Thanks. Welcome to Limoneira's first quarter fiscal year 2023 financial results conference call. At this time, all participants are in listen-only mode. The question answer session will follow the formal presentation. To join the question queue, you may press star and one on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills with ICR. Thank you. You may begin.
Thank you for joining us for Limoneira's first quarter fiscal year 2023 conference call. On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palamountain, Chief Financial Officer. By now, everyone should have access to the first quarter fiscal year 2023 earnings release, which went out today at approximately 4:00 P.M. Eastern Time. If you've not had a chance to view the release, it's available on the investor relations portion of the company's website at limoneira.com. This call is being webcast, and a replay will be available on Limoneira's website as well. Before we begin, we'd like to remind everyone that prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions.
Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control and could cause its future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risk details in the company's 10-Qs and 10-Ks filed with the SEC and those mentioned in the earnings release.
Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether a result of new information, future events or otherwise. Please note that during today's call, we will be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Limoneira's ongoing results of operations, particularly when comparing underlying results from period to period.
We've provided as much detail as possible on any items that are discussed on an adjusted basis. Within the company's earnings release, and in today's prepared remarks, we include adjusted EBITDA, adjusted net loss for diluted earnings per share and diluted net loss per common share, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA, adjusted net loss for diluted EPS and diluted net loss per common share to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to its website. With that, it is my pleasure to turn the call over to the company's President and CEO, Mr. Harold Edwards.
Thanks, John. Good afternoon, everyone. I am pleased with our performance in the first quarter. Despite the heavy rains in California pushing the initial first quarter avocado harvest and a portion of the lemon harvest into the second quarter, we generated over $37 million of revenue in our seasonally softer quarter. We had minimal damage to our crops from the rain and fully expect to recoup the delayed revenue in the second and third quarters, keeping our full year 2023 volume guidance intact. Additionally, we expect pricing for fresh lemon cartons to increase in the second half of the fiscal year.
For new investors listening to our call today, I would like to quickly recap our strategic transition plan that is pivoting our business towards an asset lighter model in order to streamline our operations and sell non-strategic assets, improve the consistency of our earnings, increase EBITDA and dividends per share, reduce debt, right-size the balance sheet, and improve the return on invested capital. This plan involved the identification of approximately $150 million of assets for sale, which, because of greater value realized in initial monetization efforts, we believe are now worth approximately $180 million and a transition to a more efficient operating plan.
We've made significant progress advancing our strategy to monetize certain non-strategic assets with nearly all of those identified assets sold, expanding our One World of Citrus initiative with the recruitment of close to 1 million additional cartons from new grower partners and executing on harvest at Limoneira, all of which are transforming our balance sheet and positioning us to improve our top and bottom line results. Management will be meeting with our board of directors this month for our annual strategic planning session to implement a new strategic capital allocation plan, taking into account our very strong balance sheet. We have successfully closed on the sale of four of the six identified assets over the past six months for a total of $130 million in proceeds.
We ended the first quarter with the announced closing of our northern property sale for approximately $99 million in net cash proceeds. The northern property sale is the most transformative as the proceeds were used to significantly reduce our net debt position by 72% from year-end 2022 to $28.9 million, is expected to be accretive on a pro forma EBITDA and earnings basis, will strengthen the balance sheet and enable us to pursue a range of strategic opportunities to maximize shareholder value.
When we were looking for a buyer of our northern properties, it was imperative that we find one that allowed us to keep our lemon supply chain intact. The property consists of 3,537 acres made up of 2,700 planted acres, 231 acres of plantable ground, and 606 acres of open space. As we laid out in the announced sale press release, as part of this transaction, Limoneira and Prudential Agricultural Investments entered into a farm management services agreement to provide farming services related to the property for an initial term of one year and entered into a grower, packer, packing, and marketing agreement to provide packing, marketing, and selling services for lemons harvested on the property for a minimum five-year period.
