Q4 2021 Limoneira Co Earnings Call
Greetings and welcome to the La minute luminaire off fourth quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
It's now my pleasure to introduce your host John Mills with ICR. Thank you you may begin.
Great. Thank you good afternoon, everyone and thank you for joining us for luminaire, it's fourth quarter fiscal year 2021 conference call on.
On the call today are Harold Edwards, President and Chief Executive Officer, and Marc Pelham Mountain Chief Financial Officer.
By now everyone should have access to the fourth quarter fiscal year 2021 earnings release.
Which went out today at approximately four P M eastern time.
If you've not had a chance to view the release, it's available on the Investor Relations portion of the company's website at Lehman era Dot com.
This call is being webcast and a replay will be available on luminaire as web site as well.
Yeah.
Before we begin we'd like to remind everyone that prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions such statements involve a number of known and unknown risks and uncertainties many of which are outside the company's control and could cause its future results performance or achievements to differ significantly from the resort.
<unk> performance or achievements expressed or implied by such forward looking statements.
Important factors that could cause or contribute to such differences include risks detailed in the company's 10, Qs and 10-K filed with the SEC and those mentioned in the earnings release.
Sept as required by law, we undertake no obligation to update any forward looking or other statements herein, whether a result of new information future events or otherwise.
Please note that during today's call, we will be discussing non-GAAP financial measures, including results on an adjusted basis.
We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of luminaire was ongoing results of operations, particularly when comparing underlying results from period to period.
We've provided as much detail as possible on any items that are discussed on an adjusted basis also within the company's earnings release in today's prepared remarks. We include adjusted EBITDA, which is a non-GAAP financial measures a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is included in the Companys.
10-K, and press release, which have been posted to the website.
And with that it is my pleasure to turn the call over to the company's President and CEO, Mr. Harold Edwards.
Thanks, John and good afternoon, everyone.
I'm very proud of the way our team was able to successfully manage through a challenging year due to COVID-19, and its effects on logistics and channels of revenue.
Even with these challenges we achieved strong fresh lemon utilization in fiscal year, 2021, and our brokered fruit business more than doubled in fiscal year 2021 compared to fiscal 2020.
Enabling us to improve revenue and EBITDA year over year.
Our outside third party grower returns were extremely competitive this past year, as well, which should help us with additional outside grow recruiting in the upcoming year.
We are back to our pre COVID-19 growth trajectory, but we're getting closer and believe the momentum in our business and expanding brokerage business will attract more third party growers.
During our seasonally slower fourth quarter of fiscal year 2021 revenue increased 12% compared to the same period last year. These.
These results were driven by higher lemon prices and very strong brokerage fruit revenue, which more than doubled compared to last year.
Lemon pricing improved in the back half of fiscal year 2021, and we expect this trend to continue throughout fiscal year 2022.
We achieved our solid topline results, even as the widely publicized global logistical delays continue to affect the entire agricultural industry and reduced exports to Asia.
Specifically due to the shipping delays and spoilage occurring in the fourth quarter of fiscal year 2021, we expect to receive insurance compensation in the first quarter of calendar 2022.
We are excited about how we are positioned for revenue and earnings growth in fiscal year 2022, and our real estate development project harvest at Lehman era continues to perform very well and I will provide an update on this project in a few moments.
Now I'll discuss each of our business divisions' performances for the fourth quarter, starting with agribusiness.
For the fourth quarter of fiscal year 2021, total net revenue was $33 5 million compared to total net revenue of $29 $8 million in agribusiness revenue was $32 $3 million compared to $28 6 million in the fourth quarter of last fiscal year.
<unk> business revenue for the fourth quarter of fiscal year 2021 includes $7 $8 million in fresh lemon sales compared to $13 $4 million of fresh lemon sales during the same period of fiscal year 2000 22020.
The reduced lemon revenue was due to decreased volume of fresh lemons, primarily related to the timing of harvest and sales year over year, but also caused by logistical delays affecting our industry.
Average price per carton increased to $20 per carton compared to $19.23 per carton during the fourth quarter of fiscal year 2020.
The continuation of shipping delays and congested ports throughout the world caused a loss on a portion of our shipments and the balance had to be placed in different channels. We expect to receive insurance compensation in the fourth quarter of calendar 2022 related to the fourth quarter fruit spoilage.
