CGC
A very good, hitherto fore rare update from CGC.
They could not have had a worse 3 years.
Closed borders (fruit-pickers become scare).
Tightest labour market in 50 years (no-one likes picking fruit, and if they can avoid it they will, in absence of big pay rises).
Wettest weather on record, for the east coast.
All 3 are deadly to farming.
Throw in freight and shipping costs going to the moon and you’ve got your so cliched “perfect storm”. If I were a better writer I would find another term.
Oh, and a big, long running capex program, including a bet on avocados that didn’t work.
However.
From the AGM.
The weather impacts faded. Good growing conditions returned. The harvest looks good. Input costs have subsided, somewhat. Workers are becoming easier to find. The borders opened.
The international business is doing well. People like their product.
Profitability is improving.
All of that capex has set the business up well, as it exits the dark times.
The below is backwards looking, from the prior result, nothing to do with the AGM update, but I show it to suggest they’ve had no troubles growing revenue.
Quite a few of the CGC segments are still “young” in that trees and plantations will mature, and grow, producing more, and alongside a bunch of other stuff that helps that happen (more acres/hectares not least amongst them) total Costa output should increase for quite a few years.
Costa spent many years over valued. The share price far exceeded any plausible estimate of what the underlying assets could do (particularly as these assets are not infinitely scalable software solutions, but rather just fruit, which you eat).
As Costa went through its many hiccups, some forgivable, some less so, it gradually wound up at a material discount to those assets. The market thought “CGC can’t get a good return from all that capex, all that CFI”.
I don’t know if they will get the kinds of returns they targeted internally, originally, but I do think they are a good chance to be more profitable than the market expects over time.
Long run, the free trade agreement with India (okra for avos) rescues that segment of the market from oblivion, and underlying Costa, the competitive IP is likely desirable to others.
So, a good AGM update.
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