This piece of the transaction fits squarely with our strategic plan to expand our One World of Citrus in an asset-lighter way as we focus on leveraging our leading global packing, marketing, and selling services using more grower partner fruit. The economics of using grower partners is extremely attractive, with Limoneira targeting $2.00-$2.50 per carton of margin with no additional capital outlay. It also reduces the impact of pricing volatility and rising farming costs on our business and will be additive to EBITDA and earnings per share on a pro forma basis. We have become very attractive to grower partners and continue to develop best-in-class grower services to bolster our appeal through investments in our technology and supply chain.
Our strategic approach to fresh utilization enables our sales and marketing team to successfully market fresh lemons throughout the year with one of the best fresh utilization rates in the market. In fiscal year 2022, we sold over 78% of lemons fresh at competitive prices compared to our largest competitor, who is at approximately 50%. This is obviously an important draw with grower partners. We are also working to better support our grower partners by reconfiguring our global lemon packing network. This includes reducing certain orange and lemon acreage globally while still maintaining the packing and marketing of the lemons grown on these locations. In the first quarter of fiscal year 2023, roughly 66% of our U.S.-packed fresh lemon source volume came from grower partners, and our goal is to have that number closer to 75%.
The structure of our Northern Properties deal with Prudential Agricultural Investments is a great example of the direction we are headed, growing the service part of our business as we focus on packing, marketing, and selling. In return, you will begin to see meaningful improvement to our returns on invested capital with better margins, cash flow, and earnings that become a lot more stable and predictable over the next 12-18 months. As for our remaining assets, we have $50 million of the now $180 million in assets identified that we plan to monetize over the next 12-18 months. Even after the Northern Properties transaction, we continue to own approximately 11,800 acres with over 21,000 acre-feet of owned water rights, usage rights, and pumping rights.
We are finding great monetization opportunities for our water assets by either fallowing acreage, leasing pumping rights, or selling the water rights for significant appreciation over our investments. A near-term water monetization opportunity is the 1,300 acres of farmland we have in Yuma, Arizona, that has associated Class three Colorado River water rights. The Department of the Interior has instructed that seven states that derive water from the Colorado River to reduce their intake by a third, and the cuts will first come from Class eight water rights all the way down. These states will be forced to go to those with senior rights, like Class three water rights, and pay for their water.
There is a proposed new fallowing program of which we plan to take advantage with 600 of our 1,300 acres, and we expect to receive $2,433 an acre to divert water from farming to urban use. A recent $80 million transaction in the city of Buckeye, Arizona, provides a comparable water sales value of $13,500 per acre-foot, which would equate to over $150 million for our Class three Colorado River water rights, of which Limoneira would be entitled 50%. There is no guarantee we could achieve this value, but this is a great example of what is happening in our space for comparable water assets. In addition to these assets, we have our real estate development project, Harvest at Limoneira.
We announced at the end of December that we increased our cash proceeds projection for this project by over 20% to $115 million and updated our timeline to include both the Harvest development and the Harvest Medical Pavilion across the highway. We received the first $8 million of proceeds in the fourth quarter of fiscal year 2022 and expect to generate the full $115 million over seven fiscal years. The project is currently approved to develop 1,500 residential units, and we are in negotiations with the City of Santa Paula to expand that up to 2,000 units. We believe we will be able to announce the additional 500 units later this year.
Finally, we look forward to transacting on $5 million of land sales at the Harvest Medical Pavilion in the fourth quarter of 2023. What is next for Limoneira now that we have a very strong balance sheet and a clear path to stronger EBITDA, cash flow, and earnings? Over the next 12 to 18 months, you can expect to see our continued transition to an asset-light business model and focus on the best use of our assets to enhance shareholder value. Our board and management team will continue to evaluate how to best leverage our expertise in packing, marketing, and distributing citrus, combined with our valuable portfolio of agricultural lands, real estate properties, and water rights in order to enhance long-term shareholder value.
As for longer term, in addition to capital allocation decisions, our upcoming strategic board of directors planning session will also review different areas where we can potentially reinvest that will produce more consistent and more reliable returns. Potential areas of investment could be in our supply chain through investments in the forward distribution, forward warehousing, and increased packing capacity, and expanding our avocado production and potentially adding value to avocados beyond production as a complement to our One World of Citrus product offerings. With that, I'll now turn the call over to Mark.
