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Alexander & Baldwin Inc. tripled its profit in the third quarter, primarily due to the timing of a bulk sugar shipment by subsidiary Hawaiian Commercial & Sugar Co.
Honolulu-based A&B announced Thursday that it earned $13.4 million in the July-September period, up from $4.4 million in the same quarter last year.
Revenue totaled $92.9 million in the recent quarter, up from $61.9 million a year earlier.
"The company posted solid earnings in the third quarter," Stan Kuriyama, A&B’s chairman and CEO, said in a conference call with stock analysts. "Overall, we’re pleased with the company’s performance."
A&B achieved a modest increase in operating profit from real estate leasing that was partially offset by a slight decrease in operating profit from real estate sales.
A&B also absorbed $700,000 in expenses during the quarter from its spinoff of former subsidiary Matson Navigation Co. completed June 29.
But the big boost in total profit was from the timing of sales from A&B’s sugar plantation on Maui.
HC&S produced 78,200 tons of sugar in the third quarter, up 5 percent from 74,300 tons in the same quarter last year. But the company sold 72,400 tons in the recent quarter compared with 36,300 tons a year earlier because two shipments were made in the recent quarter compared with one a year ago.
The timing resulted in a near doubling of operating revenue for A&B’s agribusiness division to $67.9 million from $37.1 million, and operating income soared to $9.1 million from $3.8 million.
A&B said the benefit will reverse in the fourth quarter when two shipments are scheduled instead of three.
Still, the company noted that HC&S has delivered strong profits this year after major losses a few years earlier that prompted A&B to consider shuttering Hawaii’s last sugar plantation.
A surge in sugar prices helped HC&S shift from losses to profits during this period. Prices have fallen since the beginning of this year, but HC&S has locked in prices for all of this year’s crop and 67 percent of next year’s crop.
In real estate, A&B operating profit from leasing retail, office and industrial space to tenants in Hawaii and on the mainland rose 11 percent to $10.2 million in the third quarter from $9.2 million a year ago.
Occupancy in A&B’s commercial real estate portfolio was 93 percent in Hawaii and on the mainland in the recent quarter, up from 91 percent in Hawaii and 92 percent on the mainland a year ago.
Real estate sales for A&B produced an operating profit of $3.3 million in the third quarter, down from $3.5 million a year ago.
Sales in the recent quarter included 286 acres of Maui farmland not in sugar production, and a few resort homes and lots on Kauai and Hawaii island that the company said shows the market for residential real estate at Hawaii resorts is rebounding.
During the quarter, A&B sold two cottages and one house lot at its Kukui‘ula resort on Kauai for $2.5 million, $2.6 million and $1.6 million, respectively. The company also said one more cottage sold in October for $2.7 million, and two more are in escrow for $2.8 million and $3 million.
On Oahu, A&B is investing heavily in urban Honolulu condominium tower development. The company recently began foundation work on a Kakaako high-rise called Waihonua for which it has about 260 binding sales contracts.
A&B also plans to begin sales activity next year for a second Kakaako tower on a site formerly occupied by CompUSA. Most recently, A&B invested $20 million in a tower planned by other developers atop the Nordstrom parking garage at Ala Moana Center.
A&B is balancing some of the risk for condo tower development by letting investors provide half of the $65 million in equity for Waihonua, which is being financed primarily by a $120 million construction loan.
Each tower project typically takes two years to build, at which time unit sales would be completed to produce revenue for A&B.
Ian Zaffino, a stock analyst with Oppenheimer & Co. in New York, said on the conference call that it was a "good" quarter for A&B.
In the second quarter, A&B had a net loss of $4.4 million due to expenses tied to its separation from Matson.
Shares of A&B stock closed Thursday down 23 cents at $29.19 before the earnings announcement. Since the Matson split, A&B shares have closed between a low of $25.30 on July 2 and a high of $34.25 on July 13.
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COURTESY ALEXANDER & BALDWIN