In its recently reported second-quarter earnings release, California-based Limoneira Co. (NASDAQ: LMNR) easily topped analyst expectations with earnings of $2.6 million, or $0.17 per share, on revenue of $28.3 million. Despite operating from the thirsty, drought-stricken California soil, the agribusiness company says that for now it has enough water supply to continue producing lemons, avocados, oranges, specialty citrus and other crops.
“As we have discussed before and have included in our 10-Q, we believe we have access to adequate water supplies to support our operations, although we have incurred certain additional irrigation and crop treatment costs and have had to be more strategic in our water usage. While our operations have not been significantly affected by the drought, if it continues or worsens, or if the state of California or other governmental agencies implement regulatory restrictions or costs, our business could be impacted,” Limoneira president and CEO Harold Edwards recently stated in the earnings call.
In its 120 years of operations, Limoneira has become one of the leading integrated agribusinesses in the world, amassing approximately 10,700 acres of agricultural lands, real estate properties, and water rights in California and Arizona.
While private players like Chiquita, Dole and Sunkist are more aligned with Limoneira’s fruit and vegetable crop, Limoneira participates in the broader farm products industry alongside Archer-Daniels-Midland Company (NYSE:ADM), Tyson Foods, Inc. (NYSE:TSN), Syngenta (NYSE:SYT) and Monsanto (NYSE:MON).
Limoneira’s second-quarter top line growth of 14 percent was driven higher by lemons, avocados, specialty citrus and other crop sales. Aligned with its long-term plan to expand its agricultural acreage, Limoneira in the second quarter increased its total lemon orchard acreage in California via the expansion of its agricultural lease agreement with Cadiz.
Per the new agreement, Limoneira has the right to plant up to 1,480 acres of lemons over the next three years at the Cadiz Ranch operations in the Cadiz Valley in California. The company now has 360 acres of lemon trees that are expected to be productive in fiscal years 2017 and 2018, and said it expects to double its annual capacity of its lemon packing facilities in Santa Paula.
“We expect to utilize some of this new capacity with the production from approximately 1,000 acres of lemon orchards that are currently in development and expected to become productive over the next five years,” stated Edwards.
In addition to growth in its agribusiness segment, Limoneira is also expanding its rental operations, and reported progress on its real estate developments.
Regarding the rental operations segment, Limoneira completed the development of additional agricultural workforce housing units in Santa Paula, California, and rented 20 units in May for June 2015 move-in, with the balance of the 67 units — total units — expected to be rented in June and July of 2015. The company said it expects this project to annually contribute approximately $900,000 of additional rental income.
“We also anticipate that the additional farm worker housing units will help us maintain a consistent supply of labor for our agribusiness operations. As we have previously communicated, our long-term goal is to increase our rental operations, earnings, and cash flow to complement our agribusiness operations,” stated Edwards.
Concerning its real estate development business, Limoneira recently received approval for its Santa Paula Gateway project, which consists of a 550-acre, master-planned community with up to 1,500 residential units, 560,000 square feet of commercial space and 150,000 square feet of light industrial facilities. The plans for the project also include a public school and a 38-acre community park. In addition, land is earmarked for a future high school or academy site, as well as other master-planned community amenities.
Based on a change in expected harvest sizes, and volume and price fluctuations typical of the crops produced in its agribusiness, Limoneira also updated its fiscal year 2015 guidance. The company now expects to earn $7.6 million to $8.1 million in operating income for fiscal year 2015 compared to previous guidance of $9.4 million to $10.2 million. Fiscal year 2015 income before tax is expected to be approximately $8.8 million to $9.3 million compared to previous guidance of $10.4 million to $11.1 million. The company forecasts fiscal year 2015 per diluted in the range of $0.36 to $0.40 compared to previous guidance of $0.42 to $0.46.
Despite the lower guidance, Edwards reaffirmed his optimism for business and said the company is “excited about the position of our business as we begin the back half of fiscal year 2015. With our expanding agribusiness and rental operations, combined with significant progress on our real estate development efforts, this is an extremely exciting and dynamic time for Limoneira.”
For more information visit www.limoneira.com