Arborgen Holdings Limited · NZX:ARB

Arborgen — Investor Presentation (June 2018)

24 slides from Arborgen's investor presentation, Jun 20, 2018

  1. Slide 1: The ArborGen Opportunity

    The ArborGen Opportunity Presentation Materials – June 20, 2018

  2. Slide 2: Forward-Looking Statements

    FORWARD-LOOKING STATEMENTS There are statements in this Presentation that are ‘forward looking statements.’ As these forward-looking statements are predictive in nature, they are subject to a number of risks and uncertainties relating to Rubicon and ArborGen, many of which are beyond our control. As

  3. Slide 3: What is ArborGen's mission in life?

    3 What is ArborGen’s mission in life? To revolutionize productivity in global plantation forestry … By applying advanced technology … To critical tree traits ... To create new products that deliver ‘step-changes’ in tree-performance

  4. Slide 4: The productivity revolution in agriculture will be repeated in forestry

    4 The productivity revolution in agriculture will be repeated in forestry ... the agriculture ‘winner’ was the First-Mover Increasing Global Demand for Global, Widespread Need for Food Sustainably Grown Wood Global Area of Biotech Crops 1996 - 2016 Source : ISAAA, 2016 First Mover First Mover

  5. Slide 5: The forestry opportunity is significant if it follows the agriculture model

    5 The forestry opportunity is significant if it follows the agriculture model  “Corn parallel” - gives insight into the opportunity for ArborGen’s advanced genetics to lift yield in forestry Forestry Terminology Biotech Transgenic (or GE) Yield (bushels / acre) Single-Cross Hybrids Varietal ArborGe

  6. Slide 6: Technology employed determines extent of genetic 'step-up'

    6 Technology employed determines extent of genetic ‘step-up’ – its about re-shaping / breaking the normal distribution curve  ArborGen is the only global • Bio-informatics integrated • Cryopreservation • Cell replication commercial player • Somatic embryogenesis operating across • Genomic selection

  7. Slide 7: Advanced genetics is 'the' value lever

    7 the story – as- advanced The ArborGen Opportunity highlights genetics is ‘the’ value lever  The table below shows the value levers available to forest owners – advanced genetics is the one that ‘moves the dial’ Forest value sensitivity analysis Potential per acre value increment over base US OP l

  8. Slide 8: How do advanced genetics add value?

    8 the story – as The ArborGen Opportunity highlights – how do advanced genetics add value?  Advantages of AG’s US MCP and Varietal loblolly pine ‘genetic chips’ over industry standard OP 1. Superior log out-turns  More volume  … on less land  Higher saw-log out-turn Note: Saw-logs sell for 2.5-3

  9. Slide 9: Pre-requisite #1 – the germplasm advantage

    9 the story#1 Pre-requisite – as highlights – the germplasm advantage Germplasm is critical – technology alone is an insufficient pre-condition for success Germplasm repository (i.e. base genetics and superior crosses) from hundreds of years in aggregate of tree improvement by leading international

  10. Slide 10: Pre-requisite #2 – the 'tree machine' has been built

    10 the story Pre-requisite #2 ––the as highlights ‘tree machine’ has been built  There are no global integrated commercial competitors to ArborGen in this arena  ~US$300 million invested over 15+ years to complete the model  No-one else has been able to build / put in place ArborGen’s ‘end-to-end

  11. Slide 11: Prerequisite #3 – global commercialisation channels have been built

    11 Prerequisite #3 – global commercialisation channels have been built ArborGen operates ~14 nurseries, 15 seed orchards, 30 distribution centers, and 2 R&D facilities around the world United States United States  ~30% share of total SE loblolly pine market  Customers include some of the largest l

  12. Slide 12: US market advanced genetics conversion – the 'big picture'

    12 US market advanced genetics conversion – the ‘big picture’ Seedling sales M per annum Value of Selling 450 Advanced Price of genetics seedling 400 350 300 MCP & VARIETAL 250 200 150 OP 100 time * Directional representation only as to timing and volumes

  13. Slide 13: US Stage 1 – moving customers from commodity OP to MCP products

    13 USc US Stage 1 – moving customers from commodity OP to ArborGen’s MCP products For ArborGen, MCP-conversion is a lower-risk deliverable strategy  Genetics are proven  Compelling value-proposition for ArborGen to up-sell existing customers to MCP  ArborGen customers want the product today  Arb

