Fruitful earnings: Costa Group (ASX:CGC) share price surges 8% on full-year results

2021 was a good year for Costa Group's international segment.

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Key points

  • The Costa Group share price opened 6.6% higher this morning after the company released its full-year earnings 
  • Over 2021, its international segment's revenue increased 30% and its EBITDA was boosted 10% 
  • This year is also looking bright for the company, particularly as its international berry activities are off to a strong start

The Costa Group Holdings Ltd (ASX: CGC) share price is soaring this morning after the release of the company's earnings for 2021.

At the time of writing, the Costa Group share price is $3.25, 8.33% higher than its previous close.

Here are the highlights of the horticultural company's full-year results for the 2021 calendar year:

Costa Group share price launches on boosted international sales

2021 was seemingly a strong year for the grower, packer, and marketer of fresh fruit and vegetables.

Over the 12 months ended 26 December, the company's international segment saw its revenue surge 30%. Now, international customers make up 27% of the company's sales.

The international segment brought in $177.7 million in 2021. Its EBITDA came to $77 million – a 33% increase.

The company's produce segment recorded $929.5 million of revenue and EBITDA of $126.6 million ­– relatively flat with 2020.

Finally, its farms and logistics segment saw $159.4 million of revenue – a 6% improvement on that of 2020. However, its EBITDA fell 1.3% to $14.6 million.

Costa Group ended the period with net debt of $299.2 million and $61.9 million in cash and equivalents.

What else happened in the half?

Costa Group's earnings and sales from berries was strong in 2021. Its premium Arana blueberry variety delivered a 20% price premium while its Tasmanian crop has produced higher than expected volume.

The avocado market, however, saw an increase in supply and was hampered by COVID-19-induced hospitality shutdowns and low price points.

Mushroom production was up 11% in the second half of 2021 and pricing was maintained.

Costa Group's July acquisition of Queensland-based citrus grower 2PH Farms – costing the company around $200 million, much of which it secured through a capital raise – was completed with 100% customer retention.

The business' growing season went as expected and 77% of its product was exported.

However, some citrus regions struggled against cool weather in the second half of 2021, causing issues with grown fruit.

Though, the second half was a better time for tomatoes with a 10% improvement in production volumes compared to the first half. Pricing also improved in the second half.

Internationally, China's berry volumes increased 40% on the prior year, helping to boost revenue by 48%. Morocco's berry volumes also increased 21% in 2021.

The company's emerging regions didn't perform as well. Revenue dropped slightly after delayed crop timing in the United States.

Though, the company provided a 52-week supply of African-grown blueberries to Europe for the first time.

Additionally, many of the company's segments were impacted by COVID-19-related supply chain issues and labour shortages in 2021.

What did management say?

Costa Group CEO Sean Hallahan commented on the company's results for 2021, saying:

It was a record year for Costa's international segment with 30% revenue growth. This supports our investment strategy to expand our production and supply footprint through utilising our world leading blueberry genetics.

The current and projected growth of the middle class in China, the per capita growth in European berry consumption and the opportunities presented by emerging regions, such as India, means Costa is well positioned to benefit as we further invest in growing our international operations.

What's next?

Looking to what 2022 might bring, Hallahan noted early-season China yield and demand are still above expectations.

Its Moroccan berry harvest is also set to benefit from strong demand.

In Australia, berries and tomato yields had a strong start to 2022, while mushroom production volumes have improved significantly.

In 2022, the company's return on invested capital (ROIC) will be driven by the beginning of harvesting its new 50-hectare berry farm in China, a full-year contribution from PH2 Farms, 10 new hectares of tomato glasshouse, high volumes of blueberry varieties, and an expected rebound in the company's Sunraysia grape volumes.

However, avocado production is expected to be below that of 2021 but could be boosted by the return of food service markets.

It's also a citrus 'off'-year and COVID-19 impacts will likely continue to impact labour sourcing and supply chains.

Costa Group share price snapshot

Today's gains have boosted the Costa Group share price back into the green year-to-date.

It is now 7.6% higher than it was at the start of 2022. Though, it's still around 26% lower than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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