S&W Seed Company announced the consolidation of the Company’s U.S. alfalfa seed production operations, resulting in the sale of its Five Points, California seed processing facility for $2.25 million. Moving forward, all U.S. seed production operations will be consolidated in the Company’s two mechanized facilities in Nampa, Idaho and New Deal, Texas. S&W anticipates approximately $1 million in annualized cost synergies from the consolidation, which is expected to improve gross margins in alfalfa seed. The $2.25 million in gross proceeds from the sale will be used to pay-off long-term debt associated with the Five Points facility.
“Our supply chain team has been evaluating strategies to improve our cost of goods (COGS) structure for producing and packaging our seed products. Among the many strategies we considered, the relocation of seed production from more expensive regions such as California to more cost-effective regions was highlighted as one of the best ways to effect immediate impact on achieving our goals for reducing COGS and improving gross margins,” commented Mark Wong, CEO of S&W Seed Company. “The sale of our California facility will reduce our overall production costs, anticipated to be approximately $1 million on an annualized basis, and further allows us to improve our capital structure through the pay-off of long-term debt associated with the facility.”
In addition to the two U.S.-based production facilities, S&W also maintains production operations in Australia.
All full-time plant personnel have been offered employment by the acquiring entity. The sale of the Five Points facility is expected to result in a one-time gain on disposal of fixed assets of approximately $1.25 million. The transaction closed on January 21, 2021.
