AGM 2021

Aug 18, 2021

Slides

Good morning, ladies and gentlemen. Welcome to the Annual Meeting of Shareholders of ArborGen Holdings Limited. I am Dave Knott and I am the Chairman of the Board of ArborGen. Thank you for your attendance today at our virtual meeting. Who would have thought 12 months on from our last COVID affected meeting we would be in a similar situation with having to meet again via webcast and having to cancel the physical meeting in Auckland. I certainly wanted to be present in New Zealand for this meeting. However, as you will understand, travel and quarantine restrictions have prevented that from happening even before New Zealand was locked down announcement on Tuesday. I'm pleased to advise that a quorum is present and that this meeting is duly constituted. The notice of meeting set to shareholders last month sets out a formal agenda for today's meeting. In this online meeting environment as with a normal annual meeting, all shareholders have the ability to ask questions and vote. Please be aware that to use the online voting facility, shareholders and proxy holders must have entered the CSN or holder number and postcode or country code into the Luby software. If you encounter any issues, please refer to the virtual meeting guide that was sent to shareholders, which is also available on our website or by phoning the Computershare helpline on NZ area code 094888877. Since all shareholders are attending all right, we are back. Sorry about that, everyone. We lost power here in Ridgeville. I'll pick up where I left off. Since all shareholders are attending virtually, those of you who have questions can submit them at any time through the online portal, but I would encourage you to do so as early as possible as that will allow us to answer the questions to answer the questions at the appropriate time of the meeting. To ask a question virtually, click the speech bubble icon which will open a new screen. At the bottom of that screen, there's a section for you to type your question. Once you're finished typing, please hit the arrow symbol to send. We'll do our best to answer all your questions. Where we have a number of questions on the same topic, we will look to consolidate the response. Voting will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new voting icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time. I will give you a warning before I move to close the voting. I would like to introduce the members of your Board and management to you. We have all our overseas and New Zealand based directors joining in the virtual meeting today. From the U. S, we have directors Ranjantandan, Tom Avery and Ozi Horton attending virtually. Present with me in ArborGen's headquarters in Ridgeville is ArborGen's Chief Executive Officer, Andrew Baum. In Auckland, also virtually, we have Directors Paul Smart and George Adams as well as our company Secretary and Performance Improvement Director Sharon Luthair Chandra our CFO Alex Brown and our General Manager of Australasia Greg Mann and our communications contact Pam Wortenberg. Turning then to our program for today. First, I will ask Andrew to update you on the progress we have made over the past year. I will then make some comments from the Board's perspective. You will then have the opportunity to raise any questions you may have. We will then deal with the formal resolutions to be considered by this meeting. I will now ask Andrew to review our recent activity for you. Thank you, David, and welcome to our shareholders joining us today. As always, it is a pleasure speaking to you again, although I regret the COVID-nineteen border restrictions have once again prevented me from doing so in person. Our vision remains to build a global high growth business by developing and selling proprietary advanced genetics tree seedlings that offer step changes in productivity and deliver significant value to forestry landowners. We are the largest tree seedling provider in some of the biggest forestry markets in the world. And our technology and products are transforming the forestry sector, delivering bigger and better trees faster. Our strength is built on decades of investment in research, intellectual property and people capability and no other competitor can match our advanced genetic programs depth or breadth. Proven performance of our advanced genetic seedlings at commercial scale combined with active forestry markets are providing strong tailwinds to market adoption of our higher value seedlings. The value story for our business is now becoming clear with accelerating momentum and positive market conditions setting the path for strong growth in fiscal year 2022 and beyond. Our strengthening position is translated into results. As noted in our annual letter to shareholders in May, the fiscal year ended 31 March 2021 proved to be one of the most challenging periods we have ever experienced with the global COVID pandemic materially affecting sales in 2 of the three reasons which we operate, the United States and Brazil. That said, and bear in mind the unprecedented challenges we faced, we are extremely pleased with the solid year over year performance for the period. We've already provided detailed information on our FY 2021 results in our market announcements in the annual report. In summary, the group reported seedling sales volumes of 391,000,000 units down approximately 10% on prior period, mainly due to the impact of COVID-nineteen. Prior year extreme weather and unusual biological events in 2018 also constrained MCP supply and sales. Pleasingly, however, some of our younger orchards are now entering their productive life and increased bagging and pollination activity is driving a market increase in our future supply. Revenue was $52,700,000 7% down on the prior period, largely due to the impact of COVID in the U. S. And Brazil, the $52,700,000 and the other figures I'm mentioning are in U. S. Dollars. Operating earnings before COVID related government grant income and costs incurred were $2,600,000 up $200,000 on the prior period. Net earnings improved by $5,900,000 to 3,200,000 dollars Net cash from operating activities doubled to $9,900,000 from the $4,800,000 in the prior period. This includes COVID related grants and costs. Net debt reduced to $27,400,000 from $29,600,000 in the prior period. The main use of cash during the period related to the continued working capital build in the U. S. MCP seed supply for future periods with MCP bagging and pollination activity 35% higher than the prior period. ArborGen reported a record U. S. GAAP EBITDA result of $11,300,000 excluding corporate costs of $1,300,000 more than double U. S. GAAP EBITDA reported in the prior period of $5,400,000 During the period, Arbogen received $4,700,000 of government grants, including $4,300,000 from U. S. Small Business Administration, of which $3,700,000 was recognized as other income in the 12 month prior result. Partially offsetting this was $1,700,000 of