Q3 2023 Limoneira Co Earnings Call
Greetings and welcome to Lehman years third quarter fiscal year 2023 financial results conference call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host John Mills with ICR. Thank you you may begin.
Good afternoon, everyone and thank you for joining us preliminary third quarter fiscal year 2023 conference calls.
On the call today are Harold Edwards, President and Chief Executive Officer.
And Mark Pella Mountain Chief Financial Officer.
By now everyone should have access to the third quarter of fiscal year 2023 earnings release, which went out at approximately four P. M. Today eastern time.
We'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 <unk> website as well.
Where 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 results performance or achievements expressed or implied by such forward looking statements.
Important factors that could cause or contribute to such differences include risk factors in the company's 10, Qs and 10-K filed with the SEC and those.
And 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'll 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 <unk> 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 and in today's prepared remarks, we include adjusted EBITDA.
And adjusted diluted earnings per share, which are non-GAAP financial measures a reconciliation of adjusted EBITDA and adjusted diluted EPS to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to the website.
And with that it's my pleasure to turn the call over to the company's President and CEO , Mr. Harold Edwards.
Thanks, John and good afternoon, everyone. The success of our strategic shift towards an asset lighter business model is evident in our third quarter results with brokered lemons and other lemon sales growing 76% year over year to $8 $8 million and achieving farm management.
<unk> of $5 $4 million compared to no farm management revenue last year. Additionally.
Additionally, we continue to make headway monetizing water assets with the recently announced water following program in Yuma, Arizona first expected annual proceeds of $1.3 million.
Over the past year, we have worked to identify and eliminate unproductive or unprofitable parts of our business, including the sale of nonstrategic assets exiting farming operations in Cadiz and terminating our long term pension plan all of which we expect to dramatically improve our margins starting in fiscal.
Full year 'twenty 'twenty four.
Overall, our third quarter results were impacted by lower lemon pricing and lower fresh utilization rates as a result of the heavy rains in California throughout December until May, which delayed a portion of our lemon harvest by two months and led to an industry wide pest issue that lowered the.
Grade uncertain fruit.
As a result, lemon pricing remained pressured throughout the quarter. However, as of the beginning of August Lemon pricing has steadily been increasing for all grades and sizes with prices up compared to the last few years and at the highest level since 2018.
California Lemon production traditionally sees a lull during the summer months and picks up around late August early September when the Desert region starts. However, this year the start of the Desert region is behind schedule and the region is only expected to have limited picking through mid September the size of the fruit is smaller.
And picking hours will be limited due to heat and humidity altogether production in the desert region is expected to be down about 15% from last year due to the impact of weather in combination with a portion of the acreage now being followed.
11, the season has kicked off lemon production in the Desert region is expected to continue through the end of the calendar year.
Also since the beginning of August the overall lemon market has shown an increase with prices being significantly higher for all grades and sizes.
Prices are substantially higher year over year as well as compared to the beginning of summer. This is caused by the supply and demand curve being out of balance on the supply side. The availability of fruit has been reduced California, and South American supply on the trees in combination with remaining volumes in storage is.
Much less at the same time last year.
Weather weather events like flooding in Chile are having an impact on the quantity and quality of 11 craft.
Closer to the USA and Mexico excessive heat in July impacted the grade and the size of the fruit.
Add to this the situation a good demand and prices will go up.
We believe all of these factors position us very well for expected higher lemon pricing in fiscal year 2024.
Our avocado revenue in the third quarter of fiscal year 2023 was lower than the prior year period with fewer pounds sold due primarily to the alternate bearing nature of the avocado tree as well as lower prices per pound during this period compared to last year.
The overall improvements we are making to our business as well are well aligned with our strategic asset lighter transition plan that we expect to be completed in the next nine months, we are working to pivot our business towards a model that will streamline our operations and sell non strategic assets improve.
The consistency of our earnings increase EBITDA and dividends per share reduced debt right size, the balance sheet and improve the return on invested capital.
Debt less cash on hand as of July 31, 2023 was $32 million compared to $105 million at the end of fiscal year 2022.
The benefits of all these improvements will begin to be fully realized in fiscal year 2024.
