Milling & Baking News - May 22, 2018 - 16

Financial Results

Seaboard milling operating
income declines in first quarter
MERRIAM, KAS. - Seaboard Corp.
posted operating income of $11 million in its Commodity Trading and
Milling (C.T.&M.) segment during the
first quarter ended March 31, down
36% from $17 million in the same period of fiscal 2017.
Net sales for the segment totaled
$786 million, up 8% from $727 million
in the same period a year ago. The increase primarily reflected higher sales
prices for wheat sales to third parties
and higher volumes of sales to affiliates and third parties, partially offset
by lower corn and soybean meal sales
prices and volumes to third parties.
"The decrease (in income) for the
three-month period primarily reflected
lower margins on affiliate and thirdparty sales, primarily on corn and rice
commodities and higher selling, general
and administrative costs," Seaboard
noted in a May 2 filing with the U.S.
Securities and Exchange Commission.
"The decrease was partially offset by
fluctuations of $2 million of mark-tomarket derivative contracts.

"Due to worldwide commodity
price fluctuations, the uncertain political and economic conditions in the
countries in which this segment operates, and the current volatility in the
commodity markets, management is

unable to predict future sales and operating results for this segment. However, management anticipates positive
operating income for this segment for
the remainder of 2018, excluding the
effects of marking to market derivative contracts."
Seaboard said that if it had not applied mark-to-market accounting to
its derivative instruments, operating
income in the C.T.&M. segment would
have been lower by $6 million and $4
million for the three-month periods of
2018 and 2017, respectively.
"While management believes its
commodity futures, options and foreign

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exchange contracts are primarily economic hedges of its firm purchase and
sales contracts or anticipated sales contracts, Seaboard does not perform the
extensive record-keeping required to
account for these transactions as hedges
for accounting purposes," the company
said. "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 markto-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 $36 million in property, plant and
equipment during the first quarter of
fiscal 2018, of which $5 million was for
the C.T.&M. segment. Seaboard said
the C.T.&M. investment primarily
was of a normal recurring nature and
included replacements of machinery
and equipment, and general facility
modernizations and upgrades.
During the first quarter, Seaboard
said its C.T.&M. segment acquired three
flour mills and an associated grain trading business located in Senegal, Ivory
Coast and Monaco for total consideration of $330 million. The acquisition
primarily was funded using proceeds
from Seaboard's short-term investments
and the incurrence of a note payable to
the sellers, the company said.
"With this business, the C.T.&M.
segment expects to increase Seaboard's
flour and feed milling capacity and annual grain trading volumes," the company noted in the filing. "Also during
the first quarter, Seaboard's C.T.&M.
segment invested total consideration of
$18 million for a 50% noncontrolling interest in a grain trading and flour milling business in Mauritania."
Seaboard said in the filing it has
budgeted capital expenditures totaling
$202 million for the remainder of fiscal
2018, including $36 million for milling
assets and other improvements to existing facilities and related equipment.
Overall, net income at Seaboard in
the first quarter ended March 31 was
$32 million, equal to $26.75 per share on
the common stock, down 73% from $85
million, or $71.84 per share, in the same
period a year ago. Net sales were $1,579
million, up 13% from $1,399 million. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - May 22, 2018

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