AGI Announces Third Quarter 2018 Results; Declares Dividends
Nov 07, 2018, 06:00 ET
WINNIPEG, Nov. 7, 2018 /CNW/ - Ag Growth International Inc. (TSX: AFN) ("AGI", the "Company", "we" or "our") today announced its financial results for the three and nine months ended September 30, 2018, and declared dividends for December 2018, January 2019 and February 2019.
Overview of Results
(thousands of dollars except per share amounts) |
Three Months Ended September 30 |
Nine Months Ended September 30 |
||
2018 $ |
2017 $ |
2018 $ |
2017 $ |
|
Trade sales (1)(2)(4) |
243,120 |
205,666 |
719,868 |
582,596 |
Adjusted EBITDA (1)(3)(4) |
40,234 |
36,081 |
120,181 |
102,082 |
Profit |
20,744 |
15,588 |
38,479 |
35,464 |
Diluted profit per share |
1.14 |
0.92 |
2.25 |
2.18 |
Adjusted profit (1) |
12,637 |
12,984 |
46,382 |
34,598 |
Diluted adjusted profit per share (1)(5) |
0.74 |
0.79 |
2.65 |
2.14 |
(1) |
See "Non-IFRS Measures". |
(2) |
See "Operating Results – Trade Sales" in the Q3 MD&A. |
(3) |
See "Operating Results - EBITDA and Adjusted EBITDA" in the Q3 MD&A. |
(4) |
The Company adopted IFRS 15 in 2018 and in Q1 2018 recorded sales and adjusted EBITDA of $4.4 million and $1.5 million, respectively, that under IAS 18 had also previously been recognized in 2017. For the purposes of its Q3 MD&A, where applicable, AGI has adjusted 2017 results by corresponding amounts accordingly. |
(5) |
See "Detailed Operating Results - Diluted profit per share and diluted adjusted profit per share". |
Trade sales and adjusted EBITDA in the third quarter of 2018 increased significantly compared to the prior year due to strong organic growth in AGI's Canadian Commercial business as well as higher sales in the U.S. Farm market. Commercial sales increased 34% compared to Q3 2017 due largely to continued momentum in the Canadian Commercial grain and fertilizer platforms. Offshore, excluding AGI Brazil, the Company continued to deliver on a record backlog however sales excluding acquisitions decreased compared to the previous year due to the timing of customer projects. In Brazil, AGI's operations broke even in the third quarter of 2018 due to a steady increase in sales combined with improving manufacturing efficiencies and declining start-up expenses. AGI's Commercial backlog in Canada and offshore extends well into 2019 and in total is 82% higher than the prior year. Higher sales of portable grain handling equipment in the U.S. Farm market resulted from strong crop conditions and pent up demand, however overall Farm sales decreased in the quarter as an abrupt end to the western Canadian summer negatively impacted storage equipment sales. AGI achieved strong gross margins in Q3 2018 due to higher sales volumes, the realization in Q3 of sales price increases to offset the higher input costs that negatively impacted H1 2018, improving results in Brazil and a continued operational focus at Global and Yargus. However, higher SG&A expenses, largely the result of an increased investment in sales & marketing and engineering initiatives and one-time consulting fees, resulted in a lower adjusted EBITDA margin compared to 2017. Adjusted profit and adjusted profit per share decreased slightly compared to 2017, while diluted profit and profit per share increased significantly compared to the prior year.
"Solid third quarter sales were driven by a healthy mix of organic growth in our U.S. Farm and Canadian Commercial markets and increasing sales at AGI Brazil, along with strong contributions from recent acquisitions." said Tim Close, President and CEO of AGI. "We continue to invest in our 5-6-7 strategy by building our marketing, technology, sales and engineering groups to provide better service and value to our customers globally across our five platforms. Our continued growth was recently complemented by an equity raise and we will soon complete a renewal and upsizing of our credit facilities, positioning AGI for ongoing growth and success."
Diluted profit per share and diluted adjusted profit per share
A reconciliation of profit and diluted adjusted profit per share to adjusted profit and adjusted diluted profit per share is below.