In addition last quarter, we increased the value of assets for sale to approximately $180 million and we've already closed on four of the six identified assets over the past 12 months for a total of $130 million in proceeds we have $50 million of remaining assets identified.
That we plan to monetize over the next nine months.
Even after the recent nonstrategic asset sales, we continue to manage approximately 11100 acres of land with approximately 21000 acre feet of owned water usage and pumping rights. We recently announced that we entered into a second following program with Yuma Mesa irrigation.
Drainage district in the United States Bureau of reclamation. It supersedes the initial program and will commit to follow one land through at least calendar year 2025.
We expect to receive approximately $1.3 million annually paid in quarterly installments for following 581 acres out of our approximately 1300 acres of farmland in Yuma, Arizona.
Human Mesa irrigation will refrain from diverting Colorado River water that otherwise would have been used to irrigate followed lance so that the saved water may be retained in lake Mead as Colorado River system conservation water, increasing the supply and elevation of Lake Mead and helping to avoid walk.
Shortages in Arizona, and the lower basin.
We're finding great monetization opportunities for our water assets by either following acreage leasing pumper pumping rates or selling the water rights for significant appreciation of our investments. We believe this water monetization in Yuma, Arizona is just the beginning of additional future opportunities for our abundant water assets.
We have spent many years striving to improve our stewardship of water on all of our properties and this has enabled us to reduce our usage and increase our available water for future monetization opportunities.
So what is next for Lehman area now that we have a very strong balance sheet and a clear path to stronger stronger EBITDA cash flow and earnings in fiscal year 2024.
Over the next nine months you can expect to see our continued transition to an asset lighter business model and focus on the best use of our assets to enhance shareholder value. We have dramatically decreased interest expense removed our pension obligation will be receiving quarterly payments from the Yuma irrigation district for a following program.
And we believe lemon pricing will continue to improve from the lows in the third quarter positioning us very well for very strong improvements in fiscal year 2024.
Our board and management team will continue to evaluate how to best leverage our expertise in farming management packing marketing and distributing citrus combined with our valuable portfolio of agricultural lands real estate properties and water rights in order to enhance long term shareholder value.
And with that I'll now turn the call over to Mark.
Thank you Harold and good afternoon, everyone. As a reminder, it is best to view our business on an annual not quarterly basis due to the seasonal nature of our business.
Historically, our second and third quarters are the seasonally stronger quarters, while our first and fourth quarters are softer.
For the third quarter of fiscal year 2023, total net revenue was $52 $5 million compared to total net revenue of $58 $9 million in the third quarter of the previous fiscal year.
Agribusiness revenue was $51 $1 million compared to 57 $6 million in the third quarter last year.
Other operations revenue was $1 $4 million compared to one $3 million in the third quarter last year.
Agribusiness revenue for the third quarter of fiscal year 2023 includes $24.2 million in fresh lemon sales compared to $27 8 million during the same period of fiscal year 2022.
The year over year decline in fresh lemon revenue as a result of the excessive rainfall in California that Harold mentioned, which delayed a portion of a portion of our lemon harvest by two months and led to an industry wide test issue.
The rains caused an infestation of snails on the trees industrywide that lowered the grade on certain fruit.
Our fresh utilization rate fell by 10% to 60% in the third quarter with a portion of the downgraded fruit scented juice and other portion left on Sellable.
Approximately $1 4 million cartons of fresh lemons were sold during the third quarter of fiscal year 2023 at a $17 92 average.
Average price per carton compared to approximately $1 5 million cartons sold at an $18 39 average price per carton during the third quarter of fiscal year 2022.
Lemon pricing through the first nine months of fiscal year 2023 remained challenging. However, we were encouraged beginning in the end of August to see a steady recovery in price for all grades and sizes and prices are now sitting at the highest level since 2018.
Brokered lemons and other lemon sales were $8 $8 million and $5 million, respectively. In the third quarter of fiscal years, 2023 and 2022 representing 76% growth year over year.
The company recognized $3 $5 million of avocado revenue in the third quarter of fiscal year, 'twenty twenty-three compared to $12 $6 million in the third quarter of fiscal year 2022.
Approximately $2 8 million pounds of avocados were sold in aggregate during the third quarter of fiscal year 2023 at a 99 cent average price per pound compared to $5 7 million pounds sold at a $2 and 21 average price per pound during the third quarter.
