Limoneira Earnings Call: Deep Losses, Bold Turnaround Plan

Limoneira ((LMNR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Limoneira Balances Painful 2025 Results With Ambitious Transformation Plan

Limoneira’s latest earnings call painted a mixed picture: operationally, fiscal 2025 was a tough year with steep revenue declines, sizable operating and EBITDA losses, and higher leverage, but management emphasized a clear multi‑year transformation roadmap. The company is leaning heavily on new and expanded value drivers – a major return to Sunkist, avocado capacity growth, real estate monetization, water rights, and a new organic recycling joint venture – to rebuild profitability and diversify away from volatile commodity cycles. The tone was sober about current earnings pressure yet confident that the structural changes underway can materially reshape the business over the next several years.

Sunkist Partnership Promises Major Cost Savings and Commercial Upside

Limoneira’s headline strategic move is its return to Sunkist, which management highlighted as a cornerstone of its turnaround. The shift is expected to produce roughly $10 million in cost savings in fiscal 2026, including about a 50% reduction in SG&A. A key lever is the sharp drop in sales and marketing cost per carton, falling from around $1.50 to just $0.60. Beyond the cost benefit, Sunkist gives Limoneira better access to premium retail and foodservice accounts, improving contracted exposure and category-selling capabilities. Management framed this partnership as both an immediate margin enhancer and a distribution upgrade that should help stabilize pricing and volumes in the core lemon business.

Expanding Avocado Acreage to Nearly Double Capacity

The company is making a long-term bet on avocados despite near-term volatility. Limoneira now has 1,500 acres planted, of which 800 acres are currently bearing and 700 acres are nonbearing. Those 700 acres are expected to come into production over the next 3–4 years, representing close to a 100% increase in avocado production capacity. For fiscal 2026, management guided avocado volumes to 5–6 million pounds. While the current year reflected a severe avocado downturn, the company believes this expanded acreage positions it to benefit when crop cycles normalize and market conditions improve.

Real Estate Projects Set Up a Multi‑Year Cash Windfall

Real estate remains one of Limoneira’s most significant value drivers. The Harvest at Limoneira project is expected to generate approximately $155 million in distributions over the next five fiscal years, a substantial potential source of capital relative to the company’s current market and balance sheet profile. Phase 3 alone includes roughly 500 home lots and about 300 apartments. Beyond Harvest, the company highlighted the 35‑acre East Area Two medical pavilion as a potentially near-term monetization opportunity, and the 221‑acre Limco Del Mar infill asset as a longer-term development engine. Management underscored that these projects are central to deleveraging, funding core agriculture investments, and diversifying earnings away from pure commodity exposure.

New Organic Recycling Joint Venture Adds a Non‑Commodity Cash Engine

Limoneira is also stepping outside traditional agriculture with a planned 50/50 organic recycling joint venture with Agerman. The facility is expected to process about 300,000 tons annually and begin contributing $4–$5 million in EBITDA starting in fiscal 2027. Management described this JV as a key piece of its strategy to build stable, non‑commodity cash flows that can offset the inherent volatility in citrus and avocado markets. If executed as planned, the JV could become a meaningful, recurring profit stream with less dependence on farming cycles and global produce pricing.

Accelerating Asset Monetization to Fund the Transition

To support its transformation, Limoneira is actively monetizing non-core and international assets. The company completed the sale of its Chilean operations for $15 million and is advancing the sale of its Windfall Farms vineyard and Argentine agricultural assets, targeting roughly $40 million in proceeds by the end of fiscal 2026. Additionally, management reported progress monetizing its water-related assets, having already realized $1.7 million from water rights this year. These transactions are intended to provide liquidity, reduce leverage, and recycle capital into higher-return projects such as avocado expansion, real estate development, and the recycling JV.

