MRO Magazine

Ag Growth Announces Second Quarter 2015 Results; Declares Dividends

By Marketwired News   

WINNIPEG, MANITOBA–(Marketwired – Aug. 14, 2015) – Ag Growth International Inc. (TSX:AFN) (“AGI” or the “Company”) today announced its financial results for the three and six month periods ended June 30, 2015, and declared dividends for September, October and November 2015.

Overview of Results

(thousands of dollars)Three Months Ended June 30 Six Months Ended June 30
 2015 2014 2015 2014
Trade sales(1)$123,459 $112,422 $217,879 $198,603
Adjusted EBITDA(1)(2)$22,387 $24,048 $38,828 $38,512
Profit$8,173 $13,638 $4,764 $14,856
Adjusted profit(1)$11,899 $12,511 $19,303 $16,802
Diluted profit per share$0.58 $0.99 $0.35 $1.12
Diluted adjusted profit per share(1)$0.85 $0.84 $1.41 $1.26
(1)See “Non-IFRS Measures”.
(2)See “Diluted profit per share and Diluted adjusted profit per share”.

Adjusted EBITDA decreased compared to the second quarter in 2014 as drought conditions in western Canada and cautious buying behavior in the United States negatively impacted sales of on-farm products including portable grain handling, aeration and storage equipment. While AGI’s North American commercial business progressed at a reasonable pace the level of activity remained below the very strong demand experienced in 2014. AGI’s international business performed very well in the first half of 2015 and sales increased significantly due to continued momentum in Latin America and projects with multinational grain handlers in Ukraine. On May 20, 2015, AGI completed its acquisition of the Westeel division (“Westeel”) of Vicwest Inc. and for the period May 20, 2015 to June 30, 2015 Westeel sales and adjusted EBITDA included in AGI’s consolidated results were $18.1 million and $2.3 million, respectively.

“By far, the highlight of the quarter was the closing of the Westeel transaction on May 20th“, said Gary Anderson, CEO of AGI. “We have made great progress with integration, completing a revised organizational structure that includes substantial annualized cost savings. I am extremely pleased with the calibre of people on the Westeel team. They have demonstrated great pride in their brand and commitment to our customers. Congratulations to those who have stepped up to take on new roles in the organization. Cost savings from restructuring along with some initial supply chain synergies have combined to meet our near term goal of $5 million in annual synergies. Our work has now turned to the longer term process of creating revenue synergies and new market development.

While the drought in western Canada has taken some of the wind out of our sails for the remainder of this year, we remain very excited with this acquisition and the benefits Westeel will deliver in the long run.”

Westeel Acquisition

AGI completed its acquisition of Westeel on May 20, 2015. Headquartered in Winnipeg, Manitoba, Westeel is Canada’s leading provider of grain storage solutions offering a wide range of on-farm and commercial products for the agricultural industry. The acquisition included Westeel’s foreign sales offices, its 100% interest in Italian subsidiary PTM Technology, a manufacturer of grain handling equipment, and its 51% interest in a European subsidiary.

Sales and adjusted EBITDA for Westeel decreased compared to 2014 as poor growing conditions in western Canada lowered crop production expectations and negatively impacted farmer sentiment. Drought conditions in western Canada are expected to negatively impact results for the balance of 2015 (see “Outlook”).

Integration of the Westeel business is ahead of expectations and is well advanced in all aspects of the operation including production, coordination of North American and International sales efforts, centralization of the marketing function, information technology transfer and the human resources and finance functions. Cost synergies realized to date are higher than originally anticipated and at the time of writing synergies related to organizational restructuring along with certain supply change synergies have already reached the Company’s near term goal of $5 million in annual synergies. Management expects to realize additional sales, manufacturing and purchasing synergies in 2016.

Diluted profit per share and Diluted adjusted profit per share

Diluted profit per share for the periods ended June 30, 2015 decreased primarily due to transaction costs related to the acquisition of Westeel and as the result of losses on foreign exchange that resulted from a significant decline in the value of the Canadian dollar vs. the U.S. dollar in the quarter. The foreign exchange losses relate to AGI’s hedge book and to translating certain U.S. dollar denominated balance sheet accounts, including long-term debt, into Canadian dollars at the rate of exchange in effect on the balance sheet date.

(thousands of dollars)Q2
Profit as reported  $8,173  $13,638  $4,764  $14,856 
Per share as reported$0.58 $0.99 $0.35 $1.12 
Loss (gain) on foreign exchange550 (1,360)10,416 1,584 
M&A Activity2,437 51 3,514 180 
Non-cash loss on available-for-sale investment0 1,100 0 1,100 
Loss (gain) on sale of PP&E739 (918)609 (918)
Adjusted profit (1)  $11,899  $12,511  $19,303  $16,802 
Diluted adjusted profit per share(1)$0.85 $0.84 $1.41 $1.26 
(1)See “Non-IFRS Measures”


On-Farm Equipment

The majority of planted acres in western Canada did not receive sufficient moisture during critical stages of the growing season and as a result market observers generally anticipate a significant deterioration in crop yields and crop production. Demand for AGI on-farm handling, aeration and storage equipment, including equipment from its newly acquired Westeel division, will decrease accordingly. The geographic sales mix of Westeel is weighted towards western Canada and accordingly AGI’s exposure to the region increased subsequent to the acquisition.

