SEABOARD CORP /DE/

Seaboard Corporation is a diversified global conglomerate operating in agricultural, energy, and ocean transport businesses, with operations in over 45 countries. The company is primarily engaged in hog production, pork processing, and biofuel production in the United States; commodity trading and grain processing in Africa and South America; cargo shipping services in the U.S., Caribbean, and Central and South America; and electric power generation in the Dominican Republic. Seaboard also holds an equity method investment in Butterball, LLC, a producer and processor of turkey products. All of Seaboard's segments provide essential products or services, including food, energy, and transportation, and are heavily commodity-driven, resulting in high volatility due to market prices and a cyclical nature of financial performance.

Seaboard's Pork segment faces competition from regional, national, and international pork and other protein producers, based primarily on product quality, customer service, and price. According to S&P Global in 2025, Seaboard Foods was ranked number three in hog production in the U.S. based on its sows in production and number four in pork processing in the U.S. based on daily processing capacity, including Triumph's and STF's capacity. Competition in the CT&M segment comes from numerous traders worldwide and imported grain-processed products or other local producers. The Marine segment competes based on price, reliable sailing frequencies, and customer service. The Liquid Fuels segment competes with other biofuel producers primarily on price. For the Power segment, the Dominican government sets a cap on electricity spot market prices and establishes dispatch order based on a merit list of producers by energy efficiency, with renewable energy producers and those with lower variable operating costs potentially receiving dispatch preference. The Turkey segment competes with regional and national producers based on brand, product quality, customer service, and price.

Seaboard generates revenue through six reportable segments: Pork, Commodity Trading and Milling (CT&M), Marine, Liquid Fuels, Power, and Turkey. The Pork segment is a vertically integrated pork producer that sells pork products to further processors, foodservice operators, distributors, and grocery stores in the U.S. and internationally, with approximately 25% of sales to Mexico, Japan, China, and other foreign markets. The CT&M segment is an integrated agricultural commodity trading, processing, and logistics company with trading offices, milling facilities, and a fleet of chartered and owned vessels. The Marine segment provides dry, refrigerated, and other cargo shipping services between the U.S. and 27 countries in the Caribbean and Central and South America. The Liquid Fuels segment produces biodiesel and renewable diesel and generates environmental credits. The Power segment is an independent power producer generating electricity for the Dominican Republic power grid. The Turkey segment represents Seaboard's non-controlling 52.5% investment in Butterball, accounted for under the equity method. Substantially all of Seaboard's revenue arrangements consist of a single performance obligation, with revenue from products and services transferred at a single point in time accounting for approximately 85% of net sales.

The Pork segment's operations consist of hog production facilities for internal genetic and commercial breeding, farrowing, nursery and finishing, and a pork processing plant in Oklahoma. The segment has a double-shift capacity to process approximately six million hogs annually and can breed and raise approximately eight million hogs annually. It owns and operates eight centrally located feed mills with a combined capacity to produce approximately three million tons of formulated feed annually. The segment also owns nine renewable natural gas production sites located on certain of its hog farms. Seaboard has a 50% investment in Seaboard Triumph Foods, LLC, which operates a pork processing plant in Iowa, a 50% investment in Daily's Premium Meats, LLC, which produces and markets raw and pre-cooked bacon, and a 50% interest in Seaboard de Mexico USA LLC, which operates a ham-boning and processing plant in Mexico. For the year ended December 31, 2025, the Pork segment reported net sales of $2.018 billion and operating income of $67 million.

The CT&M segment, managed under the name Seaboard Overseas and Trading Group (SOTG), operates milling facilities at 14 locations in ten countries and has ten trading offices in nine countries. The milling facilities produce approximately two million metric tons of wheat flour, manufactured feed, maize meal, and oilseed crush commodities per year. The segment owns six dry bulk vessels and voyage-chartered between 24 to 61 additional bulk vessels monthly during 2025. For the year ended December 31, 2025, the CT&M segment reported net sales of $5.173 billion and operating income of $143 million. The Marine segment leases approximately 297,000 square feet of off-port warehouse space and 87 acres of port terminal land in Miami, Florida, and an approximate 77-acre cargo handling and marine terminal facility in Houston, Texas. The Marine segment owns 14 cargo vessels, including eight new dual-fueled vessels, and charters 11 vessels. For the year ended December 31, 2025, the Marine segment reported net sales of $1.605 billion and operating income of $165 million. The Liquid Fuels segment owns biodiesel plants in Oklahoma and Missouri with capacities of up to 46 million gallons and 32 million gallons annually, respectively, and a renewable diesel plant in Kansas with capacity to produce 85 million gallons annually. The segment also owns a terminal facility in California with a maximum throughput capacity of approximately 300 million gallons of fuel per year. For the year ended December 31, 2025, the Liquid Fuels segment reported net sales of $605 million and an operating loss of $127 million. The Power segment owns two power-generating barges in Santo Domingo, Dominican Republic, with EDM II and EDM III having capacities to generate approximately 108 megawatts and 150 megawatts of electricity, respectively. For the year ended December 31, 2025, the Power segment reported net sales of $232 million and operating income of $46 million. The Turkey segment, through Butterball, has three primary processing plants, two further processing plants, and numerous live production facilities and feed milling operations with capacity to produce approximately one billion pounds of turkey annually. For the year ended December 31, 2025, the Turkey segment reported income from affiliate of $82 million.

