Limoneira: Pricing headwinds affect Q3 performance
Limoneira experienced a challenging third financial quarter on the back of pricing headwinds resulting from an oversupply of large-sized lemons.
Total net revenue rose by 27% to US$50.9m over the period ended July 13, and Limoneira continues to expect record revenues in the fiscal year.
But while last year the company registered net income of US$8.1m in the third quarter, this year it registered a net loss of US$1.1m.
Meanwhile, operating income for the quarter decreased to US$2.1m from US$11.4m in the third quarter last year.
"Throughout the third quarter, we continued to face pricing headwinds due to larger than normal size fruit which resulted in low 50% fresh utilization and $18.00 price per carton," said Harold Edwards, president and CEO.
"However, as we progress into the fourth quarter, we expect to achieve fresh utilization rates of 70% - 75% now that we are returning to a normal inventory of sizes and average price per carton has improved to approximately $21.50.
"For the full year of fiscal year 2019, we continue to expect to grow a tree crop of approximately 7.2 million domestic lemon cartons. Unfortunately, due to the lower fresh utilization rate during the third quarter, our lemons grown for fiscal year 2019 will not translate into our full year goal of fresh cartons sold."
He continued that the weather events that affected the overall lemon and orange industry during the first nine months of this year "offset" the fact that Limoneira has achieved its grower retention goals and increased its market share
"As we turn our sights to fiscal 2020, we are well positioned for a return to solid growth and improved profitability," he said.
Agribusiness revenue for the third quarter includes US$46.4m in lemon sales, up from US$30.7m in the same period last year. This increase was largely due to the higher volume offset by lower prices of fresh lemons.
Avocado revenue for the quarter was US$2.5 million, compared to US$5.6m last year, which was primarily the result of lower volume partially offset by higher prices.
Increasing lemon volumes
Looking beyond 2019, Limoneira has an additional 1,200 acres of non-bearing lemons that are estimated to become full bearing over the next four years. The company expects the first 300 acres of the 1,200 acres to become full bearing in fiscal year 2020.
Beyond these 1,200 acres, Limoneira intends to plant an additional 500 acres of lemons in the next two years which it believes will further build its long-term pipeline of productive acreage.
This additional acreage is expected to increase annual lemon supply from its 2019 level by approximately 30%.
The company also expects to have a steady increase in third-party grower fruit. It says the foregoing describes organic growth and does not include potential acquisition opportunities in its highly fragmented industry.