The Costa Group Holdings Ltd (ASX: CGC) share price is tumbling lower following the release of its half year results.
At the time of writing, the horticulture company's shares are down 4% to $3.25.
Costa share price falls after reporting modest profit growth
- Revenue flat over the prior corresponding period at $612.4 million
- Directly attributable COVID-19 costs of $2.5 million
- Earnings before interest, tax, depreciation, amortisation, and the fair value movements in biological assets (EBITDA-S) up 4.3% to $124.4 million
- Net profit after tax-S up 3% to $44.4 million
- Fully franked interim dividend of 4 cents per share
- Net debt of $208 million, representing leverage of 1.4x
What happened in FY 2021 for Costa?
For the six months ended 30 June, Costa reported a flat revenue of $612.4 million and a 3% increase in net profit after tax to $44.4 million. A key driver of this was its International business, which delivered a record result.
International revenue increased 25% over the prior corresponding period thanks to positive pricing, yield, and demand. This was supported by its premium varieties in China, which continue to attract a significant price premium. Management believes this supports the company's continuing development of its China farming footprint across multiple locations in Yunnan Province.
The strong performance in the International business offset a mixed performance by the Domestic business. It struggled with inclement weather and weaker avocado pricing. The latter was driven by sustained higher volumes and a contraction in the foodservice sector.
What did management say?
Costa's CEO, Sean Hallahan, was pleased with the half and particularly the performance of its International business.
He said: "Our international segment through our operations in China and Morocco continues to make an ever-increasing contribution to our overall performance and has delivered record results. This has not only occurred because of increased berry plantings but is also an endorsement of our world leading blueberry genetics, which continue to be well received by consumers across Asia and Europe and are attracting a price premium."
"Domestic produce performance was mixed for the half, with avocado performance impacted by high volumes and resultant pricing below forecasts. Our berry category delivered a positive performance with generally favourable pricing across our four main berry varieties. Table grape and first half citrus yields from the Sunraysia (Vic) region were unfortunately impacted by a New Year's Day hail storm. While there were relatively positive demand and pricing conditions for mushrooms our ability to fully benefit was not able to be realised due to lower production volumes."
What's next for Costa?
Failing to give the Costa share price a lift today was news that it is on track to achieve its guidance in FY 2021.
Mr Hallahan explained: "We have confirmed our full year forecast which is in line with that disclosed at the 2PH acquisition and capital raise, which includes CY21 EBITDA-S and NPAT-S being marginally ahead of CY20. There is still a significant amount of domestic activity to occur over the second half, with positive momentum driving the remainder of the citrus season, especially with strong export into Japan, China and Korea, and the main berry season expected to deliver healthy growth versus previous comparable period."
The Costa share price is now down 21% in 2021.