Our fiscal year 2022.
The California, avocado crop typically experiences alternating years of high and low production due to plant physiology.
Additionally, we were dealing with an oversupplied avocado market exacerbated by a lot of fruit coming in from Mexico, and Peru that put pressure on the price of avocados in the third quarter.
The company recognized $1 $3 million of Orange revenue in the third quarter of fiscal year, 2023 compared to $3 $7 million in the third quarter of fiscal year 2022 approximately 71000 cartons of oranges were sold during the third quarter of fiscal year 2023.
At an $18 17, and average price per carton compared to approximately 209000 cartons sold at a $17.88 average price per carton during the third quarter of fiscal year 'twenty to 'twenty two.
Specialty citrus and other revenue was $1 $9 million in the third quarter of fiscal year, 2023 compared to $1 $1 million in the third quarter of fiscal year 2022.
As a reminder, we sold almost all of our Orange and specialty citrus acreage in the northern properties transaction during the first quarter of fiscal year 2023.
Total costs and expenses for the third quarter of fiscal year, 2023 were $54 million compared to $47 $9 million in the third quarter of last year.
The increase of $6 $1 million was primarily due to increases in growing and packing costs, partially offset by decreases in our third party grower and supplier costs and depreciation and amortization.
We faced challenging labor costs in our packing house this past quarter exacerbated by the lower volumes of cartons being processed.
Operating loss for the third quarter of fiscal year, 'twenty to 'twenty, three with $1 $5 million compared to operating income of $11 $1 million in the third quarter of the previous fiscal year, primarily due to lower avocado volume and pricing.
Net loss applicable to common stock after preferred dividends for the third quarter of fiscal year, 2023 was $1 $3 million compared to net income applicable to common stock of $7.3 million in the third quarter of fiscal year 2022.
Net loss per diluted share for the third quarter of fiscal year 2023 was seven <unk>.
Compared to net income per diluted share of 40 for the same period of fiscal year 2022.
Adjusted net income for diluted EPS for the third quarter of fiscal year, 2023 was $400000 compared to $7 $9 million in the same period of fiscal year 2022.
Adjusted net income per diluted share for the third quarter of fiscal year 2023 was two cents compared to adjusted net income per diluted share a 43 cents for the third quarter of fiscal year 2022.
A reconciliation of net loss or income attributable to luminary company to adjusted net loss or income for diluted EPS is provided at the end of our earnings release.
Adjusted EBITDA was $2 $8 million in the third quarter of fiscal year, 2023 compared to $14 $8 million in the same period of fiscal year 'twenty to 'twenty two.
A reconciliation reconciliation of net loss or income attributable to luminary company to adjusted EBITDA is also provided at the end of our earnings release.
Turning now to our balance sheet and liquidity.
At the beginning of the year, we sold our northern properties, which resulted in total net proceeds of $98 $4 million. The proceeds were used to pay down all of our domestic debt, except the AG West farm credit $40 million non revolving line of credit, which has a fixed interest rate of 3.57%.
And shelf July 1st of 2025.
Long term debt as of July 31st 2023 was $47 million compared to $104.1 million at the end of fiscal year 2022.
Debt levels as of July 31st 2023, minus $11 million of cash on hand.
<unk> and a net debt position of $30.2 million at quarter end.
As a reminder, we have $50 million of remaining non strategic assets for monetization over the next nine months and expect their sales combined with improving EBITDA will result in the opportunity to have no debt and a cash position on our balance sheet by this time next year.
Now I'd like to turn the call back over to Harold to discuss our updated fiscal year, 2023 outlook and longer term growth pipeline.
Based on the comments I made earlier about our lemons in the Desert region. We now expect fresh lemon volumes to be in the range of $4 7 million to 5 million cartons for fiscal year 2023, compared to previous guidance of 5 million to $5 4 million cartons, we achieved avocado.
<unk> of $3 8 million pounds in fiscal year 2023, compared to previous guidance of 3 million to 4 million pounds.
Based on our asset lighter model transition, we expect to generate an additional $50 million of asset sales. During the next nine months. We continue to expect to receive total proceeds of $115 million from harvest at Lehman era.