COVID non recurring expenses related to seedling write offs and incremental expenses in the period. Note though that margin loss on seedlings written off have not been included in non recurring expenses and are instead and effectively reducing U. S. GAAP gross margin. The fact that we were able to achieve these results in the context of the unprecedented global conditions in fiscal year 2021 speaks to the strength of Arbogen, its superior portfolio and team. These results also demonstrate the progress we are making in implementing our strategy of transforming forest productivity through the conversion of seedling markets to advanced genetic products, especially here in the United States. Beyond the tremendous benefits these transformative products offer our customers, they create substantial value for Arbogen as they generate dollar margins that are 4 to 8 times that of a non advanced genetic products. This strategy is underpinned by the following. We are the leading supplier of advanced genetic tree seedling products in the world with customers ranging from small landowners who will plant 20 acres once every few years to large forest land owning financial organizations that plant tens of thousands every year. The breadth and depth of our product portfolios and technology platform, our extensive production operations throughout the U. S. South and our superior sales and marketing capability and product quality and testing and R and D sales support services further reinforce our leadership position. The core element of our strategy is the conversion of the U. S. Loblolly pine market to advanced genetics in the particular mass control pollinated products or MCP. Until the 1950s in the United States most commercial pine plantations were planted from seed obtained from pine cones collected from existing plantations in native forests. In the 1950s the industry began planting orchards using trees that have been identified as good performers in plantations. In these orchards, father trees produce pollen that produce pine cones and ultimately seed on mother trees. Cones were harvested 18 years later from the mother trees and used to produce seed. Use of these open pollinated seedlings referred to as OP resulted in substantial improvements in forest productivity and value. While OP Orchards allowed for a much better control of the genetics used in plantation forestry compared to the prior approach, it was still a very imprecise process. You did not know what trees from the orchard provided the pollen to a given mother and extensive amounts of pollen from outside the orchard will pollinate the flowers of mothers in the OP orchards. I believe we're going to go to Slide 17 and then we will show the video if that is okay with the looming. Beginning in the early 1990s, tree improvement programs began to explore production of hybrid trees where both parents were known as had been done with corn in the mid-twenty century. These efforts were focused on 2 issues. First, it was necessary to determine what parents when cross together resulted in the most productive offspring as only a small percentage of crosses will result in progeny with good genetics. 2nd, it was necessary to develop a process to implement the hybridization process at scale. The results of these efforts was the development of mass control pollinated or MCP products. In the production of MCP, flowers from the best mothers are back prior to pollination. Pollen is collected from the best fathers, the pollen is applied to the bagged flowers, the bags removed after pollination is complete. This is all done by people and lives operating from 40 feet to 80 feet in the air. This calendar year in February 2021, we bagged and pollinated over 1,500,000 trees, the most ever. We expect this number to increase substantially moving forward as the orchards we planted in 2011 2012 become fully productive. And I believe we have a video now that will show what that process looks like at an orchard here in Ravenel, South Carolina. Thank you. I would note that that whole process is done in about 6 weeks. We put up bags on 1,500,000 trees in a period of 6 weeks as we go from orchard to orchard. The impact why do we do this? The impact of MCP Genetics on forest productivity is dramatic as shown here. Its use results in the production of bigger, more valuable trees with much greater sawtimber potential, trees used to produce lumber that can be harvested earlier than OP genetics. When pine trees are harvested, those with trunks with good form, trunks that are straight with no disease, forks or curves are used for timber. Those that are not of sawtimber quality are used for pulp production. This is a critical importance to forest landowners as sawtimber trees are worth 2 to 4 times more than pulpwood trees. Beyond MCP, we are also developing varietals produce proprietary production processes that offer even more value to forest landowners. We are well positioned for accelerated growth and our MCP strategy plays an important part of this, a critical part of this. Our advanced genetics are now proven at scale and the transformation to advanced genetics is at an inflection point. Point. No competitor can match our MCP program breadth or depth and we're continuously developing more valuable products. Our investment in Orchard expansions a decade ago significantly increased our MCPC supply. Demographics, global warming and other macro trends are providing strong tailwinds and we use geographic diversity to reduce risk. What is the value of MCP to the landowner? As shown here, MCP offers step function increases in value to our customers. Demonstrating the value of genetics in forestry is more complicated and more challenging than in agriculture where crops are harvested annually. In agriculture, the difference in yields per hectare between 2 products multiplied by the price per unit of production defines product value and can be measured at the end of every season. For forestry long harvest cycles, approximately 25 years to final harvest for Loblawley pine, multiple intermediate harvests and products of different value, e. G. Sawtimber and pulpwood make determining value in advanced genetic products much more challenging. To address this, the industry has developed an entire analytical framework which uses a discounted cash flow approach that takes all of the input costs, land preparation, genetics, silviculture and harvest costs and the revenue streams from harvested logs to produce a bare land value referred to in the industry as BLV figure. BLVs are the tool used by much of the industry in decision making. It's used to determine how much forestry land is worth, what investments to make in silviculture, when to harvest and increasingly in determining which genetics to deploy. This slide demonstrates that the value of MCP offers forest landowners is dramatic, increasing BLVs bare land values by up to 80%. This value is not incremental, it is a step function change. For less