Throughout fiscal year 2021, we made great strides in expanding our one world of Citrus initiative and improving our long term growth opportunities. We continue to focus on expanding our retail sales opportunities as well as strengthening our foodservice relationships as many restaurants began to open again after COVID-19.
19.
We made a strategic decision to dramatically expand our brokered fruit business, which offset seasonally slower domestic volumes in the fourth quarter, providing supplemental fruit for our global customers, we generated $17 $4 million of brokered fruit revenue in the fourth quarter of fiscal year 'twenty.
'twenty, one compared to $8 1 million in the same period last year approximately 941000 cartons of brokered fruit were sold during the fourth quarter of fiscal year 2021 at an average of $18.44 average price per carton.
Compared to approximately 449000 cartons sold at an $18.13 average price per carton during the fourth quarter of fiscal year 2020 brokered fruit revenue is primarily comprised of pack fruit for resale, where we are the principal in the transaction.
Turning now to our real estate development Division.
Harvest at Lehman, Eric continues to perform very well and is now closed 586 lots since inception, including 30, new lot closings in the fourth quarter of fiscal year 2021, we.
We have now completely sold phase one of this project and are now focused on the 554 lots for sale in phase II.
We expect to begin receiving cash distributions this year from harvest at Lehman era, and fully expect to generate $80 million of cash distributions over the next five years.
In addition, we believe there is upside to our stated cash distributions due to the potential increased number of sellable lots entitled and harvest at Lehman era increased values of our remaining sellable lots in the project.
And the opportunity of the recently announced medical campus in our East area two development.
In July of 2021, we entered into a non binding letter of intent to sell approximately 25 acres of our east area. Two property in five stage purchases to an investment company for the purpose of constructing a medical campus consisting of medical office buildings and in acute care.
Hospital completion.
Completion of the transaction is subject to the execution of a purchase and sale agreement and resolution of certain contingencies. This potential transaction isn't included in our projected $80 million of cash proceeds and we will provide an update unexpected amounts of cash distributions later this year.
Many of you have recently read about the recent rainfall throughout California, and Arizona, which is reducing pressure felt by the existing statewide drought.
The much needed early season rainfall not only helps to replenish groundwater basins, but also has dramatically positive impacts on tree health and vitality as well as fruit sizing.
The past few years have been challenging for our industry. We have taken this period of time to become closer with our customers and enhancing our operations through technical improvements such as implementing a real time digital information system, we call farm to table by a tablet initiative.
This is increasing efficiency across our supply chain by monitoring daily tree health and fruit growth predicting right time to harvest fruit identifying labor and distribution needs and matching harvest fruit grades and sizes to global demand this creates greater yields and quality improves efficiency within.
Harvest and packing teams and sales teams can improve fresh utilization.
We also continued to build upon our 129 years of stewardship of both our natural and human resources by employing sustainable practices in all aspects of operation.
With over 15400 acres of rich agricultural land and water assets throughout California, Arizona, Chile, and Argentina, we are well positioned for long term growth through our one world of citrus mantra of meeting our customers year round global demand for citrus.
And with that I'll now turn the call over to Mark.
Thank you Harold and good afternoon, everyone. As a reminder, due to the seasonal nature of our business. It is best to view our business on an annual not quarterly basis, historically, our first and fourth quarters are seasonally softer quarters, while second our second and third quarters are stronger.
For the fourth quarter of fiscal year 2021, total net revenue was $33 5 million compared to total net revenue of $29 $8 million in the fourth quarter of the previous fiscal year Agribusiness revenue was $32 3 million compared to $28 6 million.
In the fourth quarter last year.
The increase in revenue was primarily driven by a 115% year over year increase in brokered fruit sales in the fourth quarter of fiscal year 2021.
Other operations revenue was relatively flat to the prior year at $1 $2 million in the fourth quarter of fiscal year 2021.
Agribusiness revenue for the fourth quarter of fiscal year, 2021 includes $7 8 million and a fresh lemon sales compared to $13 $4 million. During the same period of fiscal year 2020 <unk>.
Approximately 390000 cartons of fresh lemons were sold during the fourth quarter of fiscal year 2021 at a $20 average price per carton compared to approximately 596000 cartons sold at a $19 <unk> average price per carton during the fourth quarter of fiscal.
Year 2020.
The decreased volume of fresh lemon, partially relates to harvesting and logistical delays affecting our industry.
