Costa struggles to beat float

Something to prove:Costa Group’s chairman Neil Chatfield, chief executive Harry Debney and Geelong fruit and vegetable businessman Frank Costa. Photo: Josh RobenstoneCosta Group chief executive Harry Debney​ said Australia’s biggest fruit and vegetable company will need to prove itself to investors before it starts moving into positive territory on the ASX.

Costa, which listed on the ASX in July, posted underlying revenue of $723.5 million, 2.7 per cent higher than its prospectus estimate, while net profit was 1.3 per cent higher at $38.3 million.

But its shares slumped 2 per cent on Tuesday to $1.96, marking another day that it has yet to trade above its listing price of $2.25.

“We would always like to get above that,” Mr Debney said. “But, look, we’re a month old, it’s very new to us.

“We don’t have any direct comparables and I think people are going to take a while to understand what we think is a very unique business model.

“We just have to keep delivering above expectations and, as we do, the value of the company will become realised.”

Mr Debney attributed the revenue gain to a 10 per cent gain in its produce category, which is core business and includes berries, mushrooms, tomatoes and citrus.

He said the company had shifted from truss tomatoes to a snacking variety, which had higher margins, while its blueberry and raspberry sales had surged 25 per cent.

“Expansion of our berry plantings, where we now have farms in four states, has further positioned the company as a truly national year-round supplier of premium berries to the domestic market,” he said.

Mr Debney said result “vindicated” the company’s strategy to pursue only four main categories and focus on protective cropping, which is growing fruit and vegetables under cover, intellectual property and brand development.

Among these initiatives includes its blueberry joint venture in Morocco which supplies the European and British markets.

Mr Debney said the company was set to add another 90 hectares of berry plantings in north Africa in FY16 and the following year.

“In terms of the [European and British] market uptake the varieties are doing very well. There has been a very good uptake from the European retailers and there is quite a lot of demand out of continental Europe so we are very bullish about Morocco.”

Mr Debney estimated net profit would rise to $47.6 million in FY16.

“The company is well positioned to capitalise on continued growth opportunities over FY16, with our new 10-hectare tomato glasshouse commencing full production and a first harvest expected in October 2015.”

The company did not declare a final dividend.