sophisticated smaller landowners, we use a cash on cash analysis to demonstrate value. We've developed a proprietary value calculator, which demonstrates that for every dollar invested in Advanced Genetics, you will get a double digit increase in revenue with a cash on cash return of up to 18x the original investment. Again, the value offered by MCP is dramatic. Harbors and sales are at an inflection point. We are now positioned well positioned to reap the benefits from over 20 years of investment in developing best in class proprietary MCP products, expanding supply of proprietary genetics to orchards established across the U. S. South and continued education of the market about the value of MCP products. We are the preeminent supplier of MCP to the U. S. Market with over 80% share of the addressable MCP market in the U. S. We are the only company offering MCP products adapted to all the subregions of the U. S. Market. And we offer by far the largest portfolio of products, including a range of MCP Elite and MCP 2.0 products with unparalleled performance. Importantly, our portfolio is complemented by a product development pipeline that offers even future gains in the year to come. When we began to implement our strategy in 2012, our goal is to convert the market to Advance 2 Next was complicated by the fact that there were not a lot of commercial stands of MCP based timber that were mature enough to be able to show prospective customers older trees in a commercial setting to prove that MCP offered the benefits we presented. There are the basis of those underlying value projections we showed you. The more progressive institutional ladder is believed based on the data available, but many customers, even some relatively sophisticated ones needed to see more hard evidence. Today, with more than 2,000,000 acres of MSP planted, there are stands over 20 years in every region, including extensive thinning data from those stands, making the marketing message much easier. It's no longer a matter of believe what we say, it's a matter of believe what you see. Today, we have customers calling us, asking us to visit their MCP stands because they're doing so well. And in some cases asking us if we have signs that they can post on their lands and long roads stating that the trees are MCP. To continue to drive advanced genetic sales moving forward, we have a comprehensive marketing and sales program and educating customers about the benefits of advanced genetics based on this now demonstrated performance. As we have mentioned before, we have significant we have invested significantly expanding the supply of our superior MCP products. As shown here, this historic activity is now bearing fruit. After 3 years of of constrained MCP supply due to orchard capacity and the impact of Hurricane Michael, we are projecting a substantial increase in the supply of our proprietary MCP sealants in the U. S. Proprietary in our hot particularly in our highest demand U. S. Coastal south and Piedmont markets, the blue portion of each of the bars or the green portion of each of the bars shown here. This is due to our large younger seed orchards now entering their seed producing life stage. The cone harvest completed in November 2020 generated a material increase in MCPC production, particularly in our severely constrained eastern that is our coastal and Piedmont regions. To clarify, this is seed that was available for sowing in April of this year 2021 to meet seedling sales in the current fiscal year ending March 2022. As a result of this increased harvest, we were able to substantially increase MCP seedling production this year by over 30% or approximately 30,000,000 seedlings over the prior year. Earlier this year in February, we completed our best ever number of MCP producing flowers bagged in holiday, which saw a 35% increase in bagging activity over the prior year. Nearly every orchard surpassed their projected bagging times. Subject to uncontrollable factors, the increase in the recently completed 2021 MCP pollination activity is projected to produce MCP seed equivalent to over 200,000,000 MCPC seedlings in late 2022, which will be available for seedling sales in the fiscal year ending March 2024. In addition to our growing MCPC seed supply, we are also advancing our pipeline of next generation advanced products to ensure we continuously move our customers up the MCP value chain, offering them superior products to increase value and maintain our strong competitive lead in the market. We have invested significantly in building the supply pipeline of these products and we project that the availability of the higher value MCP products such as MCP Elite and MCP 2.0 where we have a strong competitive advantage will substantially increase over the next 5 years. Beyond the value of those products offered to our customers, these MCP 2.0 and MCP Elite products offer our margin even better margins than our MCP Advanced and Select products. Outside of traditional forest markets, the increasing emphasis on the role trees can play in offsetting carbon emissions is creating new opportunities for us. ArborGen is well positioned to benefit from increasing focus on climate change by consumers, investors, companies, customers and regulators. For example, Microsoft has vowed to be carbon negative by 2,030, while British Petroleum aims to be net 0 by 2,050. Amazon's Climate Pledge invested in Pac Am, a technology company that verifies the impacts of carbon capture in the world's forests allowing organizations and individuals to compensate their emissions with confidence by supporting reforestation and forest conversion projects. ArborGen's near term goal is to be part of the forest carbon solution, including participation in reforestation and carbon project providers activities. In New Zealand, the increasing value of carbon is driving an expansion in tree plants and we are already selling tree seedlings into that new market. We are also beginning to see programs in the United States and Brazil that could have a similar impact on market growth and product value. Beyond the value our advanced genetic products offer to our customers in terms of improved growth, disease resistance and improved sawtimber potential, we believe that Arbor does more advanced genetics fix or absorb 40% more carbon than traditional seedlings. We've already developed the methodology to biometrically model sequestration on a genetic and geographic level, which is essential for verification. We are currently developing our strategy for allowing our customers to use advanced genetics to benefit from this aspect of their use. We believe that if and when we are able to obtain this benefit, it will create significant opportunities and value for our customers and ourselves. Beyond forestry, Arbogen's proprietary somatic embryogenesis capability, our leading edge biotechnology which we have demonstrated at scale with clients represents an R and D platform that can be leveraged for the development of new novel propagation techniques for new crops. Our in vitro technology and systems are the results decades of intensive research efforts and investment. As this slide shows, Arbogen somatic embryogenesis developmental process technology is highly automated. In summary, these activities include and allow for the accelerated development of clonally propagated species ranging from cannabis to sugarcane. They allow us to produce virus free material of horticultural, tropical and other species. They enable gene editing or of horticultural, tropical and other species. They enable gene editing or CRISPR technology programs in tree crops like avocado, banana, coffee and cacao, enable biotechnology based development of forestry species aimed at addressing global climate change. In this respect, we have recently executed an agreement in this space with a U. S.