Continued robust performance in North American Farm markets, EMEA, Brazil and India was offset by lower results in North American Commercial markets resulting in a record third quarter for sales and adjusted EBITDA despite ongoing COVID-19 challenges.
As indicated throughout 2020, Commercial backlogs had been weighted to the third quarter. Sales in the quarter were also augmented by a relatively early harvest across North America. COVID-19 has had a material impact on North American Commercial markets as customers have delayed projects or are facing challenges in project progress. AGI’s Q3 2020 trade sales of $282.5 million grew 8.2% from third quarter 2019 and adjusted EBITDA of $51.8 million grew 32.4% over third quarter 2019. Farm sales in the third quarter were up 24% over Q3 2019 and 9% year-to-date (‘YTD’). North America Commercial sales were down 20% and 23% respectively in the three and nine months ended 2020 versus 2019. The International business continues to excel over the previous year despite the obstacles of COVID-19 with a sales increase of 10% in the quarter and 16% YTD. Excluding the Milltec acquisition, international sales in the nine months ended Sept. 30, 2020 increased 5% over 2019. “The third quarter of 2020 was a record third quarter for AGI in terms of both sales and adjusted EBITDA with broad-based and robust performance across all platforms except for NA Commercial, which has been hardest hit with COVID challenges.”, said Tim Close, president and CEO of AGI. “The third quarter was also a record quarter for adjusted EBITDA, just beating the second quarter of 2019 which was our prior high water mark. This strong performance in the quarter highlights the benefits of our diversification investments over the past 5 years, the resiliency of our business and our leadership in the global food infrastructure sector.”
Year-over-year increases in planted acreage and generally favorable weather contributed to strong crop volumes across North America. A relatively early harvest further underpinned strong momentum in Farm results in the quarter. Demand was broad based across regions and products driven by positive dynamics and has led to relatively lower inventory levels across dealers and stocking points. The backlog for Farm sales at the end of the third quarter is down 11% year-over- year (‘YOY’), however, the majority of this decrease is due to a positive reduction in AGI SureTrack backlog, a business with distinctly different fundamentals. The company has increased automation and inventory at SureTrack to substantially reduce lead times for customers. Annual early order programs that launched across Farm products in September are expected to be positive as dealers replenish inventory in preparation for 2021 and consequently management anticipates Farm Sales to be slightly higher than 2019 levels in the fourth quarter and positioning us well for the first half of 2021.
COVID-19 has had a substantial impact on project activity, quoting, project development and project progression across North America. The company expects a rebound in Commercial activity post COVID-19 as customers move to address mandatory maintenance, facility automation, capacity expansion and loading efficiencies.
Analysis by David Newman, analyst with Desjardins, said, "AGI reported adjusted EBITDA of C$52 million, a strong beat vs. our forecast and consensus of C$42 million, driven by robust performance in North American Farm markets, EMEA, Brazil and India, offset by COVID-19 headwinds facing North American Commercial markets."
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