Costa Group has called for an increase in foreign investment in Australia’s agriculture industry in order to grow.
Chief executive Harry Debney and chairman Neil Chatfield have voiced their concern over the country’s lack of support for foreign investment following the federal government’s decision to block the sale of Australia’s largest private landholding, Kidman’s, to foreigners.
"I don't want to get caught up in China versus the US or Europe, but we need foreign investment. Australian agriculture is undercapitalised, that's a fact," Debney said, adding that Costa wouldn’t be where it is today without foreign investment.
The leading Australia horticulture group raised A$550m in its initial public offering on the Australian Stock exchange in July, with Debney stating that the group couldn’t have got to where it is today without foreign investment.
US private equity firm Paine & Partners purchased a 50 per cent stake in Costa in 2011, and since the float has retained a 10.5 per cent share of the company.
"If I go back to when Paine came in, we were capital constrained, we had a very stretched balanced sheet," Debney said. "We couldn't get funding from the local banks. Agriculture was on the nose. But once we brought in … a US investor, the banks said 'right we are happy to invest and you're back in business'.
"Our whole growth story, which has been very successful, was founded on getting a external investor from outside this country."
Protected cropping paying off
Speaking at the Costa AGM on 19 November, Debney told investors that Costa expected 80 per cent of its revenue in the 2016 financial year to come from protected cropping.
Costa has invested in protected cropping across its berry, mushroom and tomato lines to minimise risk, with a new 10ha glasshouse constructed in Guyra for its sweet snacking tomato line.
“[Protected cropping] is a key part of our growth and risk management strategy, in particular the protection it provides from the adverse impact of extreme weather events,” Debney said, adding that a recent hail storms at its largest berry growing farm in Corindi weren’t expected to impact on its full year earnings forecasts.
Many of you will be aware that in recent weeks there were severe hail storms in the Coffs Harbour region which also includes our largest berry growing farm at Corindi. I am pleased to report that the impact of the hail storms on our crops was only moderate and is not expected to impact on the Company’s ability to meet its full year earnings forecast.
“This is because our entire raspberry crop at Corindi is protected and likewise a large part of our blueberry crop,” Debney said. “We see this as very much a vindication of our decision to expand our protected cropping and to proactively address a significant element of risk for not only ours but for any agricultural company.”
Debney said the company is on track meet its FY2016 prospectus forecast net profit of A$47.6m.