Low prices for mushrooms have hurt fruit and vegetable giant Costa Group.Credit:Rohan Thomson
Costa will issue new shares at a price of $2.20 per share under the offer,at a steep 36.4 per cent discount to the stock's last traded price of $3.46 on October 21,before the company went into a lengthy trading halt.
In a statement to the ASX shortly after 5pm Monday,Costa said"previously foreshadowed challenges facing the company have continued to crystallise".
These included the ongoing,extreme dry conditions which were now affecting the size and yield of key crops for the company;avocados,blueberries and the late-season citrus crop.
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One problem facing Costa has been raspberries that crumble and cannot be sold. Revenue has also been hit by persistent,low prices for mushrooms.
"With raspberries,the financial impact of raspberry crumble continues to build with the season peak still to come. Intensive mitigation work is being done but this is taking longer than expected. Looking forward the impact for 2020 is expected to moderate,"Costa said in a presentation accompanying the announcement.
Costa also said it would pause its 10-hectare glasshouse expansion at Guyra outside Armidale in the NSW due to concerns about water security and accelerate the closure of its older mushroom facilities in Queensland and Tasmania. The mushroom closures will trigger a one-off impairment of up to $70 million.