AGI Revises Dividend Policy; Provides Business Update
Winnipeg, MB, April 14, 2020 – 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.
For More Information Contact:
Investor Relations
Steve Sommerfeld
204-489-1855
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.