Tim Close - President and Chief Executive Officer Steve Sommerfeld - Executive Vice President and Chief Financial Officer

Damir Gunja - TD Securities Jacob Bout - Canadian Imperial Bank of Commerce Greg Colman - National Bank Financial Peter Prattas - Altacorp Capital, Inc. Nelson Mah - Laurentian Bank Securities

All participants please stand by; your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to AG Growth First Quarter 2016 Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the meeting over to Mr. Tim Close, Chief Executive Officer of AG Growth. Please go ahead, Mr. Close.

Good morning and thank you for joining our Q1 call. I have Steve Sommerfeld with me here today. We will briefly discuss the quarter, make a few comments on our recent initiatives and then turn the call over for questions. As we grow our business globally and diversify between our Farm and Commercial divisions, we aim to balance the significantly different demand drivers, the two sides of AGI, to smooth results on a consolidated basis. Our first quarter results demonstrate the importance of this diversification. Today, our business is approximately 55% Farm and 45% Commercial, despite the significant addition of the Westeel acquisition to our Farm business in 2015. As a comparison the Farm-Commercial split was roughly 70-30 in 2010, nearly 100% Farm in 2006. Our Farm business, which is almost entirely North America, follows a crop cycle that starts with planning in early Q2, develops throughout the summer along with the weather, culminates with the harvest conditions, crop yield and volume results in the fall. Q1 of each year is mostly impacted by prior year’s crop, as our markets absorbed the level of demand created by the crop volume and harvest conditions of the prior year. Our dealers consider inventory levels in way expectations of farmers as the market will explore to the new crop. We expected weakness in our Q1 Farm results as we come off the 2015 crop cycle, which included a drought in Western Canada, a quick efficient harvest in the U.S. and a soft environment for CapEx at the Farm level. On the Commercial side of AGI demand is more a function of changes in global crop production creating trading patterns and the global grain infrastructure build. The demand on this side of our business is much less tied to the crop cycle or regional weather events. However, demand can change significantly on a regional basis, depending on where our customers are focused in any given year. Q1 in the Commercial side is typically slower in terms of revenue, but very busy on the quoting side, as customers lock in their current year plans, prepare for Q2, Q3 installation. Demand in North America remains strong as we delivered on projects that pushed into 2016. However, our international business returned to a more typical Q1 and it was down versus a very strong 2015. We track our Commercial business with much more of an annual perspective as timing of projects can easily shift between quarters. And this year we expect revenue to be weighted toward the second-half. Turning back to our Q1 results, we can see balance between our demand drivers playing out. We had record sales of $113 million and record adjusted EBITDA of $19.8 million. These numbers represent the weakness in our Farm business that we have discussed; the relative strength in the North American Commercial business, including VIS; and the contribution of the Westeel acquisition, both domestically and internationally. We are pleased with the performance of our businesses in Q1 in this tough environment. Although Q1 did benefit slightly from sales that we had expected to see in Q2. While we expect Q2 to be impacted by timing on the commercial side and continued subdued demand in the Farm, we do expect to have growth in the first-half of 2016 versus last year. You will note that we have separated the geographic contribution in our MD&A, both including and excluding acquisitions to facilitate year-over-year comparisons. Excluding acquisitions, our domestic commercial business offset our domestic farm results to deliver flat results year over year when combined. And our international results were down significantly from a strong 2015 that had benefited from large projects in Ukraine and South America. Our record results were then delivered from the rebounding results of Westeel and recent acquisitions, including VIS. We are pleased with the contribution from Westeel in this tough crop cycle, very pleased with the improvement in margins of Westeel that benefited from the synergies we achieved post-acquisition and the efforts of the team to increase productivity. We were busy in Q1 in the M&A front as well. We closed three tuck-in acquisitions. During the quarter we added NuVision in Western Canada and Entringer in Brazil. We also purchased the remaining minority stake in Frame, our corrugated bin business in Italy. These acquisitions contribute to three separate initiatives at AGI, however, only Frame added meaningfully to results in Q1. NuVision brings turnkey capabilities to our fertilizer platform in Western Canada. This platform is now comprised of Westeel smoothwall bins, VIS fertilizer handling equipment, and NuVision design and installation services. This is the most robust platform in this space in Western Canada, excited to offer this total package to our customers. As a point of reference, NuVision would have added $1 million to Q1 in terms of EBITDA. Entringer is the first step in building our business in Brazil, where tariffs and taxes have restricted our ability to operate in this key market in the past. We are working harder on our project to build a plant in Brazil to expand our capacity and introduce additional product lines. There is no volatility in this market. However, we believe now is the time to invest in Brazil and build the platform going forward. Frame is located in Italy very close to our PTM business. Together, these two businesses allow us to bundle handling and storage products throughout the EMEA region and to an expanded customer base. We are cautiously optimistic about the remainder of 2016. However, we know that Q2 will continue to see soft environment in the farm side in the U.S. as our dealers remain cautious with new orders. We believe demand will pick up in the U.S. as we get closer to the harvest and farmers prepare to handle what we expect to be a good size crop. Our Canadian portable handling business is stronger and benefitted from the large increase in pulse acreage. The storage business in Canada continues to recover from 2015. We are keeping our eye on weather across the region. On the Commercial side, we see a robust international pipeline of quotes that we expect will convert to good sales and backlogs heading into Q3 and Q4. Canada remains a bright spot on the commercial side, along with good visibility from key commercial divisions in the U.S. With that, I will turn the call back to Alana and take any questions.