-based biotechnology company. These capabilities also facilitate the highly controlled production protocols required for cannabis or hemp production. Arbors has worked with several market several major market players to horticulture and other crops seeking to leverage our capabilities including in sugarcane, avocado and other crops. Given the nature of our business, we are subject to climatic events that could adversely impact both our seed and seedling production. As outlined in our annual report, we have developed and implemented a number of initiatives and standard operating procedures to minimize these risks. In regards to seed production, the most important risk mitigation strategy is to build sufficient inventory of reserve seeds that we are not completely reliant on seed harvest every year. We are actively working on building our buffer, MCPC inventory and are projecting to reach our 2 minimum 2 years on hand to seed inventory in the next 3 to 4 years. And in fact, we've already begun building inventory in our Texas and Arkansas provinces. Beyond building seed inventory, regional seed diversity is also an important risk mitigator and we have 10 geographically dispersed orchards across the U. S. South as you can see on the map. Moreover, we have a substantial number of younger trees in the orchards aged between 7 12 years. This represents over 6% of our total orchard trees, which are now becoming highly productive. And we continue to plant new trees or graft new trees with improved genetics as older trees are taken out of production. In summary, we have systematically laid the groundwork for Arboridge's advanced genetic strategy and we are now beginning to reap the benefits as we have the supply, capacity, proof of performance and organization to implement our strategy. The macro trends are in our favor. Strong U. S. Housing demand is expected to grow over the next decade due to a prolonged period of underbuilding. It's been complemented by favorable demographics and aging housing stock. There's an increase in reforestation and forestation projects to reduce carbon emissions. Demand isn't growing for manufactured across laminated timber with a further 200,000,000,000 trees more worldwide required by 2,030 to meet projected demand. In New Zealand, the government policy and support of forestry combined with aging flying plantations will drive local demand. And new pulp mills in Brazil will create strong demand for eucalyptus based pulp and charcoal products will also increase regional demand for our seedlings. We are looking forward to driving the value of our business for our shareholders as we do so. Thanks again for your commitment and confidence. I will now turn it over to Dave. Thank you, Andrew. Before moving to your questions in the more formal session of the day, I would like to make a few comments on the current fiscal year ending March 2022. As you've heard before, our primary focus and priority continues to be improving cash generation. And in this respect, the most critical driver of earnings and cash flow growth for our business is the step change growth in our MCPC Seating sales. ArborGen has invested significantly in developing our best in class proprietary genetics and deploying these genetics in our orchards to build the supply pipeline that is now coming on stream. To summarize Andrew's comments, the substantial lift in MCPC harvested in late calendar year 2020, particularly in our Eastern provinces, increased the availability of our MCP seedling in the U. S. Allowing us to increase MCP production by approximately 30,000,000 units for sale in the current fiscal year. Added to this, strongly improving markets in the U. S. And Brazil post the pandemic lows combined with higher demand for our proprietary genetics in the U. S. And Brazil bode well for a strong 2022 fiscal year. In our largest market, the U. S, our operational and sales activities have largely returned to normalcy as we continue to increase our face to face interactions with customers. We are pleased to inform you that we now have orders in place for over 90% of our seedling sales planned for the current year. Due to extreme rain conditions during the early most vulnerable phase of seedling growth, we unfortunately experienced some seedling inventory loss, almost all of which were lower value OP seedlings. This has reduced our estimated inventory volume to approximately 4% below the sales budget for the current fiscal year. There is, however, the potential that actual inventory could be higher than currently estimated as some seedlings were planted later than usual and were not large enough to be included in the initial inventory count, but could eventually achieve target specifications. We will of course take all reasonable measures to encourage the growth of these seedlings to meet size requirements. Global carbon markets provide a significant growth opportunity for our business. We are pleased to report we have recently executed a non exclusive license agreement with a company focused on using biotechnology to develop trees that better capture and store carbon. Specifically, we are licensing our technology for the production of transgenic pine trees targeted at increasing CO2 fixation and improving adaptation to climate change. The fees payable under the agreement total $500,000 in current fiscal year as well as further annual payments and will involve the incurrence of some minimal incremental costs. Pine sales in Brazil are tracking ahead of budget for the current fiscal year as customer demand recovers strongly from last year's COVID depressed levels. Strong eucalyptus demand and shortage of supply due to market capacity constraints is also driving slightly higher average selling prices and production costs. We rely on contract grower greenhouse capacity for approximately 50% of our eucalyptus production needs, with the team working very hard to meet the increase in market demand. In New Zealand, we have dispatched over just over 80% of our current season's crop. As you're aware though, New Zealand moved to alert level 4 on Tuesday at