Announcement
FLLYR: ARB: ArborGen Holdings Annual Results - Year Ended 31 March 2021
01:46pm
ARB
27/05/2021 13:46
FLLYR
PRICE SENSITIVE
REL: 1346 HRS ArborGen Holdings Limited
FLLYR: ARB: ArborGen Holdings Annual Results - Year Ended 31 March 2021
ArborGen Holdings Reports US$3.2m Net Profit,
Projects Increasing Advanced Genetics Sales
o Pleasing result despite headwinds and challenges in 2021, with a solid
year-over-year performance
o Significant improvements in net earnings, operating cash flow, US-GAAP
EBITDA
o Strengthened balance sheet and renegotiated banking terms and tenure
o Positive progress on cash flow initiatives
o Increasing supply and growing demand for higher value, advanced genetic
(MCP ) seedlings
o Well positioned for FY22 with 30% increase in MCP seed harvested
o Advanced genetic (mainly MCP) seedlings expected to increase from 31% of
FY21 total US loblolly sales volume, to 35-40% in FY22
o US-GAAP EBITDA guidance for FY22 of US$13 - $14.5 million - a material
increase on FY21 US-GAAP EBITDA which included government grant income
o Further growth of MCP expected in future years from maturity of orchards
and flowers pollinated in FY21
o Strong housing growth and carbon credits provide significant growth
opportunities
o Added opportunity to extend proprietary intellectual property into other
crop species
ArborGen Holdings Limited (NZX: ARB) has announced an after-tax profit of
US$3.2 million for the year ended 31 March 2021 and is projecting rising
availability and sales of its genetically-enhanced seedlings to the
plantation forestry sector.
Excellent progress was made on ArborGen's core strategy to grow supply and
sale of its proprietary advanced genetic products (MCP seedlings) in its
largest market, the US, where it is the unparalleled leader. The company is
now positioned to realise the gains from over two decades of investment, with
proven MCP performance at commercial scale, increased market awareness of the
value of MCP products and an increasing supply of MCP seed.
Results highlights (audited results for the year ended 31 March 2021):
o Profit growth in line with expectations despite Covid impact
o Doubling of US-GAAP EBITDA (1,3,4) to US$11.3m, up 109% in line with the
increased guidance provided in May 2021 (US$11-$11.5m)
o Material improvement in Net Profit after Tax to US$3.2m (4) ($2.7m loss in
FY2020)
o Strong operating cash flow of US$9.9m, up 106% (4)
o Reduction in net debt to US$27.4m, down $2.2m
o Global seedlings sales were down approximately 10%, to 391 million largely
driven by consequences of the Covid pandemic such as sawmill closures and a
shortage of planting crews due to temporary suspension of H2-B visas into the
US
For the new fiscal year ending 31 March 2022, ArborGen is targeting increased
US-GAAP EBITDA of US$13m to $14.5m, driven by increased availability of its
proprietary MCP seedlings in the US, improving markets in all regions, and
increasing recognition of the benefits of its proprietary genetics in the US
and Brazil. This target represents significant growth on FY21 which included
Covid related government grant income.
Chief Executive, Andrew Baum, said the business made good progress during the
year in improving operational performance and cash generation. Pleasingly,
after three years of constrained supply, increased MCP seed and, in turn,
seedling production is now offering substantial margin growth potential.
"Last year's cone harvest (completed in late 2020) saw a substantial increase
in MCP seed production, particularly in our severely constrained Eastern US
(Coastal and Piedmont) regions, allowing us to increase our MCP seedling
production this year by over 30%, or approximately 30 million seedlings. The
margin growth potential for ArborGen is substantial as MCP margins are 6-8
times higher than OP margins on an absolute basis.
"Added to this, we have also recently completed our 2021 MCP pollination
activity which saw an unprecedented number of flowers, resulting in a 35%
increase in MCP bagging and pollination activity (5) over the prior year.
Subject to uncontrollable factors, such as extreme weather, the increase in
this recently completed 2021 MCP pollination activity will drive a
significant boost in MCP seedling supply for the fiscal year ending March
2024."
