ROO continues global expansion with China deal

Published at Feb 5, 2018, in Technology

Roots Sustainable Agricultural Technologies Limited (ASX:ROO) has signed an exclusive distribution agreement for the Chinese market with leading international ag-tech integrator Dagan Agricultural Automation.

The deal allows Dagan to exclusively sell Roots’ patented root zone temperature optimisation (RZTO) technology and associated products for an initial three years throughout China that can be extended for two additional years.

The agreement can also be expanded to include other patented technology of ROO such as Irrigation by Condensation (IBC) as well as extending this exclusivity to other geographic markets.

To remain exclusive, the distribution agreement requires achieving minimum sales over a five-year period of US$19 million for ROO technologies. The sales targets are broken down as $US3 million to ROO over the first three years; $US6 million in year-four; and $US10 million in sales in the fifth year.

At the same time, it’s worth noting that this is an early stage play and investors should seek professional financial advice if considering this company for their portfolio.

This is a major deal for ROO as China now accounts for 53 per cent of total global vegetable production, or nearly 550 million tonnes. As explained by ROO CEO and Co-founder, Dr Sharon Devir, “While China is a powerful agricultural producing country, it faces many challenges. It must feed nearly three times the number of people per area unit of land as the rest of the world. There is growing middle class demand for more protein in the diets, and local land and water resource constraints make production increases a challenge.

The agreement follows the initial sale to Dagan in China of US$257,000 (A$323,000) announced previously for the installation and use of Roots’ proprietary RZTO technology to heat and cool the roots of eight crops such as vegetables, herbs and flowers.

It also builds on ROO’s global expansion plans which include the recent distribution announcement for Australia as well as similar current agreements in Southern European and the Middle Eastern markets.

Dr Devir said, “This distribution agreement means that Roots can expect to significantly expand its presence in China, the world’s largest agricultural market. We expect to establish a long term commercial relationship with Dagan to serve our global expansion plans. This distribution agreement with Dagan is a professional endorsement of Roots’ technology and its ability to help address some of the critical agricultural production and pollution challenges this market faces. We have conservative sales targets over the five-year period, allowing for modest sales in the first three years so we can focus on establishing sales networks and showcasing capability, with resulting sales activity increasing in years four and five.”

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