A jump in production at its expanded auger factory in Manitoba and “strong demand” for grain handling and aeration equipment have punched up the third-quarter ledger for Ag Growth.
The Winnipeg-based income fund, owner of several grain handling, storage and equipment firms in Canada and the U.S., on Friday posted net earnings of $9.75 million on $60 million in sales for the quarter ending Sept. 30, up from $8.98 million on $40.8 million in the year-earlier period.
“Market fundamentals in our segment of the agricultural space remain strong and backorders for portable grain handling, aeration and storage equipment remain well above historical norms,” CEO Rob Stenson said in a release Friday.
Demand for the company’s equipment “remains very strong due to successive large corn harvests, an increase in on-farm storage and depleted inventory levels throughout the fund’s distribution network,” the company said in the release.
As well, “increased capacity at the Westfield division has allowed the fund to capitalize on strong demand for portable grain handling equipment,” Stenson said, referring to Westfield Industries, the company’s auger manufacturing division at Rosenort, Man., about 50 km south of Winnipeg.
Specifically, the firm said, sales of grain handling equipment in the North American market, particularly Westfield augers and Batco conveyors, were up 30 per cent over the year-earlier period due to “exceptional farm-level demand.”
Ag Growth’s margin percentages were “tempered somewhat” by performance at the firm’s Edwards/Twister division, Stenson said, referring to the two Lethbridge, Alta., companies, aeration equipment maker Edwards and grain bin maker Twister Pipe. The two companies were integrated after Ag Growth bought Twister in 2007.
However, Stenson added, the fund believes “ongoing management initiatives” will lead to improved performance.
Ag Growth also reported nearly doubling its Q3 international sales to $3.6 million, largely by way of market development in Russia and Kazakhstan.
Its gains on sales are expected to be offset slightly by the weakening Canadian dollar, the fund warned. In 2007, Ag Growth recorded “large gains” when translating its U.S. dollar-denominated debt into Canadian dollars. In 2008, by comparison, the income fund posted a loss on foreign exchange of $1.2 million in its Q3.
Barring a recovery in the loonie, Ag Growth expects “large unrealized loss” on its U.S. dollar-denominated long-term debt in its Q4. The company also calculated that its 2008 Q3 sales would have been up a further $700,000 had the loonie remained around the average exchange rates seen in 2007.