Why the Costa share price crashed 25% lower today

The Costa Group Holdings Ltd (ASX:CGC) share price has crashed lower today after downgrading its profit guidance for calendar year 2019…

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The worst performer on the S&P/ASX 200 index on Thursday has been the Costa Group Holdings Ltd (ASX: CGC) share price.

The horticulture company's shares fell as much as 25% to a 52-week low of $3.88 this afternoon following the release of its annual general meeting presentation.

When Costa's shares hit that new low, it meant they had lost 57% of their value since peaking at $9.08 just under a year ago.

Why did Costa's shares crash lower?

At the start of the year the company's shares came under pressure after a surprise deterioration in trading conditions led to the company falling well short of its guidance for the six months ending December 31.

The company also downgraded its guidance for the 12 months to June 2019 from low double digit growth to being largely flat.

But one positive was that management reiterated its calendar year FY 2019 guidance for NPAT-SL growth of at least 30%. This was once again reiterated in Costa's February update.

But unfortunately due to a number of issues this month, the company no longer expects to achieve its calendar year NPAT-SL guidance.

These issues include lower mushroom prices, increasing competitive pressures on pricing for its Moroccan produce, high waste and low yields in a major raspberry variety, and a female fruit fly appearance during a routine trapping at the Impi farm at Stuart's Point.

In light of the above, management now expects calendar year NPAT-SL to be in the range of $57 million to $66 million. This will be an increase of between 0.7% and 16.6%, which is well short of its previous guidance of at least 30% growth.

Elsewhere on the ASX 200 today, heavy declines have been experienced by the GUD Holdings Limited (ASX: GUD) share price due to a broker downgrade and the Nearmap Ltd (ASX: NEA) share price due to general weakness in the tech sector.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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