Ag Growth Announces Third Quarter Results; Declares Dividends

Ag Growth Announces Third Quarter Results; Declares Dividends 
WINNIPEG, MANITOBA -- (Marketwire) -- 11/14/12 -- Ag Growth
International Inc. (TSX:AFN) ("Ag Growth" or the "Company") today
reported its financial results for the three and nine month periods
ended September 30, 2012, and declared dividends for December 2012,
January 2013 and February 2013. 
Overview of Results 


 
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(thousands of dollars)                Three Months Ended   Nine Months Ended
                                            September 30        September 30
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                                          2012      2011      2012      2011
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Trade sales (1)                        $83,465   $81,845  $254,717  $233,975
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Adjusted EBITDA (1)                    $12,531   $14,836   $44,757   $44,705
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Net Profit                              $6,501    $4,570   $20,624   $21,270
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Diluted profit per share                 $0.52     $0.36     $1.64     $1.69
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(1) See "Non-IFRS Measures".                                                

 
Trade sales in the three and nine month periods ending September 30,
2012 increased $1.6 million (2%) and $20.7 million (9%) over the same
periods in the prior year. The largest single driver of sales growth
in the three and nine month periods was a substantial increase in
international business, particularly in the countries of the former
Soviet Union. Also contributing to growth in sales was robust demand
in western Canada and the acquisition of Airlanco. The Company
achieved sales growth despite a decline in U.S. sales that resulted
from a severe drought that significantly impacted third quarter
demand. 
Adjusted EBITDA decreased in the third quarter of 2012 as the U.S.
drought reduced demand for the Company's higher margin on-farm grain
handling equipment. For the nine-month period ending September 30,
2012, adjusted EBITDA increased over the prior year as the Company
significantly increased its sales in the Canadian and international
markets and due to robust demand for on-farm equipment in the United
States prior to the appearance of drought conditions. 
Net profit and diluted profit per share increased in the third
quarter of 2012 as lower adjusted EBITDA was more than offset by
lower transaction costs, a higher gain on foreign exchange and a
lower effective tax rate. For the nine month period ended September
30, 2012, diluted profit per share decreased $0.05 per share as a
large gain on foreign exchange in 2011 was only partially offset by
lower transaction expenses and a lower effective tax rate in the
current year. 
"After a strong first half in which the Company demonstrated
significant operational improvements and a return to higher levels of
profitability it is certainly disappointing that the historic drought
that has gripped our key U.S. market will negatively impact our
second half results", said Gary Anderson, President and Chief
Executive Officer.  
"Somewhat overshadowed by the impact of the drought has been a number
of very positive developments on which I am pleased to report.
Perhaps most significant is our success in international markets in
2012. The hard work of our international sales and support team has
resulted in increased market awareness and substantial repeat
business which we fully expect will support continued growth
offshore. I was able to visit Russia and Ukraine in October 2012 and
I came away very impressed by the increased presence of AGI in these
markets and the breadth and depth of the relationships developed over
the last several years. Our offshore sales are up 35% over the prior
year and with quoting activity at record highs we remain very
confident in our strategy of bundling commercial grain handling
equipment with large diameter storage bins manufactured at our
Twister facility." 
"We have undertaken a number of new product development initiatives
in 2012 which we feel will contribute greatly to our success in
future years. In 2013 we will manufacture 90' and 105' storage bins
and will introduce commercial capacity grain drying equipment. We
believe the ability to bundle these products previously sourced from
third parties with our market leading commercial handling equipment
will further enhance our growth in offshore markets. Also in 2013 we
will launch a newly designed high capacity Westfield grain auger
which we expect will further enhance Westfield's position in the
portable grain handling market." 
"We expect to enter 2013 ready to capitalize on what we believe are
long-term positive agricultural fundamentals. Although the fourth
quarter of 2012 will be impacted by the historic drought in the
United States and we expect some softness to persist into 2013, we
look forward to the challenges and opportunities in the upcoming year
and expect to deliver solid growth both domestically and overseas." 
Outlook 
The severe U.S. drought in 2012 significantly reduced crop production
volumes and resulted in a very early and efficient harvest. As a
result, the Company expects limited in-season sales in the fourth
quarter of 2012. The poor harvest also resulted in limited inventory
carryover which is likely to reduce participation in the Company's
fourth quarter preseason booking programs and may temper demand for
portable equipment in the first and second quarters of 2013.
Management believes U.S. farmers are likely to plant a significant
number of corn acres in 2013 to capitalize on high commodity prices
and accordingly, based on current conditions, management is
optimistic with respect to demand for portable grain handling
equipment in the second half of 2013. 
The widespread drought in the U.S. also impacted the Company's
commercial businesses. Negative market sentiment and an outlook for
lower commercial handling volumes in the short-term delayed the
launch of certain domestic commercial business in 2012, particularly
on smaller, regional projects. Although quoting activity for 2013
business has increased recently, due to lead times associated with
commercial business domestic demand in the next several months is
expected to be constrained. However, based on current conditions
management expects a return to normalized conditions in the second
half of 2013. 
Crop production in Canada increased slightly compared to 2011 and
dealer inventories post-harvest are consistent with historical
levels. Although dry conditions later in the growing season resulted
in an early harvest and tempered fourth quarter in-season sales,
management expects participation in preseason programs to be
consistent with previous years. Looking ahead to 2013, management
expects the Company's commercial business will continue to grow and
based on current conditions expects another strong year in portable
grain handling, storage and conditioning. 
Ag Growth enjoyed great success offshore in 2012 and expects growth
in international business to continue in 2013. Quoting activity is at
record highs and the Company's growing presence and distribution in
many offshore markets, particularly in the former Soviet Union,
positions the Company well for the upcoming year. In 2013 the Company
will also introduce 105 foot diameter storage bins and commercial
capacity grain drying equipment which will further complete Ag
Growth's industry leading commercial product offering. 
On balance, the short-term impact of the U.S. drought and the early
U.S. harvest is expected to temper fourth quarter demand for both
portable and commercial grain handling products in the United States.
As a result, sales and adjusted EBITDA in the fourth quarter of 2012
are expected to be well below the fourth quarter of 2011. The
Company's fiscal 2012 payout ratio will increase compared to 2011
however the Company's dividend policy will not be altered in response
to this short-term weather event. 
Management remains optimistic with respect to the Company's prospects
in 2013. Although the 2012 drought resulted in higher than typical
inventory carryover at our U.S. dealers, the impact is not expected
to extend beyond the second quarter of 2013. In the upcoming year
U.S. farmers may again plant significant corn acreage to capitalize
on high commodity prices which would then be expected to result in
robust demand for portable grain handling equipment in the second
half of 2013. Demand in the Canadian market is expected to be strong
in 2013 and Ag Growth remains very optimistic with respect to its
international business and the potential of bundling commercial grain
handling equipment with storage bins and other Ag Growth products. In
summary, although management anticipates some softness in the United
States in first half of 2013, based on current conditions the Company
anticipates a return to favourable conditions with the new crop year
and expects sales and adjusted EBITDA in 2013 to increase
significantly compared to the drought impacted results of 2012. 
Dividends 
Ag Growth today announced the declaration of cash dividends of $0.20
per common share for the months of December 2012, January 2013 and
February 2013. The dividends are eligible dividends for Canadian
income tax purposes. Ag Growth's current annualized cash dividend
rate is $2.40 per share. 
The table below sets forth the scheduled payable and record dates:  


