Seneca Stock Declines Following Lower Q4 Earnings Despite Sales Gain

Core Viewpoint - Seneca Foods Corporation reported a mixed financial performance for the fourth quarter and full fiscal year 2025, with increased sales but declining net earnings and margins, indicating underlying cost pressures and operational challenges [2][4][6]. Financial Performance - For Q4 fiscal 2025, net sales reached $345.8 million, a 12.3% increase from $307.9 million in Q4 fiscal 2024 [2]. - Full-year net sales rose 8.2% to $1.58 billion from $1.46 billion, driven by higher volumes and favorable pricing [2]. - Net earnings for the year declined 34.9% to $41.2 million from $63.3 million, with earnings per share dropping 31.1% from $8.56 to $5.90 [2]. Margin Analysis - Gross margin as a percentage of net sales decreased significantly, from 6.7% to 4.5% for Q4 and from 12.9% to 9.5% for the full year [3]. - Adjusted net earnings, excluding LIFO-related charges, fell 16.3% to $67.1 million from $80.2 million [4]. - EBITDA decreased 18.1% to $136.9 million from $167.3 million, indicating weaker operational performance [4]. Segment Performance - The vegetable division accounted for 91.1% of food packaging revenues, with canned vegetables making up 83.2% of total net sales [5]. - Canned vegetable sales increased to $1.31 billion from $1.20 billion, a 9.1% rise [5]. - Other segments, including frozen vegetables and snacks, also showed growth, albeit at lower rates [5]. Management Commentary - CEO Paul Palmby noted strong top-line performance despite challenges such as adverse weather and cost inflation, highlighting a $297 million reduction in net debt [6]. - Management acknowledged that high-cost inventories from the previous year continued to compress margins [6]. Cost Pressures - The company faced elevated input costs across various categories, including raw materials and labor, which outpaced pricing adjustments [7][8]. - LIFO inventory valuation resulted in a significant charge of $34.5 million, up 54.3% from the previous year, impacting reported profitability [8]. Future Outlook - Seneca did not provide formal guidance for fiscal 2026 but emphasized ongoing cost management efforts and potential stabilization of certain cost pressures [11]. - The company is investing in technology and logistics to improve future margins [11]. Other Developments - No significant acquisitions or restructuring initiatives were disclosed for the quarter, with a focus on debt reduction and modest stock repurchases [12].