Thank you, Harold. Good afternoon, everyone. As a reminder, it is best to view our business on an annual, not quarterly basis due to the seasonal nature of our business. Historically, our first and fourth quarters are the seasonally softer quarters, while the second and third quarters are stronger. For the first quarter of fiscal year 2023, total net revenue was $37.9 million compared to total net revenue of $39.3 million in the first quarter of the previous fiscal year. Agribusiness revenue was $36.5 million compared to $38.1 million in the first quarter last year. Other operations revenue was $1.4 million compared to $1.2 million in the first quarter of fiscal year 2022.
Agribusiness revenue for the first quarter of fiscal year 2023 includes $24.7 million in fresh lemon sales, similar to $24.7 million during the same period of fiscal year 2022. Approximately 1,308,000 cartons of fresh lemons were sold during the first quarter of fiscal year 2023 at an $18.88 average price per carton, compared to approximately 1,207,000 cartons sold at a $20.48 average price per carton during the first quarter of fiscal year 2022. Of the 1,308,000 and 1,207,000 cartons of U.S.-packed fresh lemons sold during the first quarters of fiscal year 2023 and 2022, respectively, 66% and 57% respectively were procured from outside growers.
As part of the company's strategic plan, it is transitioning One World of Citrus to an asset-light model through the expansion of grower partners. Due to heavy rainfall that occurred during the first quarter of fiscal year 2023, the timing for the initial avocado harvest was pushed from the first quarter into the second quarter of fiscal year 2023. The company recognized no avocado revenue in the first quarter of fiscal year 2023, expects to recoup this delayed revenue in the second and third quarters. The company recognized $800,000 of avocado revenue in the first quarter of fiscal year 2022 on approximately 365,000 lbs at a $2.10 average price per lbs.
The company recognized $1.2 million of orange revenue in the first quarter of fiscal year 2023 compared to $900,000 in the first quarter of fiscal year 2022. Approximately 64,000 cartons of oranges were sold during the first quarter of fiscal year 2023 at an $18 average price per carton compared to approximately 53,000 cartons sold at a $16.47 average price per carton during the first quarter of fiscal year 2022. Specialty citrus and other crop revenues was $1.2 million in the first quarter of fiscal year 2023 compared to $900,000 in the first quarter of fiscal year 2022.
Total costs and expenses for the first quarter of fiscal year 2023 were $12 million compared to $48.8 million in the first quarter of last year. The decrease of $36.8 million was primarily the result of the gain recognized from the sale of the northern properties in January 2023. During the first quarter of fiscal year 2023, the company made funding contributions of $2.6 million to fully fund and settle the company's retirement plan and recorded settlement charges of $2.7 million. There are no remaining benefit obligations or plan assets. A patronage dividend of $1.4 million will be recorded in the second quarter of fiscal year 2023 compared to a patronage dividend of $1.6 million recorded in the first quarter of fiscal year 2022.
Operating income for the first quarter of fiscal year 2023 was $25.9 million compared to an operating loss of $9.6 million in the first quarter of the previous fiscal year. Net income applicable to common stock after preferred dividends for the first quarter of fiscal year 2023 was $15.5 million compared to a net loss Applicable to common stock of $6.6 million in the first quarter of fiscal year 2022. Net income per diluted share for the first quarter of fiscal year 2023 was $0.84 compared to a net loss per diluted share of $0.38 for the same period of fiscal year 2022.
Adjusted net loss for diluted EPS for the first quarter of fiscal year 2023 was $9.3 million compared to a loss of $5.7 million in the same period of fiscal year 2022. Adjusted net loss per diluted share was $0.53 compared to an adjusted net loss per diluted share of $0.33 for the first quarter of fiscal year 2022. A reconciliation of net income or loss attributable to Limoneira Company to adjusted net loss for diluted EPS is provided at the end of our earnings release. Adjusted EBITDA was a loss of $7.9 million in the first quarter of fiscal year 2023 compared to a loss of $5.6 million in the same period of fiscal year 2022.
