AG Growth sticks with Ukraine

Big part of equipment maker’s business | Company confident recent turmoil won’t hurt sales

A western Canadian agricultural manufacturer with a significant interest in Ukraine says it’s business as usual in the country despite political turmoil that could affect the farm economy.


Ag Growth International, which announced record 2013 sales and profits last week, said it expects to continue shipping portable and commercial grain handling and storage equipment to Ukraine.


The country has played a major role in AGI’s international expansion. 


The Winnipeg company operates production facilities in Canada, the United States and Europe. 


“It’s in our plan to do a nice piece of business in Ukraine and a lesser amount in Russia in 2014,” chief financial officer Steve Sommerfeld told investors. 


“Obviously, we thought hard about it given the current situation and where our sales might come from, and we were comfortable making the statement. We are still shipping to the region. The tap hasn’t been turned off by any means, but it’ll be augmented by sales in other parts of the world.”


The company was also active in the Middle East, Southeast Asia, Australia and South America last year.


AGI posted total sales of more than $350 million with earnings before interest, taxes, depreciation and amortization topping $60 million. The numbers were buoyed by strong North American demand following a large harvest and a 29 percent in-crease in international sales totalling more than $92 million.


Sales to Russia, Ukraine and Kazakhstan were $57 million, up significantly from 2012, with Ukraine accounting for most of the business. 


The Crimea region of southern Ukraine has been in flux recently as Russia positions itself to annex the area. The Ukrainian currency has declined, and there are reports that local farmers will require additional financing to seed this year’s crop. 


The Ukrainian government reported last week that much of the Crimean grain crop would go unseeded because of a fuel shortage. Production from the area accounts for a small fraction of the country’s grain output.


AGI’s customers are located at ports and inland facilities in the western Odessa region, although the potential for delays in shipping equipment to Ukraine were noted. 


Canadian manufacturers have become interested in Eastern Europe in recent years because of its large agricultural production and potential for growth. AGI’s Ukrainian customers are corporate farms, commercial grain handlers and port facilities. 


“From a business perspective, there are some things that we know and some things that we don’t know,” said president Gary Anderson.


“We know that Ukraine is one of the most promising agricultural producers and exporters in the world.”


In North America, AGI linked big harvests across the continent, including a rebound following droughts in the United States, with an increase in sales. 


Its third and fourth quarter numbers show a spike over the previous year, reflecting farmers’ need for on-farm storage. A big crop last year in Canada was followed by falling commodity prices and a clogged transportation system, which has kept much of it on the farm. 


AGI reported that sales in the second half of last year were up 13 percent in Canada and 31 percent in the U.S.


“We certainly feel pain for our farm customers. Cash flow is going to be affected,” said Anderson. 


“There’s a lot of frustration out there on the farm level, but for our products, we’re part of the solution. It’s been good business for us.” 


Ottawa recently ordered Canadian National Railway and Canadian Pacific Railway to each begin shipping 5,500 grain cars a week after little grain moved this winter.


“It’s too little too late to have a huge impact on the on-farm stock,” said AGI vice-president Dan Donner.


“I think from our business perspective, it’s driving people to make some storage decisions now, knowing that it’s going to trickle out slowly.” 


The company’s order backlog is up over last year.


AGI also announced the acquisition of the Rem GrainVac line in February, which will make use of its Batco manufacturing facility in Swift Current, Sask.

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