We originally expected delayed shipments of many agricultural products, including <unk> to move from the third quarter into the fourth quarter of fiscal year 2021, However, the continuation of shipping delays and congested ports throughout the world caused a portion of these shipments to spoil and the balance had to be reworked.
To quantify we had more than 10 ships on the wire carrying approximately 70000 cartons of fruit from Chile, and Argentina that went from the delay of 22 days to 65 days, we expect to receive insurance compensation in the first calendar quarter of 2022.
For the fourth quarter of fiscal 2021 spoiled fruit.
The company recognized $17 $4 million of brokered fruit sales in the fourth quarter of fiscal year 2021, compared to $8 1 million in the same period last year.
Approximately 941000 cartons of brokered fruit were sold during the fourth quarter of fiscal year 2021 at $18, 44th scent average price per carton compared to approximately 449000 cartons sold at an $18 <unk> average price per carton.
During the fourth quarter of fiscal year 2020.
As Harold mentioned, we are focused more on broker fruit sales to offset the soft seasonality and will continue to expand that business in fiscal year 2022.
The company recognized nominal avocado revenue in the fourth quarter of fiscal year 2021, compared to $482000 in the same period last fiscal year approximately 3000 pounds of avocados were sold during the fourth quarter of fiscal year 2021 at a $1 30.
Six average price per pound compared to approximately 487000 pounds sold at a 99 cent average price per pound during the fourth quarter of fiscal year 2020.
The reduction in avocado revenue compared to the prior year is due to the highly publicized lack of rainfall throughout California, and the west coast, which reduced the overall size of the actual avocado fruit pieces and caused the majority of the fruit to be harvested in the third quarter of fiscal year 2021.
The increase in average price per pound was due to lower supply of fruit in the marketplace.
The company recognized nominal orange revenue in the fourth quarter of fiscal year 2021, compared to $551000 in the same period of fiscal year 2020, primarily attributable to pricing adjustments in the fourth quarter of fiscal 2021 related to Orange is delivered to third party packing houses.
Specialty citrus and other crop revenues increased to $3 2 million in the fourth quarter of fiscal year 2021, compared to $2 million in the fourth quarter of fiscal year 2020.
The increase was primarily due to higher volume of wine grapes sold in the fourth quarter of fiscal year 2021.
Total cost and expenses for the fourth quarter of fiscal year, 2021 were $40 million compared to $39 $3 million in the fourth quarter of last year opera.
Operating loss for the fourth quarter of fiscal year 2021 decreased to $6 5 million.
Compared to a loss of $9 $5 million in the fourth quarter of the previous fiscal year net loss applicable to common stock after preferred dividends for the fourth quarter of fiscal year, 2021 was $5 million compared to a net loss of $7 $6 million in the fourth quarter of fiscal year two.
2020.
Net loss per diluted share for the fourth quarter of fiscal year 2021 was <unk> 28, compared to a net loss per diluted share a 43 for the same period of fiscal year 2020 <unk>.
Approximately $700000 or <unk> <unk> per share of the loss was due to fruit spoilage relating to shipping issues, we expect to receive insurance reimbursement in the first quarter of 2022 related to this spoilage.
Adjusted adjusted net loss applicable to common stock for the fourth quarter of fiscal year, 2021 was $4 9 million compared to a loss of $7 6 million in the same period of fiscal year, 2020, which excludes the loss on stock in Colorado.
Adjusted net loss per diluted share was <unk> 28.
Compared to adjusted net loss.
Per diluted share of <unk> 43 for the fourth quarter of fiscal year 2020, a reconciliation of adjusted net loss to net loss is provided at the end of our earnings release.
Adjusted EBITDA was a loss of $3 5 million in the fourth quarter of fiscal year 2021, compared to a loss of $7 2 million in the same period of fiscal year 2020, a reconciliation of adjusted EBITDA to net loss has also provided at the end of our earnings release.
For the fiscal year ended October 31, 2021 revenue was $166 million compared to $164 6 million in the same period last year operating loss for the fiscal year 2021 was $6 3 million compared to a loss of 19.
In the same period last year net loss applicable to common stock after preferred dividends was $3 9 million for the first for the fiscal year 2021, compared to a net loss of $16 $9 million for the fiscal year 2020.
Net loss per diluted share for the fiscal year 2021 was 23 <unk>.