A reconciliation of net income the loss attributable to Limoneira Company to adjusted EBITDA is also provided at the end of our earnings release. Turning now to our balance sheet and liquidity. On January 31, 2023, we sold our northern properties, which resulted in total net proceeds of $98.8 million. The proceeds were used to pay down all of our domestic debt except the AgWest Farm Credit $40 million non-revolving line of credit, which is fixed at 3.57% until July 1, 2025. Long-term debt as of January 31, 2023 was $40.9 million compared to $104.1 million at the end of fiscal year 2022.
Debt levels as of January 31, 2023, minus $12.5 million of cash on hand resulted in a net debt position of less than $29 million at quarter end. We have $50 million of remaining non-strategic assets for monetization and expect their sale combined with improving EBITDA will result in the opportunity to have no debt in a cash position on our balance sheet. I'd like to turn the call back to Harold to discuss our fiscal year 2023 outlook and longer-term growth pipeline.
Crop reports for lemons continue to suggest industry-wide production is expected to be down 10%-15% in fiscal year 2023 from Mother Nature. However, due to the planned expansion of our grower partner fruit, we are expecting to increase volume and increase our market share in fiscal year 2023. We continue to expect total lemon sales volume to be in the range of 5 million -5.4 million cartons for fiscal year 2023. This is up from 4.9 million cartons in fiscal year 2022 and 4.4 million cartons in fiscal year 2021. For the second quarter of fiscal year 2023, we expect to experience continued pricing pressure, but believe the industry-wide lower production will lead to higher prices beginning in the second half of fiscal year 2023.
Also, during the second quarter of fiscal year 2023, we received a patronage dividend from our primary lender, AgWest, formerly Farm Credit West, of $1.4 million. We continue to expect avocado volumes for fiscal year 2023 to be in the range of 4 million -5 million lbs. It's important to note that while fiscal year 2022 was a record year for avocado revenue, the California crop typically experiences alternate years of high and low production due to plant physiology. This, along with adverse weather conditions, is contributing to the year-over-year decline. We experienced unusually high temperatures in early September and a wind event in November that knocked fruit off of our trees and will have a negative impact on our 2023 avocado crop.
We continue to expect to receive $115 million compared to the previous estimate of $95 million from Harvest at Limoneira and the addition of the Limoneira Lewis Community Builders II and East Area II spread out over seven fiscal years, with proceeds of $8 million already received in the fourth quarter of fiscal year 2022. Our cash flow projections were updated last quarter to include the medical campus in our East Area II development. A portion of the cash flow projections were pushed out approximately 18 months due to the higher interest rate environment, which reduced the current number of new home starts. The breakdown is expected to be as follows: Fiscal year 2022 generated $8 million of cash to Limoneira. Fiscal year 2023 is expected to generate $5 million.
Fiscal year 2024 is expected to generate $8 million. Fiscal year 2025 is expected to generate $17 million. Fiscal year 2026 is expected to generate $25 million. Fiscal year 2027 is expected to generate $30 million. Fiscal year 2028 is expected to generate $22 million. Lastly, as previously stated, we have identified $180 million of non-strategic assets for sale. We have made great progress thus far executing against our plan with the sale of $130 million in the past six months. And expect to announce the sale of the remaining $50 million in the next 12-18 months. With that, I'd now like to open the call up to your questions. Operator?
Certainly. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Eric Larson from Seaport Research Partners. Please go ahead.
Hey, guys. How are you doing today?
Hi, Eric.
Eric.
My first question, I think I know the answer to this. You know, on your big asset sales, are the water rights going with those, I'm assuming? Is that true or is it not? Is there any way to sort of split or try to figure out what the value those water rights would have been as part of the sale price?
The part of the compelling price that we received for the northern properties, Eric, was due to the access of reliable water and water rights. The asset, the water assets did go with the land assets in that, in those sales. There were a number of different water rights associated with those properties, with various and varying ranges of value, based on the reliability and the sustainability of each of those sources. Prior to the divestiture of the northern properties, we had about 28,000 acre-feet of water rights, and that number now is down to 21,000 acre-feet. About 7,000 acre-feet of water went with those properties.
Eric, just further detail. Far and above the best water rights that we have left, which are here, the adjudicated Santa Paula Basin and Yuma, which equate to over 90% of the prior water value. Still in great shape with water and moving forward there.