Crop conditions in the United States are generally favourable though certain areas have received excessive moisture and crops have been damaged as a result. The USDA currently forecasts corn production in 2015 to approximate 13.7 billion bushels (2014 – 14.0 billion bushels). Crop volume is the primary demand driver for AGI and demand at the farm level will ultimately be determined by the number of bushels of grain at harvest. However, farmer sentiment and cash flow considerations at the dealer level are contributing to cautious buying behavior, even in light of expectations for a large crop in 2015. Management continues to anticipate high levels of in-season demand for portable equipment, however, based on existing backlogs, current dealer inventory levels and the pace of new order intake the Company’s forecast for portable equipment sales in the second half of 2015 has decreased. AGI is able to react relatively quickly to an increase in demand and has proactively increased inventory levels throughout its warehousing network, however, the window to manufacture, transport and assemble portable equipment prior to the end of harvest is shortening which may constrain in-season sales in the third quarter of 2015 and possibly the fourth quarter subject to the timing and duration of harvest.

Commercial Equipment

The long-term trend towards increasing amounts of grain grown continues to drive demand for capacity and efficiency enhancements throughout the North American commercial grain handling infrastructure. The pace of customer commitment in North America for commercial equipment increased after the first quarter and as a result AGI’s domestic order backlog as at June 30, 2015 approximated the high levels of 2014. Management anticipates strong sales of commercial equipment in the third quarter of 2015 however it does not expect these sales to reach 2014 levels. Quoting activity remains strong and accordingly management anticipates healthy North American sales of commercial equipment in the fourth quarter, however the magnitude of these sales will depend largely on the timing of customer commitments.

AGI’s international sales in the six months ended June 30, 2015 increased 55% over the first half of 2014. The strong performance was largely related to projects in Ukraine, primarily with multinational grain handlers, and continued success in Latin America. AGI was able to deliver on many of these large projects in the first half of the fiscal year and still exit the second quarter with an international backlog similar to the prior year. AGI has a high quality quote log and expects to finalize additional new business in the near term. Management currently expects international sales in the second half of 2015 to approximate the strong levels experienced in 2014 however these sales may be influenced by the timing of customer commitment and their delivery requirements.


AGI’s financial results are impacted by the rate of exchange between the Canadian and U.S. dollars and a weaker Canadian dollar relative to its U.S. counterpart positively impacts profit and adjusted EBITDA. AGI’s average rate of exchange in fiscal 2014 of $1.10 was significantly lower than prevailing rates and accordingly AGI’s financial results in 2015 may significantly benefit from a weaker Canadian dollar compared to the prior year. A portion of the Company’s foreign exchange exposure has been hedged through forward foreign exchange contracts and based on current rates of exchange the Company expects to recognize significant loss on these contracts in the second half of 2015. At June, 30, 2015, the fair value of the Company’s outstanding forward foreign exchange contracts was a loss of $15.2 million.

Sales in the second half of 2015 will be influenced by weather patterns, crop conditions and the timing of harvest and conditions during harvest. Changes in global macroeconomic factors as well as sociopolitical factors in certain local or regional markets, including the ongoing uncertainty and volatility in Ukraine, and the availability of credit and export credit agency support in offshore markets, also may influence sales, primarily of commercial grain handling and storage products. Results may also be impacted by changes in steel prices and other material input costs and the rate of exchange between the Canadian and U.S. dollars.


Management expects third quarter sales of on-farm portable equipment to fall significantly below the levels experienced in 2014 as existing order backlogs and the current pace of order intake do not support a significant increase in demand in Q3. Poor crop conditions in western Canada have negatively impacted the 2015 business of newly acquired Westeel and accordingly third quarter results from Westeel are expected to materially decline compared to the prior year. AGI’s commercial business, both domestically and overseas, is expected to perform well in the third quarter however realized sales are subject to the timing of customer commitment and delivery considerations. On balance, management expects third quarter adjusted EBITDA to fall significantly below record 2014 levels.

Sales of on-farm equipment in the fourth quarter will be influenced by crop conditions, the timing of harvest and conditions during harvest. On-farm sales of grain handling, aeration and storage equipment in Canada will be negatively impacted by a poor harvest however participation in pre-season programs will in part depend on inventory management at the dealer level over the next several months. Management has less than usual visibility into fourth quarter prospects for portable on-farm equipment in the United States due to the somewhat unique demand environment experienced to date in 2015. However, management does anticipate significant in-season demand provided the US harvest unfolds favorably. Similar to Q3, management has a positive bias towards fourth quarter commercial business in North America and overseas however consistent with prior years commercial sales realized in Q4 are subject to the timing of customer commitment and their delivery requirements. Based on the factors discussed above management maintains a cautious outlook towards the fourth quarter of fiscal 2015.

