USA – Seaboard milling unit, Commodity Trading and Milling (CT&M) has reported operating income of US$46 million in the year 2018, an 84% increase from US$25 million in the previous fiscal year.
The company said net sales for the segment during fiscal 2018 totalled US$3.42 billion, up 16% from US$2.94 billion in the same period a year ago.
This was attributed to higher volume of third-party sales, including sales for a business acquired in January 2018, and higher affiliate sales prices, partially offset by lower third-party sales prices.
The segment, managed under the name of Seaboard Overseas and Trading Group, contributed approximately 47% of Seaboard’s total inventories as of December 31, 2018.
Sales and operating results of the sector were affected by worldwide commodity price fluctuations, uncertain political and economic conditions in the countries it operates, and the volatility in the commodity markets.
“Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this segment would have been higher by US$3 million in 2018, lower by US$4 million in 2017 and remained the same in 2016,” said Seaboard in results filing.
“While management believes its commodity futures, options and foreign 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.
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.”
Income from affiliates for the CT&M segment decreased by US$18 million for the year ended December 31, 2018 compared to 2017.
Results were also impacted by lower margins on commodities and higher selling, general and administrative expense, partially offset by higher gains of US$4 million on mark-to-market derivative contracts.
Seaboard reported losses at an equity method investment located in the Democratic Republic of Congo.
During the period, Seaboard invested US$162 million in property, plant and equipment, US$29 million was for the CT&M segment particularly in milling assets.
In January 2018, the company completed the acquisition of Groupe Mimran’s flour milling and associated businesses located in Senegal, Ivory Coast and Monaco for total consideration of US$324 million.
The deal not only increased its footprint on the continent but also increased the flour and feed milling capacity of its consolidated and non-consolidated businesses.
With the acquisition, Seaboard now operates grain-related businesses in 41 locations in 22 countries in Africa, South America and the Caribbean, including 18 that involve wheat flour milling.
In the first quarter of fiscal 2018, Seaboard acquired a 50% noncontrolling interest in a grain trading and flour milling business in Mauritania for total consideration of US$16 million.