And east area too spread out over seven fiscal years with approximately $8 million received in fiscal year 2022.
We have 700 acres are non bearing lemons and avocados estimated to become full bearing over the next four to five years, which we expect will enable strong organic growth in the coming years. The company also expects to have a steady increase in third party grower fruit.
And with that I'd like to open up the call to your questions operator.
Thank you.
We will now be conducting a question and answer session.
E Com.
Bill will indicate your line is in the question queue you.
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Please while we poll for questions.
Yes.
Thank you. Our next question comes from Dan <unk>.
With Stephens. Please proceed with your question.
Hey, good afternoon, Thanks for taking my questions guys, Hey, Dan Beck.
So I wanted to ask you you alluded to materially higher margins and profitability in fiscal 'twenty, four and recognizing that it's it might be premature to to fully flesh out what that means can you talk a little bit about.
You know as we think about the full year for 2024.
The improvements that you guys are putting in place and in the asset monetization and restructuring of the business that you're delivering against.
Is that going to be something that ramps and contribution through 2024 or well.
Give us what should be a full picture of.
The new margin profile of the business.
Yeah, So I think Ben that Theres, a couple of things that we tried to signal that we can point out specifically that should really begin to be felt beginning in the fourth quarter, but with the full annual impact in fiscal year 'twenty four so the first obvious one is the significant.
A reduction in interest expense from carrying a much like a lighter.
A lighter debt load.
The second is what was the pay off of our our pension plan, which was costing us running through the P&L approximately $1 million annually.
The following program in Yuma, Arizona has actually turned that that sort of area, even with lower priced lemons into now.
Profitable situation, where because of the logistics costs and the the low pricing environment wed be had been experiencing losses in that part of our production area.
One of the biggest changes that we've made and which will significantly benefit us will be the.
The elimination of our Cadiz farming operations, which because of inflation and very high logistics costs, you know much lower lemon pricing environment.
It was was was costing us a significant a significant amount of cash annually, but also was leading to operational loss, which are now eliminated because we've terminated those operations.
And finally, the the the growth of our agency business and the growth of our grow our partner business and then the continued growth now of our farm management services business with our northern California assets. The combination of all of those things.
<unk>.
It put us in a great position to create.
Low levels of profitability, but then if you combine those with higher lemon prices and while it's too it's premature to give specific guidance on avocado volumes.
Preliminary estimates seem to be significantly higher than this year.
We believe the combination of all of those things put us into a great position to get back to you really good levels of profitability in 2024.
Okay, Great and you noted your you've made significant headway on monetization you quantified the remaining assets to be sold have you seen any impact to the value of potential asset sales as a result of interest rates, increasing and where does that stack rank of.
You know either an impediment or a risk as you think about completing the asset monetization program. Yeah. That's a great question. We we were really worried about that as we've watched interest rates increase but I would say that Fortunately, we believe that the remaining assets that were focusing on which specifically are our vineyard and pass the Roe.
<unk>.
And then our production assets in Chile, we we have been very pleased that we have not seen any significant deterioration or destruction in values or pricing. There are we've had good interest in those assets and we're optimistic that our we believe we can not only complete transactions, but we.
Leave we can treat.
Can complete them within the value ranges that we've we've signaled.
Okay, great and one more if I could ask.
You asked about this last quarter.
Hum.
Would you characterize them in terms of monetizing their water rights.
Following its still your preferred mechanism.
And how should we think about it.
Kind of the calculus that you go through as you think about okay. If we're signing up for a multiyear program of following versus a potential fundamentals that you might see in a geography, how do you think through that thought process and weigh the cost benefit analysis of engaging in a Halloween program.
Yeah, that's a great question and fundamentally we believe in that our land and water assets will continue to go up so owning those long term I think is is the smart thing for us to do it really depends on regions. As we've always talked about is water scarcity creates water value.
Now in California, we had a year of rain and so that's that's to be determined but really in the desert specifically, it's fundamental that growing deserts or lemon in the in the sand in the desert really doesn't make a lot of sense relative to the other regions around the world and then California, what that can do that so if we can follow.
Half or even all of that we're very optimistic to think that you know.
