EPS of $1.80 decreased by 40.1% from previous year
Gross margin of 14.0%
Net income of 12.66M
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Seneca Foods Corporation (SENEA) QQ1 2025 Results Analysis: Revenue Upbeat, Margin Expansion, and Strong Free Cash Flow in Packaged Foods
Executive Summary
- Q1 2025 demonstrated resilient top-line performance with revenue of $304.7 million, up 2.03% year over year, while sequential quarterly results improved meaningfully on profitability metrics as gross margin expanded to 14.01% from prior levels. Operating income rose to $25.64 million and net income to $12.66 million, driving diluted EPS of $1.80 and basic EPS of $1.82 for the quarter. This reflected pronounced operating leverage and favorable mix that pushed the EBIT/EBITDA metrics higher despite a challenging year-ago comparison.
- The quarter delivered robust cash generation, with net cash provided by operating activities of $50.33 million and free cash flow of $38.26 million. Capex totaled $12.07 million, underpinning a capital expenditure program that remains constructive for sustaining production capacity and efficiency gains. Balance sheet leverage persists, with total debt of $614.58 million and net debt of $601.61 million; interest coverage stood at approximately 2.5x, underscoring ongoing refinancing and working-capital considerations as inventory remains elevated.
- The company continues to exhibit a strong inventory position (inventory of about $841.8 million; current ratio of 3.83x) and a substantial working-capital footprint, contributing to a weighted-average days metrics framework (DSO ~28.5 days; DIO ~289 days; DPO ~21.5 days; cash conversion cycle ~296 days). While this indicates significant working capital needs, the quarter’s sustained cash generation supports a positive near-term liquidity profile and potential deleveraging over time. The stock’s current valuation, with a P/E around 7.9x and an EV/EBITDA in the mid-20s, suggests a value-oriented entry point for investors willing to accept working-capital intensity as a feature of a mature packaged-foods franchise.
- Overall investment thesis: The QQ1 2025 results indicate a constructive trajectory—revenue is growing modestly, gross margins are improving, and FCF generation remains solid. The key near-term risk is the working-capital intensity inherent in Seneca’s business model (high inventory levels and longer CCC). A disciplined balance-sheet approach, coupled with ongoing margin management and potential deleveraging, could unlock additional upside. Investors should monitor input cost volatility, seasonality, and capital-allocation strategy going forward.
- Revenue: $304.727 million; YoY +2.03%; QoQ -1.06%
- Gross Profit: $42.691 million; YoY -22.79%; QoQ +105.46%
- Gross Margin: 14.01% (0.1401)
- Operating Income: $25.639 million; YoY -27.77%; QoQ +794.59%
- Operating Margin: 8.41% (0.0841)
- EBITDA: $37.433 million; EBITDA Margin ~12.28%
- Net Income: $12.661 million; YoY -45.22%; QoQ +663.71%
- Earnings Per Share (basic): $1.82; Diluted: $1.80; YoY EPS -40.13%; QoQ +668.75%
- Net cash from operating activities: $50.332 million
- Free Cash Flow: $38.259 million
- Cash at end of period: $12.975 million
- Capex: $12.073 million
- Inventory: $841.847 million; Accounts receivable: $96.448 million; Current assets: $955.682 million
- Total assets: $1.369125 billion; Total liabilities: $780.179 million; Stockholders’ equity: $588.946 million
- Total debt: $614.582 million; Net debt: $601.607 million
- Liquidity ratios: current ratio 3.83x; quick ratio 0.456x; cash ratio 0.052x
- Leverage and coverage: debt-to-capitalization 0.511; debt ratio 0.449; interest coverage 2.48x; return on equity 2.15%; ROA 0.92%
- Valuation indicators (proxied): P/E ~7.9x; P/S ~1.31x; P/B ~0.68x; EV/EBITDA ~26.8x
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
304.73M
2.03%
-1.06%
Gross Profit
42.69M
-22.79%
105.46%
Operating Income
25.64M
-27.77%
794.59%
Net Income
12.66M
-45.22%
663.71%
EPS
1.82
-40.13%
668.75%
Key Financial Ratios
currentRatio
3.83
grossProfitMargin
14%
operatingProfitMargin
8.41%
netProfitMargin
4.15%
returnOnAssets
0.93%
returnOnEquity
2.15%
debtEquityRatio
1.04
operatingCashFlowPerShare
$7.23
freeCashFlowPerShare
$5.5
dividendPayoutRatio
0.09%
priceToBookRatio
0.68
priceEarningsRatio
7.89
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings-call transcript data were provided in the supplied materials. The analysis below integrates disclosed P&L, cash flow, balance sheet metrics, and ratio analysis. If a transcript becomes available, I can extract management commentary and quotes to enrich this section with theme-based notes (strategy, operations, market conditions) and direct quotations.
