FORT MYERS, Fla. - Alico, Inc. (NASDAQ:ALCO), a major citrus producer, has secured a new supply agreement with Tropicana Brands Group, effective from June 5, 2024, until July 31, 2027. The contract stipulates the sale of citrus fruit from approximately 65% of Alico's currently planted acres at prices significantly higher than last season.
This new deal comes as a successor to the existing agreements that are due to expire by the end of July 2024. Under the terms of the new agreement, Alico will supply citrus at prices per pound solids that are approximately 33% to 50% higher over the contract's term compared to the average price for all the citrus fruit sold to Tropicana in the last season.
Additionally, Alico maintains another ongoing supply contract with Tropicana that will remain effective through the 2024-25 harvest season.
John Kiernan, President and CEO of Alico, expressed satisfaction with the extension of their relationship with Tropicana, emphasizing a shared commitment to addressing the challenges of the Florida citrus industry with a focus on both short-term patience and long-term strategy. The new agreement, alongside the existing one, secures the majority of Alico's citrus fruit sales at more certain pricing provisions for the upcoming seasons.
Alico, Inc. is known for operating two divisions: Alico Citrus, which is among the nation's largest citrus producers, and Land Management and Other Operations, which includes land leasing and related support operations.
The information in this article is based on a press release statement from Alico, Inc.
In other recent news, Alico, Inc. has reported a significant $28.5 million inventory write-down in its Second Quarter 2024 Earnings Conference Call due to lower citrus production, primarily as a result of Hurricane Ian's aftermath and ongoing citrus greening issues.
Despite these challenges, Alico has outlined plans to double the number of trees treated with Oxytetracycline (OTC) therapy in fiscal 2024, a move aimed at significantly increasing fruit harvests. The company is also in the process of finalizing a new contract with Tropicana, which is expected to yield higher prices per pound solid.
In its commitment to the Florida citrus industry, Alico has planted over 2.2 million new trees since 2017. The company is also exploring alternative uses for underperforming citrus groves, such as mining and leasing, as part of its strategy to optimize the value of its real estate assets.
The company's next earnings update is expected in August, where further insights into Alico's financial health and operational progress will be provided.
InvestingPro Insights
Alico, Inc.'s (NASDAQ:ALCO) new supply agreement with Tropicana Brands Group is poised to enhance its sales profile, which is particularly noteworthy as the company has been experiencing a challenging financial landscape. According to InvestingPro data, Alico's market capitalization stands at a modest 197.16 million USD, reflecting a smaller player in the industry. Despite a significant decrease in revenue over the last twelve months as of Q2 2024, with a contraction of 31.93%, the company's P/E ratio is currently at 4.92, suggesting that the market may be undervaluing its earnings potential.
Moreover, Alico's commitment to shareholder returns is evident, as it has maintained dividend payments for 20 consecutive years, boasting a dividend yield of 0.77% as of mid-2024. This dedication to shareholder value aligns with the company's reported high shareholder yield, one of the InvestingPro Tips. However, it's important to note that analysts do not anticipate the company will be profitable this year, and net income is expected to drop. Alico's valuation implies a poor free cash flow yield, which could be a cause for concern among investors looking for strong cash generation.
Investors seeking a deeper dive into Alico's financial health and future prospects can find more comprehensive analysis and InvestingPro Tips on the InvestingPro platform. There are 12 additional tips available, which could provide valuable insights into Alico's operational and financial strategies. For those interested, use coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further details and metrics that could inform investment decisions.
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