Business Overview and History

Limoneira Company (NASDAQ:LMNR) is a 131-year-old international agribusiness headquartered in Santa Paula, California. The company has grown to become one of the premier integrated agribusinesses in the world, with a strong focus on sustainable practices and diversified operations.

Limoneira was founded in 1893 and has been a key player in the citrus industry for over a century. The company started as a lemon grower in Ventura County, California, taking advantage of the ideal growing conditions for citrus crops near the Pacific Ocean. Over the decades, Limoneira steadily expanded its lemon orchards and processing facilities, ensuring a reliable supply of high-quality lemons for its customers.

As one of California's oldest citrus growers, Limoneira has diversified its agricultural portfolio over time. In addition to lemons, the company has expanded into other crops such as avocados, oranges, and wine grapes. This diversification has helped Limoneira navigate the inherent risks and challenges of the fresh produce industry.

Throughout its history, Limoneira has faced and overcome various challenges. For instance, in December 2017, the company experienced high winds and wildfires in Southern California, which caused a brief power outage at its Santa Paula packinghouse and destroyed 14 of its farm worker housing units. However, the company's orchards did not suffer significant damage, demonstrating its resilience in the face of natural disasters.

Today, Limoneira owns and manages approximately 10,500 acres of agricultural land, with the majority located in Ventura County, California, as well as in Arizona, Chile, and Argentina. The company's business model is centered around four main segments: fresh lemons, lemon packing, avocados, and other agribusiness operations. Limoneira is one of the largest lemon growers in the United States, producing approximately 3,400 acres of lemons. The company is also a significant avocado producer, with around 1,400 acres of avocado orchards. In addition, Limoneira grows oranges and wine grapes, and provides farm management services.

Financials

In fiscal year 2024, Limoneira reported record net revenues of $191.5 million, a 6% increase from the previous year. The company's agribusiness segment, which includes its core lemon and avocado operations, accounted for $185.9 million, or 97%, of total net revenues. Limoneira's other operations, which include rental and real estate development activities, contributed the remaining $5.6 million.

Breaking down the agribusiness segment, fresh lemon sales were $84.0 million on 4.5 million cartons of lemons sold at an average price of $18.87 per carton. The company also generated $32.0 million in brokered lemons and other lemon sales, $17.1 million in lemon packing revenue, and $3.0 million in lemon by-product sales. The avocado segment sold 15.1 million pounds of avocados at an average price of $1.67 per pound, generating $25.1 million in revenues. The other agribusiness segment, which includes oranges and specialty citrus, contributed $24.6 million to total net revenues.

For the most recent quarter (Q4 2024), Limoneira reported revenue of $43.9 million, a 6% increase year-over-year, primarily due to an $8.9 million increase in avocado revenue, partially offset by a $2.9 million decrease in fresh packed lemon sales. However, the company reported a net loss of $1.9 million for the quarter.

Limoneira's financial ratios demonstrate its strong liquidity and solvency. As of October 31, 2024, the company had a current ratio of 0.74 and a quick ratio of 0.74, indicating sufficient current assets to cover short-term obligations. The debt-to-equity ratio was 0.0029, suggesting a very conservative capital structure with minimal leverage.

The company's profitability ratios have shown improvement in recent years. Limoneira's gross profit margin for fiscal year 2024 was 11.2%, and its net profit margin was 4.0%. The company's return on assets and return on equity were 2.6% and 4.0%, respectively, for the same period.

Liquidity

Limoneira's liquidity position remains strong, as evidenced by its financial ratios. The company's current and quick ratios of 0.74 indicate that it has sufficient liquid assets to meet its short-term obligations. As of October 31, 2024, Limoneira had $3.0 million in cash on hand and access to a $75.0 million credit line under its Revolving Credit Supplement. This strong liquidity position allows Limoneira to maintain operational flexibility and pursue growth opportunities as they arise.

Avocado Expansion and Strategic Shifts

One of Limoneira's key strategic initiatives is the expansion of its avocado production. The company plans to increase its avocado plantings by 1,000 acres through fiscal year 2027, capitalizing on the growing consumer demand for avocados. This expansion is expected to drive significant EBITDA growth in the coming years. In fiscal year 2024, Limoneira's avocado segment generated $25.1 million in revenue, a significant increase from the prior year, with 15.1 million pounds sold at an average price of $1.67 per pound.

In addition to its agribusiness operations, Limoneira has been actively diversifying its business through real estate development and water rights monetization. The company's residential joint venture with The Lewis Group of Companies, known as the Harvest at Limoneira project, has been a success, with the joint venture closing on the sale of 554 residential units in fiscal year 2024. Limoneira now expects to receive total proceeds of $180 million from this project, spread out over seven fiscal years, with $15 million received in fiscal year 2024. The company has also announced plans to monetize a portion of its valuable water rights in the Santa Paula Basin, demonstrating the inherent value of its water assets.

Risks and Challenges

Limoneira's business is subject to various risks, including adverse weather conditions, natural disasters, and pest and disease outbreaks that can impact crop yields and quality. The company is also exposed to commodity price fluctuations and rising input costs, which can affect its profitability. The global lemon market is currently in an oversupplied position, which could impact prices and profitability in the near term.

The real estate development segment carries its own set of risks, such as regulatory approvals, market conditions, and project execution. Limoneira's ability to successfully navigate these challenges and execute its strategic initiatives will be crucial for its long-term growth and profitability.

Outlook and Guidance

For fiscal year 2025, Limoneira expects fresh lemon volumes to be in the range of 5 million to 5.5 million cartons. Avocado volumes are projected to be in the range of 7 million to 8 million pounds, which is lower compared to fiscal year 2024 due to the alternate bearing nature of avocado trees.

The company's long-term strategy includes expanding avocado production by 1,000 acres through fiscal year 2027, which is expected to drive significant EBITDA growth. This expansion, coupled with the ongoing real estate development project and potential monetization of water rights, positions Limoneira for continued growth and diversification of revenue streams.

Conclusion

Limoneira's fiscal year 2024 results highlight the company's ability to adapt and capitalize on market opportunities. The strong performance in the avocado segment, combined with the progress in its real estate and water rights initiatives, positions Limoneira for continued growth and value creation.

As the company continues to execute its strategic plan, investors should closely monitor Limoneira's ability to further expand its avocado production, effectively manage its costs, and successfully monetize its water assets and real estate developments. With its diversified business model, proven track record, and focus on sustainable practices, Limoneira appears well-positioned to navigate the challenges facing the agribusiness industry and deliver long-term value for its shareholders.

The company's strong market position in lemons and avocados, along with diversification into other citrus and specialty crops, has allowed it to generate consistent cash flows from its agricultural operations. As Limoneira continues to expand its operations and explore new revenue streams, it remains a noteworthy player in the agribusiness sector, poised for future growth and success.