Costa Group posts 6 per cent surge in half-year sales, profit

Australia’s biggest fresh fruit and vegetable producer has defied COVID-19 and drought setbacks to post positive half-year results.

Costa Group’s citrus and grape orchard at Renmark, SA.

FRUIT and vegetable grower Costa Group has defied drought and the global effects of COVID-19 to post strong half-year results with revenue and profit up more than 6 per cent.

Shares in Australia’s largest fresh produce grower surged 10 per cent on Friday morning to more than $3.33 each following the company’s announcement that revenue was up 6.8 per cent to $612.4 million and profit was up 6.4 per cent to $43.4 million.

The $1.19 billion company said its Australian operations had “recovered” from weather and drought challenges over summer, but admitted drought wiped off $15 million from its berry and tomato categories.

Its farms in China and Morocco have exceeded expectations over the half-year to June 28, with an “exceptional” yield across China due to improved agronomic interventions and favourable weather conditions.

Costa chief executive Harry Debney said while adverse weather and drought late last year and early this year has impacted the company’s bottom line over the past six months, it has recovered.

“These historical conditions should have no material impact in 2HC20 or beyond and there is broad based forward momentum in demand and pricing over our Australian portfolio leading into the second half of CY20,” Mr Debney said.

COVID-19 has cost the company $3 million in the six months in direct costs and impacted earnings by $5 million due to market disruption for its Morocco operation.

Costa’s mushrooms have been in strong demand as more Australians cook at home and many opt for the company’s packaged offerings rather than loose mushrooms.

Heat and drought led to a lighter citrus harvest, however this was partially offset by strong export and domestic demand and improved pricing compared to last year. A hailstorm in November last year wiped $8 million off the earnings of its citrus crop.

This year marks the beginning of a new chapter for the Melbourne-headquartered company as it assumes the mantelpiece of Australia’s biggest avocado grower and marketer just three years after venturing into production of the fruit.

The company has $42 million of growth projects underway in the second half of the year, including expansion in China and at its glasshouse tomato growing facility in Guyra, NSW.

Net debt has increased 2.9 per cent to $181.7 million.

An interim dividend of 4 cents a share, fully franked, will be paid on October 8.

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