midnight, meaning all crop harvesting and dispatch activity has stopped. We are however allowed to carry out certain essential operations such as irrigation activities to keep our plants in good condition and run our quarantine facility. In Australia, we continue to dispatch crop to plan. Subject to uncontrollable factors, we are targeting U. S. GAAP EBITDA excluding public company costs for the current 2022 fiscal year to be in the U. S. Dollars 13,000,000 to $14,000,000 range. Looking beyond the current fiscal year, there are a number of factors that support strong earnings growth, including strong projected underlying demand for solid wood products, particularly softwood products in the U. S. Supported by a strong U. S. Housing market and population demographics. Russia's proposed ban on the exportation of softwood logs goes into effect on January 1, 2022. Structural supply constraints in Canada and the Western United States, which is driving expansion in sawmill capacity in the U. S. South. Much higher MCP cone and seed projected to be harvested in late calendar year 2022 due to the record pollination activity earlier this calendar year, which will be available for sale in fiscal year ending March 2024. Continued conversion of our sales to higher value MCP products, our larger industrial customers now understand the increased value our advanced genetics offer them with stated short to mid term targets ranging from 50% to 90% of their states being planted with MCP Genetics. Our focus is ensuring we can meet this demand from our industrial customers as well as extending our conversion activities into the large private landowner segment. In Brazil, increasing softwood products, product exports, new pulp mills that have been recently announced, strong demand for eucalyptus based pulp and charcoal products and increasing recognition of the value of ArborGen's proprietary products are all expected to contribute to sales increases in future years. And in New Zealand, demand from the replanting of existing forests established in the late 1980s to mid 1990s planting boom, as well as new forest establishment driven by government policies to meet climate commitments. Strong domestic processing and export markets and increased planting of native species are all supportive to the business. Outside of forestry, our somatic embryo or in vitro technology capabilities and genomics and tissue culture expertise create a number of opportunities for us in other crop species. We've already deployed our technology in sugarcane, developed tissue culture protocols for cannabis and are evaluating other opportunities including coffee and cocoa production. Added to this, the role trees can play in offsetting carbon emissions will create further opportunities for us. As the company announced on June 30th, the Board earlier this year received a confidential non binding indicative incomplete and highly conditional proposal to acquire ArborGen. A subcommittee of independent directors was appointed to assess the proposal and concluded that based on the information available, the proposal undervalued the company. In light of this, the Board decided to commence a strategic review, which is now underway. The objective of this strategic review is to consider all options to unlock value for the benefit of all shareholders. These options could include, but are not limited to, a sale of all of the shares in ArborGen Holdings, a sale of all or some of the assets of the company or a U. S. Listing. We will update shareholders as and when appropriate. Before I move to the business of the meeting, I would like to acknowledge and thank the ArborGen teams across New Zealand, Australia, Brazil and America. They have worked tirelessly and done an amazing job in often challenging conditions to deliver a strong result for shareholders. I will now open up to questions. If you are yet to submit your question online, please click on the speech bubble icon when the new window opens type in your question at the bottom of the screen. For questions relating to the actual resolutions we'll respond to these as well as we deal with each of the resolutions in turn. Okay, Dave, thank you. We've got some questions that are now coming through. First question is, it is very encouraging to see macro factors providing tailwinds supporting Abidjan's future growth. However, one large negative I believe is the so called wall of wood, I. E. The oversupply of timber as a result of the state government encouraging plantings in the 1990s in the Southeast. Do you agree? And what can Abidjan do to mitigate any negative impact? I'll take that one, Sharon. Thank you. It's an excellent question and one that we're dealing with. And certainly, there is an oversupply of wood right now relative to the demand. That was the plantings in the late in 1990s were compounded by the impact of the recession. So the growth to drain that is the amount of wood that's being produced versus the amount of wood that's being consumed is still upside down. That is we're growing more wood than we are consuming. That is expected to change over the next 3 or 4 years as the demand we projected and both David and I both spoke about earlier occurs. I would note as well that from a market size perspective, the wall of wood as it were is not a constraint. Where the wall of wood has had an impact has been on soft timber prices, while lumber reached record levels this year, the price of southern landowners did not increase commensurately. We're actually beginning to see the price of timber increase. And we'd note that we use the current timber pricing, which is based on the wall of wood as the basis for all of the BLV calculations and cash on cash calculations I described earlier. So even with these depressed log pricing levels, our advanced genetics is compelling. So what we expect to happen over the next few years as the demand for wood increases for the regions we cited is that the market size will increase and that the value proposition around our MCP and varietal products will only get more compelling as the value of sawn tibber and pulpway slowly increases over the next few years. So it's something we stay on top of and we think we're through the worst and are on the way to a much more compelling supportive environment. Thank you, Andrew. Next question, where is the strategic review announced 6 weeks ago at? In the announcement you said a bid had been received that materially undervalued the company. What value do you put on the company? I will refer this question to Tom Avery, who is the Chair of the subcommittee. Tom? Thanks, Sharon. With respect to the first question, where is the strategic review? It was commenced in late June, as David said. We do not have a fixed timeframe for completing it. We are not under any pressure to complete it in a rapid manner. We want to take our time and do it well, but it's being progressed as quickly as possible. The second question was, we felt like the offer, or