Thank you. We will now take questions from the telephone line. [Operator Instructions] The first question is from Damir Gunja with TD Securities. Please go ahead.

Thanks. Good morning and thanks for taking my question. Just wondering if you can elaborate a little bit, Tim, on the quoting activity by region, internationally, and maybe some bright spots or some additional color you can give us there?

Sure. I think - and that’s one thing we’d like to point out, is the diversification of where we’re quoting is increasing every year. We still see good activity through the Black Sea region, through Ukraine, and Romania, and surrounding regions. And then, with the addition of PTM, Frame, we have a very good pipeline and quote log into Northern Africa, into the Middle East. And we also continue to see activity in South America. So it’s pretty diversified, I’d say it’s much more diversified than ever before with good activity really globally. And including, as I mentioned, log activity in Canada on the Commercial side.

Okay, thanks. And, Steve, maybe a follow-up, should we be thinking about a benefit on steel year over year, any color you can give us there? And do you plan to do any FX hedging out into 2017?

Right, well, on the steel side, Damir, as you probably know steel prices are beginning to creep up. We had a nice year-over-year improvement in our steel cost in Q1. We locked in and pre-bought much steel really as the mills would allow. So we expect Q2 will still see a benefit from steel. And you will see steel creep up, our forecast hold true in the second-half of 2016. On the foreign exchange side, we are watching it very closely, obviously. And we have not added any hedges since last February really. So today at spot rate of $1.25 [ph], we are obviously very comfortable operating in this range. We haven’t excluded the possibility of entering new hedges. But we have not made a concrete plan to enter new ones at this point.

Okay. Thanks, guys.

Thanks, Damir.

Thank you. The next question is from Jacob Bout with CIBC. Please go ahead.

Good morning.

Good morning, Jacob.

So making some comments on the cautiousness of the U.S. farmer, maybe talk a little bit about how that changes or does it change going into the second-half of 2016, talk a little bit about what U.S. dealer inventories look like, right now.

Right, Jacob, you are pretty quiet there. I didn’t hear all that.

Can you hear me now?

Yes, much better.

Okay. I’ll repeat my question then. So just the question here is just on the U.S. farmer and their cautiousness and how long you think that will continue into the second-half of the year. And maybe just comment on U.S. dealer inventory levels.

Yes. Maybe we’ll split that one up. I’ll have a quick comment. I mean, there is partially - there are a lot of good positive signs in the U.S. As you know well, the planting intensions are very strong on the - and weather continues to be favorable and we’ll see how that develops, but from the key-driver perspectives, there is positive signs. What we’ve seen over the last few years is a bit of a change in terms of timing of some of the orders and it’s certainly dealers that drive that as they will go through the remainder of the year. And it wasn’t long ago that Westfield for instance was very much a Q3 business. And so there has been a few years that were different as we saw some of those orders brought forward into the earlier four quarters. And so it wouldn’t be a - we do, we are watching this closely and we do see a trend more - or back to that - the previous patterns. And they also take advantage of our increased capacity for production and we also have more stocking point throughout North America. So it allows the dealers to watch the markets as they develop a bit more. What Steve and I were just chatting about this before the call…

I don’t want have - I want to add, Tim is absolutely right. We are very close to our dealers and the end-user farmers. It’s really watching and had been close to our customers at this point. The dealers are cautious on putting inventory on their balance sheet. And if you do go back five years ago or so, the portable grain handling business in the U.S. was very much weighted towards Q3. And in the last couple of years really may have been more of an anomaly than the new norm. So we have the capacity and the ability to dial-up our production capacity if necessary and utilize our stocking points. We’ll just stay close.

