Ag Growth International Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
January 9, 2026

Key Takeaways

  • Negative Sentiment: AGI delayed its Q3 filing after an audit committee review of Brazil operations identified a material weakness in internal controls related to complex project accounting and segregation of duties, and remediation plans are underway.
  • Positive Sentiment: Despite the delay, Q3 results showed solid operational performance with consolidated revenue of CAD 389 million (+9% YoY) and Adjusted EBITDA CAD 71 million (+4% YoY), which management attributes to strategic execution.
  • Positive Sentiment: Commercial momentum—especially in Brazil and other international markets—combined with an order book of about CAD 667 million and a newly launched Brazilian investment fund to monetize long-term receivables is expected to provide liquidity and support deleveraging into early 2026.
  • Negative Sentiment: The North American farm market remains soft with dealer inventories still above historical norms and management expects Q4 Adjusted EBITDA to be lower sequentially and year-over-year, while pursuing facility consolidations, ERP deployments, and other cost actions to improve 2026 margins.
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Earnings Conference Call
Ag Growth International Q3 2025
00:00 / 00:00

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Operator

Thank you for standing by. This is the conference operator. Welcome to the AGI third quarter 2025 results conference call and webcast. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star, then one on your telephone keypad. As a courtesy to management and other participants on the call, please limit yourself to two questions and rejoin the queue if you have further questions. Should anyone need assistance during the conference call, they may reach an operator by pressing star, then zero. Before we begin, we caution listeners that this call contains forward-looking information and that actual results could differ materially from such forecasts or projections. Further, in preparing the forward-looking information, certain material factors and assumptions were used by management.

Operator

Additional information about the material factors that could cause actual results to differ materially from the forecasts or projections and the material factors and assumptions used by management in preparing the forward-looking information are contained in our third quarter MD&A and press release, which are available on the AGI website. I would now like to turn the conference over to Paul Householder, President and CEO of AGI. Please go ahead, sir.

Paul Householder
President and CEO at AGI

Good morning, and thank you for joining AGI's third quarter 2025 results call. Today, I'll review our Q3 performance and how the execution of our strategy is driving results. After my remarks, I'll turn the call over to Jim for additional commentary on the quarter. I'll begin with safety, which remains a top priority at AGI. Our recordable incident rate decreased 15% year over year to a new all-time low. In addition, more than half of our production facilities have now surpassed one year without a lost-time accident, clear evidence of our progress on safety and the benefits of embracing a zero-harm culture. We continue to invest in proactive measures, including enhanced training, digital monitoring, and near-miss reporting. Safety isn't a standalone metric; it's embedded in how we plan, operate, and make decisions each and every day across the entire company, from our facilities to our corporate offices.

Paul Householder
President and CEO at AGI

To begin our prepared remarks this quarter, I would like to first address the delay in filing our results. This quarter, we experienced a delay in our third quarter filings and were unable to meet the prescribed timelines for releasing financial results and related disclosures. We concluded that further time was required to confirm and finalize the accounting treatment of operations in Brazil, as we had become aware through our internal channels of various financial reporting and internal control matters that required additional time to evaluate. Additionally, over a relatively short period of time, we created and launched a new business model, secured several large and comprehensive projects, and formed an investment fund to support current and future projects. These measures, while delivering favorable profitable growth, added significant complexity to our business, which contributed to our auditors needing to fully review.

Paul Householder
President and CEO at AGI

Additionally, our audit committee performed an independent and comprehensive review of various matters relating to our financial reporting and internal controls with respect to operations in Brazil. Through this comprehensive review, we identified specific opportunities to improve our financial reporting processes and internal controls related to Brazil. These findings were determined to constitute a material weakness in our Internal Control over Financial Reporting. We are actively addressing this material weakness and have initiated remediation measures, which are further detailed in the Disclosure Controls and Procedures and Internal Control over Financial Reporting section of the MD&A. Turning to a recap of our Q3 results, as well as a broader discussion on our key corporate strategies, AGI delivered a solid quarter with growth in both revenue and adjusted EBITDA, despite a challenging market segment backdrop. Consolidated revenue reached CAD 389 million, which represents 9% growth year-over-year.

Paul Householder
President and CEO at AGI

Importantly, this is consistent with our prior commentary on realizing second-half revenue growth. Adjusted EBITDA came in at CAD 71 million, up 4% versus prior year. Our third quarter results reflect both the strength of our strategy and the realities of our markets. While the North America farm market navigates challenging ag equipment dynamics, our commercial segment, in particular within the international regions of our business, is quite strong and continues to demonstrate a steady growth profile. Our third quarter results are perhaps the clearest example yet of the benefits we're realizing from the successful execution of the key strategies and tactics put into place over the last few years. AGI is now better positioned to capitalize on market opportunities across diverse geographies. As a reminder, we've organized our corporate strategies into three areas: profitable organic growth, operational excellence, and balance sheet discipline.

Paul Householder
President and CEO at AGI

As we get into our third quarter results, I'd like to use this framework to provide updates across all three of these areas, including where these strategies have been implemented over recent years and how they are delivering value and supporting growth potential. I'll begin with profitable organic growth. Recall this strategy included three areas: product transfers, emerging markets, and growth platforms. An inherent strength of our strategy is that each of these areas is interrelated, which serves to reinforce their effectiveness. I will address each in order. Undoubtedly, product transfers have been a growth driver for AGI. As a reminder, product transfers involve taking highly successful products from one region within AGI and running an internal transfer program to migrate the sales through-to-manufacturing capabilities to other attractive regional markets.

Paul Householder
President and CEO at AGI

Product transfers often include some local market product customization to ensure it will fit the requirements of a new customer base within that new region. Similar to the first half of the year, international commercial segments benefited from our efforts on executing product transfers. Customer demand for complete solutions is high in Brazil, and our team is actively advancing several major projects secured in both 2024 and 2025 across food, feed, and fertilizer, in addition to our long-standing presence in the grain market. All these elements have come together to deliver strong customer engagement and a high pace of activity. Our comprehensive offering is a competitive advantage, which has enabled us to rapidly grow market share in one of the most strategically important and high-growth agriculture markets in the world. We are encouraged by the highly active pipeline and note the significant opportunities remain as we move into 2026.

Paul Householder
President and CEO at AGI

Product transfers have also been a key part of our success in areas outside of Brazil. In India, our storage bins, permanent material handling, and portable material handling solutions have added important capabilities, which are providing top-line stability and serving as a catalyst to access large and rapidly growing markets within India and across Asia-Pacific. As a relatively early entrant into this emerging market, we remain optimistic about the potential of these new in-country capabilities to provide long-term profitable growth. Food, feed, and fertilizer product transfers are the next areas of focus for India as we look towards 2026 and beyond, building on our success in Brazil. The second pillar of our profitable organic growth strategy is a focus on emerging markets, particularly within our EMEA business. A strategic deployment of business development resources into the Middle East has yielded several large project wins.

