A&B posts 33 percent drop in 3rd quarter profits
Alexander & Baldwin, the Hawaiian-based parent firm of Jones Act ocean carrier Matson Navigation, on Friday reported that net income was $36.8 million during the third quarter of 2008, down 33 percent from $49.1 million in the third quarter of 2007. The firm, headquartered in Honolulu, reported third quarter revenue up 5.4 percent to $458.6 million, compared with revenue of $432.9 million in the year-ago period.
Third quarter operating income for A&B dropped to $36.8 million, off 38 percent from 2007 third quarter operating income of $49.1 million.
'We did relatively well in the third quarter given the deteriorating conditions in the markets we serve,' said Allen Doane, chairman and CEO of A&B, in a statement. 'Continuing cost containment and revenue optimization efforts have offset to some degree the impact of much weaker economic conditions. We are pleased at this stage of the year to be slightly above 2007 in earnings but we realize the challenges of the current economic turmoil make it difficult to maintain this performance.'
The firm's ocean transportation division reported third quarter net income slid 22.9 percent to $31.4 million, on a 4.8 percent increase of revenues to $272.8 million.
A&B said that container volumes dropped 5 percent during the third quarter, mainly due to slowing market conditions in Hawaii. Guam and China volumes remained essentially flat compared to volumes in the third quarter of last year.
'In all of our trade lanes, improvements in yield management and ongoing cost containment initiatives, including fleet rationalization,' said Doane, 'partially offset the impact of reduced volume and higher vessel expenses.'
The logistics division of A&B posted a 17.6 percent drop in third quarter net income to $5.1 million, on a 6.8 percent increase in revenues to $118.1 million.
'Year over year volume declines of 8 and 11 percent in the highway and rail segments, respectively, negatively impacted earnings,' said Doane. 'Non-recurring reductions in accruals and lower provision for bad debts that occurred in the third quarter of 2007 also contributed to a negative year over year comparison.'
Doane attributed the volume decreases to a 'softening in domestic logistics markets, in line with slackening consumer demand.'
A&B's agribusiness division posted a slight uptick in revenue to $37.5 million, while suffering a significant 109 percent decline in income to $6.7 million, mainly due to the result of lower sugar production and higher operating costs.
The two real estate arms of A&B'leasing and sales'both posted relatively flat revenues, ending the third quarter at $26.2 million and $77.2 million, respectively. The leasing division posted a 9 percent drop in operating profit to end the third quarter at $11.1 million. The sales division net income for the third quarter, including joint ventures, slipped 32 percent to 25.8 million.
'Modest occupancy losses in a few retail and office properties, directly related to softening economic market conditions, unfavorably impacted [leasing] results in the quarter,' Doane said. He added that the real estate sales division's net income results were due primarily to the sale of two retail properties and a vacant Maui commercial parcel in the quarter.
A&B said Matson's Hawaii automobile volumes were down 29 percent to 21,800. Matson has faced increased competition for roll-on/roll-off cargo from a new service operated by Pasha Hawaii Transport Lines.
On Sept. 30, a federal court judge in Virginia granted summary judgment in favor of the Shipbuilders Council of America and Pasha in a lawsuit against the Coast Guard seeking to prevent a Matson ship, the Mokihana, from continuing to trade between California and Hawaii after it was altered in Chinese and Alabama shipyards so that it could carry ro/ro cargo.
Pasha and the Shipbuilders Council of America filed a federal lawsuit against the Coast Guard asking it to prevent the ship 'from engaging in the United States coastwise trade' and 'enjoin the Coast Guard from issuing a further coastwise endorsement to the Mokihana.'
Judge T.S. Ellis of the U.S. District Court for the Eastern District of Virginia in Alexandria, granted a motion for summary judgment to the Shipbuilders Council and Pasha. ' Keith Higginbotham and ' Chris Dupin