Gary Anderson - Chief Executive Officer Steve Sommerfeld – EVP and Chief Financial Officer Tim Close - President Dan Donner – SVP of Sales and Marketing

Jacob Bout - CIBC World Markets Christine Healy - Scotia Capital Inc. Greg Colman - National Bank Financial John Chu - Altacorp Capital Dina DeGeer - Bluewater Investment Management

Good morning, ladies and gentlemen. Welcome to the AGI’s First Quarter 2015 Conference Call. As a reminder, this conference call is being recorded. I would like to turn the meeting over to Mr. Gary Anderson, Chief Executive Officer of AGI. Please go ahead, Mr. Anderson.

Thanks, Donna, and good morning to everybody from a sunny Manitoba. We have got Steve Sommerfeld with us today, our Executive Vice President and CFO. We have got Tim Close, our President, and we have got Dan Donner our Senior Vice President of Sales and Marketing with us. And it's a beautiful day out here on the prairies of Western Canada. Sun is shining and the farmers are in their fields hopefully and getting ready for another, hopefully, a good year. We are here in Winnipeg instead of in Toronto this year and I was trying to reflect back with Steve here yesterday on when the last time we didn’t have an AGM in Toronto. And we both thought it was in the late 90s when we were in [indiscernible] hotel, we were a junior capital pool but Eric Lister told us that it was actually that first stub year, 2004-2005, we did actually have one in Winnipeg, so we are both corrected on that. The format is different this year at our AGM and I guess I got the idea from Bill Lambert, who is reflecting upon the old days when AGMs, at least with the banks and things, would be big events. They would bring in people that they want to recognize from various branches and things across the country. And so we are taking up on that a little bit bringing in people from all of our North American divisions and in keeping with our theme with our annual report which was From The Ground Up. You may recall some of the photography and things that was done and I will put a plug-in for my daughter Mary when we did that road trip last summer. And in that we have kind of chronicled some of the shop floors in North America and the work that takes place there. And so today in keeping with that theme we have got a number of people from out in the divisions with us today for the AGM and then we will put them to work this afternoon. We will have a lean workshop and then in good AGI fashion we will have social tonight. So it should be a pretty full day. So I appreciate everybody participating in this meeting on not short notice but on a short period of time from when the results have come out. You know you haven't probably had very much time to go through it. And we do try to balance being considerate to your time and in this case being able to pull this AGM off here in Winnipeg. So I do appreciate everybody's efforts today. So on behalf of our Board of Directors and all of us at AGI, we are pleased to provide you with our Q1 2015 financial results. Trade sales of $94.4 million exceeded last year's record sales of $86.2 million by 9.5% while adjusted EBITDA for Q1 was $16.4 million, an increase of 13.6% over last year's record. Our pre-season on-farm business was buoyed by back to back record corn corps in the U.S. leaving dealer inventory levels in need of replenishment. Commercial activity internationally made up for a more traditional start to our commercial business in North America. We see international sales remaining robust while North American markets becoming watchful for evidence of a good crop. This behavior is being expressed through increased utilization of our portable grain handling warehouse inventory to bridge pre-season and in-season demand. Our recent uptick in North American commercial quoting activity is an encouraging sign that the slower start to the year was merely a traditional seasonality and not suggestive of a longer-term trend. Offshore, business continues to grow in spite of political unrest in certain areas of Eastern Europe where Q1 sales in that region were $12 million, up from $7.2 million a year ago at this time. Our business in Latin America is building on last year's momentum making up 25% of our backlog as of March 31. In total international sales and order backlog at the end of Q1 totaled, $55.6 million, up significantly over same period last year of $38.4 million. We are also encouraged by current quoting activity and those which are in the most likely to close category. I think Dan actually has got some news later on here in Latin America. If you ask the right question, he will tell you. This quarter we will also be value stream mapping our international process here back in Winnipeg in support of our international activity to ensure that we are capable of scaling up our business as we grow. Solid progress was made in the first quarter to advance development of our business in Brazil. While we are keen to move forward, we are being diligent with training the team, refining the quote process and the pricing strategy, developing the manufacturing plan and determining best opportunities for both short and long-term. In April we participated in our first commercial and farm shows, formally launching our presence in the market. While it's premature to offer metrics, we were favorably impressed. Actually the three gentlemen with me today were all at the farm show just a couple of weeks ago. So we are pretty encouraged by the response we have got in the market to date. We expect to see a modest level of activity by Q4 with momentum building into 2016 and beyond. Here at home we continue to work through the process with the competition bureau and other parties in the Vicwest transaction. An agreement was recently signed to extend the transactions outside date to May 20. Our Westeel integration team is as prepared as one can be and anxious to get started. Referencing our own current involvement in the storage and conditioning market in Western Canada, we expect softer market conditions from those of a year ago. Regardless, we will be happy to get the keys and begin our work towards synergizing the transaction and positioning ourselves for long-term growth. And before going into the Q&A, I would just like to acknowledge the exceptional work that’s taken place over the past number of years at our Nobleford, Alberta bin and aeration plant. In late April, our Nobleford team hosted representatives from all of the North American divisions to participate in the three day lean symposium. And that was an eye opener for a lot of people to see the extent to which lean practices and philosophy were present in this operation. And for me it was a reflection of just how far we have come in our lean journey in Nobleford since the fall of 2008. And you will recall we had a bull's eye on our back for a few years back then and to see it today is really something. So we have truly achieved a lean culture and one that serves as an internal benchmark in our quest to create a companywide standard and cultural identity. I would like to commend Kyle South, General Manager of our AGI Nobleford plant. Adam Savidant, Lean Coordinator, and the entire Nobleford team for their dedication and resolve to continuous improvement and shop floor empowerment. I would also like to thank Gurcan Kocdag, our VP of Storage and conditioning for his leadership and trust in the team. So I think at this point we will open it up to Q&A and go from there, Donna. Okay.

