent to $10.7 million from $9.5 million while its revenue gained 5 percent to $21.9 million. A&B said the improved results stemmed from property acquisitions, new leases and a lease termination payment.

The company's food products division, getting a boost from the federal grant, more than tripled its operating profit to $9 million from $2.6 million a year earlier, while revenue jumped 67 percent to $22.4 million. The amount of sugar produced rose 67 percent to 19,500 tons.