Compared to a net loss per diluted share of <unk> 96 in fiscal year 2020.
For the fiscal year 2021, adjusted net loss applicable to common stock was $3 $9 million.
Compared to a net loss of $12 million for the fiscal year 2020.
Adjusted net loss per diluted share was <unk> <unk> compared to adjusted net loss per diluted share of <unk> 68.
For the fiscal year 2020, based on approximately $17 6 million and $17 7 million.
Respectively weighted average diluted common shares outstanding.
We recorded for fiscal years, 2021, and 2020 and income tax benefit of $300000 and $8 5 million on a pre tax loss of $4 $2 million and $26 4 million respectively.
<unk> provision recorded for the fiscal year 2021 differs from the U S. Federal statutory tax rate of 21% due primarily to foreign jurisdictions, which are taxed at different rates state taxes, non deductible tax items and value related valuation allowances on certain deferred.
Tax assets of foreign subsidiaries.
The effective tax rate in fiscal year, 2021 was six 4% compared to an effective rate of 32, 2% in the prior fiscal year. The lower tax rate is mainly due to valuation allowances on deferred tax assets in Chile and Argentina.
Turning now to our balance sheet and liquidity long term debt as of October 31, 2021 was $134 million compared to $122 $6 million at the end of fiscal year 2020.
Now I would like to turn the call back to Harold to discuss our fiscal year 2022 outlook and longer term growth pipeline.
Thank you Marc as we all know the COVID-19 pandemic continues to affect all foodservice businesses and industry logistics on a global basis, even with this continued pandemic. We believe we will experience improving results in fiscal year 2022 compared to fiscal 2021.
Due to our stronger position in grocery and growing brokerage business.
As food service and export markets recover we also expect lemon prices to increase in fiscal year 2022 compared to fiscal year 2021 spin.
Specifically, we expect total lemon sales volumes to be in the range of $4 5 million cartons to 5 million cartons for fiscal year 2022, and avocado volumes are expected to be in the range of 5 million pounds to 6 million pounds for fiscal year 2022.
We also expect to expand Orange volume in fiscal year 2022 by marketing another producers Orange is through our one world of Citrus program, we have a growing list of customers that enjoy our ability to provide all of their citrus needs for one single supplier and by increasing our orange is we will be able to attract even more customer.
<unk>.
In addition, we expect to receive $80 million from harvest at <unk>. During the next five fiscal years beginning in fiscal year 2022, we believe the breakdown will be as follows fiscal year 2022 is expected to generate $3 million of cash to Lehman era fiscal year 2023 is expected to generate <unk>.
$15 million.
Fiscal 2024 is expected to generate $27 million fiscal 2025 is expected to generate $25 million and fiscal year 2026 is expected to generate $10 million.
These expectations from harvest do not include the potential upside from increased values of our remaining sellable lots increased number of residential lots, we may be entitled to sell at harvest as well as the potential opportunity of a medical campus in our east area. Two development, we expect to be in a position to provide greater transparency.
On these opportunities later this year.
Lastly to support our expected continued growth we have an additional 1000 acres of non bearing lemons estimated to become full bearing over the next four years, which will enable us to achieve strong organic growth for many years to come we expect 200 of the 1000 acres to become full bearing in fiscal year 2022.
These 1000 acres, we anticipate this additional acreage will increase our domestic supply of luminaire owned lemons from our 2021 level by approximately 50% or by about 900000 to one 3 million additional fresh cartons as the non bearing and planned acreage becomes <unk>.
Reductive.
And with that I'd like to open the call up to your questions operator.
At this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys one.
One moment, please while we poll for questions.
Our first question is from Ben <unk> with Stephens. Please proceed with your question.
Hey, good afternoon, everybody. Thanks for taking my questions.
Hi, Ben.
So I wanted to start asking about the brokerage business. So.
Interesting to see the growth in that business.
Sounds like an interesting growth opportunity to augment the existing growth that you guys have.
As the bearing acreage rolls on.
Can you talk about the scalability of that opportunity what are the constraining factors to growing that and.
What should we be thinking about in terms of setting our expectations around how big that business can get for you guys.
Happy to so the real opportunity that we've been presented with that business was created by us creating the.
The global supply chain model, where we have a little bit of our own production. We have packing assets that are representing outside growers fruit and now we have customers that have become comfortable with our year round supply capability at both retail and foodservice.