Paul Householder
President and CEO at AGI

Activity has also been steady in Africa and Southeast Asia, with a consistent stream of new project wins. Preliminary visibility into potential new projects in Ukraine has begun to emerge. In aggregate, we have expanded our presence in many areas of the world, which supports the overall diversification and resilience of our business. Finally, the third pillar of our profitable organic growth strategy is our growth platforms. These include food and feed equipment businesses, as well as our digital products. These businesses have a focus on enhancing processing capabilities, which naturally complement our core storage and handling expertise. In addition, these areas all participate in very large and growing addressable markets. So far, our efforts have been mostly on enhancing and developing solution offerings, leveraging capabilities within AGI and pulling them together into comprehensive standalone global business units.

Paul Householder
President and CEO at AGI

With that process largely complete, we are now gaining momentum and making positive contributions to our financial results. The feed business has a large pipeline with numerous opportunities in advanced quoting stages. The food platform is benefiting from concentrated efforts to develop new customer relationships and diversify across global end markets. And finally, the digital business, which has primarily been a North America offering, is now being taken to new regions around the world, most notably into Brazil. Overall, these three strategies, implemented just a few years ago, have generated favorable financial and strategic results for AGI. These strategies are collectively driving the above-market growth we are delivering in the commercial segment. As conditions in the farm market eventually stabilize, our strategy provides upside potential to our results, which fundamentally did not exist just a few years ago.

Paul Householder
President and CEO at AGI

A few further comments on the other two core elements of our corporate strategy: operational excellence and balance sheet discipline. Our operational excellence program continues to progress and is designed to optimize the business and deliver margin-enhancing efficiencies. Two significant facility consolidations within North America are nearing completion, enabling us to streamline production and remove costs, helping to create a more agile manufacturing network that can quickly and efficiently respond to market shifts and customer needs. In addition, towards the end of 2025, we also divested one of our smaller non-core Canadian facilities to a new owner, further streamlining our footprint within North America. Building on these consolidations, we've advanced several initiatives to optimize manufacturing throughput and streamline our supply chain. Our teams have implemented process improvements across key sites, rationalized product lines, and enhanced logistics coordination.

Paul Householder
President and CEO at AGI

These efforts are already delivering benefits in cost structure and working capital efficiency and set the stage for improved profitability as volatile market conditions stabilize and demand rebounds in the North America farm market. Finally, our ERP implementation remains a cornerstone of our overall transformation. This enterprise-wide initiative is now progressing through a series of deployment phases. Once fully implemented, our new ERP platform will unify our systems, accelerate quoting and engineering workflows, and unlock significant efficiencies across finance, operations, and supply chain, among other areas, which all ultimately serve to enhance the customer experience. This expanded organizational capability will deliver cost savings in addition to the potential for additional revenue through a more effective and integrated information system.

Paul Householder
President and CEO at AGI

While we are encouraged by the progress we've made in managing what is in our control by streamlining costs and finding more efficient ways to operate the business, as we look toward 2026, we expect to take additional steps to improve our operating efficiency across North America. These actions are designed to both optimize our operating cost structure while enhancing the customer experience. The measure of success of these actions will be to strengthen our North America operating margins across 2026. Finally, an update on our balance sheet discipline strategy. We continue to make meaningful progress on working capital, advancing the deployment of upgraded and consistent processes, tools, and capabilities to each of our facilities, and improving overall working capital visibility and control across the organization. In September, we launched a new commercial investment fund in Brazil, complementing the existing farm structure.

Paul Householder
President and CEO at AGI

This innovative investment vehicle allows us to bring differentiated offerings to the market while monetizing AGI's long-term financing receivables tied to large commercial projects. With the fund now in place, future cycles of project financing and receivables monetization will be more streamlined, creating structural competitive advantages for our Brazil business. The first monetization of financing receivables occurred shortly after Q3. We expect additional inflows in early 2026, providing both liquidity and support for debt reduction. Finally, through a partnership with a leading Canadian financing institution, we have initiated a payables optimization program aimed at improving terms and increasing our average length of payables with certain high-volume suppliers. This will help maximize cash flow and incrementally further reduce overall working capital. Moving on to our order book. Our current order book remains healthy, supported by momentum in the commercial segment.

Paul Householder
President and CEO at AGI

At the end of the quarter, our order book stood at approximately CAD 667 million, up slightly year-over-year. Consistent with the first half of the year, the order book is heavily weighted toward commercial, given ongoing industry-wide challenges in the farm ag equipment segment. With over 90% of the order book allocated to commercial, our order book is more impacted by the timing of successfully winning large commercial projects. The overall composition of our order book reflects a strategic shift toward higher-value projects with longer execution timelines. This approach enhances revenue visibility, strengthens customer relationships, while partially mitigating the impact from the slow farm segment activity. A few comments on tariffs and recent developments. Tariff dynamics remain fluid, and our internal teams are actively monitoring developments across key markets. New regulations and increased tariff rates were introduced in the third quarter.

Paul Householder
President and CEO at AGI

Our teams continue to explore available avenues to mitigate the effect of tariffs, including modifying and redesigning our supply chain. Overall, our agile organization, global sourcing strategies, and flexible supply chain enable us to manage these uncertainties effectively, minimizing disruption and margin impacts. We will continue to closely monitor the situation for new developments. Progressing through the fourth quarter, activity and quoting pipeline across our international commercial segment remained steady. However, soft sentiment across the North America agriculture sector, particularly in our Canadian farm business, continues to weigh on our overall performance, with unclear timing for a meaningful farm market recovery. The near-term focus for our North America farm business is order intake and a successful execution of our Early Order Program.

Paul Householder
President and CEO at AGI

In addition, business activity in India and North America commercial, historically strong markets for AGI, began to slow through the end of the year, with expectations to remain subdued into early 2026. Despite these headwinds, the strength of our order book within certain areas of the commercial segment highlights the resiliency of our diversified business model, helping to partially offset the challenges across certain markets. Overall, Q4 expectations are for lower adjusted EBITDA sequentially and versus prior year, largely from challenging market conditions, negative mix, and notably higher SG&A costs from a comparatively lower prior year. We remain excited about the potential of the company with the compounding impact of our strategy delivering international commercial momentum, combined with an eventual rebound in the North America ag equipment segment. I'll now turn the call over to Jim.

Jim Rudyk
CFO at AGI

Thank you, Paul, and good morning, everyone.