[ GRAPH ]
Turning to the immediate outlook, Chairman David Knott said strong tailwinds
were positioning the business well for FY22.
With 50% of adults in the US now fully Covid-vaccinated, and the expectation
is that 75% to 85% will be vaccinated by August of this year. Regulations
around H2-B non-immigrant labour visas have eased, and strong underlying
demand for wood, especially softwood, is driving an expansion of sawmill
capacity, which will in turn support strong demand for softwood seedlings
this financial year and beyond.
In New Zealand, demand is being driven by replanting of the "wall of wood"
forests established in the late 1980s to mid-1990s and new forest
establishment to meet government climate change commitments.
In Brazil, ArborGen's orders to date are nearly 70% higher than at this time
last year. The company is projecting increasing sales in Brazil based on
increasing softwood exports, recently-announced pulp mills, strong demand for
eucalyptus pulp and charcoal products, expansion of ArborGen's sales and
marketing teams, and rising recognition of the value of its proprietary
products.
ArborGen continues to progress a range of initiatives to minimise the effects
of adverse weather events.
These include building an inventory of reserve seed, reducing supply risk
through geographically dispersed orchards and nurseries, a diversified age
profile for orchard trees, and nursery procedures protecting vulnerable
younger seedlings.
Mr Knott said that beyond converting customers to ArborGen's higher-value
genetics, the company had continued to drive initiatives to improve cash
generation performance.
These included reducing discretionary overhead costs and capital expenditure,
increasing collaboration income, and improved utilisation of nursery
equipment.
Improved funding arrangements with Synovus Financial Corporation provided
ArborGen with an additional US$4.5 million of working capital.
Mr Knott said that "ArborGen is now well positioned to further build on our
market leading intellectual property, extensive capabilities and proprietary
products. Our team responded with agility and resilience to the Covid
pandemic, which affected families, communities and businesses in all our
regions. We remained focused on our core goals and are confident of
delivering an improving performance in FY22 and increasing value to
shareholders."
FOOTNOTES
1 US-GAAP EBITDA is US-GAAP Earnings Before Interest, Tax, Depreciation and
Amortisation. ArborGen uses US-GAAP EBITDA when discussing financial
performance. This is a non-GAAP financial measure and is not recognised
within IFRS. Non-GAAP financial measures should not be viewed in isolation
nor considered as a substitute for measures reported in accordance with GAAP.
Management believes that US-GAAP EBITDA provides useful information, as it is
used internally to evaluate performance, and it is also a measure that equity
analysts focus on for comparative company performance purposes, as the
measure removes distortions caused by differences in asset age, depreciation
policies and debt:equity structures.
2 MCP - Mass Control Pollinated
3 FY21 US-GAAP of $11.3m excludes public company/corporate costs of US$1.3m.
Further detail and reconciliation provided in FY21 financial statements and
investor presentation.
4 Includes other significant items comprising government grant subsidies of
$3.7 million, partially offset by expenses in the period of $1.7 million
relating to seedlings written-off and incremental Covid expenses incurred in
the period (2020: a loss of $3.9 million).
5 Bagging and pollination activity involves the bagging of flowers followed
by injection of selected pollen into bags to produce targeted offspring trees
utilising ArborGen's proprietary IP and expertise.
ENDS
For assistance or further information, please visit www.arborgenholdings.com
or contact:
Andrew Baum
Chief Executive Officer (US-based)
T: +1 888 888 7158
E: ambaum@arborgen.com
Sharon Ludher-Chandra
Company Secretary & Performance Improvement Director (NZ-based)
T: +64 21 898 624
E: info@arborgenholdings.com
For media assistance, please contact Jackie Ellis on +64 27 246 2505 or email
jackie@ellisandco.co.nz.
About ArborGen Inc
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 www.arborgen.com.
End CA:00372976 For:ARB Type:FLLYR Time:2021-05-27 13:46:14
Click here
to view related attachments.