Acreage that was losing you know probably a few thousand dollars an acre over the last few years now is is basically coupon.
And then the remaining acres that we have is all newer plantings more dense plantings, which gives us a better ability to achieve profitability and lower cost and so but the real impediment there specific to the desert as the transportation and I don't think any of us see transportation going down. So if we see that opportunity for a long term follow up program, which would potentially.
B 25, 30 years at double or more of the current rates, that's very attractive and you know you create an $8 million coupon and then find new sources, whether it's coachella or Mexico or the southern hemisphere, that's kind of how we we walked through that and so.
Just one other comment on where we are here in district two it's similar this is our this is our homeland and you know we believe in holding onto our assets in an increasing value, but there will be one off opportunities to lease water, whether that's to the communities around us or other farmers not quite like a following just year on year programs are in that way.
Okay. That's great. Thanks, so much.
Thank you. Our next question comes from bad.
With Lake Street Capital markets. Please proceed with your question.
Alright, Thanks for taking my questions. A few a few for you guys first of all on women pricing you talked about kind of how optimistic you are about pricing conditions. Today. If you if you are gay.
Dave if you quantified that I missed it in your comments can you talk about the pricing that youre seeing in the market today are saying that it's the highest it's been since 2018.
Sure you bet. So as we know so this is sort of a slow the slow period for us fundamentally in California. The crop has moved away from district, two and there's a little bit of gap between now and the desert and the way that the fruit profile work at the end of district to a lot of that fruit went to juice or was unsellable as we noted.
About 40% of that so there was a major a gap in that supply so prices well they look bad from a mix perspective, the prices, where we're in the low to mid twenties sort.
Sort of in July now, we're seeing prices is as supply even dips further between 35 and $40 for some some mix and so yes, and it always has to do with how much do you have of anything which is nobody has all of the supply at the moment, but we're about to come in to supply from the Desert Inn.
In the next month and a half and then the winter.
Crop and historically as we've seen a higher base price, we see a much less of a dip and so for example, this year's price over last year's average if you just put the mixed together is four to $5 higher than the last two years or even three years closer to where we were in 2018. So it gives us.
Some optimism that that supply is imbalanced that people are going to move through the crops in an efficient way, which will help us maintain those elevated prices going forward.
Yeah, I have optimism I would say so that's great to hear.
Perfect.
Transition to your.
Comments on your farm management practices.
Hey.
First question is the $5 million that you recognized is that entirely associated with our management for.
For the northern properties.
The trends that you had or where it was a portion of that from from farms elsewhere.
It's primarily due to the northern properties Prudential, we have another property here del Mar down that we're doing far management that where the general partner for but it's it's it's a fraction of that so primarily just the northern part now and as we secure that into next year, we'll look to them to get more growers and in all those regions.
Okay, great and the magnitude of that was more than I certainly was expecting what was the magnitude of that surprising to you or was that about in line with your expectations going into the period it.
It was actually a little bit above and so we get 8% to 10% margin on that business and what that specific situations as they wanted to do some more improvements different pruning fertilization programs.
Actually decent planting planning so it was just a bit more effort than we had budgeted in there and so therefore the more revenue.
Got it got it very good and last question for me given all the various global supply dynamic that you that you outlined.
Does that have any impact on your expectations for sourcing third party fruit in 2024.
We have laid out relatively Ah I believe achievable growth targets are we certainly have been pleased with the reception from third party growers and handlers, who are willing to let us handle their fruit. So you know.
I believe our expected growth is in the <unk>.
Call It a 10% to 20% of total volume a range, which we think we can manage a relatively effectively.
So I really don't see we're not concerned about being able to access the fruit and it seems like our supply chains are are absorbing these sales nicely and so we're we're pretty confident in our ability to successfully grow that side of the business.
Great Great very good alright, well, thanks for taking my questions that does it for me I'll get back in line. Thank.
Thank you Ben.
Yeah.
Thank you. Our next question comes from Vincent Anderson with Stifel. Please proceed with your question.
Yes, thanks, good afternoon guys.
Okay.
So I was curious where did you pick up or have you been picking up the majority of your your brokered fruit gains just in terms of origin and destination.
Well so.
