Volatile sugar prices, executive turnover beset A&B of Hawaii

Volatile world sugar prices have made life difficult for companies that depend on the sweetener for their profits. One such firm having a hard time refining this year's earnings is Alexander & Baldwin Inc. (A&B), historically one of Hawaii's "Big Five" companies. When the uncertain economies of the US and Hawaii are mixed in, the outlook becomes even more clouded.

Analysts who follow A&B are having as much difficulty as the 110-year-old company in getting a handle on the kind of performance to expect for 1980. Estimates range from $4.10 to as much as $6.50 a share. Last year's profits were equal to $3.76 per share.

Adding to the confusion is the rollercoaster spot market price for sugar. At the end of 1979 it was about 15 cents a pound. Since then, the spot price has bounced erratically between 20 and 32 cents.

But sugar's outlook isn't the only thing that concerns A&B these days. For the second time in two years the company's chairman and chief executive has quit without explanation. Latest to depart what has become a corporate hot seat was Gilbert Cox, who abruptly quit in January as chairman, chief executive, and a director.

The chairman's slot continues unfilled but Robert Pfeiffer, president and chief operating officer, was given the additional title of chief executive. Mr. Pfeiffer, who recently turned 60, faces mandatory retirement at 65. Eyeing A&B's revolving door, he admits the turnover at the top has been "an unsettling situation that has calmed down. We're all hoping we will have stability from here on."

Heard in the background, however, are the echoes of Mr. Cox, who was more specific when he joined A&B as president in mid-1978, the company's 12th chief executive in its more than a century of doing business. At the time, he offered assurances he would serve the company five years, until at least July of 1983. He previously had been president and chief operating officer at Amfac Inc., another member of the islands' Big Five and one with a mandatory retirement age of 62.

Mr. Cox was comfortable, he indicated, in working without an employment contract. He succeeded Lawrence Pricher, who unexpectedly resigned as chairman and chief executive in May 1978.

Mr. Pfeiffer prefers discussing A&B today and where it's headed, rather than dwelling on the turnover of top management. In 1979 A&B earned $34.1 million from continuing operations, a 62 percent increase over the $21.1 million of the prior year. Per share profits were 64 percent higher.

"We don't expect to have another 62 or 64 percent increase in 1980, but we do believe we have moved to a new income plateau we can achieve or surpass for at least the next several years," says Mr. Pfeiffer.

Supporting that optimistic outlook were this year's first quarter results, higher than analysts expected, with earnings coming in at $1.43 a share, up from 42 cents in the first three months of 1979. Also encouraging is that all major operating groups contributed to the gains.

Still, Analyst David Jackson of Los Angeles-based Bateman Eichler, Hill Richards, says that despite that impressive improvement "full year results will primarily be determined by the ultimate price the company's 1980 sugar crop can fetch." He had been looking for 1980 net per share of $5.50 but recently boosted that to about $6.50, which he terms "conservative."

"If there is a world sugar production shortfall as predicted, it is likely sugar prices would move higher, and, if that is the case, we will move our estimate higher by an appropriate amount," says Mr. Jackson. Each penny per pound advance in the price of sugar is worth about 30 cents a share in after-tax earnings to A&B.

A hedge against the uncertainites of the sugar market can be found in some of A&B's nonsugar endeavors. "Our other businesses are stable and will show an increase for the year," promises B. Ray Evans, A&B's senior vice-president and chief financial officer. "The extent of sugar's performance will determine the ultimate landing ground or leveling for profits, which will be somewhere in excess of the $3.76 per share from continuing operations last year."

Despite the importance of sugar prices this year, it is ocean transportation, conducted by Matson Navigation Company, a wholly-owned San Francisco subsidiary, which hauls in the largest share of A&B's total revenues.

A&B's other major activities involve development and management of residential, resort, commercial, and industrial property, mainly on Maui and Kauai; investments centering on equity positions in other companies and short-term investments; and the merchandising, trucking, and storage of building materials, hardware; sugar, and general freight hauling and storage.

But it's Matson that's the heavyweight among the company's diversified operations. Last year, the shipping and cargo handling firm provided 67 percent of revenues, or just over $238 million. Matson's operating profit of $29.1 million contributed 47 percent of the corporate total.Now if only A&B's top executives can stop resembling ships passing in the night. . . .