Shares of Seneca Foods Corporation SENEA have gained 0.8% since the company reported its earnings for the quarter ended Dec. 28, 2024. This compares favorably with the S&P 500 Index’s 0.7% decline over the same time frame. Over the past month, however, Seneca's stock has gained 3.6%, outperforming the S&P 500's 3.2% rise.

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Earnings Report Highlights

For the fiscal third quarter ended Dec. 28, 2024, Seneca reported net sales of $502.9 million, a 13.1% increase from $444.5 million in the same quarter of fiscal 2024. The revenue growth was driven primarily by higher sales volumes, partially offset by lower selling prices. Gross margin, however, contracted significantly to 9.8% from 12.2%, attributed to continued elevated costs, which outpaced the increase in net sales.

However, the company faced a decline in profitability, with net earnings down 17.1% to $14.7 million from $17.7 million in the prior-year period. Diluted earnings per share (EPS) dropped 14.3% to $2.10 from $2.45, reflecting the pressure on margins.

On a nine-month basis, net sales for the period ended Dec. 28, 2024, totaled $1.23 billion, a 7.2% increase from $1.15 billion in the same period the prior fiscal year. This resulted from a rise in unit sales volumes. Gross margin, however, contracted significantly to 10.9% from 14.6%, attributed to continued elevated costs, which outpaced the increase in net sales. Net earnings for the period fell 38% to $40.6 million from $65.6 million, and diluted EPS declined 33.8% to $5.81 from $8.78 on a nine-month basis.

Segmental Performance

Seneca operates two primary segments: Vegetable and Fruit/Snack. For the fiscal third quarter ended Dec. 28, 2024, the Vegetable segment generated net sales of $453.2 million, a 13.3% increase from $400.1 million in the prior-year period. The Fruit/Snack segment reported net sales of $40.2 million, a 13.2% rise from $35.5 million in the previous year. The Other category, which includes non-food operations, contributed $9.5 million to net sales, up 7.4% from $8.9 million in the prior-year period.

Segmental and Operational Insights

Gross margin for the third quarter of fiscal 2025 decreased to 9.8% from 12.2% in the year-ago period, reflecting the impact of historic rainy weather in Seneca's key growing regions. The adverse weather resulted in a poor pack season and higher raw material costs. Adjusted net earnings, which exclude non-cash LIFO charges, were $22.9 million for the quarter, down 14.2% from $26.7 million a year earlier. EBITDA for the quarter stood at $39.6 million (down 12.2% year over year), while FIFO EBITDA, which adjusts for LIFO-related inventory charges, totaled $50.5 million, down 11.6% from $57.1 million in the prior year.

Key Business Metrics and Commentary

Paul Palmby, president and CEO of Seneca, noted that the company’s revenue momentum has been robust, with strong sales volume growth offsetting some of the challenges from a historically poor pack season. The unfavorable weather conditions, characterized by heavy rains in key growing regions, reduced crop yields and increased input costs for labor, packaging, and distribution.

Operating income for the quarter was $25.7 million, down 16.6% from $30.8 million a year ago. Interest expenses rose 16.5% to $7.8 million from $9.4 million in the prior year, reflecting continued financial headwinds. Adjusted earnings before income taxes for the quarter were $30.3 million, down 14.1% from $35.2 million in the third quarter of fiscal 2024.

Factors Influencing Results

The revenue increase during the quarter was driven by robust demand for Seneca’s products. However, lower selling prices, combined with higher costs stemming from adverse weather and rising labor expenses, pressured margins. The company’s reliance on agricultural outputs meant that weather volatility had an outsized impact on its operational performance.

Management highlighted strong cash flow and working capital improvements, which helped the company reduce debt during the quarter. However, the sharp increase in costs from the pack season and elevated interest rates presented notable challenges.

Guidance and Forward-Looking Insights

While management did not provide explicit guidance for the upcoming quarters, they emphasized their focus on mitigating cost pressures through operational efficiency and pricing strategies. Risks highlighted by management include volatile raw material prices, labor shortages, and the potential for continued weather-related disruptions. The company remains committed to leveraging its strong sales momentum while maintaining financial discipline.

Other Developments

Seneca Foods did not report any acquisitions, divestitures, or major restructuring activities during the quarter. However, the company continues to focus on reducing its leverage, with significant debt paydown achieved during the period. Additionally, management emphasized the importance of maintaining liquidity and operational resilience in a challenging macroeconomic environment.

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