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HC&S last harvest was ‘better than expected’

HC&S turned a profit of $7.2 million in 2016

The Hawaiian Commercial & Sugar Co. Puunene Mill is silent, having shut down in December along with sugar operations. Alexander & Baldwin said that the shutdown cost less than expected and that the plantation actually made an operational profit in 2016. Still, the $78 million in cessation costs put a drag on A&B’s 2016 financial performance, the company said Tuesday. * The Maui News / MATTHEW THAYER photo

The cost of shutting down Hawaiian Commercial & Sugar Co.’s operations last year was $20 million lower than expected and the company’s sugar operations performed “better than expected” for its last harvest, said the chief executive officer of parent company Alexander & Baldwin on Tuesday.

“I want to thank the HC&S employees and the employees across the company (that) make these results possible,” said Chris Benjamin, president and CEO of A&B, who was speaking to financial analysts and professional investors in a webcast and call to discuss the company’s financial results for 2016 and fourth quarter.

A&B officials had forecast between $5 million and $15 million in agribusiness operating losses last January, but HC&S actually turned a profit of $7.2 million for 2016. With the company already seeing positive results in the third quarter, Benjamin in October attributed the better-than-expected agribusiness performance to lower sugar production costs.

The cost to close HC&S, the last sugar plantation on Maui and the state, also was lower than forecast. A&B had projected the closure cost to be between $90 million and $110 million, which included severance and other exit expenses. However, the total actually turned out to be $78 million, though A&B expects to incur additional cessation costs this year, A&B officials said.

A&B reported $41.1 million in after-tax losses from the shutdown of HC&S in 2016 and $29.7 million in 2015.

Despite the better than expected news on the sugar front, the closing of HC&S put a drag on A&B’s 2016 performance. The company reported a net loss of $8.9 million in 2016 or $0.18 per diluted share. That compares to 2015 when the company reported a net income of $26.5 million or $0.54 per diluted share.

Benjamin took a positive outlook going forward.

“Although financial results for the quarter and year were challenged because of the strategic decisions that were made, we are poised for success in 2017, as we complete our REIT (real estate investment trust) evaluation, pursue targeted CRF (commercial real estate) acquisitions in Hawaii, advance several development projects and our Maui diversified agriculture initiatives and capitalize on our substantial paving backlog at Grace Pacific.”

Among the new projects Benjamin pointed to was the development of a Safeway-anchored shopping center on the Paia side of the Hookele Street-Hana Highway intersection in Kahului that the company announced last week. The 94,000-square-foot Ho’okele Shopping Center will include the grocery store and fuel station combination on 57,400 square feet. Benjamin said leasing efforts are ongoing for the rest of the space.

In an email following the call, A&B officials said that it is looking to fill the remainder of the center with a mix of local and national tenants, including fitness, health and beauty, financial services and sit-down and quick-serve restaurants. A&B believes businesses will be attracted by the Safeway and the visibility of the shopping center from Hana Highway.

Construction is expected to begin in the first-quarter of 2018 and completed by the second quarter of 2019. In its report, A&B said the project will cost $42 million.

For 2016, A&B sold three vacant parcels amassing 611 acres on Maui for a total of $27.7 million. One of those sales was 339 acres of former sugar cane land on the edge of Paia town; that parcel sold for $9.9 million on Dec. 20 to EC Paia LLC. It lists its member/manager in Hawaii business records as Eagle Canyon Capital based in Northern California.

The company also sold 268 acres around the famed “Jaws” big-wave surfing spot for $9.5 million in September to Maui County. A&B officials said the other sale for about $8 million was near the Maui Business Park in Kahului.

Sales at the joint venture Keala O Wailea, a 70-unit luxury low rise, multifamily resort in Wailea, appear to be going well.

“The construction of units of Keala O Wailea is in full swing,” Benjamin said.

According to information provided Tuesday, the project is 77 percent sold with 54 binding contracts totaling $64.2 million. The project remains on track with initial closings in December. When the project broke ground two years ago, two-and three-bedroom units were expected to sell for $700,000 to $1.8 million.

The last harvest of HC&S also meant the end of the company. The remaining workers, “about a dozen of them” working on diversified agriculture projects, are now A&B workers, said Darren Pai, A&B spokesman on Tuesday.

They are all that’s left of the 675 workers that began 2016 at HC&S.

Of those workers who were laid off, 233 have found full-time or part-time jobs; 110 have retired; 15 have relocated off-island and 50 have enrolled in degree or other programs at University of Hawaii Maui College, Pai said.

“Dozens more” are enrolled in programs provided through government or private providers and include computer classes and commercial driver’s license training.

* Melissa Tanji can be reached at mtanji@mauinews.com.