Alico (ALCO), a long-standing player in Florida’s citrus industry, has announced a strategic transformation. The company intends to “become a diversified land company with each of its properties now expected to create profitable agricultural revenue opportunities that are not citrus-related.”
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As a result, by the end of the citrus harvest this year, the company will wind down its Alico Citrus business, marking the end of an era.
Why Is ALCO Winding Down Its Citrus Business?
ALCO owns around 53,371 acres of land spanning eight Florida counties and 48,700 acres of oil, gas and mineral rights in the state. However, the company now sees opportunity beyond citrus. This shift comes as the company grapples with a staggering 73% decline in citrus production over the last ten years, primarily driven by citrus greening disease and hurricane damage. Recognizing the challenges in its legacy business, Alico aims to redirect its focus toward non-citrus agricultural ventures and real estate development.
ALCO Intends to Unlock Land Value
Under the new strategy, around 75% of Alico’s land will remain dedicated to agriculture, while the remaining 25% of its land holdings could have significant potential for commercial and residential development. Management estimates the total value of its landholdings is likely to be between $650 million and $750 million.
Furthermore, Alico expects that third-party caretakers will manage approximately 3,460 of its citrus acres through 2026. This approach allows the company to maintain its operations while strategically reallocating resources.
ALCO Expects to Maintain Financial Stability
Despite the challenges, Alico expects to maintain positive cash flow for the remainder of the current fiscal year, with sufficient cash reserves to sustain operations for at least two more years without selling additional land.
Is ALCO Stock a Buy?
While none of the Wall Street analysts have covered ALCO stock over the past three months, ALCO has risen by more than 10% over the past year.
