Press release from Marketwire
Ag Growth Strengthens Product Catalogue with Acquisition of Airlanco; Provides Market Update and Preliminary Third Quarter Sales Estimate
Tuesday, October 04, 2011
WINNIPEG, MANITOBA--(Marketwire - Oct. 4, 2011) - Ag Growth International Inc. (TSX:AFN) ("Ag Growth" or the "Company") today announced the acquisition of substantially all of the operating assets of Airlanco, a manufacturer of aeration products and filtration systems that are sold primarily into the commercial grain handling and processing sectors. The purchase price of USD $11.0 million plus closing costs and a working capital adjustment will be financed from Ag Growth's acquisition line of credit and represents a valuation of approximately five times Airlanco's normalized fiscal 2010 EBITDA.
Airlanco is located in Falls City, Nebraska and has traditionally served customers headquartered or located in North America. The Company had sales of approximately $11 million in 2010, operating out of an 80,000 square foot facility with 65 employees.
"We are very excited to add a respected company like Airlanco to our family", said Gary Anderson, Chief Executive Officer, "Airlanco is a key player in the aeration fan market in the United States and is recognized as a reputable solution provider for the high capacity fan market. In addition, Airlanco provides dust collection and filtration systems across a broad range of customers, with a strong focus in commercial grain handling and several processing sectors. The Airlanco brand is known for its premium quality and commitment to customer satisfaction. Airlanco will add key product categories to the AGI catalog, strengthening our "one-stop shop" concept and in turn allowing us to better serve new and existing customers in the global marketplace."
Market Update and Third Quarter Preliminary Sales Estimate
Western Canada – hot and dry weather throughout most of the summer resulted in an early and efficient harvest. Based on government statistics, the harvest in Saskatchewan was 91% complete as at September 26, 2011, compared to 29% at the same time in 2010. Harvest in other areas of western Canada is also substantially complete. Weather conditions during harvest were for the most part excellent and accordingly the harvest was clean and efficient and the crop was generally taken off at optimal moisture levels. Consistent with the Company's previous experiences, a fast, dry and efficient harvest has resulted in a significant reduction in demand for portable grain handling and aeration equipment.
United States – a severe heat wave enveloped the corn-belt and Great Plains region for most of the summer resulting in an acceleration of crop maturity after a late spring planting. The heat stress of the summer coupled with varied weather conditions in recent weeks has resulted in lower yield expectations and reduced crop production estimates which have been reflected in a number of crop updates provided by the United States Department of Agriculture. Although harvest is progressing at roughly the same pace as 2010, we believe farmer uncertainty with respect to yield and visible crop damage in certain areas has resulted in a significant reduction in demand for portable grain handling and temporary storage equipment.
As a result of these North American crop and harvest dynamics, together with the less than optimal conditions in Mepu's regional market and start-up issues at the Company's green-field storage bin facility, management currently estimates third quarter trade sales for Ag Growth will approximate $81 million, compared to $86 million in the second quarter of 2011. Reduced in-season sales of portable grain handling equipment are expected to also have a negative impact on trade sales in the fourth quarter of 2011. The Company's outlook for commercial grain handling and international sales remains positive.
"This year has continued to present challenges", said Gary Anderson, Chief Executive Officer of Ag Growth. "First delayed planting, then a hot dry summer and now highly variable weather conditions as we enter harvest has resulted in lower than anticipated yields and reduced crop production forecasts. These factors in combination appear to have created a wait and see attitude in many farmers' purchasing behavior with a consequent reduction in purchases of portable grain handling and temporary storage equipment in the third quarter. Despite the softness of this quarter, our outlook towards the agricultural sector remains positive and by continuing to lever our brand strength and product offering we believe we are poised for growth in 2012 and beyond."
Ag Growth will hold a conference call on Wednesday, October 5, 2011, at 11:00 A.M. EST. To participate in the conference call, please dial 1-866-226-1798 or for local access dial 416-340-2218. 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 1845180.
Ag Growth is a leading manufacturer of portable and stationary grain handling, storage and conditioning equipment, including augers, belt conveyors, chain conveyors, grain storage bins, grain handling accessories, grain aeration equipment and grain drying systems. Ag Growth has ten manufacturing facilities in Canada, the U.S. and Finland and its sales, marketing, and distribution system distributes product in 48 states, nine provinces, and internationally.
References to "normalized EBITDA" are to Airlanco's unaudited earnings before income taxes, finance costs, depreciation and amortization and include normalization adjustments for owner/manager compensation structure and related party transactions. References to "trade sales" are to sales excluding the gain or loss on foreign exchange. Management believes that, in addition to sales, profit or loss and cash flows from operating, investing, and financing activities, normalized EBITDA and trade sales are useful supplemental measures in evaluating a company's performance. Normalized EBITDA and trade sales are not financial measures recognized by International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Management cautions investors that normalized EBITDA and trade sales 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 a company's liquidity and cash flows. Ag Growth's method of calculating normalized EBITDA and trade sales may differ from the methods used by other issuers. Financial information relating to Airlanco is prepared in accordance with United States generally accepted accounting principles, which differ in some material respects from IFRS, and accordingly may not be comparable to the financial statements of Ag Growth or other Canadian public companies.
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 the acquisition, our business and strategy, including our outlook for our financial and operating performance including our sales expectations for the third quarter of 2011. 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 the risk that the business of Airlanco will not be integrated successfully and on a timely basis, the risk that any growth prospects from the acquisition of the Airlanco business will not be fully realized or will take longer to realize than expected, potential undisclosed liabilities associated with the acquisition, changes in international, national and local business conditions, crop yields, crop conditions, seasonality, industry cyclicality, volatility of production costs, commodity prices, foreign exchange rates, and competition. In addition, actual results may be materially impacted by the pace of recovery from the global economic crisis in certain areas, including the cost and availability of capital. Many of these risks and uncertainties are described in more detail 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. The third quarter 2011 sales estimate included in this news release is based on preliminary estimated financial results. These estimated results are subject to change upon completion of the financial statements for the three and nine months ended September 30, 2011, and changes could be material. Ag Growth anticipates filing its unaudited financial statements and related management's discussion and analysis for the three and nine months ended September 30, 2011 on SEDAR on or about November 11, 2011.
FOR FURTHER INFORMATION PLEASE CONTACT:
Steve Sommerfeld Ag Growth International Inc. Investor Relations 204-489-1855 firstname.lastname@example.org