Costa Group CEO Harry Debney to bow out

Harry Debney is set to bow out as the chief executive of fruit and vegetable company Costa Group after 10 years at the helm.

The exit will occur over the next nine months, with the company embarking on an internal and external search for a successor in what chairman Neil Chatfield termed as an ''orderly'' transition into retirement.

The company produces mushrooms, tomatoes, blueberries, avocados and citrus fruit, and Mr Debney has guided it through a volatile time including a public float on the Australian Securities Exchange in 2015 and a horror 2019.

Costa plunged to a loss in calendar 2019 through heavy impairments after four profit downgrades in 12 months and a heavily discounted $176 million capital raising to shore up a weakened balance sheet.

But the business has been steadied even though the coronavirus pandemic has delivered another set of difficulties and volatile conditions.

Retail sales of the group's produce have been ''solid'', Mr Debney told the group's "virtual" annual general meeting on Friday. But sales to hotels, restaurants and cafes have been hit by shutdowns from government restrictions, although demand is starting to improve as curbs are loosened.

"The majority of our core produce categories are now experiencing positive demand and pricing from the retail sector,'' Mr Debney said.

"Farming operations are meeting yield and quality expectations and have not been adversely affected by COVID, although mitigation costs are considerable,'' he said.

Solid retail demand

Mr Debney is a non-executive director on online retailer Kogan.com, as well as running the Costa Group.

Kogan.com, whose sales revenue more than doubled in April as vast numbers of shoppers shifted online during the COVID-19 lockdown, hit a sharemarket capitalisation of $1 billion on Friday.

Costa Group shares have risen 24 per cent from $2.50 on March 23, when the ASX hit its low point as fears about the economic damage from COVID-19 were at their worst, to about $3.10 now. The company has a sharemarket capitalisation of $400 million.

Mr Debney said on Friday that the Australian operations of Costa had been through a period of ''high volatility'', but overall demand and pricing for the fruit and vegetable portfolio was solid, in particular in the retail sector which remained the group's primary market and focus.

But there had been a reduction in demand in the food service sector because of the closure of restaurants and cafes.

School closures and shutdowns in hospitality had also hit the consumption of snacking tomatoes. But Mr Debney said the group's Perino brand were still a ''standout'' in the category.

Costa Group had some strife with the mushroom category in 2019 after an industry oversupply, but a restructure and improving conditions means that business has turned around.

"Our mushroom category is experiencing an improved year with strong consumer demand and pleasing yield and quality from our streamline three site operations,'' Mr Debney said.

Costa closed older facilities in Queensland and Tasmania last year.

About 65 tonnes per week of production had come out of the system, which had helped pricing improve.

An expansion of its mushroom facilities at Monarto, about 70 kilometres from Adelaide in South Australia, has been completed and production is steadily ramping up and will hit full speed by July.