Jim Rudyk
CFO at AGI

Today, I'll touch on a few areas that include an overview of our third-quarter results, an update on key balance sheet metrics, some comments on cash flow, and a quick recap of our capital allocation priorities. Total revenue for Q3 was CAD 389 million, up 9% year-over-year, while adjusted EBITDA reached CAD 71 million, an increase of 4%. Adjusted EBITDA margin came in at 18.2%, down about 100 basis points from last year, primarily reflecting the mixed shift toward commercial projects. Our commercial segment continues to deliver strong year-over-year revenue growth. This performance reflects our execution of large-scale projects across multiple international markets. Brazil remains a standout contributor. Customer demand for comprehensive solutions is high, and our team is actively advancing several major projects secured in both 2024 and 2025.

Jim Rudyk
CFO at AGI

Thanks to our product transfer program, technical support from strategic third-party partners, and customized financing options, we are able to maintain a high pace of activity. Elsewhere, our EMEA region continues to make meaningful contributions, driven by the execution of several major projects in the Middle East and Africa. Strong third-quarter revenue growth was coupled with excellent cost control initiatives to enable an outsized capture of incremental adjusted EBITDA contribution from this region. As a result of execution of large-scale projects, increased volume, and disciplined cost containment, our commercial segment's adjusted EBITDA margin expanded to 19.5%, up from 17.9% year-over-year.

Jim Rudyk
CFO at AGI

It's worth clarifying that we did have some commercial revenue, which was anticipated in Q4, move into Q3 based on project timing and accelerated achievement of certain milestones, though this doesn't impact our overall outlook for second-half revenue growth on a fully consolidated basis, which also includes expectations for a strong Q4 result for our commercial segment. Turning to our farm segment, while overall revenue declined this quarter, performance varied across regions. Brazil showed improvement with revenue and order book up quarter over quarter. The U.S. saw only a slight revenue decline and early signs of order book stabilization, and Canada softened after a strong 2024, with conditions now broadly in line with the U.S. Low commodity prices continued to pressure farmer income, and while dealer inventory for portable equipment declined through Q3, it's still above historic levels.

Jim Rudyk
CFO at AGI

As a result, our farm segment adjusted EBITDA margin remains compressed due to lower volumes and an unfavorable product mix. We recently launched our annual Early Order Program for portable grain handling equipment, a category hit hard by current market conditions. Adjustments have been made to better align with today's environment, but early feedback suggests purchasing trends may mirror last year's weak performance. While the program offers insight into sentiment, it's too early to call a trough in the overall market. Conditions remain challenging, and we're focused on cost control and preparing for recovery. The simple reality is that industry conditions within our farm market have not changed. Crop prices are still low, dealer inventories are still high, and tariffs and subsidy support remain uncertain. We expect the near-term uncertainty in the North American farm market to persist into early 2026.

Jim Rudyk
CFO at AGI

One final comment on some of the details of our adjusted EBITDA in the quarter. It's worth calling out the transactional, transitional, and other line item in our adjusted EBITDA reconciliation. We have diligently worked to reduce this figure as we have now progressed through several one-time expenses and projects related to streamlining the business. As a percentage of total adjusted EBITDA, this line item is largely immaterial this quarter. While certain transient projects and one-time expenses can come up on occasion, we believe we are now in a place where this line item should be smaller and less variable than prior quarters, enhancing our overall earnings quality. Moving on to our balance sheet and cash flow. Our net debt leverage ratio held steady at 3.9x on a quarter-over-quarter basis.

Jim Rudyk
CFO at AGI

This was primarily due to the sizable, but temporary working capital investments required to support large-scale projects, particularly in Brazil. Importantly, operating cash flow in the quarter remained strong, demonstrating the underlying strength of our business, though free cash flow was impacted by the requirement for some additional project financing in Brazil. We anticipate this cash flow dynamic will shift in the coming months and quarters as the previously announced investment fund set up in Brazil steadily monetizes these long-term receivables. This increases our cash flow while decreasing our overall working capital investment. The process of monetizing these receivables through the investment fund has already started, with AGI collecting some initial inflows in Q4. As we proceed into 2026, further monetization actions are expected.

Jim Rudyk
CFO at AGI

Strategically, with the investment fund in place, further projects and related transactions will be able to more rapidly move through our balance sheet and produce cash inflows, a unique advantage for AGI in the Brazilian market. Finally, a few comments about our capital spending plans for 2025. We remain on pace for total CapEx of approximately CAD 30 million for the full year 2025, with about CAD 21 million incurred through the third quarter. The expenses for our ERP implementation are not included in these figures. We're continuing to evaluate larger, more strategic capital investment opportunities and are advancing planning efforts in parallel. In closing, I would like to reiterate the importance of AGI delivering a solid Q3 amid varied market conditions. This is a tangible signal that our strategic initiatives are working and delivering real value to the business.

Jim Rudyk
CFO at AGI

Thank you for your continued support, and we look forward to updating you on our progress in the quarters ahead. Now, back over to you, Operator, to open up the call for questions.

Operator

Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. As a reminder, please limit yourself to two questions and rejoin the question queue if you have further questions. We will pause for a moment as callers join the queue. The first question today comes from Gary Ho with Desjardins. Please go ahead.

Gary Ho
Gary Ho
Research Analyst at Desjardins

Thanks. Good morning, gentlemen.

Gary Ho
Gary Ho
Research Analyst at Desjardins

Just maybe to start off with respect to the reporting delay, there's a lot of accounting and legal jargon in the release. So maybe just can you walk us through kind of what the weaknesses in internal controls were related to? Was it uncertainty with revenue recognition, segregation of duties? Maybe just high level, what didn't the accountants get comfort with? And I'm assuming that's all been resolved and working through the remediation. We shouldn't experience any delays looking out.

Jim Rudyk
CFO at AGI

Hey, Gary. Thanks for the question and good morning. Yeah, and so we did a lot of business opportunities in Brazil happened throughout the year, large projects, complex projects, new stuff to us. And we felt it necessary to do a deeper dive in our operations in Brazil.

Jim Rudyk
CFO at AGI

Really, it was great to make sure that we established the right foundation and structure because these opportunities are quite large, and we expect them to continue for quite some time. We took the time, and as you can probably appreciate, new businesses, new things going on, and studied how we were doing anything. The areas of focus that came out of it centered around a few areas related to things that you'd probably expect, segregation of duties. In new businesses, typically, you have fewer people involved running with them and doing things. We have an opportunity to have more people involved, spread that responsibilities around, improve our segregation of duties. From a technical accounting perspective, these deals and the legal agreements are quite complex. There's an opportunity there.

Jim Rudyk
CFO at AGI

I mean, we rely on third parties, but there's an opportunity there to enhance our specific accounting knowledge in these complicated areas and help with training people, providing more information for people, and having more people internally be involved in the process. And then the last thing too that we're establishing is really just extra review processes and making sure that all the right sets of eyes are involved, scrub it, and make sure that everyone's comfortable going forward. I think this is something that happens inevitably whenever a business gets involved in a new area. And so fortunately, we were able to do all the work and quite exhaustive work and come out of it with a very good remediation plan.

