For fresh produce marketing in Australia and New Zealand
Liam O'Callaghan

BY LIAM O'CALLAGHAN

Friday 31st May 2019, 15:59 Melbourne

Costa shares plunge

Shares in Australian agribusiness dropped 27 per cent in a day due to a lowered profit forecast

Costa shares plunge

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Shares in fresh produce company Costa Group plummeted on 30 May as it reduced its profit forecast for 2019 following a series of weather-related setbacks.

The shares dropped 27.6 per cent to close at A$3.75 (US$2.59), a two-year low for Costa. It came after the company downgraded its earnings guidance

for the 2019 calendar year from A$73m (US$50m) to between A$57m and A$66m (US$39m and US$45m).

This is the second time this year Costa has downgraded its forecast, with an earlier revision announced in January.

Harry Debney, chief executive of Costa, told shareholders at the company’s AGM that during May the company faced “a deteriorating operating environment on a number of fronts”, which together would impact results.

In May, its grower network started to see high waste in their major raspberry variety from a condition called ‘crumbly fruit’. This resulted in low yields and harvest labour inefficiencies.

In the mushroom category, Costa expected an increase in consumption during May but the continued unseasonably warm weather saw continuing weaker demand and ‘price softness’, according to Debney.

A third major hinderance to the company was the trapping of female fruit fly it its Impi citrus farm at Stuart’s Point, South Australia, last week. The farm is located in the Riverland region, which enjoys fruit fly-free status. The status is a major benefit for Costa as it means fruit does not need to undergo cold treatment for shipment to key export markets, thereby reducing costs.

“Authorities are in the process of implementing a 15-kilometre exclusion zone from the Riverland fruit fly free region,” Debney said.

“We are in discussion with the relevant state and national agencies, but it appears that approximately 17,000 tonnes of Costa’s citrus crop may not be packed in our Riverland sheds and in that event would need to be sent to third-party packers in Sunraysia and also cold treated to meet export protocols.”

While the company still expected the results to be above the previous year, the lowered forecasts were enough to cause the drop in share price.

 

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