One explanation for the solid performance yesterday by Costa Group shares is that the fruit and vegetable grower and supplier made it through 2019 and to an earnings announcement with a repeat of the downgrades that started in January 2019 and helped drive the share price to record lows.
Costa group shares jumped more than 16% at one stage in early trading while the ASX was positive and even though those gains were trimmed in the afternoon’s big sell-off, they held to be up 4.9% at $3.00 by the end of the day.
Costa Group survived a challenging 2019 when it was hit by drought, profit downgrades, and a damaging hailstorm, and says it has started 2020 enjoying “considerably” stronger prices for most of its crops.
Mushroom prices are up 17% compared to last year, while berry prices are up in the “mid-teens”.
Mushrooms in particular as well berries are key crops for the ASX-listed fresh produce company, which has invested millions of dollars to expand their production and earnings and both were troubled in 2019, especially raspberries.
Costa reported a 5.8% rise in revenue to $1.05 billion in the year to December with a not unexpected full year statutory loss of $35.4 million, compared to a profit of $45 million for 2018.
A $61.9 million write-down relating to ageing mushroom facilities that the company closed (and warned about in 2019) pushed it to a statutory loss.
“The second half of the year was particularly challenging, which impacted fruit sizing and yield in our late season citrus, berry and avocado crops. We also had to take action to remove part of our berry crop at Corindi (New South Wales) due to a lack of rain in order to conserve our perennial blueberry footprint,” said Costa chief executive Harry Debney.
A key priority for the company this year and into the future is improving its ongoing water security across the business, in recognition of the risks to water supply from weather and climate cycles.
“The company is committed to making our operations sustainable so they can both better withstand environmental risk including unforeseen and extreme weather events, and maximise opportunities with respect to improving our economic efficiency and profitability over the medium to long term,” Mr. Debney said.
Costa says it will soon seek approval from NSW authorities to construct a second dam at its Guyra tomato glasshouse facility on the New England Tablelands.
Despite the loss Costa will pay a final dividend of 2 cents a share, making a total of 5 cents a share for the year.
