Just before the market closed, Costa (ASX: CGC) made an announcement about the hailstorm event in the Riverland, South Australia region.
Costa is Australia’s largest horticultural business. It produces glasshouse tomatoes, berries, avocados, mushrooms and citrus fruit. It has over 4,500 planted hectares of farmland, 30 hectares of glasshouse facilities and seven mushroom growing facilities across Australia. Costa also has international interests, with majority owned joint ventures covering six blueberry farms in Morocco and three berry farms in China.
Costa’s Hail Setback
A couple of days ago there was a hailstorm in Riverland, South Australia. Costa has been working on what the impact could be for the farms.
It would normally be too early to say if there is an impact, however because Costa is going through a capital raising at the moment, management thought it would be appropriate to provide an update.
Three of Costa’s seven citrus farms have been affected by the hailstorm, those were Yandilla, Kangara and Amaroo. These farms have a total of around 1,700 hectares and of this, approximately two thirds sustained little to no impact.
The trees on those parts of the farms didn’t sustain any structural damage, with the only damage being done to early stage fruitlets that form this time of year.
It’s expected that there will be no impact in the 2021 year or on the yield in 2020, but there may be an impact on the quality of the crops which may hurt pricing.
A normal part of the process is for some fruitlets to fall in early summer, so Costa expects more of the falls to be the damaged fruitlets in early summer.
Any Financial Impact?
If there is damage to some of the crops then EBITDA-SL (click here to learn what EBITDA means) could be lower by $4 million to $6 million and NPAT-SL (underlying net profit) would be subsequently hurt by $3 million to $4 million.
Costa concluded: “However, given the preliminary nature of this assessment and it being too early to predict how other parts of Costa’s portfolio will perform in CY20, it is too early to determine whether any impact from this event will result in a change to the recently announced CY20 forecast.”
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