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Seneca Foods Corp (SENEA)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 FY2024 delivered strong execution: net sales rose 12.6% year over year to $298.7M on pricing, gross margin expanded to 18.5%, and diluted EPS reached $3.01; management cited stabilizing inflation and a “good crop” underway as tailwinds .
  • Mix of higher selling prices (+$40.2M) offset lower volumes (-$6.7M) YoY; LIFO swung to a $1.7M credit vs a $19.2M charge in the prior-year quarter, materially lifting margins .
  • Interest expense stepped up to $6.57M on higher rates and the Amended Term Loan A-2, partly tempering bottom-line gains .
  • No formal quantitative guidance or earnings call transcript was provided in filings; catalysts to watch are sustained gross margin improvement (LIFO normalization, pricing hold) and harvest quality/volume through the pack season .

What Went Well and What Went Wrong

  • What Went Well

    • Margin and EPS inflection: gross margin expanded to 18.5% (from 8.6% YoY) and diluted EPS rose to $3.01; CEO: “The Company had a strong first quarter…as inflation stabilizes…we are very pleased with where we are.”
    • Pricing power: net sales +$33.5M YoY primarily from higher selling prices (+$40.2M), partially offset by lower volumes (-$6.7M) .
    • LIFO relief: LIFO moved to a $1.7M credit vs a $19.2M prior-year charge, supporting gross margin expansion .

  • What Went Wrong

    • Volume softness: sales volumes declined YoY despite price increases; fruit products net sales decreased on lower volumes despite pricing actions .
    • Higher interest burden: interest expense increased to $6.573M (vs $1.390M prior-year quarter) on higher rates and new term loan structure .
    • Ongoing footprint actions: restructuring (equipment moves) tied to the prior cessation of green bean production at a Northeast plant .

Financial Results

MetricQ3 FY2023 (Dec 31, 2022)Q4 FY2023 (Mar 31, 2023)Q1 FY2024 (Jul 1, 2023)
Net Sales ($USD Millions)$473.254 $331.063 $298.664
Gross Margin %11.4% 5.3% 18.5%
Operating Income ($USD Millions)$29.817 $(5.313) $35.497
Net Earnings ($USD Millions)$21.054 $(9.150) $23.111
Diluted EPS ($)$2.74 $(1.20) $3.01
Interest Expense ($USD Millions)$4.277 $6.288 $6.573
LIFO (Charge)/Credit ($USD Millions)$(30.9) $(20.7) $1.7

Segment/product mix (Q1 YoY):

Product Category (Net Sales, $USD Millions)Q1 FY2023 (Jul 2, 2022)Q1 FY2024 (Jul 1, 2023)
Canned Vegetables$218.335 $250.950
Frozen Vegetables$19.711 $21.539
Fruit Products$18.332 $16.738
Snack Products$2.980 $3.098
Other$5.835 $6.339
Total$265.193 $298.664

Selected KPIs (Q1 FY2024):

KPIQ1 FY2024
Cash from Operations ($USD Millions)$25.024
FIFO EBITDA ($USD Millions)$47.637
LIFO Reserve ($USD Millions)$300.740
Working Capital ($USD Millions)$637.736
Revolver Avg Outstanding ($USD Millions)$108.303
Revolver Weighted Avg Rate (%)6.36%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company GuidanceFY2024/Q2-Q4—No numeric guidance disclosed in Q1 8-K press release or 10-Q—

Note: Filings reviewed did not include quantitative forward guidance; forward-looking statements discuss risks and business conditions but no ranges for revenue/margins/OpEx .

Earnings Call Themes & Trends

Note: No Q1 FY2024 earnings call transcript was available in the document set. Thematic comparison uses management commentary from Q3/Q4 press releases and Q1 8-K/10-Q.

TopicPrevious Mentions (Q3 FY2023, Q4 FY2023)Current Period (Q1 FY2024)Trend
Inflation/LIFO“Persistent inflationary pressures… another large non-cash LIFO charge” (Q3) ; FY2023 faced an “unprecedented non-cash LIFO charge of $100M” and Q4 GM 5.3% (Q4) LIFO credit of $1.7M; GM 18.5% Improving (from heavy LIFO charges to a credit)
Pricing vs VolumeQ3 growth “mostly from higher selling prices/improved mix” ; Q4 YoY revenue slightly down on lower volume mostly offset by price YoY uplift from pricing (+$40.2M) partly offset by volume (-$6.7M) Pricing remains supportive; volumes soft
Supply Chain/Harvest“Supply chain operated admirably” in FY2023 (Q4) “2023 harvest…well underway with a good crop so far” Positive operational backdrop
Interest Rates/LeverageRising interest burden evident: Q4 interest $6.288M Interest $6.573M; higher rates and Amended Term Loan A-2 cited Headwind persists with higher rates
Footprint/RestructuringCeased green bean production at a NY facility (Q3/Q4) Equipment moves drove small restructuring charges Transition execution continues

Management Commentary

  • “The Company had a strong first quarter of fiscal 2024, with sales and FIFO EBITDA increasing compared to first quarter of fiscal 2023… As inflation stabilizes and with the 2023 harvest season well underway with a good crop so far, we are very pleased with where we are.” — Paul Palmby, President & CEO .
  • Pricing and mix dynamics: net sales increase driven by higher selling prices; volumes down YoY in canned/frozen (partially offset), fruit category net sales declined on volume despite pricing .
  • Interest expense up on rates/term loan changes; effective tax rate 23.6% (vs 24.2% prior-year quarter) .

Q&A Highlights

  • No public Q&A transcript was available; key clarifications from filings:
    • Sales bridge: +$40.2M price/mix, -$6.7M volume YoY .
    • LIFO impact: $1.7M credit in Q1 vs $19.2M charge prior-year quarter .
    • Interest expense drivers: higher rates and Amended Term Loan A-2 .
    • Seasonality: pack runs June–November; holiday demand lifts Q3 sales; bill-and-hold occurs late pack (Q2–Q3) .
    • Controls: identified material weakness in year-end LIFO reserve review controls; remediation actions underway (enhanced controls/software) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2024 revenue/EPS was unavailable at the time of query; as a result, estimate comparisons cannot be provided. Company did not issue quantitative guidance in the Q1 filings .

Key Takeaways for Investors

  • Margin recovery is underway: gross margin 18.5% benefitting from LIFO credit and pricing; watch durability as input costs normalize .
  • Pricing actions continue to offset volume softness; sustained consumer demand and retailer inventory behavior will be key for volumes into the holidays .
  • Interest expense is a notable headwind near term given higher rates and term loan structure; financing costs rose to $6.57M in the quarter .
  • Harvest quality is a near-term catalyst: management cites a “good crop so far,” supporting service levels and cost absorption in coming quarters .
  • Balance sheet/working capital remain pivotal in a seasonal business: working capital $637.7M; revolver average borrowings $108.3M at 6.36% weighted average rate .
  • Internal control remediation around LIFO year-end calculation is in progress; while interim LIFO calculations are not impacted, year-end execution bears monitoring .
  • With no formal guidance and no transcript, monitor upcoming pack/holiday sell-through and subsequent 8-K/10-Qs for confirmation of margin trajectory and pricing sustainability .