MERRIAM, KAS. — Seaboard Corp. posted operating income of $21 million in its Commodity Trading and Milling (CT&M) segment during the third quarter ended Sept. 29, up sharply from $7 million in the same period of fiscal 2017.
Net sales for the segment totaled $898 million, up 29% from $694 million in the same period a year ago.
In the nine months ended Sept. 29, the company had operating income of $30 million in the segment, up from $25 million a year ago. Nine-month sales totaled $2,574 million, up 21% from $2,122 million.
Seaboard said the increase in sales for the three- and nine-month periods primarily reflected higher volume of third-party and affiliate sales, including sales for Mimran, which was acquired in January, partially offset by lower third-party sales prices.
Seaboard said that if it had not applied mark-to-market accounting to its derivative instruments, operating income in the CT&M segment would have been lower by $8 million and higher by $4 million for the three- and nine-month periods of 2018, respectively.
“Operating income for this segment would have been lower by $3 million and $7 million for the three- and nine-month periods of 2017, respectively, had mark-to-market accounting not been applied,” Seaboard noted in an Oct. 31 filing with the U.S. Securities and Exchange Commission. “While management believes its commodity futures, options and foreign exchange contracts are primarily economic hedges of its firm purchase and sales contracts and anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these transactions as hedges for accounting purposes. Accordingly, while the changes in value of the derivative instruments were marked-to-market, the changes in value of the firm purchase or sales contracts were not. As products are delivered to customers, these existing mark-to-market adjustments should be primarily offset by realized margins or losses as revenue is recognized over time, and these mark-to-market adjustments could reverse in 2018. Management believes eliminating these mark-to-market adjustments provides a more reasonable presentation to compare and evaluate period-to-period financial results for this segment.”
In the filing, Seaboard said it invested $95 million in property, plant and equipment during the first nine months of fiscal 2018, of which $22 million was for the CT&M segment. Seaboard said the CT&M investment mostly was for milling assets.
Seaboard said in the filing it has budgeted capital expenditures totaling $103 million for the remainder of fiscal 2018, including $39 million for milling assets and other improvements to existing facilities and related equipment.
Overall, net income at Seaboard in the third quarter ended Sept. 29 was $35 million, equal to $29.93 per share on the common stock, down 57% from $81 million, or $69.28 per share, in the same period a year ago. Net sales were $1,651 million, up 18% from $1,402 million.
In the first nine months of fiscal 2018 net income totaled $74 million, or $62.96 per share, down from $224 million, or $191.63 per share, in the same period a year ago. Net sales totaled $4,921 million, up 17% from $4,223 million.