Rubicon is an NZX-listed investment company whose ArborGen subsidiary is the world’s largest integrated developer, commercial manufacturer and supplier of advanced forestry seedlings with operations in the US, Brazil and Australasia.
FY19 represented Rubicon/ArborGen’s first full year as a unified company under single parent ownership. Overall, revenue and gross profit were slightly below our expectations but group EBITDA, PBT and EPS were in line. Some restructuring activity and extreme weather events held back in-year sales performance. US hurricane events and wet conditions affected forestry customers’ planting activities in some areas while sales volumes grew in Australasia but were constrained by local market conditions in Brazil. Hurricane damage will restrict Rubicon’s ability to grow volumes of advanced seedlings in the US for the next couple of years. We reduced our FY20 and FY21 PBT and EPS estimates by between 20–25%. While this is disappointing, our three-year EPS CAGR (to FY23) is still over 30%. ArborGen’s market positions remain strong and we believe that this will translate to good growth. The ASM is scheduled for 17 September.
The economic growth outlook in each of its core countries being the US, Brazil, New Zealand and Australia is either good or improving, according to OECD data. Consequently, the primary end-markets served by its plantation forestry customer base (being construction, and the pulp and paper industries) are in a positive cyclical phase.