USA- Kansas-based Seaboard Corp’s Commodity Trading and Milling (CT&M) segment recorded a 148% increase in operating income thanks to higher margins in some commodities and the sale of their Brazilian flour milling operations in the 2022 fiscal year.
The segment, which sources and markets over 14 million tonnes of agricultural commodities each year, posted US$151 million operating income in the fiscal year ended Dec. 31, 2022, up from US$61 million in fiscal 2021.
Seaboard’s CT&M segment has milling operations in 40 locations in 23 countries producing approximately two million tonnes of wheat flour, maize meal, manufactured feed, and oilseed crush commodities annually.
In fiscal 2022, these traded commodities enjoyed high sale prices, significantly driving the operating income up to contribute to the 148% surge.
Another major contributor to the newsworthy surge was the Seaboard CT&M segment sale of its Brazilian flour milling operations during fiscal 2022, contributing US$6 million in cash proceeds.
Additionally, operational changes in 2021 drove operational costs up, something that did not feature in 2022, hence the significant difference in the income posted in the two fiscal years.
Seaboard also enjoyed derivative contract gains of US$7 million related to the change in mark-to-market adjustments while 2021 saw contract losses of the same amount.
Net sales partially offset by low volumes to affiliates
The CT&M segment net sales totaled US$6.29 billion for fiscal 2022, up 22% from US$5.15 billion in fiscal 2021.
According to Seaboard, higher sales prices of most commodities, and higher volumes to third-party customers take credit for the increase but were partially offset by lower volumes to affiliates due to the timing of shipments.
“Certain foreign milling operations may operate at less than full capacity due to low demand, poor consumer purchasing power, excess milling capacity in their competitive environment, or imported flour,” Seaboard said.
Overall, Seaboard’s net sales were also up by the same percentage as their CT&M segment, fiscal 2022 posting US$11.24 billion compared to US$9.23 billion in 2021.
Additionally, in 2022, Seaboard recorded net earnings of US$580 million, equal to $499.66 per share on the common stock, versus US$570 million, equal to $490.36 per share in 2021.
What is in store for 2023?
In spite of the impressive performance of the CT&M segment in 2022, Seaboard’s management is not able to predict the direction sales will take in 2023.
“Due to worldwide commodity price fluctuations, the uncertain political and economic conditions in the countries in which this segment operates and the volatility in the commodity markets, management is unable to predict sales and operating results for this segment for future periods,” Seaboard commented in a February filing with the US SEC.
In the immediate future, there is good news for Seaboard’s stockholders as the board of directors authorized a quarterly cash dividend of US$2.25 per share of its common stock, payable on March 6, 2023.
Seaboard’s management is also planning capital expenditures of US$750 million, most of which will be in the Pork and Marine segments.
This planned investment is significantly higher than the US$474 million invested in fiscal 2022, with US$315 million and US$136 million going to the Pork and Marine segments respectively.