WINNIPEG, MANITOBA, CANADA — Ag Growth International Inc. (AGI) posted a profit of C$13.034 million in the third quarter ended Sept. 30, equal to C$0.85 per share on the common stock, which compared with a loss of C$8.638 million in the same period a year ago. Sales increased 38% to C$158.680 million, up from C$114.918 million.
Adjusted EBITDA, meanwhile, climbed to C$36.368 million from C$19.909 million.
In a Nov. 10 trading statement, AGI said both sales and adjusted EBITDA were the highest ever for the company, boosted by acquisitions that complemented robust in-season sales in western Canada and strong results from the company’s Commercial business units. Excluding acquisitions, AGI’s adjusted EBITDA increased C$4.2 million over the year-ago period as sales of grain handling and aeration equipment benefited from a large crop and a wet harvest in western Canada, and higher adjusted EBITDA from AGI’s Commercial divisions resulted from a strong operational performance that in part reflects the commissioning of two new manufacturing facilities in 2015.
AGI’s farm business is comprised primarily of portable grain handling equipment and Westeel’s North American storage business.
“The primary demand driver for portable handling equipment is the amount of grain handled as this dictates farmer capacity requirements and the product replacement cycle,” AGI said. “Large crops and generally wet harvest conditions in both Canada and the U.S. have increased the wear on existing equipment and are supportive of in-season sales and future replacement sales. In Canada, these factors combined with positive farmer sentiment have resulted in higher sales of portable equipment. In the U.S., however, negative farmer sentiment has resulted in very cautious buying behavior. Sales of replacement parts in the U.S. are well above prior year levels, which appears to indicate end-users are managing with existing equipment and deferring new equipment purchases to future quarters. Accordingly, management anticipates fourth quarter demand for portable equipment will approximate prior-year levels.”
AGI’s commercial business is comprised primarily of high capacity grain handling and conditioning equipment and larger diameter storage bins.
“In North America, demand for commercial equipment is less sensitive to a specific harvest but rather is driven primarily by macro factors, including the longer-term trend towards higher crop volumes, the drive toward improved efficiencies in a mature market and, more recently in Canada, the dissolution of the Canadian Wheat Board,” AGI said. “Commercial activity in North America remains robust, however, fourth-quarter sales may fall below prior-year levels as a number of projects were completed and shipped late in the third quarter of 2016.”
AGI said demand in the remainder of 2016 and in 2017 will be influenced by several factors, including weather patterns, crop conditions and the timing of harvest and conditions during harvest. Other factors that may come into play include changes in global macroeconomic factors as well as sociopolitical factors in certain local or regional markets and the availability of credit and export credit agency support in offshore markets, which may influence sales, primarily of commercial grain handling and storage products, AGI said.
Along with the release of its financial results, AGI announced it has entered an agreement to acquire all of the outstanding shares of Yargus Manufacturing, Inc. for $43.2 million. Based in Marshall, Illinois, U.S., Yargus manufactures material handling equipment used primarily in commercial fertilizer applications.
“This acquisition completes our fertilizer platform in North America, significantly accelerates our global strategy and adds unique product lines including controls and proprietary software to our catalogue,” said Tim Close, chief executive officer of AGI. “We look forward to presenting our full fertilizer platform, from design through to production and installation to the market in the following months.”
AGI completed a number of acquisitions in recent months, including VIS (November 2015), Entringer (March 2016), NuVision (April 2016) and Mitchell (July 2016).
For the nine months ended Sept. 30, profit totaled C$24.016 million, or C$1.61 per share, which compared with a loss of C$3.874 million in the same period a year ago. Sales were C$411.240 million, up 30% from C$307.266 million.