Ag Growth Announces Fourth Quarter and Annual 2017 Results; Declares Dividends
WINNIPEG, March 14, 2018 /CNW/ - Ag Growth International Inc. (TSX: AFN) ("AGI", the "Company", "we" or "our") today announced its financial results for the three months and year ended December 31, 2017, and declared dividends for March, April and May 2018.
Overview of Results
| (thousands of dollars except per share amounts) |
Year Ended December 31 |
|
| 2017 |
2016 |
|
| Trade sales (1) (2) |
755,605 |
546,616 |
| Adjusted EBITDA (1)(3) |
123,329 |
100,307 |
| Profit |
35,196 |
19,306 |
| Diluted profit per share |
2.18 |
1.29 |
| Adjusted profit (1) |
39,449 |
36,898 |
| Diluted adjusted profit per share (1)(4) |
2.44 |
2.47 |
| (1) |
See "Non-IFRS Measures". |
| (2) |
See also "Operating Results – Trade Sales" in the Annual MD&A. |
| (3) |
See also "Operating Results - EBITDA and Adjusted EBITDA" in the Annual MD&A. |
| (4) |
See "Diluted profit per share and diluted adjusted profit per share". |
Trade sales and adjusted EBITDA were at record levels in 2017, as broad-based strength in both the Farm and Commercial segments was complemented by contributions from acquisitions made in 2016 and 2017. AGI's Farm trade sales increased by 47% as a robust Canadian Farm market was complemented by improving market conditions in the U.S. and the May 2017 acquisition of Global Industries, Inc. ("Global"). Commercial trade sales increased by 29%, the result of higher international sales and contributions from 2016 acquisitions that expanded AGI's Commercial product offering and diversified its geographic reach and customer base. Higher adjusted EBITDA and a gain on foreign exchange more than offset higher finance costs related to the Global acquisition, resulting in an increase in unadjusted profit per share compared to the prior year, while diluted adjusted profit per share declined compared to 2016.
"We are pleased today to report our fourth quarter and fiscal 2017 results", said Tim Close, President and CEO of AGI. "We achieved record results in 2017 but more importantly we completed key initiatives to facilitate our continued growth as we solidified our fertilizer platform, completed our build in Brazil, invested in our engineering resources, added to our Farm and Commercial product lines and grew our presence in key markets. Over the past several months we have also welcomed the teams at CMC, Junge Control and Danmare to AGI. While these were three relatively small acquisitions, the strategic impact across AGI will be well beyond their current scale as we move into liquid fertilizer, sensors, equipment and system controls and scale up our food system design capabilities to steepen the growth trajectory of our Food platform. We are very proud to add each of these great businesses and team members to AGI and look forward to building on the solid foundations that exist in all three businesses. We continue to have great momentum across all business lines around the world, and I want to thank all of our hard working employees for their dedication towards meeting and exceeding our customers' expectations."
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.
| Year Ended December 31 |
||
| (thousands of dollars except per share amounts) |
2017 |
2016 |
| Profit |
35,196 |
19,306 |
| Diluted profit per share |
2.18 |
1.29 |
| (Gain) loss on foreign exchange |
(11,578) |
14,070 |
| Fair value of inventory from acquisition (2) |
5,037 |
0 |
| M&A expenses |
1,259 |
3,018 |
| Other transaction expenses (3) |
7,506 |
1,307 |
| Gain on financial instruments |
(357) |
(9,210) |
| (Gain) on sale of PP&E |
(909) |
(114) |
| Impairment charge (4) |
1,932 |
7,839 |
| Allowance for Net Receivables |
0 |
682 |
| Non-cash accretion related to early redemption of the 2013 Convertible Debentures |
1,363 |
0 |
| Adjusted profit (1) |
39,449 |
36,898 |
| Diluted adjusted profit per share (1) |
$2.44 |
$2.47 |
| (1) |
See "Non-IFRS Measures". |
| (2) |
Non-cash expenses related to the sale of inventory that acquisition accounting required be recorded at a value higher than manufacturing cost as at the date of acquisition. Amounts in 2016 were not considered material and accordingly were not added back to adjusted EBITDA. |
| (3) |
Includes restructuring and other acquisition related transition costs, as well as the accretion and other movement in contingent consideration and amounts due to vendors. |
| (4) |
To record assets held for sale at estimated fair value. |
OUTLOOK
AGI's Farm business in 2018 is expected to benefit from increased demand in the U.S. for both portable grain handling equipment and grain storage systems. U.S. Farm sales are expected to increase due to pent-up demand, the result of under-investment in equipment over the last several years, and market expectations for another year of significant planted acreage. In addition, U.S. tax reform in 2018 may stimulate demand as many farmers will pay lower taxes and may be eligible for accelerated depreciation on equipment purchases. In Canada, demand is expected to continue to benefit from positive markets, however a dry and early harvest in certain areas has resulted in a degree of carryover in dealer inventory, and Canadian Farm sales in fiscal 2018 may not reach the record sales of 2017. Management anticipates results at recently acquired Global will benefit from increased demand for grain storage systems, synergies realized throughout 2017 and improvements in manufacturing efficiencies. Overall, Farm backlogs are significantly higher than the prior year, and based on current conditions management anticipates that Farm sales in fiscal 2018 will be above 2017 levels.