Unlocking Hidden Value in Water Rights

Water rights were presented as a major, and often underappreciated, asset on Limoneira’s books. The company believes it can capture $50–$70 million in value through fiscal 2027 from its class three Colorado River water rights and conserved pumping rights in the Santa Paula Basin. Management highlighted that Limoneira is well-positioned to participate in federal and state water programs tied to Colorado River adjustments. If realized, these water monetization opportunities could provide a significant source of capital to bolster the balance sheet and fund growth initiatives without excessive reliance on debt.

Improved Lemon Sales Mix and Pricing in the Fourth Quarter

Despite overall annual weakness, Limoneira posted a notable improvement in fresh lemon performance in the fourth quarter. Fresh packed lemon sales climbed to $19.2 million, with about 821,000 cartons sold at an average price of $23.33 per carton, compared to 470,000 cartons at $17.95 in the prior year period. That represents a 74.9% increase in carton volume and a 29.9% jump in average price per carton year-over-year for the quarter. Management pointed to a better sales mix and stronger pricing as evidence that the commercial strategy is gaining traction, and suggested that the Sunkist partnership should further support pricing and mix going forward.

Managing Liquidity and Banking Covenants Amid Elevated Debt

On the financing front, Limoneira has taken steps to reinforce liquidity while navigating higher leverage. The company received a $10 million distribution from its real estate joint venture, helping to support near-term cash needs. It also renegotiated its banking covenants, securing more favorable terms that maintain access to its $115 million credit facility, with approximately $41.6 million of availability as of October 31, 2025. These moves provide breathing room as the company executes on its transformation initiatives, though management acknowledged that balance sheet flexibility remains a key focus area.

Deep Operating and Net Losses in Fiscal 2025

Financially, fiscal 2025 was clearly a down year. Limoneira reported an operating loss of $20.4 million, more than triple the prior year’s $6.2 million operating loss. Net loss applicable to common stock was $16.5 million versus net income of $7.2 million in fiscal 2024. On a per-share basis, the company swung from net income of $0.40 per diluted share last year to a net loss of $0.93 per diluted share. Management attributed much of this deterioration to weak top-line performance, avocado volatility, higher costs, and transformation-related charges, while asserting that these investments are necessary to reposition the business.

Adjusted EBITDA and EPS Turn Sharply Negative

The non-GAAP metrics told a similar story of near-term pain. Adjusted EBITDA for fiscal 2025 came in at a loss of $6.5 million, compared with positive adjusted EBITDA of $26.7 million in fiscal 2024 – a swing of roughly $33.2 million. Adjusted net results also deteriorated, with adjusted net loss per diluted share of $0.79 versus adjusted net income of $0.62 per diluted share a year ago. These figures underscore that underlying operations, excluding one-time items, were under considerable pressure, reinforcing the urgency of the strategic changes underway.

Revenue Contraction Highlights Top-Line Headwinds

Limoneira’s revenue line reflected broad weakness in 2025. Total net revenue fell to $159.7 million from $191.5 million in fiscal 2024, a decline of about $31.8 million, or roughly 16.6%. Fourth-quarter revenue was also soft, slipping modestly to $42.8 million from $43.9 million, a 2.5% decline. The company pointed to lower avocado revenue, lost farm management income, and softer specialty crops as key contributors, partially offset by improved fresh lemon performance late in the year.

Avocado Revenue and Volume Collapse on Alternate-Bearing Cycle

The most dramatic drag on results came from avocados. In the fourth quarter, avocado revenue plunged to just $0.3 million from $8.9 million in the prior-year quarter. Volumes dropped to approximately 396,000 pounds from about 4.6 million pounds, a staggering 91.4% decline. Pricing also weakened, with average price per pound falling from $1.92 to $0.79, a 58.9% decrease. Management attributed this to the alternate-bearing nature of avocado trees, emphasizing that the crop cycle is inherently volatile. The long-term expansion of acreage is intended to smooth this volatility over time, but the current year’s downturn highlighted the risk.

