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Monday, September 22, 2014         

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More boats to China

Matson will double its routes between China and California, though it won't increase service to Hawaii or Guam

By Andrew Gomes

POSTED:


Buoyed by a 129 percent gain in second-quarter profit, Alexander & Baldwin Inc. said yesterday it plans to expand container shipping service from China through subsidiary Matson Navigation Co.

Honolulu-based A&B reported earning $28.9 million in the three months ended June 30, up from $12.6 million in the same period last year.

Revenue totaled $398.9 million in the quarter compared with $351 million a year earlier.

"We enjoyed a strong second quarter," Stanley Kuriyama, A&B president and chief executive officer, said in a statement.

The surge in profit largely was due to improved results from Matson's China service, which A&B said it will expand starting next month.

The new service will double Matson's trade between China and California, though it won't increase service to Hawaii or Guam.

Matson, which began serving China in 2006, is chartering five ships from other companies that will operate the ships for Matson. The five ships will sail once a week from China with port calls in Hong Kong, Shenzhen and Shanghai. Matson currently operates weekly service using five of its own ships with stops in Shanghai, Ningbo and Xiamen.

An additional stop in Shanghai will be added next month, followed by stops in Hong Kong and Shenzhen in mid-September. Regular weekly service to all three ports using the chartered vessels will be in full swing by October, A&B said.

"The China-to-U.S. trade lane is one of the world's most robust and is expected to grow over time," Kuriyama said. "Trans-Pacific market dynamics are very favorable, as the combination of strong U.S. demand and tighter shipping capacity has contributed to full utilization and improved pricing on our China service vessels."

BOUND FOR CHINA

Matson Navigation Co.'s "Long Beach Express" China service:

EXISTING SERVICE
» Began container shipping in 2006 from Ningbo and Shanghai to Long Beach, Calif.
» Added a stop in Xiamen in May 2009
» Service is weekly using five Matson ships, which also stop in Hawaii and Guam after Long Beach before returning to China.

PLANNED EXPANSION
» Service from Hong Kong, Shenzhen and Shanghai to Long Beach
» Five chartered ships will provide new service.
» Expansion will begin next month with the stop in Shanghai.
» First port calls in Hong Kong and Shenzhen start in mid-September.
» Ships return to China from Long Beach, with no stops in Hawaii or Guam.

A&B, in a conference call with stock analysts, said it expects to spend $50 million to $60 million to purchase containers and other equipment necessary for the expansion, which will serve three of the world's four busiest container ports. The company said startup costs likely will reduce Matson's operating profit later this year.

In the second quarter, Matson posted a 75 percent gain in operating profit to $37 million from $21.1 million a year earlier. Much of the rise was due to higher shipping rates and volumes from China. Volume rose 35 percent to 15,000 containers in the China service during the quarter, up from 11,100 containers a year earlier, while rates were 50 percent higher.

"The China trade lane performed exceptionally well this quarter," Kuriyama told analysts on the conference call.

By comparison, Hawaii container volume was down 2 percent to 33,700 containers in the second quarter from 34,300 containers a year earlier.

Automobile shipments to Hawaii were down 22 percent to 21,100 vehicles from 27,200 vehicles in the same period a year ago.

Container shipments to Guam were up 17 percent to 4,200 containers from 3,600 containers.

Other A&B business divisions posted positive, though weaker, operating results.

Real estate leasing contributed $8.5 million in operating profit in the second quarter, down 23 percent from $11 million a year earlier. The results included significant changes in A&B's portfolio of income-producing properties due to the sale of some assets and acquisition of new property, as well as lower rents at mainland properties.

The average occupancy rate for A&B's mainland real estate assets was 86 percent in the second quarter compared with 84 percent a year earlier. In Hawaii, A&B's average property occupancy rate was 93 percent in the second quarter compared with 95 percent a year earlier.

A&B recorded $8 million in operating profit from real estate sales in the second quarter, which was down from $9.6 million a year earlier. Sales in the recent quarter included an industrial property in Washington and five vacant parcels on Maui.

In A&B's agribusiness division, which includes Kauai Coffee Co. and Hawaiian Commercial & Sugar Co., second-quarter operating results swung to a positive $1.8 million from an $11.3 million loss in the 2009 second quarter.

The improvement was driven by dramatically reducing losses on sugar sales. Sugar prices were higher but not high enough to overcome expenses. HC&S also sold less sugar in the second quarter—22,700 tons versus 30,800 tons a year earlier. Other areas of A&B's agribusiness operations, including coffee, power and molasses sales, helped yield the relatively small operating profit.

For the whole company, A&B's second-quarter profit equated to 70 cents of earnings per diluted share of stock, compared with 31 cents per share a year earlier.

Shares of A&B stock closed yesterday up 36 cents at $33.78. Over the last 52 weeks, A&B stock has closed between a high of $36.95 on April 2 and a low of $27.02 on Aug. 17.





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Matson doubles shipping service to China




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