rather the proposal that we received was materially undervalued company. And we'll consider all options, all available options to unlock value for the shareholders under the strategic review. Thank you, Tom. Next question, what are measurable targets and steps that the company will take to maximize free cash flow generation of the business? What are specific cost cutting initiatives that the Board is considering? I'll let Andrew take the first part and I'll take the second part. Well, obviously we have if you take a look at the financial statements for the past few years, we have reduced our spending on both across the board, all of our operating expenses, primarily in the United States. We've been able to keep our expenses contained in both Brazil and New Zealand, even as sales have increased substantially. I think that right now we have a business that is right sized for the opportunity. And it's important to recognize as well that the infrastructure we've built can support the dramatic increase in sales that we're expecting to see with very modest increases in either our operating footprints or in terms of the actual overhead and research and development that required. I can assure you that the primary focus or one of the primary foci of each one of our board meetings is how we're doing on operating expenses against the budget and we have a whole series of protocols internally to monitor this at a management level on a monthly and sometimes even weekly basis. Yes, we've gone through expenses on a line by line basis over the last few years and continue to try and pull out any unnecessary or try to find workarounds to reduce costs. We've gone as far as to look at the vehicles that we lease and see if there's cheaper versions, etcetera. The cost cutting and maximizing free cash flow, in my opinion, go hand in hand and we're constantly looking to maximize free cash flow. That's the focus of the Board, that's the focus of management and as such cost cutting is a major part of that along with growth. I appreciate the question. Thank you. It's from another shareholder. I would like to know what research, if any, is being done to develop tree seedlings that might address climate change issues, particularly the ability to sequester carbon. These trees might earn carbon credits for the plantation owners and have additional returns beyond just the harvest. I am also strongly in favor of a U. S. Listing for this company. I'll take the first part and I'll turn over the second part to David or Tom. As I mentioned in the presentation, we do believe and I agree completely with Christine that the global carbon markets provide significant growth opportunities for us. And as I mentioned, we are actively exploring the most appropriate way for us to engage in those markets to the benefit of our customers, our shareholders and the environment. The key element of that for us is trees that grow bigger, faster. Fixing carbon is directly related to how quickly you grow and how big you grow. And as we've demonstrated with our MCPN varietals, we offer that these products offer that. So fortunately for us, the core program the core goal for our product development program, which is improved growth correlates 100% with improved fixation of carbon. Importantly, we have also done extensive modeling and can demonstrate through the growth and yield models that we have validated by data we've collected in the field with respect to growth and yield that we can fix up to 40% more carbon using our advanced genetic trees than you have with the traditional open pollinator products. So we think we have the strong case to make and the data is unequivocal that we are in fact part of the solution. We are now working with a variety of different carbon registries and other groups to determine how we integrate that value into the registry so that our customers can recognize value and we're working contemporaneously to develop a strategy that allows us to share that value with ourselves and our customers and whatever partners we choose to work with. It is an area of active engagement and it's something that we are looking forward to progressing over the next couple of quarters. And then as far as the last comment about being in favor of the U. S. Listing, we appreciate your input and we're exploring all options through this independent committee. Thank you. Thank you. What steps is the company taking to utilize new technology to open up new revenue streams and leverage existing IP at the company, specifically as it relates to widely discussed opportunities in carbon markets, remote sensing, forest management? Another great question. And I think I spoke to the efforts that we're making with respect to carbon extensively in the presentation in an answer in the last question. Beyond that, the partnership that we talked about earlier in the presentation concerning licensing of our technology for carbon fixation is an element of monetizing that element of our intellectual property estate. We are also engaged in at least half a dozen projects that look at leveraging things like remote sensing, improved fixation of improved utilization of nitrogen using different microbial systems. One of the advantages of being the market leader is that people are looking to deploy technology in forestry, we're the 1st port of call. So we are looking at remote sensing, both from a marketing perspective and from a provision of additional services to our customers. We're looking at the use of remote sensing to help our customers manage forestry more effectively. And we're looking at various additives to seedlings both in the nursery and in the field to improve their productivity. Again, we want to make sure that before we devote major resources to that, we can deliver on the promises that are required to maintain our reputation as the trusted advisor to our customers. We're also looking as I mentioned to leverage our somatic embryogenesis capability. We did one substantial program in sugarcane and we're looking at exploiting that opportunity and other crops on both tropical as well as hemp and cannabis. Thanks Andrew. I'll refer this next question to Tom. The Board has undertaken a strategic review of the company. Can you please tell us when the process will conclude and what options are being considered? It was announced that there was an offer to buy the company. Can you disclose at what price? It is a fiduciary duty of the Board to protect the investors' interest and after years of negative free cash flow, sale of the company should be strongly considered. We're not in a position to comment on the price that was for the valuation that was proposed by the party. As mentioned in our 30th June announcement, the subcommittee of independent directors carefully evaluated the proposal and concluded that based on the information before the subcommittee, it materially undervalued the company. As far as how long the strategic review will take, as I think I mentioned before, we