Okay. Okay. Yeah, thank you. That's good clarification. Next question is Just the lemon business. I mean, obviously it was soft again this quarter. You know, you're under $19 per carton. I think you need to be at around 20 to kind of even break even and make some money. Give us a little more flavor, Harold, about, you know, really when does the supply situation really start to tighten up? When is it you're talking about kind of gradual improving pricing through the rest of the year, but it seems to be continually getting delayed. I'm just curious as to how you look at that, you know, the cadence of how that pricing outlook is gonna be.
No. That's a great question. We keep dealing with the reality of an oversupplied lemon market, exacerbated by a lot of young plantings throughout California and Arizona domestically, but also a lot of fruit ready to be imported from the southern hemisphere. Mark, actually, Mark and his team completed a really fascinating and interesting analysis about the economics of each of the growing districts in California and Arizona, and the profitability of each of the districts as it related to a weighted average, sort of here is what the costs of all of them together are, and then here's what the price achieved in each of those time frames of the year when each of those lemons go to market.
What we found was really interesting. The, you know, the year starts for us in the desert. What we found there was that the cost structure was high, really driven because it's a tough place to grow lemons, which compromises the yields. The lower yields equates to higher costs per carton because you're not generating the amount of fruit that you do in other places, and the cost of transportation to get it all the way from Arizona to our packing house in Santa Paula. You put that together, and that really was a really negative part of the margin that we were achieving.
If what's going on in Arizona now is almost as 50% of what's going on in Arizona is more of a water story, where we fallowed 600 of the 1,300 acres, which takes, you know, half of the cost of farming out of that equation. It's now being replaced by a water coupon that we receive for the fallowing program. Overnight now, the desert operation has become profitable. We go up into the San Joaquin Valley, similar situation. Actually higher productivity, so higher yields. Because of the transportation costs and some of the other costs associated with the farming in the north that were related to necessary agricultural applications for pests related to the Asian citrus psyllid, that also was a high cost structure.
Now that has all been divested, and now that's been replaced by farm management services income. Yet we still keep that supply chain coming through our packing house. You come down to the California coast, which is where 50% of our total production takes place. As you know, these lemons are what come out in the seasonally high time of the year when consumption is in the highest in the late spring and the early summer. The profitability of the production down here on the coast is actually pretty good, and it's really because it's a much lower cost structure driven by higher yields, but also higher pricing typically that we get at that time of the year.
When you put it all together, I think what you're gonna see is you're gonna see even with these challenging prices that we're receiving that's driven by sort of just the pervasive oversupply of lemons, that you'll start seeing our margins start to improve now because of the restructuring of the business.
Got it. No, that makes a lot of sense. That's good. That's good insight. When, when you know, when you kind of factor in the whole thing, are you also seeing, you know, an increase in imports on lemons, or is this really a domestic issue that can be solved with sort of the analytics that you just laid out?
Well, I think that the, you know, the greatest challenge is also the greatest opportunity is that when you get pricing down at this level, it kind of creates a moat around the market because it becomes uneconomic for the Southern Hemisphere shippers to ship into the market at this price because of their costs of logistics to get it here makes that prohibitive.
Yeah.
I think it takes an overall price above $20 a carton to make the import reality, you know, a competitive threat, and we're just not there yet. We want to be there, right? Because our domestic fruit can enjoy that, those economics. Right now, you know, I think that as we look forward, we don't see any catalysts until the second half of the year to drive pricing up. We'll just have to see where we get when we get to the summer, the late spring, early summer. Because it is a smaller crop domestically, we are optimistic that we'll see higher pricing in the late spring, early summer.
Got it. Okay. Final question on. You're gonna, I think now in the, you know, the next few days, just hammered with rain and stuff again. Yeah, you know, you don't complain about moisture, because when you don't have it, you don't, you realize how much you miss it. Are the weather conditions here still gonna be such that it's, that's gonna be prohibitive for you to harvest? How are you looking at, you know, you know, I think there's supposed to be six-eight in of rain in some parts of, you know, kind of just, you know, in mountains right to the east of you in the next few days. How are you looking at all that?
