Ag Growth International (TSE:AFN) reported stronger farm equipment results in the third quarter of 2026, but a sharp decline in its commercial business weighed on earnings as the company worked to reduce debt and restructure its operations.
Farm revenue rose 19% from a year earlier to CAD 159 million, while commercial revenue fell 29% to CAD 181 million. Consolidated adjusted EBITDA was CAD 39 million, including an approximately CAD 10 million hit from a Brazil project cost overrun and a bad debt provision.
“We are not satisfied with our consolidated results, but we know what the issues are,” President and CEO Paul Brisebois said on the earnings call. He pointed to positive free cash flow, lower net debt and progress on cost reductions as evidence of the company’s efforts to address them.
Farm Recovery Offsets Commercial Weakness
Farm adjusted EBITDA increased 38% to CAD 38 million, and its margin expanded more than 300 basis points to 23.8%. Brisebois attributed the improvement to higher volumes, pricing discipline and a leaner cost base. North American farm revenue rose 23%, and the region’s farm order book more than doubled year over year.
Brisebois said the evidence increasingly points to 2025 as the bottom of the farm cycle, although the pace of recovery will depend on farmer sentiment. He said better commodity prices were being partly offset by input cost inflation and trade uncertainty.
AGI has raised prices by approximately 10% to 15% on galvanized bin lines and 3% to 5% on portable lines as steel costs have increased, Brisebois said. The company’s early order program launched in October, with solid participation so far.
Commercial adjusted EBITDA fell to CAD 7 million from CAD 50 million, with a margin of 4.1%. Brisebois attributed nearly half of the decline to Brazil, roughly a quarter to Europe, the Middle East, Africa and Asia-Pacific, and a quarter to North America.
Consolidated adjusted EBITDA margin declined to 11.5% from 18.2%, CFO Haaris Uddin said. He cited lower volumes, the wind-down of higher-margin Brazil projects, the Brazil charges and the mix of North American commercial projects.
Brazil Wind-Down and Commercial Restructuring
AGI recorded a CAD 4.7 million cost overrun on its remaining Brazil long-term finance project and a CAD 5.4 million bad debt provision related to customers in its traditional Brazil business. Brisebois said the final long-term project was expected to end in November and that the company did not foresee additional costs beyond those already recorded.
Revenue from Brazil’s long-term finance projects fell CAD 30 million, or 50%, year over year. Their order book was below CAD 10 million, compared with CAD 159 million a year earlier. Brisebois said the planned exit reduces credit and execution risk but will remain a headwind to year-over-year comparisons in 2027.
Uddin said AGI had approximately CAD 90 million in current receivables from its traditional Brazil business and would reassess its allowance quarterly. Brisebois said the company is no longer financing projects.
In North America, AGI has returned responsibility for quoting, pricing and execution to individual facilities after closing a centralized Chicago-area office. Brisebois said projects quoted under the former model hurt margins and that some lower-margin work would continue through the fourth quarter.
The company is also closing or consolidating several commercial facilities. Brisebois said AGI had won approximately 60% of decided customer projects since July, above its 55% target. He described 2026 as a likely bottom for commercial performance, particularly margins, while cautioning that geopolitical and trade conditions remain outside the company’s control.
Debt, Liquidity and Asset Sales
AGI generated CAD 27 million in third-quarter free cash flow, compared with a CAD 2 million use of cash a year earlier. Net debt declined to CAD 954 million from CAD 977 million at the end of the second quarter. However, the all-in net debt leverage ratio rose to 6.1 from 5.2 as trailing adjusted EBITDA declined, Uddin said.
The leverage ratio under AGI’s senior credit agreement was 4.12 at Sept. 30, below the 4.75 maximum then in effect. The covenant threshold steps down to 4.50 through year-end and 4.25 through March 2027. Liquidity at Sept. 30 was approximately CAD 78 million, including CAD 45 million in cash and CAD 33 million available under senior credit facilities.
In October, holders approved an extension of CAD 85 million of debentures from December 2026 to December 2030. Brisebois said refinancing two convertible debentures maturing in 2027 is the strategic review committee’s highest priority, and the company is considering non-dilutive options.
Brisebois said progress on CAD 50 million of asset monetizations has been slower than desired, but AGI aims to have the proceeds in hand by the first half of 2027. He added that other initiatives, potentially including business-line sales, are in progress.
Uddin cautioned that free cash flow would not necessarily remain at recent levels every quarter, as AGI typically builds inventory in the first quarter. He said the company was comfortable with its available liquidity to manage that seasonal buildup.
About Ag Growth International (TSE:AFN)
Ag Growth International Inc. is a leading manufacturer and supplier of equipment and solutions for the agriculture, fertilizer, feed, food and commercial sectors. With manufacturing facilities and operations on six continents, AGI provides complete systems and services that support producers and processors throughout the agricultural value chain.