And so once that capability was built it allowed us the opportunity now to begin to represent third party shippers and their citrus.
And.
Typically these are commission based sales opportunities.
Our commission rates ranged from anywhere from 6% to 12% I think right now our average.
Commission rate is 8%.
<unk>.
In terms of the scale ability we feel this is a very very scalable opportunity for us.
And attracting high quality third party shippers into our one world of Citrus network. We think is just a matter of finding the right production areas around the world. So at this point, we're sourcing fruit in Mexico in Chile and Argentina.
And in Peru, and we see great opportunities to augment or supplement that with additional brokerage opportunities out of South Africa, and eventually out of Spain.
And in terms of the total volume.
That we can expect we can probably anticipate growing that part of our business realistically at call it 20% annually, but with with great opportunities to to scale that and grow that at different times of the year when mother nature doesn't give us the tree crops that we need.
To keep our supply chain up to speed now granted it's lower margin business.
Then our vertically integrated production packing marketing and selling business, but it doesn't cost us anything to get these these deals other than the time to meet the shippers and that their quality. So we think it's a very scalable opportunity for us and one that will really allow us to plug the.
Holes as Mark was saying earlier in his comments in our seasonally soft quarters in our first quarter and our second quarter and our goal will be to keep our supply chains growing consistently throughout the year, where we're selling an equal amount of fruit in the off seasons by sourcing. These.
These agency or brokerage deals.
I just might add.
The opportunity one obviously that would harold alluded to that there's no capital involved and really it's just human capital.
The cost to get these column, 8% to 10% average across the board deals.
Minimal and it also allows us to begin to think about these value add services. We can provide to these growers in other countries, whether it's logistics.
Additional bagging through our Dcs and whatnot, so really opens up a whole new tranche for us.
Okay, that's great Super interesting.
I wanted to ask about the spoilage and but logistics delays at the ports can you talk about where we are today in terms of getting back to normal and then if you have any sense. Yet can you talk about what you think the insurance proceeds might look like in the first quarter of next year.
Happy to ban so I'll dig into the where we are today and then mark can talk about expectations from insurance so the.
The good news for us in terms of our where we are in the seasonality of our fruit is we're not importing any fruit from the southern hemisphere right now all of our production today is coming out of the desert and then out of the San Joaquin Valley in California, and so we're not experiencing any negative.
Impacts on our supply chains or our shipments because everything is being sourced domestically.
As it relates to our exports we are still seeing soft demand from our from our Asian.
Partners and the Asian markets are still suffering from the impacts of the pandemic.
So that's good news bad news the good news is that our business is not being severely impacted because of the logistical delays bad news is markets are still suffering from COVID-19 and the pandemic and softer foodservice demand in those markets.
We do expect that by the time those markets become healthy and open up that the supply chain issues will be well down the road to being resolved.
But we can tell you that as we drive.
Down into Los Angeles in that area and you look out in the harbor Theres still a lot of ships that are floating out there. So we know theyre not through their challenges, but we are reading about improvements and things getting better.
The real issue for US Ben will will come in the mid to late summer when we go back to our model of our supply chains being dependent on that southern hemisphere fruit and we'll be very cautious about bringing fruit into the west coast ports, and probably err on the side of bringing more deliveries to the east co.
S markets and using trucking to bring at west to avoid the congestion.
And then so from that from the insurance side.
It's all a little complicated one theres multiple carriers involved when youre talking about 70000 cartons, but we had some legal opinions done from our attorneys down and looking at all the contracts.
Think sort of a minimum level is about $300000 I mean, thats, specifically related to just reimbursement of transportation cost.
And then all the way up to about $1 $3 million potential.
My gut is it will hopefully fall somewhere in the middle but right now we're just not trying to put a specific figure on it but again the attorney thought we had within the contracts.
Some leverage there so all worked out and we should see that in the next three months.
Yeah, Okay, great. Thanks.
Last question for me.
<unk>.
Harold you talked about the rain.
Can you tell yet what that might mean for your trees and how.
How much more rate do we need to start to get back to normal I know, we're a long way from normal so give us a sense of the impact of what that could mean to your business.
Yes. So it actually is a very very positive thing just maybe to start with the negative side.
So what it did is it meant that in December we werent able to get in to pick for 12 days and so call. It two weeks and so what that's done is that's pushing our expected results out by two weeks. So I think from a pragmatic perspective, it's going to mean that we're going to be.
