Australia: Citrus and tomatoes help drive up profits at Costa in H1

February 26 , 2018

Costa has also reached a conditional agreement to acquire an avocado operation in a new growing region for the company.

Leading Australian produce company Costa Group Holdings (ASX: CGC) saw its net profit after tax rise 14.5% in the first half of 2017-18 to hit AUD$28.6 million, bolstered by an “exceptional” season for citrus and an excellent performance for tomatoes.

In its results announcement today for the half-year ended Dec. 31, 2017, the company also pointed to ongoing growth in the domestic berry program, an increase in its stake in Moroccan berry company African Blue to 86% and further M&A activity in avocados.

“These results are indicative of a strong 1H FY2018 with our citrus category continuing to make a standout contribution, fuelled by growing export demand across our key markets including Japan, USA and China,” said CEO Harry Debney.

“Tomatoes also made an excellent contribution boosted by the snacking segment’s performance,” he said.

Strong tomato category results were underpinned by a reconfiguration of glasshouses and a change in planting schedules which have smoothed volume away from traditional peak production in summer to a more consistent yield throughout the year.

Higher pricing amidst short supplies led to third party avocado sales growth, and today the group announced it had reached a conditional agreement to acquire Coastal Avocados farms and packing operations on the New South Wales mid-north coast, bringing Costa’s total number of growing regions for the crop up to four.

Coastal Avocados has total plantings of 79 hectares across the farms and a further 24 hectares of greenfield development land next to the existing site at Comboyne. These operations currently produce 200,000 trays per annum but that figure is expected to rise to 300,000 at maturity.

Meanwhile, a further 300,000 trays from third party growers are also processed annually through Coastal’s newly upgraded packing facility.

Costa also announced two further avocado acquisitions were completed as of January, 2018, including the Gunalda farm in Central Queensland and the Burness farm in Far North Queensland.

“As a result of these acquisitions Costa will, on completion of the Coastal Avocados acquisition, have a production and supply footprint stretching from February through to December,” Debney said.

“We are now well under way to executing our strategy to build avocados into our fifth core vertically integrated produce pillar and to ultimately achieve 52 week supply.

“Costa believes there are considerable growth opportunities in the avocado segment and it is one that we have set a three year goal in which to become the market leader.”

In other acquisition activity, Costa completed its acquisition of Impi Orchards in December, including 77 hectares of quality citrus plantings and a further 65 hectares of development land, producing a mix of oranges, mandarins, grapefruit and lemons.

In berries, the company also launched its new premium 200g punnet of Arana blueberries, which were grown at its Corindi farm in New South Wales. Further volume of this variety is expected in the next financial year following a 31-hectare substrate conversion during FY2018.

The expansion of Costa’s Tasmanian Berry Distribution Centre was also completed on schedule, allowing for the handling of peak December volumes and greater storage capacity for blueberries in a modified atmosphere facility. Elsewhere in the state, new blackberry plantings have reportedly established well with a small harvest of the Elvira variety expected this year.

Adapting to tough weather in China

Costa’s operations in China were difficult in the first half but the company reports the upcoming main berry harvest expected between March and May is in line with expectations.

“Conditions in China over the past summer were challenging, with wet weather hampering growth project development and requiring more focused pest and disease management from our very experienced management team on the ground who are able to address these issues as soon as they occur,” Debney said.

After wet weather hindered development work, lessons have been applied to the FY2019 planting plan with preparatory  groundworks now being undertaken at the new Manhong site for a 65-hectare expansion in advance of the next season.

The group also emphasized a significant focus on further developing team capability and safety culture in China, with the engagement of a safety specialist to align Chinese operational standards with best practice Australian standards.




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