In short, SEB posted revenue of $729.1M vs $635.5M compared to 1Q 2006. SEB earned $39.13 per share in 1Q 2007 compared to $40.86 one year ago for the same period - a 4.2% decline in EPS.
SEB's earnings were not 'stellar' but very strong to say the least. For many stocks, it would be seen as a 'bad' sign. Sales up, margins down, and net income down. As an owner, I certainly do not like making less than I did last year, but I recognize some years are better than other and as long as I can increase the fundamental value of my company, I am feeling pretty good about the prospects of the company.
Seaboard produced over $50M in cash from operations from the quarter (up $4M+ from the same period in 2006), added another $50M in shareholders' equity, and added another $40.48 per share to its book value (SEB now 2.55x book value vs 2.7x book value). I like this because it makes SEB cheaper. It is somewhat mixed feelings, but in some ways, I would prefer the stock price of SEB to stay flat and have the book value continue to grow so at some point, I can pick up shares for say 2.2x (or less) of book value. Now, that likely will not happen, but it can with a stock like SEB, especially with how they produce shareholders' equity on an recurring basis.
SEB was able to enhance its book value and shareholders' equity, despite seeing a reduction in cash and marketable securities - I really like seeing that from a long term prospect. SEB spent a great deal of money in capital expenditures in 1Q 2007. The 10-Q report with the SEC outlines them all.
The ones I thought were the most important:
1. Biodiesel Plant: There is big talk about the need for biodiesel and SEB has the perfect environment to produce the stuff. SEB is completing the project sometime in 2007. Apparently, they already have buyers lined up for the stuff, but I am unsure how much it can actually produce in revenue and profit. Regardless, biodiesel is a hot topic and glad SEB is expanding their revenue stream this way.
2. Investments in Marine Transportation: Dry bulk shipping and marine transportation will continue to be strong, it seems. Of 1Q 2007 CapEx, 61% was spent on Marine Transportation and for the rest of 2007, the same line of business will get 41.4% of the $156.5M slated to be spent. The expenditures seem to be related to outright purchasing of vessels they already have chartered and to purchase additional vessels, containers, and port expansion. All of these are very bullish indicators for this line of business which continues to show very strong growth and demand.
SEB also continues to invest in its other core businesses to maintain the success enjoyed by them through the years.
I am glad to be an owner and continue to look for a good entry point where the stock price allows a desirable entry point.
Disclosure: Author holds a position in SEB
SEB 1-yr chart