Thursday, August 18, 2022

ArborGen to focus on US and Brazil

ArborGen Holdings has concluded a year-long strategic review and the directors have refocused the company on forestry and carbon markets in the south of the United States and in Brazil.

The NZX listed company with a sizeable historical New Zealand register of smaller investors sold its NZ and Australian forest nurseries last November for $22.25 million, strengthening its balance sheet.

These were sold to a consortium led by Hugh Fletcher.

ArborGen says it remains the world’s largest commercial pine seedling supplier and a leading source of advanced genetics in the forest industries.

It has 5000 smaller NZ investors in the company formerly called Rubicon, dating back to its days as a subsidiary of Fletcher Challenge.

Following the strategic review ArborGen said its core end market, the US housing market, is supported by very strong long term underlying fundamentals.

These are years of underbuilding in housing following the global financial crisis, and strong demographic trends towards young people wanting their own homes.

One forecast of growth in demand was that lumber sales will increase by 24% by 2025.

Supply issues have hit western Canada companies, which have been purchasing mills in the US South, and supplies from central Europe are also disrupted.

“As the leading commercial supplier of proprietary advanced genetics loblolly seedlings in the US South, ArborGen believes that it is well positioned to leverage this growth.”

ArborGen is also actively engaged with various carbon registries and major carbon companies, participating in protocol development for plantation forestry.

In the past 12 months all options for the company had been considered and researched, from reinvestment to sale.

At the end of May the company reported its annual results to the end of March which included revenue up 11% to $47.6m, earnings up from $1m to $2.7m and net debt reduced substantially from $27.4m to $11.5m.

In the past year the company’s shares have traded in a range of 22c to 32c and are currently near the bottom of that range.

It has 500m securities issued and has a market valuation of $110m.

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