Seaboard reports loss for Q1

With the uncertainty of the long-term impact of the coronavirus (COVID-19) looming large for its future, Seaboard Corp. for the first fiscal quarter ended March 28, 2020, reported a net loss of $103 million, and a net loss of $88.43 per share of the common stock, compared to earnings of $57 million, $48.79 per share, during the same quarter in 2019.

According to the company’s filing with the Securities and Exchange Commission (SEC), the company reported net sales of $1.68 billion compared to $1.54 billion during the same period last year.

Thanks in part to higher volumes and prices, pork sales totaled $455 million in Q1, an 11.4% increase over the same quarter in 2019, which totaled $403 million. Higher-priced market hogs also contributed to the increase. Improved margins on pork product sales contributed to operating income for the pork segment in Q1, which was reported at $32 million compared to a loss of $34 million in the same period the previous year.

As an investor in Butterball LLC, Seaboard reported net sales of $318 million in Q1, a 4.7% increase compared to $303 million during the same period in 2019. Despite higher sales, Butterball’s net loss was reported at $13 million, improving on the previous year’s loss of $21 million. Higher production costs served to offset the turkey business’ improved results, attributed in part to higher prices for turkey products sold due to a strong sales mix with more value-added products.

In its SEC filing, Seaboard said the impact of COVID-19 on its business is unknown and impossible to predict. The company confirmed on April 14, an employee at its Guymon, Okla., processing plant tested positive for the virus. The worker did not report back to work after being tested and operations at the facility were not interrupted

“Seaboard is taking a variety of measures to ensure the availability and functioning of its essential operations and to promote the safety and security of all employees,” said the company in the SEC filing.

The performance of the company’s pork segment is dependent on numerous factors that affect pricing, supply and demand.

“Management is unable to predict future market prices for pork products, the cost of feed or third-party hogs or the prices of biodiesel,” according to the filing. “Based on market conditions and the impacts of the COVID-19 pandemic, management currently cannot predict if this segment will be profitable for the remainder of 2020.”

In terms of capital expenditures, Seaboard invested $43 million in its pork segment, mostly for the expansion of its Guymon-based pork plant, a three-phase, $100-million upgrade announced in early 2020. The company is also in the process of converting an idled ethanol plant in Hugoton, Kan., to a renewable diesel production plant. Of Seaboard’s $241 million budgeted for capital expenditures for the remainder of 2020, approximately $172 million is earmarked for the conversion of the diesel plant and with the balance expected to complete the expansion of the Guymon processing plant.

Continued operation of both the Oklahoma plant and the Seaboard Triumph Foods processing facility, which it jointly owns in Sioux City, Iowa, with Triumph Foods, is a significant factor in Seaboard playing its role as a prominent supplier to the food supply chain. STF officials confirmed earlier this month an employee at the plant had tested positive for COVID-19, but operations continued as the employee quarantined at home

“The Pork segment is largely dependent on the continued operation of its Oklahoma pork processing plant and the STF plant,” the company said. “The closure, even temporarily, of these plants could have a material adverse effect on liquidity and financial results as Seaboard may be unable to process hogs resulting in a significant number of excess hogs in its live production system unable to be processed into finished pork product due to idled plant capacity.”

Likewise, the impact of COVID-19 on the Butterball business hinges on the continued operation of its processing operations and any interruption could negatively impact Seaboard’s investment in the company.

As a diverse, global company, dramatic changes in national and worldwide economic conditions and the impact of governmental response could negatively affect the demand and production process of Seaboard’s grains, shipping ability, meat and poultry products.

“Seaboard is monitoring the impact of theCOVID-19 pandemic, which has already caused a significant disruption to global financial markets and supply chains. The significance of the operational and financial impact to Seaboard will depend on how long and widespread this disruption proves to be,” according to the company. “The extent to which the COVID-19 pandemic impacts Seaboard’s results will depend on future developments, which are uncertain and cannot be predicted, including new information which may emerge concerning the severity of the pandemic and the actions that are being taken to contain and treat it. If economic or market conditions in key global markets deteriorate, Seaboard may experience material adverse effects on its business, financial condition and results of operations.”