Executive Summary / Key Takeaways

• Seaboard Corporation ($SEB) is a diversified global agribusiness and transportation company leveraging an integrated supply chain across segments including Pork, Commodity Trading and Milling (CTM), Marine, Liquid Fuels, Power, and Turkey.
• First quarter 2025 results showed significant improvement, with net sales increasing by $125 million and operating income rising by $58 million year-over-year, primarily driven by strong performance in the Marine and CTM segments.
• The company's strategic investments in its Marine fleet, including new dual-fueled vessels, and operational improvements in Liquid Fuels contributed positively, while the Pork segment faced margin pressure and tariff uncertainty.
• SEB maintains a solid liquidity position with nearly $1.1 billion in cash and short-term investments and $827 million in available borrowing capacity as of March 29, 2025, supporting ongoing capital expenditures like vessel construction.
• Key risks include volatility in commodity markets, the evolving landscape of international tariffs and trade restrictions, ongoing litigation, and the impact of new global minimum tax rules (Pillar Two).

Seaboard's Enduring Model in a Volatile World

Seaboard Corporation, with a history stretching back to 1918, has evolved into a unique, vertically integrated conglomerate operating across essential global industries. Its business model spans agricultural production (Pork, Turkey, sugar/alcohol), commodity trading and processing (CTM), international shipping (Marine), and energy generation (Liquid Fuels, Power). This diversification, coupled with strategic investments in non-consolidated affiliates, aims to leverage expertise and expand reach in specific markets and geographies. The company's integrated supply chain, particularly linking commodity sourcing, processing, and marine transportation, forms a foundational strength intended to enhance operational efficiency and manage costs.

Within the competitive landscape, Seaboard operates alongside major players like Archer Daniels Midland (ADM) and Bunge Global (BG) in commodity trading and milling, and Tyson Foods (TSN) in pork production. While ADM and BG benefit from greater scale and potentially more advanced processing technologies in certain areas, offering efficiencies like lower per-unit costs in grain handling or faster milling speeds, Seaboard differentiates itself through its integrated model. The ability to connect commodity sourcing with its owned marine logistics network can offer cost advantages in transportation in specific regions. In the pork segment, Tyson Foods' larger scale provides processing efficiencies, but Seaboard's focus on exports and integration with its Marine segment offers advantages in global distribution and potentially faster transit times. Seaboard's diversified portfolio, including segments like Power and Liquid Fuels, provides a broader base compared to more focused competitors, potentially offering resilience against downturns in any single market.

Technological differentiation, while not always highlighted with specific performance metrics, plays a strategic role. In the Marine segment, investments in new dual-fueled vessels represent a move towards more efficient and potentially lower-emission transportation, aligning with evolving industry standards and potentially offering long-term operational cost benefits compared to older, less efficient fleets. The Liquid Fuels segment's renewable diesel plant utilizes technology to produce biofuels, supported by clean fuel production tax credits, positioning Seaboard in the growing renewable energy market. While the precise quantifiable benefits over alternative production methods or traditional fuels are not detailed, the strategic intent is clear: to participate in markets driven by environmental regulations and energy transition. Similarly, the "All Other" segment's sugar and alcohol operations include power cogeneration, a technology that enhances energy efficiency by utilizing byproducts, potentially leading to cost savings and a more sustainable operational profile. These technological applications, while varying in scale and impact across segments, contribute to Seaboard's operational capabilities and strategic positioning in their respective markets.

Performance Reflecting Diversified Strengths

Seaboard's first quarter of 2025 demonstrated the impact of its diversified operations amidst fluctuating market conditions. Total net sales increased by $125 million, reaching $2,316 million for the three months ended March 29, 2025, compared to $2,191 million in the prior-year period. This growth was primarily fueled by strong performances in the Marine and CTM segments. Operating income saw a significant rise of $58 million, moving from $20 million in Q1 2024 to $38 million in Q1 2025.

The Marine segment was a key driver, with net sales increasing by $71 million (21.4%) to $403 million, and operating income surging by $42 million to $57 million. This improvement was attributed to a 12% increase in cargo volumes and an 8% rise in average freight rates, including higher-margin refrigerated cargo. The CTM segment also contributed positively, with net sales up $35 million (2.9%) to $1,225 million, driven by higher volumes despite lower average prices. Operating income for CTM increased by $23 million to $41 million, primarily benefiting from mark-to-market gains on derivative contracts.

