Ag Growth International flagged a revival in spending by US
farmers on crop storage equipment, amid some signs of recovery in the machinery
market too, as the silos maker unveiled a return to the black.
The Canada-based group said that "early signs of recovery in
demand appear to be forming" in sales to North American farmers.
In the first two months of 2017, "new orders have increased by
over 30% to the prior year, and order backlogs are significantly higher than at
the same time of 2016".
Ag Growth International, forecasting an, unspecified, rise
in sales and underlying profits this year, added that "management is cautiously
optimistic that recent activity is an indicator of a modest improvement in the
North American Farm sector".
'Severe reduction in
The comments follow two years of declining sales in the
North American farm market, led by the softness in the US.
"The farm market in the US has experienced weakness in 2015
and 2016 as a significant drop in corn and soybean prices, without an immediate
corresponding decrease in input costs, resulted in a severe reduction in farmer
net income," AGI said.
And they come amid some hope of improvement in broader spending
by farmers on farm equipment too, with Canadian tractor sales jumping 21% year
on year in February, according to the Association of Equipment Manufacturers.
US farm income
The Canada increase was led by a 25% surge in sales of four-wheel-drive
tractors beloved of large crop enterprises – a market which has been
particularly depressed amid crop price weakness.
In the US, while the four-wheel-drive tractor market
remained in decline last month, overall tractor sales rose 12.8%, and the combine
market rebounded by 29% - giving overall machinery sales, by vehicle, their
best February since at least 2013, and one well above the five-year average.
The improvement – while only showing up in one month's data –
contrasts with gloomy market outlooks from the likes of Agco and Deere & Co
of full-year market contraction of 5-10%.
Deere has forecast net cash income for US farmers recovering
a little bit this year, by $1.6bn to $93.5bn, but remaining well below the 2015
level of $104.7bn.
Back in the black
Winnipeg-based Ag Growth International reported earnings of
Can$19.31m for 2016, compared with a loss of Can$25.23m a year before.
The turnaround reflected in part comparison with a 2015 in
which results were blighted by the performance of now-sold operations including
A series of acquisitions - including fertilizer handling
equipment group Yargus in North America, and South American grain bins group
Entringer - also boosted 2016 results, adding some Can$39m to earnings before interest,
tax, depreciation and amortisation (ebitda).
Excluding purchases, ebitda fell by 5.6% to Can$61.32m, on
revenues down 11.3% at Can$310.7m.
"Adjusted ebitda benefited from a strong Canadian farm market
and robust North American demand for commercial equipment, offset by weakness
in the US farm market and a decrease in large international project sales," the