Matson Navigation Co. plans to undo a big, bold and costly expansion of ocean cargo transportation in China, terminating a nearly year-old route that had cut deeply into profits of parent company Alexander & Baldwin Inc.

Honolulu-based A&B announced the decision Monday in conjuction with the release of an earnings report that said second-quarter profit fell 35 percent to $18.7 million from $28.9 million a year earlier.

The profit decline occurred in the face of revenue that surged to $488.2 million in the April-June period, up from $396.8 million a year earlier.

One stock analyst said the move by A&B to cut Matson’s China service in half was surprising considering the hefty investment and relatively early stage in the venture, though swallowing losses quickly could be better for the company in the long term.

"A swift decision may benefit the company more than dragging it out," said Sheila McGrath, managing director of New York-based investment banking firm Keefe, Bruyette & Woods. "Perhaps it was the prudent decision."

Matson has served China since 2006. After achieving strong results, the company invested $60 million to double the service in September 2010. But the move has not paid off and showed no indication of a turnaround.

A&B called the expanded service a large disappointment and said it accounted for an $11 million after-tax loss in the second quarter.

Ceasing the expanded service is projected to cost another $20 million to $25 million but was the "right" decision for the company and shareholders, according to Stan Kuriyama, A&B’s president and chief executive officer.

Matt Cox, Matson’s president, told stock analysts on a conference call that high fuel costs combined with weak demand and excess supply led to the painful decision to terminate the expanded service, which Matson operated directly between California and China using five ships chartered from other companies.

The last sailing for the China-direct service will be Aug. 21.

Matson will continue to serve China with five company-owned vessels that stop every week in Xiamen, Ningbo and Shanghai ports along with Hawaii, Guam and Long Beach, Calif.

The expanded China service made port stops in Hong Kong and Yantian plus a second call in Shanghai using chartered vessels operating directly from Long Beach. Because of the route and outsourcing arrangement, there will be no loss of Hawaii jobs or service.

Kuriyama said Matson’s core business remains fundamentally sound and profitable.

Matson’s overall operating income during the second quarter totaled $9.4 million, down 75 percent from $37 million in the same quarter last year.

A&B said the weakness experienced by Matson in China overshadowed strong second-quarter performances for Matson’s core business in Hawaii as well as A&B’s real estate and agribusiness operations.

Kuriyama called Hawaii a bright spot for Matson, achieving a 6 percent gain in container volume and a 12 percent gain in automobile shipments. The recent quarter represented a third consecutive quarter for increased container volume in Hawaii, reflecting the state’s modest recovery.

In real estate, A&B recorded a $10.6 million operating profit from property sales, up 33 percent from $8 million a year earlier. The gain was driven primarily by the sale of a shopping center in Texas.

A&B also reported a $10.4 million operating profit from real estate leases in the second quarter, up 22 percent from $8.5 million a year earlier. A&B’s portfolio of office, retail, industrial and other property it leases to tenants had relatively stable occupancy.

The biggest improvement in operating profit among A&B divisions came from agribusiness, which includes Hawaiian Commercial & Sugar Co. A&B said operating profit for agribusiness was $8.5 million in the second quarter, up from $1.8 million a year earlier.

The huge gain mostly stemmed from a raw sugar delivery in June sold at an exceptionally high price. A&B also said gains improved for molasses and electricity sales tied to sugar production at Maui-based HC&S.

Shares of A&B stock fell $5.03 to $38.90 on Monday, a bad day for many stocks caught up in a broad market plunge. A&B released its earnings after the stock market closed on Monday.