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CGC - Costa Group Holdings

Dona Ferentes

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Today, Costa has entered into binding agreements (subject to the satisfaction of customary conditions) with a group of companies (2PH or Pressler entities) to acquire the business and assets of 2PH Farms Pty Ltd and its related entities, a Central Queensland based citrus grower for an upfront consideration of approximately $200 million in cash.

Costa will pay an additional $31 million in July 2023 for the purchase of the Conaghans property, where a new citrus crop is currently being planted by 2PH, subject to certain conditions.

total upfront funding requirement is approximately $219 million (including stamp duty and transaction costs) and is to be funded with the proceeds of a fully underwritten pro rata accelerated renounceable entitlement offer with retail rights trading to raise $190 mil
 
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I worked as a mandarin picker on 2PH, enormous place, was shut down for an extended period because of some blight. The management were extremely 'picky' about how you cut the fruit stems because it was catering to the fussy Japanese market where the customers bought like one fruit at a time and would reject the slightest blemish. Horrible hateful place. Uncertainties of production and markete would not make me think of CGC as a more attractive buy after this but don't really know. That's one family that owned 2PH so it has paid off if they're still owners.
 
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I worked as a mandarin picker on 2PH, enormous place, was shut down for an extended period because of some blight. The management were extremely 'picky' about how you cut the fruit stems because it was catering to the fussy Japanese market where the customers bought like one fruit at a time and would reject the slightest blemish. Horrible hateful place. Uncertainties of production and markete would not make me think of CGC as a more attractive buy after this but don't really know. That's one family that owned 2PH so it has paid off if they're still owners.
Could Costa transform the Mandarins into Lemon with their Midas touches:)
 
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some details of the CR -
Tomorrow 25 June will tell the market how the financial institutions accepted the rights offer at $3.
The rights are not necessarily for all shareholders as the term has been used 'certain shareholders'.
80 pc of citrus (meaning lemon :) and mandarin) price is yet to be determined and about 11 pages of key risk statement and then 4 pages of international restriction. I felt sleepy after reading the first page.
Monday 28 June the cat will come out of the bag.
With the volume of CR, I do not see market will rejoice the issue price and will show its teeth to CGC. :(
1624546837689.png
 
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Yes, likely to drop the share price as the issue price is well below what it was trading at. Glad to be out, even though I sold after the huge drop on 27 May.
 
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One of my picks for the 2022 tipping competition.

It's not a stock I know too much about but my reasoning comes down to an overall inflationary environment and this company seemingly being large enough to have some pricing power for non-discretionary products.

It's not a stock I'm well informed about however so don't take my comments as serious analysis - I'm not holding with real money. :2twocents
 

JohnDe

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"...2021 financial year, Costa delivered on its stated guidance with a $64 million underlying Net Profit After Tax (before fair value movements in biological assets and material items – NPAT-S), a 16.2% increase on CY20.

The Board declared a fully franked final dividend of 5.0 cents per share for the second half of CY21, bringing the total dividend payment for CY21 to 9.0 cents per share, fully franked.

This result further reinforced the growing importance of our international segment and the role it will play into the future as a key growth driver. It was a record performance, with increased berry plantings in our China operations delivering higher volumes and our premium blueberry varieties...."

 

Dona Ferentes

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What we should do with CGC, is see if there's anything to learn from this recent price dump?
.... that there may be another price dump?

Now in a Trading Halt, but only after dropping to $2.53, or down 12%, this morning.

Must be poorly telegraphed bad news, but on which of many fronts?
  • higher input costs
  • recent flooding, unseasonal rain and thus crop damage
  • inability to secure a workforce, especially in transient/ harvest capacities
  • inability to pass costs through to consumer
  • supply line disruptions
  • all of above
 

JohnDe

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.... that there may be another price dump?

Now in a Trading Halt, but only after dropping to $2.53, or down 12%, this morning.

Must be poorly telegraphed bad news, but on which of many fronts?
  • higher input costs
  • recent flooding, unseasonal rain and thus crop damage
  • inability to secure a workforce, especially in transient/ harvest capacities
  • inability to pass costs through to consumer
  • supply line disruptions
  • all of above

Shares in agribusiness Costa Group Holdings are in a trading pause after falling more than 12 per cent lower to $2.53 just before noon.
The fall came after an analyst warning about a potential earnings impact from lower citrus supply and the entrenched avocado oversupply situation.
In a note, Credit Suisse analyst Larry Gandler cut Costa to neutral, from outperform, and slashed its target price to $2.80 (from $3.70) because while demand is strong for agribusiness Costa's produce, "supply and logistics remain a challenge".
"It appears the 2022 citrus season is not matching our previous expectations.
"The 2022 citrus supply is hampered by lower quality/disease in the Southern States (navel oranges) and logistics issues (lack of freight capacity and higher shipping cost)."
Credit Suisse believes Costa is navigating the situation better than the competition, but lower quality fruit and shipping delays are lowering prices.
"We now expect CGC AUD citrus export prices to be flat despite a near 10 per cent depreciation in the AUD-USD."
Separately, avocado pricing has not quite recovered to Credit Suisse's modelling.
"We lowered our citrus and avocado revenue/price for 2022. We carried some Avocado weakness into future years because the industry is entrenched in oversupply."
 
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.... that there may be another price dump?

Now in a Trading Halt, but only after dropping to $2.53, or down 12%, this morning.

