AGI earnings improve in first quarter

by Susan Reidy
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AGI
 
WINNIPEG, MANITOBA, CANADA — Ag Growth International Inc. (AGI) reported significant improvement in the first quarter of 2018 due to strong demand for commercial equipment in Canada, an increase in international sales and demand for portable equipment in the United States.

The company reported adjusted EBITDA of C$30.7 for the period ended March 31, up from C$25.6 million in the same period a year earlier.

Trade sales totaled C$214 million, up from C$154.7 million a year earlier.

AGI said the adjusted EBITDA for the quarter also benefited from its recent acquisitions of CMC, Junge and Danmare.

Adjusted EBITDA as a percentage of sales declined compared with the previous year, largely due to the April 4, 2017, acquisition of Global Industries Inc., where sales volumes and margin percentages are expected to improve along with increasing demand in the United States.

Tim Close CEO and president of AGI
Tim Close, president and chief executive officer of AGI

“We saw solid performance to start 2018, with 38% sales growth and a 20% increase in adjusted EBITDA,” said Tim Close, president and chief executive officer of AGI. “The increase over 2017 was driven by healthy organic growth as well as significant contributions from key acquisitions made over the last 12 months, as we have added new products and capabilities in grain storage and handling, fertilizer, applied technology and engineering and project management.”

Planting progress in most areas of North America is well behind historical averages due to a late spring, which may result in a later-than-typical harvest, which is generally a positive for AGI.

Sales at MFS and Hutch are expected to benefit from increasing demand for grain storage and handling systems in the United States, while sales of NECO grain dryers are expected to increase, primarily due to increasing market penetration in Canada.

Commercial sales in Canada are expected to increase significantly in 2018 due to strong demand for grain, feed and fertilizer storage and handling facilities. In the United States, Commercial activity is expected to be stable, due to ongoing maintenance capital expenditure programs and investments to increase capacity and productivity.

International sales will benefit from a very strong, geographically diverse sales order backlog, with particular strength in EMEA and South America.

On balance, management anticipates trade sales and adjusted EBITDA in fiscal 2018 will increase compared to 2017, due to strong demand for Commercial equipment in Canada, a significant increase in international sales and improved demand for Farm equipment in the United States.

Existing backlogs are high, particularly with respect to the company's Farm business in the United States and its Canadian and international Commercial business.

Trade sales and adjusted EBITDA in 2018 will be influenced by weather, crop conditions, the timing of harvest and conditions during harvest and changes in input prices, including steel.

Other factors that may impact results in 2018 include 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, AGI said.

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