WINNIPEG, Jan. 16, 2020 /CNW/ - Ag Growth International
Inc. (TSX: AFN) ("AGI" or the "Company") is pleased to announce it
has acquired 100% of the shares outstanding of Affinity Management
Ltd. ("Affinity"). Affinity was launched in 2007 and currently has
18 employees, with headquarters in Oakville, Ontario. The transaction was funded
from the Company's operating facilities.
Affinity was founded by Neal
Dilawri and was developed over 12 years in partnership with
one of the world's largest agricultural inputs manufacturers.
Affinity is a provider of software solutions to the agriculture
industry under the brand name Compass® and includes a comprehensive
Enterprise Resource Planning ("ERP") system for growers and ag
retailers, as well as an agronomy tool. The ERP system
provides full accounting functionality, including management of
accounts receivable, accounts payable, payroll, and inventory
tracking. Additionally, Affinity employs on-staff accountants who
provide bookkeeping services to its grower customers.
Compass® also acts as a central data repository and portal which
allows for the sharing of information with a grower's trusted
advisors, including agronomists, accountants, lenders, and
insurance providers.
The Compass® product suite is highly complementary to AGI's
current offering and will be a key component of the full AGI
SureTrack platform. Compass® customers include independent
growers, agronomy companies and ag retailers, representing over
8,000 individual farmers across North
America.
Mr. Dilawri will take on a senior leadership role with the AGI
SureTrack platform and will provide vision and guidance to the
platform going forward.
"AGI SureTrack is an independent platform bringing together data
across the farm, providing our customers with the ability to manage
their crop production, manage their overall business, and market
their grain based on content and robust traceability," said
Tim Close, President and Chief
Executive Officer of AGI . "Compass takes AGI SureTrack to
the next level, adding comprehensive ERP capabilities for AGI
Dealers and agriculture retailers, and significantly adding to our
offering for farmers. I am looking forward to working closely
with Neal in his new leadership role with AGI SureTrack as we
continue to grow this platform. I also want to welcome the
entire Affinity team to the AGI family."
UPDATE ON Q4 2019 AND OUTLOOK
AGI results in Q4 2019 were mixed as strong demand for portable
grain handling and drying equipment, a solid performance in
India and significantly improved
results in Brazil were offset by a
combination of factors that resulted in Q4 2019 results falling
below prior year levels. In 2019, AGI demonstrated the success of
its AGI SureTrack subscription model as demand exceeded our
capacity and we increased retail equivalent sales by 70%, despite
the challenges of a soft U.S. ag market. In the fourth quarter of
2019, AGI increased its investment in sales, marketing and
technical resources at AGI SureTrack to address capacity and
accelerate the future pace of new user additions, thereby
increasing our recurring revenue stream and adding significant
equipment cross-sell opportunities. The accounting implications of
the conversion of AGI SureTrack to a subscription model,
particularly in a seasonally weak quarter, coupled with an
increased investment in the platform, resulted in negative Q4 2019
adjusted EBITDA of approximately $2.7
million. AGI will continue to invest in the SureTrack
platform in fiscal 2020, however the quarterly amount of negative
adjusted EBITDA is expected to be lower than experienced in Q4
2019. Secondly, a very wet and late harvest in the United States and a continuation of the
weak macro environment had a greater than anticipated impact on
AGI's grain storage systems business, resulting in lower than
expected sales and adjusted EBITDA. Lastly, at the request of our
customers, several Commercial projects in Canada and offshore were postponed into Q1
2020, resulting in a deferral of sales and earnings. In sum,
management anticipates adjusted EBITDA in the fourth quarter,
inclusive of the impact of subscription accounting, will
approximate $23 million.
Management retains its positive outlook for 2020. In 2019, AGI
demonstrated the success of its AGI SureTrack subscription model by
increasing retail equivalent sales by 70%, despite capacity
constraints and a challenging U.S. ag market, and in 2020 that
growth is expected to continue as AGI builds on existing
relationships with processors, merchandisers, grain buyers and
producers throughout North
America. In addition, management anticipates robust Farm
demand with the beginning of the 2020 planting season due to an
increase in U.S. planted acres, an improvement in weather
conditions compared to historically poor conditions in 2019, and
better farmer economics and sentiment should the U.S. and
China fully implement Phase 1 of a
trade agreement. Offshore, management expects continued growth in
India and Brazil, and anticipates an improvement in the
global trade environment will result in increased demand in its
Commercial business. In sum, Farm and Commercial backlogs have
returned to the very strong levels experienced leading into 2019,
and management expects sales and adjusted EBITDA in 2020 to
significantly exceed 2019 results.
