Grain handling equipment firm Ag Growth has posted a record first quarter on farmers’ high demand for the equipment to store and manage their grain stocks on-farm.
The Winnipeg income fund on Thursday reported net earnings of $10.13 million on sales of $55.29 million for its first quarter ending March 31, up from $1.89 million on $35.14 million in the year-earlier period.
“Demand for portable grain handling and aeration equipment remained strong due to positive agricultural fundamentals, successive large harvests and continued high levels of on-farm storage,” the company said.
Ag Growth was in a position to capitalize on those market drivers, the company said, thanks largely to “sustained capacity gains” at Westfield, the company’s grain auger manufacturing subsidiary at Rosenort, Man., south of Winnipeg.
Ag Growth completed a major expansion of production capacity at Westfield in March last year.
As well, Q1 sales benefited from price increases announced in 2008 and a weaker Canadian dollar. “As expected, sales of commercial equipment decreased largely due to macroeconomic factors,” the company said.
However, CEO Rob Stenson noted in the company’s release, “North American farmers appear to have adequate access to credit and in any case our portable equipment generally represents a relatively insignificant expenditure to the farmer.”
Factors such as access to credit appear to be impacting sales to the commercial sector in North America, though, and are also tempering growth in new overseas markets, Stenson said.
“We remain very excited about the development of new markets and have quoted a significant amount of business in Russia, Kazakhstan and elsewhere. We expect substantial growth in these regions once our prospective customers can more easily access financing.”
The company last month also announced a deal to assume the tax losses of a defunct mining firm, in order for Ag Growth to convert from an income trust to a corporation.
Ag Growth has until the end of 2013 to assume corporation status in order to qualify for a tax-free conversion, following the federal government’s decision to tax income trusts starting in June 2007.
Ag Growth’s Canadian holdings include grain auger makers Westfield and Wheatheart; conveyor belt maker Batco; grain bin manufacturer Twister Pipe; and the Edwards Group, a grain dryer company.