Costa Group Holdings Limited (Costa; ASX: CGC), Australia’s leading grower, packer and marketer of fresh fruit and vegetables today announced its financial results for the half year ended 30th June 2019 (1H CY2019).

Here are the key headlines of the CY2019 results:

• At the half year, the business was tracking broadly in line with the lower end of the revised target range outlined at the company’s AGM. 2H CY2019 results will be supported by a strong citrus crop with 75% to be harvested from July to November.
  
• Adverse conditions during the Moroccan blueberry season, low mushroom demand, raspberry quality and impact of citrus water cost and fruit fly has culminated in a difficult 1H CY2019.
  
• The trading environment across tomatoes, avocados and berries have been favourable, with the outlook for the 2019 citrus season strong, although later in timing.
  
• At this time, challenges and uncertainties remain with market conditions in mushrooms and berries in the second half.
  
• China expansion is on track to achieve the five-year roll-out plan by 2020 with planning underway for further expansion in 2021. 45-hectare expansion at Agadir, Morocco has been completed and will provide for earlier season production.
  
• Under the company’s current long-term growth agenda pre-harvest production costs will continue to increase ahead of future earnings.

• Refinancing of senior debt facilities completed with extension of term to three- and four-year tenors and upsize of facilities to $500m.
  
  Financial results are as follows:
  
• Revenue of $573m – growth of 11.8% on the prior comparative period.
  
• Statutory NPAT of $41.1m, inclusive of material items and amortisation of intangibles relating to the African Blue acquisition, and adoption of IFRS16 from January 2019.

• EBITDA before SGARA, leasing and material items (EBITDA-SL) $82.4m – 8.4% lower than the prior comparative period.

• NPAT before SGARA and leasing (NPAT-SL) of $40.9m – $7.2m lower than the prior comparative period.

• Leverage of 2.59x EBITDA-SL at June 2019.

• Dividend of 3.5 cents per share, fully franked (record date 12 September 2019, payment date 3 October 2019) recognising major growth initiatives in train.

Costa Group CEO Harry Debney noted that 1H CY2019 had proved challenging for the company.

“We were faced with a number of challenges during 1H CY2019, including adverse conditions during the Moroccan blueberry season, low mushroom demand, varying raspberry quality, and water costs and fruit fly impacting the citrus category. All of these occurrences made for a difficult period,” said Mr Debney.

However, the trading environment across tomatoes, avocados and berries has been favourable, while the outlook for the 2019 citrus season is strong, although later in timing.

“At the half year, the business was tracking broadly in line with the lower end of the revised target range outlined at the company’s 30th May AGM. 2H CY2019 results will be supported by a strong citrus crop with 75% to be harvested from July to November,” said Mr Debney.

Management is concentrating on mitigating the challenges the company has faced in CY2019 and is highly focused on major business initiatives to ensure strong delivery in the 2020-2022 period.

“The company has a number of initiatives across our categories which are very much focused on improving our performance and profitability. This includes expanding our berry varietal breeding program – both sub-tropical and tropical, commercial plantings of new citrus varieties and trialling of high density, trellised and protected avocado cropping,” said Mr Debney.