WINNIPEG, MANITOBA, CANADA — Ag Growth International Inc. (AGI) saw its adjusted earnings drop in the second quarter ended June 30 but the company said earnings were solid in light of the coronavirus (COVID-19) pandemic.
The company reported EBITDA of C$44.1 million for the quarter, compared with C$51.4 million in the same quarter a year ago. For the first six months of the year, the company reported EBITDA of C$69.7 million, which compared with C$82 million in the same period a year ago.
The company's diluted profit (loss) per share for the three- and six-month periods ended June 30, 2020, was profit of C$0.76 and loss of C$1.84, respectively, versus profit of C$0.67 and C$1.37, respectively in 2019.
“The resilience of our business was demonstrated in the second quarter with strong results in our Farm business and relatively stable performance across AGI despite the significant headwinds created by COVID,” said Tim Close, president and chief executive officer of AGI. “We have been pushing hard over the last number of years to diversify our business from a geographic and end market basis to decrease regional exposure and align our business more closely with global food supply infrastructure build and maintenance. Our historical, and in particular our performance in 2020, continues to highlight the resilience of our business and the strength of our customer relationships and market positions. The outlook across AGI is positive as we move through the year with stable backlogs and positive momentum across our business.”
As previously reported, international production suspensions due to COVID-19 in the first half of 2020 lasted between two and four weeks and impacted the first quarter and, more significantly, the second quarter. In the United States, internal safety protocols required AGI to temporarily suspend production on several occasions in the second quarter, and these plant closures generally lasted three to 10 days. To date there have been no production suspensions in Canada. AGI is currently manufacturing at full capacity at all locations.
Commercial grain handling in the United States has been stable but has been restrained by depressed agricultural markets and international trade disputes.
In Canada, the Commercial market was very active over the last several years due to an increased investment in grain infrastructure, however, Commercial activity in Canada has begun to normalize and the Canadian backlog has now decreased compared to the high levels of a year ago. Nonetheless, in part due to higher backlogs of Fertilizer and Food projects, Commercial sales order backlog in North America as of June 30, 2020, is flat to 2019.
AGI entered 2020 with an international sales order backlog weighted toward the second half of the fiscal year. However, international sales in the first six months of 2020 have significantly exceeded those of the prior year, largely due to strong performances in Brazil and India.
Market conditions in Brazil are favorable as farmer economics have benefited from a depreciation in the Brazilian real, good crops and strong export demand, and results in Brazil in the second half of 2020 are expected to further reflect continued sales market development and improved operational metrics.
In India, operational metrics remain very strong and AGI anticipates Milltec will leverage its market share and benefit from what is expected to be a large rice harvest later in the year.
In many other regions capital decisions related to Commercial projects have slowed due to the uncertainty surrounding COVID-19. Management anticipates these delays will impact sales in the third and fourth quarters of fiscal 2020, however the extent and duration of the crisis will determine the impact on the pace of project pipeline development and the subsequent timing of revenue recognition.
On balance, new order intake has remained strong in certain regions, including Brazil and India, and AGI's international backlog as of June 30, 2020, is flat to 2019.
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