don't have a fixed time frame for completing the strategic review. We're under no pressure of any sort to push through it faster than we think makes good business sense. But it has commenced and it's being progressed as quickly as possible. Thank you, Tom. Next question. I have voted against the directors reappointment as I consider the fees paid to be grossly excessive for a company of this size. That these total $600,000 for a company with sales of $52,000,000 let alone the lack of profitability shows this company continues to ignore shareholders for the benefit of directors and management? We faced this question several years ago when Tom and Ozi and a few others were pointing to the Board. And at the time it was explained and I'll do it again that to get these high quality Board members of this caliber, which frankly are overqualified for a company of this size, you need to offer them appropriate remuneration. And frankly, what the Board has done over the past 3 years, I think is very much earned the compensation that they've received. The share price has started to reflect that. The company is operating at the best level that it's operated in years and we continue to move forward into we continue to move forward and grow the company with under the leadership of this Board. And I think that they're all very welcome additions to the company. I agree. Thank you, Dave. Last question, how much will non forestry crops contribute to earnings? Well, I think that you think of that look at that in both the immediate term and then the intermediate longer term. In the short term, it's mid single digit percentage of the total revenue that we're earning. I don't think we can be more specific than that given the disclosures that we've made to date. It's difficult to project with any specificity given the relative early stage of the activities we're pursuing. But I think it will grow substantially over the next 3 to 5 years. I would note that our adoption in New Zealand where we have our quarantine facility is substantially greater than mid single digits, certainly a double digit contributor that's highly profitable. Thank you, Andrew. Next question. As the market leader, is there the possibility that you would consider taking over some of your competitors in the seedling market in the U. S. Southeast? I think that that would be a great thing for the company. We currently don't have the balance sheet to digest a major acquisition or really small acquisition at this point. As we continue to grow free cash flow, we will have the opportunity to pay down debt and then start to look at things like that. But right now, our focus is on cutting costs and growing free cash flow and doing the best with the hand that we've been dealt. I believe there are no more questions at this stage. Dave? Okay. Thank you, Sharon. I now propose that we move to the 4 formal resolutions for this meeting. These were notified in the notice of meeting and explanatory notes have been provided. Only shareholders, proxy holders or corporate representatives of of a shareholder may vote on today's resolutions. Voting on each of the resolutions in the notice of meeting will be by way of poll. We will answer any questions on each resolution after I've moved it. For those shareholders voting online, which is everyone this time around, a bar chart icon should be displayed at the bottom of your screen. From here, the resolution and voting choices will be displayed. Let's now turn to the individual resolutions. Because this resolution relates to my election, I will ask Paul Smart to step in to chair the meeting. Paul? Thank you, Dave. The first resolution relates to the election of Dave Knopp Jr. As Director. Dave is currently the alternate director for David Knott Sr. David Knott Sr. Will retire at the completion of this meeting, and Dave Jr. Will therefore cease to be his alternate. Dave has been an alternate on the board since February 2017 and chairman since July 2018. Dave is the CEO and Chief Investment Manager and Executive Managing Member of KNOT Partners, who, with associated entities, is Arbogen's largest shareholder. He has served as co chief investment manager of KNOT Partners since March 2017 and being eligible offers himself for election to the Board. The Board unanimously supports Dave's election. I'll now ask Dave to address you regarding his appointment. Over to you, Dave. Thank you, Paul, and hello again. In case anyone missed it earlier, I'm Dave Knott, and I'm grateful for the opportunity to speak with you today. As many of you know, I've been an alternate director here at ArborGen for the past four and a half years and have served as Chairman of the Board for the past 3 years and also serve on the compensation and nomination committees. I'm the managing member of KNOT Partners where I along with my 2 partners oversee a number of both private and public company investments. I serve on the Board of DRS Imaging, a privately held documentation solutions provider, while also acting as a Board observer and or advisor to several other privately held companies. We've seen a lot of changes take place at ArborGen over the last few years. The biggest change in my view was becoming the sole owner of ArborGen Business, which really allowed both the Board and management to focus with one clear goal in mind, which is growing our seedling business and maximizing profitability. Growth and profitability are at the forefront of every decision we make and I believe the results of that focus are starting to show in our current results. I have been following this company as an analyst for around a decade now, having had the pleasure of serving on the board for a large portion of that time and I truly feel the company is on the right track to continue growing and becoming more profitable in the years to come. And as the largest shareholder, I will continue to work diligently to maximize value for all of us. Thank you, Dave. Are there any questions in relation to this resolution? There are no questions, Paul. Thank you, Sharon. In that case, I will thank you and we'll now pass the meeting back to you, Dave. Thank you, Paul. The second resolution relates to the re election of Independent Director, Tom Avery. Tom was appointed to the Board in July 2018 and serves as the Chairman of the Remuneration Committee and the Independent Directors Committee. Tom has extensive investment banking and venture capital experience, having served on numerous company boards throughout his career and advising companies on successful financing, planning and execution of growth strategies. Tom retires from the Board of ArborGen and being eligible offers himself for reelection. The Board unanimously supports Tom's reelection today. I will now ask Tom to address you regarding his appointment. Thank you, Dave, and good morning, everyone. It's nice to be with you today. As Dave said, I served on the Arbogen Board since my initial appointment in July of 2018. I'm Chair of