Announcement
GENERAL: ARB: ArborGen Holdings' Market Update
02:14pm
ARB
09/04/2020 14:14
GENERAL
NOT PRICE SENSITIVE
REL: 1414 HRS ArborGen Holdings Limited
GENERAL: ARB: ArborGen Holdings' Market Update
9 April, 2020
Expansion of Brazil Operations
Today, ArborGen announced the continued expansion of its Brazil operations
with the lease of a eucalyptus nursery from Brotale in the town of Ribas do
Rio Pardo, in the state of Mato Grosso do Sul in Brazil. The nursery in Ribas
will begin by producing 12 million eucalyptus seedlings, including
genetically improved clonal material, and the plan is to increase its
production to 15 million seedlings by 2021. This lease follows the lease of
a 15 million eucalyptus seedling nursery in the town of Inimutaba, Minas
Gerais state in Brazil, also from Brotale, in November, 2019.
ArborGen Brazil is one of the largest commercial suppliers of eucalyptus and
pine trees seedlings in Brazil with its eucalyptus products also sold in Sao
Paulo, Mato Grosso do Sul, Minas Gerais, Mato Grosso and Parana states.
ArborGen's CEO, Andrew Baum, said "We are excited to announce the lease of
the nursery in Ribas, which will further strengthen ArborGen's presence and
ability to make our portfolio of advanced eucalyptus seedling genetics
accessible to landowners in Mato Grosso Do Sul."
Gabriela Monnerat, the General Manager of ArborGen Brazil, said "To further
expand our sales and marketing capability, we are also adding two additional
people to our sales team - one in Minas Gerais and the other in Mato Grosso
Do Sul. ArborGen's seedlings also offer growers excellent yield and high wood
density, making them ideal for pulp, charcoal and energy markets, and we are
confident, with these recent additions, we will continue to strengthen our
position in Brazil."
The Brazilian forestry industry is one of the largest, fastest-growing in the
world, and Brazil is the world's largest producer and exporter of hardwood
pulp. The eucalyptus market utilises approximately 700 million seedlings per
year.
COVID-19 and General Update
Commenting on the current COVID-19 situation, ArborGen's chairman, Dave
Knott, said, "ArborGen continues to operate all its global nurseries and
orchards while strictly adhering to region specific government guidelines and
regulations. The safety and wellbeing of our employees is paramount to us,
and as the crisis has evolved we acted to ensure that in the vast majority of
our geographies, any employee who was able to move to remote home working was
supported to do so.
"Last month we announced that in NZ, in compliance with strict requirements,
ArborGen will continue to undertake critical irrigation and associated
activities necessary to ensure the survival and viability of the current
year's crop leading up to the 2020 lifting season.
"In ArborGen's largest market - the US, the US Department of Homeland
Security has defined the forestry industry as an "essential critical
infrastructure workforce". As such, our operations across all nurseries and
orchards continue to progress with all typical activities continuing as
planned, while ensuring compliance with all appropriate state specific
regulations and requirements. The 2019-2020 crop lifting and sales season is
now complete, and preparations are now underway for the 2020-2021 crop
season. Customers continue to indicate they are committed to their planned
2020-2021 planting programs. That said, given the rapidly evolving market
conditions surrounding the impact of COVID-19, the company is pro-actively
taking additional steps including reducing discretionary costs and capital
spend to mitigate any downside risk.
"In Brazil, while most of ArborGen's customers are continuing with their 2020
planting programs, planting rates have slowed moderately as planting crews
adjust to new health and safety measures. On a positive note, as pulp and
paper is forestry's primary end-market in Brazil, forestry is considered an
essential activity. ArborGen's combined internal and outsourced eucalyptus
and pine production capacity is approximately 100 million seedlings.
"In respect of fiscal year ending March 2020, in our September 2019 Interim
Review, we stated that we continue to believe that we are on track to meet
our guidance that ArborGen's US-GAAP underlying earnings1,2 will be circa 20%
higher than the prior year's US$6.1 million. While we are still finalising
our year end results, we believe our US-GAAP underlying earnings1,2 for
FY2020 will be at least 40% higher than the prior year's (FY2019) US$6.1
million comparative."
Commenting on fiscal year ending March 2021, Mr Knott said, "Setting aside
COVID-19, we expect fiscal 2021 US-GAAP underlying earnings to be higher
again than prior year (subject to uncontrollable factors). While we have had
no indications of significant changes from our customers regarding their
2020-2021 planting programs, we are however cognisant of the macro economic
conditions due to COVID-19 and the potential risks to our business. We
continue to closely monitor all markets that we operate, and will keep the
market apprised of any material events."
1. US GAAP underlying earnings is a non-GAAP earnings measure which does not
have a prescribed meaning by GAAP, and may not be comparable to similar
financial information presented by other entities. Please refer to Note 30 of
the 31 March 2019 Financial Statements.
2. For the avoidance of doubt, this figure is pre-public company costs of
approximately US$1.5 million, and excludes abnormal items.
ArborGen
ArborGen is the largest commercial global seedling supplier and a leading
provider of advanced genetics, for the forest industry. Employing
state-of-the-art technology, ArborGen is developing high-value products that
significantly improve the productivity of a given acre of land by enabling
our customers to grow trees that yield more wood per acre with greater
consistency and quality in a shorter period of time. For more information,
please visit ArborGen's website at www.arborgen.com.
Brotale
Brotale has been in the Brazilian Eucalyptus seedling market since 2007 and
produces, in addition to eucalyptus, banana and sugarcane seedlings with
advanced technology. Brotale, with the lease of the Eucalyptus seedling
nursery, will now focus its activities in the sugarcane and Banana seedling
area and transfer the Eucalyptus activities to ArborGen.
End CA:00351560 For:ARB Type:GENERAL Time:2020-04-09 14:14:40
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