WINNIPEG, MANITOBA--(Marketwired - Aug. 11, 2016) - Ag Growth International Inc. (TSX:AFN) ("AGI" or the "Company") today announced its financial results for the three and six-month periods ended June 30, 2016, and declared dividends for September, October and November 2016.

Overview of Results

(thousands of dollars) Three Months Ended
June 30
Six Months Ended
June 30
2016 2015 2016 2015
Trade sales (1) 143,538 113,942 257,210 200,569
Adjusted EBITDA (1) 26,031 22,286 45,830 39,557
Net profit 5,285 8,173 10,982 4,764
Diluted profit per share $0.35 $0.58 $0.74 $0.35
Adjusted net profit (1) 8,819 12,368 14,819 20,602
Diluted adjusted profit per share (1)(2) $0.59 $0.88 $0.99 $1.50
(1) See "Non-IFRS Measures".
(2) See "Diluted profit per share and Diluted adjusted profit per share".

Trade sales in the second quarter increased significantly over 2015 as strong North American Commercial sales, an increase in demand for Westeel product and contributions from other recent acquisitions more than offset lower sales of Farm equipment in the U.S. and a decrease in export sales originating from AGI's North American facilities. Gross margins remained strong at Westeel and other Farm divisions due to previously realized synergies and the proactive purchasing of steel to protect against rising costs. Commercial gross margin percentages benefited from a favourable sales mix, improved results at Union Iron and low steel costs. Higher adjusted EBITDA and a non-cash gain on financial instruments were more than offset by non-cash items including share-based compensation and asset impairment charges, as well as losses on foreign exchange and higher debt service, resulting in a decrease in net profit and net profit per share.

"Despite softness in the US Farm market we saw strong results from many parts of AGI in the second quarter," said Tim Close, President and CEO of AGI. "The acquisitions we completed over the past 18 months provided significant contributions and along with solid performances from key divisions served to offset some tough markets. We are continuing to see the positive impact of our strategy to diversify our Commercial business into new markets and add Westeel to our Farm group. We are very pleased to see Westeel producing the kind of results that come from combining market leading products and customer service with an excellent team. All recent acquisitions performed very well with VIS having another great quarter. While Brazil negatively impacted the quarter, the team has begun reshaping Entringer and building our new facility to position us for a bright future. We broke ground in the quarter and our new facility is emerging from the corn fields.

The size of the crop, commodity prices and weather are out of our control but its how we respond to the combination of those factors that marks our success. I am very proud of how our Farm teams have responded and managed through a challenging environment in the U.S. Our Domestic Commercial businesses had a very good quarter with the Hi Roller team achieving outstanding results from their new facility. We continue to see a lot of activity globally on the Commercial business and all Farm divisions are preparing for what is shaping up to be a great crop in the US and in Canada.

Diluted profit (per share) and Diluted adjusted profit (per share)

A reconciliation of net profit and diluted profit per share to adjusted net profit and adjusted diluted profit per share is below.

(thousands of dollars)
Three Months Ended
June 30
Six Months Ended
June 30
2016 2015 2016 2015
Profit as reported 5,285 8,173 10,982 4,764
Diluted per share as reported $0.35 $0.58 $0.74 $0.35
Loss on foreign exchange 2,807 550 2,578 10,416
Assets under review (2) (1,041) 469 (481) 1,299
Asset Impairment 2,313 0 2,313 0
M&A expenses 736 2,437 951 3,514
Contingent consideration expense 381 0 448 0
Gain on financial instruments (3,105) 0 (3,425) 0
Loss on sale of PP&E 1,443 739 1,453 609
Adjusted profit (1) 8,819 12,368 14,819 20,602
Diluted adjusted profit per share (1) $0.59 $0.88 $0.99 $1.50
(1) See "Non-IFRS Measures"
(2) Based on operations' profit


