Wall Street Transcript Interview with JD Alexander, the President and Chief Executive Officer of Alico, Inc. (ALCO)

Wall Street Transcript

67 WALL STREET, New York - October 13, 2012 - The Wall Street Transcript has just published its Farming Equipment, Chemicals and Products Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: High Crop Prices - Emerging Market Farm Mechanization - Crop Yield Management - U.S. Corn Crop

Companies include: Alico Inc. (ALCO) and many others.

In the following excerpt from the Farming Equipment, Chemicals and Products Report, the CEO of Alico discusses the outlook for his company for investors:

TWST: When did Alico start operations and what are your activities?

Mr. Alexander: Alico, or the Atlantic Land & Improvement Company, was founded in 1960. The company was spun off from the Atlantic Coast Line Railroad Company. We own approximately 130,300 acres in southwest Florida, which is located in Collier, Glades, Hendry, Lee and Polk counties. We produce citrus and sugarcane, as well as raise beef cattle. We also lease land, have rock and sand mines, and one producing oil well.

TWST: One of the accomplishments of Alico is the company has increased yield and decreased production costs in its citrus production. How do you do that?

Mr. Alexander: We farm the groves by using best management practices. I was a Production Manager for Alico from 1987 to 1997. During that time, we made a lot of progress in improving the production of our groves. It's not really just one thing. It's a lot of things which you do right routinely that creates a better situation all around. Most crops are annual crops. You plant them and have a crop in months.

But citrus is produced from a tree that takes years to grow, so the size and strength of the tree dictates how many oranges it can produce. Most of time, the care you give a tree in this quarter or this year may not be fully realized until the next year or even the year after that. So you must build and nurture the productive capacity of the tree in order for it to produce optimally. That is something we have done extremely well - build the productive capacity of the tree to get the most production we can.

TWST: What kinds of citrus does Alico produce?

Mr. Alexander: Mostly, we produce oranges for orange juice, which we sell to companies that produce not-from-concentrate or concentrate orange juice. Additionally, we sell some fresh citrus.

TWST: Overall, what's the outlook for the Florida citrus market?

Mr. Alexander: In the short run, it's a bit of a difficult situation. There is an oversupply of orange juice in the world market today. The condition began developing earlier this year. First, we started the 2011/2012 season with historically low inventories, which caused the brands to pay higher prices for fruit, then demand slowed, and Brazil produced a much larger crop than normal resulting in significant increases in inventories at higher prices, which in turn lowered cash prices. Most of our crop is sold on multiyear, floored delivery contracts at above-current cash market prices. Therefore, we are somewhat insulated from the drop in cash prices for fruit.

We believe that the current market imbalance will correct over the next two to three years and restore pricing that allows Florida growers to continue to grow high-quality Florida orange juice. Over the intermediate to longer term, we believe Florida is an important and competitive source for the brands and quality orange juice marketers.

TWST: Alico also is involved in citrus supply chain management. What does that mean?

Mr. Alexander: That's a fancy phrase for buying smaller quantities of fruit, which we aggregate and deliver to the citrus-processing plants to process. We also arrange for the harvest and haul of the fruit from the growers to the processing plants.

TWST: Please explain Alico's revenue cycle to us.

Mr. Alexander: Citrus is our main revenue source. We start harvesting citrus in November with the early and mid-varieties, and finish harvesting in June with Valencias. However, we have harvested as late as August. Sometimes weather conditions can change this by affecting the maturity of the crop, and it can change the harvesting dates either pushing it forward or back depending on the conditions. So for us, the citrus revenue cycle typically begins in late November and runs through June.

Our year end is September 30. We use this fiscal year end because it corresponds with the low point in our citrus inventory cycle. We have limited revenues in our fiscal fourth quarter, which is from July through September, but revenues begin to pick up in the fiscal first quarter, October through December, and then we are in full swing by the fiscal second quarter, January through March, with our early and mid-varieties, and finish in the fiscal third quarter, April through June.

Sugarcane follows a similar production, harvest and revenue cycle. We start harvesting sugarcane in early to mid-September, and are usually finished harvesting by the end of March. So it's basically a six-month harvest cycle, October through March.

TWST: Who are the company's buyers for sugarcane?

Mr. Alexander: There are three mills that process sugarcane in Florida. All of our production goes to U.S. Sugar, which is located in Clewiston. The two other mills are Florida Crystals and Florida Sugar Cane Cooperative.

TWST: What's Alico's growth strategy for the next several years, and where do you plan to focus your efforts?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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