And then, how about dealer inventories in Canada and maybe you can comment a bit on the shift to the larger pulse crop, how does that change things for you?

Yeah. Although - I guess, we didn’t comment on dealer inventories in the U.S. which are really I would say normal, maybe slightly elevated, but I wouldn’t say in any material way. In Canada, the inventory levels are again quite typical. The kind of the shift towards pulses in 2016 is really being reflected in our [health through their business in that so] [ph] that’s what it was designed for. So their Canadian business is up significantly year over year as is their backlog. I guess, crop in Canada benefits all of our portable grain handling business.

And how about on the Westeel side?

Yeah. Westeel continues to rebalance off of 2015, excellent margin performance at Westeel. As I mentioned, really driven by the changes we made there and coming back to some normalized volumes or getting back to normalized volumes. So that business is tracking well. I think everybody has got their eye on how the weather performs throughout the planting season here.

The acquisition of, I guess, VIS and NuVision, what’s the seasonality like of their EBITDA and maybe you can talk a little bit about the cost and revenue synergies you’re expecting as a result of those two acquisitions?

Yes, well, in terms of seasonality, NuVision will typically build - they do a lot of their buildings through the winter. So Q4 into Q1, as their customers are preparing for the fertilizer season staring in spring. So there is a, that’s typically been in the heavy period. So Q2 will be a softer quarter for them. And then plans against are ramping up through Q3, Q4 starts to be a lot of installation. On the back of that and move forward six weeks or so from a timeline perspective and you got to be producing the equipment that’s going to be installed by NuVision during that period. And that’s how you see the seasonality affected for VIS from fertilizer number. VIS does do a full suite of products including feed and grain, but their fertilizer equipment production will ramp up along the lines of that installation cycle.

And then thoughts on the cost and revenue synergies?

It’s mostly revenue synergy. Sorry, Jacob I forgot the - I didn’t write down the second part of your question. Yes, it’s mostly revenue synergies and NuVision would typically have sourced most of that equipment from our competitors, from third-parties. And they will continue to do some of that. But they also replace some of that with VIS equipment. So that’s where the revenue synergies will come. They will look to Westeel for product as well and we expect to see good contribution from those synergies. It wasn’t - really wasn’t about cost synergies on that side. It was entirely focused on a - looking at that sales channel and being able to offer turnkey capabilities to our clients, which I’ve been talking about it for number of years.

Okay. Last question here, so you talked about going from 70-30 to the 50-50 split here as far as the Farm. Can you comment a bit on margins and how we should be thinking about that, because if I remember correctly, the portable grain handling was substantially higher margin than some of the commercial work you’ve done. So how should we be thinking about that?

Yes. Hey, Jacob, it’s Steve. I think when you’re modeling margins the best way to do it still is to have Westeel on the separate market. So it kind of go back to the pre-Westeel days, our Farm margins were well into the 40s. That holds true with our guidance on the commercial products, which should vary within commercial, but on average would be into the mid-30s. And as you know, with Westeel different point, we had a margin of 30% in Q1, which were fantastic. Historically, 25% is probably a more average number.

Great, helpful. Thanks, guys.

Thanks, Jacob.

Thank you. The next question is from Greg Colman with National Bank Financial. Please go ahead.

Yes, gentlemen. Just a couple ones here, and want to just start off with a bit of a history lesson. You were talking about flat - approximating Q1 2015 results and Q1 2016, obviously saw some healthier performance both top-line revenue there - top-line and EBITDA. You mentioned that there is a timing impact, pulling sales from Q2. Can you quantify that or if you don’t want to quantify, can you at least discuss, was that the whole impact of their performance or is this something else going on there versus your expectations and what we actually saw?

Hey, Greg, it’s Steve. Quite honestly, we are providing guidance and it’s the same for Q2. It’s really directional. We are not pointing to a specific number, when we mentioned the kind of some Q2 business coming into Q1 I wouldn’t characterize it as material. There was some kind of shifting of sales, a little bit of sales mix that was more favorable towards Q1 that helped on the margin line and maybe some shipments. But when you look at H1 in total, we thought - as Tim mentioned in his opening comments, we do see nice growth over 2015, over the six months period.

