ASX 200 down, Woolworths falls, Costa acquires more farms

The ASX 200 fell today, with Woolworths dropping on FY21 significant costs.

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The S&P/ASX 200 Index (ASX: XJO) fell 0.60% to 7,299 points.

Here are some of the highlights from the ASX today:

Woolworths Group Ltd (ASX: WOW)

The supermarket giant announced some significant items that are expected to be recognised in the FY21 result.

The total is a $57 million pre-tax gain. This has been driven by a $220 million gain on the equity value of its interest in Quantium.

It’s recognising $69 million of transaction costs in FY21 relating to the demerger of Endeavour Group as well as the costs associated with buying its stake in PFD Food Services.

Woolworths is going to include a $50 million asset impairment charge for its Metro Food stores. This is due to the COVID-19 impact on sales on key transit traffic locations such as CBD and public transit sites. The impairment charge is for store and lease assets across 13 stores of its network. However, most Metro locations have not been impacted by a decline in customer foot traffic. Management said most stores continue to perform well.

The ASX 200 supermarket giant also said it’s going to recognise $44 million of supply chain redundancy costs relating to the closure of a distribution centre in NSW. Woolworths is investing in a new large 76,000 square metre facility to be built in Wetherill Park to service over 280 stores in NSW and replace its fragmented temperature controlled network. The new facility will cost $400 million, with completion expected in FY24. Benefits will be felt from FY25 onwards.

The Woolworths share price fell around 2% today in response.

Costa Group Holdings Ltd (ASX: CGC)

Costa shares went into a trading halt today after announcing an acquisition. It’s going to do a capital raising to fund it.

The agricultural giant announced it’s going to spend approximately $219 million on buying 2PH Farms, which is the largest citrus grower in northern Australia. Its farming operations are in Central Queensland.

It will also pay an additional $31 million in July 2023 for the purchase of ‘Conaghans’ property, where a new citrus crop is currently being planted by 2PH.

Costa is expecting to realise a number of benefits from the deal, including greater export supply to key Asian markets, exclusive rights to selected proprietary varieties, scale benefits and an extended variety and early season timing.

Debt will fund part of this deal. But the capital raising is a $190 million 1 for 6.33 pro rata accelerated renounceable entitlement offer at $3 per new share.

The ASX 200 share also revealed that it’s expecting underlying net profit after tax (NPAT-S) to be marginally ahead of what was generated in the 2020 calendar year (which was $55.1 million), before taking into account the effects of the acquisition of the capital raising.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

The Soul Patts share price rose by 8.5% in response to yesterday’s news of the planned takeover of Milton Corporation Limited (ASX: MLT), which is an old listed investment company (LIC). Soul Patts was the best performer in the ASX 200.

Soul Patts said in a presentation yesterday that this deal would provide additional liquidity to pursue investment opportunities across multiple asset classes and fund further diversification.

Some of the assets that Soul Patts could look at includes private equity, direct credit, emerging companies, global equities and property.

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