WINNIPEG, Aug. 10, 2017 /CNW/ - Ag Growth International Inc. (TSX: AFN) ("AGI", the "Company", "we" or "our") today announced its financial results for the three and six-month periods ended June 30, 2017, and declared dividends for September, October and November 2017.
Overview of Results
| Three Months Ended June 30 |
Six Months Ended June 30 |
||||
| (thousands of dollars except |
2017 |
2016 |
2017 |
2016 |
|
| Trade sales (1) |
222,241 |
143,538 |
376,930 |
257,210 |
|
| Adjusted EBITDA (1) |
40,099 |
26,017 |
66,001 |
45,790 |
|
| Profit |
14,749 |
5,285 |
19,876 |
10,982 |
|
| Diluted profit per share |
$0.88 |
$0.35 |
$1.22 |
$0.73 |
|
| Adjusted profit (1) |
13,903 |
9,862 |
21,614 |
15,302 |
|
| Diluted adjusted profit per share (2) |
$0.84 |
$0.66 |
$1.33 |
$1.02 |
|
| (1) |
See "Non-IFRS Measures". |
| (2) |
See "Diluted profit per share and Diluted adjusted profit per share". |
Trade sales and adjusted EBITDA significantly exceeded previous highs due to AGI's strong market position in the robust Canadian Farm and Commercial markets, improving demand for portable grain handling equipment in the U.S. and the contribution of recent acquisitions as AGI continues to diversify its geographic and end market exposure. Higher sales and a continued focus on operating margins resulted in a significant increase in adjusted EBITDA, profit and profit per share compared to the prior year.
"Strong performance in our Farm and Commercial business units resulted in record second quarter results." said Tim Close, President and CEO of AGI. "We are seeing positive year-over-year increases in many parts of AGI as we focus on our customers and realize the benefit of both organic investment and recent acquisitions. Acquisitions in 2016 and 2017 added meaningful contribution to these results however we are just starting to see the potential of our investments in Brazil, our Fertilizer and Seed platform, our global Commercial platform and our Food equipment division. We have made substantial investments in these initiatives, we are making good progress on each, and we are excited about the near-term growth potential as we pursue our Field to Consumer strategy. We are also continuing to invest in these initiatives in terms of people and capital while exploring new opportunities to expand each platform."
Diluted profit per share and Diluted adjusted profit per share
A reconciliation of profit and diluted adjusted profit per share to adjusted profit and adjusted diluted profit per share is below.
| Three Months Ended June 30 |
Six Months Ended June 30 |
|||||
| (thousands of dollars except per |
2017 |
2016 |
2017 |
2016 |
||
| Profit as reported |
14,749 |
5,285 |
19,876 |
10,982 |
||
| Diluted profit per share as reported |
$0.88 |
$0.35 |
$1.22 |
$0.73 |
||
| (Gain) loss on foreign exchange |
(4,034) |
2,807 |
(4,616) |
2,578 |
||
| Fair value of inventory from acquisition |
2,503 |
- |
2,731 |
- |
||
| M&A expenses (2) |
3,870 |
732 |
5,499 |
950 |
||
| Contingent consideration expense |
361 |
385 |
713 |
449 |
||
| Gain on financial instruments |
(3,576) |
(3,105) |
(2,601) |
(3,425) |
||
| Loss (gain) on sale of PP&E (3) |
30 |
(38) |
12 |
(28) |
||
| Impairment charge (3) |
- |
3,796 |
- |
3,796 |
||
| Adjusted profit (1) |
13,903 |
9,862 |
21,614 |
15,302 |
||
| Diluted adjusted profit per share (1) |
$0.84 |
$0.66 |
$1.33 |
$1.02 |
||
| (1) |
See "Non-IFRS Measures" |
| (2) |
Includes transaction costs, non-cash expenses related to recording inventory at fair value when acquiring companies and non-cash transaction costs. |
| (3) |
A loss on sale of PP&E was reported at June 30, 2016, as AGI performed a strategic review of its Mepu and Applegate divisions and recorded the assets of each at fair value. Both Applegate and Mepu were subsequently classified as discontinued operations and, accordingly, the loss on sale of PP&E has been reclassified as an impairment, and the impairment charge add-back in 2016 now includes all impairment items related to the dispositions. As a result, adjusted profit per share for the three and six-month periods increased from $0.59 and $0.99, respectively, to $0.66 and $1.02. |