Okay, that’s great. Yes, I know I tend to focus a little bit too much on the issue there, so I do appreciate that. On the organic growth when we are looking at how things shook out again, just staying on the history lesson here in Q1. Excluding acquired business, it looks like your sales were down about 13% year over year in Q1, just on the same-store sales side. I know your kind of transitioning in the regional discussion versus Farm and Commercial split, and really enjoying the differentiation there. But can you discuss that organic sales decrease year over year as it pertains Farm versus Commercial, because we’ve got a few moving parts as the lumpy commercial business, some larger orders in 2015 that make harder comps. But then the Farm business itself is actually struggling a little bit, just the farmer income. So I’m just trying to understand the organic contraction year over year, where is it on the Farm versus Commercial side?

Yes. Hi, Greg, it’s Tim, here. Yes, it’s a good question. When we look at Q1, excluding acquisitions, we’re kind of back to our 2014 numbers in Q1. 2015 was a very strong quarter to start the year off. And very good contribution from international sales, from the international commercial sales, but benefitted from a couple of two, three big projects that landed in Q1 last year, that was a little unusual from the timing perspective. So when we look back, excluding 2015, then we’re kind of back to a 2014 level. And 2014, as you know ended up pointing out to be a good year. So we have to look at these businesses, the Farm business in particular is a very mature business in North America, and keep the longer term average in perspective when we look at that business. So it was a lot from that international that moved year over year, and back to kind of the patterns that we saw in 2014.

Got it. So if I could try to rephrase, just make sure understand here. It does sound like it was a little bit more of the bulkier larger Commercial side, it might have caused the apparent organic contraction year-over-year in 2016?

Right. And I might add to that. Within North America, I think we’ve spoken to it already, the Farm business was down year-over-year in the U.S., offset by some pretty healthy commercial business domestic.

Got it. And then just ramping up staying on sort of the international side, and then - and what’s going there. You’re discussing an increasing backlog in 2016 in the second-half as things kind of come in there and the backlog grows with bidding presumably, turning over into that. Can you talk to us a little bit about the speed of the conversion of that backlog into revenue? Would we expect to see it revenue growth almost concurrent with that backlog growth or just immediately lagging in the back-half of this year or would that be more of a signal towards, kind of a little bit bulkier international presumably, Commercial in early 2017?

Yes. Well, I’ll take a crack at it and then I’ll ask Tim to do the same. So let’s maybe talk about excluding acquisitions, we can talk about Frame and PTM separately. With our kind of existing business pre-acquisitions every year have its own story. If you go back a couple of years entering 2015 for example, we entered 2015 with a great backlog and I’ve showed up in our first kind of quarter results. The timing and the conversion to sales of some of these projects, especially the larger ones are quite difficult to predict. We can’t drive the timing of our customer commitments. The back guidance we can give today is we have a nice book of bills in our likelihood bucket. The timing of closing little uncertain, we expect a nice share of that to show up in 2016, it’s also very possible that we may end 2016 with a great backlog come into 2017 like we did come into 2015. While, a lot of number is being turn around there, but it’s not likely to be a Q2, when we probably - my best document today would be the larger sales that are starting to show up later in Q3.

Okay, no, that’s great. I appreciate it. And then I guess finally - sorry, I forgot this earlier. You mentioned Westeel’s margins really good performance there. And I think based on the math that we do, and I’m talking EBITDA margins here, not gross, I think your posting entered around on the 14% range in Q1, that’s versus last year trading around - or put it posting around 8% to 9%. Is this where we’re looking as a good run rate meaning, kind of the cost synergies down in place there or is there a bit more to go to put it in different way if revenue for Westeel was same in Q1, and all your cost synergies were done, would be a 14% margin or a little bit higher?

Well, that’s a great question. So Westeel is - with the cost synergies in place, we’re well in our way to achieving sort of the margins that we targeted, when we bought the business. Q1 was - did have some benefit from product mix, which probably accelerated or make those result in those margins being little higher in Q1 and we would have expected in terms of our - how we’re expected to get the margin growth. So I would say, that’s a little bit ahead of what we thought, which is great. And the other point is that, that business really benefits from volume, and as we bring the volumes up and you see it normalize, if we get through this crops cycle. You will see a nice continued growth in that margin. So it might track along the lines of what we achieved in Q1 as we get more volume into the business.

That’s great. That’s really good. Thanks. Okay, that’s it for me, guys.

Thanks, Greg.

Thank you. The next question is from Peter Prattas with Altacorp Capital. Please go ahead.

