Ag Growth International Inc.
TSX : AFN

Ag Growth International Inc.

March 12, 2014 07:00 ET

Ag Growth Announces Record 2013; Declares Dividends

WINNIPEG, MANITOBA--(Marketwired - March 12, 2014) - Ag Growth International Inc. (TSX:AFN) ("AGI" or the "Company") today announced its financial results for the three and twelve month periods ended December 31, 2013, and declared dividends for March 2014, April 2014 and May 2014.

Overview of Results

(thousands of dollars) Three Months Ended
December 31
Year Ended
December 31
2013 2012 Change 2013 2012 Change
Trade sales (1) $ 88,016 $ 59,899
47
% $
358,348
$
314,616

14
%
Adjusted EBITDA (1) $
13,904
$
4,735

194
% $
61,186
$
49,492

24
%
Net Profit $
518
$
(3,436
)
-
$
22,591
$
17,188

31
%
Diluted profit per share $
0.04
$
(0.27
)
-
$
1.75
$
1.37

28
%
(1) See "Non-IFRS Measures".

Trade sales and adjusted EBITDA were at record highs in 2013 due to a very strong second half as AGI capitalized on favourable crop conditions in North America and experienced continued success in international markets. AGI's leading market share in portable grain handling allowed the Company to take full advantage of record North American crop production volumes and a prolonged U.S. harvest. Sales of commercial grain handling equipment increased substantially compared to 2012 due to robust domestic demand and a significant increase in international business. Offshore, AGI's sales increased 29% compared to the prior year as the Company continues to expand its global reach and solidify its position in key international markets. A strong operating performance across all divisions lead to an increase in the Company's gross margin percentage and accordingly, with sales at record highs, AGI's adjusted EBITDA exceeded $60 million. Based on current conditions in North America and strong momentum in its international business, management retains a positive outlook for fiscal 2014 (see "Outlook").

"We are very pleased to report record results for the fourth quarter and fiscal year of 2013." said Gary Anderson, President and Chief Executive Officer. "It is significant to note that the strength of our results was broadly based within our business, with fourth quarter sales records in Canada, the United States and offshore, and robust demand both on-farm and commercially. The achievement of record results for the fiscal year, despite significant first half headwinds related to the 2012 U.S. drought, demonstrates the progress we have made on a number of fronts, including operational initiatives, new product development and an increasing presence in the global marketplace."

"We enter 2014 on very strong footing, with positive market dynamics in North America, a significant level of committed business internationally and record order backlogs across all business lines. In 2013 international sales represented 26% of our total and we expect to continue to expand our global footprint as our sales activity increases in South America and the Asia Pacific region. We remain very enthusiastic with respect to AGI's prospects in 2014 and beyond and look forward to delivering solid results to our shareholders over the long term."

OUTLOOK

Overview

Record crop production in North America and a prolonged harvest season in the U.S. resulted in strong demand for on-farm portable grain handling equipment and low post-harvest inventory levels throughout AGI's North American dealer network. In addition, moderating agricultural commodity prices have incentivized farmers to store more of their 2013 crop on the farm which is supportive of post-harvest demand for storage, aeration and handling equipment. As a result, off-season demand is higher than typical and participation in the Company's annual preseason programs was very strong as dealers rebuild their inventory in advance of the 2014 growing season. AGI's backlog for portable handling equipment is at record levels as we enter 2014 which bodes well for sales in the first two quarters of 2014.

Demand for portable handling equipment in the second half of 2014 will be influenced by a number of factors including the volume of grain grown and conditions during harvest. At its 2014 Agricultural Outlook Forum, the USDA forecast overall planting in the U.S. to ease lower in 2014, with corn acres declining 3.6% from the modern day record high in 2013 and soybean acres increasing 3.9%. It is premature to accurately predict crop yields however field moisture levels in the U.S. are significantly improved compared to the same time in 2013. Based on current conditions, management expects strong demand for portable equipment in the second half of 2014.

Demand for commercial equipment remains very strong as the U.S. commercial grain handlers continue to focus on efficiencies and expansion of capacity in response to fluctuating agricultural commodity prices and a long-term trend towards higher grain production. AGI's commercial handling equipment business has also benefited from our continued growth in offshore markets. The Company's commercial backlog entering 2014 was its highest on record and quoting activity both domestically and offshore remains robust.

Offshore, AGI reported its fourth consecutive record year in 2013 as sales grew 29% to over $92 million. AGI's increasing presence in new markets across the globe has resulted in record levels of quoting activity and entering 2014 AGI's international order backlog is significantly higher compared to the prior year. In 2014 management expects to transact significant business in Eastern Europe, particularly Ukraine. Current political volatility in the region, however, has the potential to delay the shipment of committed orders and may defer new business. (See "Recent Events in Ukraine"). Sales growth is anticipated in Latin America as AGI begins to realize on the groundwork that was laid through the allocation of dedicated sales resources in 2012. AGI's growing global presence was further evidenced by sales in the Middle East, Southeast Asia and Australia in 2013 and management anticipates continued success in these regions in 2014. Based on current conditions, management anticipates overall international sales in 2014 to exceed the record levels achieved in 2013.

