USA – The Kansas based agribusiness company, Seaboard Corp has reported a loss of US$2 million in its Commodity Trading and Milling (CT&M) segment during the second quarter ended June 30.
The company had operating income of US$9 million in the segment while net sales totalled US$890 million, a 27% increase from US$701 million in the same period a year ago.
An increase in the net sales was attributed to reflected higher volume of third-party and affiliate sales partially offset by lower third-party sales prices.
Also, the segment benefited from sales for Groupe Mimran’s flour milling and associated businesses located in Senegal, Ivory Coast and Monaco, which it acquired in January for US$375 million.
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 higher by US$18 million and US$12 million for the three- and six-month periods of 2018, respectively.
“Operating income for this segment would not have changed for the three-month period of 2017, but operating income for this segment would have been $4 million lower for the six-month period of 2017,” Seaboard noted in an Aug. 8 filing.
“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.
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.”
The group invested US$58 million in property, plant and equipment during the first half of fiscal 2018, of which US$17 million was for the CT&M segment.
CT&M investment primarily included replacements of machinery and equipment, and general facility modernizations and upgrades.
In 2016, Seaboard invested US$31 million in CT&M unit in Zambia including US$29mn for the construction of two dry bulk vessels with plans to further invest US$29mn on the segment for a new wheat mill.
Earlier this year, the American agribusiness firm tabled a proposal to acquire an additional 46.1% stake Kenyan Unga Group in a move to take the company private, but minority stakeholders came out to block the transaction.
In the first quarter ended March 31, the firm reported 36% decline in profits blamed on lower corn and soybean meal sales.