Monday 1st November 2021
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ArborGen Holdings Limited (NZX: ARB ) (the Company or ArborGen) has entered into an agreement to sell ArborGen ANZ for NZ$22.25m to Geyser Limited Partnership (Geyser).
The transaction has arisen as a result of the strategic review being undertaken by the Company (as announced on 30 June 2021 https://www.nzx.com/announcements/374791). The Company engaged PwC to assist with the strategic review.
ArborGen ANZ is an operationally separate and significantly smaller operation than ArborGen’s US business. It is forecast to contribute approximately 15+% of Group Revenue in FY’22, but has a lower growth profile compared to ArborGen’s other markets. ArborGen ANZ is currently operating at around its maximum combined productive capacity of approximately 30 million tree stocks per annum in NZ and 5.5 million per annum in Australia, and further expansion of capacity to grow the core forestry and horticulture businesses would require significant additional capital spend. The Board believes that sale proceeds are better deployed in higher growth markets in the US and Brazil.
The Company’s core strategy is to grow the sales of its higher margin proprietary advanced genetic products (Mass Control Pollinated (MCP) and Varietals) in the United States where there is significant identified potential to grow market share and drive advanced genetics adoption. Further investment in the US comes at a time when that business is poised to benefit from decades of investment in developing best-in-class proprietary MCP products, expanding supply through orchards expansions across the US South, and upgrading both industrial and private landowner customers to MCP seedlings. The Company confirms that it continues to be on track to deliver its highest MCP sales year in the US this year with year-to-date MCP sales orders now at approximately 105 million seedlings, 25 million units higher than the prior year. In particular, MCP unit sales to the private landowner segment, where the majority of MCP sales growth will occur are projected to be up over 45% compared to prior year.
Further investment in Brazil comes at a time when ArborGen has grown to become one of the largest commercial suppliers of eucalyptus and loblolly pine seedlings, benefitting from increased recognition of its proprietary advanced genetics, and strong pulp and charcoal markets.
Please see the links below for details
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