Although management anticipates a challenging second half in 2015 we remain very enthusiastic with respect to our prospects for long-term growth both in North America and overseas. The strength of our on-farm and commercial businesses in North America remains intact and AGI will benefit from the continuing trend towards higher grain volumes. Our international business continues to gain momentum and has become more geographically diverse. We remain particularly excited with respect to the enormous potential of Brazil and look forward to positive results from our operations in that country in 2016. Finally, our integration of Westeel is ahead of schedule and we are confident that synergies from this acquisition will exceed our initial expectations. The benefits of this strategic acquisition will contribute to the growth and prosperity of AGI over the long term.


AGI today announced the declaration of cash dividends of $0.20 per common share for the months of September, October and November 2015. The dividends are eligible dividends for Canadian income tax purposes. AGI’s current annualized cash dividend rate is $2.40 per share.

The table below sets forth the scheduled payable and record dates:

Monthly dividend Payable date Record date
September 2015 October 15. 2015 September 30, 2015
October 2015 November 13, 2015 October 30, 2015
November 2015 December 15, 2015 November 30, 2015

MD&A and Financial Statements

AGI’s financial statements and MD&A for the three and six month periods ended June 30, 2015 can be obtained at and will also be available electronically on SEDAR ( and on AGI’s website (

Conference Call

Management will host a conference call at 10:00 am (ET) on Friday, August 14, 2015 to review the Company’s results for the three and six month periods ended June 30, 2015. To participate in the conference call, please dial 1-866-225-0198 or for local access dial 416-305-1119. An audio replay of the call will be available for seven days. To access the audio replay, please dial 1-800-408-3053 or for local access dial 905-694-9451. Please quote passcode 2328993.

Company Profile

Ag Growth International Inc. is a leading manufacturer of portable and stationary grain handling, storage and conditioning equipment, including augers, belt conveyors, grain storage bins, grain handling accessories, grain aeration equipment and grain drying systems. AGI has manufacturing facilities in Canada, the United States, Italy, the United Kingdom and Finland, and distributes its products globally.

Non-IFRS Measures

References to “EBITDA” are to profit before income taxes, finance costs, depreciation, amortization, impairment charges related to goodwill, intangibles or available for sale assets. References to “adjusted EBITDA” are to EBITDA before the Company’s gain or loss on foreign exchange, gains or losses on the sale of property, plant & equipment, non-cash share based compensation expenses and expenses related to corporate acquisition activity. Management believes that, in addition to profit or loss, EBITDA and adjusted EBITDA are useful supplemental measures in evaluating the Company’s performance. Management cautions investors that EBITDA and adjusted EBITDA should not replace profit or loss as indicators of performance, or cash flows from operating, investing, and financing activities as a measure of the Company’s liquidity and cash flows.

References to “trade sales” are to sales net of the gain or loss on foreign exchange. Management cautions investors that trade sales should not replace sales as an indicator of performance.

References to “gross margin” are to trade sales less cost of sales net of the depreciation and amortization included in cost of sales.

References to “adjusted profit” and “diluted adjusted profit per share” are to profit for the period and diluted profit per share for the period adjusted for the non-cash CRA settlement, losses on foreign exchange, transaction costs, non-cash loss on available-for-sale investment and gain on sale of property, plant and equipment.

Forward-Looking Statements

This press release contains forward-looking statements that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. Forward-looking statements may contain such words as “anticipate”, “believe”, “continue”, “could”, “expects”, “intend”, “plans”, “will” or similar expressions suggesting future conditions or events. In particular, the forward looking statements in this press release include statements relating to our business and strategy, including our outlook for our financial and operating performance including our expectations for sales and adjusted EBITDA. Such forward-looking statements reflect our current beliefs and are based on information currently available to us, including certain key expectations and assumptions concerning anticipated grain production in our market areas, financial performance, business prospects, strategies, product pricing, regulatory developments, tax laws, the sufficiency of budgeted capital expenditures in carrying out planned activities, currency exchange rates and the cost of materials, labour and services. Forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking statements, including changes in international, national and local business conditions, weather patterns, crop planting, crop yields, crop conditions, the timing of harvest and conditions during harvest, seasonality, industry cyclicality, volatility of production costs, agricultural commodity prices, the cost and availability of capital, currency exchange rates, and competition. These risks and uncertainties are described under “Risks and Uncertainties” in our MD&A for the three and six month periods ended June 30, 2015 and in our most recently filed Annual Information Form. These factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking statements. We cannot assure readers that actual results will be consistent with these forward-looking statements and we undertake no obligation to update such statements except as expressly required by law.

Ag Growth International Inc.
Steve Sommerfeld
Investor Relations


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