Costa shares have plunged on a downgrade, widening the gap to PSP’s possible takeover price

Costa shares have had a shocker of a day after a profit downgrade and a delay to its results announcement. They now trade well below a possible takeover bid price.

Costa’s citrus hasn’t performed as expected.

Costa Group shares plummeted on Thursday after the company pushed the release of its half year results back by almost a week and warned of a deterioration in earnings for its major citrus division.

The produce group gave no explanation as to why the results would be delayed until Thursday, August 31, with its shares falling 10.8 per cent to $2.96 on the news.

This number is well shy of the $3.50 per share which has been offered for the company in a non-binding, indicative offer from Paine Schwartz Partners, which was announced on July 4.

Costa shares have traded as high as $3.39 following the announcement of the potential change of control of the company.

Costa told the ASX in a brief statement that PSP, which holds a 13.78 per cent stake, had been advised of the latest trading conditions.

“While it remains uncertain if a transaction with PSP will eventuate and at what price, discussions with PSP are continuing,’’ Costa said.

“We expect to be able to provide an update in relation to the transaction in mid/late September.’’

Costa said its unaudited EBITDA-S before material items for the first half would come in at about $150m.

“There has been deterioration in the outlook for later season quality across our citrus category,

the impact of which is currently estimated at approximately $30m, together with softening in

consumer demand within the tomato category,’’ Costa said.

“These are both expected to impact on the full year result, with the full year EBITDA-S expected to remain in excess of the results for CY22.’’

Costa last year posted full year earnings of $214.8m, down 1.6 per cent, on revenues of $1.36bn, up 11.2 per cent.

In February, at the release of its full year result, Costa said it was expecting better growing conditions to provide a tailwind for the business.

“With improved weather expectations for 2023, and La Nina appearing exhausted as we head into more neutral weather patterns, we are forecasting a return to more normal growing conditions which we expect to deliver imported performance,’’ interim chief executive harry Debney said at the time.

This expectation was reiterated at the company’s annual meeting in May, with no further guidance given in the intervening period.

PSP, a US private equity company, assisted with the float of Costa in 2015.

PSP bought its 13.78 per cent interest at $2.60 per share in October last year and followed that up with an unsolicited, confidential proposal in late May.

This followed a “verbal engagement” between Costa and PSP in April in relation to a potential approach in the range of $3.20-$3.30.

The cash bid is subject to a number of conditions and would need sign off from the Foreign Investment Review Board.