Strong real estate sales in the first half of last year helped Alexander & Baldwin Inc. avoid more than a modest decline in 2008 profits, which fell 7 percent to $132.4 million from $142.2 million in 2007.

The Honolulu-based company said its earnings were favorable, but warned that its outlook this year has dimmed.

"We are pleased by this performance, but we recognize that our 2009 earnings prospects have been diminished," Allen Doane, A&B chairman and CEO, said in a statement. "As a result, we will continue to take all necessary measures — cost containment and expense reduction, deferral of nonessential capital projects, preservation of cash, shoring up of our liquidity sources — to preserve our financial strength."

A&B is one of Hawai'i's largest and most diverse companies, parts of which serve as a barometer for the state's economy.

Among A&B assets are ocean transportation firm Matson Navigation Co., Hawaiian Commercial & Sugar Co., Kaua'i Coffee Co. and major real estate development and leasing projects in Hawai'i and on the Mainland.

Last month, Matson announced plans to cut 10 percent of its nonunion workforce, or about 60 people, to align expenses with declining business. A&B at the time said it planned more cost-reduction measures such as cutting jobs, eliminating salary increases and adjusting profit-sharing targets and incentive-award targets.

Much of A&B's weakened profits last year happened in the fourth quarter as the local and national economies tumbled.

A&B's fourth-quarter net income fell 34 percent to $23.9 million from $36.4 million in the same quarter in 2007, while revenue for the same period declined 8 percent to $400 million from $433 million.

Revenue for all of last year totaled $1.9 billion, which was up from $1.67 billion a year earlier.

A&B said profits last year were aided by real estate deals as well as efforts to improve operational efficiencies that helped offset operating profit decreases in its ocean transportation and real estate leasing businesses plus a loss in its agriculture division.

In real estate, operating profit from property sales was up 28 percent to $95.6 million on revenue that soared 197 percent to $350.2 million.

The company noted that in the latter half of the year there was a significant drop in sales at development projects as consumer demand for primary and resort homes declined.

Property sales for the year included residential and commercial units at the 352-unit Keola La'i high-rise condominium completed early last year in Kaka'ako, single-family homes at Keala'ula on Kaua'i, an apartment building on Maui and several other Maui properties. Sales also included two shopping centers and one office building on the Mainland.

At Matson, a 9 percent decline in Hawai'i container volume and a 22 percent decline in Hawai'i automobile shipments helped shrink operating profit by 16 percent to $105.8 million. Container volume on Matson's China service was down 7 percent, and Guam volume was down 5 percent.

Matson's operating profit in the fourth quarter fell more sharply — 30 percent — as Hawai'i automobile volume fell 54 percent and container volume in Hawai'i, China and Guam markets fell close to 15 percent.

Full-year Matson revenue was up 2 percent to $1.02 billion, largely because of fuel surcharges and improved cargo mix.

A separate Matson unit involved in coordinating land-based cargo transportation and warehousing reported an operating profit of $18.5 million, which was down 15 percent on close to flat revenue.

In agriculture, A&B posted a $12.9 million operating loss, which compared with a $200,000 profit a year earlier.

The company said it benefited slightly from higher hydro-electric power and specialty sugar sales that helped keep total revenue about even, but historically low sugar production resulting from a two-year drought led to the loss.

A&B produced 145,200 tons of sugar last year, down 12 percent from 164,500 tons a year earlier, and said water delivery to fields were 50 percent of the prior 60-year average, making 2008 the driest year on record.

Besides financial results from A&B's operating divisions, the company reported repurchasing nearly 1.5 million shares of common stock, and raising its dividend for a third straight year — moves that A&B said underscore its commitment to returning cash to shareholders and making investments it believes will create value over time.

The price of A&B shares closed yesterday on the New York Stock Exchange at $21.79, down 1 cent in trading after the earnings announcement.

A&B stock over the last 52 weeks has traded at a high of $53.29 on April 25 and a low of $21.37 on Jan. 20.

Net profit last year on a per-share basis was $3.19, down from $3.30 a year earlier.