AGI's Farm business represents approximately one-half of AGI's total revenue profile and is comprised primarily of portable grain handling equipment and Westeel's North American storage business. The primary demand driver for portable handling equipment is the amount of grain handled as this dictates farmer capacity requirements and the product replacement cycle. Favourable crop conditions in both Canada and the U.S. in 2016 support market expectations of bumper harvests and an uptick in demand has been noted in certain regions, particularly in western Canada. While a large crop is expected to increase end-user demand for portable equipment, the impact on AGI results in the third quarter may be constrained due to elevated inventory levels throughout the marketplace and dealer cautiousness with respect to adding additional inventory in advance of harvest. As a result, backlogs are similar to the prior year and based on current activity we expect third quarter Farm sales of portable equipment to be similar to 2015, however, with the expectation of a large crop in the U.S. there is potential for upside. Sales in the fourth quarter will be influenced by, among other things, third quarter demand and resulting dealer inventory levels and the timing of harvest and conditions during harvest.

Westeel's storage business is comprised of corrugated storage bins, smoothwall bins and liquid storage tanks. Demand drivers for storage include volume of grains grown, crop trends, fertilizer storage and handling practices and the consolidation of farms. While the macro environment in Canada is supportive of these trends, demand in the first half of 2016 was negatively impacted by higher than normal dealer inventories. Increased second quarter demand allowed Westeel dealers to work down their inventory levels and a surge in new orders subsequent to June 30, 2016 has resulted in a significant increase in order backlog compared to 2015. Accordingly, Westeel sales in the third quarter are expected to be well above 2015 levels. Based on current conditions, management expects fourth quarter sales will benefit from strong dealer participation in preseason programs and as a result will also exceed the prior year. Sales volume in Q4 may be affected by the timing of shipments related to the preseason program.

AGI's Commercial business is comprised primarily of high capacity grain handling and conditioning equipment and storage in offshore markets. In North America, demand for Commercial equipment is less sensitive to a specific harvest but rather is driven primarily by macro factors including the longer-term trend towards higher crop volumes, the drive towards improved efficiencies in a mature market and, more recently, the dissolution of the Canadian Wheat Board, and current activity in North America is reflective of these trends. Commercial activity in North America remains robust and, excluding acquisitions, management anticipates second half sales to slightly exceed the prior year.

Offshore, the commercial infrastructure in many grain producing and importing countries remains vastly underinvested resulting in significant global opportunities for AGI's Commercial business. Our international business expanded significantly in 2015 due to increasing brand presence, continued momentum in Eastern Europe and Latin America and the acquisition of Italian subsidiaries Frame and PTM. Management expects a strong contribution from its Italian subsidiaries in 2016 as Frame delivers on a significant backlog and AGI further consolidates its sales structure. Excluding recent acquisitions, our international backlog is lower than the prior year as AGI had secured several large projects by early 2015 and similar projects are not in the current backlog. Accordingly, excluding acquisitions, management does not expect international sales to reach the record levels achieved in 2015. However, we have a large and high quality quote log and management continues to work towards securing a number of larger projects for delivery commencing in the second half of 2016 and into 2017.

AGI completed a number of acquisitions in recent months including VIS (November 2015), Entringer (March 2016), NuVision (April 2016) and Mitchell (July 2016). These acquisitions were funded with cash and the Company's revolver facility and include earn-out provisions. Management does not anticipate a positive EBITDA contribution from Brazilian-based Entringer in 2016, however, the addition of VIS, NuVision and Mitchell is expected to generate significant second half adjusted EBITDA, approximately in-line with the acquisition metrics disclosed upon announcing the transactions (see "Acquisitions").

AGI's results in the second half of 2016 and in fiscal 2017 may be impacted by the significant increase in steel prices experienced in the current year. While the impact on 2016 results has been partially mitigated through the proactive procurement of steel, the effect of higher input costs is expected to be more prominent in future quarters as previously procured steel is utilized. Current forecasts for steel generally indicate prices will remain well above 2015 levels. While management will attempt to further mitigate increasing input costs through purchasing strategies and product sales price increases there may be a negative impact on gross margins should these initiatives not fully offset anticipated higher input costs.

Demand in 2016 will be influenced by, among other factors, 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 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. Consistent with prior periods, Commercial sales are subject to the timing of customer commitment and delivery considerations. 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. However, 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 realize a loss on these contracts in fiscal 2016.

