Winnipeg, MB, January 20, 2021 – Ag Growth International Inc. (TSX: AFN) (“AGI”, “we” or the “Company”) provided the following updates on the commercial grain storage bin failure (the “Incident”) and on its expected fourth quarter financial performance.
Update on the Incident
The Company has made substantial progress in determining its approach to the potential remediation of the commercial grain storage bins as previously disclosed. In the context of delivering the best possible solution for the affected customers, while also considering time to remediation, the Company has determined to proceed with replacing the entire hopper base of the grain bins as opposed to replacing components of the existing structure. The grain bins involved are comprised of a cylinder top and a hopper base. While the cause of, and the responsibility for, the Incident has not been determined, the Company continues to proceed on the basis of providing full remediation to the two affected customer sites.
The replacement of the hoppers results in a significantly expanded scope. The remediation is now comprised of an increased amount of steel and a more extensive level of decommissioning and construction. The recent increase in the price of steel also drives higher costs for the project. Taken together these factors will result in a $30m total increase in the expected cost of the remediation for the two customer sites combined. The Company continues to believe that this amount will be partially offset by insurance coverage and result in a lower net impact. AGI is working with insurance providers and external advisors to determine the extent of this cost offset.
"100% of our focus is on our customers as we deal with these product issues at the two industrial sites. ", said Tim Close, President and CEO of AGI. "We are committed to delivering a robust solution to mitigate this unfortunate incident while also minimizing the time to remediation and acknowledging that the cause of the Incident is undetermined. In order to stand behind our commitment we are increasing the expected cost of the full remediation by $30m. AGI is better positioned for continued growth and success than at any time in our history. Our global platform performed well through the extreme tests of 2020 and we sit today with record backlogs across the business. North American Farm, Brazil, EMEA, India and our Technology platform, AGI SureTrack, are all positioned for record performance as we move into 2021. We will address the current challenges directly and drive change across our business to mitigate, put this behind us, and capitalize on the momentum we have going forward."
Update on Q4 2020 and 2021 outlook
The Company also provided an update to its expected Q4 2020 financial results. Having closed out FY 2020, we can confirm our prior guidance of annual sales and adjusted EBITDA results being in line with 2019.
International markets are very robust with record backlogs and very active pipelines. Brazil, EMEA, and India are all seeing a substantial increase in backlogs year-over-year.
North American Farm momentum is also strong driven by fundamental demand, rising crop prices, and favourable dealer positons inventory. North American backlogs overall are also up year-over-year with respect to FY 2019.
The AGI Food business is gaining significant traction with backlogs also up substantially year-over-year.
AGI SureTrack, our market-leading, IoT driven, end-to-end technology platform, is positioned to continue to see robust growth in 2021.
There is a positive environment globally with crop prices increasing and active quoting across AGI. Overall, management expects 2021 results to exceed 2020 results in both sales and Adjusted EBITDA with strong performance in H1.
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AGI Company Profile
AGI is a leading provider of solutions for the global food infrastructure, including seed, fertilizer, grain, feed, and food processing systems. AGI has manufacturing facilities in Canada, the United States, the United Kingdom, Brazil, India, France and Italy and distributes its product 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” 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.
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 on settlement of leases, equipment rework costs, fair value of inventory from acquisitions and non-cash asset impairment charge.
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 sales and adjusted EBITDA for the 2020 year and fourth quarter, industry demand and market conditions, the anticipated ongoing impacts of the COVID-19 outbreak on our business, operations and financial results; the estimated costs to the Company that may result from the Incident including costs of remediation and the availability of insurance coverage to offset such costs; the sufficiency of our liquidity; long term fundamentals and growth drivers of our business; future payment of dividends and the amount thereof; 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 COVID-19 outbreak on our business, operations and financial results; anticipated grain production in our market areas; financial performance; the scope, nature, timing and cost of work that will be required in connection with the Incident; 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 COVID-19 pandemic, including the effects on the Company's operations, personnel, and supply chain, the demand for its products and services, its 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; changes in trade relations between the countries in which the Company does business including between Canada and the United States; cyber security risks; the risk that the assumptions and estimates relating to the costs to the Company of the Incident and underlying the provision for warranty accrual and remediation related thereto and insurance coverage for the Incident will prove to be incorrect as future information becomes available to the Company . 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. Without limitation of the foregoing, the provision for warranty accrual and remediation related to the Incident requires significant estimates and judgments about the scope, nature, timing and cost of work that will be required. It is based on management’s assumptions and estimates at the date thereof and is subject to revision in the future as further information because available to the Company. 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.