WINNIPEG, MANITOBA, CANADA — Ag Growth International, Inc. (AGI) is making changes to its dividend to facilitate cash conservation, leverage reduction and a stronger balance sheet in light of the uncertainty surrounding impacts of the coronavirus (COVID-19) pandemic.
The company said it will reduce its dividend to an annual level of 60 per common share. The dividend will move from monthly to quarterly payments.
New capital projects and new hires also are being restricted to strategic exceptions to further prioritize capital availability.
“This decision was made in the context of significant uncertainties created by the global COVID-19 crisis, facilitates leverage reduction, and gives us greater flexibility to act on substantial strategic and accretive internal investment opportunities across AGI,” said Tim Close, president and chief executive officer of AGI. “Over the past several years AGI has invested in expanding our business into new products and regions and in growth within existing markets.”
Close said the company is a week from launching V2.0 of its SureTrack platform and its Brazilian business is at an inflection point as it builds backlogs and the scale needed to operate in the region. The company’s Italian operations completed a substantial expansion and automation project.
“COVID-19 will have further impact on our business while we determine the depth and duration of the global disruptions,” Close said. “Recent days have confirmed our core infrastructure strategy as our operations have been captured as essential services, providing us with the relatively unique right to operate in this environment. Like much of the world we must use the levers we have to protect our business, to prepare for a deep and extended impact while finding the time and resources to advance our strategic projects. The dividend reduction is an important element of our Preparation with Progress initiative that we are now implementing to further address capital allocation.”
AGI’s North American facilities have maintained steady production. Manufacturing activity had been suspended for periods in India, Italy, Brazil and France over the past weeks. However, AGI has now restarted production in all of these locations albeit at less than full capacity.
“We are using strict safety protocols, staggered shifts and amended working plans to close the gap to 100% capacity in the near term, which should be achievable barring new or extended activity limitations by regional governments,” Close said.
The planting season in North America is now underway and backlogs across all AGI Farm product categories remain consistent with the prior year. AGI’s Commercial backlogs in North America are flat to last year while international backlogs are currently significantly higher than the prior year, with overall sales weighted toward the second half of 2020.
On a consolidated basis, AGI’s backlog as at March 31, 2020, is higher than at the same time in 2019. Maintaining backlog levels going forward will be impacted by ongoing order intake.
Global demand is being impacted at various levels by COVID related uncertainties. The degree of impact is currently minimal on Farm products while Commercial projects are generally active but moving ahead at a slower pace. It is too early to fully assess the extent of the full COVID impact.
“The production delays in our international business will have a material impact on Q2 as revenue has been delayed due to the production suspensions,” Close said. “The status of each of our businesses could change as the impact of COVID may cause new or additional production suspensions as the extent of this crisis is better understood.
“We fundamentally believe that the demand drivers in food infrastructure combined with our strong position in each of our markets must be matched with a cautious approach to cash preservation and leverage reduction in this environment. This combination will allow AGI to weather this global storm and emerge in a strong position to execute upon our strategic plan and return to our record of sequential annual growth.”
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