Costa Group shares have crashed by nearly a quarter after Australia’s largest horticultural company said it was facing problems with everything from crumbly raspberries to decreased mushroom consumption to fruit flies.
Costa Group now says it expects to receive $140 million to $153 million in revenue and make $57 million to $66 million in profit for the year ending June 30.
In late February it had forecast its profit would increase 30 per cent, meaning it was expecting to make around $73.6 million.
At 1335 AEST Costa shares were down $1.27, or 24.52 per cent, to $3.91 – their lowest level in more than two years.
Chairman Neil Chatfield told shareholders at Costa Group’s annual meeting on Thursday that the grower had experienced “an unprecedented level of volatility across virtually all of our categories and seen our earnings negatively impacted”.
A condition called “crumbly fruit” has hit Driscoll’s raspberries, in which the berries fall apart when handled, causing low yields and substantial labour harvest inefficiencies, chief executive Harry Debney said.
With the group’s berry operations in Morocco, weekly harvest yields have been variable, and the season outlook has declined.
Unseasonably warm weather in May has weakened demand for mushrooms in Australia, which Costa supplies 45 per cent of.
A fruit fly found in routine trappings at a farm in Stuart’s Point, NSW, may mean 17,000 tonnes of Costa’s citrus crop may have to be sent to third-party packers in Sunraysia rather than Costa’s Riverland sheds.
Finally the company’s tomato operations in Guyra, NSW, are facing challenges with regard to water, and the company is uncertain about water allocations to its seven citrus orchards from July.
Still, Mr Debney said he was “positive overall” about the prospects for the citrus season.
“No one said it was easy to run an agricultural company,” he told shareholders.
Mr Chatfield reminded shareholders that no other sector that is subject to weather and climate risks like agriculture is, and said executives were experienced enough not to get unnecessarily side-tracked with short-term events.
Mr Chatfield also said he was frustrated with the slow pace of progress in opening up export markets to Australia’s “world leading” blueberry varieties and called on officials to do more.
“It is important that the federal government take a whole of government approach when negotiating such trade access, and that the necessary technical and trade negotiation experts are all involved,” he said.