Ag Growth Announces First Quarter Results; Declares Dividends
FOR: AG GROWTH INTERNATIONAL INC.
MAY 11, 2012 - 08:00 ET
WINNIPEG, MANITOBA--(Marketwire - May 11, 2012) - Ag Growth International Inc. (TSX:AFN) ("Ag Growth" or the "Company") today reported its financial results for the three months ended March 31, 2012, and declared dividends for June, July and August 2012.
|Overview of Results|
|(thousands of dollars)||Three Months Ended
|Trade sales (1)(2)||$72,291||$66,008|
|Adjusted EBITDA (2)||$12,162||$11,811|
|Diluted profit per share||$0.42||$0.38|
|(1)||Sales excluding gains or losses on foreign exchange contracts.|
|(2)||See "Non-IFRS Measures".|
Trade sales, adjusted EBITDA and profit per share all increased in the period compared to the first quarter of 2011. Preseason demand for portable grain handling equipment at the dealer level was robust in anticipation of a projected record number of corn acres in the US and a forecast significant increase in seeded acres in western Canada. North American sales of commercial handling equipment also increased over the comparable period in the prior year as investment in modernization and capacity expansion of commercial infrastructure continued in response to increasing demand and to capitalize on positive agricultural fundamentals.
"Our first quarter progressed roughly in line with our expectations", said Gary Anderson, President and Chief Executive Officer. "Demand for our portable handling equipment is very strong as corn planting in the U.S. is forecast to be the highest since 1937 and farmers in western Canada are expected to seed approximately eight million more acres of land than in 2011, largely due to the recovery of acres that were lost to flooding in 2011. Sales of commercial equipment exceeded the record levels achieved in the first quarter of 2011 as momentum from the prior year carried forward into 2012."
"We are encouraged with the progress we have made with our Twister storage bin facility. We devoted considerable resources to address manufacturing costs and efficiencies and the product line generated a positive gross margin in the first quarter of 2012. Storage sales in the first quarter of 2012, though higher than the same period in 2011, were constrained by management until the cost rationalization project was substantially completed. Storage sales for the balance of 2012 are expected to increase significantly over the same period in the prior year."
"Progress has also been made on a number of fronts at Mepu. We have implemented practices to increase input cost certainty, further developed our sales and support group in Latvia and invested in research and development to design a commercial capacity Mepu dryer. Though not a contributor to EBITDA in the first quarter due to seasonality, we expect the benefits of these initiatives to be more pronounced in future quarters and retain a positive outlook for this division in 2012 and beyond."
"We believe we have emerged from the challenges encountered in 2011 a stronger company and we are looking forward with enthusiasm to the balance of 2012. A return to normalized conditions in western Canada and the potential for a 14 billion bushel corn crop in the U.S. have provided considerable tailwinds for our portable grain handling business. Offshore, our sales backlog is significantly higher than at this time in 2011 and our international sales team continues to develop new business that will benefit results in the current year and into 2013. On balance, we expect solid financial performance in 2012 will result from increasing offshore sales, operational improvements at Twister and Mepu and strong agricultural fundamentals both in North America and internationally."
Management expects demand for portable grain handling equipment in 2012 will benefit from positive on-farm economics, the potential for a large number of corn acres in the U.S. and an expected return to normalized conditions in western Canada. The USDA's prospective plantings report released on March 30, 2012 forecasts U.S. farmers will plant 95.9 million acres of corn in 2012 (2011 - 91.9 million acres), the highest planting level since 1937. Based on previous USDA yield estimates this may result in a corn crop in excess of 14 billion bushels (2011 - 12.4 billion bushels). The number of seeded acres in Canada, based on Statistics Canada's planting intentions survey released April 24, 2012, is expected to increase by approximately eight million acres or over 10% compared to 2011 as farmers seed many of the acres lost to flooding in the previous year.
Sales of commercial equipment in North America were at record levels in 2011 due to positive agricultural economics and a commercial infrastructure which is expanding its capacity to accommodate the growing number of total bushels of grain in the system. Based on current conditions management anticipates continued high levels of North American demand in 2012, however North American sales may not match the record sales achieved in 2011. Offshore commercial grain handling sales are expected to increase compared to 2011 as the Company remains very encouraged with the outlook for offshore markets and the potential of product bundling with storage bins and other Ag Growth products.
Ag Growth remains very optimistic with respect to its international potential. The Company has continued to invest in its international development with additions to its sales and support team and the establishment of sales offices in Colombia, Argentina and Latvia. Ag Growth's international sales backlog for 2012 is significantly higher than the backlog at this time in 2011. Internationally, the Company's sales and sales backorder is geographically diverse and includes Russia, Eastern Europe, Latin America, Southeast Asia, the Middle East and Africa.
Management believes start-up challenges at the Twister greenfield storage bin facility are largely resolved. Twister contributed a positive gross margin in the first quarter of 2012 and management expects margin improvements to continue throughout the year. Regional conditions at Finland-based Mepu appear to have normalized and management expects improved results from Mepu in 2012 compared to 2011. Mepu has historically been very seasonal, with negative EBITDA in the first and fourth quarters, and this trend continued in the first quarter of 2012 and is expected to continue going forward.
Management expects gross margins in portable and commercial handling equipment to remain strong in 2012 and expects margin improvements at the Mepu and Twister divisions. The Company's gross margin expectations for storage products in 2012 are significantly higher than those achieved in 2011. However, storage sales are expected to comprise a higher proportion of total sales in 2012 and this change in sales mix is expected to reduce gross margin percentages on a consolidated basis. As a result of these offsetting factors, Ag Growth's consolidated gross margin percentage in 2012 is expected to remain relatively consistent with 2011.
Consistent with prior years, demand in 2012, particularly in the second half, will be influenced by crop conditions, the timing of harvest and conditions during harvest. Changes in global macro-economic factors, including the availability of credit in new markets, also may influence demand, primarily for commercial grain handling and storage products. Results may be also be impacted by changes in steel costs and other material inputs. The rate of exchange between the Canadian and US dollars may impact the comparison of results between 2012 and 2011. The Company's average rate of exchange in 2011 was $1.00 USD = CAD $0.97.
Ag Growth today announced the declaration of cash dividends of $0.20 per common share for the months of June 2012, July 2012 and August 2012. 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:|
|Monthly dividend||Payable date||Record date|
|June 2012||July 30, 2012||June 29, 2012|
|July 2012||August 30, 2012||July 31, 2012|
|August 2012||September 28, 2012||August 31, 2012|
MD&A and Financial Statements
Ag Growth's financial statements and management's discussion and analysis for the three month period ended March 31, 2012 can be obtained at http://media3.marketwire.com/docs/Q1aggrowth.pdf and will also be available electronically from SEDAR (www.sedar.com) or from Ag Growth's website (www.aggrowth.com).
Ag Growth will hold a conference call on Friday, May 11, 2012, at 1:00 P.M. EST to discuss its results for the three month period ended March 31, 2012.
To participate in the conference call, please dial 1-877-240-9772 or for local access dial 416-340-9432. 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 confirmation code 2221745.
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.
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.
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 resolution of start-up issues at our Twister bin plant and the future contribution of that plant to our operating and financial performance, the impact of crop conditions in our market areas, the impact of current economic conditions on the demand for our products, 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 certain of 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.
Ag Growth International Inc.