High demand for key crops in Australia and strong berry growth and citrus exports overseas have helped Costa Group (ASX: CGC) record a 29.7% rise in net profit after tax to AUD$49.3 million for the 2016 financial year.
The group also passed the AUD$1 billion mark in transacted sales for the first time.
“This year has seen Costa complete our first full financial year as a publicly listed company and while it is very pleasing to have exceeded our prospectus forecast earnings, the results also demonstrate the strength of our business model underpinned by our high quality diversified portfolio,” CEO Harry Debney said in a release.
The company highlighted positive demand for mushrooms with stable industry volume growth, while Costa’s production refinements have led to yield growth.
In berries, Costa was able to overcome setbacks in the first half from hailstorms on its New South Wales farms, while category growth has continued “unabated”.
The group has seen new raspberry production come on to the market, while there has also been a recent success in blackberries with Driscoll’s genetics passing quarantine with a small trial planting scheduled in FY2017 – this is especially relevant given Australia’s strict biosecurity stance on blackberries, which are classed as a weed pest.
“The contribution of raspberries to our produce performance has been exceptional this year and follows six years of continuous growth where raspberries now rank equally as significant as our blueberry crop,” Debney said.
Costa Group has accelerated its raspberry and blueberry expansion program in Tasmania and Far North Queensland, and a small blueberry farm was acquired this month in Tasmania to supplement shoulder season volumes.
“Due to the success of our berry growth projects, Costa now has greater than 50% of blueberry production outside the main production period of August to December,” Debney said.
“This gives us a significant advantage over our competitors with a full 12 month market offer.”
The company now has 2,171ha of planted citrus in the Riverland region across five farms, and the category delivered “outstanding results” through a combination of yield, quality and price in the year. The export market was described as “buoyant”, particularly from the Japanese market, which resulted in 59% of the crop being exported.
In grapes, Costa’s early season grape farm in Queensland performed above expectations, as did its grape export program.
The year was challenging in tomatoes due to price deflation, but a new 10ha glasshouse focused on snacking tomatoes has delivered better than expected yield performance.
Costa Farms and Logistics continued to improve earnings from distribution centers, and there was some negative impact from banana price deflation due to industry oversupply; however, bananas are not one of the group’s major categories.
International growth
Costa’s international results were positively affected by the success of its blueberry varieties in the U.K. and continental European markets, as well as Driscoll’s use of Costa varieties in the Americas.
The African Blue season in Morocco exceeded expectations due to favorable growing conditions which enabled a longer growing season and 76.6% lift in transacted sales.
“Expanding production in Morocco through our African Blue joint venture means that our blueberry varieties are now available in volume in the UK and Europe, with retailers routinely rating our varieties as preferred product, commanding a price premium,” Debney said.
The Moroccan project now has 208ha planted across five farms, including 13ha of substrate production. New Costa varietes are also being trialed in the North African country.
For Costa’s joint venture in China with Driscoll’s, the first raspberry harvest was completed at Shiping, Yunnan earlier this year, and the first blueberry harvest is set to run from December to March.
A second farm in China is currently being established in Manlai near the Burmese border.