[Operator Instructions] And the first question is from Jacob Bout from CIBC. Please go ahead.

First thing I wanted to talk about was the deferral of purchases that you are seeing right now. Have you seen this historically and what do you think is driving this and is this kind of a one of two quarter event.

Sorry, Jacob. Steve, did you hear it because I didn’t...

Right, yes. Jacob is asking about, you know we gave some guidance and outlook on how the on-farm business and the dealer networks buying pattern may have changed slightly from last year. So what we are seeing is a couple of things I think. And one is that our dealer network -- although our equipment is not commodity price driven, at the end of the day volume will dictate demand for portable grain augers. Our dealer network sells more than grain augers. And because they sell mainline equipment and that business is down significantly in the U.S., we believe they are managing their cash flows a little more cautiously then prior years. Using our warehousing system more than in most years. And we have seen it before but we have been on a nice run for the last number of years.

I would echo what Steve is saying. In Canada, it's a little different situation. We are back to maybe a more normal level with grain stock. And if you will remember the prior year bins were overflowing due to some logistical issues. So back to more of a normal pattern in terms of farmer buying decision.

Maybe just moving to Brazil. What and to whom are you selling into the Brazilian market?

Hi, Jacob, it's Tim Close. It's a good question. We really break it down in Brazil on commercial side and the on-farm side much like North America. Commercial side is, we have a good team that’s out building a nice quote log in Brazil. And as projects there are initiated and come to market, you know that in commercial side these are big projects and long lead times. So it's key to get in early on those and influence as much as you can the project early on and we are out doing that and building that nice quote log right now. And the farm side we were bringing on a team on that side of the business as well. The farm show we were at two weeks ago Gary talked about was dedicated almost entirely to the farm side, equipment on the farm side. And we will likewise start building up a network there and some sales into the second half of the year. So both of them in both sides have got into early stages but we will build nicely I think into 2016.

Can you just give us an update on where you are as far as building a plant there?

Yes. We are looking -- we haven't made any decisions on building a plant there. We are still looking at a few options including the right place. You want to get - Brazil, as you know is tricky from a logistics perspective and you've got to balance off being close to those few markets we just talked about and logistic chain from a supply perspective. So there is -- right now we have got a good plan for bringing equipment into Brazil. And while we are selling direct into those markets we can do that and be competitive and then we will be careful and diligent about where we actually set up manufacturing.

And the last question here is just on the closing of the Westeel. What are the hurdles right now? Why is it taking so long?

Just the Competition Bureau doing their work. I want to be respectful of that. Obviously it's -- every time I am sure they get involved with a deal that it's something new for them. So they are just going through all of their process. But no I would characterize it as promising to close in the next little while.

Thank you. The next question is from Christine Healy from Scotia Bank. Please go ahead.

