Business Overview and History

Alico, Inc. (NASDAQ:ALCO) is a Florida-based agribusiness and land management company that has been navigating the challenges of the citrus industry while exploring opportunities to unlock value from its substantial land holdings. With a history spanning over 125 years, Alico has evolved from a pure-play citrus grower into a diversified enterprise, leveraging its expansive real estate assets to drive long-term shareholder value.

Alico’s origins trace back to the late 19th century, when the company was established as a citrus operation. Over the decades, Alico has grown to become the largest publicly traded citrus grower in Florida, with approximately 48,000 acres of citrus groves spread across seven counties. The company’s primary business segment, Alico Citrus, is responsible for planting, owning, cultivating, and managing these citrus groves to produce fruit for sale to fresh and processed citrus markets.

In addition to its core citrus operations, Alico has a Land Management and Other Operations segment, which includes activities related to grazing and hunting leasing, management and/or conservation of unimproved native pastureland, rock mining royalties, and other minor lines of business. This segment also encompasses activities related to owning and/or leasing improved farmland, which has been converted or permitted for conversion from native pasture.

Throughout its history, Alico has faced numerous challenges, including natural disasters and disease outbreaks. In 2017, the company experienced significant impacts from Hurricane Irma, which caused substantial damage to its citrus groves. Alico worked diligently to recover from the hurricane’s effects and continue its citrus operations. More recently, in 2022, the company was again impacted by Hurricane Ian, which disrupted its citrus production.

Despite these setbacks, Alico has remained committed to its citrus business, investing heavily in its groves. Since 2017, the company has planted over 2.2 million new trees, demonstrating its long-term commitment to the industry. Today, Alico owns approximately 53,700 acres of land and 48,700 acres of mineral rights throughout Florida, positioning it as a major player in the state’s agricultural sector.

Navigating Challenges in the Citrus Industry

The Florida citrus industry has faced significant challenges in recent years, with the introduction of the Asian citrus greening virus in 2005 having a devastating impact on the state’s citrus production. Alico, like many of its peers, has had to contend with the effects of this disease, which has infected an estimated 80% of Florida’s citrus trees.

In response to these challenges, Alico has implemented various strategies to mitigate the impact of citrus greening. In 2023, the company began treating over 35% of its producing trees with an oxytetracycline (OTC) product, a citrus greening therapy, and in 2024, it treated approximately 4.5 million producing trees. The company has also received grant funding from the Florida Citrus Research and Field Trial Foundation to assist with the costs of these OTC treatments.

Despite the ongoing challenges, Alico’s citrus operations have shown signs of recovery. In the nine months ended June 30, 2024, the company reported a 10.8% increase in pound solids produced for its Early and Mid-Season crop and a 7.6% increase for its Valencia crop, compared to the same period in the prior year. Additionally, Alico was able to negotiate more favorable pricing in its contracts with its largest customer, Tropicana, which is expected to drive higher revenues in the coming years.

Transitioning to a Balanced Approach: Citrus and Land Management

While Alico remains committed to its citrus operations, the company has also been actively pursuing a diversified real estate strategy to unlock the value of its substantial land holdings. In 2022, Alico began a comprehensive analysis of its land portfolio, which encompasses approximately 54,500 acres across seven counties in Florida.

As part of this initiative, the company has started the entitlement process for its 4,500-acre grove in Collier County, with the goal of exploring the highest and best use for this asset. Additionally, in 2024, Alico entered into an agreement to sell approximately 798 acres of citrus land for $7.2 million, or $9,000 per acre, while retaining the option to continue growing citrus on a portion of the land for the next harvest season.

Further, in April 2024, Alico announced that it had entered into a purchase option agreement with a third-party for the sale of approximately 899 acres of land at a price of $11,500 per acre. This transaction, which is expected to be completed by the end of 2024, will see the buyer, E.R. Jahna Industries, conduct sand mining operations on the land, while Alico retains the right to lease back most of the acreage, including 340 net citrus acres, for a nominal fee.

These strategic land transactions demonstrate Alico’s commitment to actively managing its real estate assets to maximize shareholder value, while maintaining its core citrus operations. The company’s balanced approach, combining its agricultural legacy with proactive land management, positions it to navigate the challenges of the citrus industry while unlocking the potential of its broader real estate portfolio.

