TSX:AFN - Post Discussion
Post by
retiredcf on Mar 06, 2024 9:14am
RBC
March 5, 2024
AGI (Ag Growth International)
Q4/23 results and 2024 guidance in line on continued strong execution
TSX: AFN | CAD 57.76 | Outperform | Price Target CAD 75.00
Sentiment: Positive
Our view: We expect a positive reaction from Ag Growth shares to Q4 results that were in line with expectations and 2024 EBITDA guidance that was slightly above consensus. We are encouraged by continued operational execution reflected in further margin expansion along with a record backlog into 2024. We believe the door is opening to incremental organic growth investment with target deleveraging nearing completion and maintain our view that shares have the potential to re-rate as execution continues into 2024.
Actual: $73M EBITDA | RBCe: $70M | Consensus: $73M
Outlook: Ag Growth provided 2024 EBITDA guidance of >$310M (vs. RBCe and consensus of $307M and $294M in 2023) driven by a strong outlook for the International segment and backlogs at record levels entering the year (+25% y/y). The guidance is back half weighted with results expected to ramp up throughout the year based on timing of commercial projects. We also expect AGI to make continued progress on de-leveraging with a target of 2.5x net debt to EBITDA in 2024, from 2.8x currently.
Summary: Q4/23 results were in line with expectations as stronger margins (19.3% actual vs. 17.7% RBCe) offset softer top line growth ($379M actual vs. $393M RBCe).
In the Farm segment, sales were slightly below expectations ($189M actual vs. RBCe $194M) while segment EBITDA was above ($47M vs. RBCe $45M). Slower sales in the Farm segment were primarily attributable to Canada and International, partially offset by strong demand in the US while EBITDA margin outperformance (24.7% actual vs. 23.0% RBCe) was driven by the continued positive mix benefit of higher margin portable equipment, manufacturing efficiencies, and benefit from prior Digital restructuring efforts. Farm backlogs grew on the back of strong demand for portable equipment in Canada which should support results in H1/24 while the US backlog decreased due to order shipment timing.
In the Commercial segment, sales lagged our estimate ($190M actual vs. RBCe $198M) while segment EBITDA was in line with expectations ($36M actual and RBCe). Sales benefited from strong growth in Asia-Pacific, particularly in India, although offset by weaker results in Canada and ongoing restructuring in the Food subsegment while strong EBITDA margins (18.8% actual vs. 18.0% RBCe) were supported primarily by continued operational efficiency. Growth in the Commercial order book was driven by robust International demand which is expected to flow through to the top line in H2/24 based on project timing.
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