Off-year for Costa Group: Revenue loss due to small volumes

The figures for the six months, ending on 31 December 2018, of the Australian company, the Costa Group show a decrease. They were lower than those in the same period of the previous year. This was expected, as it was announced in August of last year. The citrus tree cycle is one of the contributing factors for this decline.

Costa booked a turnover of A$477,6 million, more than EUR300 million). This is compared to the A$489,3 million (EUR308 million) in 2017. There are three reasons for this decrease in revenue. In the first place, the citrus harvest as lower as it is an ‘off-year’. This means there was less citrus available.

The quality of this product also declined toward the end of the season. This was reflected in November and December's sales prices. All of this resulted in 15.3% fewer sales for this category. Seventy-three percent of this company's packaged citrus products are exported. Of this, Japan is good for 40%. Then follows the US, New Zealand, and China. The company is planning on expanding its market to Korea this year.

Snack tomatoes and mushrooms
The snack tomatoes' good harvest could not be fully absorbed by the retail sector. This meant that more of these tomatoes were supplied to wholesalers. On average, this resulted in a lower price.

Fewer truss tomatoes were harvested, and prices were under pressure. A new variety of truss tomato is now being cultivated. This variety has a better shelf life, better yields, and a higher resistance to disease. This resulted in a 2.3% decrease in sales.

The mushroom results met expectations. This despite compost's variable quality having a negative impact on production. The continued drought is pushing straw prices up. These high prices will continue into 2019. The revenue for this sector ended up being 2.3% lower than last year.

Soft fruit's sales climb
Blueberries booked mixed results. There was a good production of Corindi. Lower volumes of this variety from Northern Queensland stand in contrast. The market performed somewhat better than expected. This was thanks to the good start of the season.

The supply of Arana premium was well received by the market. Raspberry results were described as "disappointing". There was a solid 6.3% growth in turnover.

During these six months, avocado cultivation was mainly done in the northern parts of New South Wales. This was supplemented by batches from Queensland. Prices were challenging because of the overlap from Central Queensland at the start of the season.

At the end of the season, there was an overlap of cultivation from Western Australia. This resulted in higher volumes of avocado on the market. These third-party volumes also increased by 14% to more than 1 million trays. In these six months, exports to South-East Asia also began. Sales were 1.1% higher.

Lower EBITDA
Outside of Australia, the Costa Group has a subsidiary in Morocco for blueberry cultivation. There, harvesting will begin in the first half of this year. Recently, investments were only done in cultivation.

In China, the raspberry harvest went as expected. However, volumes were lower than last year. This was as a result of the crop cycle. The blueberry harvest has started off well with a positive market. The large sizes, in particular, are bringing in good prices. At the group's cultivation site in Bailang, disease pressure reduced the estimated crop size.

EBITDA over these six months came to A$33,8 million (EUR21,2 million). This is A$ 27.7 less than a year earlier when the EBITDA was A$61,5 million (EUR38,7 million).

Costa also announced that, as of 28 February, Kevin Schwartz would be stepping down as the company's Non-executive Director. He is the founder and CEO of Paine Schwartz Partners. He has served on Costa's Board since 2011. As of 1 April, Jane Wilson will take on the position of the company's independent Non-executive Director.

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