Seneca Foods Reports Sales and Earnings for the Three Months Ended June 29, 2024

Rhea-AI Summary

Seneca Foods (NASDAQ: SENEA, SENEB) reported financial results for Q1 fiscal 2025 ended June 29, 2024. Net sales increased to $304.7 million, up from $298.7 million in Q1 fiscal 2024, driven by higher sales volumes. However, gross margin decreased to 14.0% from 18.5% in the same period last year. CEO Paul Palmby noted a solid first quarter with positive volume momentum in the core vegetable business, despite category headwinds. Contract manufacturing volumes were below forecast due to timing, but are expected to recover later in the fiscal year. Margins remain pressured compared to last year due to higher cost inventory and a competitive pricing environment.

Positive

• Net sales increased by $6.0 million to $304.7 million compared to Q1 fiscal 2024
• Core vegetable business showed positive volume momentum
• Contract manufacturing sales expected to recover later in the fiscal year

Negative

• Gross margin decreased to 14.0% from 18.5% in Q1 fiscal 2024
• Contract manufacturing volumes came in below forecast
• Margins pressured due to higher cost inventory and competitive pricing environment

Insights

Financial Analyst

Seneca Foods' Q1 FY2025 results show a mixed performance. Net sales increased by $6.0 million to $304.7 million, a 2.01% year-over-year growth, driven by higher sales volumes. However, the gross margin contracted significantly from 18.5% to 14.0%, indicating pressure on profitability.

The core vegetable business showed positive volume momentum, which is encouraging given category headwinds. However, the delay in contract manufacturing volumes and margin pressure from higher cost inventory and competitive pricing are concerning. These factors suggest challenges in maintaining profitability despite top-line growth.

Investors should monitor how Seneca manages its inventory costs and pricing strategy in the coming quarters to improve margins. The company's ability to recover delayed contract manufacturing sales later in the fiscal year will be important for meeting annual targets.

Market Research Analyst

Seneca Foods' performance reflects broader trends in the packaged foods industry. The increased sales volume amid category headwinds suggests Seneca may be gaining market share or benefiting from shifts in consumer behavior towards packaged vegetables. However, the margin compression indicates intensifying competition and cost pressures affecting the entire sector.

The delay in contract manufacturing volumes highlights potential supply chain or production scheduling issues. This could be industry-wide, affecting other players as well. The competitive pricing environment suggests that passing on higher costs to consumers is challenging, which could be a persistent issue for the sector in the near term.

Investors should compare Seneca's performance with peers to gauge its relative position and ability to navigate industry headwinds. The company's strategies to mitigate cost pressures and improve operational efficiency will be critical for future performance.

FAIRPORT, N.Y., Aug. 08, 2024 (GLOBE NEWSWIRE) -- Seneca Foods Corporation (NASDAQ: SENEA, SENEB) today announced financial results for the three months ended June 29, 2024.

Executive Summary (vs. year-ago, year-to-date results):

• Net sales for the first quarter of fiscal 2025 totaled $304.7 million compared to $298.7 million for the first quarter of fiscal 2024. The year-over-year increase of $6.0 million was due to higher sales volumes.
  
  
• Gross margin as a percentage of net sales is 14.0% for the three months ended June 29, 2024, as compared to 18.5% for the three months ended July 1, 2023.
  

“The Company recorded a solid first quarter, as our core vegetable business exhibited very positive volume momentum despite category headwinds,” stated Paul Palmby, President and Chief Executive Officer of Seneca Foods. “Contract manufacturing volumes came in below forecast due to timing; we expect to make those sales later in the fiscal year than initially planned. In addition, margins remain pressured compared to last year due to higher cost inventory and the competitive pricing environment.”

About Seneca Foods Corporation

Seneca Foods is one of North America’s leading providers of packaged fruits and vegetables, with facilities located throughout the United States. Its high quality products are primarily sourced from more than 1,200 American farms and are distributed to approximately 55 countries. Seneca holds a large share of the market for retail private label, food service, restaurant chains, international, contracting packaging, industrial, chips and cherry products.  Products are also sold under the highly regarded brands of Libby’s®, Green Giant®, Aunt Nellie’s®, Green Valley®, CherryMan®, READ®, and Seneca labels, including Seneca snack chips.  Seneca’s common stock is traded on the Nasdaq Global Select Market under the symbols “SENEA” and “SENEB”. SENEA is included in the S&P SmallCap 600, Russell 2000 and Russell 3000 indices.

Non-GAAP Financial Measures

Adjusted net earnings is calculated on a FIFO basis and excludes the impact from the application of LIFO. The Company believes this non-GAAP financial measure provides for a better comparison of year over year operating performance. The Company does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP. Set forth below is a reconciliation of reported earnings before income taxes to adjusted net earnings (in thousands).