Conversely, the Pork segment experienced a $13 million decrease in net sales to $486 million, largely due to lower volumes of market hogs and pork products sold, partially offset by higher selling prices. Operating income in the Pork segment decreased by $32 million, moving from a $1 million profit in Q1 2024 to a $31 million loss in Q1 2025. This decline was attributed to lower margins on pork products and market hogs, impacted by the absence of favorable inventory reserve adjustments seen in the prior year, and increased legal claims expense, despite lower feed costs. The Liquid Fuels segment saw a substantial increase in net sales, up $34 million (39.1%) to $121 million, reflecting higher fuel volumes and prices, as its renewable diesel plant had consistent production compared to no operations in Q1 2024. The segment's operating loss narrowed by $23 million to $26 million, benefiting from increased sales but facing higher production costs and a lower per-gallon value from the new clean fuel production tax credit compared to the expired blenders credit. The Power segment saw a modest $5 million increase in net sales to $53 million due to less maintenance, with operating income remaining flat at $7 million as higher fuel costs offset revenue gains. Income from the Turkey segment affiliate (Butterball) decreased by $1 million to $8 million, primarily due to higher production costs related to bird health issues, despite strengthening turkey commodity markets.

From a liquidity standpoint, Seaboard maintains a robust position. As of March 29, 2025, the company held nearly $1.1 billion in cash and short-term investments and had $827 million in available borrowing capacity under its lines of credit.

Cash used in operating activities totaled $20 million in Q1 2025, a shift from $19 million provided in Q1 2024, primarily due to working capital fluctuations in the CTM segment related to inventory timing. Capital expenditures were $109 million, with a significant $74 million allocated to the Marine segment for vessel construction, including the delivery of one new dual-fueled vessel and plans for five more in 2025. Management has budgeted approximately $451 million for capital expenditures for the remainder of 2025, primarily for Marine and Pork segment investments, which are expected to be funded by existing liquidity and borrowing capacity.

Outlook and Risks on the Horizon

Management's outlook for the remainder of 2025 reflects the inherent volatility and uncertainty across Seaboard's diverse operations. The Pork segment's profitability remains uncertain, heavily influenced by unpredictable market prices and the impact of retaliatory tariffs, such as those recently imposed by China on U.S. pork. China represented 3% of this segment's total sales in 2024, and the tariffs could negatively impact margins if alternative markets are not found.

The CTM, Marine, Power, and Turkey segments are anticipated to be profitable, while the Liquid Fuels segment is expected to be near break-even, excluding mark-to-market adjustments for CTM. However, these outlooks are subject to significant variables. CTM's performance depends on volatile worldwide commodity prices and political/economic conditions. Marine's profitability is tied to fuel costs, voyage costs, cargo volumes, and freight rates. The Liquid Fuels segment faces uncertainty regarding market prices for biofuels, environmental credits, production tax credits, and feedstock costs, with a scheduled one-month maintenance period for the renewable diesel plant in the second quarter expected to halt production temporarily. Power's results are sensitive to fuel costs and spot market rates. Turkey's profitability depends on market prices for turkey products and feed costs.

Several risks could materially impact Seaboard's financial condition and results. The most prominent include changes in U.S. trade policy and retaliatory actions by other countries, leading to volatile commodity markets and uncertain global economic conditions. Tariffs and trade restrictions can reduce sales, increase material costs, and lower revenues and margins. Litigation risks are also significant, including the ongoing Pork Price-Fixing Antitrust litigation (despite recent settlements, some cases will proceed to trial) and the Helms-Burton Act and Uruguay bankruptcy proceedings, which could result in material liabilities if unfavorable outcomes occur. Furthermore, the adoption of Pillar Two tax rules in jurisdictions where Seaboard operates, effective in 2025 in some countries including the Isle of Man and The Bahamas, is expected to increase the effective tax rate as these jurisdictions previously had rates below the 15% minimum. While management believes the USTR fees on Chinese vessels will not materially impact the Marine segment due to vessel exemptions, retaliatory actions or broader trade restrictions could still indirectly affect port costs and commodity prices.

Conclusion

Seaboard Corporation's performance in the first quarter of 2025 underscores the resilience provided by its diversified business model, with strong contributions from its Marine and CTM segments offsetting challenges in Pork. The company's integrated operations and strategic capital investments, particularly in its Marine fleet, position it to capitalize on opportunities in global trade and essential goods markets.

However, the investment thesis is tempered by significant external risks, including volatile commodity prices, the unpredictable nature of international trade policies and tariffs, and ongoing legal exposures. While management anticipates profitability across most segments for the remainder of the year, these forecasts are subject to considerable market and operational uncertainties. Investors evaluating Seaboard should weigh the benefits of its unique diversification and integrated supply chain against the inherent cyclicality of its core markets and the potential impact of geopolitical and regulatory headwinds. The company's ability to navigate these complex dynamics, manage costs, and effectively deploy its substantial liquidity will be critical determinants of its future financial performance.