(thousands of dollars except per share amounts) |
Three Months Ended Sept 30 |
Nine Months Ended Sept 30 |
||
2018 $ |
2017 $ |
2018 $ |
2017 $ |
|
Profit |
20,744 |
15,588 |
38,479 |
35,464 |
Diluted profit per share |
1.14 |
0.92 |
2.25 |
2.18 |
Loss (gain) on foreign exchange |
(2,413) |
(8,453) |
9,920 |
(13,069) |
Fair value of inventory from acquisition (2) |
- |
2,307 |
1,183 |
5,038 |
M&A expenses |
582 |
(117) |
1,450 |
970 |
Other transaction expenses (3) |
1,051 |
1,737 |
3,474 |
6,862 |
Gain on financial instruments |
(7,256) |
2,255 |
(8,501) |
(346) |
Loss (gain) on sale of PP&E |
(71) |
(978) |
145 |
(966) |
Impairment charge (4) |
- |
645 |
232 |
645 |
Adjusted profit (1) |
12,637 |
12,984 |
46,382 |
34,598 |
Diluted adjusted profit per share (1) |
0.74 |
0.79 |
2.65 |
2.14 |
(1) |
See "Non-IFRS Measures". |
(2) |
Non-cash expenses related to the sale of inventory that acquisition accounting required be recorded at a value higher than manufacturing cost. |
(3) |
Includes restructuring and other acquisition related transition costs, as well as the accretion and other movement in contingent consideration and amounts due to vendors. |
(4) |
To record assets held for sale at estimated fair value. |
OUTLOOK
Expectations of a large crop in the United States coupled with pent up demand for portable grain handling equipment and recent underinvestment in grain storage are supportive of strong demand for AGI Farm products in the United States in both Q4 2018 and into 2019. In Canada, an abrupt end to summer and poor fall weather conditions are expected to negatively impact Farm sales in Q4 2018 and have a slight negative impact in the first quarter of 2019. Despite difficult conditions in the latter months of 2018, Farm dynamics in Canada remain positive and management anticipates strong demand will return upon commencement of the new crop season in Q2 2019. Based on current conditions, management anticipates that total Farm sales and EBITDA in Q4 2018 will approximate 2017 levels, and we expect year-over-year growth in our Farm business in fiscal 2019.
AGI's Commercial backlog is significantly higher than at the same time in 2017 due to continued investment in Canadian grain and fertilizer infrastructure and robust international demand. In addition, recent acquisitions Junge and Danmare are performing well and are in line with expectations. Accordingly, management anticipates that Commercial sales in North America in the fourth quarter of 2018 will exceed those of the prior year. International sales momentum is expected to continue in the fourth quarter and into 2019 based on a very strong backlog with particular strength in EMEA and South America. The recent addition of Sabe in France is also expected to contribute to strong international results. Overall, management anticipates sales and EBITDA related to Commercial equipment in the fourth quarter of 2018 will be higher than the prior year and growth is anticipated in 2019.
Results from AGI operations in Brazil have improved in recent quarters due to higher sales volumes, improving manufacturing processes and a less significant impact from start-up related costs. AGI's backlog in Brazil is substantially higher than the prior year and management anticipates a positive contribution from AGI Brazil in the fourth quarter of 2018. Looking ahead to 2019, AGI's Commercial business in Brazil is expected to benefit from a continued need for grain handling infrastructure while AGI's local presence and growing brand recognition in South America is leading to increasing opportunities with local and multinational participants. Farm sales in Brazil are expected to increase due to market share initiatives and the potential for overall market growth, however Farm sales may be impacted by access to capital and a cautious approach to capital investment. Overall, management anticipates improved results from Brazil in 2019 and a positive EBITDA contribution.
In summary, management anticipates trade sales and adjusted EBITDA in the fourth quarter of fiscal 2018 will increase compared to 2017. Looking ahead to 2019, robust demand for grain, feed and fertilizer infrastructure in Canada, strong momentum in international markets, improved results in Brazil and positive North American Farm dynamics are expected to result in growth across all of AGI's platforms and in all geographies, resulting in higher sales and adjusted EBITDA compared to fiscal 2018.
