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Lower selling prices due to an overabundance of last summer's bumper crop led to a year-over-year drop in net income and a decrease in sales for Seneca Foods Corp.
The food processor based in Marion, Wayne County, last week reported that its net income for the year ended March 31 was $17.7 million, or $1.45 a diluted share, down 63.5 percent from net income of $48.4 million, or $3.96 a diluted share, the previous year.
Sales fell nearly 7 percent to $1.19 billion.
Kraig Kayser, president and CEO, said the company had to invest heavily in marketing promotions during the year because of price wars among competitors due to an overabundance of products.
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.
For the current fiscal year, the vegetable inventory is improving, which should allow Seneca Foods to reduce its promotional activities and increase profitability, Kayser told investors. He expects improved performance by the second half.
"We are well-positioned to succeed," Kayser told investors during a call to discuss financial results last week. "We were profitable in (fiscal) 2011 and expect to emerge stronger than ever."
The decrease in annual revenue was due in part to a drop in sales to General Mills Operations LLC and the loss of a large snack customer, Kayser said.
Seneca Foods supplies vegetables for General Mills' Green Giant line. For the year, sales to General Mills totaled $191 million, down from $240 million, filings with the Securities and Exchange Commission show.
Seneca Foods' two product categories with the largest sales also posted year-over-year declines. Vegetable sales were $693 million, down from $751 million last year, and fruit sales were $195 million, down from $200 million a year ago, SEC filings show.
The company also posted drops in sales and profit for its fourth quarter, with a net loss of $1.9 million, or 15 cents a diluted share, compared with a profit of $6.3 million, or 51 cents a diluted share, a year earlier. Sales dropped by 9.4 percent to $253 million.
Shares of Seneca Foods (Nasdaq: SENEA) were trading at midweek around $26 a share. Their 52-week range is $21.86 to $33.54.
The annual and quarterly financial results were less than what analysts had expected.
Analysts polled by Thomson Reuters had expected Seneca Foods to report earnings per share of $1.60 on sales of $1.22 billion. For the quarter, the analyst consensus was earnings per share of a penny on sales of $277 million.
Bryan Spillane, an analyst with Bank of America Corp. Merrill Lynch, asked if the company expected to see higher retail prices for its fruits and vegetables.
Kayser said it is likely that prices could rise at stores, largely because it is paying growers more for fruits and vegetables, but also because of rising steel and fuel costs.
The increases, however, should not be substantial, Kayser said. For example, a $1 increase in the price of a 24-can case of vegetables sold to the retailer would result in a 4-cent increase per can.
Seneca Foods' products tend to be less expensive than other food choices, Kayser said.
"Processed fruits and vegetables tend to be a very good bargain when putting food on a plate," he said.
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