Wednesday 24th November 2021
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ArborGen Holdings Limited (NZX: ARB ) has announced its unaudited results for the six months to 30 September 2021, reporting a period of positive revenue and earnings growth in its US and Brazil markets.
The six-month consolidated result is presented showing the ArborGen’s New Zealand and Australian businesses as discontinued.
The sale of the ANZ business for $22.25m is now unconditional and completion scheduled for 30 November 2021. The proceeds from the sale will afford ArborGen with greater strategic and financial flexibility, strengthening our balance sheet so the company can pursue growth opportunities.
ArborGen’s core focus remains on growing sales of its higher margin proprietary advanced genetic products (Mass Control Pollinated (MCP) and Varietals) in the United States and the company is on track to deliver its highest MCP sales year in FY22, with year-to-date MCP sales orders now at approximately 104 million seedlings, 24 million units higher than the prior year.
Further growth of MCP is expected in future years, driven by increased supply from flowers pollinated in FY21 and ongoing maturity of orchards, and increasing adoption from both industrial and private landowner customers. A number of large industrial customers have publicly stated MCP targets ranging from 75% to 100% of their plantings as maturing stands of MCP trees demonstrate compelling value gains, with a much higher percentage of valuable sawtimber generated per acre. ArborGen is the clear MCP market leader in the US, responsible for 80% of all MCP sales in the addressable market.
The US business is now poised to benefit from decades of investment in developing best-in-class proprietary MCP products, increasing supply through orchard expansions across the US South, and upgrading both industrial and private landowner customers to MCP seedlings.
ArborGen is replicating its US strategy in Brazil, to convert the market to products with superior genetics from its portfolio of licensed and owned proprietary products. After years of oversupply, both pine and eucalyptus seedling markets are now supply constrained. ArborGen is the only company providing superior, proprietary genetics to Brazilian pine and eucalyptus growers and is well positioned to meet demand as it addresses production capacity.
Strong underlying growth drivers – US housing growth, Brazil pulp and charcoal demand and carbon markets – are supporting ArborGen’s positive outlook, with proceeds from the sale of the ANZ business to provide flexibility to invest in new and existing opportunities.
The company has re-confirmed guidance of US GAAP EBITDA to be in the range of US$11.3 to $11.7m for FY22, subject to any future impact from supply chain and COVID related issues in the US. This includes $2 million related to ArborGen ANZ’s six-month performance, and $0.9 million of non-recurring costs.
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