Financial Performance and Liquidity

For the nine months ended June 30, 2024, Alico reported total revenues of $45.71 million, a 16.7% increase compared to the same period in the prior year. This growth was primarily driven by an increase in pound solids produced and higher pricing for both the Early and Mid-Season and Valencia citrus crops, as well as an increase in grove management services revenue.

The company’s net income attributable to Alico common stockholders for the nine-month period was $25.10 million, compared to $0.90 million in the same period of the prior year. This significant increase was largely due to the $74.9 million gain on the sale of 17,229 acres of the Alico Ranch in December 2023 and a $4.4 million gain on the sale of 798 acres of citrus land in June 2024.

Alico’s balance sheet remains strong, with a working capital ratio of 2.67 as of June 30, 2024, and approximately $94.8 million of undrawn capacity under its revolving line of credit and working capital line of credit facilities. This financial flexibility provides the company with the resources to continue investing in its citrus operations, as well as explore strategic land development opportunities.

In the most recent fiscal year 2023, Alico reported revenue of $39.85 million and net income of $1.83 million. Operating cash flow was negative $6.25 million, while free cash flow was negative $22.91 million. For the most recent quarter (Q3 2024), revenue increased by 86.8% to $13.61 million, primarily due to the timing of the Valencia harvest. However, net income decreased to a loss of $2.04 million, mainly due to the impact of Hurricane Ian and the receipt of $17.5 million in insurance proceeds in the prior year’s third quarter.

Alico’s liquidity position remains solid, with $9.11 million in cash and $94.75 million available under its credit facilities. The company’s debt-to-equity ratio stands at 0.20 to 1.00, indicating a conservative capital structure. The current ratio of 2.67 and quick ratio of 0.90 further demonstrate Alico’s ability to meet its short-term obligations.

Risks and Outlook

While Alico has demonstrated resilience in navigating the challenges of the citrus industry, the company remains exposed to various risks, including weather conditions, disease, water supply, and market price fluctuations. The ongoing impact of citrus greening, as well as the potential for future hurricane-related disruptions, could continue to affect the company’s citrus production and financial performance.

Additionally, Alico’s real estate development initiatives are subject to regulatory approvals, market conditions, and the company’s ability to effectively execute its strategic plans. Any delays or setbacks in these efforts could impact the company’s ability to fully realize the value of its land holdings.

Despite these risks, Alico remains cautiously optimistic about its future prospects. The company’s investment in OTC treatments, combined with its new, more favorable supply contract with Tropicana, are expected to support improved citrus production and profitability in the coming years. The new 3-year contract with Tropicana covers approximately 65% of Alico’s acres and is expected to result in significantly higher prices per pound solid next year.

Alico continues to evaluate its properties to determine the highest and best use to create long-term value for shareholders. The company has entered into purchase option agreements and sales agreements for certain groves to monetize assets and redeploy capital. This strategy aligns with Alico’s balanced approach to managing its citrus operations and real estate portfolio.

As part of its succession planning, Alico has announced that Adam Putnam will be appointed as the new Chairman of the Board following the next Annual General Meeting in 2025, succeeding George Brokaw. This leadership transition is expected to provide continuity in the company’s strategic direction.

Conclusion

Alico, Inc. is a unique agricultural company that is navigating the challenges of the citrus industry while proactively exploring opportunities to unlock value from its substantial land holdings. With a history spanning over 125 years, the company has evolved from a pure-play citrus grower into a diversified enterprise, leveraging its expansive real estate assets to drive long-term shareholder value.

While the citrus industry continues to face significant headwinds, Alico has demonstrated its resilience through strategic initiatives, such as the adoption of OTC treatments and the negotiation of more favorable supply contracts. The company’s Alico Citrus segment, which accounts for 97.6% of consolidated revenues, has shown signs of recovery with increased production and improved pricing. The Land Management and Other Operations segment, although smaller, provides diversification and additional revenue streams.

Alico’s balanced approach to real estate management, including strategic land sales and development, positions it to create additional value beyond its core citrus operations. The company’s ongoing evaluation of its land portfolio and willingness to monetize underperforming assets demonstrate a commitment to maximizing shareholder value.

As Alico continues to navigate the complexities of the citrus industry and explore the untapped potential of its real estate portfolio, investors would be wise to closely monitor the company’s progress and its ability to execute on its long-term strategic vision. With a strong liquidity position, favorable contracts in place, and a clear strategy for growth, Alico is well-positioned to overcome industry challenges and capitalize on opportunities in both its citrus and land management operations.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.