During 2025, Seaboard's Board of Directors approved a share repurchase program authorizing the repurchase of up to $100 million of Shares through December 31, 2027. Seaboard repurchased 13,261 Shares for $39 million, including excise taxes, for the year ended December 31, 2025. In the Marine segment, six new dual-fueled vessels were completed and delivered during 2025, the last of the original eight ordered vessels, and Seaboard Marine entered into an agreement to build a ninth new vessel at a cost of approximately $75 million. In the Power segment, TCCB entered into an agreement to construct a new power-generating barge, Estrella Del Mar IV (EDM IV), which is expected to commence operations in the Dominican Republic in 2028, with a total estimated cost of approximately $315 million. During 2025, Seaboard reduced its borrowing capacity under the committed line of credit from $450 million to $300 million. Seaboard also invested $50 million in a fund that owns corporate debt securities as a long-term investment. During 2024, Seaboard established a valuation allowance against its U.S. deferred tax asset balances of $212 million, and during 2025, Seaboard released substantially all of its U.S. valuation allowance, resulting in an income tax benefit of $170 million.

For the year ended December 31, 2025, total net sales were $9.746 billion, compared to $9.100 billion in 2024 and $9.562 billion in 2023. Operating income was $239 million for 2025, compared to $156 million in 2024 and an operating loss of $87 million in 2023. Net earnings attributable to Seaboard were $496 million for 2025, compared to $88 million in 2024 and $226 million in 2023. Earnings per common share were $514.46 for 2025, compared to $90.62 in 2024 and $202.21 in 2023. Cash generated from operating activities was $568 million for 2025, compared to $519 million in 2024. As of December 31, 2025, Seaboard had cash and short-term investments of $1.2 billion and additional total working capital of $890 million.

Management anticipates the Pork segment will be profitable in 2026, but no assurances can be made as it is difficult to predict market prices for pork products, the cost of production or third-party hogs, and the impact of tariffs for future periods. Management anticipates positive operating income, excluding the effects of mark-to-market adjustments, for the CT&M segment in 2026, but no assurances can be made as it is difficult to predict worldwide commodity price fluctuations and the uncertain political and economic conditions in the countries in which this segment operates. Management anticipates the Marine segment will be profitable in 2026, but no assurances can be made as it is difficult to predict changes in cargo volumes, cargo rates, fuel costs, or other voyage costs for future periods. Based on current market conditions, management anticipates near break-even results for the Liquid Fuels segment in 2026, but no assurances can be made as it is difficult to predict market prices for biodiesel, renewable diesel and credits, the cost of feedstock, or production levels for future periods. Management anticipates the Power segment will be profitable in 2026, but no assurances can be made as it is difficult to predict fuel costs or the extent that spot market rates will fluctuate due to fuel costs or other power producers for future periods. Management anticipates the Turkey segment will be profitable for 2026, but no assurances can be made as it is difficult to predict market prices for turkey products, the cost of production for future periods, and impacts from diseases.

In the Marine segment, Seaboard Marine entered into an agreement to build a ninth new dual-fueled vessel at a cost of approximately $75 million. The new dual-fueled vessels bring greater fuel efficiency, increased twenty-foot equivalent unit (TEU) capacity, and a host of other advantages to the Marine segment's fleet, creating a better overall fleet balance of owned and chartered vessels. In the Power segment, TCCB entered into an agreement to construct a new power-generating barge, Estrella Del Mar IV (EDM IV), which is expected to commence operations in the Dominican Republic in 2028, with a total estimated cost of approximately $315 million, with installment payments due based on milestones achieved. The newer barges have gas and steam turbines instead of reciprocating engines and are more energy efficient than EDM II. The Power segment has entered into long-term fuel supply agreements to ensure natural gas is available for EDM III's current operations and EDM IV's future operations, as this new barge will also only operate on natural gas.

The Liquid Fuels segment's operating loss increased for the year ended December 31, 2025, compared to 2024, primarily due to 19% higher feedstock costs and lower income recognized from the production tax credits as compared to the federal blender's tax credits. The 2025 income from production tax credits accounted for 52% of the total income generated by federal blender's tax credits in 2024, inclusive of volume fluctuations. The production tax credit value varies based on the greenhouse gas emissions factor of fuel produced. The federal blender's credit expired December 31, 2024, and was replaced by a new clean fuel production tax credit effective January 1, 2025, that is recorded as a reduction to cost of sales. Further guidance regarding the new fuel production tax credit is still pending, and the credit extends through 2029; however, this credit, along with other government incentives, may not be continued.

