AGI Westeel grain storage
In the past 10 years, AGI haspreviously acquired Hi Roller, Westeel, Union Iron, Tramco and Airlanco. 
WINNIPEG, MANITOBA, CANADA — Acquisitions and international Commercial projects pushed along Ag Growth International Inc.’s (AGI) sales and profits in the first quarter of 2017.

AGI posted a profit of C$7.478 million in the quarter-ended March 31, equal to C$0.48 per share on the common stock, an increase of 24.6% compared to a profit of C$6 million, or C$0.40 per share, in the same period a year ago. Sales increased 36% to C$154.689 million, up from C$113.672 million.

Adjusted EBITDA also experienced an increase of 29.8%, climbing to C$25.674 million from C$19.773 million in the same period of last year.

Trade sales and adjusted EBITDA significantly exceeded record 2016 results due to robust demand in Canada, higher international sales and the impact of acquisitions, the company said. Strength in the Canadian Farm market was complemented by higher Farm sales in the United States. Robust demand in Europe, the Middle East and Africa (EMEA) and the Black Sea region resulted in higher international sales and an increase in international sales order backlog compared to the prior year. Trade sales from acquisitions in the quarter were C$30 million. Higher adjusted EBITDA was offset by transaction costs related to the acquisition of Global Industries, Inc. (April 4) and increased share based compensation expenses, resulting in a small decrease in profit and diluted profit per share compared to 2016.

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

“We saw broad based strength across AGI in the first quarter as many international Commercial projects moved off the drawing board into development, the U.S. Farm market began showing signs of a rebound and Canadian Commercial and Farm markets remained robust.” said Tim Close, president and chief executive officer of AGI during a call with analysts on May 9. “During the quarter we also completed the acquisition of Global Industries and in doing so welcomed a great team of people, added leading brands and dealers, and significantly increased our platform in the U.S. Our project in Brazil is on track due to some outstanding work from across AGI to fast track the design and construction of our facility and tackle the engineering required to support our product transfer. With robust backlogs across AGI we are seeing positive signs for continued strength in 2017.”

The demand environment for AGI’s Commercial business remains positive for several reasons, including the global trend toward higher crop volumes, infrastructure deficiencies in many grain producing and importing regions of the world, the drive toward improved efficiencies in a mature North American market, the dissolution of the Canadian Wheat Board and the evolution of retail fertilizer distribution.

“While domestic commercial markets were more or less flat in Q1, we started to see increasing contribution from international project sales,” Close said. “Very nice to see, following a frustrating 2016, as large projects across regions went through lengthy delays. We are now seeing these project sales building nicely, and resulting in materially-higher international backlogs. Domestic projects are also starting to pick up in the U.S. and Canada, with some exciting projects in the queue for later this year and into 2018.”

AGI completed several acquisitions in 2016 and the inclusion of a full 12 months of results from NuVision (acquired April 2016), Mitchell (July 2016) and Yargus (November 2016) in fiscal 2017 is expected to increase EBITDA compared to the prior year. In addition, AGI believes the combination of these entities has created a market leading fertilizer platform and accordingly expects to organically grow sales for each of these businesses.

“We are still in a process of integrating and achieving the synergies of these groups working together,” Close said. “We saw a start of that in Q1. We have a lot more potential for cross-selling and bundling products domestically and internationally. The addition of Yargus, Mitchell, NuVision, Frame, and Entringer to our existing commercial businesses has fundamentally changed the opportunities available to our commercial group, both domestically and internationally.”

AGI entered the Brazilian market through its purchase of Entringer in March 2016, and soon after commenced construction of a new production facility that will house both Entringer products and many of AGI’s North American product lines. Management anticipates the new facility will be fully commissioned in the second half of 2017.

“This has been a massive engineering and construction effort, with a cross-divisional, cross-functional team that came together to bring this to fruition,” Close said. “We have a lot of work ahead of us, but we now have the foundation to pursue our objectives in a country with great potential for AGI. Everyone involved continues to wrestle with language and distance issues, however, great progress has been made. We are very focused on executing our business plan, in Brazil in particular.”

AGI has focused efforts in 2017 on growing its Farm and Commercial business in Brazil while at the same time transferring product knowledge from North America to Brazil and investing in people to prepare for future growth. On balance, AGI said it anticipates adjusted EBITDA in Brazil will be slightly positive in the second half of 2017.