How Is The Needle Moving On Costa Group Holdings?

The company reported revenue of $478 million for 1FP18 which was down by 2.4 percent on a pcp basis. The revenue degrowth was mainly attributed to citrus category underperformance due to lower biennial crop cycle, as per the company’s anticipation.

The EBITDA before SGARA fell by 42.0 percent coming in at $35.3 million. The drop in EBITDA was attributed to the shift in seasonality of earnings to Jan-Jun, the citrus cycle, and African Blue consolidation. Also, the produce segment witnessed softer trading in December.

NPAT (before material items and amortisation) saw a significant drop to $8.5 million (July-Dec’18) vs. $28.6 million million (July-Dec’17). The drop was due to higher depreciation, and interest charges post the African Blue acquisition and the recent CapEx investment.

Further, reporting on the operations, under the produce segment, the company witnessed 6.3% revenue growth under the berry segment, the raspberry volume growth stood at 30%, but the overall raspberry pricing was lower due to lower quality production and timing. Mushroom segment revenue fell by 2.3% contributed by 6% lower volume vs. pcp but was offset by stronger pricing. Tomato segment revenue also de-grew by 2.3% due to softer market pricing. The citrus segment was the biggest drag in the overall revenue, with a de-growth of 15.3% due to lower volumes and softer season. Finally, avocado segment witnessed a marginal increase in revenue of 1.1% due to increased volumes and lower pricing.

Reporting on the costa farms and logistics segments, the segment saw a 3.8% increase in revenue, with logistics growing by 7.9% aided by additional income from contract warehousing. Costa farms grew by 2.8%.

Finally, the international segment revenue came in at $6.6 million in FP18 vs. $3.6 million in H1FY18, and earnings were heavily weighted to calendar H1.

On the outlook front, the company has transitioned to CY reporting and believes that it better reflects planning, revenue generation, and reporting cycles. The second half will witness more earnings due to delayed Monarto commissioning and timing of the new citrus season inclusive of NCF (Nangiloc Colignan Farms) acquisition, as per the company reports. The company reportedly witnessed good price recovery in February across categories. The company maintains a positive outlook, and it expects CY2019 NPAT-Sl growth of at least 30%.

Costa CEO, Harry Debney acknowledged that the company had delivered a lower profit number than expected. He also stated that they have plans in place to consolidate their position which includes building new capacity and scale through organic and inorganic route, develop new varieties that extend their production and supply period, establish high-end brands, continued investment in automation to improve productivity.

Stock Information:

The stock was listed on the ASX on 24-July-2015, and since its listing, the stock price has moved up by ~133 percent. However, in the past one year the share price has corrected by 30 percent. The stock has moved down by 30.91 percent and 7.4% in the past three months and one month respectively.

The shares of CGC were trading at A$5.110 on ASX (As on Thu 28 March 2019) up by 1.59%.

CGC’s market value is $1.61 billion. The ASX reported average trading volume is 2,873,036. The company’s EPS stood at 0.360 AUD, it is currently trading at a PE of 13.960x, and dividend yield of 2.68 percent, as per the latest ASX update.

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