Trade sales and adjusted EBITDA in 2018 and 2019 will be influenced by, among other factors, weather patterns, crop conditions, the timing of harvest and conditions during harvest and changes in input prices, including steel. Steel prices have increased significantly over the last number of quarters and volatility in steel markets may be exacerbated by additional U.S. trade actions. The Company endeavors to mitigate its exposure to higher input costs through strategic procurement of steel, sales price increases and limiting the length of time commercial quotes remain valid, however the pace and volatility of input price increases may negatively impact financial results. Other factors that may impact results in 2018 and 2019 include the impact of existing and potential future 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.
Dividends
AGI today announced the declaration of cash dividends of $0.20 per common share for the months of December 2018, January 2019 and February 2019. The dividends are eligible dividends for Canadian income tax purposes. AGI's current annualized cash dividend rate is $2.40 per share.
The table below sets forth the scheduled payable and record dates:
Monthly dividend |
Payable date |
Record date |
December 2018 |
January 15, 2019 |
December 31, 2018 |
January 2019 |
February 15, 2019 |
January 31, 2019 |
February 2019 |
March 15, 2019 |
February 28, 2019 |
MD&A and Financial Statements
AGI's financial statements and management's discussion and analysis (the "Q3 MD&A") for the three and nine months ended September 30, 2018 can be obtained at https://www.newswire.ca/news-releases/ and will also be available electronically on SEDAR (http://www.sedar.com) and on AGI's website (http://www.aggrowth.com).
Conference Call
Management will hold a conference call on Wednesday, November 7, 2018, at 8:00 a.m. EST to discuss AGI's results for the three and nine months ended September 30, 2018. To participate in the conference call, please dial 1-888-390-0605 or for local access dial 416-764-8609. An audio replay of the call will be available for seven days. To access the audio replay, please dial 1-888-390-0541 or for local access dial 416-764-8677. Please quote passcode 812112# for the audio replay.
Company Profile
AGI is a leading provider of equipment solutions for agriculture bulk commodities including seed, fertilizer, grain, and feed systems with a growing platform in providing equipment and solutions for food processing facilities. AGI has manufacturing facilities in Canada, the United States, the United Kingdom, Brazil, South Africa and Italy and distributes its product globally.
Further information can be found in the disclosure documents filed by AGI with the securities regulatory authorities, available at www.sedar.com and on AGI's website www.aggrowth.com.
NON-IFRS MEASURES
In analyzing our results, we supplement our use of financial measures that are calculated and presented in accordance with International Financial Reporting Standards ("IFRS"), with a number of non-IFRS financial measures including "EBITDA", "Adjusted EBITDA", "trade sales", "adjusted profit" and "diluted adjusted profit per share". A non-IFRS financial measure is a numerical measure of a company's historical performance, financial position or cash flow that excludes (includes) amounts, or is subject to adjustments that have the effect of excluding (including) amounts, that are included (excluded) in the most directly comparable measures calculated and presented in accordance with IFRS. Non-IFRS financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-IFRS financial measures having the same or similar businesses. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
We use these non-IFRS financial measures in addition to, and in conjunction with, results presented in accordance with IFRS. These non-IFRS financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our IFRS results and the accompanying reconciliations to corresponding IFRS financial measures, may provide a more complete understanding of factors and trends affecting our business.
In this press release, we discuss the non-IFRS financial measures, including the reasons that we believe that these measures provide useful information regarding our financial condition, results of operations, cash flows and financial position, as applicable, and, to the extent material, the additional purposes, if any, for which these measures are used. Reconciliations of non-IFRS financial measures to the most directly comparable IFRS financial measures are contained in the Q3 MD&A.
Management believes that the Company's financial results may provide a more complete understanding of factors and trends affecting our business and be more meaningful to management, investors, analysts and other interested parties when certain aspects of our financial results are adjusted for the gain (loss) on foreign exchange and other operating expenses and income. These measurements are non-IFRS measurements. Management uses the non-IFRS adjusted financial results and non-IFRS financial measures to measure and evaluate the performance of the business and when discussing results with the Board of Directors, analysts, investors, banks and other interested parties.
