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Press release from Marketwire

CORRECTION FROM SOURCE: Ag Growth Announces Second Quarter Results; Declares Dividends

Thursday, August 16, 2012

CORRECTION FROM SOURCE: Ag Growth Announces Second Quarter Results; Declares Dividends10:12 EDT Thursday, August 16, 2012WINNIPEG, MANITOBA--(Marketwire - Aug. 16, 2012) - The following corrects and replaces the release sent on August 14th, 2012 at 8:11pm ET.Ag Growth International Inc. (TSX:AFN) ("Ag Growth" or the "Company") today reported its financial results for the three and six month periods ended June 30, 2012, and declared dividends for September, October and November 2012.Overview of ResultsThree Months EndedSix Months Ended(thousands of dollars) June 30 June 302012201120122011Trade sales (1)$98,961$86,124$171,252$152,130Adjusted EBITDA (1)$20,064$18,194$32,226$29,865Net Profit$8,824$11,994$14,123$16,700Diluted profit per share$0.70$0.91$1.12$1.34Diluted profit per share- Exclude gain (loss) on FX (2)$ 0.81$ 0.77$ 1.19$ 1.03(1) See "Non-IFRS Measures".(2) The diluted profit per share comparison between 2011 and 2012 is significantly impacted by the Company's gain (loss) on foreign exchange which is comprised primarily of gains or losses on derivative contracts and non-cash revaluations of U.S. dollar denominated debt and working capital.Trade sales and adjusted EBITDA increased over the same periods in 2011 due to strength in portable and commercial grain handling equipment and the October 2011 acquisition of Airlanco, a manufacturer of aeration products and filtration systems. Preseason demand for portable grain handling equipment was robust due to a record number of corn acres planted in the U.S. and a significant increase in seeded acres in western Canada. Sales of commercial equipment also remained strong due to continued investment in facility upgrades and capacity expansion throughout the North American commercial infrastructure. "We are pleased with our results for the first half of 2012", said Gary Anderson, President and Chief Executive Officer. "Our strong performance reflects operational and process improvements that addressed start-up issues at our greenfield Twister facility, regional issues at Mepu and significant growth in our international business. Our portable grain handling divisions responded well to high levels of preseason demand that resulted from a very positive market outlook earlier in the year, while sales at our commercial divisions continued on a pace roughly consistent with the record levels achieved in 2011.""We remain optimistic with respect to the Company's international sales development as our investment in international sales and support infrastructure continues to bear fruit. Our strategy of bundling commercial grain handling equipment with commercial size storage bins manufactured at our greenfield Twister facility has been very effective. Our international sales and order backlog are up significantly compared to 2011 as we increase penetration in key markets including Russia, Ukraine and Kazakhstan and gain further momentum in other important areas such as South America and Asia.""The second half of 2012 will be significantly impacted by the historic drought that has gripped most key grain growing regions of the United States. Reduced crop production forecasts and the increasing likelihood of an early and dry harvest will temper our sales and earnings for the balance of the year. However, we have successfully managed our business through droughts in the past and again in 2012 we will prudently manage our margins and cash flows while maintaining our dividend. Our positive outlook for the Canadian and offshore markets and our product diversification will help lessen the impact of what is likely to be a very poor U.S. harvest. We expect to enter 2013 ready to capitalize on what we believe are long-term positive agricultural fundamentals."OutlookA severe drought has significantly lowered yield and production forecasts for corn, soybean and other grains in most of the key growing regions of the United States. In their August 10, 2012 production forecast, the National Agricultural Statistics Service (NASS) projected the U.S. corn yield at 123 bushels per acre, the lowest since 1995/96. Based on the NASS forecast, the U.S. corn harvest is expected to approximate 10.8 billion bushels (2011 - 12.4 billion bushels). The primary demand driver for the Company's on-farm equipment is the volume of grain grown and as a result the likelihood of a poor crop, combined with what may be an early and dry harvest, is expected to materially impact sales of this equipment. Approximately 60% of the Company's total sales are to the U.S. and approximately half of its U.S. sales relate to on-farm portable grain handling, storage and conditioning equipment.The outlook for the Canadian and offshore markets contrasts greatly with the situation in the U.S. Crop production in Canada is expected to increase significantly over the prior year due to a higher number of seeded acres and favorable crop conditions in western Canada. The Company's trade sales in Canada in the first six months of 2012 have increased 31% over the prior year and based on current conditions management anticipates the robust demand to continue in the second half. Approximately 20% of the Company's sales are in Canada with the majority of these related to portable grain handling and on-farm storage and aeration.The Company's growth in international markets continues to gain momentum. Sales outside of North America in the first six months of 2012 increased 24% over the prior year and based on current backlogs and quoting activity management expects international sales in fiscal 2012 will greatly exceed 2011 levels. Ag Growth continues 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. 