But yes, but yes, so it all get it all primarily comes here, but most of it is from Argentina, Mexico and Chile.
Okay.
Alright, well that's good to hear on on Mexico, because I was going to follow that up with I know you probably can't comment on just how the discussions with the board have been going with regard to some of the longer term investments like the South American pack house, but as you've ramped up broker fruit and just given the importance of Mexico to the U S market.
Has anything you've seen with.
With your activities there maybe started to ship to your view of where you'd want to prioritize.
We have we've always sort of plugged as part of the season with Mexican fruit because that that is sort of the best supply source for a period of the year I think we we we mentioned earlier in our comments that Mexico got hit by some severe heat, which compromise some of the quality and the availability of some of that Mexican fruit.
And in the long term as we go forward I think we'll continue to operate with co Packers and sourced fruit out of Mexico.
The situation in Argentina relatively is unchanged as it remains a good source of fruit for us to broker and to manage well and we continue to be bullish on our our our stated transition goal of pivoting from being mostly a producer of Chilean lemon.
Ins into being more of a packer market are seller of Chilean fruit.
So I think our long term view is unchanged and it it'll just we'll just continue moving down the road of our our stated roadmap of asset monetization.
Which will then free up capital, we hope in Chile, which will allow us to then begin construction on our packinghouse and put ourselves into position to become a packer marketer seller out of Chile versus a more of a producer in Chile.
Sure sure.
And then as I kind of think about the broker fruit and the farm management services are obviously pretty new in terms of like a distinct operation within your company.
But I would venture to guess as you model that out forward you don't have the same operating Leverages as you know the owned asset base, but the margins on that I would imagine are probably looking pretty strong right out of the gate.
Margins are great. You know are our primary goal is to do the best job, we can and.
Do a good job in the eyes of our of our primary client right now Prudential and to secure that that business for the coming year and coming years and as we as we do that then we will begin to spread our wings and seek new farms to provide those services for we we've we begun the.
The process of identifying potential areas for growth and potential firms and I think I've been very pleased with the reception that we've received in the marketplace of potential targets to grow so, but where we're proceeding cautiously as we as we're kind of getting our arms around you.
The true functionality as an operator in the farm management services space and wanted to just make sure that we walk before we start running but I think the outlook is good and our ability for margin expansion in that side of the business. We believe is is excellent.
Gotcha, and maybe just tying it all together and this is.
Extremely hypothetical but just looking at the last couple of years and the disruptions this year again.
Is there a way to think about kind of your the variable cost component of your owned and operated assets versus where you think you can take.
More of a service based revenue, whether you want to call brokered fruit service or at the very least farm management service and you separate those out and you come into another year, where you have a weather disruption.
Is there a model out there where you could walk away from branches one year keep the trees healthy, but actually limit all of your downside to really just whatever sunk costs was there from the spring.
Yes.
Constitutes the spring for that region.
And just harvest returns on the service revenue and come back next year and actually limit downside.
In a scenario like we've seen recently.
We we we studied that that's it's it's a it's a crazy thought that I think the reality is though that are you know in order to stick stick with trees and farming you you need to keep farming them and trees need attention and they need fertilizer and they need water and they they need pruning and just that's what creates the opportunity.
To have harvestable fruit in the following year. The good news, we think Vince is that as we look at the the areas where we've.
Focusing on our own production and in growth.
We believe we've put ourselves in sort of an optimal position to.
Chief profitability, because all of our district to our coastal assets are very close to our packinghouse here, our logistics costs are lower and so our cost to put up a a pak cartons of lemons that we produce in the on the coast here is much lower than what it had been up in the San Joaquin Valley.
Ali or out in the desert and we believe that gives us a you probably our best shot at sustained profitability. During these years of of pressured lemon pricing. We believe that that as we are able to realize higher lemon pricing and continue to grow that through grower partners third party fruit that will allow us.
Do you continue to drive our cost per cartons down and give us margin expansion opportunities as all that happens.
Okay, no that makes sense. Thanks, thanks for human or hearing me on that one Greg.
Thanks Vince.
Thank you.
Great.
B Riley Securities. Please proceed with your question.
Hi, good afternoon.
Thank you for taking my question I just wanted to understand.
Doug.
You know obviously the shortfall in lemons.
