Rubicon returns to profit as Tenon rides US housing rebound, ArborGen rejigs R & D

Rubicon [NZX: RBC], the forestry biotech company spun out of Fletcher Challenge, returned to profit on an earnings before interest, tax, depreciation and amortisation basis after its Tenon unit rode the coat-tails of a resurgent US housing market, and its ArborGen joint venture refocused its research and development programme.

The Auckland-based company reported EBITDA of US$3 million in the 12 months ended June 30, from an EBITDA loss of $5 million a year earlier, it said in a statement. The net loss narrowed to US$6 million from US$12 million in the 2012 financial year, and the company is targeting a return to the black in 2014 provided its Tenon subsidiary meets a forecast doubling of earnings.

Rubicon holds a controlling 59 percent stake in wood mouldings maker Tenon and a 32 percent share of US-based seedlings biotech firm ArborGen.

The company's turnaround was largely due to Tenon's return to an EBITDA profit as the US housing market starts to recover from the sub-prime mortgage collapse in 2007 and 2008, which helped feed the global financial crisis.

Rubicon said Tenon is on the hunt for acquisitions, and is focusing on North America, where it seeks to build on its existing operations.

Meantime, ArborGen lifted sales of its seedlings and has scaled back some R&D discovery projects to reduce spending on pure science and accelerate near-term operational and commercial projects. Rubicon anticipates the restructuring will underpin gains in sales and earnings.

Rubicon said it still plans to float ArborGen after an aborted initial public offer in 2011, though it has to weigh up the realisation of immediate value against what it could get in the future.

"While we believe the business is 'ready' today, we are determined to choose the optimal equity market conditions to execute an IPO of the company," Rubicon said. "Shareholders can be assured that this decision remains at the very top of our agenda.

Rubicon's shares fell 2.9 percent to 34 cents today, and have gained 21 percent this year. Shares in Tenon dropped 6.4 percent to $1.31, and have jumped 69 percent this year.

(BusinessDesk)