 
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         Monthly dividend             Payable date              Record date
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            December 2012         January 30, 2013        December 31, 2012
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             January 2013        February 28, 2013         January 31, 2013
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            February 2013           March 29, 2012        February 28, 2013
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MD&A and Financial Statements 
Ag Growth's financial statements and management's discussion and
analysis for the three and nine month periods ended September 30,
2012 can be obtained at
http://media3.marketwire.com/docs/Q3aggrowth.pdf and will also be
available electronically from SEDAR (www.sedar.com) or from Ag
Growth's website (www.aggrowth.com). 
Conference Call 
Ag Growth will hold a conference call on Wednesday, November 14,
2012, at 1:30 P.M. EST to discuss its results for the three and nine
month periods ended September 30, 2012.  
To participate in the conference call, please dial 1-866-226-1792 or
for local access dial 416-340-2216. 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
pass code 1516766. 
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. Ag
Growth has eleven manufacturing facilities in Canada, the United
States, the United Kingdom and Finland, and its sales, marketing, and
distribution system distributes product in 48 states, nine provinces,
and internationally.  
Non-IFRS Measures 
References to "EBITDA" are to profit before income taxes, finance
costs, depreciation and amortization. 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 and
expenses related to corporate acquisition activity.. References to
"trade sales" are to sales excluding the gain or loss on foreign
exchange. References to "funds from operations" are to cash flow from
operating activities before the net change in non-cash working
capital balances related to operations and stock-based compensation,,
less maintenance capital expenditures and adjusted for the gain or
loss on the sale of property, plant & equipment. Management believes
that, in addition to cash provided by (used in) operating activities,
funds from operations provide a useful supplemental measure in
evaluating its performance. Management believes that, in addition to
sales, profit or loss and cash flows from operating, investing, and
financing activities, trade sales, EBITDA, Adjusted EBITDA and funds
from operations are useful supplemental measures in evaluating the
Company's performance. Trade sales, EBITDA, Adjusted EBITDA and funds
from operations are not financial measures recognized by IFRS and do
not have a standardized meaning prescribed by IFRS. Management
cautions investors that trade sales, EBITDA, Adjusted EBITDA and
funds from operations should not replace sales or 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. Ag Growth's method of calculating trade sales, EBITDA,
Adjusted EBITDA and funds from operations may differ from the methods
used by other issuers. 
Forward-Looking Statements 
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", "expects", "intend", "plans", "will"
or similar expressions suggesting future conditions or events. In
particular, the forward looking statements in this press release
include statements relating to the benefits of acquisitions, our
business and strategy, including our outlook for our financial and
operating performance, growth in sales to developing markets, the
impact of crop conditions in our market areas, the impact of current
economic conditions on the demand for our products, future sales and
adjusted EBITDA, and the payment of dividends. 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 financial performance, business
prospects, strategies, product pricing, regulatory developments, tax
laws, the sufficiency of budgeted capital expenditures in carrying
out planned activities, foreign 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, crop yields, crop conditions,
seasonality, industry cyclicality, volatility of production costs,
commodity prices, foreign exchange rates, competition and the cost
and availability of capital for our customers. These risks and
uncertainties are described under "Risks and Uncertainties" in our
MD&A and in our most recently filed Annual Information Form. 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.
Contacts:
Ag Growth International Inc.
Investor Relations
Steve Sommerfeld
204-489-1855
steve@aggrowth.com
 
 
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