Paul Householder
President and CEO at AGI

Yeah. And maybe, Gary, just building on that to the second half of your question, building on Jim's comments, yes, that remediation plan, which is outlined in the MD&A, we've obviously internally built that out into a pretty comprehensive plan that our teams are focused on executing and implementing. And then the whole intention there, obviously, Gary, is to better position us to handle these projects in the future and avoid any type of delays in the future, again, to the second half of your question.

Gary Ho
Gary Ho
Research Analyst at Desjardins

Great. Thanks. Okay. And then my second question, just on the maybe for Jim, just on the long-term receivables that moved up, CAD 127 million in Q2, CAD 169 million in Q3. I know you talked a little bit about the Brazil financing vehicle. Maybe just walk us through how quickly you can monetize these receivables and bring cash in and deleverage throughout 2026.

Jim Rudyk
CFO at AGI

Yeah. So we did an announcement a little while ago about we put the fund in place. The fund is quite sizable and allows us to fund. It's now increased, actually, but we announced a CAD 1.2 billion, or sorry, size of availability. That structure is put in place. It's a unique solution. So part of the challenge of taking some time is this isn't an off-the-shelf solution. We've been working with our partners to get that put in place properly. It's in place. We have the investors lined up. The money's committed. And so now it's a matter of administratively for each of our deals, making sure all the steps are followed. And so that's what's taking a bit of time. The administrative process for some of these tasks in Brazil is onerous. And so we expect to have those completed through the early part of 2026.

Jim Rudyk
CFO at AGI

No risk on the funding, no risk on things being done. It's really more procedural, administrative. You've got a lot of from a legal perspective. Part of the great feature of what we've put in place is that we have lower cost of funding. The reason for that is because we've got we're not just selling receivables. There's some collateral involved. That collateral needs to be registered. That requirement is just administratively takes a bit longer in Brazil.

Gary Ho
Gary Ho
Research Analyst at Desjardins

Okay. Maybe just a final point. As we end next year, from now until end of 2026, how much do you think you can monetize through that or arrange?

Paul Householder
President and CEO at AGI

Well, it depends on the opportunities that we continue to take on. So we expect of the current opportunities that we have, we would monetize a good percentage of it.

Paul Householder
President and CEO at AGI

So we've talked about in the past monetizing 60%-80% of the amount of the sales at a minimum. And so we expect to continue to that. That would be our expectation of the percentage. We do keep some of the financing ourselves, but our intention and the way we're setting this up, Gary, is to make sure that all of our costs are funded through this monetization vehicle so that effectively we're not dipping into our working capital or to our own cash to fund these deals or the cost of these deals.

Gary Ho
Gary Ho
Research Analyst at Desjardins

Okay. That makes sense. Okay. Thanks for this. I'll requeue and congrats on pushing through and getting these out.

Paul Householder
President and CEO at AGI

Thanks, Gary.

Operator

The next question comes from Steve Hansen with Raymond James. Please go ahead.

Steve Hansen
Steve Hansen
Managing Director at Raymond James

Yeah. Good morning, guys. Thanks for the time. Look, real mixed emotions over this filing delay and the outcome, frankly.

Steve Hansen
Steve Hansen
Managing Director at Raymond James

I mean, I don't know. I don't think anything about it was normal, really, from an external standpoint. I think it just has to be said. I can appreciate the need for all the deep dive. That stands to reason. But the delay was nothing normal course. But maybe just a question about it all. Were you surprised by the outcome at all? And why did it take so long? Ultimately, is the question. And again, the complexity I can understand, but the timing and the delay, I don't think I really understand. So just maybe when you got into this, was it a surprise to you that it would take so long to go through all this review with the auditors? Or maybe just give us a sense for how the outcome reflected your initial expectations. Thanks.

Paul Householder
President and CEO at AGI

Yeah. Thanks, Steve. Appreciate the question.

Paul Householder
President and CEO at AGI

Certainly appreciate the sentiment as well shared by us. As Jim commented, the activity that we undertook in Brazil was quite complex. The complexity was related to both the projects as well as the fund that was set up that Jim just outlined. As we started to understand that it was going to take more time to complete the audit and complete the internal reviews, compounded by some concerns and questions that were raised internally, Steve, the focus quickly went to making sure that we got this right. So we were patient. We worked through it diligently. We wanted to make sure that we got it right. We wanted to make sure that we flushed out all of the opportunities for improvement so that we were better set up to handle this type of activity in the future. Net-net, it did take a while. That was certainly unfortunate.

Paul Householder
President and CEO at AGI

It was compounded a bit by some of the holiday seasons that we ran into. But to get to your question on the outcome, as Jim outlined and as written in the MD&A, some very valuable opportunities for us to enhance the structure of our finance and accounting procedures related to these, which, again, as we implement those changes, will better position us in the future.

Steve Hansen
Steve Hansen
Managing Director at Raymond James

Okay. Appreciate that. Just turning back to the fundamentals then for a minute. Can you maybe just describe where you think we're at on the inventory side for portable in North America? I know you described it as above average, but it has been coming down, I think, by most accounts. The question is, when do we start to get to sort of that sort of basement level or normalization level where we can start to move off the floor?

Steve Hansen
Steve Hansen
Managing Director at Raymond James

Because this all integrates back into your own production profile, of course. Where do you think we're at? Are we 10% above average, 50% above average? Just give us a sense for that. And then how you think the front half of the selling season is going to play out here, and can we get back into sort of a higher operating rate in the back half? Thanks.

Paul Householder
President and CEO at AGI

Yeah. Terrific question, Steve. And obviously, our portable product line, fundamental to our farm business, very important across North America as well, certain pockets internationally. As you rightfully point out, and as we've been commenting on the past, one of the headwinds that we have had with our portable equipment is a high level of inventory that's been maintained at our dealers. That inventory level has really spiked at the tail end of 2024.

Paul Householder
President and CEO at AGI

The teams have really done a nice job partnering with our dealers across North America to implement various incentives to work that dealer inventory down. I would say, Steve, across the first half of 2025, those inventory levels were a bit slow to move. That certainly accelerated across the second half of the year. We end 2025 in a much better inventory position than we started. As you noted, it's still above historical levels, but we're getting much closer. There's not a holistic answer to that question, and what I mean by that, Steve, is in the U.S., our inventory levels are actually in a bit of a better position. That's likely because the challenges that we saw in the market started first in the U.S., and so that cycle is just a little bit more progressed.

Paul Householder
President and CEO at AGI

And you see that in our portable inventory levels being in a little bit of a better shape. We're confident that we're going to see the same result up in Canada, certainly across the first half of 2026. Jim did comment that our early order program continues to progress. At this point in time, we see it slightly ahead of where we were last year. And again, that's predominantly on the strength in the U.S., and that improved dealer inventory levels.

