Market Overview

Ag Growth Announces First Quarter 2019 Results; Declares Dividends

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WINNIPEG, May 7, 2019 /CNW/ - Ag Growth International Inc. (TSX:AFN) ("AGI", the "Company", "we" or "our") today announced its financial results for the three months ended March 31, 2019, and declared dividends for June, July and August 2019.

Overview of Results


Three-months Ended March 31

[thousands of dollars except per share amounts]

2019

$

2018

$

Trade sales [1][2]

216,198

214,097

Adjusted EBITDA [1][3]

30,637

30,727

Profit [4]

13,222

4,943

Diluted profit per share

0.70

0.30

Adjusted profit [1]

4,991

11,463

Diluted adjusted profit per share [1][4]

0.27

0.70

 

[1]   

See "Non-IFRS Measures".

[2]   

See "Operating Results – Three Months Ended March 31, 2019 – Trade Sales" in our Management's Discussion and Analysis for the three-months period ended March 31, 2019 ("MD&A").

[3]   

See "Operating Results – Three Months Ended March 31, 2019 – EBITDA and Adjusted EBITDA" in our MD&A.

[4]   

See "Operating Results – Three Months Ended March 31, 2019 - Diluted profit per share and diluted adjusted profit per share" in our MD&A.

 

Trade sales increased over the prior year as robust demand for AGI Farm equipment and contributions from recent acquisitions offset the impact of challenging winter conditions in North America and the timing of international sales. Adjusted EBITDA was consistent with record 2018 levels as strong gross margins and improved results in Brazil were offset by SG&A expenses related to market growth, primarily branding and advertising initiatives. Adjusted profit and adjusted profit per share decreased compared to 2018, largely due to increases in 2019 in non-cash interest expense and intangible amortization, and due to an income tax recovery in 2018, however the positive impact of non-cash gains on foreign exchange and the Company's equity compensation swap resulted in a significant increase in profit and diluted profit per share compared to the prior year.

"A very busy first quarter saw us close three important acquisitions," said Tim Close, President and CEO of AGI. "Our platform acquisition of Milltec in India provided AGI with expertise in rice milling solutions as well as a deep management team, beginning a new era for AGI given the significant growth opportunities in the rice vertical and in India and southeast Asia.  The Bin Manager sensor network and Field Data Manager tools, brought together in IntelliFarms' SureTrack grain management solution, opens new ways for us to add unique value for our customers and further differentiate AGI.  The acquisition of Improtech expanded our Food platform and provided AGI with additional expertise within the food and beverage industry. Our Q1 adjusted EBITDA remained consistent against a strong 2018 comparative, despite the impact of a long winter and the timing of international sales, and heading into Q2 and H2 2019 our outlook across AGI is positive with healthy backlogs in key businesses."

Diluted profit per share and diluted adjusted profit per share

Diluted profit per share in 2019 was $0.70 [2018 - $0.30]. Profit per share in 2019 and 2018 has been impacted by the items enumerated in the table below, which reconciles profit to adjusted profit. Adjusted diluted profit per share has decreased compared to 2018 largely due to a higher tax expense, the result of an income tax recovery in Q1 2018, and non-cash interest expense related to AGI's credit facility renewal in Q4 2018 and the redemption of AGI's 2014 Debentures.


Three-months Ended March 31

[thousands of dollars except per share amounts]

2019

$

2018

$

Profit

13,222

4,943

Diluted profit per share

0.70

0.30




Loss (gain) on foreign exchange

(2,524)

5,701

Fair value of inventory from acquisition [2]

24

586

M&A expenses

2,137

168

Other transaction and transitional costs [3]

2,624

136

Loss (gain) on financial instruments

(10,438)

(233)

Loss on sale of PP&E

(54)

(70)

Impairment charge [4]

-

232

Adjusted profit [1]

4,991

11,463

Diluted adjusted profit per share [1]

0.27

0.70

 

[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

Successive large crops in North America have resulted in sustained demand for AGI Farm equipment, particularly for portable grain handling equipment, while sales and backlogs of grain drying and aeration equipment have benefited from market share growth and wet conditions throughout North America. Orders for grain storage systems in the U.S. have been negatively impacted by difficult winter conditions, however management anticipates backlogs to grow in the near-term as U.S. farmers remain incented to add storage due to low commodity prices and a shortfall in existing storage capacity. Overall, AGI's backlog for Farm equipment is higher than at the same time in 2018 and management anticipates Q2 2019 and fiscal 2019 sales to increase over the prior year.

AGI's Commercial backlog in Canada remains very strong due to continued investment in Canadian commercial grain handling infrastructure, including in port facilities and inland terminals. In the United States, Commercial activity is expected to remain stable compared to the prior year. Offshore, sales in Q1 2019 were the second highest on record and backlogs remain above the very strong levels of 2018 due largely to a higher backlog in Brazil and contributions from acquisitions. AGI's quoting pipeline in EMEA and elsewhere is very active and management anticipates the current backlog will increase in the near-term. Commercial sales growth is anticipated in Q2 2019 and fiscal 2019, however the expectation remains that sales growth in all regions, including Brazil, will be weighted towards the second half.

On March 28, 2019, AGI announced the completion of its acquisition of Milltec, a manufacturer of rice milling and processing equipment in India. For the twelve months ended January 31, 2019, Milltec's sales and EBITDA were $56.2 million and $10.1 million, respectively. Milltec's results in calendar 2019 will be impacted by, among other things, the Indian monsoon season which is currently expected to approximate historical averages. Milltec's sales reflect agricultural seasonality in India, and historically approximately 70% of their sales have occurred in the first and fourth calendar quarters, while sales have been lowest in the second quarter of the calendar year. Management anticipates Milltec's historical seasonality will continue in 2019.

Overall, positive demand drivers for AGI Farm equipment, including the expectation of another large crop in North America, are expected to drive sales growth across all Farm product categories in 2019. Commercial sales are expected to benefit from existing backlogs and near-term opportunities, as well as the recent addition of Milltec in India. Management anticipates AGI sales and adjusted EBITDA for Q2 2019 and fiscal 2019 will increase compared to the prior year, with the most significant growth expected to occur in the second half of the year.

Trade sales and adjusted EBITDA in 2019 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. 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 2019 include the impact of existing and potential future trade actions, the ability of our customers to access capital, 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 June, July and August 2019. 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

June 2019

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