Regina-headquartered AGT Food and Ingredients Inc. experienced a 35% drop in first-quarter revenue as the company sold and shipped lower volumes of pulses and grains, partly due to the ongoing Middle East conflict. The global agrifoods company, which went public on the Toronto Stock Exchange on March 3, reported revenue of $560.6 million for the quarter ended March 31, down from $860.1 million in the same period last year. This fell short of National Bank of Canada analyst Zachary Evershed's conservative estimate of $636.3 million.
CEO Focuses on Long-Term Growth
Murad Al-Katib, AGT's founder and chief executive, downplayed the revenue decline during a Wednesday earnings call, emphasizing that the company prioritizes other metrics and maintains a long-term growth perspective. "This is normal, but what we target is consistent margin and cash flow," Al-Katib stated. "We won't do business for the sake of showing growth and turnover. It's pointless." He added that all performance measures are based on free cash flow and low leverage, aiming for margin growth to outpace revenue growth, which is typical for food companies.
Financial Highlights and Challenges
Adjusted free cash flow, a non-standard financial measure, improved to $16.4 million for the quarter, up from $13.7 million a year ago, partly due to the sale of shortline rail assets in Saskatchewan. However, the company reported a net loss of $96.9 million, significantly wider than the $4.9 million loss in the prior year, primarily due to one-time IPO expenses of $85.3 million. The IPO, which raised over $596 million and reduced total debt by approximately $920 million, marked the company's first public disclosure of its operations.
Revenue from pulses and specialty crops, which constitute the bulk of AGT's operations, fell by 56% in the first quarter compared to a year earlier. Rice, pasta, semolina, and bulgur also saw revenue declines. In contrast, cereals and oilseeds experienced a nearly 20% increase. The value-added processing segment was hit hardest as the U.S.-Iran conflict caused sales delays and shipping route disruptions. Total volumes of pulses, grains, and staple foods shipped declined by 13%.
Resilience in Packaged Foods
Packaged food and ingredients, a smaller segment of AGT Foods, recorded steady revenue. Al-Katib highlighted this segment as the company's "resiliency" during the Middle East conflict. Despite lower revenue, he expressed confidence in long-term gains, particularly as the company awaits expansions to pasta production capacity in Minot, U.S., and India. Pasta brands, including gluten-free and high-protein products, are expected to be key drivers for future business growth.
Al-Katib also noted that seasonality, harvests, and global food commodity prices contributed to the quarter's results, in addition to the conflict disruptions. The company remains focused on delivering consistent margin and cash flow, with an eye on sustainable growth beyond short-term fluctuations.
