Food ingredients work for AGT

AGT Food and Ingredients president credits turnaround to diversification

The move by a major pulse processor to diversify into the food ingredients business is paying off.

Shares of AGT Food and Ingredients, the company formerly known as Alliance Grain Traders, were up 70 percent over a year ago as of early December.

That is the best performance of the 11 North American food companies tracked by Bloomberg.

“There’s a lot of excitement over the positioning of the company,” said AGT president Murad Al-Katib.

“The earnings have dramatically recovered from the 2012 trough.”

Al-Katib attributes the turnaround largely to the company’s decision to diversify into the food ingredients business. The first production line at its food ingredients plant in Minot, North Dakota, was commissioned in June 2013.

The facility produced 75,000 tonnes of pulse flour, protein, starch and fibre concentrates in 2014.

The company’s packaged food and food ingredients segment delivered $103 of earnings before interest, taxes, depreciation and amortization (EBITDA) per tonne in the fourth quarter.

That compares to $66 of EBITDA per tonne for the traditional pulse processing segment of the business.

“We’re talking about a very significant value lift,” said Al-Katib.

AGT’s board of directors recently approved the addition of a third production line at the Minot plant, which will be operational in the first quarter of 2015.

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It will bring the plant to full capacity, with the ability to produce 105,000 tonnes of food ingredients annually.

“That’s a lot. That’s not a niche. This is becoming a big-scale business,” said Al-Katib.

He said interest from the major food companies has been terrific.

They like that the pulse ingredients are non-genetically modified, high in protein and fibre, gluten-free and rich in micronutrients.

They also like that pulses don’t require as much fertilizer to grow as other crops.

“There were over 700 product launches in the United States last year using pulse ingredients, and I would venture to say we have very strong presence in a large number of those products,” he said.

The fractionated products are used in a variety of applications, including baking, cereals, meat products, snacks, extruded foods, dips, soups, beverages and convenience meals.

AGT signed a deal in June appointing Ingredion Inc. as the exclusive distributor of its ingredients in the United States, Canada, China, Europe, the Middle East and North Africa.

As well, it signed a five-year agreement with Cargill to be its exclusive North American agent for pulse protein products for the pet food and animal feed markets.

AGT operates its own sales program in regions not covered by those agreements.

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Al-Katib estimated that half of the pulses used in the Minot plant come from southern Saskatchewan.

He said he recently spoke to a grower from Craven, Sask., who received a premium from AGT for his high protein peas, which were picked up from his farm and shipped to Minot.

That same grower could soon be supplying another food ingredient plant closer to home.

AGT is conducting a feasibility study on converting excess capacity at its flagship lentil splitting plant in Regina into a second food ingredient facility. The project would also involve new construction.

It will be presented for approval by AGT’s board of directors in March.

Al-Katib would like to expand the food ingredient business to 300,000 tonnes of annual capacity over the next four to five years.

The likely candidates to follow the Regina conversion would be AGT’s plant in Williston, N.D., and a portion of the company’s huge splitting operation in Mersin, Turkey.

It takes nine to 12 months to convert existing plants, compared to 18 months to build a new facility. It also costs less.

The food industry’s alternative flour segment, which includes pulse flour, is forecast to grow almost four times faster than wheat flour in the sweet and savory snack category from 2012-17 in North America and Europe, according to Euromonitor International.

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