I guess, firstly, one of the drivers for your strong margins in the quarter seems to be the integration of REM and Batco. Maybe you can give us just an idea, how significant is REM to that division and has it bumped the division's normalized margins up or is it more that they were dragged down by the integration and now Batco is back to normal.

Okay. I will just speak to the first part of it, just have a little fun with you Christine. My kids -- I went to work over there in, I think 1994-95, in there somewhere. And they were very excited that I was going to work at REM because of the band and then they realized it's REM as in the first part of the founder's name, Rempel. You are from closer to my kids generation than me. Anyways -- so the margins -- the integration went really, really well, exceptionally well. And that takes the workforce from the GrainVac side that moved in and the workforce at Batco to be very accepting of each other. And in fact exemplary approach to it. And so bringing all of that together into a facility that we have got and sharing the overheads and all of that, I think have helped us. Obviously we have better efficiencies in that plant for the Batco side than what we had in our smaller shop and we were just bursting at the seams. So there would be some margin gain there but also it would have been a bit of a challenge with the overhead structure had we not brought REM in as well. So it's kind of the combination of the both. Steve, you want to...?

Well, I can add a couple of comments Christine. Compared to Q1 of '14 which was the quarter when REM was moved over. You know there was some disruption to operations moving REM in and getting it all set up to begin the integration. So Q1 of '14, the margins at Batco REM were lower than they should be. The run rate now is fantastic like Gary said. Margins in Q1 '15 benefitted from the U.S. dollar which was helpful and slightly to product mix as well. The portable grain handling component of our sales was higher than last year. So I think the combination of those three things would be really what's driving the margin.

Okay. Thanks. That’s helpful. And then just moving to Lat Am. So it looks like sales are really gaining momentum there and you specifically highlighted projects in your release in Bolivia and Peru. Can you talk about how these projects would compare to ones in Eastern Europe. Are you bundling storage of commercial grain handling equipment same as you do there? Are you starting to see some repeat orders? Just maybe some color on that would be great.

Sure. It's Dan. I can comment on that. I think the projects in some ways are similar to Eastern Europe in that we are bundling together products from multiple divisions. But they tend to be less storage and more high throughput facilities. So selling more of the handling equipment and less of the storage. And as Gary mentioned, we are gaining some traction. We are seeing a few repeat projects with similar -- same customers. We have only been in Latin America actively in last four years so it's nice to see it coming forward so quickly. We just last week signed a significant order in Latin America with a North American customer. And it also speaks to likely where we will see the activity in Brazil in the early stages with high throughput, high capacity handling equipment.

Okay. Great. So higher margin, I guess, overall projects compared to Eastern Europe. Okay. And then just one last one. Gary, can you give us a sense of how much the portable equipment sales in the U.S. were up in the quarter and commercial sales were down in the quarter? Because overall to us it looks like U.S. sales are just flat but from your comments it seems like there was some big movement there.

Right. I can maybe answer that. I mean in Canadian dollars they were flat but keep in mind that the exchange rate is different now. So the commercial business was down compared to '14 which we knew coming into the year that our backlogs weren't the same. And as more of it return to kind of typical conditions where you don’t have a big backlog entering a fiscal year and the orders start coming from towards the end of Q1 and at Q2. You know the on-farm business, I would say consistent with 2014 Q1. In any Q1 when you are filing preseason orders, you are not really reacting so much to the 2015 ultimate demand of more to -- kind of the carryover from 2014 which was kind of a decently depleted inventory pipeline that needed to be refilled.

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

I am good. Everything is answered. Thanks.

Thank you. [Operator Instructions] And the next question is from John Chu from Altacorp Capital. Please go ahead.

Maybe just touching on Christine's question, a bit more on the margins. Anyway to maybe rank the contributions that the operating efficiencies versus mix and versus FX you may have had. I am wondering if the mix and the FX is sustainable, so obviously trying to get a sense of where the operating efficiency is the main driver for what we saw on the margins or not?