  14. Slide 14: Improvement in ArborGen's financials is consistent with 'big picture' progress

    14 Improvement in ArborGen’s financials is consistent with ‘big picture’ progress (AG Consolidated Operating Cashflow Gross Margin 1 under US GAAP) (post interest, pre capex & nwc) US$ millions $5 US$ millions $25 $20 $0 $15 -$5 $10 -$10 $5 $0 -$15 2015 2016 2017 2018 2019F 2015 2016 2017 2018 2019F

  15. Slide 15: How does this all relate to the Rubicon share price?

    Value Upside 15 How doesthe story this – as highlights all relate to the Rubicon share price? RBC Annual Report Note 15 Current Book value Mid-Case Enterprise value - US$ m 106 170 363 less RBC debt 1,2 - US$m -18 -18 -18 RBC market capitalisation - US$ m 88 152 345 NZ$:US$ cross rate 0.6900 0.7205

  16. Slide 16: How can we think about book value?

    Value Upside 16 How canthe westory think– about as highlights book value? – i.e. + 66% CY CY+2 Curr price Book Value 106 Implied AG value in RBC US$m 170 0.26 RBC share price implied NZ$ cps 0.43 2x Revenue multiple CY+2 2-3x 15.1 EBITDA multiple CY+2 10-15x 50-55 Revenue US$m 68 ~7 EBITDA US$m 14 C

  17. Slide 17: And how can we think about the mid-case value?

    Value Upside 17 thecan … And how story we– think as highlights about the mid-case value? Note 15 to RBC Annual Report US market - loblolly pine Mid-case Mar'18A Scenario2 1 Market seedling size - m/pa 800 1 1,000 AG market share - % 30% 40% 3 OP 69% 163 35% 140 4 MCP & Varietal 31% 73 65% 260 AG lob

  18. Slide 18: Mid-case value: market size

    Value Upside 18 … And how can we think about the mid-case value? the story – as highlights 1 Market Size  Unsurprisingly, the seedling market size is correlated to wood use (with a harvesting -> replant ‘lag’)  Previous ‘mid-cycle’ market size ~1 billion per annum in loblolly pine seedlings  The

  19. Slide 19: Mid-case value: margin per seedling

    Value Upside 19 … And how can we think about the mid-case value? the story – as highlights 2 Margin p/seedling - US$  US advanced genetics pricing ladder is already in place …  The industry is prepared to pay for superior genetics  Forest owners are already paying 7x base OP prices  The immediat

  20. Slide 20: Mid-case value: market share

    Value Upside 20 … And how can we think about the mid-case value? the story – as highlights 3 Market Share %  Market Share growth from 30% to 40% is a function of -  The value delivered to the forest grower by AG’s genetics  A portfolio of improved products in the pipeline  The absence of any ser

  21. Slide 21: Mid-case value: product mix

    Value Upside 21 … And how can we think about the mid-case value? the story – as highlights 4 Product Mix MCP & Varietal Current Terminal  US product-mix assumptions are not aggressive compared with NZ - ArborGen - NZ 80%  NZ was an ‘early adopter’ of advanced genetics ArborGen - US 31% 65%  On th

  22. Slide 22: Brazil foothold: eucalyptus varietals

    Another slice: Brazil ‘foothold’ established - significant growth potential #1 Eucalyptus Varietals ?????  Conditions are favorable for ArborGen to become a leading supplier of Eucalyptus varieties  Non-integrated growers do not have access to advanced genetics  Growers are facing continued press

  23. Slide 23: Brazil foothold: loblolly pine MCP and varietals

    Another slice: Brazil ‘foothold’ established - significant growth potential #2 Loblolly Pine MCP & Varietals ?????  Conditions are favourable for ArborGen to enter the loblolly market in Brazil  The market lags the US in terms of maturity and availability of genetics  …and is under-served  … wit

  24. Slide 24: ArborGen's story – a one page concluding snapshot

    24 theStory ArborGen’s story––aas highlights one page concluding “snapshot”  ArborGen sits at the intersection of a growing global wood demand-supply imbalance  Enhancing the productivity of forestry is the answer to this emerging imbalance …  The advanced-genetics transformation that occurred in

ArborGen Holdings — Investor Presentation (June 2018) on 6ix