Rubicon gains on Arborgen maturing

Wednesday 6 Jun 2018

Rubicon says FY earnings beat guidance as ArborGen moves out of R&D phase – NZX- listed forestry investor Rubicon says it beat its target of doubling annual earnings as its ArborGen unit shifts into full commercialisation, posting a muddle of numbers including a new balance date and pared back business units.

Auckland-based Rubicon aligned its balance date with its fully-owned subsidiary ArborGen, which sells and develops advanced genetic seedlings to improve forest productivity and is its only asset, to 30 Sept from 30 June and this week released first- half accounts. The firm annualised those earnings to give a like-for-like comparison rather than rely on the statutory six-month versus 15-month periods on different balance dates in its accounts.

Rubicon said its US-GAAP earnings before interest, taxes, depreciation and amortisation was US$4.3 million for the year to March 31 on gross profit of US$18 million. That's the measure ArborGen would report in a US listing situation and involves the full expensing of all US$5.6 million research and development activities as US GAAP does not allow the capitalisation of these costs.

The company had previously said it expected annual ebitda to more than double to US$3.4 million and chair Stephen Kasnet today said "these numbers are ahead of our previously announced earnings targets, in what turned out to be a very difficult operating environment". An extremely tough hurricane season during the year hit seedling sales by some 20 million units.

Looking ahead, Rubicon is targeting earnings "approaching" US$7 million for the March 2019 year, dependent on weather and demand conditions.

“It should be clear now that ArborGen’s heavy product development phase and the related past ebitda losses which peaked at US$18 million, are now well behind us,” Kasnet said.

He added that ArborGen is now firmly ebitda positive and its forecasts are for it to be net earnings and operating cash-positive from now as the firm ramps up sales of its advanced genetics products in the US and develops its position in Brazil.

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