Sour citrus: Extreme weather bruises Costa’s orange business

Australia’s largest fresh food producer Costa Group has downgraded the earnings guidance for its citrus business after excessive rainfall and lower temperatures, brought on by La Niña, damaged its orange and mandarin crops.

ASX-listed Costa Group’s citrus is grown in three key regions: roughly 40 per cent in the Riverland area (South Australia), 40 per cent in Sunraysia (straddling the NSW-Victoria border), and 20 per cent in central Queensland.

The company said on Monday that adverse weather conditions had taken a heavy toll on its citrus crop across the country.

“The weather impact has been pretty consistent run across the whole country, which is very unusual – normally you have a north-south divide – but this year, La Niña and other influences have had an effect right across the country,” said Costa interim CEO Harry Debney.

The ASX company had flagged earlier this year that rain bombs would result in poorer quality citrus. Those conditions have continued, leading to higher labour, pest and disease control costs.

Costa Group’s Queensland citrus crop has been harvested and packed, while its southern crops in the Riverland and Sunraysia regions are about 80 per cent through the harvest, with late navels and some mandarins still to be packed.

The lower quality crop had resulted in “considerably lower” pack out volumes, which is down “at least 20 per cent” on expectations, Debney said. This is expected to impact the bottom line of Costa’s citrus business.

“The net outcome to date plus the forecast for the balance of the citrus season is expected to translate into full year EBITDA-S for the Citrus category that is considerably lower than previously forecast.”

The revised earnings guidance was poorly received by the market, with investors sending Costa Group’s shares down 11.5 per cent to $2.04.