Higher Costs and One-Time Transformation Charges Weigh on Results

Costs also moved against the company in the latest quarter. Total costs and expenses in Q4 rose to $53.9 million from $46.6 million a year earlier. Limoneira booked $6.7 million in strategic transformation costs, including expenses tied to the Sunkist transition, tree disposals to support avocado expansion, and other nonrecurring items. The quarter was further impacted by costs associated with a storage power outage, for which the company expects insurance recoveries in fiscal 2026. Management argued that while these charges are painful in the short term, they should position the company for a leaner cost structure and improved profitability.

Loss of Farm Management Revenue and Weaker Specialty Crops

Another drag on the income statement was the loss of farm management revenue and softness in specialty categories. Following the termination of a farm management agreement effective March 31, 2025, Limoneira recognized no farm management revenue in fiscal 2025, compared with $2.9 million in 2024. Specialty citrus, wine grapes, and other revenues also declined, slipping to $2.9 million from $3.5 million. While these segments are not the largest contributors to overall revenue, their decline added to the cumulative pressure on the top line during an already challenging year.

Rising Leverage as Transformation Investments Ramp Up

The company’s balance sheet reflected the strain of a transitional year. Long-term debt increased to $72.5 million as of October 31, 2025, up from $40.0 million in the prior year. With just $1.5 million of cash on hand, net debt stood at about $71.0 million, marking a notable increase in leverage. Management acknowledged the elevated debt levels but emphasized that asset monetization, real estate distributions, and water rights sales should provide key sources of capital to reduce leverage over time. Until then, the company will be operating with a more levered profile as it executes its transformation plan.

Near-Term Earnings Pressure While Long-Term Plans Take Shape

Management repeatedly stressed that fiscal 2025’s weak financial metrics reflect a period of investment and restructuring. The company faces meaningful near-term earnings pressure and ongoing cash needs while it funds avocado expansion, real estate development, the Sunkist transition, and the organic recycling JV. The strategy aims to build a more diversified, higher-margin business, but execution risk is significant, and investors should expect continued volatility until the new revenue streams and cost savings fully materialize.

Guidance and Outlook: Cost Savings, Volume Growth, and Monetization

Looking ahead to fiscal 2026 and beyond, Limoneira’s guidance centers on volume growth, cost reduction, and asset monetization. The company expects fresh lemon volumes of 4.0–4.5 million cartons and avocado volumes of 5–6 million pounds in 2026, underpinned by improved lemon sales channels and ongoing avocado acreage ramp-up. The Sunkist transition is projected to deliver about $10 million in cost savings year-over-year, including an estimated 50% reduction in SG&A. Over the next 3–4 years, the 700 currently nonbearing avocado acres are expected to come into production, roughly doubling capacity. Beginning in fiscal 2027, the Agerman organic recycling JV is targeted to generate $4–$5 million in annual EBITDA. The company is also guiding to roughly $155 million in real estate distributions over the next five fiscal years and is pursuing further asset sales, including $15 million already realized from Chile and approximately $40 million targeted from Windfall Farms and Argentina by end of fiscal 2026. On the water side, management believes it can unlock an additional $50–$70 million from Colorado River and Santa Paula Basin rights through 2027. Limoneira enters fiscal 2026 with $72.5 million of long-term debt, net debt of around $71 million, and access to a $115 million credit facility with about $41.6 million of availability, giving it runway but also underscoring the importance of delivering on its strategic initiatives.

In sum, Limoneira’s earnings call underscored a company in the midst of a difficult but potentially transformative inflection. Current financial results are weak, with losses, lower revenues, and higher leverage weighing on the story, particularly for investors focused on near-term earnings. Yet management laid out a detailed plan to reshape the cost structure, expand high-potential avocado capacity, monetize real estate and water assets, and add more stable, non‑commodity income through an organic recycling JV. For investors, the key question is execution: if Limoneira can deliver on its monetization goals and operational targets, the long-term upside could be significant, but the path there is likely to remain bumpy.