Australia's biggest fruit and vegetable producer, Costa Group, has seen its value smashed for the third time following another profit downgrade and a big capital raising to shore up a heavily indebted balance sheet.
Costa's shares initially tumbled 25 per cent on opening after being suspended from trading on the ASX for more than a week.
At 10:30am (AEDT) Costa shares had recovered marginally to be down 16 per cent to $2.69, a three-year low.
Shares had been put in a trading halt as the company scrambled to organise a heavily dilutive capital raising from investors to stave off the threat of breaching its loan obligations with its bankers.
The $176 million raising, offering shareholders one share for every four they own at $2.20, was initially sold at a steep 36 per cent discount to Costa's last share price on October 21.
The company has now issued its fourth profit downgrade in a little over a year — and third since January — as it has struggled to combat both drought and oversupply in some of its key products, an oversupply Costa itself has helped drive.
The hot, dry conditions have affected the yield and quality of avocados, blueberries, raspberries and citrus; with blueberries also hit by an abundance of low-cost fruit on the market.
The company also announced it would close its mushroom production in Tasmania and Queensland and shift operations to South Australia.
Having been floated in 2015 at $2.20, Costa achieved market-darling status, soaring to almost $9 a share in June last year on the back of its entrepreneurial approach to the growing and marketing of five key supermarket staples.
Rapid growth at a price
The company spent around $400 million on the rapid expansion of logistics chains and acquisition of citrus, avocado, tomato, berry and mushroom farms both domestically and offshore, in China and Morocco.
It also drove up debt perilously close to the loan covenant limits imposed by its bankers.
Costa said it was pleased with the demand from institutional investors and large funds for the new shares on issue.
The institutional allocation raised $87 million and was made at a slight premium to the offer price at $2.30, with around 88 per cent of the entitlements taken up.
"We are very pleased our shareholders have strongly supported the equity raising, which is part of a prudent approach to ensure Costa's balance sheet will continue to allow the company to deliver on current and future growth initiatives," Costa Group chief executive Harry Debney said in a statement.
Smaller retail investors will be offered their portion of the new shares on November 6.
