Press release·03/01/2025 08:14:27

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, delivering solid sales growth and managing its operations effectively.

Financial Performance Overview

For the nine months ended December 28, 2024, Seneca Foods reported net sales of $1,233.0 million, an increase of 7.2% compared to the same period in the prior year. This growth was primarily driven by higher sales volumes, which contributed $87.3 million in favorability. However, the company also experienced a net unfavorable impact of $4.9 million due to a combination of reduced selling prices and product mix changes.

The company’s operating income for the nine-month period was 6.1% of net sales, down from 9.1% in the prior year. This decline was mainly due to continued elevated costs, which outpaced the increase in net sales. Specifically, the company’s gross margin decreased from 14.6% to 10.9%, as the cost of finished goods sold during the current period was higher than the prior year.

Seneca Foods’ selling, general, and administrative (SG&A) expenses decreased as a percentage of net sales, from 5.5% to 4.7%, reflecting the fixed nature of certain expenses and the increase in net sales. The company also incurred minimal restructuring charges during the period.

Revenue and Profit Trends

The company’s net sales growth was driven by strong performance in its canned and frozen vegetable categories, which together contributed $78.3 million in increased sales. This was partially offset by a $1.8 million decrease in net sales from non-food packaging and other ancillary operations.

The decline in gross margin was primarily due to the higher cost of finished goods sold, which included products from both the preceding year and the current year seasonal packs. These higher costs were driven by factors such as supply chain disruptions, steel supply and pricing challenges, raw material shortages, and labor shortages.

To offset these cost increases, Seneca Foods has attempted to raise sales prices to its customers. However, the company has noted that increases in the prices it charges may lag behind rising input costs due to competitive pressures and pricing methodologies in the various sales channels.

Strengths and Weaknesses

One of Seneca Foods’ key strengths is its diversified product portfolio, which includes canned, frozen, and jarred produce, as well as snack chips. This diversification helps the company mitigate risks and capitalize on changing consumer preferences. Additionally, the company’s strong brand recognition, with products sold under both private label and its own brands, provides a competitive advantage.

However, the company’s reliance on seasonal growing cycles and the resulting fluctuations in working capital needs can be a weakness. The company’s primary liquidity requirements include debt service, capital expenditures, and working capital needs, which can vary significantly throughout the year. This seasonal nature of the business can create challenges in managing cash flow and inventory levels.

Another potential weakness is the company’s exposure to cost increases in raw materials, packaging, labor, and other production inputs. While Seneca Foods has attempted to manage these costs through various strategies, such as locking in prices through short-term supply contracts and advance grower purchase agreements, the company’s profitability can be impacted if it is unable to fully offset these rising costs.

Outlook and Future Prospects

Looking ahead, Seneca Foods believes that its operations, along with existing liquidity sources, will satisfy its cash requirements for at least the next twelve months. The company expects to maintain or have access to sufficient liquidity to retire or refinance its long-term debt at maturity, using a combination of operating cash flows, access to the capital markets, and its revolving credit facility.

However, the company acknowledges that it faces several risks and uncertainties that could impact its future performance, including:

• Continued volatility in raw material, fuel, labor, and other input costs
• Supply chain disruptions and labor shortages
• Adverse weather conditions and their impact on crop yields
• Competitive pressures and the ability to pass on cost increases to customers
• Potential product liability claims or food safety issues
• Regulatory changes and compliance requirements

To navigate these challenges, Seneca Foods will need to continue its focus on cost management, operational efficiency, and strategic investments to maintain its competitive position. The company’s ability to adapt to changing market conditions and effectively manage its working capital and liquidity will be crucial in the coming years.

Overall, Seneca Foods has demonstrated its resilience in the face of a challenging operating environment. While the company’s profitability has been impacted by elevated costs, its sales growth and ongoing efforts to manage expenses suggest that it is well-positioned to weather the current conditions and capitalize on future opportunities in the packaged fruits and vegetables market.