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Rubicon says FY earnings beat guidance as ArborGen moves out of R&D phase

Monday 28th May 2018

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NZX-listed forestry investor Rubicon says it beat its target of doubling annual earnings as its ArborGen unit shifts into full commercialisation, posting a muddle of numbers including a new balance date and pared back business units. 

Auckland-based Rubicon aligned its balance date with its fully-owned subsidiary ArborGen, which sells and develops advanced genetic seedlings to improve forest productivity and is its only asset, to Sept. 30 from June 30 and today released first-half accounts. The firm annualised those earnings to give a like-for-like comparison rather than rely on the statutory six-month versus 15-month periods on different balance dates in its accounts. 

Rubicon said its US-GAAP earnings before interest, taxes, depreciation and amortisation was US$4.3 million for the year to March 31 on gross profit of US$18 million. That's the measure ArborGen would report in a US listing situation and involves the full expensing of all US$5.6 million research and development activities as US GAAP does not allow the capitalisation of these costs.

The company had previously said it expected annual ebitda to more than double to US$3.4 million and chair Stephen Kasnet today said "these numbers are ahead of our previously announced earnings targets, in what turned out to be a very difficult operating environment". An extremely tough hurricane season during the year hit seedling sales by some 20 million units. 

Looking ahead, Rubicon is targetting earnings "approaching" US$7 million for the March 2019 year, dependent on weather and demand conditions. 

“It should be clear now that ArborGen’s heavy product development phase and the related past ebitda losses which peaked at US$18 million, are now well behind us,” Kasnet said. 

He added that ArborGen is now firmly ebitda positive and its forecasts are for it to be net earnings and operating cash-positive from now as the firm ramps up sales of its advanced genetics products in the US and develops its position in Brazil.

Kasnet also said the company "will likely be aided in our future earnings targets by the NZ government’s positive approach to forestry planting and regional development." The government has announced an annual New Zealand planting goal of 100 million seedlings per annum for the next 10 years – 1 billion in total. Given approximately 70 million are currently being planted commercially, the government ‘top-up’ is around 30 million per annum.

"As ArborGen has six nurseries spread throughout the regions in both of the North and South Islands, we are very well placed to assist the government in reaching its goals," said Kasnet. 

The programme is expected to generate sales in the March 2020 fiscal year, he said. 

The statutory figures include Rubicon's stake in the Tenon Clearwater unit, which it sold in January. The financial statements show Rubicon reported a net profit of US$2 million in the six months ended March 31 on revenue of US$35 million. It posted a loss of US$6 million on revenue of US$6 million in the 15 months ended Sept. 30, 2017, including the negative earnings contribution from the divested Tenon Clearwater. 

The stock recently traded at 27.5 cents down 1.8 percent but has lifted 44 percent so far this year. 


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