Ag Growth CEO Says Russia Will Fuel Rebound

Bloomberg reports that Ag Growth is continuing to expand outside the U.S. and Canada, which currently make up about 80% of the company’s business. “A lot of the progressive corporate farms in the former Soviet Union are looking to North America for proper grain storage because existing storage is antiquated,” said Chief Executive Officer Gary Anderson. “We want to provide it.”

Anderson said he will increase revenue by expanding marketing in former Soviet Union countries including Russia, which is forecast to raise grain production about 30% this year.

International sales, which have risen 240% in the past three years compared with a 17% rise in the U.S., will replace Canada as the company’s second-largest market next year, Anderson said. Eastern Europe will comprise 80% of sales to foreign markets.

Anderson, who cofounded the company in 1996, plans to open an office in Russia after 2014. Six of the marketing staff of 25 to 30 people currently spend more than half the year in eastern Europe though none are based there, he said.

Ag Growth may expand further into eastern Europe with an acquisition, possibly in Turkey or the Ukraine after picking up dozens of closely held companies since its IPO, Anderson said. Future clip-on acquisitions will be in the range of C$20 million and “geographically driven to give us a more global footprint,” he said. Russia is off the table because it’s “impossible” to buy a company there, he said.

“We remain optimistic on Ag Growth’s medium- to longer-term growth prospects given our expectations of robust global demand for grain handling and storage equipment,” Robert Winslow, analyst at National Bank Financial, said in a March 14 note to clients. There is “continued strong demand in the Former Soviet Union region” and “the negative effects of the U.S. corn belt drought” are not expected again this year, he said.

Russia is an ideal target for expansion as farmers in the seventh-largest corn export market look for newer technology to store and handle grain, according to Spencer Churchill, analyst at Paradigm Capital Inc., “That’s an area of the world that is lacking in grain storage infrastructure,” he said in a phone interview from Toronto. Many producers, “leave grain on the concrete, subject to the rain and spoilage because there’s just not enough storage.”

Ag Growth and many of its brands have been Association Regular member since 2005; aggrowth.com.