OUTLOOK
Sales of Farm equipment in Canada remain very strong and order backlogs are well above the prior year. As a result, management anticipates third quarter Canadian Farm sales to exceed a very strong 2016 comparative. Hot and dry weather in certain areas of western Canada has the potential to lower yields and expedite harvest, which may lead to higher inventory carryover at some dealers, however the impact in Q4 is not currently expected to be significant. In the United States, improving Farm market dynamics have resulted in higher sales of portable grain handling equipment compared to 2016. Although crop conditions in the U.S. are not as favourable as at the same time a year ago, management anticipates improving demand dynamics and pent up demand for portable equipment should more than offset the impact of potentially lower crop volumes, and sales in the third and fourth quarters of 2017 are expected to exceed the prior year.
AGI anticipates growth in its Canadian Commercial business will result from significant near-term investment in Canadian grain handling infrastructure, which has resulted in part due to the dissolution of the Canadian Wheat Board, and the continued evolution of Canadian fertilizer distribution. In the United States, Commercial backlogs remain steady and management anticipates sales levels in the second half of 2017 will approximate those of the prior year. Offshore, AGI's project sales backlog has increased significantly in recent months, particularly in the Black Sea region and South America. Management anticipates second half international sales will be well above the prior year due to higher project sales, continued robust demand in Europe, the Middle East and Africa ("EMEA") and international sales from recently acquired Yargus Manufacturing, Inc. ("Yargus") and Global Industries ("Global").
AGI acquired Global on April 4, 2017. AGI has completed the first phase of the integration of Global and management expects synergies to be higher than initially anticipated, largely due to purchasing synergies and the rationalization of the combined entities' senior management and sales teams. In addition, management believes there is a significant opportunity for future margin expansion through increased adoption of lean manufacturing and improved manufacturing processes. In the first six months of 2017, AGI experienced increased demand for portable grain handling equipment, which is expected to also benefit certain Global product lines. However, U.S. demand for grain storage systems, which represent the majority of Global's sales, is expected to remain at cyclical lows for the balance of 2017.
AGI completed several acquisitions in 2016 and the inclusion of a full twelve months of results from NuVision Industries Inc. ("NuVision") (April 2016), Mitchell Mill Systems ("Mitchell") (July 2016) and Yargus (November 2016) in fiscal 2017 is expected to increase EBITDA compared to the prior year. In addition, management believes the combination of these entities has created a market leading fertilizer platform and accordingly expects to organically grow sales for each of these businesses.
The construction of AGI's manufacturing facility in Brazil is largely complete. AGI is currently manufacturing storage equipment at the new facility and expects to manufacture grain handling, drying and other equipment before the end of 2017. AGI has focused efforts in 2017 on growing its Farm and Commercial business in Brazil while at the same time transferring product knowledge from North America to Brazil, and investing in people to prepare for future growth. AGI's Brazilian operations are not expected to generate positive EBITDA in the second half of 2017, largely because Commercial projects have not materialized as quickly as anticipated. Management maintains a favourable outlook for 2018 due to increasing Farm sales, a high level of Commercial quoting activity and improving economic conditions in Brazil, including rapidly decreasing interest rates.
