Australian (ASX) Stock Market Forum

CGC - Costa Group Holdings

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CGC
Has continued on its way
retracing some of its large fall.
Left to early and didn't re visit.
But all in all following a common reaction to such a large move.
Regardless of the direction of the move.
 
Miner said:
Good morning folks
This morning 10 AM Friday 11 Jan, I tried to reach CEO's office. Harry is on leave :) returning on Monday. Michael the man designated to take all calls and respond to Shareholders' query today as well as when Harry returns. Obviously the $1.8 Million pay check man can have good sleep when shareholders are losing sleep. For the record, I was not an investor when the market slumped. But put a gamble to buy some last night.
More interesting Goldsman Sachs has published this BUY recommendation today, upgrading their previous ones with an upgrade stating long term story intact and cyclical . Personally I do not want to put money on Goldman's recommendation alone.
This morning the price has slightly better than last night's closing price with a volume of transaction 1.8 million already ???
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Hello CGC posters
This was the response from CGC received yesterday . Notwithstanding the reply is limited to some extent to my expectations, but I am appreciating that Harry did find time to reply within a short time frame. This is an excellent sign to treat your shareholders. My list of hall of fame therefore adds Harry as well :) . As promised on my previous postings, sharing the communication with you. BTW, the CGC is slowly rising up but once a stock market darling falls fast, does not bring it back to same position too quickly unless something substantial change happens. On personal ground availing the purchase @$4.6, my small holding is looking better to warrant a hold and watch .
" Extract of message from Michael and Harry from CGC EMT"
Dear xxx ,
thank you for your email. Below is a reply from our CEO Harry Debney to your email.

Yours faithfully

Michael Toby


Dear xxx


Thank you for your email expressing your thoughts on our trading update and the company’s performance. Such frank feedback from our shareholders, whether be it negative or positive is always welcome.

A business like ours is always subject to short term market conditions and operational issues, many of which are outside our control. Therefore please be assured that we take our disclosure obligations very seriously and have acted accordingly in informing the market (by way of a trading update released to the ASX on 10th January) of present trading conditions in a timely manner reflective of changing circumstances.

As you will appreciate, we are not in a position to comment on the appropriateness of the market’s response to the revised guidance we provided for the period to 30 June 2019. However, I note that, as reiterated in our release to the market yesterday, our guidance for the Calendar Year 2019 remains unchanged from what was advised at our AGM.

Given the market’s reaction you are certainly entitled to express your views on how you perceive the company to be performing. Together with our Executive Team I can assure you we have no intention of resting on our laurels with respect to past performance, or taking our eye off the ball when it comes to growing the business in a responsible and profitable manner.

We are all acutely aware that in order for Costa to maintain its market leading status in the Australian fresh produce industry, we must continue to be disciplined and innovative in the way we manage and grow the business. The fundamentals of our business continue to be strong, but we are also ever vigilant in identifying ways in which we can make the business operate more efficiently through reduced cost and increased productivity.

Once again I thank you for your feedback.

Best Regards
Harry Debney

==========


Michael Toby
Corporate Affairs Manager

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p: 03 8363 9071
f: 03 8363 9099
e:
275 Robinsons Rd Ravenhall VIC 3023
Locked Bag 1000, Sunshine, VIC, 3020
www.costagroup.com.au


From: Costa Group <info@costagroup.com.au>
Sent: Friday, 11 January 2019 12:37 AM
To: Costa Info <info@costagroup.com.au>
Subject: Detected Possible Impersonation SPAM Contact Form Submission
 
Since that huge price fall in response to their downgraded guidance, price has stabilised and formed a three month base. Price is looking likely to break out and there is an acceptable RR setup for me here. It's most definitely a reversal and a "fill the gap" opportunity.

Agricultural companies all experience poor growing conditions at some stage. CGC's hit should be temporary.

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Motley Fool Reports
https://www.fool.com.au/2019/05/30/5-things-to-watch-on-the-asx-200-on-thursday-30/

Costa Group share price on watch after downgrading its profit guidance
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James Mickleboro
Motley Fool 30 May 2019

Costa Group Holdings Ltd (ASX: CGC) share price could come under pressure on Thursday following the release of its annual general meeting presentation which included updated guidance for calendar year 2019." The Costa Group Holdings Ltd (ASX: CGC) share price could come under pressure on Thursday following the release of its annual general meeting presentation which included updated guidance for calendar year 2019.

What was in the presentation?
As well as providing its shareholders with a breakdown on the company’s performance and achievements over the last 12 months, management provided an update on its recent trading performance.

According to the release, the trading environment through March and April was generally favourable with an improved outlook for a number of Costa’s categories including tomatoes, avocados, and berries. The prospects for the forthcoming citrus season are also good.

