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Seneca eyes growth in frozen food

Rochester Business Journal
August 13, 2010

Seneca Foods Corp. will grow its business by increasing sales of its frozen vegetable offerings, expanding international business and launching new products, its chief executive said last week.

"We believe the company is positioned to succeed well into the future," said Kraig Kayser, president and CEO, during the company's annual meeting at its headquarters in Marion, Wayne County.

Kayser addressed mainly Seneca Foods' executives and board members at the meeting, discussing how the company fared in fiscal 2010 and what steps it will take in the future. The meeting came at roughly the same time when the company released its first-quarter financial results.

Seneca Foods, which sells more than $1 billion a year in food products, reported first-quarter net earnings of $5.3 million, or 43 cents a diluted share, versus net earnings of $11.1 million, or 91 cents a diluted share, a year earlier.

Sales fell 4.6 percent to $219.9 million. The drop in sales was due largely to lower selling prices and a less favorable sales mix, partially offset by an increase in sales volume.

Increasing promotional activity to reduce a large inventory last year also hurt the bottom line, company leaders said, and weather conditions could continue to be a factor this year.

"Earnings will be much tougher to come by in 2011," Kayser said.

Seneca Foods, which has processing facilities in Geneva, Ontario County, and Leicester, Livingston County, sells products under the Libby's, Aunt Nellie's Farm Kitchen, Stokely's, Read and Seneca labels. It is the country's largest processor of canned fruits and vegetables, and it ranked 22nd on the Rochester Business Journal's most recent list of manufacturers with 397 local employees.

Seneca Foods supplies almost all of the largest U.S. retailers, selling to traditional grocers, food service distributors, alternative format groceries such as Wal-Mart Stores Inc., schools and the government. The company also generates some $150 million in annual revenue through its can-making business.

Kayser called fiscal 2010 another strong year for the company because of high selling prices coupled with a good growing season. It posted net earnings of $48.4 million, or $3.96 a share, compared with $18.8 million, or $1.53 a share, in fiscal 2009.

Excluding a non-cash after-tax inventory charge of $7.3 million, net earnings per diluted share were $4.56 in fiscal 2010. Excluding a similar charge of $37.9 million in fiscal 2009, net earnings were $4.62 per diluted share.

Annual sales were down by $600,000 to $1.28 billion.

Strong sales of canned vegetables helped offset losses on the canned fruit side of the business. The drop in canned fruit sales largely reflected lower sales to the Department of Agriculture, which declined from $78 million in 2009 to $36 million in 2010.

To help offset that loss, the company focused on getting its products in big-box and dollar stores, replacing foreign fruit offerings there, Kayser said.

Last fiscal year, Seneca Foods also amended and strengthened its alliance with General Mills Inc. For the past 16 years, Seneca Foods has produced hundreds of millions of cases of canned and frozen vegetables for General Mills, which it sells under the Green Giant and Le Sueur brands. In fiscal 2010, Seneca Foods sold nearly $240 million of product to General Mills, representing 19 percent of total revenue.

Canned vegetables represented 82 percent of total sales in fiscal 2010, but company leaders are hoping that the acquisition of Unilink LLC will expand the frozen vegetable business.

The Unilink acquisition could roughly double Seneca Foods' frozen vegetable business, Kayser said. Seneca Foods also is planning to use its plant in Buhl, Idaho, for the frozen vegetable business.

Seneca Foods this week completed its acquisition of Unilink and an affiliated company, Lebanon Valley Cold Storage L.P., which primarily sell frozen fruits and vegetables in the packaged, private-label retail and food service channels. Unilink has its headquarters in Lebanon, Pa. Its fiscal 2009 revenue was roughly $65 million.

To position the company for long-term growth, Seneca Foods has been investing in new equipment at its plants. The company began a $22 million project last year to replace its optical sorting systems at its plants and has invested in modern fleet vehicles and harvesters with global positioning systems.

The company has expanded its can-making operations, investing $13 million in improvements, including upgrades related to the can-making operation in Marion.

Seneca Foods also has invested in its seed business and has been selling processed pea seeds to customers. The business did roughly $4 million in sales last year, Kayser said.

New product offerings will be introduced over the next 24 months, including jumbo fruit cups and a crisp onion snack product. Company leaders believe Seneca Foods will increase its exporting activity as the United States takes a greater role in feeding other nations.

Christopher Carosa, president of Carosa Stanton & Depaolo Asset Management LLC, said the company appears to be in good shape and is fairly recession-proof because of its diverse product base.

From an investor's point of view, however, the firm needs to have a higher volume of shares for the stock to trade, Carosa said.

"The biggest issue we have is that the company is not really that active from a trading standpoint," he said.

8/13/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail service@rbj.net.

 


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