Ag Growth Announces Q2 Results; Declares Dividends

Overview of Results

Adjusted EBITDA decreased compared to the second quarter in 2014 as drought conditions in western Canada and cautious buying behavior in the United States negatively impacted sales of on-farm products including portable grain handling, aeration and storage equipment. While AGI's North American commercial business progressed at a reasonable pace the level of activity remained below the very strong demand experienced in 2014. AGI's international business performed very well in the first half of 2015 and sales increased significantly due to continued momentum in Latin America and projects with multinational grain handlers in Ukraine. On May 20, 2015, AGI completed its acquisition of the Westeel division ("Westeel") of Vicwest Inc. and for the period May 20, 2015 to June 30, 2015 Westeel sales and adjusted EBITDA included in AGI's consolidated results were $18.1 million and $2.3 million, respectively.

"By far, the highlight of the quarter was the closing of the Westeel transaction on May 20th", said Gary Anderson, CEO of AGI. "We have made great progress with integration, completing a revised organizational structure that includes substantial annualized cost savings. I am extremely pleased with the calibre of people on the Westeel team. They have demonstrated great pride in their brand and commitment to our customers. Congratulations to those who have stepped up to take on new roles in the organization. Cost savings from restructuring along with some initial supply chain synergies have combined to meet our near term goal of $5 million in annual synergies. Our work has now turned to the longer term process of creating revenue synergies and new market development.

While the drought in western Canada has taken some of the wind out of our sails for the remainder of this year, we remain very excited with this acquisition and the benefits Westeel will deliver in the long run."

Westeel Acquisition

AGI completed its acquisition of Westeel on May 20, 2015. Headquartered in Winnipeg, Manitoba, Westeel is Canada's leading provider of grain storage solutions offering a wide range of on-farm and commercial products for the agricultural industry. The acquisition included Westeel's foreign sales offices, its 100% interest in Italian subsidiary PTM Technology, a manufacturer of grain handling equipment, and its 51% interest in a European subsidiary.

Sales and adjusted EBITDA for Westeel decreased compared to 2014 as poor growing conditions in western Canada lowered crop production expectations and negatively impacted farmer sentiment. Drought conditions in western Canada are expected to negatively impact results for the balance of 2015 (see "Outlook").

Integration of the Westeel business is ahead of expectations and is well advanced in all aspects of the operation including production, coordination of North American and International sales efforts, centralization of the marketing function, information technology transfer and the human resources and finance functions. Cost synergies realized to date are higher than originally anticipated and at the time of writing synergies related to organizational restructuring along with certain supply change synergies have already reached the Company's near term goal of $5 million in annual synergies. Management expects to realize additional sales, manufacturing and purchasing synergies in 2016.

OUTLOOK

On-Farm Equipment

The majority of planted acres in western Canada did not receive sufficient moisture during critical stages of the growing season and as a result market observers generally anticipate a significant deterioration in crop yields and crop production. Demand for AGI on-farm handling, aeration and storage equipment, including equipment from its newly acquired Westeel division, will decrease accordingly. The geographic sales mix of Westeel is weighted towards western Canada and accordingly AGI's exposure to the region increased subsequent to the acquisition.

Crop conditions in the United States are generally favourable though certain areas have received excessive moisture and crops have been damaged as a result. The USDA currently forecasts corn production in 2015 to approximate 13.7 billion bushels (2014 – 14.0 billion bushels). Crop volume is the primary demand driver for AGI and demand at the farm level will ultimately be determined by the number of bushels of grain at harvest. However, farmer sentiment and cash flow considerations at the dealer level are contributing to cautious buying behavior, even in light of expectations for a large crop in 2015. Management continues to anticipate high levels of in-season demand for portable equipment, however, based on existing backlogs, current dealer inventory levels and the pace of new order intake the Company's forecast for portable equipment sales in the second half of 2015 has decreased. AGI is able to react relatively quickly to an increase in demand and has proactively increased inventory levels throughout its warehousing network, however, the window to manufacture, transport and assemble portable equipment prior to the end of harvest is shortening which may constrain in-season sales in the third quarter of 2015 and possibly the fourth quarter subject to the timing and duration of harvest.

AGI's financial results are impacted by the rate of exchange between the Canadian and U.S. dollars and a weaker Canadian dollar relative to its U.S. counterpart positively impacts profit and adjusted EBITDA. AGI's average rate of exchange in fiscal 2014 of $1.10 was significantly lower than prevailing rates and accordingly AGI's financial results in 2015 may significantly benefit from a weaker Canadian dollar compared to the prior year. A portion of the Company's foreign exchange exposure has been hedged through forward foreign exchange contracts and based on current rates of exchange the Company expects to recognize significant loss on these contracts in the second half of 2015. At June, 30, 2015, the fair value of the Company's outstanding forward foreign exchange contracts was a loss of $15.2 million.

Sales in the second half of 2015 will be influenced by weather patterns, crop conditions and the timing of harvest and conditions during harvest. Changes in global macroeconomic factors as well as sociopolitical factors in certain local or regional markets, including the ongoing uncertainty and volatility in Ukraine, and the availability of credit and export credit agency support in offshore markets, also may influence sales, primarily of commercial grain handling and storage products. Results may also be impacted by changes in steel prices and other material input costs and the rate of exchange between the Canadian and U.S. dollars.

Summary

Management expects third quarter sales of on-farm portable equipment to fall significantly below the levels experienced in 2014 as existing order backlogs and the current pace of order intake do not support a significant increase in demand in Q3. Poor crop conditions in western Canada have negatively impacted the 2015 business of newly acquired Westeel and accordingly third quarter results from Westeel are expected to materially decline compared to the prior year. AGI's commercial business, both domestically and overseas, is expected to perform well in the third quarter however realized sales are subject to the timing of customer commitment and delivery considerations. On balance, management expects third quarter adjusted EBITDA to fall significantly below record 2014 levels.

Sales of on-farm equipment in the fourth quarter will be influenced by crop conditions, the timing of harvest and conditions during harvest. On-farm sales of grain handling, aeration and storage equipment in Canada will be negatively impacted by a poor harvest however participation in pre-season programs will in part depend on inventory management at the dealer level over the next several months. Management has less than usual visibility into fourth quarter prospects for portable on-farm equipment in the United States due to the somewhat unique demand environment experienced to date in 2015. However, management does anticipate significant in-season demand provided the US harvest unfolds favorably. Similar to Q3, management has a positive bias towards fourth quarter commercial business in North America and overseas however consistent with prior years commercial sales realized in Q4 are subject to the timing of customer commitment and their delivery requirements. Based on the factors discussed above management maintains a cautious outlook towards the fourth quarter of fiscal 2015.

Although management anticipates a challenging second half in 2015 we remain very enthusiastic with respect to our prospects for long-term growth both in North America and overseas. The strength of our on-farm and commercial businesses in North America remains intact and AGI will benefit from the continuing trend towards higher grain volumes. Our international business continues to gain momentum and has become more geographically diverse. We remain particularly excited with respect to the enormous potential of Brazil and look forward to positive results from our operations in that country in 2016. Finally, our integration of Westeel is ahead of schedule and we are confident that synergies from this acquisition will exceed our initial expectations. The benefits of this strategic acquisition will contribute to the growth and prosperity of AGI over the long term.

AGI's financial statements and MD&A for the three and six month periods ended June 30, 2015 can be obtained athttp://media3.marketwire.com/docs/AFN0814Q22.pdf and will also be available electronically on SEDAR (www.sedar.com) and on AGI's website (www.aggrowth.com).