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Ag Growth Announces Second Quarter 2018 Results; Declares Dividends

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Ag Growth Announces Second Quarter 2018 Results; Declares Dividends

Canada NewsWire

WINNIPEG, Aug. 9, 2018 /CNW/ - Ag Growth International Inc. (TSX:AFN) ("AGI", the "Company", "we" or "our") today announced its financial results for the three and six months ended June 30, 2018, and declared dividends for September, October and November 2018.

Overview of Results

(thousands of dollars
except per share
amounts)

Three Months Ended June 30

Six Months Ended June 30

2018

$

2017

$

2018

$

2017

$

Trade sales (1)(2)(4)

262,651

222,241

476,748

376,930

Adjusted EBITDA (1)(3)(4)

49,220

40,099

79,947

66,001

Profit

12,792

14,749

17,735

19,876

Diluted profit per share

$0.75

$0.88

$1.06

$1.22

Adjusted profit (1)

22,282

13,903

33,745

21,614

Diluted adjusted profit per share (1)(5)

$1.21

$0.84

$1.91

$1.33



(1)

See "Non-IFRS Measures".

(2)

See "Operating Results – Trade Sales" in the Q2 MD&A.

(3)

See "Operating Results - EBITDA and Adjusted EBITDA" in the Q2 MD&A.

(4)

The Company adopted IFRS 15 in 2018 without retrospective application and as a result in Q1 2018 recorded sales and adjusted EBITDA of $4.4 million and $1.5 million, respectively, that under IAS 18 had previously been recognized in 2017. For purposes of comparability, these amounts have been adjusted for in the 2017 figures in the above table.

(5)

See "Detailed Operating Results - Diluted profit per share and diluted adjusted profit per share".

 

Trade sales and adjusted EBITDA were at record levels in both the three and six-month periods ended June 30, 2018 due to continued momentum in international sales, a robust Canadian Commercial market and strong portable grain handling sales in the U.S. Excluding acquisitions, international sales increased 44% compared to the prior year, easily surpassing record highs due to continued strength in EMEA and higher sales in Brazil. Commercial activity in the Canadian fertilizer and grain segments remains very high due to the evolution of fertilizer distribution and expansion of the Canadian grain handling infrastructure. In the United States, prospects of another large crop and pent up demand have resulted in recovering sales of portable grain handling equipment. Adjusted EBITDA as a percentage of sales in Q2 increased to 18.7%, up significantly compared to Q1 2018 due to higher sales volumes, sales mix and a narrowing of the operating loss in Brazil. Higher adjusted EBITDA was offset by a translation loss on foreign exchange, resulting in lower profit and profit per share, while adjusted profit and adjusted profit per share increased significantly compared to 2017.

"We had an outstanding effort from teams throughout AGI in the second quarter.", said Tim Close, President and CEO of AGI. "Our Farm group delivered solid results, including significant sales growth in the US, strong sales in Canada and consistent margins in an environment of volatile input prices.  Significant growth in our Commercial business was driven by a robust market in Canada and record international sales.  All in, the broad based, strong performance across AGI pushed organic growth to 12% in the quarter.  The outlook across AGI continues to be positive. 

Subsequent to the quarter we bolstered our Food platform with the acquisition of Sabe in France.  Sabe is a strategic addition to the group that brings all of the elements we look for in a new member of the AGI family, including an excellent group of very talented people who consistently deliver high quality projects, leading to their customers placing a great deal of confidence in the Sabe team over and over again.  We are very happy to welcome Arnaud Meynial, Patrice Perraud, Yohan Texier and the entire Sabe team to the AGI family.  Our teams are already busy on integration and collaborating on initiatives to work together globally."

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.