Is it.
And you've you've taken the guidance down and I'm, sorry, if I missed the earlier part of the remarks.
The reason the core reason for that and can be you know when does that sort of correct.
And then also on the avocado was that those were slightly trending better than <unk>.
Did you had guided earlier.
Yeah. So so we're you know we're sort of midstream in the fourth quarter. Now are the reason we brought the total volume of lemons down was because of the low fresh utilization that we that we achieved in the third quarter a year ago, we were 75% fresh utilization because of the challenges with quality.
<unk> and some of the delays from the from the rainfall we actually experienced utilization in the third quarter of about 60% and so that's really what and so basically you had the same amount of fruit that came off the trees, but only 60% made their way into the fresh box and so that really had the big negative impact.
On volume for the year, which is why we brought our estimates for the year down.
As we look forward into next 2024, we see significantly higher opportunities for for growth in terms of total volume and and on both lemons and avocados. So I think you'll see significant growth.
Of our own production, but also the production of our grower partners on the lemon side of the business and then significantly higher.
Kadow volume because as we talk about the alternate bearing nature of of avocado production next year should be an up year and as we're out there looking at the trees in how many pieces are hanging on the trees. I think we're pleased with what we see for next year.
Got it.
Very helpful. And then just you know your plans on expansion a big part of your expansion of the one world of citrus.
Can you just kind of touch a touch upon again your goals are.
Yes, so well this year was a little bit of a setback because of the utilization I think we'd we sort of projected getting to 5.2 million cartons. This year and it looks like it's going to come in closer to 4.8 domestically.
I think we're right on track with our Chilean.
Production, and then where we're at or above our projections with the agency fruit as we look to next year, we'd hope to be in that you know 5.2 to $5 5 million range of of cartons of lemons that we would produce in combination with our grower partners.
Chile next year should be about 182 million somewhere in that range. One eight to 2 million cartons, and then and then the value that the balance of the growth should be the agency fruit. So aside from the utilization setback. This this year, we're actually on track with our with our our forecast at R. R.
Targets for growing the grower partner side of our business and in third party grower fruit, so that seems to be right on track. So I believe that if we're able to execute on fresh utilization levels above 70% next year, which are targeted at 75% we should be right on track.
To be right right, where we had communicated at the Investor day.
Presentations and as Mark alluded to earlier, we are optimistic that we will see higher pricing, which should then give us much greater opportunity for for greater profits and EBITDA creation next year.
Thank you that's very helpful.
Lastly, you touched upon the progress in Chile, Chile contributes a huge number a pretty sizable number of your improvement in bottom line EBITDA.
How's that going.
And how do we make that type of thing right yeah. So.
The way to kind of follow up progress there will be an announcement at some point the successful monetization of our production assets and then the utilization of the capital that we're able to achieve in that monetization process to begin construction in the development of our new packinghouse.
And so the next thing that we'll want to you you'll want to see is us reporting on our successful sale of our production assets as well as then guidance on the timeframe of the construction project of our of our new packing facility in Chile.
Right and does the production from our unit volume from Chile does that get impacted at all by the by the bottlenecks the Panama Canal.
No. We've we haven't hadn't really any issues right now that the ships come up they usually take a stop in Mexico and come up from from the West. So everything from from that perspective is we have not had any supply chain issues are shipping issues. So far this year.
Got it.
And then just finally any updates on the two more.
Asset sales.
Is that a time, yes.
Right. So so we're we're continuing to want run we're running.
<unk> for both the Chilean assets as well as our windfall.
Farms vineyard and I would say, we're probably mid process with both of those assets are we've we've been pleased with the the interest in in all of those assets and so we're just at the point now where we're getting our arms around potential opportunities, which.
We look forward to taking to our board to discuss and I think we're probably six months away from any announcements on the monetization of of both those 96 to nine months on both those projects.
Got it thank you.
Super helpful. I'll take this offline. Thank you. Thank you. Thank you Raj.
Thank you.
There are no further questions at this time I would like to floor back over to Harold Edwards for closing comments.
Thank you for your questions and for your interest in Lee Minera have a great day.
This concludes today's teleconference. You may disconnect your lines at this time.
Thank you for your participation.
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