Management anticipates second half results to reflect a significant contribution from recent acquisitions, strong demand in Canada for Farm products including Westeel storage equipment and continued strength in the North American Commercial business. However, the portable Farm market in the U.S. continues to be soft and the timing of commitments from international customers remains uncertain. On balance, based on current conditions, management anticipates second half adjusted EBITDA excluding acquisitions will approximate 2015 levels and including acquisitions will be well above prior year results.


AGI today announced the declaration of cash dividends of $0.20 per common share for the months of September 2016, October 2016 and November 2016. 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
September 2016 October 14. 2016 September 30, 2016
October 2016 November 15, 2016 October 31, 2016
November 2016 December 15, 2016 November 30, 2016

MD&A and Financial Statements

AGI's financial statements and MD&A for the three and six-month periods ended June 30, 2016 can be obtained at and will also be available electronically on SEDAR ( and on AGI's website (

Conference Call

Management will hold a conference call on Thursday, August 11, 2016, at 9:00 a.m. EST to discuss its results for the three and six month periods ended June 30, 2016. To participate in the conference call, please dial 1-866-225-2055 or for local access dial 416-340-2218. An audio replay of the call will be available for seven days. To access the audio replay, please dial 1-800-408-3053 or for local access dial 905-694-9451. Please quote passcode 5381818.

Company Profile

Ag Growth International Inc. is a leading manufacturer of portable and stationary grain handling, storage and conditioning equipment, including augers, belt conveyors, grain storage bins, grain handling accessories, grain aeration equipment and grain drying systems. AGI has manufacturing facilities in Canada, the United States, Italy, Brazil, and the United Kingdom, and distributes its products globally.


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", "Adjusted EBITDA", "gross margin", "funds from operations", "payout ratio", "adjusted payout ratio", "trade sales", "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 certain of 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 this press release.

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, amortization and asset impairment charges. References to "adjusted EBITDA" are to EBITDA before the Company's gain or loss on foreign exchange, gains or losses on the sale of property, plant & equipment, non-cash share based compensation expenses, gains or losses on financial instruments, expenses related to corporate acquisition activity. Adjusted EBITDA excludes the results of AGI divisions Applegate and Mepu as the previously announced strategic review of these assets has resulted in their sale in 2016. 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.

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. Trade sales exclude the results of AGI divisions Applegate and Mepu as the previously announced strategic review of these assets has resulted in their sale in 2016.

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 losses on foreign exchange, transaction costs, certain items considered by management to be unusual and non-recurring in nature and the gain (loss) on sale of property, plant and equipment.


This press release contains forward-looking statements that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. Forward-looking statements may contain such words as "anticipate", "believe", "continue", "could", "expect", "intend", "plan", "will" or similar expressions suggesting future conditions or events. In particular, the forward looking statements in this MD&A include statements relating to our business and strategy, including our outlook for our financial and operating performance including our expectations for sales and adjusted EBITDA. Such forward-looking statements reflect our current beliefs and are based on information currently available to us, including certain key expectations and assumptions concerning anticipated grain production in our market areas, contributions from recent acquisitions, financial performance, business prospects, strategies, product pricing, regulatory developments, political events, tax laws, the sufficiency of budgeted capital expenditures in carrying out planned activities, currency exchange rates and the cost of materials, labour and services. Forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking statements, including changes in international, national and local business conditions, weather patterns, crop planting, crop yields, crop conditions, the timing of harvest and conditions during harvest, seasonality, industry cyclicality, volatility of production costs, agricultural commodity prices, the cost and availability of capital, currency exchange rates, competition and AGI's failure to achieve the expected benefits of the recent acquisitions. These risks and uncertainties are described under "Risks and Uncertainties" in our most recently filed Annual Information Form. These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements. We cannot assure readers that actual results will be consistent with these forward-looking statements and we undertake no obligation to update such statements except as expressly required by law.

Contact Information:

Ag Growth International Inc.
Steve Sommerfeld
Investor Relations