Costa Group has again cut its earnings forecasts and revealed a $176 million issue to save the company from being crippled by rising debt, poor trading conditions, drought, high water costs and weak pricing for its fruit and vegetables.
A big loss for generics pharmaceuticals maker Mayne Pharma in 2018-19 surprisingly produced a big gain, meanwhile listed horticulture producer and distributor Costa Group has reported a 15% drop in statutory interim profit.
Costa Group has announced its fourth downgrade for the year, now expecting 2019 net profit of $28m and operating earnings (EBITDA) of $98m. Macquarie notes tomatoes are the only produce category to meet second half expectations.
Citi notes pricing for mushrooms has been unusually weak this year. This is Costa Group's largest domestic product category. The weakness should abate in coming months but the broker remains cautious about forecasts.
It was a litany of disaster for Costa in May. Variable harvest conditions for Moroccan blueberries, not cold enough for mushroom demand, crumbly raspberries and a fruit fly-spotted in one of the companies seven citrus orchards.
Macquarie believes the company is well-positioned for growth and on track to achieve its targets for five-year berry plantings of 240ha in China by 2020. The international business is a driver of the company's target for net profit growth of 30% or more in 2019.