			Three Months Ended
			June 29, 2024				July 1, 2023
Earnings before income taxes, as reported			$	16,501			$	30,261
LIFO credit				(2,918	)			(1,700	)
Adjusted earnings before income taxes				13,583				28,561
Income taxes at statutory rates				3,125				6,727
Adjusted net earnings			$	10,458			$	21,834

Set forth below is a reconciliation of reported net earnings to EBITDA and FIFO EBITDA (earnings before interest, income taxes, depreciation, amortization and non-cash charges related to the LIFO inventory valuation method). The Company does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP (in thousands).

			Three Months Ended
EBITDA and FIFO EBITDA:			June 29, 2024				July 1, 2023
Net earnings			$	12,661			$	23,111
Income tax expense			3,840				7,150
Interest expense, net of interest income			10,345				6,573
Depreciation and amortization			12,446				12,603
Interest amortization			(115		)		(100		)
EBITDA			39,177				49,337
LIFO credit			(2,918		)		(1,700		)
FIFO EBITDA			$	36,259			$	47,637

Forward-Looking Information

This release contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they address future events, developments, and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "seeks," "should," "likely," "targets," "may", "can” and variations thereof and similar expressions. Forward-looking statements are subject to known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed. We believe important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following:

• the effects of rising costs and availability of raw fruit and vegetables, steel, ingredients, packaging, other raw materials, distribution and labor;
• crude oil prices and their impact on distribution, packaging and energy costs;
• an overall labor shortage, ability to retain a sufficient seasonal workforce, lack of skilled labor, labor inflation or increased turnover impacting our ability to recruit and retain employees;
• climate and weather affecting growing conditions and crop yields;
• our ability to successfully implement sales price increases and cost saving measures to offset cost increases;
• the loss of significant customers or a substantial reduction in orders from these customers;
• effectiveness of our marketing and trade promotion programs;
• competition, changes in consumer preferences, demand for our products and local economic and market conditions;
• the impact of a pandemic on our business, suppliers, customers, consumers and employees;
• unanticipated expenses, including, without limitation, litigation or legal settlement expenses;
• product liability claims;
• the anticipated needs for, and the availability of, cash;
• the availability of financing;
• leverage and the ability to service and reduce debt;
• foreign currency exchange and interest rate fluctuations;
• the risks associated with the expansion of our business;
• the ability to successfully integrate acquisitions into our operations;
• our ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption;
• other factors that affect the food industry generally, including:
  • recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products;
  • competitors’ pricing practices and promotional spending levels;
  • fluctuations in the level of our customers’ inventories and credit and other business risks related to our customers operating in a challenging economic and competitive environment; and
  • the risks associated with third-party suppliers, including the risk that any failure by one or more of our third-party suppliers to comply with food safety or other laws and regulations may disrupt our supply of raw materials or certain finished goods products or injure our reputation; and
• changes in, or the failure or inability to comply with, U.S., foreign and local governmental regulations, including environmental and health and safety regulations.

Except for ongoing obligations to disclose material information as required by the federal securities laws, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of the filing of this report or to reflect the occurrence of unanticipated events.

Contact:
Michael Wolcott, Chief Financial Officer
585-495-4100

Seneca Foods Corporation
Unaudited Selected Financial Data
For the Periods Ended June 29, 2024 and July 1, 2023
(In thousands of dollars, except share data)
		Three Months Ended
		June 29, 2024				July 1, 2023
Net sales		$	304,727			$	298,664
Operating income (note 1)			25,443				35,497
Other non-operating income			(1,403	)			(1,337	)
Interest expense, net			10,345				6,573
Earnings before income taxes		$	16,501			$	30,261
Income tax expense			3,840				7,150
Net earnings		$	12,661			$	23,111
Basic earnings per common share		$	1.82			$	3.04
Diluted earnings per common share		$	1.80			$	3.01

Note 1:		The effect of the LIFO inventory valuation method on the first quarter pre-tax results increased operating income by $2.9 million and $1.7 million for the three months ended June 29, 2024 and July 1, 2023, respectively.
Note 2:		The Company used the “two-class” method for basic earnings per share by dividing the earning attributable to common shareholders by the weighted average of common shares outstanding during the period.

FAQ

What were Seneca Foods' (SENEA) net sales for Q1 fiscal 2025?

Seneca Foods reported net sales of $304.7 million for Q1 fiscal 2025 ended June 29, 2024.

How did Seneca Foods' (SENEA) gross margin change in Q1 fiscal 2025?

Seneca Foods' gross margin decreased to 14.0% in Q1 fiscal 2025 from 18.5% in Q1 fiscal 2024.

What factors affected Seneca Foods' (SENEA) performance in Q1 fiscal 2025?

Seneca Foods' performance was affected by higher sales volumes in the core vegetable business, lower contract manufacturing volumes, higher cost inventory, and a competitive pricing environment.

What is the outlook for Seneca Foods' (SENEA) contract manufacturing sales?

Seneca Foods expects contract manufacturing sales to recover later in fiscal 2025, despite being below forecast in Q1.