UPDATE ON PROJECT REWORK
In the third quarter of 2019 AGI recognized a pre-tax charge of
$7 million for estimated rework costs
on specific projects. Planning and related rework have advanced
significantly since AGI announced the preliminary estimate on
October 16, 2019, and the Company now
estimates total costs will be in the range of $8.5 - $10 million.
AGI is incurring this increased charge to continue to stand behind
its customer partnerships and to ensure the projects meet AGI's
high standard for quality.
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, 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.
CAUTIONARY STATEMENTS
Preliminary Unaudited Financial Information
The estimated pre-tax charge to be taken in AGI's financial
results for the year ended December, 2019 and our expectations for
company and AGI SureTrack adjusted EBITDA in the fourth quarter of
2019 are based on, among other things, the anticipated costs of the
rework of the related equipment, including the additional time,
material, services and other costs required to ensure the
applicable projects meet AGI's high standard for quality and
customer satisfaction, and AGI's financial results for the three
months and year ended December 31,
2019. The actual rework costs and AGI's financial results
for the three months and year ended December
31, 2019, have not yet been finalized or approved and as
such, such estimates and guidance are subject to the same
limitations and risks as discussed under Forward-Looking
Information set out below. Accordingly, the amount of the pre-tax
charge and AGI's guidance for three months and year ended
December 31, 2019 may change upon the
completion, audit and approval of the financial statements for the
three months and year ended December 31,
2019 and the changes could be material.
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 AGI. All
information and statements contained herein that are not clearly
historical in nature constitute forward-looking information, and
the words "anticipate", "believe", "continue", "could", "estimate",
"expect", "intend", "plans", "postulates", "predict", "should",
"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. 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
preliminary estimate of the pre-tax charge related to the estimated
cost of rework for equipment supplied to certain projects; our
expectations for company and AGI SureTrack adjusted EBITDA in the
fourth quarter of 2019; and our outlook for our financial and
operating performance in 2020 including our expectations for our
future financial results including sales and adjusted EBITDA,
industry demand and market conditions. 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 AGI operates; the timely receipt of
any required regulatory and third party approvals; the ability of
AGI to obtain and retain qualified staff and services in a timely
and cost efficient manner; the timing and payment of dividends; the
ability of AGI to obtain financing on acceptable terms; the
regulatory framework in the jurisdictions in which AGI operates;
the ability of AGI to successfully market its products and
services; the estimated costs associated with the equipment
supplied including the total cost of the rework and any additional
associated costs; and AGI's ability to achieve the expected
benefits of the acquisition of Affinity, and the anticipated impact
of the acquisition of Affinity on AGI's business. 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 AGI'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; changes in trade
relations between the countries in which AGI does business and
elsewhere including between Canada
and the United States and between
the United States and China; changes in our estimate of the costs
associated with the rework of equipment supplied including the
potential for additional associated or incidental costs and
liabilities; the failure to realize some or all of the anticipated
benefits of the acquisition of Affinity; and the finalization of
our financial statements for the three months and year ended
December 31, 2019. These risks and
uncertainties are described under "Risks and Uncertainties" in our
Q3 MD&A, our annual MD&A and in our most recently filed
Annual Information Form, all of which are available under AGI's
profile on SEDAR [www.sedar.com]. These factors should be
considered carefully, and readers should not place undue reliance
on AGI'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 and other
financial information, 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.
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" and "adjusted
EBITDA". 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.
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. Reconciliations of
historical non-IFRS financial measures to the most directly
comparable historical IFRS financial measures are contained in our
previously filed management's discussion and analysis.
References to "EBITDA" are to profit before income taxes,
finance costs, depreciation, amortization and AGI's share of
Associate's net income (loss). 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, fair value of
inventory from acquisitions, impairment and equipment rework.
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.
SOURCE Ag Growth International Inc. (AGI)