AGI's financial results are impacted by the rate of exchange between the Canadian and U.S. dollars. A weaker Canadian dollar positively impacts sales and gross margin percentages when comparing to prior periods. For the year ended December 31, 2013, AGI's average rate of exchange was $1.03. The Canadian dollar weakened in the latter portion of 2013 and based on the current rate of exchange AGI's financial results in 2014 may benefit from a weaker Canadian dollar compared to 2013. A portion of the Company's 2014 foreign exchange exposure has been hedged through forward foreign exchange contracts (see "Financial Instruments).

On January 17, 2014, AGI redeemed its outstanding 7.0% convertible debentures with cash on hand and proceeds from the December 2013 issuance of 5.25% convertible debentures (see "Capital Structure"). Management expects lower cash interest expense related to outstanding debentures will benefit profit per share in 2014.

Consistent with prior years, sales in 2014, particularly in the second half, will be influenced by weather patterns, crop conditions and the timing of harvest and conditions during harvest. Changes in global macro-economic 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 and other material input costs and the rate of exchange between the Canadian and U.S. dollars. (See also, "Risk and Uncertainties").

Recent Events in Ukraine

AGI's international growth strategy has been very successful and in recent years offshore sales have increased significantly. In 2013, sales to Russia, Ukraine and Kazakhstan ("RUK") were $57 million (2012 - $27 million), with a significant majority of these in Ukraine. AGI currently has accounts receivable in RUK of $17 million, the value of which are 90% insured by Export Development Canada ("EDC"). We do not believe recent events in Ukraine have resulted in a significantly higher risk related to the collection of these receivables. AGI has no physical assets located in RUK.

Our business in Ukraine, as is the case with most of our new business in emerging markets, is primarily comprised of turn-key projects that bundle our commercial grain handling equipment with large diameter storage bins and are sold to large corporate farms, commercial grain handlers and port facilities. Our customers in Ukraine are predominantly well capitalized entities that either qualify for EDC insurance, direct financing or are able to pay cash in advance of shipment, and they generally transact a significant portion of their business in U.S. dollars and accordingly are largely insulated from volatility in local currencies.

AGI's plans for 2014 include a continuing significant amount of business in Ukraine and a substantial amount of this business has been committed as at the date of writing. We have been in regular contact with our customers in the region and to date there has not been an indication that their capital expenditure plans have been impacted by the recent events. Our customers have requested we keep on schedule and accordingly we continue to ship product to Ukraine as we have throughout Q1.

The situation in Ukraine and the region is very fluid. Although at this time our customers have not changed their view with respect to capital projects this may change if the situation worsens. Our business may also be adversely affected in the event of negative developments with respect to currency controls, trade sanctions or export credit agency support, a deterioration in or expansion of the current political, social or military situation or if the current situation is protracted. (See also, "Risk and Uncertainties - International Sales and Operations").

Dividends

AGI today announced the declaration of cash dividends of $0.20 per common share for the months of March 2014, April 2014 and May 2014. 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 2014 April 15, 2014 March 31, 2014
April 2014 May 15, 2014 April 30, 2014
May 2014 June 13, 2014 May 30, 2014

MD&A and Financial Statements

AGI's financial statements and management's discussion and analysis for the three and twelve month periods ended December 31, 2013 can be obtained at http://media3.marketwire.com/docs/AFN0314Q0636.pdf and will also be available electronically from SEDAR (www.sedar.com) or from AGI's website (www.aggrowth.com).

Conference Call

AGI will hold a conference call on Wednesday, March 12, 2014, at 11:00 a.m. EST to discuss its results for the three and twelve month periods ended December 31, 2013. To participate in the conference call, please dial 1-800-769-8320 or for local access dial 416-340-8530. 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 pass code 6614830.

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 eleven manufacturing facilities in Canada, the United States, 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, and goodwill and intangible impairment. 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 and expenses related to corporate acquisition activity. References to "trade sales" are to sales excluding the gain or loss on foreign exchange. Management believes that, in addition to sales, profit or loss and cash flows from operating, investing, and financing activities, trade sales, EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the Company's performance. Trade sales, EBITDA and Adjusted EBITDA are not financial measures recognized by International Financial Reporting Standards ("IFRS") and do not have a standardized meaning prescribed by IFRS. Management cautions investors that trade sales, EBITDA and Adjusted EBITDA should not replace sales or 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. AGI's method of calculating trade sales, EBITDA and Adjusted EBITDA may differ from the methods used by other issuers.

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 MD&A include statements relating to our business and strategy, including our outlook for our financial and operating performance. 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, foreign 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 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, foreign exchange rates, and competition. These risks and uncertainties are described under "Risks and Uncertainties" in this MD&A 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.

Contact Information

  • For More Information Contact:
    Investor Relations
    Steve Sommerfeld
    204-489-1855
    steve@aggrowth.com