Demand in 2017 will be influenced by, among other factors, weather patterns, crop conditions and the timing of harvest and conditions during harvest. Certain areas of western Canada and the United States have experienced hot and dry weather in 2017, which may lower crop yields and impact demand for AGI equipment. Changes in global macroeconomic factors as well as sociopolitical factors in certain local or regional markets may influence sales, primarily of Commercial grain handling and storage products. Consistent with prior periods, Commercial sales are subject to the timing of customer commitment and delivery considerations. A weaker Canadian dollar relative to its U.S. counterpart positively impacts AGI's profit and adjusted EBITDA, and future results may be impacted if the recent strengthening of the Canadian dollar is sustained. A number of factors, including U.S. trade action, may impact input pricing in 2017. The Company has mitigated its exposure to higher input costs through strategic procurement of steel, sales price increases and limiting the length of time commercial quotes remain valid.
In summary, management anticipates record sales and adjusted EBITDA in the second half of 2017 will result from strength in the Canadian Farm and Commercial markets, a modest recovery in the U.S. Farm market, an increase in international sales and contributions from acquisitions. Management expects sales and EBITDA in the second half of 2017 to be well above strong 2016 comparatives, however the timing of domestic and international Commercial projects may result in the more significant increase occurring in the fourth quarter.
Dividends
AGI today announced the declaration of cash dividends of $0.20 per common share for the months of September, October and November 2017. 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 2017 |
October 13, 2017 |
September 29, 2017 |
||||||
| October 2017 |
November 15, 2017 |
October 31, 2017 |
||||||
| November 2017 |
December 15, 2017 |
November 30, 2017 |
MD&A and Financial Statements
AGI's financial statements and management's discussion and analysis (the "Q2 MD&A") for the three and six month periods ended June 30, 2017 can be obtained at http://www.newswire.ca/news-releases/ and will also be available electronically on SEDAR (www.sedar.com) and on AGI's website (www.aggrowth.com).
Conference Call
Management will hold a conference call on Thursday, August 10, 2017, at 9:00 a.m. EST to discuss the Company's results for the three and six-month periods ended June 30, 2017. To participate in the conference call, please dial 1-888-390-0605 or for local access dial 416-764-8609. An audio replay of the call will be available for seven days. To access the audio replay, please dial 1-888-390-0541 or for local access dial 416-764-8677. Please quote passcode 434798# for the audio replay.
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, Brazil, South Africa and the United Kingdom, and distributes its products globally.
NON-IFRS MEASURES
In analyzing our results, we supplement our use of financial measures that are calculated and presented in accordance with International Financial Reporting Standards ("IFRS"), with a number of non-IFRS financial measures including "EBITDA", "Adjusted EBITDA", "trade sales", "adjusted profit" and "diluted adjusted profit per share". A non-IFRS financial measure is a numerical measure of a company's historical performance, financial position or cash flow that excludes (includes) amounts, or is subject to adjustments that have the effect of excluding (including) amounts, that are included (excluded) in the most directly comparable measures calculated and presented in accordance with IFRS. Non-IFRS financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-IFRS financial measures having the same or similar businesses. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
We use these non-IFRS financial measures in addition to, and in conjunction with, results presented in accordance with IFRS. These non-IFRS financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our IFRS results and the accompanying reconciliations to corresponding IFRS financial measures, may provide a more complete understanding of factors and trends affecting our business.
In this press release, we discuss the non-IFRS financial measures, including the reasons that we believe that these measures provide useful information regarding our financial condition, results of operations, cash flows and financial position, as applicable, and, to the extent material, the additional purposes, if any, for which these measures are used. Reconciliations of non-IFRS financial measures to the most directly comparable IFRS financial measures are contained in the Q2 MD&A.
Management believes that the Company's financial results may provide a more complete understanding of factors and trends affecting our business and be more meaningful to management, investors, analysts and other interested parties when certain aspects of our financial results are adjusted for the gain (loss) on foreign exchange and other operating expenses and income. These measurements are non-IFRS measurements. Management uses the non-IFRS adjusted financial results and non-IFRS financial measures to measure and evaluate the performance of the business and when discussing results with the Board of Directors, analysts, investors, banks and other interested parties.
