Ag Growth sees profits in quarter due to equipment demand
March 14, 2012
by World Grain Staff
WINNIPEG, MANITOBA, CANADA — Ag Growth International, Inc. reported on March 14 a drop in profits for 2011, but a significant improvement in the last quarter of the year due to strong preseason demand for equipment.
Net income for 2011 was C$24.5 million or C$1.97 per share, compared to C$59.7 million or C$2.43 per share in 2010. Profit for the fourth quarter 2011 was C$3.25 million compared to a loss of C$379,000 for the same time period in 2010.
Sales of commercial handling equipment in the fourth quarter of 2011 increased over the same quarter in the prior year due primarily to continued strength in the domestic market. Adjusted EBITDA, net profit and profit per share all increased significantly over the same period in the prior year.
"We are very pleased with our fourth quarter results", said Gary Anderson, president and chief executive officer. "Strong preseason sales of portable equipment in both Canada and the U.S. provide an indication that our dealer network is looking to 2012 with optimism. Strong demand for commercial equipment continued into the fourth quarter and as result we achieved record domestic commercial sales in 2011. The positive results from the fourth quarter were not enough, however, to offset the negative impacts of foreign exchange, poor regional conditions at Mepu and the start-up issues at Twister experienced throughout the year."
"Entering 2012 we believe the challenges at Mepu and Twister have largely been resolved. Conditions in Mepu's regional market in northern Europe appear to have normalized due largely to a favorable 2011 harvest. Interest in our storage bin product line remains strong both domestically and overseas and management retains a very positive outlook for contributions from this plant in 2012, although targeted gross margins may not be immediately achieved."
Management expects demand for portable grain handling equipment in 2012 will benefit from positive on-farm economics, the potential for a large number of corn acres in the U.S. and a return to normalized conditions in western Canada. The U.S. Department of Agriculture (USDA) is currently forecasting that U.S. farmers in 2012 will plant 94 million acres of corn (2011 - 92 million acres), the highest planting level since 1944. Based on the USDA yield estimate this may result in a corn crop in excess of 14 billion bushels. In western Canada, management anticipates that seeded acres will more closely approximate traditional levels as current conditions are not indicative of the excessive spring flooding that resulted in 4 million acres of farmland going unseeded in 2011.
Sales of commercial equipment in North America were at record levels in 2011 due to positive agricultural economics and a commercial infrastructure which is expanding its capacity to accommodate the growing number of total bushels of grain in the system. Based on current conditions management anticipates continued high levels of domestic demand in 2012, however domestic sales may fall below the record sales achieved in 2011. International commercial grain handling sales are expected to increase compared to 2011 as the company remains very encouraged with respect to the outlook for developing markets and the potential of product bundling with storage bins and other Ag Growth products.