Shares in fruit and vegetable grower and supplier Costa Group sold off heavily on Monday morning, without a peep from the company until 11.56 am when a pause in trading appeared on the ASX announcement list.
Costa shares had opened lower and continued falling to be down 12% at $2.52 when the pause was announced.
Three hours later and a market update was issued and didn’t seem as dire as the morning market plunge would have suggested.
Costa ruled off its first half on June 30 and releases its interim results late next month and directors told the market that:
“Ahead of the release of half year results, Costa notes its operations performed well in first half of the 2022 financial year and unaudited results are anticipated to be in line with the Company’s expectations.”
“The International and Domestic produce segments are both expected to finish the half year ahead of the corresponding prior half year – the June half of 2021
But there seems to be some problems with quality and pricing in the company’s citrus business because of the impact of poor weather and heavy rains.
And the full extent of the production, quality, pricing and earnings impact of these problems in its citrus businesses in Queensland, NSW, Victoria and South Australia won’t be known until the December half year, as the company explained in Monday’s statement.
“Across the portfolio the citrus season has seen strong demand and pricing, with fruit continuing to be successfully exported to China and other key Asian markets, with an improvement in shipping services versus the prior year, albeit transit times and service performance are still not at pre-pandemic levels.
Costa said the 2PH (A central Queensland citrus business) “business is predominantly operating in line with pre-acquisition expectations with volumes above forecast, however some quality issues have been encountered due to weather events occurring over recent weeks.
“Certain varieties have been affected, and at this stage of the harvest this has resulted in a lower percentage of first grade product versus the prior year.”
“Whilst we are currently approximately halfway through the 2PH harvest season, given the first four months of the year are non-sales period, the majority of 2PH earnings are in the second half of the year,” Costa said in the statement.
It said its Riverland and Sunraysia crops are circa one third through the season as at the beginning of July, and “demand for all varieties remains strong with increased pricing versus the prior year.”
“However, weather events have also resulted in some quality issues which have become evident as the season has progressed, most notably with Navels, and more so in Sunraysia than the Riverland.
“This has impacted pack out rates versus the prior year. Similar to 2PH, the Riverland and Sunraysia operations earnings are predominantly recognised in the second half of the year.
“The full impact of these quality issues across the citrus portfolio on final pricing outcomes and second half earnings cannot be determined until the citrus season is further progressed.
“With the benefit of the season being more advanced, a more fulsome update will be provided at the investor briefing following the 1HCY2022 results release on 26 August 2022,” Costa said.
The release of the statement took some pressure off the weak shares which ended the session down 8% at $2.65, a bit better than the 12% slide at the opening of the day’s dealings.
