AGI Announces Q4 and Annual 2018 Results

Link to Full Release – 

WINNIPEG, March 14, 2019 /CNW/ – Ag Growth International Inc. (TSX:AFN) ("AGI", the "Company", "we" or "our") today announced its financial results for the three months and year ended December 31, 2018, and declared dividends for March, April and May 2019.

 

Quarter Ended 

December 31

Year Ended

December 31

[thousands of dollars ]

2018

2017

2018

2017

Trade sales 

214,195

167,691

934,063

750,287

Adjusted EBITDA 

28,014

19,715

148,195

121,797

Profit 

(11,861)

(1,800)

26,618

33,664

Trade sales and adjusted EBITDA increased significantly in the fourth quarter of 2018 due to strength in international markets, continued momentum in the Canadian Commercial market and contributions from acquisitions. Adjusted EBITDA as a percentage of sales in the quarter reflected seasonal patterns and was consistent with 2017. AGI Brazil posted a loss for the quarter, despite an increase in sales, largely due to a significant warranty provision related to damaged steel and expenses incurred in delivery and assembly as we improve our distribution model in Brazil. In the quarter, net profit was negatively impacted by a non-cash foreign exchange loss on U.S. dollar denominated debt and a non-cash loss on the Company's equity compensation swap, however adjusted profit and profit per share increased significantly compared to the prior year.

"A strong fourth quarter closed off a record year for AGI in 2018", said Tim Close, President and CEO of AGI. "We made significant progress against our 5-6-7 strategy throughout 2018, resulting in organic sales growth of 12.8%. We kicked off 2019 with three acquisitions as AGI added significantly to its Food platform and made two transformational additions, one to its technology platform and more recently to establish a solid platform in India. Moving into 2019, a prolonged winter has impacted projects and deliveries, pushing some sales into the second quarter, however we expect continued organic growth in 2019 augmented with significant contributions from acquisitions."

Trade sales and adjusted EBITDA for the year ended December 31, 2018 were at record levels, significantly exceeding 2017 results. Farm sales increased over 2017 as higher sales in the U.S. and contributions from acquisitions more than offset an expected decrease in Canada from record 2017 levels. Continued momentum in the Canadian grain and fertilizer platforms along with robust international demand resulted in a significant increase in Commercial sales over the prior year. Net profit was negatively impacted by the non-cash foreign exchange loss on U.S. dollar denominated debt and the non-cash loss on the Company's equity compensation swap, however adjusted profit and profit per share increased significantly compared to the prior year. AGI entered 2019 with record backlogs and anticipates continued momentum in both its Farm and Commercial businesses (see "Outlook").

OUTLOOK

Successive large crops in the United States and market expectations for another large planting in 2019, coupled with recent underinvestment in grain storage, has resulted in an on-farm storage deficit in the U.S. Accordingly, although farmer economics in the U.S. remain challenged, AGI anticipates strong demand for grain storage systems in 2019. In addition, sales of portable grain handling equipment are expected to benefit from high crop volumes and the replacement nature of the product. In Canada, Farm economics remain positive and management anticipates strong demand in 2019. In Both the U.S. and Canada, a challenging winter and what appears to be a late spring are expected to dampen sales in Q1 2019. However, anticipated growth rates are expected to return upon commencement of the new crop season in Q2 2019. Based on current conditions, management anticipates that total Farm sales and adjusted EBITDA in 2019 will exceed 2018 results.

AGI's Commercial backlog in Canada remain very strong due to continued investment in Canadian commercial grain handling and fertilizer infrastructure, and accordingly management anticipates robust sales in 2019. In the United States, Commercial activity is expected to remain stable compared to 2018. AGI's international sales backlog is significantly higher than the prior year and momentum is expected to continue throughout 2019 due to strong levels of quoting activity in most regions, including EMEA and Latin America. Accordingly, Commercial backlogs in Canada and offshore remain significantly higher than the prior year. Commercial sales are expected to be weighted towards the second half of 2019 due to challenging winter conditions in North America and customer construction schedules. Overall, management anticipates sales and adjusted EBITDA related to Commercial equipment in 2019 will exceed strong 2018 results.

AGI Brazil entered 2019 with a record sales order backlog that includes a strong Farm component as well as substantial South American commercial projects. New order intake has accelerated over recent quarters and momentum is expected to continue in 2019. In addition, margins are expected to improve in 2019 and over the longer term as AGI continues to apply lean practices on all aspects of the organization, including manufacturing, logistics and customer service. Accordingly, management anticipates adjusted EBITDA in Brazil in 2019 will be higher than the prior year and further improvements are expected over the long-term, however quarterly results may vary as AGI Brazil navigates the complexities of being a start-up company with ambitions of rapid growth in Brazil.

In summary, management anticipates 2019 sales and adjusted EBITDA will increase significantly compared to the prior year. The anticipated growth compared to 2018 is expected to be weighted towards the second half of 2019 due to difficult winter conditions in North America and customer construction schedules. Overall, positive Farm demand drivers in North America are expected to drive sales growth in grain storage systems and portable handling equipment and Commercial sales are anticipated to be very strong in Canada and internationally. Based on existing backlogs, quoting activity and positive demand drivers, management expects record results in 2019 and looks forward with excitement to the upcoming fiscal year.