Maui Land reconsiders processed pineapple

The company has put plans for a new micro cannery on hold

Maui Land & Pineapple Co. is looking at the viability of remaining in the processed-pineapple business and has put plans for a new micro cannery on hold after an operating loss of nearly $9 million in its agriculture segment in the fourth quarter.

The Kahului-based company, which reported yesterday an overall net loss of $1.5 million in the quarter, began operating its new $17.5 million fresh-fruit packing facility in July and had expected to build a smaller version of its existing cannery sometime this year.

But David Cole, chairman, president and chief executive of MLP, said the company is considering "a variety of options" in light of continuing losses from the processed side of the pineapple business.

"It's tough to justify modernization of the processed side," Cole said.

Cole said the fresh-pineapple business -- of which two-thirds is sold through direct channels -- generated a 31 percent operating margin in the fourth quarter.

"We're trying to beef up all the systems we put into place last year and we're still very bullish on the fresh pineapple business," he said. "But we've got to hit our numbers to justify our continued investment in the business."

He noted that the operating margin for the processed portion was in negative territory. The processed business includes juice, as well as crushed and canned pineapple, and is dominated by institutional accounts and government accounts, such as the school lunch program.

"All options are on the table," he said. "We may get out of some segments of the processed business, but we also may get more into other segments of the business. Probably, we'll most likely partner with someone rather than exit the business entirely."

Cole declined to comment about who that partner could be.

MLP's $8.9 million operating loss from its agriculture, or pineapple, division included $2.1 million in charges for acceleration of depreciation and write-offs of assets that have been or will be replaced. Revenue for the agriculture unit fell 24.7 percent to $16.7 million from $22.2 million a year earlier due to lower sales of processed and fresh pineapple, and lower average prices for processed pineapple, in particular juice sales. MLP's agriculture division had an operating loss of $4.2 million in the fourth quarter of 2005.

Overall, the company's fourth-quarter revenue declined 12.7 percent to $46.5 million from $53.2 million a year earlier. MLP had a loss per share of 20 cents versus a gain of 66 cents a share in the fourth quarter of 2005 when MLP had net income of $4.8 million.

MLP's real estate segment saw its operating profit in the quarter fall 26.5 percent to $10.1 million from $13.8 million and its revenue decline 9.2 percent to $18.8 million from $20.7 million. MLP said the lower results were due to increased losses from Kapalua Bay Holdings LLC as a result of the beginning of sales and marketing efforts, fewer lot sales at Honolua Ridge than the previous year, and lower revenue and profits from noncore land sales transactions.

In its resort segment, MLP's operating loss widened to $3 million from $1.6 million while its revenue increased 7.9 percent to $11 million from $10.1 million. MLP said the higher revenue reflected rate increases at the Kapalula Villas and golf operations, while the wider operating loss was due primarily to charges for employee severance, increased advertising and promotional expenses, and higher utility expenses.

For all of 2006, MLP's net income fell 50.4 percent to $7.2 million, or 98 cents a share, from $14.6 million, or $1.99 a share. Included in the 2006 net income were $7.6 million in charges, consisting of the depreciation and write-off of assets, as well as employee severance charges for layoffs associated with the new facility, and the cost of taking employees out of operations for retraining. The company had $6.1 million in charges in 2005.

Revenue for the year fell 4.2 percent to $178.9 million from $186.7 million.