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Rubicon sinks deeper into the red

Thursday 1st March 2012

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Rubicon, the forestry-based biotech company, sank deeper into the red in the first half as a strong kiwi dollar and tepid US housing market weighed on subsidiary Tenon’s earnings, and its debt costs rose.

The Auckland-based company made a loss of US$8 million, or 1.4 US cents per share, in the six months ended Dec. 31, from a loss of US$1 million, or 0.4 US cents per share, a year earlier.

Revenue from wood mouldings vendor Tenon was unchanged at US$162 million, though the unit posted a loss of US$2 million on an earnings before, interest, tax, depreciation and amortisation (EBITDA) basis as the strength of the New Zealand dollar eroded export earnings and the US housing market remained in a slump.

The company’s ArborGen unit, a tree seedling company that abandoned a float on the New York Stock Exchange last year, reported flat earnings as its shareholders injected new funds to pay for research, offsetting its commercial tree operations.

“This result, as we have said before, is a long way away from being indicative of the underlying value of our Tenon and ArborGen investments,” chief executive Luke Moriarty and chairman Steve Kasnet said in a statement. “We remain confident that with time, as ArborGen matures and Tenon is supported by a more favourable operating environment, our future earnings results will grow to reflect the true value of both of these two businesses.”

In December, Rubicon’s biggest shareholder Knott Partners boss David Knott joined the board amid lobbying by fellow investor Sandell Asset Management to sell Rubicon or its holding in Tenon. George Karaplis was also elected to Rubicon’s board at the annual meeting.

Rubicon’s consolidated debt rose to US$51 million as at Dec. 31 from US$39 million a year earlier, doubling its finance costs to US$2 million in the period.

To renew its plan for an initial public offering of ArborGen, the company and its fell shareholders will have to source new funding, which may come from them putting in more cash, tapping private capital or seeking new bank finance.

“As the partners have yet to determine the optimal path, the funding demand on Rubicon for the balance of the 2012 calendar is not yet known,” Moriarty and Kasnet said.

The company was more upbeat about its Tenon subsidiary’s outlook with the US Federal Government announcing initiatives to reignite housing in the world’s biggest economy.

“While we will need to see how wider economic events and key housing data track over the next six months before a new ‘direction’ can be called with certainty, these are certainly positive early signs of a recovery emerging,” they said.

Rubicon shares climbed 5.3 percent to 40 cents in trading yesterday, and have gained 11 percent this year. Tenon’s stock was unchanged at 81 cents, and has gained 17 percent this year.


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