It's another great question. We had an all hands on deck meeting on that very subject this morning. I guess the good news is that we have good inventory across all size and grade structures. We do anticipate being delayed in picking for the better part of this week. As you, as you're pointing out, there's a lot of rain coming to Central and Northern California. We are ready right now with the crews ready to go here on the coast if we need to go get fruit. We anticipate being just fine in terms of continuing on with our harvest in District one. Right now, the crop is kind of midway through the season up in the San Joaquin Valley.
We think that'll finish out in a kind of a normal way, even with this weather and this rain, and then transition smoothly into District two onto the coast. I think as you might remember, Eric, the District two crop is always there 'cause the trees are blooming here year-round. We do have access to good amounts of fruit. Inventories are good. And you know, unlike 2019 where we had that situation where the lemons got big 'cause we weren't able to get into harvest, we're all over that this year and making sure that that does not happen, and trying to make sure that our inventories are balanced by size and grade so that we, you know, we can keep the supply chains cooking right along, even with this weather.
All right. Thanks. I'll get back in queue.
The next question comes from Raj Sharma from B. Riley. Please go ahead.
Hi. Thank you for taking my question. I had a sort of following up on the lemons. You know, you just mentioned that you expect a significant pickup in the cartons with improved pricing. Where is this increased production going to come from? Can you talk about that? I know you said there were external growers as well. Also, you did just talk about why you thought pricing was gonna improve, you know, and that was gonna be a second half event. What kind of a pricing increase can we expect on the lemons?
Hi, Raj. That's a great question. I wish I could, I wish I could answer that directly with my crystal ball. What we know is that we're behind in our harvest up in the valley and kind of on par with our harvest for the remainder of the season on the coast. As we look at our tree crops, we have ample production of our own production, but also we were successful in recruiting an additional 1 million cartons of new fruit across all three of the districts that are in combination with our own production and the grower partners that we serviced in 2022.
Even though Mother Nature brought us a lower tree crop of about 15% across each of the districts, our recruiting actually give us great belief that we'll be able to grow and have access to enough fruit. We're still sort of hanging on to our guidance of 5.2 million-5.4 million cartons for the year, which would demonstrate some pretty good growth year-on-year. I think I finished last year with 4.9 million cartons. The fruit's there, you know, we've got enough time to go get it, and the weather is not causing that much disruption at this point in terms of changing size or grade structure. We're optimistic that we'll be able to get it and put it through the packing house and get it into the market.
Yeah. To follow up on pricing, as Eric asked earlier, it all comes down to that sum-supply-demand balance from the imports that typically start from Argentina in late April, early May. If the transportation costs aren't there, if the price isn't high enough for them to break even, we'll usually get a $2 or $3 lift from current pricing, which is right about just below 18 right now. You know, Mother Nature does the rest of her thing. That's historically how we've looked at it from a budgeting perspective.
That's great. Thank you. Then on the avocado production, clearly lower this year than last year, how much of a recovery do you see in Q2 onwards? What's happening on the production side? Are you gonna be able to recover a lot of it, most of it? Can you talk about that, please?
Yeah. The rain is actually really helpful for the avocados. I think it gives us optimism that we should be in the high range of the targeted volume numbers. The harvest really now at this point will be driven by the opportunities that we see in the marketplace. Great news was we saw an uptick in avocado pricing last week. 48s are now getting a little over $1.20 in the marketplace, and, you know, that's kind of directionally where we were hoping to harvest. We find the market seems to be improving and coming to us at this point.
You know, we're pretty confident that, you know, there's on the upper end of the 4 million-5 million lbs range that we guided to. I think our overall avocado number and guidance is intact. Fingers crossed that it comes in a little better, but if it does, it'll be driven by more favorable market pricing. It's just too difficult for us to pin that down. You know, we watch the market every day, and when the market moves, we'll start harvesting. I think if I had to guess how the fruit flow would play out, I'd say 50% of 5 million lbs in Q2 and 50% in Q3.
Got it. Q2 and Q... Got it. Then just if I can move on to profitability, can you kind of philosophically talk about where you see EBITDA improvements, and do you see EBITDA improvements, sort of profitability improvements in terms of margins this year? Is that coming from a greater sort of brokering and shipping?
