Seaboard said the decrease in operating income primarily reflected lower margins resulting from lower volumes and sales prices.
Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income in the segment would have been US$31 million, down from US$39 million in the same period a year ago.
Additionally, the net sales for the segment during the most recent quarter totaled US$1.34 billion, down 22% from US$1.71 billion in the same period a year ago.
According to the company, the decrease primarily reflected lower volumes of certain commodities sold related to increased competition and market dynamics, as well as lower average sales prices as a result of commodity price fluctuations.
In an Aug. 1 filing with the US Securities and Exchange Commission, Seaboard said it invested US$219 million in property, plant, and equipment in the first half of fiscal 2023, of which US$151 million was in the Pork segment, and US$58 million was in the Marine segment.
For the remainder of 2023, Seaboard said the management budgeted capital expenditures totaling US$390 million.
Overall, Seaboard in the second quarter posted net income of US$52 million, equal to US$44.80 per share on the common stock, down 52% from US$108 million, or US$92.53 per share, in the same period a year ago.
Net sales were US$2.39 billion, down 20% from US$2.97 billion in the same period a year ago.
Seaboard seeks to settle class action suit
In the meantime, Seaboard Foods has offered a settlement in one class-action lawsuit in which Seaboard has been accused of conspiring with other pork producers to drive up the price of pork products, but the company said it will not settle any similar lawsuits.
Seaboard entered into a settlement agreement in June with the direct purchaser plaintiff (DPP) class, in which the company would pay close to US$10 million.
“Seaboard believes that it has meritorious defenses to the claims alleged in these matters and intends to vigorously defend any matters not resolved by the above settlement,” the company stated.
“It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome resulting from these suits or to reasonably estimate the amount of potential loss or range of potential loss, if any, resulting from the suits. However, the outcome of litigation is inherently unpredictable and subject to significant uncertainties, and if unfavorable, could result in material liability.”
Other defendants in the lawsuit include Agri Stats, Clemens Food Group, Hormel Foods, Indiana Packers Corp., JBS USA, Smithfield Foods, Triumph Foods, and Tyson Foods.
The settlement agreement is subject to court approval, and the U.S. District Court of Minnesota is handling the suit.