WINNIPEG, April 14, 2020 /CNW/ - Ag Growth
International Inc. (TSX: AFN) ("AGI", or the "Company") today
announced a reduction of its dividend to an annual level of
$0.60 per common share. At the same
time the dividend will move from monthly to quarterly payments, and
accordingly the next dividend of $0.15 per share will relate to the months of
April, May and June 2020, and is
expected to be declared in June 2020
and payable on July 15, 2020.
AGI has sufficient liquidity and is well within its required
financial covenants, however the dividend reduction is appropriate
to facilitate cash conservation, leverage reduction, and a stronger
balance sheet in these highly uncertain times as we better
understand the impact COVID will have on our business in the
near-term through to stabilization as we emerge to a post COVID
world. New capital projects and new hires are also being restricted
to strategic exceptions to further prioritize capital
availability.
"This decision was made in the context of significant
uncertainties created by the global COVID crisis, facilitates
leverage reduction, and gives us greater flexibility to act on
substantial strategic and accretive internal investment
opportunities across AGI," said Tim
Close, President and CEO of AGI. "Over the past several
years AGI has invested in expanding our business into new products
and regions and in growth within existing markets. We are currently
a week from launching V2.0 of our AGI SureTrack platform, a
platform that is building rapidly and poised to significantly
enhance the value we deliver to our customers and grow our market
shares. Our Brazil business is at
an inflection point as we build backlogs and the scale needed to
operate in this strategic region, our Italian operations just
completed a substantial expansion and automation project and we
also have scheduled critical automation projects in our busy
portable equipment business.
Within the context of that strategic growth, COVID has impacted
our near-term results. COVID will have further impact on our
business while we determine the depth and duration of the global
disruptions. Recent days have confirmed our core infrastructure
strategy as our operations have been captured as essential
services, providing us with the relatively unique right to operate
in this environment. Like much of the world we must use the levers
we have to protect our business, to prepare for a deep and extended
impact while finding the time and resources to advance our
strategic projects. The dividend reduction is an important element
of our Preparation with Progress initiative that we are now
implementing to further address capital allocation."
AGI's status today remains stable. We had previously guided to
adjusted EBITDA in Q1 2020 that would approximate Q4 of 2019 or a
roughly 25% reduction compared to Q1 2019. This reduction was
expected given a backlog weighted to H2 2020 and a relatively
tentative market sentiment entering 2020 after significant flooding
and poor growing conditions in the United
States resulted in a disruptive and unpredictable 2019. A
relatively solid finish in our North American Farm business and
better than expected results in EMEA resulted in a Q1 2020 adjusted
EBITDA that is slightly above our previous guidance but still below
Q1 2019. The stronger finish in Q1 would have placed us closer to
our strong Q1 in 2019 barring the material impact from COVID
related delays and costs that impacted the end of the quarter.
Our North American facilities have maintained steady production
as we move into Q2 2020. Manufacturing activity had been suspended
for periods in India, Italy, Brazil
and France over the past weeks
however we have now restarted production in all of these locations
albeit at less than full capacity. We are using strict safety
protocols, staggered shifts and amended working plans to close the
gap to 100% capacity in the near-term which should be achievable
barring new or extended activity limitations by regional
governments.
The planting season in North
America is now underway and backlogs across all AGI Farm
product categories remain consistent with the prior year. AGI's
Commercial backlogs in North
America are flat to last year while international backlogs
are currently significantly higher than the prior year, with
overall sales weighted towards the second half of 2020. On a
consolidated basis, AGI's backlog as at March 31, 2020 is higher than at the same time in
2019. Maintaining backlog levels going forward will be impacted by
our ongoing order intake. Global demand is being impacted at
various levels by COVID related uncertainties. The degree of impact
is currently minimal on Farm products while Commercial projects are
generally active but moving ahead at a slower pace. It is too early
to fully assess the extent of the full COVID impact.
Our operations have been declared essential services in each of
the states and provinces where we operate in North America. The essential service
declarations validate our continued strategy to become critical
partners within the world's food supply chain and provides AGI the
opportunity to continue to operate in this environment. We are very
focused on developing and implementing robust protocols to ensure
we continue to safely and responsibly operate. Safety of our
employees is our first priority and our teams are completely
aligned on diligent and extensive implementation of all
procedures.
The production delays in our international business will have a
material impact on Q2 as revenue has been delayed due to the
production suspensions. The status of each of our businesses could
change as the impact of COVID may cause new or additional
production suspensions as the extent of this crisis is better
understood.
We fundamentally believe that the demand drivers in food
infrastructure combined with our strong position in each of our
markets must be matched with a cautious approach to cash
preservation and leverage reduction in this environment. This
combination will allow AGI to weather this global storm and emerge
in a strong position to execute upon our strategic plan and return
to our record of sequential annual growth.
Company Profile
AGI is a leading provider of equipment solutions for agriculture
bulk commodities including seed, fertilizer, grain, feed and food
processing systems. AGI has manufacturing facilities in
Canada, the United States, the United Kingdom, Brazil, France, Italy
and India, and distributes its
product globally.
Further information can be found in the disclosure documents
filed by AGI with the securities regulatory authorities, available
at www.sedar.com and on AGI's website www.aggrowth.com.
CAUTIONARY STATEMENTS
Preliminary Financial Information
Our expectations for AGI's adjusted EBITDA in the first quarter
of 2020 are based on, among other things, AGI's financial results
for the three months ended March 31,
2020, which have not yet been finalized or approved. As
such, such estimates are subject to the same limitations and risks
as discussed under "Forward-Looking Information" below.
