WINNIPEG, May 7, 2019 /CNW/ - Ag Growth International Inc.
(TSX: AFN) ("AGI", the "Company", "we" or "our") today announced
its financial results for the three months ended March 31, 2019, and declared dividends for June,
July and August 2019.
Overview of Results
|
Three-months Ended
March 31
|
[thousands of dollars
except per share amounts]
|
2019
$
|
2018
$
|
Trade sales
[1][2]
|
216,198
|
214,097
|
Adjusted EBITDA
[1][3]
|
30,637
|
30,727
|
Profit
[4]
|
13,222
|
4,943
|
Diluted profit per
share
|
0.70
|
0.30
|
Adjusted profit
[1]
|
4,991
|
11,463
|
Diluted adjusted
profit per share [1][4]
|
0.27
|
0.70
|
[1]
|
See "Non-IFRS
Measures".
|
[2]
|
See "Operating
Results – Three Months Ended March 31, 2019 – Trade Sales" in our
Management's Discussion and Analysis for the three-months period
ended March 31, 2019 ("MD&A").
|
[3]
|
See "Operating
Results – Three Months Ended March 31, 2019 – EBITDA and Adjusted
EBITDA" in our MD&A.
|
[4]
|
See "Operating
Results – Three Months Ended March 31, 2019 - Diluted profit per
share and diluted adjusted profit per share" in our
MD&A.
|
Trade sales increased over the prior year as robust demand for
AGI Farm equipment and contributions from recent acquisitions
offset the impact of challenging winter conditions in North America and the timing of international
sales. Adjusted EBITDA was consistent with record 2018 levels as
strong gross margins and improved results in Brazil were offset by SG&A expenses
related to market growth, primarily branding and advertising
initiatives. Adjusted profit and adjusted profit per share
decreased compared to 2018, largely due to increases in 2019 in
non-cash interest expense and intangible amortization, and due to
an income tax recovery in 2018, however the positive impact of
non-cash gains on foreign exchange and the Company's equity
compensation swap resulted in a significant increase in profit and
diluted profit per share compared to the prior year.
"A very busy first quarter saw us close three important
acquisitions," said Tim Close,
President and CEO of AGI. "Our platform acquisition of Milltec in
India provided AGI with expertise
in rice milling solutions as well as a deep management team,
beginning a new era for AGI given the significant growth
opportunities in the rice vertical and in India and southeast Asia. The Bin
Manager sensor network and Field Data Manager tools, brought
together in IntelliFarms' SureTrack grain management solution,
opens new ways for us to add unique value for our customers and
further differentiate AGI. The acquisition of Improtech
expanded our Food platform and provided AGI with additional
expertise within the food and beverage industry. Our Q1 adjusted
EBITDA remained consistent against a strong 2018 comparative,
despite the impact of a long winter and the timing of international
sales, and heading into Q2 and H2 2019 our outlook across AGI is
positive with healthy backlogs in key businesses."
Diluted profit per share and diluted adjusted profit per
share
Diluted profit per share in 2019 was $0.70 [2018 - $0.30]. Profit per share in 2019 and 2018 has
been impacted by the items enumerated in the table below, which
reconciles profit to adjusted profit. Adjusted diluted profit per
share has decreased compared to 2018 largely due to a higher tax
expense, the result of an income tax recovery in Q1 2018, and
non-cash interest expense related to AGI's credit facility renewal
in Q4 2018 and the redemption of AGI's 2014 Debentures.
|
Three-months Ended
March 31
|
[thousands of dollars
except per share amounts]
|
2019
$
|
2018
$
|
Profit
|
13,222
|
4,943
|
Diluted profit per
share
|
0.70
|
0.30
|
|
|
|
Loss (gain) on
foreign exchange
|
(2,524)
|
5,701
|
Fair value of
inventory from acquisition [2]
|
24
|
586
|
M&A
expenses
|
2,137
|
168
|
Other transaction and
transitional costs [3]
|
2,624
|
136
|
Loss (gain) on
financial instruments
|
(10,438)
|
(233)
|
Loss on sale of
PP&E
|
(54)
|
(70)
|
Impairment charge
[4]
|
-
|
232
|
Adjusted profit
[1]
|
4,991
|
11,463
|
Diluted adjusted
profit per share [1]
|
0.27
|
0.70
|
[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
Successive large crops in North
America have resulted in sustained demand for AGI Farm
equipment, particularly for portable grain handling equipment,
while sales and backlogs of grain drying and aeration equipment
have benefited from market share growth and wet conditions
throughout North America. Orders
for grain storage systems in the U.S. have been negatively impacted
by difficult winter conditions, however management anticipates
backlogs to grow in the near-term as U.S. farmers remain incented
to add storage due to low commodity prices and a shortfall in
existing storage capacity. Overall, AGI's backlog for Farm
equipment is higher than at the same time in 2018 and management
anticipates Q2 2019 and fiscal 2019 sales to increase over the
prior year.
