Costa Group begins search for new CEO, as Harry Debney plans retirement

Costa Group dodges China trade tensions, as chief executive Harry Debney prepares to step down after a decade in the top job.

Costa Group CEO Harry Debney will retire in the next 12 months. Picture: Aaron Francis

Costa Group appears to have dodged the heightened trade tensions between Australia and China, with its outgoing chief executive Harry Debney saying the company has maintained good relations with Beijing.

Costa operates two farms in China with Californian-based berry grower Driscoll’s. Beijing is working to alleviate poverty where the farms are located in Yunnan province, which abuts the Vietnam, Laos and Myanmar borders in China’s south-west, and Costa group is a key plank in that strategy.

“We have just completed our harvest in Yunnan Province and it’s been a very successful year again for us,” Mr Debney said.

“We are held in very high regard by the local government in Yunnan and also all the jurisdictions we deal with so we have noticed no impact so far. We read the news like everyone else, but everything we have done this year and what we have received from the authorities has been positive.

“Yunnan is an area where Beijing is concerned about poverty alleviation and we are seen as one of the companies, which is employing people and also introducing new agricultural technologies to the province. So we’re seen as one of the leading-edge companies improving technologies there.”

On Friday, Mr Debney announced his intention to retire from Costa within the next 10 months. His departure comes after a challenging time for the company, which withdrew its earnings guidance in February, citing agribusiness volatility.

The abandoning of guidance followed Costa issuing its fourth profit downgrade in a year last October, and the company launching a heavily discounted one-for-four rights issue to raise $176m in fresh capital at $2.20 per share, to shore up a weakened balance sheet.

“You can’t get perfect timing but I think it’s the right time,” Mr Debney said about his decision to leave.

“Last year was a really challenging year and I’ve got to say the company learned a lot over that year. The team got much more resilient.

“But I see this year as a recovery year and a transition year. We are going to get to a stage where 2021 and beyond is going to be really productive.”

Mr Debney said he expected growth from its international divisions, with expansion plans in Morocco and China, and its new mushroom plant in Monarto, South Australia, as well as a plan to introduce a range of premium berries, including a new varietal mix in blackberries.

“The company’s fundamentals remain strong and will deliver meaningful benefits over the medium to long term.

“They include our portfolio of market leading premium fresh produce, the utilisation of protected cropping across several of our categories, the geographical diversity of our production footprint and our growth program covering both domestic and international operations.”

Costa floated on the ASX in 2015, at $2.25 a share, with its pitch to investors centred on the company being an industrial rather than a commodity player, and therefore commanded a premium.

Innovation

The group said it had moved to a protected cropping model – moving plantings away from the paddock, where produce is exposed to the elements, and into glasshouses, galvanised steel tunnels shielded in plastic and other forms of undercover production.

Its share price rose to $8.70 in June 2018. But, like all agribusinesses, Costa soon found it couldn’t completely shake the risks of primary production, struggling with drought and more recently bushfires.

It issued the spate of downgrades after failing to meet precise profit guidance given to the market.

Costa chairman Neil Chatfield said at the company’s annual meeting on Friday that the board had started an “orderly transition retirement plan” for Mr Debney.

“The board acknowledges the outstanding leadership which Harry has provided to the company over the past 10 years and is particularly pleased with the extremely capable and stable leadership team which Harry has put in place,” Mr Chatfield said.

“The board is ... enacting a plan which will establish a formal assessment and recruitment process with consideration to both internal as well as external candidates and will update shareholders as the plan progresses.”

Costa shares fell 2.4 per cent to $3.22 on Friday compared with a broader sharemarket drop of 1.6 per cent.