Steve Hansen
Steve Hansen
Managing Director at Raymond James

Appreciate the call. Thanks.

Paul Householder
President and CEO at AGI

You got it, Steve.

Operator

The next question comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Andrew Wong
Andrew Wong
Equity Research Analyst at RBC Capital Markets

Hey, good morning. Thank you for taking my question. So maybe we'll just start with, in the commercial segment, the large-scale projects in Brazil, they've been a big success in terms of driving revenue, and they account for a lot of that year-over-year revenue growth in 2025.

Andrew Wong
Andrew Wong
Equity Research Analyst at RBC Capital Markets

So maybe just two questions. One is, how long do you anticipate these projects run for? And is there enough momentum to kind of sustain that level of revenue or even grow that level of revenue in the coming years? Or should we expect maybe some more variability in the contribution year to year, just given how large these projects are? And then secondly, could other competitors also implement a similar receivables monetization type of solution like you have right now? Thank you.

Paul Householder
President and CEO at AGI

Yeah. Andrew, terrific question. Thanks for that. We are encouraged. We are excited about these large-scale projects that we've done. The team's done an excellent job really building very valuable customer relationships in this area that position us very well to look at future projects. Our pipeline here is attractive. It is that the opportunities do exist going forward.

Paul Householder
President and CEO at AGI

We'll continue evaluating those opportunities, looking to make the best decisions to deliver value to the company. So the opportunities do exist. We enter 2026 with some projects still in our order book that we will execute across 2026. So those will contribute to our 2026 results. In addition to that, there are opportunities for us to sign new deals within the year that could also further contribute. But again, we'll look to evaluate each of those on a case-by-case basis. You do, Andrew, raise a very valid point in terms of the variability because these are large projects, right? The signing of them comes in chunks. So if and as you sign one or two projects in a certain quarter, you see the impact initially in the order book and then translates later into our revenue. So you are right.

Paul Householder
President and CEO at AGI

This does create a bit of a lumpiness and a variability in our order book. Obviously, the revenue recognition and the percentage of completion helps steady that out a bit from a financial results standpoint. Your final point there, Andrew, from a competition element, I mean, it's certainly possible for competitors to implement similar programs as we have. That being said, it's a heavy lift. And we would say that we have a significant head start that would form a level of differentiation for some time yet before any competitor is in a position to mirror what we've been able to put in place, both from a financial structure standpoint as well as partnership, execution capabilities, and other areas.

Andrew Wong
Andrew Wong
Equity Research Analyst at RBC Capital Markets

Okay. Great.

Andrew Wong
Andrew Wong
Equity Research Analyst at RBC Capital Markets

And then maybe just on other parts of the commercial segments, obviously, Brazil has been strong, but it sounds like there maybe was some headwinds or a little bit of slowdown in India and North America. Can you just maybe comment on that and provide a little bit more details? And then just looking at the order book, it's up about 1% in Q3. Is that a reasonable growth expectation for 2026? I'm just trying to help maybe just help us frame how to think about commercial in 2026, just given how much of a big revenue driver it was in 2025.

Paul Householder
President and CEO at AGI

Yeah. Terrific, Andrew. All good points there. All good questions. But let me take them individually. We'll start out at India. We really like our India business, our India position. That's been focused traditionally on rice milling for the past four or five years, really up to 2025.

Paul Householder
President and CEO at AGI

We experienced tremendous growth, very strong market conditions. We have seen those market conditions shift across 2025, particularly in the second half of the year. We expect those market conditions to remain soft entering 2026. Andrew, at a very high level, it's a similar dynamic as we're seeing in North America, but at a different magnitude, obviously not at the same magnitude. But yeah, basically, it's supply-demand. The supply of rice is quite high. The demand is lower. That puts pressure on pricing. It puts pressure on the overall supply chain and ultimately leads to a softening of demand. And we expect it to take yet a couple of quarters for that to work through. So that's our position on India, specifically on the rice milling. Fortunately, we've been very successful in product transfers in our grain handling and storage area, the bins, the material handling.

Paul Householder
President and CEO at AGI

That gives us another avenue to explore market growth, which we expect can partially offset some of that headwind in India. To the next part of your question, North America commercial, yes, we have seen some softening of that market activity really coming on here in just the latter part of 2025. We expect those softening conditions to continue in 2026. Would suggest that this is consistent with some of the difficult farm ag market conditions that we have been experiencing over the past 18-24 months, now translating a bit over to the commercial segment impacting investment decisions. So the same kind of dynamics, lower commodity prices, trade uncertainty, volatility, and tariffs likely impacting investment decisions around the commercial business in North America.

Paul Householder
President and CEO at AGI

Another dynamic is we have seen that investment by a large grain trader shift from North America out to the international and into emerging markets where they see a lot of growth potential. Fortunately, our business positions in these markets enable us to capitalize on that. Finally, the order book, yep, we're pleased with where the order book is right now. We still have Q4 to work through, Andrew, before we have visibility into 2026. As we've commented, we remain cautious on the outlook for 2026. We are now saying that the trough in North America was not 2025. We expect those soft conditions to persist into 2026. We also anticipate, because our order book is weighted so heavily to commercial, that the timing of signing large commercial projects will impact our order book.

Paul Householder
President and CEO at AGI

If we don't sign large projects in one quarter and then we do a next, obviously, you'll get swings in the order book. So we're looking forward to 2026, the challenges of 2026. We do anticipate that the challenging market conditions will persist.

Andrew Wong
Andrew Wong
Equity Research Analyst at RBC Capital Markets

Okay. Appreciate all of that detail. Thank you very much.

Paul Householder
President and CEO at AGI

You got it, Andrew.

Jim Rudyk
CFO at AGI

Thanks, Andrew.

Operator

The next question comes from Michael Tupholme with TD Cowen. Please go ahead.

Michael Tupholme
Michael Tupholme
Director at TD Cowen

Thank you. Good morning.

Jim Rudyk
CFO at AGI

How are you doing, Michael?

Michael Tupholme
Michael Tupholme
Director at TD Cowen

Good morning. Just regarding the filing delay and the review that was completed by the audit committee, I guess I'm just wondering if you can talk a little bit about whether or not this was - I mean, it seems clearly like it was focused on Brazil, but was there any consideration given to possibly needing to look at any other areas?

Michael Tupholme
Michael Tupholme
Director at TD Cowen

Then as it relates to the remediation plan, can you sort of lay out a bit of a roadmap as to how that's going to unfold and at what point you would expect for all of the measures to be implemented?