(thousands of dollars
except per share
amounts)

Three Months Ended June 30

Six Months Ended June 30

2018

$

2017

$

2018

$

2017

$

Profit

12,792

14,749

17,735

19,876

Diluted profit per share

0.75

0.88

1.06

1.22






Loss (gain) on foreign exchange

6,632

(4,034)

12,333

(4,616)

Fair value of inventory from acquisition (2)

597

2,503

1,183

2,731

M&A expenses

700

477

868

1,087

Other transaction expenses (3)

2,287

3,754

2,423

5,125

Gain on financial instruments

(1,012)

(3,576)

(1,245)

(2,601)

Loss on sale of PP&E

286

30

216

12

Impairment charge (4)

-

-

232

-

Adjusted profit (1)

22,282

13,903

33,745

21,614

Diluted adjusted profit per share (1)

1.21

0.84

1.91

1.33



(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.

(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

Crop conditions in North America are generally very positive and recent reports from both the USDA and Statistics Canada are supportive of market expectations of a large North American crop, particularly in the U.S. Demand for portable grain handling equipment in the U.S. remains very high due to underinvestment in recent years and the expectation of a favourable harvest in 2018. Order backlogs in the U.S. for both portable grain handling equipment and grain storage systems remain strong. Farm demand in Canada is stable and consistent with longer-term averages, however is not at the very high levels experienced in 2017. Favourable growing conditions in North America have compensated for a later than average planting and the benefit to AGI of a late harvest is no longer anticipated. Based on current conditions, management anticipates that Farm sales and EBITDA in the second half of fiscal 2018 will approximate 2017 levels.

Management anticipates that strong Commercial sales in North America in the second half of 2018 will result from robust demand in Canada for fertilizer and grain systems, offset by lower year-over-year activity in the U.S. In addition, management expects results to benefit from the recent acquisitions of CMC, Junge and Danmare. AGI's Commercial backlog in North America is substantially higher than the prior year. International sales momentum is expected to continue in the second half due to a very strong backlog with particular strength in EMEA and South America.  The recent addition of Sabe in France is also expected to contribute to strong international results. Overall, management anticipates sales and EBITDA related to Commercial equipment in 2018 will be higher than the prior year.

Second quarter results in Brazil improved over previous quarters due to higher sales volumes, improving manufacturing processes and a less significant impact from start-up related costs. Commercial sales and backlog have grown significantly, as AGI's local presence and growing brand recognition in South America is leading to increasing opportunities with local and multinational participants. Farm sales in Brazil increased over the prior year, however access to capital and a cautious approach to capital investment continue to contribute to a competitive marketplace. AGI's backlog in Brazil is substantially higher than the prior year, and management anticipates results will continue to improve in the second half of 2018. Net of start-up related costs, management anticipates a positive contribution from AGI Brazil in the second half of 2018.

On balance, management anticipates trade sales and adjusted EBITDA in the second half of fiscal 2018 will increase compared to 2017. AGI's platform expansion, most significantly to date into the fertilizer and food segments, is resulting in a reduction in our seasonality and cyclicality, and a lower correlation to grain volumes and harvest in a particular season. Accordingly, a higher proportion of our sales and EBITDA are falling into the first half of our fiscal year. Results in the second half of 2018 are expected to benefit from strong demand for Commercial equipment in Canada, a significant increase in international sales and improved demand for Farm equipment in the United States. In addition, trade sales and EBITDA in 2018 are expected to benefit from the recent acquisitions of CMC, Junge, Danmare and Sabe, as well as from improving results in Brazil.

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. Steel prices have increased significantly over the last number of quarters and volatility in steel markets may be exacerbated by additional U.S. trade actions. 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 financial results. Other factors that may impact results in 2018 include the impact of existing and potential future trade actions, 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 September, October and November 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

September 2018

October 15, 2018

September 28, 2018

October 2018

November 15, 2018

October 31, 2018

November 2018

December 14, 2018

November 30, 2018

 

MD&A and Financial Statements

AGI's financial statements and management's discussion and analysis (the "Q2 MD&A") for the three and six months ended June 30, 2018 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, August 9, 2018, at 8:00 a.m. EST to discuss its results for the three and six months ended June 30, 2018. 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 954079# 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 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, expenses related to corporate acquisition activity, fair value of inventory from acquisitions and impairment. 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 (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 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 (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 and input 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 the Q2 MD&A, 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)

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