Right. So when you are comparing to the last year, I mean Q1 of '14 was really the only quarter where the Batco REM margin was lower than it usually would be because of the move in Q1 of '14. So that impact will disappear going forward. You know foreign exchange was an important consideration. However, keep in mind, when you are talking about gross margin percentages, what the FX rate does not impact the percentages are U.S. divisions. It really is only our Canadian divisions that are exporting to the U.S. So when you are modeling, just keep in mind. You know sales mix, I mean this is one of those quarters where a lot of things went slight right on the margin line. You know sometimes these are [indiscernible] but sales mix was slightly a positive. Across the board at most of our divisions I would say our margins were a slight, slightly to the upside of our expectations. Sort of a cumulative effect of a number of things. I think the margins, as we get further into Q2, you will see more commercial business as a percentage of our sales and more storage business as a percentage of our sales. You would expect that margin to not stay at the Q1 '15 level.

Okay. That’s helpful. And then maybe just on the commercial grain handling. You mentioned that the next couple of months are going to be pretty important for really getting a hand on the second half revenue you can generate. So at what point, what month do you consider to be the cut off where if we get, say, orders in by later than June, July than it's going to have to be for the following calendar year. And how historically have you seen the order activity for those particular months, May, June, July compared to the prior year.

So you are looking at being able to respond into early Q4 and typically if you are booking orders in Q4 therefore the following year. So we will have quite a bit of runway on in-season. And if you recall, two of our plants are -- we are building two new plants and we will be coming on line with those over the summer. So that will, certainly in the long term help us be more responsive to the in-season. It won't catch it so much this year but there is quite a bit in-season that has this.

Okay. And then just lastly on the portable grain handling. You listed a lot of different factors that would drive order activity going forward, acres. Although we are 75% planted in the U.S. right now, crop conditions and timing of the harvest and what not. Maybe anyway to rank the importance of those so we can just get a handle on, if for example, the timing of the harvest is a bit later, that’s going to be more of a driver or less versus crop conditions and what not?

Yes. In the end, John, every year looks a little different. I mean there has been a lot of crop put in this year so it's earlier than some years. But then that means that gives the corn a better chance to have a higher yield. You don’t know what the rest of the summer will be like. I would characterize that you need quite a bit of input from mother nature between now and August before you really, certainly that [soaking] [ph] time for the corn is important to really determine how much yield you are going to get at that point as well. But you know we have had a lot of moisture here just recently which I know the farmers even though they are probably a little frustrated. Some of it came down in snow I think is my understanding, but it's all pretty welcome. So, yes, I think it's been a pretty -- you characterize as a good start to the year.

Thank you. The next question is from Dina DeGeer from Bluewater Investment Management. Please go ahead.

I would like to flush out Brazil a little more just in terms of the bodies you have there right now. Sort of what the plan is going forward. If you can give us a sense of what the costs are, I guess there is no revenue there yet but what you are running on your cost and sort of how that will scale up through the rest of the year and into 2016.

Yes, maybe I will touch on the first part of that and Steve can talk about some of the numbers a little bit. But we actually do have some revenue or early stages of revenue in Brazil. We did make some sales at at that trade show. So that was really nice to see and encouraging because they were portable sales. So portable equipment in Brazil is pretty unique. You know they don’t use portable equipment at all really. So all of our product line on the farm side is pretty unique to that country. And I think, give you a little bit of color, we had been talking about the conversion of that market to using portable equipment being a lot dated sort of conversion and we are seeing very encouraging signs that that -- the take up of that type of system will be sooner than we had thought. So we are being cautious from that sort of guidance but we are certainly optimistic about what we are seeing. The response on the farm side of the portable equipment was excellent at the farm show and has been, just before that and after the farm show, farmers really responding to a lower cost, more flexible option to move into our farm stores. So that’s been our thesis for quite a while now and we are very pleased to see some positive signs on that side. The farm side, we have four people right now, you know form the team in Brazil. And we will build that into Q2 -- or, sorry into H2 and we will add bodies directly on the farm sides. On the commercial side where the team is focused right now, they have been building that quote log and talking to lot of local players. So large local players as well as our global customers, the Bunge, Cargill, ADMs of the world, who have a good and growing presence in Brazil. So we will probably add a couple of more bodies maybe on support side, to the commercial side. That team is also supported by our international sales team. There is some excellent talent there, including Dan is in the room. So we are keeping costs reasonable and low but we are also building from what we see is a pretty steady growth in really one of the world's biggest markets for us.

Yes. And like our run rate right now would be, what, about 250,000-300,000 a quarter?

Right, yes.

Yes. It's pretty modest in terms of -- we have great people and we are not trying to get the lowest sort of salary base out there. We are hiring good talented people but right now the cost is pretty modest.

