Third-quarter profit at Alexander & Baldwin Inc. sank 77 percent as reduced real estate sales, lower shipping activity and expanded losses in agribusiness hurt earnings for the Honolulu-based company.

A&B reported net income of $8.5 million, or 21 cents per diluted share, in the three months ended Sept. 30, compared with $36.8 million, or 89 cents per diluted share, in the same period last year.

Revenue was $375.9 million versus $456.2 million in the comparable quarters.

Shares of A&B stock closed yesterday down 97 cents at $29.95 after the earnings announcement.

The company, which operates subsidiaries including Matson Navigation Co., A&B Properties, Hawaiian Commercial & Sugar Co. and Kauai Coffee Co., said efforts it has previously made to reduce costs are paying off, and that business is on solid financial ground.

"Market conditions continue to affect the company's core transportation and real estate businesses," W. Allen Doane, A&B's chairman and CEO, said in a statement. "In response to the difficult economic environment, we have taken necessary measures across all of the business units to better align our cost structure with the realities of today's conditions."

The biggest drag on third-quarter earnings was an 86 percent decline in operating profit from real estate sales to $3.5 million in the recent quarter from $25.8 million a year earlier.

Sales during the recent quarter included two small Maui land parcels and a warehouse in Los Angeles. A year earlier, property sales included several residential units at the Keola Lai high-rise in Kakaako and the Kealaula subdivision on Kauai plus three commercial properties.

REAL ESTATE

A&B said sales at ongoing real estate development projects such as residential lots at Wailea Resort on Maui and the Kauai golf resort community Kukuiula were at a near standstill, though it expects investments in such projects will pay off when market demand resumes.

The company also said it will continue to seek gains from selling commercial property and reinvesting proceeds in other real estate with growth potential.

Real estate leasing results were less volatile, contributing an operating profit of $10.2 million in the third quarter, an 8 percent decline from $11.1 million a year earlier. Occupancy rates at property in A&B's Hawaii portfolio averaged 95 percent in the recent quarter compared with 98 percent a year earlier. Mainland property occupancy fell to 83 percent from 95 percent.

At Matson, operating profit was down 23 percent to $24.2 million in the third quarter from $31.4 million a year earlier. The company said the ocean transportation unit performed relatively well, as lower shipping volume and higher stevedoring costs and pension expenses were partially offset by savings from fewer ships in service and other reduced expenses.

Hawaii container volume was down 12 percent to 35,100 in the third quarter from 39,900 a year earlier. Rental car replacement orders helped minimize the drop in Hawaii automobile shipments, which were down 3 percent to 21,200 versus 21,800 in the same period. And Matson's China service saw a 1 percent gain in container volume to 12,400 from 12,300, though that was because Matson added a third port of call in Xiamen.

AGRIBUSINESS LOSS

In agribusiness, A&B's operating loss about doubled to $13.8 million in the third quarter from $6.7 million a year earlier. The expanded loss was primarly due to reduced prices for power that affiliates of HC&S and Kauai Coffee produce and sell to local utility companies. Poorer margins on sugar sales also was a factor.

"The loss in agribusiness, while anticipated, was painful," Doane said.

HC&S produced 53,700 tons of sugar in the third quarter, or 6 percent more than a year earlier, though that was mostly due to harvest timing, A&B said.

The company added that the completion of its annual sugar harvest this month should reduce agribusiness losses in the fourth quarter perhaps by more than half.

Next year, A&B expects a dramatic improvement up to $20 million in its sugar operations because of recent increases to sugar prices and higher expected production following two years of drought conditions, according to Stan Kuriyama, A&B president. "There is positive momentum in the business," he said in a conference call with stock analysts.

However, the future of A&B's Maui sugar operation could be affected by a regulatory challenge over how much surface water HC&S should be able to use. A decision on the water issue is expected in the next several months from the state Commission on Water Resource Management.