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27.07.2016 22:05
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Alexander & Baldwin Reports Second Quarter 2016 Results
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PR Newswire
HONOLULU, July 27, 2016
HONOLULU, July 27, 2016 /PRNewswire/ -- Alexander & Baldwin, Inc. (NYSE:ALEX) ("A&B" or "Company") today announced its financial results for the three and six months ended June 30, 2016.
"Our core strategy of expanding our Hawaii commercial portfolio and increasing recurring earnings produced solid results in the quarter. Leasing operating profit and net operating income (NOI) were up 6.5% and 4.2%1, respectively, in the quarter. In addition, we completed Mainland dispositions to fund the Manoa Marketplace acquisition, and launched our important Kailua redevelopment efforts at the former Macy's site. Based on strong performance year to date and a continued favorable outlook, we expect Leasing operating profit to grow 5-7% in 2016, and we are increasing our full-year NOI growth estimate to 3-4%, up from 2%. We expect to be announcing more commercial growth opportunities as the year progresses," said Chris Benjamin, A&B president & chief executive officer.
"We also made good progress in Agribusiness, where our final sugar harvest is on track and our sugar cessation-related losses so far this year are lower than originally projected. We're now in a position to improve our full-year guidance for cessation costs."
"In addition to the Mainland dispositions, we closed the sales of five joint venture units at Kukui'ula and Ka Milo in the quarter. In July, we closed another four units and have seven binding sales at these projects that are expected to close this year. In addition, we look forward to fourth quarter sales closings at The Collection. Material & Construction's paving volume was down significantly due largely to pervasive inclement weather in the quarter, but our backlog grew to $267 million. While the weather has been challenging, the paving work is there when the weather cooperates," said Benjamin. "And finally, we successfully expanded our Hawaii renewable energy portfolio with a new $15 million investment in two solar facilities that together generate 6.5 megawatts of renewable power. The investment extends our renewable energy presence to Oahu and provides us a base to grow our portfolio where the state's renewable energy needs are the greatest."
Quarter Highlights & Recent Activity
Leasing
- Leasing operating profit was up 6.5% to $14.8 million and NOI increased by 4.2% to $22.3 million1.
- Sold three Mainland commercial properties to complete the migration process related to the Manoa Marketplace acquisition.
- Began construction of the Lau Hala Shops (formerly Kailua Macy's building).
- First tenants expected to open in early 2018.
- Letters of intent (LOIs) signed for 87% of remaining available square feet.
- Moving forward with a new food hall at the Pearl Highlands Center.
- Ground breaking is projected for fall 2016.
- Expected to open in the first quarter of 2017.
- Secured LOIs for nearly 60% of the available square feet.
- The 18,415-square-foot expansion of the Gateway at Mililani office complex has been completed and was moved into the commercial portfolio in June. The additional space was built to a 13% stabilized yield on cost.
Development & Sales
- Construction of The Collection remains on schedule for late 2016 delivery.
- Second quarter 2016 joint venture sales activity:
- Two sales at Kukui'ula on Kauai: a lot at $65 per square foot and a home for $4.1 million or $1,535 per square foot.
- Three sales at Ka Milo on the Big Island at an average $630 per square foot.
- Seven binding sales contracts at the 70-unit Keala O Wailea on Maui averaging $1.1 million per unit.
- 43 binding sales to date at an average price of $1.1 million or $820 per square foot.
- Site construction advanced.
- Delivery of units targeted in late 2017.
Materials & Construction
- $72 million of new contract wins.
- Backlog remains healthy at $266.8 million2, a 17.8% increase compared to year end.
- A quadrupling of crew days rained out in the second quarter compared to last year held operating profit to $4.9 million.
Agribusiness
- Final sugar harvest on track.
- Cessation cost outlook materially better than originally expected. Cessation, including Agribusiness segment cash flows, now expected to be cash flow positive.
- Continued advancement of diversified agriculture plans through crop and grazing trials, technology research and financial analysis.
Financial/Other
- Invested $15.4 million in two solar facilities in Mililani, Oahu totaling 6.5 megawatts.
Financial Performance
Second Quarter 2016
The Company reported a net loss for the second quarter of 2016 of $0.7 million, or $0.01 per diluted share, which included a $10.5 million after-tax loss from the Agribusiness segment, or $0.21 per diluted share, principally related to the previously disclosed cessation of sugar operations at Hawaiian Commercial & Sugar Company (HC&S). However, due to the better-than-expected outlook for cessation related costs, the Company is reducing its full-year, pre-tax cessation cost guidance from $90-$110 million to $75-$90 million and, as a result, now expects the cessation of sugar operations will be a cash positive event. Earnings for the second quarter of 2015 were $9.8 million, or $0.20 per diluted share, and included after-tax losses from the Agribusiness segment of $3.0 million, or $0.06 per diluted share.