Paul Householder
President and CEO at AGI

Yeah. Thanks, Michael. But two good questions there. And again, I think we've covered a good bit of this in our MD&A. But just to further, yes, the focus of the audit was specifically on Brazil. We did not have any reasons, nor do we have any concerns to look into any of our other regions. So yeah, just to be clear on that, the focus of it was specifically on Brazil. In terms of the remediation plan that is outlined in the MD&A, obviously, we have built that out into further details here internally. We are signing accountabilities on the specific actions.

Paul Householder
President and CEO at AGI

We're putting a project plan in place that has specific timing around it. This is obviously a top priority for us, and we will work through it diligently. Our plan is to get this implemented as quickly as possible. We don't yet have a specific timing in which all of these items will be completed. It will probably vary. Some of the things we'll get done and put in order pretty quickly. Others, when you talk about training, knowledge transfer, and learning across the organization, that could take a little bit more time. But nonetheless, this is a top priority for us, and we'll get it done quite quickly.

Michael Tupholme
Michael Tupholme
Director at TD Cowen

Okay. That's helpful and good to understand. Regarding the commentary you provided around the fourth quarter specifically, you're talking about a sequential decline in adjusted EBITDA. I'm wondering if you can provide any more detail on that.

Michael Tupholme
Michael Tupholme
Director at TD Cowen

It'll look particularly given the fact that we're in early January here. And also maybe to what extent this is reflected in sort of dynamics in farm versus commercial. I mean, I think it's clear that commercials were even seeing most of the strength and farm more challenged. But any kind of commentary at the segmented level? And then I'm also curious about the SG&A costs that you're suggesting are going to be higher in the fourth quarter. Is that specifically related to some of this review process, or is there something else going on? And will these remain elevated, or is this more of a Q4-specific dynamic that ceases to be sort of higher costs when you get beyond Q4?

Paul Householder
President and CEO at AGI

Yeah. Terrific, Michael. I'll address the first half of your question, and then I'm going to turn it over to Jim on the SG&A side. But you're absolutely right.

Paul Householder
President and CEO at AGI

We do expect Q4, as we commented on, to be down sequentially and down versus prior year. A good portion of this is market-related and some of the challenges that we're seeing both in North America, specifically Canadian farm and a bit North American commercial, as well as in India. Those are two business drivers, market drivers that are a headwind to our Q4 results and are impacting EBITDA consistent with what we've outlined in our prepared remarks. SG&A is also a variable when you look to prior year, and I'll let Jim comment on that.

Jim Rudyk
CFO at AGI

Yeah. So Michael, SG&A is more of a Q4 dynamic. Last year, as we entered Q4 and then got caught a bit off guard with the lower-than-expected U.S. farm, our farm results, that required us to do an adjustment to our bonuses primarily across the company. That adjustment was done in Q4 last year.

Jim Rudyk
CFO at AGI

So SG&A last year was slightly lower. This year, we've been on top of the bonus recordings and expectations throughout the year. So you don't have that adjustment as you did in Q4. So really just a one-time dynamic for Q4.

Paul Householder
President and CEO at AGI

Yeah. So just to pick up on, Michael, we wouldn't expect this to be something that continues going forward. SG&A remains a focus for us. We understand the importance of ensuring that our cost structures align with our market and revenue realities.

Michael Tupholme
Michael Tupholme
Director at TD Cowen

Okay. That's helpful. Thank you.

Operator

The next question comes from Tim Monachello with ATB Capital Markets. Please go ahead.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

Hey. Good morning.

Paul Householder
President and CEO at AGI

Hey, Tim.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

Most of my questions have been answered, but could you just remind us, I guess, how much was monetized under the FIDC structure in Q4?

Jim Rudyk
CFO at AGI

Well, so we did monetize some in Q4, a smaller amount.

Jim Rudyk
CFO at AGI

So we'll get into those details as we report our Q4 results. So that's good. So one of the first deals went through the fund. So the fund structure works. We know how that all flows through. And now we're focused on monetizing the other ones as quickly as possible, which will be done in early 2026.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

Okay. And then in terms of some of the efficiency initiatives that you're implementing in 2026, I'm wondering if you could provide a little bit more detail on the facility closures and facility consolidations that are ongoing and the impact that you see to margins due to these initiatives and potentially any operational impacts that you see.

Paul Householder
President and CEO at AGI

Yeah. Tim, thanks. Terrific questions. I mean, obviously, as we've noted, the challenging ag equipment market dynamics have continued in North America across 2025.

Paul Householder
President and CEO at AGI

This does give us an opportunity to continue to review what I'll call our integrated supply chain to ensure that we've got the right and the optimized cost structure. And when I say integrated supply chain, you can think of manufacturing in the middle, but obviously, our suppliers, as well as our inventory, working capital, all of those things fall within that integrated supply chain review. So there is opportunity, given the softness, for us to optimize our cost structure, make sure that we are running an efficient operation. We actually kicked off this initiative just at the onset of Q4. We expect actions to take place across Q4 as well as Q1, which should put us in a better position to run a more efficient operation across 2026. As we've noted, the measure of our progress in this area will be gross margins.

Paul Householder
President and CEO at AGI

When you look at our gross margins across our farm business, they are depressed in 2025. A number of factors are contributing to that. We obviously had tariffs as a headwind. We had a bit of mix within our farm business as a headwind. And then the third one is the point that you brought out, just the opportunity to improve the efficiency of our operation. So we expect to get that in a pretty good shape at the tail end of Q1, which then should be something that is a bit favorable from a margin standpoint in the second half of 2026.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

Can you say any specifics around which facilities are being consolidated and any commentary around maybe proceeds from the facility that that structure received in Q4?

Paul Householder
President and CEO at AGI

Yeah. Yeah, for sure, Tim. So we had two facility consolidations that we initiated throughout 2025.

Paul Householder
President and CEO at AGI

One of those was a facility in North America that we commented on really at the tail end of 2024 as we consolidated our bin manufacturing to our facility in Canada. The second one that we implemented more towards the middle of 2025 was a smaller operation in Canada that we also consolidated within one of our other Canada manufacturing facilities. So of note, both of the consolidations increased our activity within Canada but ultimately improved our manufacturing footprint. In terms of the small facility, non-core, that we moved to a new owner, that did not have a significant impact. I would categorize that, Tim, as less than CAD 10 million.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

Okay. And do you expect any one-time costs or increase in, I guess, transaction transitional or other costs in Q4, Q1 related to some of the initiatives that are being implemented today?

Jim Rudyk
CFO at AGI

Yeah. There will be some additional costs, some legal costs that will run through there, not anywhere near the magnitude of what you've seen in the past. A lot of our, as we commented in the script, a lot of those large unusual items that have happened in the past are behind us, and so going forward, you'll only have a smaller amount of costs that we'll identify out for you to be able to do what you want with in terms of how you view them, but they'll be related to non-operational, just more restructuring-type costs or unusual legal costs, so we did have this work done in Q4, so we'd expect to see a small amount going through there in Q4.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

Okay. Thanks, and then I just want to talk a little bit about, I guess, signals that you're seeing on the demand side in North American farm.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

You've talked about sort of historical cadence of demand and sort of the troughs and how long they last. And it was suggested or seen that you were probably reaching a sort of new record timeline for a dearth of portable demand. And while you see inventories declining at the dealer, do you have any commentary or feedback from your dealers related to, I guess, demand that they're seeing coming in their doors? Is that changing at all? Is it weakening or strengthening in any way?

