The Future of Forestry Jefferies 2014 Global Industrials Conference August 11, 2014
Disclaimer Any statements contained in this presentation that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein are based on current expectations, but are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including, but not limited to, risks and uncertainties relating to adverse changes in conditions in the global economy and volatility in the capital markets, the integration of businesses we have acquired or may acquire in the future, changing technologies, product development and market acceptance of our products, the cost and pricing of our products, manufacturing, competition, dependence on collaborative partners and key suppliers, capital spending and government funding policies, changes in governmental regulations, realization of anticipated benefits from economic stimulus programs, intellectual property rights, litigation, and exposure to foreign currency fluctuations and other risk factors which shall be discussed from time to time in our filings with the Securities and Exchange Commission. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law. NO OFFER OR SOLICITATION; FURTHER INFORMATION This presentation should be read together with Management s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the related notes thereto included in the preliminary prospectus. Investors are urged to read the applicable prospectus when it becomes available because it will contain important information. We shall file a registration statement (including a prospectus) with the SEC for the offering to which this presentation relates. Before you invest, you should read the prospectus in that registration statement and other documents we have filed with the SEC for more complete information about and this offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov 2
The Future of Forestry Overview Summary
Business Highlights Extensive, fully integrated operations Deep forestry seedling product portfolio Comprehensive product development capabilities and proprietary technology Strong brand recognition and distribution channels Sophisticated sales and marketing programs Experienced management team with strong track record 4
ArborGen Snapshot Company Highlights Founded in 2000 through the consolidation of the forestry R&D programs at Fletcher Challenge (now Rubicon Limited), International Paper and Westvaco Corporation (now MeadWestvaco) Owns more than 7,200 acres and leases an additional 400+ acres with over 200 employees worldwide Current products: Comprehensive radiata and loblolly pine portfolios Hardwood seedlings Tropical eucalyptus seedlings for Brazil Tempered hardwood seedlings for the U.S. Eucalyptus biotechnology products under development Base of over 5,000 customers Headquartered in Ridgeville, SC with operations in Brazil and New Zealand Generated $30 million in revenue and sold over 265 million seedlings in FY 2013 Founding Partners Primary End Markets Pulp & Paper Products Wood Products Bioenergy Charcoal ArborGen: Building a Global, High Growth Business by Bringing Proprietary Seedlings that Offer Step Changes in Productivity to the Forestry Industry 5
The Evolution of ArborGen ArborGen has Become a Global Leader in Forestry Genetics 2007: MWV, Rubicon and IP contributed substantially all their commercial nurseries and orchards, along with associated R&D programs 2012: Acquired the only global clonal pine competitor CellFor Currently has over 100 years in aggregate of tree improvement research from industry leaders Catalogued over 13,500 unique varieties for two largest commercial pine species Licensed rights to produce and sell International Paper-eucalyptus germplasm in Brazil Developed most broadly application-efficient eucalyptus transformation platform capability Federal Paper Board Co. Given the inherent time associated with tree improvement research and development, ArborGen is decades ahead of any potential new market entrant 6
Established Position in Key Markets ArborGen operates in three of the most attractive forestry markets in the world U.S., Brazil and ANZ (Australia & New Zealand combined) are ranked in the top six countries in the world for roundwood production Roundwood Production Value ($mm) Area of Planted Forests Worldwide (mm HA) China 31 $2,630 $1,435 USA Rest of Asia 20 25 $2,675 $2,630 $3,169 $1,739 $995 $627 U.S. South China Brazil ANZ Hardwoods Pine Latin America Russia Africa Western Oceania Eastern 3 4 6 12 15 14 ArborGen s current operations 0 10 20 30 40 Source: 2012 production of industrial roundwood and most recent pricing available. 7
Leading Technology Platform Germplasm Repository Includes 50 commercial tree species and hybrids Provides genetic material to produce a wide variety of improved trees Includes over 13,500 unique varieties of loblolly and radiata alone Tree Improvement Expertise Expertise is built on over 100 collective years of tree improvement research Most comprehensive and extensive field trial program in forestry Proprietary Production Process Includes proprietary methods of producing highquality products on a large scale Years of experience allow ArborGen to maximize production and minimize extraneous costs Genomics Focuses on the application of genetics and molecular biology to transform crop and animal production ArborGen applies genomics to trees, accelerating the production of improved variations on existing MCP families Biotechnology Product Development Capabilities Currently focused on eucalyptus Focused on developing eucalyptus products with improved growth rates and yields, herbicide and insect resistance, stress resistance and improved pulping efficiency 8