Have a softer first quarter than we thought but a stronger second quarter than we thought.
So just.
To the extent that you can move some of those those forecasts around I think that that's probably something that we ought to think about.
And then as it relates to the.
The overall situation of the ongoing drought in California, having.
Having this much rain. This early went a long way to replenishing empty Aqua docs and groundwater basins and Youre seeing now.
Now, we're not back to what we would call healthy.
As it relates to the large storage facilities that exist throughout the state of California, but the other aspect of the rains that maybe isn't getting as much attention, but is a godsend for all of US is the amount of snow that has has.
Taking that we received in the Sierra Nevada Mountains and that that is what provides most of the San Joaquin Valley is water rights, which are riparian rights through the rivers and the streams that flow from the snow melt as that takes place in the late spring and the early summer and Thats going to go a long way to reach.
Filling up our agricultural canals, and giving us access to two additional water that about six months ago, we were in a very dire situation. So.
But bottom line is it's been a wonderful series of storms and rains were hopeful that that we're not through with them for the season I think we still have several months, where we can expect more rain, but but certainly we're off to a great start and it's just making the entire agricultural community in California.
Pretty happy.
And Ben just to flip the card.
Go ahead Mark.
From the harvest delay perspective, typically this time of year, if we can't get in the field. We're harvesting about 100 to 125000 cartons of week. So do the math on 12 weeks or 12 day excuse me and it probably pushes about to 200000 carton from Q1 into Q2 not us.
It just moved.
Okay very helpful. Thanks, and good luck with this next fiscal year.
Thanks, Ben I appreciate it thank you.
Our next question is from Gerry Sweeney with Roth Capital Partners. Please proceed with your question.
Hey, good afternoon, Hal and Mark Thanks for taking my call.
Gary.
Logistics and brokerage were at top of my mind, but since we covered it I did wanted to talk a little bit more.
Maybe give a little bit more detail on the opportunity on the grocery side. It's obviously been an area of focus for the past year.
Yes.
Impacted the foodservice side, but.
How much of an opportunity is there longer term and does that cover the same carry the same type of margins and economics.
So exactly the same economics and margins as foodservice.
And the exciting part of that channel for Us Theres two exciting parts to it one we are growing in that channel just through gaining market share and so we believe it is sustainable but the other really exciting part of it is a very high percentage of that business has additional value added benefits to us.
Where we're able to.
Derived more.
Margin and more value added benefit through bagging and and I guess the final benefit of that which is very exciting is that it gives us a lot more flexibility with the size and the grades that we're able to serve our retail customers with and why that's super important and exciting for us as that.
Customers are pretty open to sizing and grades.
In the bagged format and that gives us the opportunity to really be able to focus on the areas of the sizes and grades where we have buildup inventory. So it really helps us with our utilization and selling more lemons fresh, but we're also able to capture a little bit more value added through the bagging service. There we think it is.
As Super exciting part of our business and as we continue to grow with our with our total volume growth I think thinking in terms of 50% retail and 50% foodservice is very achievable.
And that has very strong implications for.
Our ability to generate more value added benefit for our P&L as we grow.
Got it.
And then.
Let me see what else here.
Something else I wanted to ask about but I.
Ticket is actually slipped my mind.
Yeah.
On the logistics side I know you're targeting.
Maybe bringing some.
Two east coast, how much of a cost differential impact would that have a free product to the east coast and that shifted from there via trucking.
So it adds another mark do you have a do you have a figure that you would use for that per carton.
It's about four to $5, depending on what the seasonality, where we are typically but we saw.
Obviously incredible trucking rates are still somewhat difficult in.
And.
And then the Myer port situations so.
We're trying to figure out what the best days of that but if you use them for a $5 additional probably as good as any for the moment.
And Jerry a lot a lot a lot of that gets passed through to the customer.
Not that we not that we want to do that but.
If a customer is facing that cost increase or not being able to get a delivery. He usually ops for the cost increase.
Got it.
One question I did want to ask that actually slipped my mind I apologize have you gotten how is foodservice looking today.
We're kind of going through ups and downs.
Yeah.
<unk> took off a little bit, but how is it looking in the sort of October November early December time frame.
And then let's not worry about it.
Got it.
Weeks ago quite honest, but yes, there was that there wasn't a euphoric response to restaurants reopening and people.
