Net sales for the segment for the first quarter were $709 million, down 15.6% from $820 million in the same period of last year. The decrease primarily reflected lower sales process and the mix of products sold, partially offset by higher volumes in corn, soybean meal and wheat, the company said.
The company’s filing also noted that the CT&M segment plans to spend $29 million in 2016 primarily for a new wheat mill in Zambia and other improvements to existing facilities and related equipment.
In 2016, the CT&M segment has already invested $29 million for the construction of two dry bulk vessels, of which both were delivered and then sold and leased back to Seaboard, at book value of $44 million each during the first quarter.
Seaboard has a 50% noncontrolling equity interest in a flour production business in Brazil. Since September 2013, Seaboard has contributed a total of $50 million in investments and advances, and provided a $13 million long-term loan to this business. Half of the interest on this long-term note receivable from affiliate is payable currently in cash and the other half accrues as pay-in-kind interest. This note receivable matures in September 2020 but can be repaid with Seaboard having the option to convert the note receivable to equity and the other equity holders having the option to match such conversion with a purchase of new shares to avoid dilution.
At the time of Seaboard's initial investment in this business, plans included potential future equal additional investments by the owners to improve existing operations and expand operations to improve long-term operating results. During the three months ended April 2, Seaboard’s advances totaled $1 million and Seaboard recorded losses from affiliate of $1 million related to the advances. Based on discussions with the business’ other 50% shareholder and the executive management of the business, the extent of the losses and revised financial forecast of the business economy, the halting of the construction plans for a new plant and the amount of existing third-party debt, Seaboard previously reserved a total of $22 million related to its advances and long-term note receivable. Third-party debt was $19 million and $16 million as of April 2 and Dec. 31, 2015, respectively.
In total, Seaboard’s investment in the business, advances and long-term note receivable are zero as of April 2. Seaboard has begun the legal process, as allowed per the shareholders agreement, to convert its debt to equity and, if successful, Seaboard would obtain control of the business and the entity would become consolidated. However, there is no certainty that Seaboard will successfully be able to obtain control. Seaboard also has a gross receivable due from affiliate related to this business resulting from sales of grain and supplies of $23 million and $17 million as of April 2 and Dec. 31, 2015, respectively, which Seaboard recorded a reserve of $9 million during 2015 based on an analysis of collectability and working capital.
