Seaboard Corporation has published its results for the third quarter of 2013 (for the period ending 28 September), including the first nine months of its financial year.

Total net sales for the quarter were $1.648 billion, up from $1.479 billion last year. These bring the nine-month totals to $4.914 billion and $4.461 billion, respectively.

However, operating costs were also up - from $1.335 billion in the first three months of 2012 to $1.547 billion this year. For the year to date, the figures were $4.041 billion and $4.571 billion, respectively.

Business Segments

Turkey business

According to Form 10-Q, Seaboard's Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball, LLC (Butterball).

Butterball had total net sales for the three and nine months ended 28 September 2013 of $444 million and $1.169 billion, respectively, compared to total net sales for the three and nine months ended 29 September 2012 of $370 million and $974 million, respectively.

Butterball had operating income (loss) for the three and nine months ended 28 September 2013 of $1.282 million and $(3.238 million), respectively, compared to operating income for the three and nine months ended 29 September 2012 of $7.554 million and $48.686 million, respectively.

In the first and third quarters of 2013, Butterball incurred additional charges for impairment of fixed assets related to the planned sale of its Longmont, Colorado facility of which Seaboard’s proportionate share of these charges represented losses of $1.155 million and $3.859,000 million recognised in loss from affiliate for the three and nine months ended 28 September 2013, respectively.

As of 28 September 2013 and 31 December 2012, the Turkey segment had total assets of $1.058 billion and $871 million, respectively.

On 31 December 2012, Seaboard provided a loan of $81.231 million to Butterball, which was included in Notes Receivable from Affiliates. This loan was made to fund Butterball’s purchase of assets from Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois. In late March 2013, Butterball re-negotiated its third-party financing and on 28 March 2013, repaid in full this loan from Seaboard.

In conjunction with Seaboard’s initial investment in Butterball on 6 December 2010, Seaboard has a long-term note receivable from Butterball which had a balance of $122.438 million as of 28 September 2013. Part of the interest earned on this note is pay-in-kind interest, which accumulates and is paid at maturity. During the third quarter of 2011, Seaboard provided a term loan of $13.037 million to Butterball to pay off capital leases for certain fixed assets which originally were financed with third parties. The effective interest rate on the term loan is approximately 12 per cent.

Although the term loan expires on 31 January 2018, Seaboard anticipates that Butterball will pay off the term loan prior to such expiration date as Butterball is expected to sell all of the related assets and is required to remit the proceeds from such sale to Seaboard to repay the loan. As of 28 September 2013, the balance of the term loan recorded in long-term notes receivable from affiliates was $9.030 million.

According to the 10-Q report, Seaboard made a loss from its Turkey affiliate, Butterball of $4.044 million in the latest quarter, compared to a profit of $297,000 in the third quarter of 2012. These figures bring the loss for the first nine months of 2013 to $11,370 million following a surplus of $14.732 million last year.

Its total Turkey assets were valued at $331 million on 28 September 2013, down from $424 million on 31 December 2012.

Pork segment

Seaboard's pork sales to third parties were valued at $436 million for the three months to 28 September 2013, up from $413 million for the same period last year. These bring the year-to-date figures to $1.262 billion for this year - an increase from $1.214 billion in 2012.

The figures for operating income for the company's Pork segment were $34 million for the latest quarter compared to just under $30 million in 2012. However, for the first nine months of this year, operating income was down at just under $90 million from more than $103 million in the same period of 2012.

Seaboard's Pork assets were valued at $776 million on 28 September 2013, up from $740 million on 31 December 2012.