Could you give us -- maybe Steve you could give me a sense of when Brazil sort of starts growing you have seasonality in your margins as it is now. But I am assuming that have you done any sensitivity analysis as to how Brazil will be counter cyclical to those margins and how in that weaker quarter you usually get. Any idea there? What it could do?

Right. Well, we can talk about it qualitatively I suppose. We haven't done any sensitivity analysis. Initially when we are manufacturing out of North America before we are really in the country with a footprint. We would expect we would have some Q4-Q1 production slots which will certainly help some of the divisions that are typically weak in those quarters. Once production has moved down to Brazil, it changes things a little bit, at least to a degree and maybe Tim wants to....

Yes. You are right. There is two crops across much of the country and that will change our seasonality a bit. I think it's too early to give you any definitive guidance on how that might affect our seasonality. But there is some counter cyclicality there. And the commercial side is where a little bit harder to predict when projects come on online. So I mean typically six-eight months sort of lead time to these projects. And they are building them. There is really no relation to seasonality right now. There is just a huge gap in that infrastructure and they are building them, getting them permanent and planned and built as quickly as they can. So that side -- it's hard for us to really to predict when those big projects hit and land going forward. The farm side will probably be a little bit more steady through across the year.

Because you do give discounts, I guess, in that to your North American customers in that slow period. Would you still be giving those same discounts going forward or would you?

No, we don’t typically discount that way on these large commercial projects. Tim would be referring to, he is right, the incubation period for a commercial project is long. The one advantage we have in Latin America is the construction season is 12 months a year, we are not tied down by bad weather.

Okay. And just for Dan. Dan, did someone ask you the right question to get the information out that we were supposed to?

So a good substantial order in Latin America with a North American customer. That one had an incubation period actually of a couple of years, so.

Wow.

A couple. Dan's being modest, it goes back probably -- predates 2010 even.

Yes. It was a project that jumped a few countries, so anyway the team is happy to finally put an order behind it.

Yes.

Good. Thank you.

Further evidence that our team doesn’t give up on an order, I guess.

The next question is from John Chu from Altacorp Capital. Please go ahead.

Hi. Just a couple of quick follow-up questions. Just an update on Union Iron and how things are progressing there? And then secondly, just on Brazil, so you are adding or putting together a sales team for the portable side now because of how well that trade show went. Did I hear that correctly?

Not specifically because of the trade show. I think it's been feedback we have been getting from now a good six months as we have seen steady interest from both customers and sort of distributors in Brazil. And really positive reaction to our type of handling and storage on farm systems. We had already always planned to build out that farm side. We have probably moved that up a bit and we have got one person on side on board already. And we will build, we will probably add a couple of more over the course of the remainder of this year. And on Union Iron side, it's a work in progress here, John. It's going to take a quarter or two probably to get -- you know we are working through it. A lot it is engineering related so it is something that you can just fast forward. You have to work through the process and so that’s what's happening. And of course we are moving into that new facility this summer. So we are going to gain some efficiencies once that settles down as well.

And if I recall correctly, just on the portable side in Brazil. I think originally the plan was, you probably won't make very much progress for about five years or so. So that really did move forward, if I recall correctly.

Yes. You might have heard me say something like that just to make sure you didn’t apply a bunch of stuff into your modeling here, John. But we want to be prudent about all of it. We don’t want a gun to our head when we are developing this country as lot of North American companies make mistakes going into Brazil too fast. But it is very encouraging what we are seeing on the ground and we are moving up to some of our expectations.

Is there any assembly being done in Brazil for that or is that just the [indiscernible] piece of equipment is being shipped?

At this point we will be shipping product from North America.

And just lastly. Steve, you mentioned that in terms of the dealer purchase deferrals that you had seen that happen in previous years although nothing recently. Can you recall some of the years that you did see some of these purchase deferral?

Well, I think I would start by saying, the last few years have been very very strong on the on-farm side with a couple of back to back, kind of close to 14 billion bushels of corn crop. If you get back into kind of the late 2000s, when things were a little more typical I suppose, or the older days, however you want to phrase it, you would have seen it in some of those years where you didn’t enter a year with a backlog that took you through Q2.

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

Okay. Thank you, Donna and thank you everybody for your questions and for listening to this and we hope to see you down the road here. There is some farm shows over the summer, if you want to stretch your legs let us know, we will take you around and otherwise catch up soon. Thanks.

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