AGI's Commercial backlog in Canada remains very strong due to continued
investment in Canadian commercial grain handling infrastructure,
including in port facilities and inland terminals. In the United States, Commercial activity is
expected to remain stable compared to the prior year. Offshore,
sales in Q1 2019 were the second highest on record and backlogs
remain above the very strong levels of 2018 due largely to a higher
backlog in Brazil and
contributions from acquisitions. AGI's quoting pipeline in EMEA and
elsewhere is very active and management anticipates the current
backlog will increase in the near-term. Commercial sales growth is
anticipated in Q2 2019 and fiscal 2019, however the expectation
remains that sales growth in all regions, including Brazil, will be weighted towards the second
half.
On March 28, 2019, AGI announced
the completion of its acquisition of Milltec, a manufacturer of
rice milling and processing equipment in India. For the twelve months ended
January 31, 2019, Milltec's sales and
EBITDA were $56.2 million and
$10.1 million, respectively.
Milltec's results in calendar 2019 will be impacted by, among other
things, the Indian monsoon season which is currently expected to
approximate historical averages. Milltec's sales reflect
agricultural seasonality in India,
and historically approximately 70% of their sales have occurred in
the first and fourth calendar quarters, while sales have been
lowest in the second quarter of the calendar year. Management
anticipates Milltec's historical seasonality will continue in
2019.
Overall, positive demand drivers for AGI Farm equipment,
including the expectation of another large crop in North America, are expected to drive sales
growth across all Farm product categories in 2019. Commercial sales
are expected to benefit from existing backlogs and near-term
opportunities, as well as the recent addition of Milltec in
India. Management anticipates AGI
sales and adjusted EBITDA for Q2 2019 and fiscal 2019 will increase
compared to the prior year, with the most significant growth
expected to occur in the second half of the year.
Trade sales and adjusted EBITDA in 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. 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 2019 include the impact of
existing and potential future trade actions, the ability of our
customers to access capital, 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 June, July and August 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
|
June 2019
|
July 15,
2019
|
June 28,
2019
|
July 2019
|
August 15,
2018
|
July 31,
2019
|
August
2019
|
September 13,
2018
|
August 30,
2019
|
MD&A and Financial Statements
AGI's financial statements and management's discussion and
analysis (the "MD&A") for the three months ended March 31, 2019 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 Tuesday May 7, 2019, at 8:30 a.m. EDT to discuss AGI's results for the
three months ended March 31, 2019. 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 736149# for the audio replay.
Company Profile
AGI is a leading provider of equipment solutions for agriculture
bulk commodities including seed, fertilizer, grain, feed and food
processing systems. AGI has manufacturing facilities in
Canada, the United States, the United Kingdom, Brazil, France, Italy
and India, 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 IFRS
with a number of non-IFRS financial measures including "trade
sales", "EBITDA", "Adjusted EBITDA", "gross margin", "funds from
operations", "payout ratio", "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 our 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 before income taxes,
finance costs, depreciation and amortization. References to
"adjusted EBITDA" are to EBITDA before the gain or loss on foreign
exchange, non-cash share based compensation expenses, gain or loss
on financial instruments, , M&A expenses, other transaction and
transitional costs, gain or loss on the sale of property, plant
& equipment, gain or loss on disposal of assets held for sale
and 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 – Three Months Ended
March 31, 2019 - EBITDA and Adjusted
EBITDA" in our MD&A for the reconciliation of EBITDA and
Adjusted EBITDA to profit 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 our MD&A for the
reconciliation of trade sales to sales.
References to "gross margin" are to trade sales less cost of
inventories, and thereby exclude depreciation and amortization from
cost of sales. Management believes that gross margin provides a
useful supplemental measure in evaluating its performance. See
"Operating Results – Three Months Ended March 31, 2019 – Gross Margin" in our MD&A
for the calculation of gross margin.
References to "funds from operations" are to adjusted EBITDA
less IFRS 15 adjustment, interest expense, non-cash interest, cash
taxes and maintenance capital expenditures. Management believes
that, in addition to cash provided by (used in) operating
activities, funds from operations provide a useful supplemental
measure in evaluating its performance. References to "payout ratio"
are to dividends declared as a percentage of funds from operations.
See "Funds from Operations and Payout Ratio" in our MD&A for
the calculation of funds from operations and payout ratio.
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 the gain or loss on foreign exchange,
fair value of inventory from acquisitions, M&A expenses, other
transaction and transitional costs, gain or loss on financial
instruments, gain or loss on sale of property, plant and equipment
and impairment charge. See "Detailed Operating Results – Diluted
profit per share and Diluted adjusted profit per share" in our
MD&A for the reconciliation of diluted profit per share and
diluted adjusted profit per share to profit.
In addition, the financial information in this press release
relating to Milltec's sales and EBITDA is derived from Milltec's
financial statements, which are prepared in accordance with
generally accepted accounting principles in India, which differ in some material respects
from IFRS, and accordingly may not be comparable to the financial
statements of AGI or other Canadian public companies.
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 and input
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 our MD&A, our annual
MD&A 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)