References to "EBITDA" are to profit from continuing operations before income taxes, finance costs, depreciation, and amortization. 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, gains or losses on financial instruments, non-cash contingent consideration expenses, provisions related to the cancellation of a U.S. distributor expenses related to corporate acquisition activity, fair value of inventory from acquisitions and impairment. Adjusted EBITDA excludes the results of former AGI divisions Applegate and Mepu as the previously announced strategic review of these assets resulted in their sale in 2016. 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. See "Operating Results - EBITDA and Adjusted EBITDA" in the Q2 MD&A for the reconciliation of EBITDA and Adjusted EBITDA to profit from continuing operations before income taxes.
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. See "Operating Results - Trade Sales" in the Q2 MD&A for the reconciliation of trade sales to 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 losses on foreign exchange, transaction costs, non-cash loss (profit) on discontinued operations, contingent consideration expense and gain (loss) on sale of property, plant and equipment. See "Detailed Operating Results – Diluted profit per share and Diluted adjusted profit per share" in the Q2 MD&A for the reconciliation of diluted profit per share and diluted adjusted profit per share to profit as reported.
FORWARD-LOOKING INFORMATION
This press release contains forward-looking statements and information ("forward-looking information") within the meaning of applicable securities laws that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and the words "anticipate", "believe", "continue", "could", "expects", "intend", "plans", "postulates", "predict", "will" or similar expressions suggesting future conditions or events or the negative of these terms are generally intended to identify forward-looking information. This information involves known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. In addition, this press release may contain forward-looking information attributed to third party industry sources. Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which it is based will occur. In particular, the forward-looking information in this press release includes information relating to our business and strategy, including our outlook for our financial and operating performance including our expectations for sales and adjusted EBITDA, industry demand and market conditions, and with respect to our ability to achieve the expected benefits of recent acquisitions and the contribution therefrom. Such forward-looking information reflects our current beliefs and is based on information currently available to us, including certain key expectations and assumptions concerning: anticipated grain production in our market areas; financial performance; the financial and operating attributes of recently acquired businesses and the anticipated future performance thereof and contributions therefrom; business prospects; strategies; product pricing; regulatory developments; tax laws; the sufficiency of budgeted capital expenditures in carrying out planned activities; political events; currency exchange and interest rates; the cost of materials; labour and services; the value of businesses and assets and liabilities assumed pursuant to recent acquisitions; the impact of competition; the general stability of the economic and regulatory environment in which the Company operates; the timely receipt of any required regulatory and third party approvals; the ability of the Company to obtain and retain qualified staff and services in a timely and cost efficient manner; the timing and payment of dividends; the ability of the Company to obtain financing on acceptable terms; the regulatory framework in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its products and services. Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking information, including changes in international, national and local macroeconomic and business conditions, weather patterns, crop planting, crop yields, crop conditions, the timing of harvest and conditions during harvest, the ability of management to execute the Company's business plan, seasonality, industry cyclicality, volatility of production costs, agricultural commodity prices, the cost and availability of capital, currency exchange and interest rates, the availability of credit for customers, competition and AGI's failure to achieve the expected benefits of recent acquisitions. These risks and uncertainties are described under "Risks and Uncertainties" in the Q2 MD&A, in our MD&A for the year ended December 31, 2016 and in our most recently filed Annual Information Form, all of which are available under the Company's profile on SEDAR (www.sedar.com). These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking information. We cannot assure readers that actual results will be consistent with this forward-looking information. Readers are further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. These estimates may change, having either a negative or positive effect on profit, as further information becomes available and as the economic environment changes. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information included in this press release is made as of the date of this press release and AGI undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
SOURCE Ag Growth International Inc. (AGI)
Investor Relations, Steve Sommerfeld, 204-489-1855, [email protected]
Share this article