Revenue for the second quarter of 2016 was $102.7 million, compared to revenue of $153.7 million for the second quarter of last year. Revenue declined due to declines in property sales revenue, asphalt prices and paving revenues.
Segment and other results:
Leasing operating profit increased 6.5% in the second quarter from $13.9 million in 2015 to $14.8 million in 2016, primarily due to the timing of acquisitions and dispositions. Leasing NOI increased in the second quarter compared to last year by 4.2%1.
Development & Sales reported operating profit of $5.0 million in the second quarter of 2016 due primarily to the sales of three Mainland commercial properties to fund the Manoa Marketplace acquisition, but also included joint venture unit closings of two units at Kukui'ula and three units at Ka Milo. Operating profit from Development & Sales in the second quarter of 2015 was $14.3 million and primarily included the sale of three Kahala Avenue properties and a 2.4-acre parcel at Maui Business Park.
The Materials & Construction segment contributed $4.9 million of operating profit in the second quarter of 2016, compared to $7.0 million in last year's second quarter. A significant decrease in tons paved due to delays principally caused by weather were partially offset by increased material sales margins and quarrying efficiency gains. During the quarter, 53 crew days were rained out compared to 14 days for the second quarter of 2015. EBITDA for the second quarter was $7.8 million1 compared to $9.7 million1 last year.
Total Agribusiness operating losses for the second quarter of 2016 were $19.9 million and included $18.5 million of sugar cessation-related expenses. Second quarter Agribusiness losses were lower than projected due primarily to lower-than-expected cessation costs. Agribusiness operations losses were $1.4 million in the second quarter of 2016, compared to $4.7 million in the second quarter of 2015. Agribusiness operations losses were lower in the second quarter of 2016, compared to last year, primarily due to lower raw sugar production costs and higher charter revenue, partially offset by lower power and molasses margins.
Corporate finance and other:
Interest expense increased modestly to $6.8 million for the second quarter of 2016 from $6.6 million for the second quarter of 2015.
General corporate expenses were slightly higher, increasing to $5.6 million for the second quarter of 2016 from $5.3 million for the second quarter of 2015.
The Company reported an income tax benefit of $16.5 million in the quarter due to a net loss before taxes resulting primarily from Agribusiness losses for the quarter and credits related to the new Oahu solar investment made during the second quarter.
Year-To-Date
The Company reported a net loss for the first half of 2016 of $8.2 million, or $0.16 per diluted share, which included a $20.8 million after-tax loss from the Agribusiness segment, or $0.42 per diluted share, principally related to the cessation of sugar operations at HC&S. Earnings for the first half of 2015 were $35.1 million, or $0.71 per diluted share, and included after-tax losses from the Agribusiness segment of $1.8 million, or $0.04 per diluted share.
Revenue for the first half of 2016 was $211.5 million, compared to revenue of $304.4 million for the first half of last year. Revenue declined principally due to lower development sales, asphalt prices and paving revenue.
| ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES | |||||||||||||
| CONDENSED INDUSTRY SEGMENT DATA, NET INCOME (LOSS) | |||||||||||||
| (In Millions, Except Per Share Amounts, Unaudited) | |||||||||||||
| | |||||||||||||
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||||
| Revenue: | 2016 | | 2015 | | 2016 | | 2015 | ||||||
| Real Estate: | | ||||||||||||
| Leasing | $ | 34.6 | | $ | 34.8 | | $ | 69.4 | | $ | 67.5 | ||
| Development & Sales | 61.0 | | 52.4 | | 61.3 | | 88.9 | ||||||
| Reconciling item3 | (60.7) | | (16.7) | | (60.7) | | (21.0) | ||||||
| Materials & Construction | 42.0 | | 57.4 | | 92.7 | | 114.3 | ||||||
| Agribusiness | 25.8 | | 25.8 | | 48.8 | | 54.7 | ||||||
| Total revenue | $ | 102.7 | | $ | 153.7 | | $ | 211.5 | | $ | 304.4 | ||
| | | | | | | | | ||||||
| Operating Profit (Loss): | | | | | | | | ||||||
| Real Estate: | | | | | | | | ||||||
| Leasing | $ | 14.8 | | $ | 13.9 | | $ | 28.9 | | $ | 27.1 | ||
| Development & Sales | 5.0 | | 14.3 | | 1.2 | | 46.3 | ||||||
| Materials & Construction | 4.9 | | 7.0 | | 12.9 | | 14.2 | ||||||
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