the Remuneration Committee and also the Independent Committee overseeing the strategic review. And in addition, I'm a member of the Audit Committee. I also serve on the board of one other public company here in the US, CRA International, a NASDAQ Trading Company, and a professional services business based in Boston, Massachusetts, and on the boards of 2 private companies. My professional career was in the investment banking and venture capital industries, where I spent almost 40 years working with middle market growth companies. Most but not all of my industry experience focus on the technology sector, while assisted companies raising startup capital to private placements of equity and debt to initial public offerings to sell side and buy side mergers and acquisitions work. I've advised scores of companies company boards over the course of my career on the execution of strategic growth plans designed to maximize the return on investment to shareholders. As a venture capitalist, I invested in and helped create and execute growth plans for numerous entrepreneurial companies. And on occasion, I was involved in restructuring and turnaround situations where the company and management failed to deliver adequate results. At ArborGen, as in my other roles as a banker, investor and director, my job is to help make sure that we have the right strategy and the right management team with Board governance priorities to make sure we have proper execution of the business plan. While Harbogen has been through some significant challenges, I firmly believe the successful implementation of that strategy is beginning to prove out. Thank you for your time today and your continued support. Thank you, Tom. Are there any questions in relation to this resolution? There are no questions, Dave. Thank you. I'll move on to the next. The 3rd resolution relates to the reelection of Independent Director, Ozi Horton. Ozi retired from McKinsey and Co. In 2011 after nearly 30 years with the firm. At McKinsey, Ozi led various practice areas around the globe, including pulp, paper and packaging, industrial, change management, global operations and energy and materials and basic materials. His McKinsey client service and practice leadership provided for considerable experience working in Europe, South America, India and Asia. He is a faculty member from McKinsey's leadership development program, a senior advisor at McKinsey and also serves as an independent business advisor and director emeritus. Ozi retires from the Board of ArborGen and being eligible offers himself for reelection. The Board unanimously supports Ozi's reelection. I will now ask Ozi to address you regarding his appointment. Thank you, Dave. Good morning, everybody. I appreciate the opportunity to address you. As Dave mentioned by way of background, I've been a Director of the company since July 2018, bringing more than 4 decades of experience as a senior business consultant and operating manager and a Board professional. I am a Director Emeritus of McKinsey and Company, an international consultancy where I did spend 30 years. I retired from McKinsey a decade ago and have since served as a Board member and independent business advisor as well as a senior advisor at my old firm. Since my retirement, I've developed broad and deep experience as a board professional at several global, mostly industrial public companies with listings on the New York Stock Exchange and the NASDAQ Nordics Exchange. Currently, I'm on the Board of Worthington Industries and Louisiana Pacific Corporation, both in the U. S. Both headquartered in the U. S. As well as on the Board of a family owned enterprise, Al De Ba Group, headquartered in the Middle East. Previously, I was on the Board of Mezzo Corporation based in Helsinki. In all these settings, I also serve on committees focused on governance, compensation and audit. As well, I'm a Board member on 2 non profits, an International Arts Festival and a cancer hospital. At McKinsey, I developed broad experience across a range of industries and topics in all major geographies. In particular, in global basic industrial companies, I led fundamental transformation efforts, both at the corporate and the business unit level, involving strategy, performance improvement, culture change. And over my career, as Dave mentioned, I've also led or co led 4 global practices and 1 regional practice. Of particular elements, I developed deep packaging forest products practice. In this arena, I worked up and down the value chain with major forest products players in North America, South America, Europe and Asia Pacific, and in particular working with a few majors in their forestry divisions. And prior to McKinsey, I worked at a global fiber based packaging company, Sudoku Products, where I did gain some firsthand industry experience. So through this combination of experiences over the years, I've developed top down perspectives on industry fundamentals and dynamics and bottom up know how around the critical value levers in the Broadforest Products domain. This has enabled me to be a material contributor to the Arbogen Board across really across the full range of topics, strategy, performance, organization and governance. Arbogen is undergoing a fundamental transformation with a focus on high performance growth as the leader in advanced genetics. The hard work and investment over the last decade is now becoming apparent and it is my goal to help ensure that we continue to successfully execute this strategy. Hopefully, this has provided some additional perspectives on my background as you consider my reelection and I greatly appreciate your support. Thanks very much. Thank you, Ozi. Are there any questions in relation to this resolution? There are no questions, Dave. Thank you. Resolution 4 relates to our auditor, Deloitte. They have confirmed their willingness to continue in that role. Deloitte is automatically reappointed at the Annual Shareholders Meeting as auditor of the company. The proposed ordinary resolution is required to authorize the directors of the company to fix Deloitte's fees and expenses for the following year. Are there any questions? There are no questions. There are no further resolutions. I wish to advise that proxies have been received in respect of 272,000,000 shares being approximately 54% of total shares on issue. Please ensure you are voted on all resolutions by selecting your voting option online. If you have any difficulty, please follow the instructions in the virtual meeting guide. I'll give you a few minutes to complete your voting. Thank you. Online voting will now be closed. That brings the formal part of the meeting to a close. Is there any other business shareholders would like to discuss? Dave, there are no more questions. Thank you. I thank you for joining our meeting today and for your questions. We will keep you appraised of the strategic review process in due course. I now declare the meeting closed. Thank you and stay safe.