Yeah. Great question. A bunch of pieces of that.
How much of an EBITDA can we expect? Sorry.
As we've alluded to, you know, where this transition period is gonna be about 12-18 months, which we'll see accretiveness from the transaction, slight accretiveness both from the EBITDA perspective and EPS. The areas that we will see benefit from are, as you said, the new recruiting, so 1 million new cartons, which comes into effect basically starting in the fall of this year and then circles all around through the seasons. That's the targeted $2-$2.50 a carton operating profit. Then also the brokerage agency business, which this prior year was just over 1 million cartons. Trying to ramp that to about 1.5 million this year and then about 3 million-3.5 million over the next five years.
As we've tried to highlight, you know, we're subject to lemon pricing. Our costs have been relatively under control. Our packing cost this quarter year-over-year was down versus prior year per unit. All of the measures that we put in place from the cost efficiencies have really started to come to play. We still see ourselves, you know, targeting, you know, plus $30 million of EBITDA in the next five years.
Got it. This is the last question from me. The additional $50 million in sales that you just mentioned that would happen in the next year, two years, can you give us generally the areas that, you know, water right sales, the land, any color on that? What areas-
Yeah. The additional $50 million, if I got the question right, is, the two specific assets. Our southern hemisphere Chilean farming, which is two ranches, lemons primarily, and then our Windfall vineyard estates. Those are placeholders at $50 million, pretty close to book value. You know, we felt that that was an appropriate number. I think depending on the right opportunity and the right buyer, and the water circumstances, there will be opportunity for upside in there.
Great. Well, thank you for answering my questions and, you know, good luck. I'll take this offline. Thank you.
Great. Thank you.
Thanks, Eric.
The next question comes from Ben Klieve from Lake Street Capital Markets. Please go ahead.
All right. Thank you for taking my questions. Just a couple from me. First of all, on the avocado side, I wanna make sure I understand kind of the strategy and the timing here. The weather caused delays of harvesting in the first quarter. Harold, your comments earlier suggested that you'd kind of maybe intentionally delayed harvest kind of in February, in, at least, you know, at least through February, because of kind of pricing conditions. First of all, is that accurate that you could have harvested avocados so far this in the second quarter, but you've kind of chosen not to strategically?
Yes, that's exactly right. We could have harvested... There's fruit that is pickable, harvestable right now, but the markets have been... I don't know if you're following the markets, but they've been pretty soft, and they're just starting to improve now. When you layer on the benefits of the rain, which is sizing the fruit faster, we actually find ourselves in pretty good shape to start our harvest, beginning next week.
Great. That's helpful. Yes, I have been following that market and yeah, I live in grind and, I think I've also been watching the same weather reports that Eric has, and so I've been concerned about that. That's good to see that how you guys are navigating that. My other question is, you know, it looks like you've got a pretty impressive gain in market share this year so far, and I'm wondering if you can comment on a high level about the correlation between lemon prices and your ability to take share. When, you know, when prices here are, you know, down in this just kinda dreary $17-$18 range, you know, are you able to, you know, get these relationships developed with farmers faster than if, you know, if you're in $20-$22 range?
Part of gaining share is gaining supply first. We're really having a lot of success with that with our grower services team, our very high fresh utilization rates, and then our very competitive returns going back to growers. As a result, we've really made huge progress in our ability to access new supply. With that supply then, it allows us to go into the marketplace at food service and retail and be much more competitive with reliable levels of supply. I think the combination of those two things is what's driving our growth and allowing us to pick up share.
You may recall when we first started kind of talking about the business together, we always sort of, as a placeholder, suggested that food service represented 70% of our market opportunity and retail was 30%. There was sort of a structural change in the marketplace driven by COVID that really hasn't changed that much since we've all returned back to normal life. I'd say the actual demand is, from a consumer perspective, is probably 50/50 now, 50% food service and 50% retail.
Our biggest pickups and gains have been at the retail level, and so that's the battlefield for us right now. We're really honing in on new big retail accounts. As you go out to your local market, you'll have a much better chance of finding Limoneira stickered lemons in those supermarkets now because of this new approach and really where we're focusing.
