Summary
Alico is an interesting company with a focus largely on citrus.
Financial performance has been all over the map in recent years, with no clear trend for its revenue or cash flows.
Given current pricing, the company appears to be a decent prospect, but it’s nothing special.
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mrtekmekci/E+ via Getty Images Although many of the food and beverage companies that are publicly traded today are large conglomerates, there are still a number of small players with particular niches in which they operate that investors can choose from. One intriguing opportunity that fits this definition is a company called Alico Inc. ( ALCO ). Admittedly, the company’s small size and exposure to a limited number of revenue streams results in significant volatility from year to year.
But with shares trading at levels that look more or less fairly valued, the company doesn’t make for a bad opportunity for long term, patient investors. No, it is unlikely to be a home run anytime soon. But for those who don’t mind paying a decent price for a decent business with the intention of using that firm to achieve some desired diversification, Alico may be a good prospect to consider. A play on citrus
Today, Alico operates as a small agricultural enterprise with a primary focus on the production of citrus. As to the end of its latest fiscal year, the company owned approximately 83,000 acres of land spread across eight different counties in Florida. On top of this, it owned about 90,000 acres of mineral rights throughout the state as well, with much of this overlapping with the acres owned. Of the land that the company owns, 48,852 acres is dedicated to citrus Groves and citrus nursery development.
On top of this, the company also manages, for third parties, approximately 7,400 acres of land on which citrus is grown as well. The largest chunk of acreage the company has dedicated to these specific operations is located in DeSoto County, with total acreage there coming out to 21,472. But the company also has significant acreage in Polk, Collier, and Hendry counties. According to management, sales associated with these operations represented 97.5% of the company’s overall revenue in its 2021 fiscal year. It also is responsible for about 92% of the business’s gross profit.
The rest of the company’s operations are dedicated to a segment that management calls Land Management and Other Operations. Revenue Associated with this acreage comes from land leasing for recreational and grazing purposes, conservation, and various mining activities. It is worth noting that the company also engages in a number of transactions in this space, such as the sale, in June of last year, of 11,700 acres in exchange for $12.22 million. The only other sizable transaction for this segment in 2021 was its sale, to the State of Florida, of 5,734 acres of land in exchange for $14.45 million. but from a revenue perspective, this particular segment is fairly small, amounting to just 2.5% of the company’s sales and 8.3% of its gross profits last year.
Over the past few years, the financial picture for the company has been quite volatile. This can be seen in the chart below. After seeing revenue drop from $129.83 million in 2017 to $81.28 million in 2018, it then jumped up to $122.25 million in 2019, 2020 saw revenue of $92.51 million, while the 2021 fiscal year reported a higher reading of $108.56 million. Such volatility should not be all that surprising, especially given how concentrated the company’s sales are.
Not only that, the company’s top line is affected significantly by not just the amount of citrus it can produce, but by how much revenue it can generate for this product. For instance, although revenue for the company grew in 2021, the company actually saw the number of boxes harvested drop by 16.1% from 7,578 to 6,359. On the other hand, pricing for the company improved drastically. On a per pound basis, pricing for everything besides its fresh fruit increased by over 30% year over year, while the price per box of fresh fruit grew by 14.7%.
Not only that, the company also saw revenue increase by 269.3%, climbing from $4.6 million to almost $17 million for its management services. One important note to keep in mind instead is the company is heavily exposed to counter-party risk. This is because, as of […]