Business Overview A Diverse Operational Footprint

Seaboard Corporation (SEB) is a Kansas-based diversified agribusiness conglomerate with a rich history spanning over a century. Founded in 1918 as a flour brokerage business, Seaboard has since evolved into a sprawling enterprise with operations across pork production, commodity trading, marine shipping, biofuel manufacturing, and power generation. Under the leadership of the Bresky family, who collectively own approximately 73% of the outstanding shares, Seaboard has consistently demonstrated its ability to adapt and thrive in an ever-changing global landscape.

Seaboard's operations are divided into six reportable segments: Pork, Commodity Trading and Milling (CTM), Marine, Liquid Fuels, Power, and Turkey. This diversified business model has helped the company weather market volatility and capitalize on opportunities across various industries.

The Pork segment is Seaboard's largest, responsible for producing hogs and processing pork products for both domestic and international markets. The company's involvement in pork production began in 1982 when it acquired a pork processing plant in Oklahoma, which became the foundation for its vertically integrated pork production business. As of December 31, 2024, the Pork segment represented approximately 47% of the company's total fixed assets and 39% of total inventories.

The CTM segment operates as an integrated agricultural commodity trading, processing, and logistics company, with a presence in 26 countries, primarily in Africa and South America. Seaboard has expanded its international presence over the years, growing its footprint in these regions and adapting to local regulatory environments. The CTM segment represents approximately 41% of Seaboard's total inventories as of December 31, 2024.

The Marine segment provides cargo shipping services throughout the Caribbean, Central, and South America, while the Liquid Fuels segment produces biodiesel and renewable diesel, along with related environmental credits. The company has invested in sustainability initiatives, such as installing renewable natural gas production facilities at its hog farms.

The Power segment operates as an independent power producer in the Dominican Republic, and the Turkey segment represents Seaboard's 52.5% non-controlling investment in Butterball, a leading producer and processor of turkey products.

Seaboard's diversified operations have helped the company weather market volatility and capitalize on opportunities across various industries. In 2024, the company reported total revenue of $9.10 billion, with the Pork, CTM, and Marine segments contributing the bulk of sales.

Financial Performance Solid Fundamentals, Weathering Challenges

Over the past three years, Seaboard has demonstrated a mixed financial performance, navigating a challenging operating environment. In 2024, the company reported net income of $88 million, with operating cash flow of $519 million and free cash flow of $8 million. This represents a significant improvement compared to 2023, when the company reported a net loss of $226 million, with operating cash flow of $710 million and free cash flow of $204 million.

For the quarter ended December 31, 2024, Seaboard reported revenue of $2.48 billion and net income of $154 million. Compared to the prior year quarter, revenue increased 8.8% and net income increased 140.6%. The increase in revenue and net income was primarily driven by higher sales volumes and prices in the Pork segment.

Liquidity

The company's liquidity position remains strong, with $1.17 billion in cash and short-term investments as of December 31, 2024, and additional borrowing capacity of $985 million under its lines of credit. Seaboard's balance sheet is well-capitalized, with a debt-to-equity ratio of 0.36 as of the same date. The company's current ratio was 2.50 and its quick ratio was 1.50, indicating strong liquidity.

Challenges and Opportunities Navigating Global Headwinds

Seaboard's diverse operations have not shielded the company from the impact of global macroeconomic and geopolitical events. The company has faced challenges stemming from volatile commodity prices, supply chain disruptions, and the ongoing COVID-19 pandemic, which have contributed to fluctuations in its financial performance.

In 2024, the company's Pork segment benefited from higher margins on pork products and market hogs, while the Liquid Fuels segment struggled with lower environmental credit sales and narrower product margins. The CTM segment also experienced lower margins due to mark-to-market losses on derivative contracts, and the Marine segment saw a decline in voyage revenue.

Despite these headwinds, Seaboard remains focused on investing in its operations to increase reliability, efficiency, and sustainability. The company has committed significant capital expenditures to projects such as renewable biogas recovery facilities in its Pork segment and the construction of dual-fueled vessels in its Marine segment, positioning it to capitalize on evolving industry trends.

Furthermore, Seaboard's diversified business model and strong financial position provide a solid foundation for the company to navigate the challenges ahead. As the global economy continues to evolve, Seaboard's ability to adapt and innovate will be critical to its long-term success.

Risks and Uncertainties Navigating a Complex Global Landscape

As a multinational conglomerate, Seaboard faces a range of risks and uncertainties, including:

1. Fluctuations in commodity prices: The company's performance is heavily influenced by volatile prices for agricultural commodities, livestock, and energy, which can significantly impact its margins and profitability.

2. Global economic and political conditions: Seaboard's international operations expose the company to risks associated with economic and political instability in the regions where it operates, including currency fluctuations, trade barriers, and regulatory changes.

3. Supply chain disruptions: The company's operations are vulnerable to disruptions in global supply chains, which can affect the availability and cost of raw materials, transportation, and logistics.

4. Environmental and regulatory compliance: Seaboard's businesses are subject to a complex web of environmental, food safety, and other regulations, which can result in increased compliance costs and legal liabilities.

5. Competition and industry consolidation: The company faces intense competition in its various business segments, which can pressure margins and market share.

6. Reliance on key personnel and labor availability: Seaboard's success depends on the continued service of its experienced management team and the availability of skilled personnel, particularly in its labor-intensive Pork and Liquid Fuels segments.