Got it. Got it. Very helpful. Okay, very good. Well, thanks for taking my questions. I'll get back in line.
Thanks, Ben.
Thanks, Ben.
Once again, if you have a question, please press star then one. The next question comes from Vincent Anderson from Stifel. Please go ahead.
Yeah, thanks, and good afternoon.
Hey, Vincent.
Hey. When I look at just how many overseas growing regions have yet another year of poor production, I can definitely understand where your price expectations are coming from as we move through the balance of this year. What I'm still trying to wrap my head around is just the recent pressure we've seen. I guess a two-parter then. On the demand side, how have Asian exports been looking, particularly since apparently China told everyone to start drinking lemon water? On the supply side, you know, how much of this pressure maybe is being caused by unseasonable Mexican imports into the U.S., and what on earth is causing that? 'Cause I can't remember the last time I saw this kind of volume from them, you know, this early in the year.
We continue to hope that it's the first part of your analysis, which is that it's demand pickup, but that's what's moving more slowly than supply pickup. There's just an awful lot of young plantings across each of the districts, and that's really what's driving the oversupply domestically. When you layer into that the massive amount of plantings out of Argentina and some of the other Southern Hemisphere suppliers, that's what's really exacerbated the entire situation.
What's caused the sort of the malaise in the market and the softer pricing now is, remember last year, we, you know, we were really proud of our fresh utilization rates and our, you know, our ability to move fruit fresh for higher returns back to the growers. Our primary competitor really underperformed, they've kind of took the gloves off this year and said, "All right, we're not gonna let that happen again." They, you know, there's a lot more chasing price down to try to hang on to share. If you looked across all of the... we're a member of what's called CALGA, the California/Arizona Lemon Growers Association, which is a consortium of all of the shippers.
I think it represents almost 90% of the domestic supply of U.S. lemon production. Limoneira's pricing is right at the top of the list right now, we try to remain as disciplined as we can as we go about doing that. Typically, what happens though is when coolers get full, and you can imagine how this works, when coolers get full and fruit has a hard time moving, competition typically will use price to move fruit, and that's what's exacerbating the pricing problem in the marketplace.
Okay. No, that's very helpful. As I just kind of speculate on, you know, the potential deployment of your capital beyond deleveraging, you know, it sounded like maybe there were some citrus assets in Europe that might be looking for a new home. I'm just wondering if it makes any sense to make an investment in that market from a packing and brokering perspective, especially if there's a way in which you can, you know, have it become another, like, valve for your South American fruit or, you know, if that's not really a high return market in your mind?
I think that's a really astute observation, and it is actually something we've been studying and have been thinking about. The biggest winner in that equation would be Argentina, 'cause a lot of that Argentina fruit can find its way into the European markets competitively. The U.S. fruit has because of the logistics, it just is, it's pretty tough. Foreign exchange doesn't help that as well. That's really less of an opportunity for us at this point.
I think we see pretty, you know, and our, and our board will help us with this in our upcoming strategic planning session, but we see really interesting opportunities to invest in our supply chain, through automation and enhanced capabilities through storage and capacity improvement to take advantage of the supply chains that we have but to drive cost out of the business. The other thing to remember is remember when we sold Oxnard Lemon, we actually did a sale-leaseback on the initial part of that sale to take advantage of that storage that we still depend on.
Within three years, we're gonna be in a position where we're gonna need to find alternative storage, and we've got the calculators out and are running the numbers of what investing in increased storage capabilities here in Santa Paula would do, but the results are pretty significant. We think there'd be a great return on invested capital to invest in storage here in Santa Paula, as a complement to our recently updated packing house. Look sorta towards something like that and also, we've talked about this before, investments in increased packing capacity in Chile.
Okay. All right. Very helpful. I appreciate it, guys.
Once again, if you have a question, please press Star, then one. This concludes the question and answer session. I would like to turn the conference back over to Harold Edwards for any closing remarks. Please go ahead.
Thank you all for your questions and your interest in Limoneira. Have a great day.
This concludes today's conference call. You may disconnect your lines. Thank you for participating. We have a [audio distortion]