References to "EBITDA" are to profit from continuing operations before income taxes, finance costs, depreciation, and amortization. References to "adjusted EBITDA" are to EBITDA before the Company's gain or loss on foreign exchange, gains or losses on the sale of property, plant & equipment, non-cash share based compensation expenses, gains or losses on financial instruments, non-cash contingent consideration expenses, expenses related to corporate acquisition activity, fair value of inventory from acquisitions and impairment. Management believes that, in addition to profit or loss, EBITDA and adjusted EBITDA are useful supplemental measures in evaluating the Company's performance. Management cautions investors that EBITDA and adjusted EBITDA should not replace profit or loss as indicators of performance, or cash flows from operating, investing, and financing activities as a measure of the Company's liquidity and cash flows. See "Operating Results - EBITDA and Adjusted EBITDA" in the Q3 MD&A for the reconciliation of EBITDA and Adjusted EBITDA to profit from continuing operations before income taxes.
References to "trade sales" are to sales net of the gain or loss on foreign exchange. Management cautions investors that trade sales should not replace sales as an indicator of performance. See "Operating Results - Trade Sales" in the Q3 MD&A for the reconciliation of trade sales to sales.
References to "adjusted profit" and "diluted adjusted profit per share" are to profit for the period and diluted profit per share for the period adjusted for (gain) loss on foreign exchange, fair value of inventory from acquisitions, transaction costs, non-cash loss (profit) on discontinued operations, contingent consideration expense and gain (loss) on sale of property, plant and equipment. See "Detailed Operating Results – Diluted profit per share and Diluted adjusted profit per share" in the Q3 MD&A for the reconciliation of diluted profit per share and diluted adjusted profit per share to profit as reported.
FORWARD-LOOKING INFORMATION
This press release contains forward-looking statements and information (collectively, "forward-looking information") within the meaning of applicable securities laws that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and the words "anticipate", "believe", "continue", "could", "expects", "intend", "plans", "postulates", "predict", "will" or similar expressions suggesting future conditions or events or the negative of these terms are generally intended to identify forward-looking information. Forward-looking information involves known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. In addition, this press release may contain forward-looking information attributed to third party industry sources. Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which it is based will occur. In particular, the forward-looking information in this press release includes information relating to our business and strategy, including our outlook for our financial and operating performance including our expectations for our future financial results including sales, EBITDA and adjusted EBITDA, industry demand and market conditions, and with respect to our ability to achieve the expected benefits of recent acquisitions and the contribution therefrom including from purchasing and personnel synergies and margin improvement initiatives. Such forward-looking information reflects our current beliefs and is based on information currently available to us, including certain key expectations and assumptions concerning: anticipated grain production in our market areas; financial performance; the financial and operating attributes of recently acquired businesses and the anticipated future performance thereof and contributions therefrom; business prospects; strategies; product pricing; regulatory developments; tax laws; the sufficiency of budgeted capital expenditures in carrying out planned activities; political events; currency exchange and interest rates; the cost of materials; labour and services; the value of businesses and assets and liabilities assumed pursuant to recent acquisitions; the impact of competition; the general stability of the economic and regulatory environment in which the Company operates; the timely receipt of any required regulatory and third party approvals; the ability of the Company to obtain and retain qualified staff and services in a timely and cost efficient manner; the timing and payment of dividends; the ability of the Company to obtain financing on acceptable terms; the regulatory framework in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its products and services. Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking information, including changes in international, national and local macroeconomic and business conditions as well as sociopolitical conditions in certain local or regional markets, weather patterns, crop planting, crop yields, crop conditions, the timing of harvest and conditions during harvest, the ability of management to execute the Company's business plan, seasonality, industry cyclicality, volatility of production costs, agricultural commodity prices, the cost and availability of capital, currency exchange and interest rates, the availability of credit for customers, competition, AGI's failure to achieve the expected benefits of recent acquisitions including to realize anticipated synergies and margin improvements and changes in trade relations between the countries in which the Company does business including between Canada and the United States. These risks and uncertainties are described under "Risks and Uncertainties" in the Q3 MD&A, in our MD&A for the year ended December 31, 2017 and in our most recently filed Annual Information Form, all of which are available under the Company's profile on SEDAR (www.sedar.com). These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking information. We cannot assure readers that actual results will be consistent with this forward-looking information. Readers are further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. These estimates may change, having either a negative or positive effect on profit, as further information becomes available and as the economic environment changes. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information included in this press release is made as of the date of this press release and AGI undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
SOURCE Ag Growth International Inc. (AGI)
For further information: Investor Relations, Steve Sommerfeld, 204-489-1855, [email protected]