Paul Householder
President and CEO at AGI

Yeah. Thanks, Tim. Obviously, the North America farm market is one that we're paying extremely close attention to. We're looking at various macro-level indicators that could provide us insights into where we are in this cycle as well, Tim, as you've noted, specific feedback from our dealers and insights on market activity.

Paul Householder
President and CEO at AGI

As we sum all of those insights up, it does lead us to the conclusion consistent with what some of the other players in the market have articulated, that 2025 is not expected to be the trough. Likely, more 2026 is the trough. That's not significantly different from the look back at historical ag market cycles that we've commented previously, where peak to peak can be in a six-year timeframe. So if you put that into context, 2026 as a trough is not unreasonable. Getting to the second half of your question, what are we hearing from dealers? What are we hearing about their inventory levels? As we've commented on from the portable equipment, inventory levels are certainly coming down. That is encouraging. We are in a much better place in aggregate than we were entering 2025. That is also encouraging.

Paul Householder
President and CEO at AGI

A little bit more strength in the U.S. than in Canada, likely from a timing standpoint. So our dealers, I would say, remain cautious. I think that's probably the best description. Our dealers remain cautious heading into 2026, as do we. We recognize the importance of that relationship with dealers. We're partnering with them. We're very close to them on navigating this market cycle. And we'll continue to work forward or work with them going forward.

Tim Monachello
Tim Monachello
Managing Director at ATB Capital Markets

Okay. I appreciate the commentary. Sorry about that.

Paul Householder
President and CEO at AGI

Thanks, Tim.

Operator

The next question comes from Maxim Sytchev with National Bank Financial. Please go ahead.

Maxim Sytchev
Maxim Sytchev
Managing Director at National Bank Financial

Hi. Good morning, gentlemen.

Paul Householder
President and CEO at AGI

Good morning, Max.

Maxim Sytchev
Maxim Sytchev
Managing Director at National Bank Financial

Jim, maybe the first question for you, if I may, just circling back to accounts receivables. And do you mind maybe qualifying sort of should we be concerned around the aging of these receivables? I mean, that's the first kind of part of the question.

Maxim Sytchev
Maxim Sytchev
Managing Director at National Bank Financial

And the second part, when you use the fund to monetize what you already have, so can you just utilize this for new projects, or can you use it sort of in the bucket of overall projects as those are cycling through the percentage of completion dynamic? So can you provide a bit more color there? And I mean, I guess ultimately, it's also sort of linking to how should we be thinking about the free cash flow generation on a prospective basis. Thank you.

Jim Rudyk
CFO at AGI

So, okay. So the first part of your question, Max, in terms of concerns on the aging. So our receivables, overall, generally, the aging has not deteriorated. It remains consistent across our company. We've got extremely, extremely low write-offs historically in terms of concerns with customers not paying. So the aging is not a concern.

Jim Rudyk
CFO at AGI

However, for these new deals, and as you get through and go through the financial statements, you'll see commentary. Terms offered for some of these deals are typically five years. A large one, though, is at 15 years. And so offering that length of financing is why what's exciting about this fund that we've created helps us with. And so we can monetize and reduce our risk of all those finance, the length of that financing time, and by having these investors provide us with the cash upfront. Your question in terms of your second part was about what can I use the fund for? Correct. I mean, it's not just for any type of receivables. It's for these larger projects, certain types of customers where the investors like the profile. They like the dynamics of it. They like the areas, the industry that they're focused on.

Jim Rudyk
CFO at AGI

We have a governance structure set up whereby there's an approval required at the fund level to determine on which projects will get funded. That said, how we set it up was based on the projects that we have in our pipeline and the customers and what we see coming down the pipe. We expect to be able to fully utilize the entire amount of that fund over the coming year.

Maxim Sytchev
Maxim Sytchev
Managing Director at National Bank Financial

Okay. Thank you for that. I guess, do you mind maybe commenting about the inflation dynamic around free cash flow? How we should be thinking about this?

Jim Rudyk
CFO at AGI

Yeah. The timing, it's the free cash flow for this year. If you look at the LTM in our MD&A, it's a negative, CAD -61 million. Initial expectations were for that funding to happen in Q4, which would flip that into a positive.

Jim Rudyk
CFO at AGI

That will be stretched out into early part of 2026, and the funding is significant, and when that does happen, we will not be impacted by doing these types of deals from a free cash flow perspective, so said differently, we expect positive free cash flow in 2026, and we'll be able to continue to take on these larger deals and not have an impact on our free cash flow going forward once this fund is up and running and moving very smoothly through the process.

Maxim Sytchev
Maxim Sytchev
Managing Director at National Bank Financial

Okay. Okay. I'll just think of that, and then, Paul, if I may, just two quick ones. In terms of, I mean, obviously, there was speculation that Kepler Weber could be potentially acquired in Brazil. Just was wondering if you have any initial thoughts on that in terms of the competitive dynamic.

Maxim Sytchev
Maxim Sytchev
Managing Director at National Bank Financial

And if you can also provide a bit of an update on ERP implementation, just in terms of milestones, etc. And that's it for me. Thank you.

Paul Householder
President and CEO at AGI

Yeah. Thanks, Max. Yeah. We're aware of some of the conversations around Kepler Weber that have surfaced publicly. Obviously, we're not going to speculate on how that could play out. As I've noted in prior commentary, Kepler Weber is a good competitor, long-standing competitor down in Brazil. Traditionally, have had the number one market share. We like the competition. We've learned a lot from Kepler Weber. And we expect, regardless of what transpires down there, that they will continue to be a good competitor for us in the market. Regarding ERP, we're now fully in what we would call the deployment phase of ERP. We've completed the global design. We are now deploying it across our facilities. An important milestone.

Paul Householder
President and CEO at AGI

We completed our first deployment at a Canadian facility this year. That was a great learning for the team. Fantastic participation by that facility. Great work by our ERP implementation team. 2026 will be specifically focused on implementations. Our next one is planned for India, which we are targeting to get done somewhere around the first half of this year. And then after India, expectation is that we will move to North American farm. We're excited to get into the deployment phase. We're focused on having a very efficient ERP implementation, but also one that we quickly work through so that we can start to realize the benefits that the new ERP system is going to deliver.

Maxim Sytchev
Maxim Sytchev
Managing Director at National Bank Financial

Okay. Excellent. Thank you so much.

