Press release·02/06/2025 22:27:52

Seneca Foods Navigates Challenging Conditions with Resilience

Seneca Foods Corporation, a leading provider of packaged fruits and vegetables, has reported its financial results for the nine months ended December 28, 2024. Despite facing ongoing cost pressures and supply chain disruptions, the company has demonstrated resilience in navigating the challenging operating environment.

Financial Performance Overview

For the three months ended December 28, 2024, Seneca Foods reported net sales of $502.9 million, a 13.1% increase from the prior year quarter. This was driven by higher sales volumes, which offset lower selling prices. Net sales for the nine-month period totaled $1,233.0 million, a 7.2% increase compared to the same period in the prior year.

However, the company’s profitability was impacted by continued elevated costs. Gross margin for the three-month period was 9.8%, down from 12.2% in the prior year quarter. For the nine-month period, gross margin declined to 10.9% from 14.6% in the prior year. The decrease in gross margin was primarily due to higher input costs, including raw materials, labor, and distribution, which outpaced the increase in net sales.

Operational Highlights

Seneca Foods’ canned and frozen vegetable categories were the primary drivers of the sales growth, with a combined increase of $78.3 million over the prior year nine-month period. This was largely attributable to higher sales volumes, which offset the impact of lower selling prices and product mix changes.

The fruit products category also saw an increase, with net sales rising by $5.1 million, driven by both higher sales volumes and improved pricing. The snack products category remained relatively consistent year-over-year, with a slight increase of $0.8 million.

The company’s other revenue, which includes non-food packaging sales related to seed, cans and ends, and outside revenue from aircraft operations, decreased by $1.8 million compared to the prior year nine-month period due to lower demand.

Cost Pressures and Mitigation Efforts

Seneca Foods has faced significant cost increases across various production inputs, including raw materials, fuel, labor, and distribution. These elevated costs have been driven by factors such as supply chain disruptions, steel supply and pricing challenges, raw material shortages, and labor shortages.

To manage these cost pressures, the company has employed several strategies, including locking in prices through short-term supply contracts, advance grower purchase agreements, and implementing cost-saving measures. Seneca Foods has also attempted to offset rising input costs by raising sales prices to its customers, though the company has noted that increases in the prices it charges may lag behind the rising input costs due to competitive pressures and pricing methodologies in the various sales channels.

Liquidity and Capital Resources

Seneca Foods’ liquidity position remains strong, with a current ratio of 3.38 as of December 28, 2024. The company’s working capital decreased from $854.2 million as of December 30, 2023, to $579.2 million as of the current reporting period, primarily due to a reduction in inventory levels.

The company’s cash flow from operating activities was $243.6 million for the nine months ended December 28, 2024, a significant improvement from the $128.1 million used in the prior year period. This was driven by improved working capital management, including a lower utilization of cash for inventories resulting from the higher inventory levels carried into the current fiscal year and a reduced seasonal pack due to adverse weather conditions.

Seneca Foods’ capital expenditures for the nine-month period totaled $26.7 million, which included deposits for the installation of a new can manufacturing line. The company also made net payments of $195.0 million on its revolving credit facility during the period.

Outlook and Challenges

Looking ahead, Seneca Foods faces a mix of opportunities and challenges. The company’s larger seasonal pack sizes in the prior fiscal year, coupled with lower sales, resulted in higher inventory levels, providing the company with additional product availability leading into the current fiscal year. This, combined with the easing of certain cost pressures, has helped to normalize the company’s working capital trends.

However, adverse weather conditions during the current planting and harvesting seasons have had a notable impact, especially in the upper Midwest, Seneca Foods’ primary growing region. The challenging growing conditions and reduced crop yields have resulted in a seasonal pack that is lower than originally planned, leading to a higher-cost seasonal pack on a per-unit basis.

Seneca Foods remains cautiously optimistic about its ability to navigate the ongoing challenges. The company believes its operations, along with existing liquidity sources, will satisfy its cash requirements for at least the next twelve months, including the ability to retire or refinance long-term debt at maturity.

Conclusion

Seneca Foods has demonstrated resilience in the face of a challenging operating environment. While the company has faced significant cost pressures, it has employed various strategies to manage these challenges and maintain its financial strength. The company’s focus on operational efficiency, working capital management, and strategic investments positions it to navigate the current market conditions and capitalize on future growth opportunities.