Commercial sales in Canada are expected to increase significantly in 2018 due to strong demand for both grain and fertilizer storage and handling facilities. The existing Canadian Commercial sales order backlog includes a significant portion of the total anticipated sales in 2018. In the United States, Commercial activity is expected to approximate 2017 levels due to ongoing maintenance capital expenditure programs and investments to increase capacity and productivity. In addition, U.S. tax reform in 2018 may encourage capital investment. AGI's fertilizer platform and equipment and system controls capabilities were strengthened by the acquisition of Junge Control Inc. ("Junge") in December 2017, and the continued development of these platforms is expected to increase Commercial sales in 2018. International sales will benefit from a record backlog entering fiscal 2018, as AGI delivers on a geographically diverse sales backlog, with particular strength in Eastern Europe and South America. Overall, management anticipates sales of Commercial equipment in 2018 will be higher than the prior year.
Management anticipates a positive contribution from AGI Brazil in 2018, compared to a loss in 2017. Farm sales in Brazil are expected to benefit from AGI's investment in its sales team throughout 2017, which has led to a higher opening backlog and an active quote log. Sales of Commercial equipment are expected to benefit from a higher opening backlog and product technology transferred from North America that will further enable AGI Brazil to service customers in South America with a complete Commercial solution. Access to capital and a cautious approach to capital investment continue to contribute to a competitive marketplace in Brazil, however AGI anticipates higher sales and manufacturing efficiencies will lead to a positive EBITDA contribution in 2018, particularly in the second half of the fiscal year.
On balance, management anticipates strength in both the Farm and Commercial sectors will lead to higher sales and adjusted EBITDA in 2018. Existing backlogs are high, particularly with respect to the Company's Farm business in the U.S. and its Canadian and international Commercial business. Improved results in Brazil, a higher contribution from the Global companies and the continued development of AGI's fertilizer and controls platforms are also expected to contribute to higher EBITDA in 2018.
Trade sales and adjusted EBITDA in 2018 will be influenced by, among other factors, weather patterns, crop conditions, the timing of harvest and conditions during harvest and changes in input prices, including steel. Dry soil conditions in certain regions of Canada and the United States have the potential to worsen, and may negatively impact crop yields. Steel prices have increased significantly in recent months, and market participants anticipate continued volatility in steel markets, which may be exacerbated by U.S. trade actions, including the recent announcement of import tariffs under Section 232 of the Trade Expansion Act (USA). The Company endeavors to mitigate its exposure to higher input costs through strategic procurement of steel, sales price increases and limiting the length of time commercial quotes remain valid, however the pace and volatility of input price increases may negatively impact earnings. Other factors that may impact results in 2018 include the rate of exchange between the Canadian and U.S. dollars, changes in global macroeconomic factors as well as sociopolitical factors in certain local or regional markets, and the timing of Commercial customer commitments and deliveries.
Dividends
AGI today announced the declaration of cash dividends of $0.20 per common share for the months of March, April and May 2018. 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 |
| March 2018 |
April 13, 2018 |
March 30, 2018 |
| April 2018 |
May 15, 2018 |
April 30, 2018 |
| May 2018 |
June 15, 2018 |
May 31, 2018 |
Dividend Reinvestment Plan
AGI also announced today that it has suspended, until further notice, the active operation of its Dividend Reinvestment Plan ("DRIP"). Accordingly, the March 2018 dividend, payable April 13, 2018 to shareholders of record on March 30, 2018, will be the last dividend to be reinvested through the DRIP. Dividends starting with the April 2018 dividend, payable on May 15, 2018 to shareholders of record on April 30, 2018, will not be reinvested through the DRIP, and shareholders who were enrolled in the program will automatically receive dividend payments in the form of cash. If AGI elects to reinstate the DRIP in the future, shareholders that were enrolled in the DRIP at suspension and remained enrolled at reinstatement will automatically resume participation in the DRIP.
MD&A and Financial Statements
AGI's financial statements and management's discussion and analysis (the "Annual MD&A") for the three months and year ended December 31, 2017 can be obtained at https://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 Wednesday, March 14, 2018, at 8:00 a.m. EST to discuss AGI's results for the three months and year ended December 31, 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 914396 # for the audio replay.
Company Profile
AGI is a leading provider of equipment solutions for agriculture bulk commodities including seed, fertilizer, grain, and feed systems with a growing platform in providing equipment and solutions for food processing facilities. AGI has manufacturing facilities in Canada, the United States, the United Kingdom, Brazil, South Africa and Italy and distributes its product globally.
Further information can be found in the disclosure documents filed by AGI with the securities regulatory authorities, available at www.sedar.com and on AGI's website www.aggrowth.com.
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 MD&A for the year ended December 31, 2017.
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, 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 our MD&A for the year ended December 31, 2017 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 our MD&A for the year ended December 31, 2017 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 (gain) loss on foreign exchange, fair value of inventory from acquisitions, 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 our MD&A for the year ended December 31, 2017 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 (collectively, "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. Forward-looking 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 our future financial results including sales, EBITDA 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 including from purchasing and personnel synergies and margin improvement initiatives. 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 as well as sociopolitical conditions in certain local or regional markets, 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, AGI's failure to achieve the expected benefits of recent acquisitions including to realize anticipated synergies and margin improvements and changes in trade relations between the countries in which the Company does business including between Canada and the United States. These risks and uncertainties are described under "Risks and Uncertainties" in our MD&A for the year ended December 31, 2017 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]
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