Chairman's report

 

FY RESULT TO 31/03/2006

Announcement text

Name of Listed Issuer: BOTRY-ZEN LIMITED

For Full Year Ended: 31/03/2006

This report has been prepared in a manner which complies with generally accepted accounting practice and gives a true and fair view of the matters to which the report relates and is based on audited accounts.

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE - NZ$’000

OPERATING REVENUE

Trading Revenue: $50 (2005: $32), up 56%

Other Revenue: $227 (2005: $162), up 40%

Total Operating Revenue: $277 (2005: $194), up 43%

OPERATING DEFICIT BEFORE TAX: ($1,579) (2005: ($758)), up 108%

Taxation on operating result: Nil (2004: Nil)

OPERATING DEFICIT AFTER TAX: ($1,579) (2005: ($758)), up 108%

Extraordinary items after tax: Nil (2005: Nil)

Unrealised net change in value of investment properties: Nil (2005: Nil)

NET DEFICIT FOR THE PERIOD: ($1,579) (2005: ($758)), up 108%

Net Deficit attributable to minority interests: Nil (2005: Nil)

NET DEFICIT ATTRIBUTABLE TO MEMBERS OF LISTED ISSUER: ($1,579) (2005: ($758)), up 108%

EARNINGS PER SECURITY

Basic EPS: ($0.015) (2005: ($0.005))

Diluted EPS: ($0.015) (2005: ($0.005))

DIVIDEND: Nil

DIRECTORS REPORT

The Board of Directors of Botry-Zen are pleased to provide the preliminary report covering the 12 months of operating ending 31 March 2006.

STATEMENT OF AFFAIRS OF THE COMPANY

As shareholders will be aware the Rights Issue process, which generated a net $3.9 million in new capital, was successfully completed in late November last year. Through the many months leading into the completion of the Issue we continued with the planning of the key steps recognized as essential to advancing the Company’s commercial presence both within New Zealand and in off-shore markets. 

This comprehensive planning approach enabled us, once the new capital was available, to immediately activate the necessary contractual arrangements to proceed with the following important tasks; 

- the commencement of the formal product Registration in the United States and in Europe, 

- the significant expansion of the Dunedin manufacturing plant, - the evaluation of, and commitment to, the key steps associated with the formation of a large-scale European-based manufacturing facility,

- the continued research and development of new products, in particular the refinement of the formulation of the new “BZ II”, and the subsequent registration of that product.

We are pleased to report that in the four months since the completion of the Rights Issue the Company has made significant progress on all of the above objectives. The international registration steps, which are tied to lengthy formal tasks and timeline constraints, are advancing on schedule and of particular note it is now probable, but not assured, that we will secure early Registration in Germany/Austria prior to the commencement of the next, May 2007, northern hemisphere growing season.

This will potentially present the opportunity for the Company to commercially release “BOTRY-Zen” into these selected EU markets one year earlier than anticipated. Closely associated with this step is the requirement to conclude formal arrangements covering the off-shore contracted manufacture of “BOTRY-Zen” with a specialist German biological product manufacturer. Discussions with this company are well advanced and, assuming the targeted outcomes can be achieved, we will be activating our European marketing plan in January next year.

A Geneva-based agricultural product marketing and distribution company with a wide staffing presence and a strong resource base in key growing regions throughout the European Union is working closely with us to prepare the necessary market launch strategies and action plan. European industry interest in “BOTRY-Zen”, generated to a  large extent we believe by our acclaimed field results, remains at a high level and we are confident that we can successfully introduce the product to key growers next season. 

A good deal of our planning will be focused on user education and the implementation of “best field practice” procedures, these steps being essential in order to generate strong user endorsement for the following season’s more comprehensive (regionally and volume) product release. The major expansion of the Dunedin manufacturing plant (Stage One) is  well advanced however, at the time of writing we are running approximately four weeks behind the originally targeted time-line. 

This situation is not unexpected because of the scope and range of the specialist tasks required. For the scaleup operation, many key items of the new plant and equipment have not previously been designed and/or manufactured on the scale we are currently undertaking. We do remain on-target to manufacture new product for the approaching season, commencing in  September, but final determination of the actual quantities are dependent on the timeline for completion of the factory upgrade.

