Australia’s leading grower, packer and marketer of fresh fruit & vegetables, Costa Group Holdings Limited (ASX: CGC) made an announcement on 10 January 2019 stating that during December 2018 the company has experienced subdued demand in various categories, namely tomato, berry, and avocado. Further, the company also informed that the trading conditions in January 2019 are also appearing bleak in comparison to what was planned. Following this news, the share price of the company plunged by 33.65 percent as on 10 January 2019.
Due to the subdued demand in various categories the prices of the number of product lines have been reduced. The company is also getting affected by the short-term slippage of the commissioning of the Monarto mushroom facility upgrade in South Australia. The company is also bearing additional costs from investments such as African Blue. Today the company has informed the market that the above-mentioned factors will result in a reduction to the previously guided interim FY 2018 forecast ending December 2018. In the previously announced guidance, the company was expecting to generate low double-digit NPAT-S growth in the year ahead to 30 June 2019. However, now the company is expecting the growth in the twelve-month NPAT-S (Net Profit After Tax before SGARA) to the end of June 2019 to be largely flat as compared to the last year.
Despite announcing a reduction in the previously guided interim forecast, the company is considering the current trading conditions as a cyclic situation, and it is expecting that the trading for the CY 2019 will produce an NPAT-S result materially in line with previous guidance. As per the previous guidance, the NPAT-S would maintain an annual double-digit CAGR (Compound annual growth rate) for the two calendar years 2017 to 2019.
As per the announcement, the ongoing growth plans across the categories are continuing to track well. The company’s growth initiatives include Merger and Acquisition activity in its avocado category and acquisitions of citrus farming assets. The company is also planning expansion in its mushroom and tomato production capacity. Further, the company is also making investment in its international segment, namely African Blue in Morocco and its berry production footprint in China.
For financial year 2018, the company earned a total revenue of $1,002 million which was 10.2 percent higher than the previous corresponding period. Further, the company earned a Net Profit after Tax of $76.6 million which was 26.3 percent higher than the previous year. The EBITDA before SGARA was $150.8 million, which was 30.9 percent higher than previous corresponding period. In October 2018, the company paid the final dividend of 8.5 cents per share, fully franked, taking the full year dividend to 13.5 cents per share which is 22.7 percent higher than previous corresponding period.
Meanwhile, in the last six months, the share price of Costa Group decreased by 2.64 percent as on 9 January 2019. CGC’s shares traded at $4.890 with a market capitalization of circa $2.36 billion as on 10 January 2019 (AEST 1:25 PM).
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