Being able to go out to congregate and eat in restaurants again, so we actually saw a spike up in demand that's fallen off a little bit but by and large we're we're very strong restaurants are open.
People are people are eating out and so demand at foodservice is robust again.
The primary area of difficulty as I was mentioning earlier is just it's still in the export markets.
And why that really matters to us is so that's primarily our fancy fruit, but we can capture up to a $5 premium on those sales so by not having that we're very fortunate mother nature gave us a higher percentage of fancy fruit this year versus last but.
But because we're not able to slip that into that those premium export markets. We're not seeing at least at this point as big a lift in the overall aggregate pricing as we'd hoped.
That's all just because the Asian demand remains soft.
Got it okay. That's helpful. Okay I appreciate it thanks a lot.
Thanks Jerry.
Our next question is from Ben <unk> with Lake Street Capital markets. Please proceed with your question.
Alright, Thanks for taking my questions first follow up question on the brokered fruit business Mark you talked about the fourth quarter numbers in the year over year improvement I see some of those reflected in the 8-K as well.
Don't know if you.
What that business was on a full year basis. If you did I apologize, but could you could you.
Give us that information for fiscal 'twenty, one and growth over fiscal 'twenty.
Yeah, we didn't we didn't mention that but right.
Right now it's.
That $25 million business up significantly over 100% year over year.
And as Harold alluded to I think conservatively, we're targeting 20% growth from there but.
As we've talked about in our investor decks in the past is our ultimate intention over the next five years to seven years is to take the business to 30 million cartons of citrus of which were $10 million. Today. So clearly that is has a lot of implications to the brokerage side. So that's going to be a focus for us in this sort of asset.
Light World.
And we will continue to do that in and have those value added services.
And I think I think Dan.
But I think it generated $2.3 million of operating profit for us.
Perfect sorry.
Harold was that $2 three in fourth quarter or is that full year.
It was the full year.
Okay perfect.
On.
Very interesting looking forward to more information on that here in quarters to come.
Another question Harold you touched on the rain or you said that you commented that there was 12 days that you guys couldn't harvest.
A few years ago, when there was dramatically more rain for a longer period of time that kind of skewed the sizing.
<unk> four.
Basically all domestic production was there enough rain. This year is that there is really any kind of material impact in in kind of size and grade or was that not not enough rain or not long enough for them to do that.
No. That's a great question I appreciate it because I was going to try to weave a comment in there about it so that rain and series of rain events kept us from harvesting for eight weeks. So this was this was two weeks and so we don't anticipate the buildup of sizing.
We we see good movement on the fruit as it exists today.
I don't think it'll have any disruptive or negative impact on our supply chain I think I think it was a biologic a perfect rain with perfect results.
At this point and the one thing that maybe.
Maybe mention is that.
Avocado should should receive a huge benefit from this from this rain natural rain rainfall accelerates the growth and the size of avocados.
And.
We sell to our customers by the piece, but were paid or compensated for a production by the pounds.
So the same number of pieces. If you can get an increase in size and the average size. It can it can improve the amount of pounded you have by 20% to 30%. So it can be it can be material. So we think we're in a really great spot with the avocados, it's too early to say that thats happened or happened.
But we'll keep you posted because our our avocados.
First of all the hate the wind and they loved the rain and we had fewer wind events. This year versus last and we had more rain events. So off to a good start for 2022 with the avocados.
Got it got it helpful.
One last one for me regarding carton pricing on the third quarter call and mid what was that mid September.
Kind of commented that there was the pricing at that point was in the low twenties 22, 23 ish range on a full quarter ends up of 'twenty can you talk to me about kind of how pricing evolved throughout the quarter.
What if any.
What if anything in the back half of the quarter led to a kind of a lower lower price than then it was commented on in mid September.
Sure.
The two drivers of your price are going to be.
Your product mix. So the difference between sales between what your anticipated percentage of fancy your percentage of choice and your percentage of standards. So we had a lower percentage of fancy fruit than we anticipated.
That was the one piece so more choice more standard as a product mix in total which brought the average price of those grades down and then the other impact was a buildup in the industry of more choice fruit that.
That put more pressure.
Pressure based on this the choice grade and the impact was an oversupplied situation, which was dealt with by some of our competitors with price and that drags the whole market down.
And.