The total budget for 2026 capital expenditures is approximately $625 million, and includes $150 million for the Power segment's expenditures related to the construction of EDM IV, which is expected to commence operations in 2028, along with several projects individually immaterial across the remaining segments. Management anticipates funding these capital expenditures from a combination of available cash, the use of available short-term investments, and Seaboard's available borrowing capacity. Seaboard continues to look for opportunities to further grow and diversify its operations, and management intends to utilize existing liquidity, available borrowing capacity, and other financing alternatives to fund these opportunities.

The total budget for 2026 capital expenditures is approximately $625 million. In May 2025, Seaboard announced that its Board approved a share repurchase program authorizing the repurchase of up to $100 million of Shares through December 31, 2027, unless extended or earlier terminated. During each quarter in 2025, 2024, and 2023, Seaboard declared and paid quarterly dividends of $2.25 per share of common stock. Seaboard's Board intends that Seaboard will continue to pay quarterly dividends for the reasonably foreseeable future, with such future dividends and the amount of any such dividends being subject to the determination, declaration, and discretion of Seaboard's Board and dependent upon factors such as Seaboard's financial condition, results of operations, and current and anticipated cash needs, including capital requirements.

The impact of tariffs was not material to Seaboard's 2025 results; however, Seaboard continues to monitor the current uncertainties with tariffs and other geopolitical conditions. Seaboard cannot be certain of the outcome, which could indirectly or directly adversely impact its future financial condition and results of operations. The U.S. recently instituted certain changes, and proposed additional changes, in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., and other government regulations affecting trade between the U.S. and other countries where Seaboard conducts business. Global trade disruption, significant introductions of trade barriers, and bilateral trade frictions or countermeasures imposed in response to such government actions have and could further reduce Seaboard's ability to sell products in certain geographical markets, increase costs for imported materials and equipment, lower overall revenues and margins, or reduce demand for Seaboard's shipping services. The ongoing conflict between Russia and Ukraine has impacted global commodity, energy, and input costs and export controls and has resulted in targeted economic sanctions on Russia, certain Russian citizens, and Russian enterprises, which could negatively impact Seaboard's business.

The Liquid Fuels segment's renewable diesel production facility commenced commercial operations in 2022, but operational issues delayed the achievement of consistent operations at full capacity. Production consistency has improved; however, original construction issues, including design choices, may still require repair that may cause downtime. Market fluctuations, such as reduced demand, lower pricing, or higher costs of raw materials, reduction in government incentives, or a variable margin close to break even, has had and may continue to have an adverse impact on product sales and margins, and management could choose to scale back production temporarily until market conditions are more favorable. The Pork segment's renewable biogas recovery facilities are still in early stages of operation, and consistent production at certain sites has taken longer than expected, with future gas output potentially not meeting original projected volumes. The Power segment's new power-generating barge is being constructed in Singapore and expected to commence commercial operations in 2028; if the project is not completed on time, Seaboard has a take-or-pay fuel purchase contract that begins in 2028, and cost overruns could make this project more costly than originally thought.

Seaboard's operations and financial performance are heavily linked to commodity prices, which fluctuate due to domestic and worldwide supply and demand, weather conditions, and governmental regulation, with the Pork, Turkey, and CT&M segments particularly exposed to price volatility for pork, turkey, grains, and oilseeds. The Liquid Fuels segment's profitability is adversely impacted by government policies and changes to customer preferences for renewable energy, as the federal blender's credit expired December 31, 2024, and was replaced by a new clean fuel production tax credit that extends through 2029 but may not be continued, and the segment's operating loss increased to $127 million in 2025 from $100 million in 2024. The Pork segment's renewable biogas recovery facilities are still in early stages of operation, and consistent production at certain sites has taken longer than expected, with future gas output potentially not meeting original projected volumes, which could lead to future impairment of property, plant, and equipment. The Power segment faces competition from more efficient energy producers, as the Dominican government sets a cap on electricity spot market prices and establishes dispatch order based on a merit list, and the supply of natural gas in the Dominican Republic is limited to one primary supplier, with EDM III and the future EDM IV only operating on natural gas. The ongoing conflict between Russia and Ukraine has impacted global commodity, energy, and input costs and export controls, and commodity trades involving Russian-originated commodities could be directly or indirectly impacted by export controls, economic sanctions, and the ability to collect on contracts.

Management's message emphasizes that Seaboard's operations are heavily commodity-driven and financial performance for certain segments is cyclical based on respective global commodity markets and trends in economic activity. Management highlights that the impact of tariffs was not material to Seaboard's 2025 results, but the company continues to monitor current uncertainties with tariffs and other geopolitical conditions. Key strategic priorities emphasized for the period ahead include continued investment in the Marine segment's fleet with the construction of a ninth new dual-fueled vessel, the construction of a new power-generating barge (EDM IV) in the Dominican Republic expected to commence operations in 2028, and the ongoing development of renewable energy initiatives across the Pork and Liquid Fuels segments. Management also notes that while the Pork segment's LCNRV inventory reserve decreased $42 million during the first half of 2024 and has not been needed since, management anticipates the Pork segment will be profitable in 2026, though no assurances can be made. For the Liquid Fuels segment, based on current market conditions, management anticipates near break-even results in 2026, but no assurances can be made.