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Silo maker sees 'early signs of a recovery' in US market

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Shares in Ag Growth International hit a record high after the manufacturer of grain handling and storage systems unveiled growing orders and profits, and flagged a recovery in North American farming fortunes.

Trading updates from the AGCO and CNH tractor and farm equipment companies earlier this month had pointed to sluggish North American sales, offset by a buoyant South American market and better than expected European business.

However, trading for Ag Growth International in the January-to-March quarter was lifted by strength in the Canadian farm market, complemented by 18% higher sales to US farmers.

At the same time, robust demand in Europe, the Middle East and Africa and the Black Sea region resulted in higher international sales for the business, the Canadian-based group said.

Ag Growth International shares touched an all-time high of Can$59.00 in early deals in Toronto, before easing back to Can$57.17, up 2.8% on the day.

US farm market rebound

"The farm market in Canada remains robust as Canadian farmers benefit from the positive economics of a favourable crop mix and a weak Canadian dollar," which boosts the value in local terms of assets such as grains traded globally in dollars.

And in the US – a market which proved "weak" last year, depressed by the dent to farm income from low corn and soybean prices – "early signs of a recovery in demand for Ag Growth International product appear to be forming, particularly for portable grain handling equipment," the company said.

The company, flagging a "significant increase" in its sales order backlog, suggested that the improvement "reflects marginally improved economics for some farmers".

"Management is cautiously optimistic that recent activity is an indicator of a modest improvement in the US farm sector."

'Positive signs'

The comments came as the group reported underlying earnings up 25% to Can$7.48m for the January-to-March period, on sales up 36% at Can$154.69m.

Tim Close, the company's chief executive, said: "We saw broad based strength across Ag Growth International in the first quarter as many international commercial projects moved off the drawing board into development," besides the improvements in the US farm market.

With "robust backlogs" across the group, "we are seeing positive signs for continued strength in 2017".

By Jamie Day

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