However, the mushroom category has had to contend with lower pricing levels due to extended summer temperatures affecting short term demand and the company has had issues in Morocco which have led to delayed fruit maturity and increasing competitive pressures on pricing.

Furthermore, earlier this month the Driscoll’s grower network started to see high waste in the major raspberry variety from a condition called ‘crumbly fruit’. As a result, Costa has seen low yields and harvest labour inefficiencies which are substantial.

And finally, last week a female fruit fly was found during a routine trapping at the Impi farm at Stuart’s Point.

Unfortunately for Costa, this means authorities are now implementing a 15-kilometre exclusion zone from the Riverland fruit fly free region.

The company is in discussion with the relevant state and national agencies but believes that approximately 17,000 tonnes of its citrus crop may not be packed in its Riverland sheds. If this proves to be the case, the fruit would need to be sent to third party packers in Sunraysia and also cold treated to meet export protocols.

In light of this, management has had to downgrade its calendar year 2019 guidance.

It now expects EBITDA-SL in the range of $140 million to $153 million and NPAT-SL in the range of $57 million to $66 million. This will be an increase of 12% to 22.4% and 0.7% to 16.6%, respectively, compared to the prior corresponding period.

As a comparison, in February management had forecast calendar year 2019 NPAT-SL growth of at least 30%.
 
I have been looking at this today, and it seems to me that it might be time to put some of these in the bottom drawer.

I bought a few today at $3.92, will consider buying more if they continue to fall.
 
Entered for the July Stock tipping competition as a possible quick recovery stock. Also a possible short-term trade with an acceptable Risk:Reward is shown below:

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Gotta be honest - seeing how cheap avocados, blueberries, strawberry’s etc are atm I can’t help but think they’ll get trashed again.
 
Very hard stock to trade IMHO. Even a short-term bounce is hard to achieve and those gap downs along the way are stomach upsetting possibly diarrhea inducing.
 
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The Costa Group Holdings Ltd (ASX: CGC) share price won’t be returning to the ASX boards today as planned.

Its trading halt was due to end this morning, but the horticulture company has instead requested a suspension for upwards of five more trading days.

Costa explained that it has requested “a voluntary suspension pending an announcement to the market in respect of its trading outlook, which it is not in a position to make at this time.” It “currently expects that the voluntary suspension would be required for up to 5 trading days.”

Costa certainly is having a year to forget. Due to a range of different factors the company has downgraded its profit guidance numerous times already and looks set to do it again next week.

It all started in January when subdued demand for tomatoes, berries and avocados led to its first guidance downgrade. Instead of low double-digit growth for the 12 months to June 2019, it downgraded guidance to a largely flat result.

Then in May at its AGM, Costa downgraded its calendar year 2019 profit guidance due to a deteriorating operating environment. This included weak mushroom demand, production issues in Morocco, lower raspberry yields, and fruit flies at its citrus operation in Stuart’s Point.

At that point Costa still expected its calendar year earnings to be higher year on year, but just not as much as previously forecast.

However, in August the company released its half year results and revealed an 8.4% decline in EBITDA-SL. This led management to warn that “trading and forecasting remains challenging with potential further downside risk.”

Given the time that Costa is taking to release this latest update, it seems inevitable that another downgrade is coming. I suspect it could also amend its longer term guidance.

If its earnings guidance is downgraded, it could put the company in danger of breaching its debt covenants.

In light of this, there is speculation that it may launch a capital raising to clear some of its debt. However, given its poor performance this year, this would likely be at a material discount and highly dilutive.

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Wow.
Thanks for that post.
It is quite incredible how much trouble they appear to be in when not long ago they were going well.
 
JTLP said:
Great call by me! Little bit of market observation and what do you know, trading halt for guidance update. I’m expecting blood.
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Looks like you were right on the money on this one JTLP.

Knobby22 said:
Wow.
Thanks for that post.
It is quite incredible how much trouble they appear to be in when not long ago they were going well.
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Yeah, I remember it was a market darling in late 17' and well into 18' with all the usual broker and consensus support for higher prices. I also got in and out of the stock once, and glad to have not held right through the downgrades this year.
 
$2.20 is quite literally, giving the farm away. Bloody hell that’s a steep discount. And highly dilutive.
 
Most of the produce CGC are in have high labour input costs, so they are largely limited to the Australian market. To then rapidly increase production in a limited market seems somewhat self defeating.
Great for the consumer to get cheap berries, avocadoes and mushrooms but not likely to be profitable for CGC in the near future.
 
Expect the worst when Costa trades again this morning

New shares offered at $2.30

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