Paul Householder
President and CEO at AGI

You got it, Max.

Operator

The next question comes from Steve Hansen with Raymond James. Please go ahead.

Steve Hansen
Steve Hansen
Managing Director at Raymond James

Yeah. Thanks, guys. Just one quick follow-up.

Steve Hansen
Steve Hansen
Managing Director at Raymond James

Notwithstanding all of the accounting review stuff that we've already talked about, Jim, do you feel like you've got the people and the team in place in Brazil to manage all of these big projects? I'm thinking more on the operational, the engineering side, the upfront side, and then even as it dovetails into that, into the downstream manufacturing side. What else do you need to do to really capitalize on this opportunity? It sounds like it's not 12 months. It sounds like it's multi-year. So just trying to understand what else you need, where you need to invest, if at all, to take advantage of the opportunity. Thanks.

Paul Householder
President and CEO at AGI

Hey, Steve. Excellent question. And that is absolutely one of the areas that we're going to look on and address as part of our comprehensive remediation plan.

Paul Householder
President and CEO at AGI

As we've outlined in the MD&A, specifically around the training and development of that team as we look at these large complex projects, as well as the complexities of the fund transfer that Jim has outlined. We do expect that there could be additional resources that we would look to add to complement the capabilities that we already have in Brazil. As you've noted, Steve, that would be very appropriate given the opportunities that exist in front of us. We want to make sure that we are well set up. We got the capabilities. We got the knowledge to efficiently handle these. So yes, adding resources, adding capabilities down into Brazil is absolutely something that we're going to take a look at.

Steve Hansen
Steve Hansen
Managing Director at Raymond James

Okay. Thanks.

Paul Householder
President and CEO at AGI

You're welcome.

Operator

The next question comes from Krista Friesen with CIBC. Please go ahead.

Krista Friesen
Krista Friesen
Executive Director at CIBC

Hi. Thanks for taking my question.

Krista Friesen
Krista Friesen
Executive Director at CIBC

I was just wondering if there's any other levers you're able to pull on in 2026. Previously, you've talked about a rebate program to try and help stimulate some demand. I'm just wondering if there's anything else that can be done at this point. Thanks.

Paul Householder
President and CEO at AGI

Yeah. It's a terrific question, Krista. And just based on your question, as you're referencing levers, I assume that's related to the North America farm market and what we can do to stimulate demand. What I would say is that we're looking across all available levers. So that is a very appropriate question. We have used rebates, and we continue to use rebates in very targeted areas. And those rebates are around driving down inventory levels, which certainly helps to stimulate demand.

Paul Householder
President and CEO at AGI

We are also looking at a number of different areas, how we can continue to improve our cost structure for our portable equipment so that we can further improve the competitiveness of our products. We actually launched a number of new products on our portable product line. We introduced those new products, Krista, at some of these large farm shows across 2025. Those new product lines were very well received. We've now introduced those out into the market. That is a significant lever for us to pull to stimulate demand. So our product development, product enhancement initiatives, along with cost, along with rebates, are all levers that we would look to pull. So it's a spot-on question, and the team is doing a lot of great work in that area.

Krista Friesen
Krista Friesen
Executive Director at CIBC

Okay. Great. Thanks.

Krista Friesen
Krista Friesen
Executive Director at CIBC

And then, maybe just to think about margins on that front, you spoke to a previous question that the length of this downturn maybe isn't too different than previous ones. Using history as a guide, how are you thinking about margins in 2026? Yeah. Any color there would be great.

Paul Householder
President and CEO at AGI

Yeah. For sure. Krista, we did comment on margins. We commented on the opportunity for us to enhance our operational efficiencies in 2026, a measure of which would be improved margins. If you look specifically at North America Farm, our portable team has done an outstanding job in managing the business and maintaining margins. Really, our focus is more on the permanent side as well as complementing into a North America commercial. So it's in those areas that we want to make sure that we've got the right cost structure in place.

Paul Householder
President and CEO at AGI

We've got the right capabilities built out from a customer service, customer engagement standpoint, and in those areas, we would expect to make improvements in the early part of 2026 that support margins in the second half.

Krista Friesen
Krista Friesen
Executive Director at CIBC

Thanks. That's it for me. Appreciate the color.

Paul Householder
President and CEO at AGI

You're welcome. Thanks, Krista.

Operator

The next question comes from Kyle McPhee with Cormark Securities. Please go ahead.

Kyle McPhee
Kyle McPhee
Analyst at Cormark Securities

Hi. I'd like one final clarification on the Brazil accounting issues. The very back of your MD&A does state that the material weakness cannot be considered remediated yet, and you've defined material weakness as leaving potential for finding or incurring a reporting misstatement, so is it fair to say that we can't yet rule out the need for a restatement or a change to how you account for the operations in Brazil, or is that risk fully gone?

Jim Rudyk
CFO at AGI

The work has stopped in terms of the review, and there was no restatement. So I mean, that's stated in the MD&A. In terms of the timing of getting everything remediated, as Paul talked to earlier in his response, some of these things and activities just take time. And it's really just that simple. Just a number of initiatives being done to put in place. And there's no expectation of any issues of no material adjustments, as you noted. And so it's really just a few of the activities will take some time to put in place.

Kyle McPhee
Kyle McPhee
Analyst at Cormark Securities

Okay. Thank you. And then last one, just can you provide any color on the terms you expect as you monetize these long-term accounts receivable related to Brazil, like pennies on the dollars you're expected to get?

Kyle McPhee
Kyle McPhee
Analyst at Cormark Securities

Notably, given we now see these are 5-10-year receivables, and you do have that first little case study. Looks like you monetized CAD 8 million in Q4. So any color there if you can?

Paul Householder
President and CEO at AGI

So when you say the terms, what do you mean the terms?

Kyle McPhee
Kyle McPhee
Analyst at Cormark Securities

The amount, or are you looking for the amount? Well, you're presumably not selling the receivables at full face value. So I mean, anything you can tell us from what you learned about the first CAD 8 million, at the very least, and how much of a discount?

Paul Householder
President and CEO at AGI

Well, so the rate that we're being charged for the monetization is similar to the rate that we're using to discount what we record. One of the unique features about this whole monetization is the way we've set it up.

Paul Householder
President and CEO at AGI

The collateral that's provided, the percentage of receivable that we're monetizing is very different than your traditional factoring of receivable approach. So the cost to us is significantly lower and fully reflected in our financials.

Kyle McPhee
Kyle McPhee
Analyst at Cormark Securities

Okay. Paul, good luck. Thank you.

Paul Householder
President and CEO at AGI

Yeah. Thanks for the question, Kyle. And we really appreciate all the questions and participation that we've had in the call this morning. We look forward to further discussions on the quarter over the next week. So thanks, everybody, for dialing into the call this morning.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Analysts
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