Seaboard '06 income falls 3%

by Keith Nunes
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SHAWNEE MISSION, KAS. — Net income at Seaboard Corp. in the fiscal year ended Dec. 31, 2006, totaled $258,689,000, equal to $205.09 per share on the common stock, down from earnings of $266,662,000, or $212.20 per share, for the same period during fiscal 2005. Sales for the year were $2,707,397,000, which compared with $2,688,894,000 for fiscal 2005.

Net sales of $1,002 million for the Pork division during fiscal 2006 decreased $21.2 million compared with 2005, primarily as a result of lower sales prices for pork products and, to a lesser extent, sales volume. Operating income of $138.3 million for the pork segment declined $44.4 million for the year compared with fiscal 2005.

The company noted its results were affected by higher than normal pork prices during fiscal 2005.

"Market prices for hogs were unusually high compared to historic norms," the company said. "History has demonstrated high market prices cannot be sustained over long periods of time, but rather rise and fall based on prevailing market conditions."

While the company was able to offset rising feed prices during fiscal 2006, management expects input costs to increase. Even with the increases, however, the company expects the pork segment to remain profitable during fiscal 2007, but "significantly lower than fiscal 2006."

Operating income of the Commodity Trading and Milling Division in the fiscal year ended Dec. 31, 2006, rose to $37.2 million, up 8% from $34.4 million in fiscal 2005.

Seaboard said the increase primarily reflected positive fluctuation of marking to market derivative contracts, as well as improved income from higher sales volume at certain African milling operations. The gains were partially offset by lower sales volume, Seaboard said.

"Due to the uncertain political and economic conditions in the countries in which Seaboard operates, management is unable to predict future operating results, but anticipates positive operating income for 2007," the company said. "However, rising prices in the grain markets during the last half of 2006 reached levels that management believes could have an adverse effect on operating income in 2007."

Division sales totaled $735.6 million, down 12% from $835.7 million the previous year. The sales decrease primarily reflected the sale of some components of Seaboard’s third-party commodity trading operations in May 2005, partially offset by Seaboard reestablishing its commodity trading operations in markets associated with the sale and increased sales volumes at certain African milling operations.

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