Must be poorly telegraphed bad news, but on which of many fronts?
  • higher input costs
  • recent flooding, unseasonal rain and thus crop damage
  • inability to secure a workforce, especially in transient/ harvest capacities
  • inability to pass costs through to consumer
  • supply line disruptions
  • all of above
Good afternoon Dona Ferentes
Unfavourable earn from lower citrus supply and the avocado oversupply situation.

Kind regards
rcw1
 
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Shares in agribusiness Costa Group Holdings are in a trading pause after falling more than 12 per cent lower to $2.53 just before noon.
The fall came after an analyst warning about a potential earnings impact from lower citrus supply and the entrenched avocado oversupply situation.
In a note, Credit Suisse analyst Larry Gandler cut Costa to neutral, from outperform, and slashed its target price to $2.80 (from $3.70) because while demand is strong for agribusiness Costa's produce, "supply and logistics remain a challenge".
"It appears the 2022 citrus season is not matching our previous expectations.
"The 2022 citrus supply is hampered by lower quality/disease in the Southern States (navel oranges) and logistics issues (lack of freight capacity and higher shipping cost)."
Credit Suisse believes Costa is navigating the situation better than the competition, but lower quality fruit and shipping delays are lowering prices.
"We now expect CGC AUD citrus export prices to be flat despite a near 10 per cent depreciation in the AUD-USD."
Separately, avocado pricing has not quite recovered to Credit Suisse's modelling.
"We lowered our citrus and avocado revenue/price for 2022. We carried some Avocado weakness into future years because the industry is entrenched in oversupply."
Hi JohnDe
Sorry I just read your post… Its been awhile!! Take care. Kind regards rcw1
 
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will probably hate myself by the end of the week

but have lobbed a SMALL , low-ball bid in the market

i normally avoid 'fruit ' stocks and much rather hold the landlord ( like say RFF )
 
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Market Update
Half Year results
Ahead of the release of half year results, Costa notes its operations performed well in 1HCY2022 and
unaudited results are anticipated to be in line with the Company’s expectations. The International
and Domestic produce segments are both expected to finish the half year ahead of the
corresponding prior half year (1HCY2021).
Further detailed information will be provided at the 1HCY2022 results release on 26 August 2022.
Citrus season progress update
Across the portfolio the citrus season has seen strong demand and pricing, with fruit continuing to be
successfully exported to China and other key Asian markets, with an improvement in shipping services
versus the prior year, albeit transit times and service performance are still not at pre pandemic levels.
The 2PH business is predominantly operating in line with pre-acquisition expectations with volumes
above forecast, however some quality issues have been encountered due to weather events occurring
over recent weeks. Certain varieties have been affected, and at this stage of the harvest this has
resulted in a lower percentage of first grade product versus the prior year.
Whilst we are currently approximately halfway through the 2PH harvest season, given the first four
months of the year are non-sales period, the majority of 2PH earnings are in the second half of the
year.
The Riverland and Sunraysia crops are circa one third through the season as at the beginning of July,
and demand for all varieties remains strong with increased pricing versus the prior year. However,
weather events have also resulted in some quality issues which have become evident as the season
has progressed, most notably with Navels, and more so in Sunraysia than the Riverland. This has
impacted pack out rates versus the prior year. Similar to 2PH, the Riverland and Sunraysia operations
earnings are predominantly recognised in the second half of the year.
The full impact of these quality issues across the citrus portfolio on final pricing outcomes and second
half earnings cannot be determined until the citrus season is further progressed. With the benefit of
the season being more advanced, a more fulsome update will be provided at the investor briefing
following the 1HCY2022 results release on 26 August 2022.
Unit 1, 275 Robinsons Road, Ravenhall VIC 3023 – Locked Bag 1000, Sunshine VIC 3020
p|+613 8363 9000 f|+613 8363 9099 |www.costagroup.com.au
Investor briefing
An investor briefing will be held at 10.00am (AEST) on Friday 26 August 2022 following the release of
the 1HCY2022 results. The briefing is a webcast and will be accessible via the investor centre on our
website at www.costagroup.com.au
END
Authorised by David Thomas, Company Secretary, Costa Group Holdings Limited.

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( DYOR )

i do not hold this share

will leave that order in all week , but looks like i will be missing out , so far
 

JohnDe

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Another poor decision by Costa Group, or good long term planing?

It starts with the much maligned avocado – once a symbol of decadence blamed as the reason Millennials were failing to enter the property market. A national oversupply – after green-eyed farmers planted trees with gusto to cash in the booming market – has pushed retail prices to a record low of $1 each.
Farmers are producing 22 avocados per Australian each year – a 26 per cent increase in the past 12 months. Rabobank associate analyst Pia Piggott says it is just the beginning of what she calls an “avo-lanche”.
Costa Group, Australia’s biggest fruit and vegetable grower and wholesaler, is planting 40 hectares of avocado trees that are faster growing, producing a higher yield and are more water efficient. In the past year, the company’s shares have dived 22.9 per cent to $2.56.
Ms Piggott says it is expected domestic avocado production will surge 40 per cent, or 50,000 tonnes, in the next five years, hitting 173,000 tonnes. “The good news is consumers’ appetite for the likes of smashed avocado and avo smoothies remains healthy, both in Australia and abroad. Australian households are eating more avocados, as well as spending less on them,” Piggott says.
But she adds domestic demand is not enough to lap up the excess supply and farmers will have to look to export markets to preserve their margins. Avocado exports have already surged by more than 350 per cent in the past year, with Singapore, Hong Kong, Malaysia, Japan and the Middle East snapping up the fruit.
“The rise of avocado consumption in Asia – as a growing middle class embraces the health aspects of the fruit – presents an ongoing opportunity for exporters worldwide,” Piggott says.
 
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