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.Demand for commercial grain handling equipment in North America has been robust as the commercial sector continues to upgrade facilities and expand capacity in response to positive agricultural economics. The widespread drought in the U.S. will impact certain aspects of the Company's commercial business as our customers review their short-term capital expenditure plans. Offshore, commercial grain handling sales are expected to increase compared to 2011 as the Company remains very encouraged with the outlook in these markets. Based on current conditions management anticipates continued high levels of demand in the second half of 2012, however commercial sales may not match the record sales achieved in 2011.Gross margin percentages on the Company's storage bin products have improved significantly compared to 2011 and are consistent with management expectations. Regional conditions at Finland-based Mepu have normalized and management expects improved results from Mepu in 2012 compared to 2011. However, the effect on gross margin of these positive developments is likely to be more than offset by the impact of the drought in the U.S. The poor crop conditions in the U.S. are expected to negatively impact sales of higher margin on-farm equipment and the resultant change in sales mix along with an anticipated reduction in throughput at several of the Company's divisions may negatively impact the consolidated gross margin in the second half of 2012. As a result, Ag Growth's consolidated gross margin percentage in 2012 is expected to decrease compared to the prior year. In summary, the Company's financial results in the first half of 2012 reflect strong performance in our on-farm and commercial markets, growth in our international business and the resolution of certain operational issues that negatively impacted results in the prior year. However, looking forward the impact of the U.S. drought on the second half of 2012 will be significant. The ultimate effect on Ag Growth is somewhat difficult to forecast due to differing crop production estimates, the variability of crop conditions within regions and the unknown of the timing of harvest and weather conditions during the harvest season. Results in the second half will also be impacted by more typical factors including the western Canadian harvest and the timing of commercial and international sales. Nonetheless, based on current weather conditions and industry forecasts management estimates adjusted EBITDA in 2012 will approximate 2011 levels. The Company's payout ratio is expected to increase compared to 2011 however the Company's dividend will not be altered in response to this short-term weather event.Management is optimistic with respect to the Company's prospects in 2013. In the upcoming year U.S. farmers may again plant significant corn acreage to capitalize on high commodity prices. Although the 2012 drought will likely result in higher than typical inventory carryover at our U.S. dealers, any impact is not expected to extend beyond the second quarter of 2013. Demand in the Canadian market is expected to be robust in the first half of 2013 following what is anticipated to be an excellent harvest and Ag Growth remains very optimistic with respect to its international prospects and the potential of bundling commercial grain handling equipment with storage bins and other Ag Growth products.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 for the year ended December 31, 2011 was $1.00 USD = CAD $0.97.DividendsAg Growth today announced the declaration of cash dividends of $0.20 per common share for the months of September 2012, October 2012 and November 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 dividendPayable dateRecord dateSeptember 2012October 30, 2012September 28, 2012October 2012November 30, 2012October 31, 2012November 2012December 28, 2012November 30, 2012MD&A and Financial StatementsAg Growth's financial statements and management's discussion and analysis for the three and six month periods ended June 30, 2012 can be obtained at http://media3.marketwire.com/docs/Q2aggrowth.pdf and will also be available electronically from SEDAR (www.sedar.com) or from Ag Growth's website (www.aggrowth.com).Conference CallAg Growth will hold a conference call on Wednesday, August 15, 2012, at 2:00 P.M. EST to discuss its results for the three and six month periods ended June 30, 2012. To participate in the conference call, please dial 1-877-240-9772 or for local access dial 416-340-8527. 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 7159412.Company ProfileAg 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. Non-IFRS MeasuresReferences 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.Forward-Looking StatementsThis 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.FOR FURTHER INFORMATION PLEASE CONTACT: Steve SommerfeldAg Growth International Inc.Investor Relations204-489-1855steve@aggrowth.comwww.aggrowth.com