To mitigate these risks, Seaboard has implemented robust risk management strategies, including the use of derivative instruments to manage commodity price exposures, diversification of its geographic and operational footprint, and ongoing investments in technological innovation and employee development.

Segment Analysis Diverse Operations Driving Performance

Pork Segment: As Seaboard's largest segment, the Pork division plays a crucial role in the company's overall performance. Sales prices are directly affected by both domestic and worldwide supply and demand for pork products and other proteins. Feed costs, particularly corn and soybean meal prices, significantly impact profitability. Seaboard continuously seeks ways to enhance operational efficiency at its pork processing plant, which generally operates near capacity, while also looking to increase margins by introducing new, higher-margin value-added products. The segment has also begun producing swine-derived renewable natural gas, although sales from this operation are not yet significant as most sites are still in the early stages of production.

Commodity Trading and Milling (CTM) Segment: This segment's performance is highly dependent on fluctuating commodity prices and global market conditions. The majority of its sales are derived from sourcing agricultural commodities like wheat, corn, and soybean meal from multiple origins and delivering them to third-party and affiliate customers in various international locations. Profit margins are sometimes protected through the use of commodity derivatives and other risk management practices, but the execution of these purchase and delivery transactions can have long cycles of completion, extending for several months with a high degree of price volatility.

Marine Segment: The performance of this segment is influenced by economic conditions and political stability in the regions where it operates, particularly in the Caribbean, Central, and South America. Freight rates can fluctuate depending on regional supply and demand for shipping services, and the segment is also affected by changes in charter hire rates for ocean cargo vessels.

Liquid Fuels Segment: Profitability in this segment is impacted by world oil prices, the market prices of pork fat and other feedstocks used in production, as well as government mandates and incentives for biofuels and the market price of environmental credits.

Power Segment: As an independent power producer in the Dominican Republic, this segment's performance is influenced by spot market rates for electricity, which are impacted by fuel prices and the various producers supplying power to the grid. While fuel is this segment's largest cost component and is subject to price fluctuations, higher fuel costs have generally been passed on to customers.

Turkey Segment: Representing Seaboard's 52.5% non-controlling investment in Butterball, this segment's performance is affected by domestic and worldwide supply and demand for turkey products and other proteins. Feed costs, particularly corn and soybean meal prices, significantly impact Butterball's profitability and cash flows.

Geographic Footprint Global Reach and Market Exposure

Seaboard's operations span across multiple continents, providing the company with diverse market exposure and opportunities for growth. In 2024, Seaboard reported that 11% of its total sales were in Colombia, making it the company's largest individual foreign market. No other single foreign country accounted for 10% or more of Seaboard's total sales.

The company's workforce reflects its global presence, with approximately 53% of its 14,000 employees located in the U.S., 30% in the Caribbean, Latin America and South America, and 17% in Africa. This diverse geographic footprint allows Seaboard to capitalize on regional market opportunities while mitigating risks associated with any single market or region.

Human Capital Management Investing in a Global Workforce

Seaboard recognizes that its employees are critical to its operational success. The company places a strong emphasis on the health, safety, and financial wellness of its workforce. As of December 31, 2024, Seaboard had approximately 14,000 total employees, with the Pork segment employing the largest portion at 43% of the workforce.

The company offers competitive pay, benefits, and training and development programs to attract and retain talent. Seaboard invests in various initiatives to support and develop its global workforce, promoting internal advancement and fostering a culture of continuous improvement.

However, the company has faced some challenges in certain segments, such as high turnover in the Pork segment due to the nature of the work and rural locations of some processing plants. Seaboard continues to address these challenges through targeted retention and recruitment strategies.

Legal and Regulatory Matters Navigating Complexities

Seaboard has been involved in some legal proceedings, which the company is actively managing. In 2021, a lawsuit was filed against Seaboard Corporation and Seaboard Marine Ltd. under the Helms-Burton Act related to the company's business dealings in Cuba. Seaboard is defending this litigation, which is still pending.

Additionally, in 2018, Seaboard Foods LLC, the company's pork segment, was named as a defendant in a class action lawsuit alleging price-fixing in the pork industry. Seaboard has reached settlements with some plaintiffs in this ongoing litigation.

These legal matters underscore the complex regulatory environment in which Seaboard operates and the importance of robust compliance and risk management practices across its global operations.

Conclusion A Resilient Agribusiness Poised for the Future

Seaboard Corporation's long-standing history, diversified business model, and strong financial position have enabled the company to navigate the complex global landscape and capitalize on emerging opportunities. While the company has faced its share of challenges in recent years, its commitment to operational excellence, sustainability, and innovation positions it well to continue delivering value to its shareholders.

As Seaboard navigates the road ahead, investors will closely monitor the company's ability to manage volatile commodity prices, global economic and political risks, and evolving regulatory environments. With its experienced management team, robust risk management practices, and a track record of adaptability, Seaboard appears poised to remain a formidable player in the dynamic agribusiness sector.

The company's strong liquidity position, with $1.17 billion in cash and short-term investments and $985 million in available borrowing capacity, provides a solid foundation for future growth and investment. As Seaboard continues to optimize its diverse portfolio of businesses and expand its global footprint, it is well-positioned to capitalize on opportunities in the evolving agribusiness and transportation industries.