Last year I went on a fresh squeezed orange juice binge; nothing seemed to taste better. I bought an inexpensive electric juicer, and that turned out to be the cheap part of the deal. Oranges themselves were fairly expensive at that point as demand grew during the pandemic after years of decline. We are now on the cusp of even higher prices following a report from the U.S. Department of Agriculture that Florida is expected to produce 44.5 million boxes of oranges -- its lowest annual harvest since 1944-1945, when it produced 42.23 million boxes. For perspective, in 1945 the U.S. population was just 140 million, or just 42 % of today's 332 million.
News about the low harvest has me thinking about Florida agriculture name Alico Inc. (ALCO) , one of the largest U.S. citrus producers, which owns 48,852 acres, or 76 square miles, of citrus land. Of that land, 34,246 acres (53.5 square miles) are classified as producing acres, while the balance is support, developing or fallow land. In addition, Alico manages 7,400 citrus acres for third-party growers.
Alico also owns 32,979 acres of ranch land and 1,446 acres of mining lease land but has been focusing more on its citrus business. During fiscal 2021, the company sold 19,800 acres of ranch land and used the proceeds to buy citrus land as well as pay down debt and increase its dividend. Indeed, last year ALCO raised the quarterly dividend 178% from 18 cents to 50 cents. The payout equates to a 5.5% yield at present.
Alico has done a decent job of paying down debt over the years. At the end of fiscal 2015, total debt was $230 million, but it now stands at $125 million. Alico shares currently trade at 1.14x tangible book value.
Company guidance for fiscal 2022 is net income of between $10.7 million and $12.7 million and EBITDA of between $33.7 million and $37.1 million. Next year's "consensus" estimate (just one analyst covers ALCO) is for earnings per share of $1.10, putting the forward price-to-earnings ratio at 33. That's not exactly cheap, but this is more a potential asset play than it is an earnings play.
This is my second go-around with ALCO. I owned it several years ago, sold it and then bought it back in 2019, wanting more exposure to agriculture. Plays such as Alico are not for the impatient as they can languish for years. They may look great on paper, but unlocking value can take a long time if it happens at all. As a value investor, I am OK with that; I'm happy to reinvest the current hefty dividend while seeing whether price increases for 2022 will more than offset the potential drop in production.