Key Supply and Demand Dynamics Increasing Population The world s population rose 12.7% between 2002 and 2012, placing increasing pressure on wood products for housing and other necessities Expansion of Development A rapid expansion in development in both modern and developing countries has led to a surge in demand for wood and paper products Expansion of Conservation Land Over the past decade, a significant percentage of the remaining global forests have been set aside as protected forests Conversion to Agricultural Uses A significant amount of forestry land has been cleared to make way for farming ArborGen is poised to take advantage of a significant market opportunity 9
Ag-Forestry Productivity Parallel The productivity-improvement opportunity in Forestry is significant, but it will require the use of advanced technologies 10
Multiple Opportunities to Drive Value Transform Established Core (U.S. and ANZ) Market leader in U.S. and ANZ Driving the markets to next-generation seedlings Housing recovery drives U.S. market size Geographic Expansion Brazil eucalyptus business launched Brazil pine business launch in 2014 China a longer term opportunity New End Uses U.S. bioenergy U.S. pulp and paper hardwoods New Products Through Technology Pine somatic embryogenesis (varietals) Genomics: Pine (ongoing) and eucalyptus (future) Improved eucalyptus silviculture traits through biotechnology (herbicide tolerance, insect resistance, drought tolerance) Improved eucalyptus pulping economics through biotechnology 11
The Future of Forestry Base Business Overview
Base Business Overview ArborGen s U.S. Base Business is centered in the Southeastern U.S. Key focus on loblolly pine and other pine species Over 40 years of operations as the nation s leading seedling supplier #1 market position Established distribution channels Well-known, annually-repeating customers Sales to 17 of the top 20 Southeastern U.S. forest landowners Core customer base includes Timber Investment Management Organizations (TIMOs), corporate and private landowners Deep pipeline of next-generation (non-transgenic) advanced products Minimal technology and no regulatory risks ArborGen is the only company in the U.S. market exclusively focused on developing and providing superior genetics to the U.S. forestry industry 13
North American Operations SuperTree Nursery ArborGen Headquarters Distribution Point Sales Office Orchards 14
Higher Genetics = Higher Margins 15
Pine Genetics Lead to Enhanced Forest Value $1,700 Bare Land Value (BLV) per Acre $1,500 $1,300 $1,100 $900 Value of ArborGen s higher-value pine genetics $700 $500 Base OP OP-A Op-S Op-E MCP-A MCP-S MCP-E Varietal-I Customer Breakeven $/Seedling $0.17 $0.26 $0.39 $0.69 $0.96 $1.18 $1.74 Average Selling Price $0.05 $0.06 $0.07 $0.12 $0.13 $0.18 $0.35 ArborGen has a range of higher value genetic products for introduction today Each is set at a different price point, reflecting the value each creates for the customer Note: Data assumes last 5-yr average prices, silvilcutural regime and site dependent, bare-root products 16
Annual Production (millions) Growing Adoption of Advanced Genetics in the U.S. Market U.S. Industry Controlled Pollination Growth 80 80 million 70 60 50 01 14 CAGR 26% 40 30 20 10 0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Source: NC State University Industry Tree Improvement Program; Dr. Steve McKeand 17
The Future of Forestry Growth Beyond The Base: New Geographies
0.30 0.34 0.38 0.42 0.46 0.50 0.54 0.58 0.62 0.66 0.70 Marginal IRR Brazil Overview Brazil is the world s largest hardwood pulp producer Productive capacity expected to grow significantly as new projects are competed Annual eucalyptus plantings of approximately 800 million to 1 billion per year Market is under-served as non-integrated growers have no access to improved genetics ArborGen s products offer significant value to the market Entered the eucalyptus market in 2013 Entering pine market in 2014 80% 60% 40% 20% Clone 2 Clone 3 0% Eucalyptus plantation near Caravelas, Brazil R$/Seedling 19
Growth Strategy Revolutionizing the Productivity of the Commercial Forestry Industry Pursue strategic collaborations and acquisitions Leverage technology and business model to drive profits Established ArborGen presence Grow via expansion into emerging complementary end-markets Emerging ArborGen presence Expand into new high-growth geographies Transition customers to highervalue products Continued development of product portfolio 20
Business Highlights Extensive, fully integrated operations Deep forestry seedling product portfolio Comprehensive product development capabilities and proprietary technology Strong brand recognition and distribution channels Sophisticated sales and marketing programs Experienced management team with strong track record 21