U.S.-based Limoneira has downgraded its earnings guidance after an "overabundance" of large lemons affected revenues in the third financial quarter.
The company now expects adjusted EBITDA for the 2019 fiscal year to be in the range of US$7m to $9.5m. This compares to the previous range of US$17n to $22m.
Excessive winter rains in Southern California created an oversupply of large fresh lemons in the citrus industry, it said. This resulted in an "industry-wide decrease of lemon carton pricing and volume".
Towards the end of the quarter, the large lemon inventory didn't sell as quickly as expected. This resulted in lower fresh lemon utilization rates, lower pricing and higher costs than anticipated.
The orange industry also faced low pricing due to oversupply and large sizing of fruit into the third quarter.
"We continued to face pricing and sales volume headwinds from lower fresh utilization due to the industry-wide overabundance of large fresh lemons," said Harold Edwards, president and CEO.
He said the larger sized lemons were selling for approximately US$18.00 per carton in the quarter - "well below" normal pricing. The company had to turn around half of the lemons into juice, he added.
Limoneira still forecasting record lemon crop
Limoneira continues to expect to grow a tree crop of approximately 7.2m domestic lemon cartons.
“We expect to achieve record domestic and international fresh lemon volume in fiscal year 2019, but our operational costs are not being fully leveraged due to the drop in fresh lemon utilization rates in the third quarter," Edwards said.
The company is now achieving a sales price of US$21.50 per carton, he said.
"Even though we expect improved pricing in the fourth quarter, the weather events that affected the overall lemon and orange industry earlier this year offset the fact that we have achieved our grower retention goals and increased our market share," he said.
He also expects to see "solid growth and improved profitability" in the next fiscal year.
"Based on our expected organic lemon growth for next year and all recent acquisitions coming on-line for a full fiscal year, we are excited about our continued long-term growth opportunities," he said.