MERRIAM, KANSAS, U.S. — Seaboard Corp. posted operating income of $46 million in its Commodity Trading and Milling (CT&M) segment during the fiscal year ended Dec. 31, 2018, up 84% from $25 million in fiscal 2017.

Net sales for the segment during fiscal 2018 totaled $3.428 billion, up 16% from $2.945 billion in the same period a year ago. The increase primarily reflected higher volume of third-party sales, including sales for a business acquired in January 2018, and higher affiliate sales prices, partially offset by lower third-party sales prices.

“Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this segment would have been higher by $3 million in 2018, lower by $4 million in 2017 and remained the same in 2016,” Seaboard noted in a Feb. 21 filing with the U.S. Securities and Exchange Commission. “While management believes its commodity futures, options and foreign exchange contracts are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these transactions as hedges for accounting purposes. Accordingly, while the changes in value of the derivative instruments were marked to market, the changes in value of the firm purchase or sales contracts were not.

“As products are delivered to customers, these existing mark-to-market adjustments should be primarily offset by realized margins or losses as revenue is recognized over time and therefore, these mark-to-market adjustments could reverse in fiscal 2019. Management believes eliminating these mark-to-market adjustments provides a more reasonable presentation to compare and evaluate period-to-period financial results for this segment.”

In the filing, Seaboard said it invested $162 million in property, plant and equipment during fiscal 2018, of which $29 million was for the CT&M segment. Seaboard said the CT&M investment primarily was for milling assets.

During the first quarter of 2018, Seaboard’s CT&M segment acquired three flour mills and an associated grain trading business located in Senegal, Ivory Coast and Monaco for total consideration of $324 million. The acquisition primarily was funded using proceeds from Seaboard’s short-term investments and the incurrence of a note payable to the sellers. With this business, Seaboard said its CT&M segment increased its flour and feed milling capacity and annual grain trading volumes.

Also, during the first quarter of fiscal 2018, Seaboard’s CT&M segment acquired a 50% noncontrolling interest in a grain trading and flour milling business in Mauritania for total consideration of $16 million. Also, during 2018, Seaboard’s CT&M segment increased its ownership interest in a non‑consolidated affiliate and paid $5 million for shares purchased.

Seaboard also said in the filing it has budgeted capital expenditures totaling $457 million for fiscal 2019.

“The CT&M segment budgeted $77 million primarily for milling assets, including silos, and other improvements to existing facilities and related equipment,” Seaboard said.

Overall, Seaboard in the fiscal year ended Dec. 31, 2018, sustained a loss of $17 million, which includes $110 million of non-cash, unrealized mark-to-market losses on short-term investments. This compared with income of $247 million in fiscal 2017. Net sales were $6.583 billion in fiscal 2018, up 13% from $5.809 billion in fiscal 2017.