Accordingly, AGI's estimate of adjusted EBITDA for three months
ended March 31, 2020 may change upon
the completion, auditor review and approval of the financial
statements for the three months ended March
31, 2020 and the changes could be material.
Forward-Looking Information
This press release contains forward-looking statements and
information (collectively, "forward-looking information") within
the meaning of applicable securities laws that reflect our
expectations regarding the future growth, results of operations,
performance, business prospects, and opportunities of the Company.
All information and statements contained herein that are not
clearly historical in nature constitute forward-looking
information, and the words "anticipate", "believe", "continue",
"could", "expects", "intend", "plans", "postulates", "predict",
"will" or similar expressions suggesting future conditions or
events or the negative of these terms are generally intended to
identify forward-looking information. Forward-looking information
involves known or unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward-looking information. In addition,
this press release may contain forward-looking information
attributed to third party industry sources. Undue reliance should
not be placed on forward-looking information, as there can be no
assurance that the plans, intentions or expectations upon which it
is based will occur. In particular, the forward-looking information
in this press release includes information relating to our business
and strategy, including our outlook for our financial and operating
performance including our expectations for our future financial
results including revenue, including our expectations for Q2
revenue, EBITDA and adjusted EBITDA, including our expectations for
adjusted EBITDA for Q1 2020, industry demand and market conditions;
future payment of dividends and the amount thereof; anticipated
impacts of the coronavirus (COVID-19) outbreak on our business,
operations and financial results; sufficiency of our liquidity; the
launch of V2.0 of our AGI SureTrack platform and the timing
thereof; long term fundamentals and growth drivers of our business;
our ability to achieve 100% plant capacity; our ability to
efficiently re-start post the COVID-19 crisis; and with respect to
our ability to achieve the expected benefits of recent acquisitions
and the contribution therefrom. Such forward-looking information
reflects our current beliefs and is based on information currently
available to us, including certain key expectations and assumptions
concerning: the anticipated impacts of the coronavirus (COVID-19)
outbreak on our business, operations and financial results;
anticipated grain production in our market areas; financial
performance; the financial and operating attributes of recently
acquired businesses and the anticipated future performance thereof
and contributions therefrom; business prospects; strategies;
product and input pricing; regulatory developments; tax laws; the
sufficiency of budgeted capital expenditures in carrying out
planned activities; political events; currency exchange and
interest rates; the cost of materials; labour and services; the
value of businesses and assets and liabilities assumed pursuant to
recent acquisitions; the impact of competition; the general
stability of the economic and regulatory environment in which the
Company operates; the timely receipt of any required regulatory and
third party approvals; the ability of the Company to obtain and
retain qualified staff and services in a timely and cost efficient
manner; the timing and payment of dividends; the ability of the
Company to obtain financing on acceptable terms; the regulatory
framework in the jurisdictions in which the Company operates; and
the ability of the Company to successfully market its products and
services. Forward-looking information involves significant risks
and uncertainties. A number of factors could cause actual results
to differ materially from results discussed in the forward-looking
information, including the effects of global outbreaks of pandemics
or contagious diseases or the fear of such outbreaks, such as the
recent coronavirus (COVID-19) pandemic, including the effects on
the Company's operations, personnel, and supply chain, the demand
for our products and services, our ability to expand and produce in
new geographic markets or the timing of such expansion efforts, and
on overall economic conditions and customer confidence and spending
levels, changes in international, national and local macroeconomic
and business conditions, as well as sociopolitical conditions in
certain local or regional markets, weather patterns, crop planting,
crop yields, crop conditions, the timing of harvest and conditions
during harvest, the ability of management to execute the Company's
business plan, seasonality, industry cyclicality, volatility of
production costs, agricultural commodity prices, the cost and
availability of capital, currency exchange and interest rates, the
availability of credit for customers, competition, AGI's failure to
achieve the expected benefits of recent acquisitions including to
realize anticipated synergies and margin improvements; and changes
in trade relations between the countries in which the Company does
business including between Canada
and the United States. These risks
and uncertainties are described under "Risks and Uncertainties" in
our MD&A, our annual MD&A and in our most recently filed
Annual Information Form, all of which are available under the
Company's profile on SEDAR (www.sedar.com). These factors should be
considered carefully, and readers should not place undue reliance
on the Company's forward-looking information. We cannot assure
readers that actual results will be consistent with this
forward-looking information. Readers are further cautioned that the
preparation of financial statements in accordance with IFRS
requires management to make certain judgments and estimates that
affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent liabilities. These
estimates may change, having either a negative or positive effect
on profit, as further information becomes available and as the
economic environment changes. The forward-looking information
contained herein is expressly qualified in its entirety by this
cautionary statement. The forward-looking information included in
this press release is made as of the date of this press release and
AGI undertakes no obligation to publicly update such
forward-looking information to reflect new information, subsequent
events or otherwise unless so required by applicable securities
laws.
Non-IFRS Measures
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" and "adjusted EBITDA". 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.
Reconciliations of non-IFRS financial measures to the most
directly comparable IFRS financial measures are contained in our
MD&A.
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 share of associate's
net loss. References to "adjusted EBITDA" are to EBITDA before the
gain or loss on foreign exchange, non-cash share based compensation
expenses, gain or loss on financial instruments, M&A expenses,
other transaction and transitional costs, gain or loss on the sale
of property, plant & equipment, gain or loss on disposal of
assets held for sale and fair value of inventory from acquisitions,
equipment rework costs and impairment. 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. See "our MD&A for the reconciliation
of EBITDA and adjusted EBITDA to profit before income taxes.
SOURCE Ag Growth International Inc. (AGI)
