Mr. Paul Householder reports

AGI ANNOUNCES SECOND QUARTER 2023 RESULTS; RECORD QUARTERLY ADJUSTED EBITDA AND INCREASED FULL YEAR GUIDANCE

Ag Growth International Inc. has released its financial results for the three months ended June 30, 2023.

Second quarter 2023 highlights:

• Sales of $390-million were consistent on a year-over-year (YOY) basis.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 33 per cent to $88-million on a YOY basis; a record quarter for Ag Growth;
• Adjusted EBITDA margin percentage of 22.6 per cent, versus 16.9 per cent on a YOY basis;
• Net debt leverage ratio of 3.3 times at June 30, 2023, versus 3.6 times at March 31, 2023, and 4.8 times at June 30, 2022;
• Subsequent to the quarter, the company announced an agreement with the impacted customer to resolve the Bin incident from September, 2020, and will reflect an additional $15.6-million pretax charge in the second quarter financial statements; cash settlement of the total $55.1-million accrual is expected in the third quarter of 2023.

Outlook:

• Management is raising full-year 2023 adjusted EBITDA guidance to be at least $290-million, up from its previous guidance of at least $265-million;
• Full-year 2023 adjusted EBITDA margin percentage guidance of at least 18.0 per cent;
• Order book continues to be strong and is up 3 per cent YOY as of June 30, 2023.

"Our strong second quarter margin performance highlights the progress and pace of many of our operational excellence initiatives," noted Paul Householder, president and chief executive officer of Ag Growth. "A clear focus on manufacturing efficiency, centralized procurement, structured pricing programs, work force optimization and many other operational excellence initiatives are yielding clear benefits in terms of margin expansion. We anticipate the benefits of these efforts to be sustained through the rest of 2023 and into 2024. Our previously stated target of full-year adjusted EBITDA margin percentage of 17 per cent is well in hand and we are now targeting at least 18 per cent, representing a full-200-basis-point increase over 2022. In addition to good sales momentum through the first half of the year and a significant order book, our operational excellence initiatives and margin strength have led us to raise full-year adjusted EBITDA guidance to at least $290-million for 2023."

"The second quarter again showed progress on our most important balance sheet priorities," added Jim Rudyk, chief financial officer of Ag Growth. "Our efforts to optimize our net working capital position continues to progress, improving as a percentage of sales and along other key metrics we track internally. Our leverage position also improved with a notable decrease in debt levels compared to the second quarter of last year and a modest reduction sequentially. Our net debt leverage ratio now sits at 3.3 times, down from 4.8 times year over year and 3.6 times sequentially, and again affirms we are on the right track to meet our stated objective of approximately a 3.0-time ratio by the end of 2023, even after the cash settlement for the Bin incident is made."

Farm segment

Farm segment sales and adjusted EBITDA grew by 3 per cent and 37 per cent YOY, respectively, continuing the momentum from Q1. Sales remain strong in Canada and stable in the United States, driven by well-executed growth strategies and product innovation. Growth in North America was complemented by positive contributions from international regions, particularly in Asia-Pacific. Farm segment adjusted EBITDA margin percentage increased to 30.0 per cent from 22.6 per cent YOY, primarily on the benefits of operational excellence initiatives targeted at manufacturing efficiency, a favourable mix of portable equipment, and progress made in the digital reorganization. Looking ahead, farm segment demand continues to rise, with the overall order book up 27 per cent. The farm order book in Canada increased 77 per cent as demand fully recovers from the 2021 drought impact, which impacted demand throughout 2022. In the U.S., the farm order book increased an additional 3 per cent over a historically high backlog for Q2 set in 2022. This growth was achieved despite some customers that delayed order commitments late in the quarter as they await greater visibility to overall farming conditions across the U.S. Midwest.

Commercial segment

Commercial segment Q2 sales decreased 4 per cent and adjusted EBITDA increased by 22 per cent YOY. Sales were impacted due to the cyclical nature of large commercial projects in North America and continued softness in the food platform, offset by a pickup in demand internationally. Internationally, commercial sales increased 14 per cent, driven by strong demand for Ag Growth products and systems across South America. Demand for rice milling solutions in India continues to be a strong growth contributor, with sales increasing 17 per cent. Similar to the farm segment, the company's operational excellence initiatives, including effective management of manufacturing expenses, contributed to the adjusted EBITDA margin percentage increase to 18.5 per cent from 14.6 per cent YOY. Looking ahead, the overall commercial segment order book decreased 10 per cent, largely attributable to the continuing reset within the food platform as well some softness in the fertilizer market, while the broader overall pipeline of grain handling and storage projects remains strong with many large and attractive projects coming to market.

Outlook

The company's record Q2 adjusted EBITDA continues to demonstrate the strength of its balanced and diversified business strategy. This strategy has enabled the company to capitalize on demand from a wide variety of products, regions and customers. In addition to its sales and business mix diversification strategies, the company has layered in significant operational excellence initiatives to help strengthen margins across Ag Growth.

As a result, the company is raising its full-year guidance for 2023 adjusted EBITDA to be at least $290-million and with adjusted EBITDA margin percentage of at least 18 per cent.

Order book

The attached table presents YOY changes in the company's order book.

The attached table presents YOY changes in the company's international order book segmented by region.

MD&A (management's discussion and analysis) and financial statements

Ag Growth's unaudited interim condensed consolidated financial statements and MD&A for the three months ended June 30, 2023, can be obtained electronically on SEDAR+ and on Ag Growth's website.

Conference call

Ag Growth management will hold a conference call on Friday, Aug. 11, 2023, at 8 a.m. EDT, to discuss the company's results for the three months ending June 30, 2023. To participate in the conference call, please dial 1-800-319-4610 if joining from Canada or the U.S. and 1-604-638-5340 internationally. An audio replay of the call will be available for seven days. To access the audio replay, please dial 1-800-319-6413 if calling from Canada or the U.S. and 1-604-638-9010 internationally. Please quote passcode 0293 for the audio replay.

Ag Growth is a provider of the equipment and solutions required to support the efficient storage, transport and processing of food globally. Ag Growth has manufacturing facilities in Canada, the United States, Brazil, India, France and Italy, and distributes its product worldwide.

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