Alico Overhaul to Cut Citrus Production Expenditures

Alico Overhaul to Cut Citrus Production Expenditures

Ft. Myers, FL-based Alico Inc., one of the nation’s largest citrus producers, has announced an aggressive overhaul the company has dubbed Alico 2.0 Modernization Program. The program aims to integrate its three legacy businesses (Alico, OrangeCo., and Silver Nip) into a single, more efficient enterprise.

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According to a company press release, Alico 2.0 places a large emphasis on reducing costs in its citrus production by cutting total expenditures from $3,314 per acre to $2,164 per acre. Overall, the program should reduce the company’s cost to produce a pound solid from $2.14 down to $1.56.

The company also announced that it would divest in assets that have generated low rates of return and shut down parts of its operations that were not profitable. Alico Citrus has shut down its nursery in Gainesville, FL, is in the process of selling its trucks and trailers, consolidated offices, and sold real estate assets that were not strategic.

The company will cease its direct cattle operations at Alico Ranch. The ranch has been a landholding entity for generations, but even when profitable, ranch operations generated a minimal rate of return on capital. Alico will continue to own the property and still conduct its long-term water dispersement program and wildlife management programs, but it will lease the ranch to a third-party operator instead of conducting its own cattle operations. All of these decisions are intended to enable additional investment in the citrus business and redeployment of capital elsewhere.

Danny Sutton will take over management responsibilities with a promotion to become President and General Manager of Alico Citrus. Alico 2.0 sets the company on an aggressive planting program as well with plans to plant more than 400,000 citrus trees in 2018.

Impact of Hurricane Irma

Florida’s citrus industry was hit hard by the recent impacts of Hurricane Irma. Alico Citrus estimates that production will be down 40% to 45% from the prior season that was completed in June. While Alico Citrus lost a small percentage of trees, the force and duration of the storm impacted the majority of its groves.

Based on prior experience with serious storms of this nature, the company expects it will take at least two seasons for the groves to recover to pre-hurricane production levels. The company expects production between 4 million to 4.4 million boxes in 2018, an increase in production in 2019 and a return to pre-hurricane production levels by 2020.