In order to widen our options on product availability within the local market this year we have taken an “insurance position” in having a quantity of “BOTRY-Zen” contract-manufactured by the German company referred to above. We have  een fortunate to have had, through the upgrade process, an excellent level of valuable and specialist assistance from the AXIS & Associates team in Nelson (on granulation and dry-harvest technologies) and from the Dunedin-based Millers Mechanical Limited staff who have assisted in new equipment design (and subsequent manufacturing) and in project management capacities.

It is intended that the involvement of these parties will continue as we move through the approaching Stage Two and Stage Three steps of the plant re-development. The evaluation process associated with the establishment of a large-scale European-based manufacturing facility is proceeding as expediently as is possible. This is a significant and complex proposal which carries far-reaching potential benefits for Botry-Zen Limited. We have developed an excellent working relationship with the key German party involved and  it is clear that we have an opportunity to capture significant mutual gains through activation of the detailed plan now being negotiated.

Further information relative to this major new step will released in due course. Our second key product, currently identified in-house as “BZ II”, has produced strong field results under trialing this last season. The preliminary evaluation material for application in the control of late-season Botrytis infection in grapes is just to hand and will be comprehensively assessed as we move forward to  fully develop market-readiness and the formal registration within New Zealand and in off-shore markets. 

Registration of this product will be less complex that that associated with “BOTRY-Zen” due to the fact that the active ingredients all carry GRAS (Generally Recognised as Safe) classification. It is interesting to also note that “BZ II” trial work has produced positive initial outcomes in the control of Black Spot on apples and against Rhizopus problems in strawberries. The Company will be following through on assessing commercially relevant applications across these crops.

“BOTRY-Zen” applications in the field this immediate past season consistently met the performance levels as recorded in previous seasons. The quotation from our 2005 year-end Report remains as valid today as then: “In seventy-nine percent of the blocks where BOTRY-Zen comparisons were made with standard spray programmes BOTRY-Zen performed as well as, or better than, the standard chemical products, and in the remaining blocks there were unique or localized elements or conditions that clearly explained the (only marginally) less impressive BOTRY-Zen results”.

We have engaged the PGG Wrightson Limited (incorporating Fruitfed Supplies) team as our lead distributors and through last season our own staff have worked closely “on the ground” with their field representatives. This has been seen as important so as to effectively facilitate the grower educational process and to thoroughly impart all our knowledge on product performance and best practice protocols. The NZ Winegrower staff and the HortResearch field and laboratory personnel (beyond the stakeholding interests of their respective organizations) continue to provide a solid platform of support across many operational and industry activities. 

We would like to again record our gratitude for their interest and assistance not only across viticulture activity but with other crops as well. Strong support has also continued to come from the kiwifruit industry. We will be remaining focused, with the assistance of Zespri International, on the development of commercial strategies that will deliver positive outcomes for both the Company and the kiwifruit industry. Moving forward from providing comment on operational matters, the following represents the major components of the Company’s 2006 financial results.

A trading deficit (after depreciation) of $1,579,020 was recorded. On a comparative basis (before recognition of the gains made on the sale of the Dunedin factory) the previous year’s trading deficit was $1,223,588. Operational expense overheads were held at favourable levels this assisting in off-setting some revenue short-fall where budgeted sales  did not, due to production constraints, meet target.With significant forward steps being taken, in the latter part of the year, on the plant up-scaling process our development expenses were ahead of budgeted levels. 

This was to be expected given the forward momentum generated around the timing of the favourable Rights Issue process. The Directors remain most satisfied with the management of Company expenditure. Looking forward we believe that we can address a positive future that is essentially built around three key words, “Product, Market and Timing”.

- We have the Product now fully technologically developed and widely proven in the field.

- The Market demand within New Zealand and in the USA and in Europe is clearly visible.

- Consumers and growers at this Time are actively seeking biological alternatives to chemical solutions.

It is a difficult task to take any biotechnological idea through initial appraisal, laboratory assessment, field proof-of-performance and commercial up-grade steps and while we know further challenges lie ahead we remain confident that we are now through the hardest parts of the process. Finally we wish to place on record the Board’s appreciation of the efforts of all our staff members. They have worked tirelessly to meet, and beat, the challenges we have encountered through the past year.

Dr Max Shepherd

Chairman

For and on behalf of the Board of Directors