A&B agribusiness logs decline amid rise in production

Alexander & Baldwin’s agribusiness sector, which is predominantly Hawaiian Commercial & Sugar Co. on Maui, logged a 19.9 percent decline in revenues in 2013, and the company projects an operating loss of $6 million to $9 million this year.

In its fourth quarter and annual report released Thursday, the company cited one less sugar voyage than 2012, lower sugar prices, lower molasses revenue – likely due to the massive molasses spill in Honolulu Harbor in September that ended shipments with Matson – lower trucking revenue and lower specialty sugar sales for the decline in revenues.

Revenue for 2013 was $146.1 million, down from the $182.3 million in 2012. The agribusiness sector still managed an operating profit of $10.7 million for the year, though that was down nearly half from the $20.8 million in 2012. Most of the profits came early in the year, with the fourth quarter logging a $3.6 million loss.

Sugar production was up 7.4 percent to 191,500 tons due to higher yields in 2013, the report said. In fact, during the fourth quarter, sugar production was 29.7 percent higher than the same quarter in 2012 due to more acres being harvested and higher yields.

Chris Benjamin, president and chief operating officer for A&B, said in a conference call that HC&S is “facing headwinds due to low sugar prices” this year. The company has forward priced 21 percent of the current year’s crop through July and “will be patient in pricing future volumes,” he said.

He said that losses could be $6 million to $9 million in 2014, with the worst quarters in the latter half of the year.

Stanley Kuriyama, A&B chairman and chief executive officer, said in a news release that the company will be “seeking ways to reduce the volatility of agribusiness earnings.”

Benjamin added in the conference call: “We are looking to a lot of twists to our operating model to enhance profitability.”

The company overall reported net income of $36.9 million or 82 cents per diluted share in 2013, up from $20.5 million or 48 cents per diluted share in 2012. Leading the way was a $44.4 million operating profit in the real estate development and sales division, which logged a $4.4 million loss in 2012.

“2013 was further highlighted by the significant investments we made to grow our business in Hawaii, where we are best able to leverage our market knowledge and relationships to create value for both shareholders and the community,” said Kuriyama, citing the acquisitions of Grace Pacific, Kahala Avenue properties and the Kaneohe Ranch/Harold K.L. Castle Foundation portfolio.

“We invested over $1 billion in Hawaii in 2013,” he said in the news release. “In the process, we sold 60 percent of our Mainland commercial portfolio gross leasable area, migrating a significant portion of our commercial real estate portfolio from the Mainland to Hawaii. . . .

“Through these acquisitions, A&B also emerged as the second largest owner of retail commercial property in the state.”

Kuriyama and Benjamin cited the sale of a 24-acre parcel next to the Maui Business Park in Central Maui for a shopping complex anchored by Target, which broke ground last month and is expected to open early next year.

The $40 million garnered from the sale to Property Development Centers, a wholly owned real estate subsidiary of Safeway Inc., was reinvested into other properties, Kuriyama said.

Benjamin said that Target will be a major anchor for the Maui Business Park and expand sales in the park over the long run.

Kuriyama also noted the sale of the Maui Mall in Kahului, which was finalized last month, to Denver-based Alberta Development Partners and an affiliate of Chicago-based Walton Street Capital. Developed by A&B more than four decades ago, the mall’s sale price was not disclosed.

Paul Ito, A&B chief financial officer, did say that the money from the sale was reinvested and dissolved a bridge loan for the acquisition of Kaneohe Ranch.

In Wailea, where A&B has 160 acres in holdings, Benjamin said that the company has only three units left to sell in the 150-unit Kai Malu, which it developed with Armstrong Builders. Seven units were sold in 2013.

He said that A&B is seeking regulatory approval from the Maui County Council for a 70-unit condominium project that, if all goes well, could go into presale later this year. A&B is again partnering with Armstrong Builders on that project.

Benjamin noted that A&B currently doesn’t have much real estate inventory to sell in Wailea and that sales will be suppressed in the near future. A&B’s philosophy will be to “pursue a mixture of monetization strategies” in Wailea, Benjamin said, including developing projects, engaging in joint ventures and selling parcels.

* Lee Imada can be reached at leeimada@mauinews.com.