So specifically really related to the desert Cadiz.
It's when you're out there we had all that choice fruit, but as Harold mentioned are expected.
Expected percentage of fancy will be higher in 2022 and 2021.
Got it okay.
Okay very good.
I think that does it for me thanks for taking my questions and I'll get back in queue.
Thanks Brent.
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Our next question is from Eric Larson with Seaport Research Partners. Please proceed with your question.
Yeah. Thanks for the question Hi, guys.
Eric Hi, Eric.
So my question is and I may have missed this.
Your utilization fresh lemon utilization went up pretty sharply for.
For the entire year, which is generally which is normally very beneficial.
Did you and I may have missed this did you give the full year fresh utilization rate.
How is.
How does that improve going forward, how do you look at it and you know what.
Should we be modeling.
Yes, so great question. Thank you for that.
2021 was the year of dramatic recovery in fresh utilization, which was a function of several things one.
Certainly.
Recovery of foodservice, which created more market demand, but then but then the second thing was our team just did a great job in coordinating and.
And forecasting what our what our production and our affiliated growers production was going to be anticipate when it would be harvested and what it would be at the time of harvest and then we're out in front of that with our customers setting up programs to be able to move the fruit once it was harvested and made available.
And we did not provide the full year utilization rate, but it came in at about 78% for the for the year, which compares to I think 50% was where we wound up the prior year.
As you build your models and you think on a go forward basis, we believe that we've made the appropriate investments into technology information systems and we've just at the end of the story have a great team that really do a great job out there in.
In the team work Thats required to keep good high utilization, but I would expect to be anywhere from the 75% to 80% fresh utilization across all the districts and throughout California and Arizona.
Okay, Great. That's that's great you know I know.
It's kind of once you get north of 70.
Is when it starts having a pretty positive impact on your P&L. So.
Is it possible to get something north of let's say that 75% to 80% range or would that be more of a normalized should that should we think of that as a normalized range yes.
Yes. So so great question different answers for different districts. So when you grow in areas that have extreme climate.
<unk>, Arizona, where it gets really hot then.
Seeing maximum utilization at <unk>.
75% is probably the most we could we could probably expect but when you get up into the San Joaquin Valley, where Theres very little wind and it's really just the perfect place to grow Lemons do you have you have utilization opportunities potentially 90% there and then and then as it comes to the California.
<unk>, it's all how much when do we get and so if we get a lot of east wins, which we have not had knock wood. This year then.
I think expectation of mid to low 70% fresh utilization, but if you can avoid the big wind events, it's possible to get up to 80%. When you put the whole thing together I think the most we've ever seen is probably.
Average across all districts is like low 80%, that's probably the best we could hope for.
And one other thing just that add Eric is.
The fresh lemonade concept, which we're still developing and we've had that great customer raising Cain, adding one or two more players like that to suck up that otherwise fruit that would've gone to use for $2 and selling those as standard as an opportunity as well.
Yes.
Follow up on that.
And one other comment just because I don't think we incorporated this into our all of our comments but.
All of the tree crops across each of the districts. The Desert District tree The Valley District, one in here on the coast district to the tree crops in all of the regions are up this year, meaning there's more lemons that if we can get these higher utilization.
It means we will have a great opportunity to get up to that 5 million carton high end of the range of sales. This year. So we've got everybody focused in on that and.
The rain at this point should help that too. So that's that's our internal goal this year.
Okay and just one other quick follow up question here.
You talk about a thousand acres that's coming on.
Over the next four years Youre, saying that about 200 of those acres come this year.
Will this be the first year for harvesting and and I think it takes what maybe two to three years to really kind of get to you know kind of running full tilt in production with a new.
New acreage could you help me with that with that Harold.
Yes.
The sound bite is when you when you plant a tree. It takes three years before you get to be getting of production and it takes seven years to get to full bearing production.
So.
Of the 1000 acres Youre seeing 200 of those at year four so youre starting to get production now it's less than when it gets to your 7%, but but that's really the rule of thumb is you get your first fruit in year three.
And that tree is that at full bearing status when its year seven.
Okay perfect. Thank you I'll pass along thanks, guys.
Thanks, Eric Thank you.
We have reached the end of the question and answer session and I will now turn the call over to Harold Edwards for closing remarks.
Thank you for all your questions and your interest in Lee Minera have a great day. Thank you everybody.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Yes.
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