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Forward Guidance
- No formal forward guidance was embedded in the QQ1 2025 data provided. Based on the quarter’s performance, a conservative near-term outlook would anticipate continued revenue stability around the low-to-mid $300 million range with potential for modest top-line growth as index-driven demand for canned, frozen, and private-label packaged fruits/vegetables persists.
- Margin trajectory appears favorable given the sharp YoY margin expansion observed in Q1 2025; if commodity costs stabilize and price/mix discipline persists, the company could maintain or modestly improve EBITDA and operating margins in the near term.
- Key monitorables include: working-capital management (inventory levels and CCC), input-cost volatility (fruit/vegetable commodities, packaging, and freight), commodity price cycles, currency exposure for international sales, and capacity utilization from capital projects.
- Management commentary (when available) should address: sustainability of margin gains, currency risk, cost-control initiatives, and any capex plans tied to efficiency or capacity expansion. Based on current metrics, achieving mid-single-digit revenue growth with low-to-mid-teens EBITDA margins appears plausible if the leverage path remains manageable and inventory normalization proceeds.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SENEA Focus
14.01%
8.41%
2.15%
7.89%
CENTA
29.80%
4.26%
0.92%
38.36%
CENT
29.80%
4.26%
0.92%
45.11%
NATR
71.20%
4.17%
1.51%
42.32%
ASBFF
9.04%
9.04%
2.99%
13.11%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Seneca's QQ1 2025 results underscore a constructive margin recovery and solid FCF generation within a leveraged balance sheet. The company delivered revenue growth with meaningful margin expansion, supported by a robust free cash flow profile and a cash-efficient quarterly performance. The valuation appears compelling relative to earnings power, with a P/E near 7.9x and an EV/EBITDA in the mid-20s, suggesting a value-oriented entry point for investors willing to tolerate a higher working-capital footprint and leverage. The primary investment thesis hinges on continued margin discipline, selective deleveraging, and inventory normalization which could unlock upside in earnings quality and cash generation. Key catalysts include further margin stabilization, successful execution of capital projects that improve efficiency, and any acceleration in private-label growth or international exposure. Risks to this thesis center on commodity-cost volatility, input-price cycles, and the potential for working-capital dynamics to pressure liquidity. A balanced approach, monitoring the CCC trend, debt maturities, and commodity prices, is warranted for potential exposure to Seneca from a consumer-defensive, value-oriented perspective.
Key Investment Factors
Growth Potential
Potential for margin stability and incremental FCF generation as mix shifts toward higher-margin packaged fruits/vegetables and efficiency gains from operating improvements. Valuation at attractive levels (P/E ~7.9x) provides optionality for multiple expansion if leverage moderates and inventory normalization progresses.
Profitability Risk
High working-capital intensity with a 289-day DIO and CCC around 296 days underscores continued liquidity and liquidity-coverage considerations. Commodity-price and input-cost volatility, supply-chain risks, and potential macroeconomic headwinds could impact revenue mix and margin realization. Leverage (debt-to-capitalization ~0.511; net debt ~$601.6M) presents interest-cost and refinancing risk in a rising-rate environment.
Financial Position
Solid operating cash flow generation ($50.3M) supporting free cash flow ($38.3M) but a sizable balance-sheet burden remains (total debt $614.6M; cash $13.0M). Interest coverage (~2.5x) is adequate but not excessive; ongoing deleveraging or improved working-capital efficiency would strengthen financial flexibility. Inventory management and a disciplined capital-allocation strategy will be critical to sustain liquidity and support dividend/payout policy.
SWOT Analysis
Strengths
Diverse packaged-fruits and vegetables portfolio across canned, frozen, and private-label products providing broad consumer reach
Solid cash generation from operations (CFO $50.33M) with meaningful free cash flow ($38.26M) in QQ1 2025
Moderate EBITDA margin around 12.28% and improving gross margin (14.01%) indicating favorable mix or price realization
Healthy liquidity indicators (current ratio 3.83x) despite a modest cash balance
Established distribution network across grocery, club, foodservice, and government channels
Weaknesses
High inventory levels driving working-capital intensity (inventory $841.8M; DIO ~289 days)
Low cash balance relative to total liabilities raises liquidity sensitivity in stressed scenarios
Leverage posture with net debt ~$601.6M and interest coverage ~2.5x could constrain aggressive capital returns if earnings falter
Opportunities
Private-label growth and category expansion within canned/frozen vegetables and fruits
Private-label sourcing and scaling in international markets could improve margins
Operational efficiency initiatives to reduce CCC and optimize working-capital cadence
Potential deleveraging through continued FCF generation and disciplined capital allocation
Threats
Commodity price volatility for fruits/vegetables and packaging materials impacting COGS
Rising interest rates or tighter credit conditions affecting debt service and refinancing
Macro weakness impacting consumer demand in discretionary product lines
Competitive dynamics and price competition within packaged foods and private-label space