Good morning. Can you please give me some insights from Brazil here early days with your acquisition of Entringer. How the business environment is there and how you’re progressing with your facility there?

Yes. Good morning, Peter. We’ve - guys are just back from Brazil this morning getting our updated reports. Brazil is the economic and political environment, which I’m sure everybody is watching, is interesting, it’s I think, the only time I’ve seen impeachment of a president actually bring stability, but it’s, that environment versus what’s happening on the farmer and agriculture slightly different, there is a bit of a smaller crop in Brazil or some regional crop issues in Brazil. But overall, so very big crop even the deal within - and they’re dealing with legacy issues in terms of the equipment and infrastructure that are really impacted by the individual crop in anyone region. So there is still very good activity in Brazil, and we are starting to target a different customer base and expand the customer base of Entringer and seeing good results from that. We are transitioning the business and looking at a discipline around quoting and getting our hedge around cost of production and those - that side of the business, and then very active on planning for the building of our facility. We are being - we are looking at the detail of just every part of that plant and making sure that we get the flow right out of the gate. And our priority is on getting that layout of the new facility, exactly right for the products, new plant to build there. And so we are spending the time to look at the Commercial side and the Farm side, and projected the volumes will need out of the plant from each side of that and each product line. So we are taking a pretty cautious approach to that - to our projections are forecasting and how that tracks back to design of that plant. But overall, the projects moving ahead nicely, and the teams are all - from all of our divisions are coming together with great input to ensure we get that flow right. We’ll stage the build of that, we’ll get our bin line up, then we’ll add in different products throughout the year. So we gradually ramp up and get the commissioning of each of those products line, right.

Great. Thanks for that. And last question here is on the corn planting expectations. I would expect that increase to have a positive impact on your sales. So I just wonder from your perspective, how much of a tailwind, you expect that to be and you think it’s going to be helping you in sort of Q3 or is that more likely in Q4. And isn’t that especially positive for your higher margin portable equipment? Thanks.

Yes. Well, that’s right, Peter, you have it right, it most directly impact our portable equipment, and most importantly our grain auger sales. Sort of as we talked about earlier in this call, the timing of some of these sales, the cautiousness of our dealers to bring on inventory, a lot of this were going to help us stay very live with our customers and these sales maybe more heavily weighted towards these sales maybe more heavily weighted towards the second-half as they have been historically. The more corn volume the more crop volume the better, crops are a volume-driven product. So it’s positive for us. It will play out along with the other factors that sort of include the kind of the dealer buying behavior.

Thank you.

Thanks a lot.

Thank you. [Operator Instructions] The next question is from Nelson Mah with Laurentian Bank. Please go ahead.

I got a question, on your U.S. portable and commercial business, like I was wondering how much does the stronger U.S. dollar impacts their sales, I guess, implicitly yours as well.

Well, not directly Nelson on the sales side. We price in the U.S. in U.S. dollars. Our competitors are both U.S. and Canadian, but we all price in USD. So the stronger Canadian dollar I don’t believe has a direct or a significant impact on our sales.

Sorry, Steve. I mean, like so the U.S. dollars is also [indiscernible] as I guess, overall then corn - U.S. corn prices should be up globally. And I thought they may be less competitive which I thought would impact some of the demand side, because of the higher U.S. corn prices relative to other currencies. That’s what I was wondering about.

Oh, sure. Yes, well, I mean, it does have an impact on their exports, which does impact the price of corn and kind of the mood of the farmer. The farmers are starting to sell little more corn now that has been in storage for since last year, and because the dollar has weakened now more recently. So I think you see the grain starting to move probably not directly in correlation with, but the Canadian dollar or weaker U.S. dollar does help the export volumes out of the U.S.

So then, you’re saying this more material when now for the second-half then, right?

Yes, I mean, I think there is a couple of things. I think that can be right, because the export - as the grain moves to export markets, then you’ll get more coming out of the bins and you’ll get more use of our equipment, which is a positive for us. Conversely, if it’s impacting the - you see the export sales going the opposite way, which had been happening earlier in the year and last year, you see that storage piling up and it’s better for storage markets. We saw a little bit of Westeel product into the U.S., but we’re mainly focused on that portable equipment. So - there is going to be - as it flows more that would be better for us, for sure, at a very macro-level.

Okay. Thanks.

Thanks, Nelson.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Close.

Okay. Well, thanks very much for participation this morning and all the great questions. We look forward to touching base with you in the near future as well. Take care.

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.