Limoneira Company, a diversified citrus packing, selling and marketing company with related agribusiness activities and real estate development operations, today announced a business and guidance update for its fiscal year ending October 31, 2019.
Fiscal Year 2019 business and update and Fiscal Second Quarter 2019 insight
Excessive rains in Southern California during the Company’s first and second quarters of fiscal year 2019 has created an overabundance of large fresh lemons, which is creating a decrease in lemon carton pricing. In addition, unfavorable weather conditions for oranges has resulted in significantly lower than expected pricing in the orange market. Lastly, the rains have also delayed the timing of the southern California lemon harvest into the third quarter of fiscal year 2019. Based on these events, the Company is updating its fiscal year 2019 guidance.
For fiscal year 2019, the Company and its international affiliates are reiterating volume expectations and continue to expect to sell 8.4 to 9.0 million cartons of fresh lemons globally. Due to the competitive nature of international business, the Company is not providing average price projections for international lemon sales. Included in the global cartons estimate, is the Company’s domestic cartons which it expects to sell between 5.2 and 5.5 million. The Company is reducing pricing expectations for its approximately 2 million cartons of fresh domestic lemons to an average price of approximately $24.00 compared to previous guidance of $26.00.
The Company continues to expect to sell approximately 1.7 to 2.0 million pounds of avocados at approximately $1.20 per pound.
Due to excessive heat in the summer of 2018, the Company expects minimal revenue from avocados in fiscal year 2019. Offsetting this temporary event will be the benefit of crop insurance for approximately $2.5 million calculated on actual avocado harvest in fiscal year 2019. The Company expects a meaningful increase in avocado revenue in fiscal 2020.
For fiscal 2019, the current unfavorable domestic conditions for oranges has resulted in significantly lower than expected pricing in the orange market.
The Company now expects operating income for fiscal year 2019 to be approximately $14.5 million to $17.5 million compared to previous expectations of $20.0 million to $23.0 million.
Fiscal year 2019 Adjusted EBITDA is now expected to be in the range of $23.5 million to $27.5 million, compared to previous range of $28.0 million to $32.0 million.
The Company now expects fiscal year 2019 earnings per share to be in the range of $0.65 to $0.75 per diluted share with an estimated 18.4 million diluted shares outstanding. Adjusted earnings per diluted share are expected to be in the range of $0.55 to $0.65, compared to the previous range of $0.75 to $0.85. Adjusted EPS guidance for fiscal year 2019 excludes estimated equity earnings from Harvest at Limoneira and the potential impact of mark to market changes in the value of its 250,000 shares of Calavo. Beginning in fiscal year 2019, the Company is required to measure the changes in fair value of this investment on its statement of operations.
Longer-Term Growth Pipeline
Fiscal year 2019 outlook estimates do not include equity earnings benefits from the Harvest at Limoneira project. Initial lot sales representing 174 residential units closed in February and March of 2019 and the Company is receiving a benefit of equity earnings in its second quarter FY 2019 for $2.3 million. In addition, the company does expect additional equity earnings during the remainder of FY 2019.
Looking beyond 2019, the Company has an additional 1,200 acres of non-bearing lemons that are estimated to become full-bearing over the next four years, which will enable the Company to achieve strong organic growth for many years to come. 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 that it believes will further build its long-term pipeline of productive acreage. The Company anticipates this additional acreage will increase annual lemon supply from its 2019 level by approximately 30%, or about 900 thousand to 1.3 million additional fresh cartons, as the non-bearing and planned acreage becomes productive. The Company also expects to have a steady increase in third party grower fruit. The foregoing describes organic growth and does not include potential acquisition opportunities for the Company in its highly fragmented industry.
Harold Edwards, President and Chief Executive Officer, stated, "We continue to expect to deliver record volume, EBITDA and adjusted earnings per share in Fiscal Year 2019 despite different weather events that negatively impacted the price per carton of our lemons and oranges due to weather conditions. Our recent acquisitions, including Chile and Argentina are performing as expected and our domestic packing house is performing in-line with our fiscal year 2019 expectations. Our recent acquisitions, expanded lemon planting efforts, and affiliated grower recruiting efforts have us very well positioned for continued strong top and bottom line growth in fiscal year 2019 and beyond. The global market for lemons continues to expand and we believe with our One World of Citrus initiative has us well positioned to grow with our current and future global customers.”
Mr. Edwards continued, "Our real estate venture, Harvest at Limoneira generated $2.3 million of equity earnings during the second quarter of fiscal year 2019 and we expect additional equity earnings during the remainder of fiscal year 2019. In addition, we are announcing a partnership with a national homebuilder for an additional 63 lots set to close in our third and fourth quarters of FY 2019. Overall, we continue to believe this venture will deliver approximately $100 million of cash flow during the next 6 years that we will reinvest into the growth of our agriculture businesses.”
The Company will report its full second quarter and fiscal year 2019 results on June 10, 2019.
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