Ag Growth International Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 12, 2026

Key Takeaways

  • Positive Sentiment: Farm results strengthened: Revenue rose 19% and Adjusted EBITDA increased 38%, with North American farm orders more than doubling year over year. Management said the recovery is gaining momentum, though farmer sentiment remains cautious and sales remain below 2023 levels.
  • Negative Sentiment: Commercial remained weak: Revenue fell 29% and Adjusted EBITDA dropped to CAD 7 million, with pressure from geopolitical uncertainty, lower volumes and Brazil project roll-offs. Brazil cost overruns and bad-debt provisions reduced quarterly EBITDA by about CAD 10 million; management expects commercial headwinds to persist into Q4.
  • Positive Sentiment: Cost and operating changes are showing early signs of progress: AGI remains on track for more than CAD 30 million in annualized structural savings and is consolidating underused facilities. In North American Commercial, the company reported improved quoting activity, larger average wins and a 60% win rate on decided projects since July, although margin recovery will take time.
  • Neutral Sentiment: Cash generation improved, but leverage and refinancing remain key risks: AGI generated CAD 27 million of free cash flow and reduced net debt for a second consecutive quarter, while extending its nearest debenture maturity. However, leverage was 6.1x, liquidity was CAD 78 million, and the company is still working on refinancing 2027 convertible debentures and completing asset sales.
AI Generated. May Contain Errors.
Earnings Conference Call
Ag Growth International Q3 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Thank you for standing by. This is the conference operator. Welcome to the AGI Third Quarter 2026 Results Conference Call and Webcast. As a reminder, all participants are in 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. Please note that lines will be muted after two questions, and you are welcome to 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 may contain forward-looking information and discussion, and that actual results could differ materially from such forecasts or projections.

Operator

Further, in preparing the forward-looking information, certain material factors and assumptions were used by management. 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, financial statements, and press release. In addition, our MD&A contains reconciliations on additional non-IFRS terms and measures such as adjusted EBITDA, free cash flow, net debt, and leverage ratios, among others. AGI's third quarter press release, MD&A, and financial statements are available on the AGI website and SEDAR+. I would now like to turn the conference over to Paul Brisebois, President and CEO of AGI. Please go ahead, sir.

Paul Brisebois
President and CEO at AGI

Thank you, operator, and good morning, everyone. Thank you for joining us to discuss AGI's third quarter 2026 results. With me today is Haaris Uddin, our Chief Financial Officer, who joined AGI in August and is participating in his first earnings call with us. Haaris will walk through our financial results in more detail following my remarks. Our third quarter continued a theme we've described throughout the year, two different businesses moving in two different directions. Farm is clearly improving. Year-over-year, farm revenue was up 19%, farm adjusted EBITDA was up 38%, and our North American farm order book more than doubled from a year ago. Commercial, on the other hand, remains under pressure globally, weighed down by the cycle, a cautious macroeconomic backdrop, regional conflict, trade-related uncertainty, and the planned wind-down of our long-term finance projects in Brazil.

Paul Brisebois
President and CEO at AGI

We are not satisfied with our consolidated results, but we know what the issues are. We're fixing the ones within our control, and the progress is measurable. We generated CAD 27 million of free cash flow in the quarter, reduced net debt for a second consecutive quarter, remain on track to deliver more than CAD 30 million of annualized structural cost savings, and continued to simplify our footprint and operating model. After quarter end, with the support of our debenture holders, we addressed our nearest debt maturity. Let me begin with an overview of the quarter. Consolidated results reflect strong momentum in farm, offset by a difficult quarter in commercial. Farm delivered another strong quarter. Revenue increased 19% to CAD 159 million, driven by 23% growth in North America. Farm adjusted EBITDA increased 38% to CAD 38 million, and margin expanded more than 300 basis points to 23.8%.

Paul Brisebois
President and CEO at AGI

Higher volumes, disciplined pricing, and a leaner cost base are all showing up in these results. Commercial revenue decreased 29% to CAD 181 million, and adjusted EBITDA declined to CAD 7 million from CAD 50 million, for a margin of 4.1%. Nearly half of the decline in commercial adjusted EBITDA was attributable to Brazil, roughly a quarter to EMEA and APAC, and a quarter to North America.

Paul Brisebois
President and CEO at AGI

Two items in Brazil weighed on the quarter and are worth calling out directly: a CAD 4.7 million cost overrun on the one remaining Brazil long-term finance project and a CAD 5.4 million provision for bad debts related to certain customers in our traditional Brazil business. Together, they cost us approximately CAD 10 million of adjusted EBITDA in the quarter, taking us from CAD 49 million down to CAD 39 million. The most encouraging part of the quarter continues to be the North American farm.

Paul Brisebois
President and CEO at AGI

At quarter end, our North American farm order book had more than doubled year-over-year, with strength in both portable handling and permanent handling and storage product categories. Order intake has stepped up meaningfully over the last several months. Dealer inventories continue to normalize, and we have implemented price increases across portable and permanent products to help offset steel cost pressure. Our early order program launched in October, and participation to date has been solid. It has given us improved visibility into dealer and customer intentions heading into 2027. Putting this together, the evidence increasingly points to 2025 as the bottom for our farm business. The pace of recovery from here will depend on farmer sentiment, which remains measured, with better commodity prices partly offset by input cost inflation and trade uncertainty.

Paul Brisebois
President and CEO at AGI

That said, while the farm cycle is showing improvement, North American farm revenue is still well below the levels we saw in 2023, which leaves meaningful room to recover. Overall, we are encouraged with our farm business as we head into Q4 and 2027. In commercial, it helps to separate what the market is doing from what we control. On the market side, we are dealing with a tough combination of factors globally: cautious macroeconomic environment, regional conflict, and trade-related headwinds. In EMEA, the conflict involving Iran has effectively frozen near-term opportunities in several Middle East markets and is also having a negative impact on our rice milling business in India. The renewed escalation in Ukraine has put previously approved projects on hold, with knock-on effects in neighboring Eastern European markets.

Paul Brisebois
President and CEO at AGI

We are seeing positive project activity in Africa, and our pipeline and order book continues to build in this region, but it is only a partial offset to challenges elsewhere. I want to spend a few minutes on North America Commercial because it shows how we are simplifying the business and what that can mean for future earnings. Earlier this year, we closed our Chicago area office, which housed a centralized team that owned many processes required to run the business. We returned accountability for quoting, pricing, and execution to our facilities. Since then, we have completed a diagnostic review of our North America Commercial operations, with the key takeaway that, in core facilities, financial underperformance was driven primarily by quoting and pricing on projects booked under the former centralized model. These projects were executed in Q2, Q3, and part of Q4, with a very clear impact on margins.

Paul Brisebois
President and CEO at AGI

Together with low absorption due to lower volumes through core facilities, the misquoted commercial work compounded the challenges in this area of our business. We have already acted on this. Local facility-level leadership now owns the key processes around quoting, and in October, we approved a corrective plan to help accelerate recovery. Some of these lower-margin projects will continue to work through our results for the remainder of the year, but as they are completed and replaced with work quoted by the people who know the product and the customer best, we expect this drag to lift. This is one example, but it reflects a broader principle behind our operational simplification. The people closest to the customer and the shop floor make better decisions. Early indicators are encouraging.

Paul Brisebois
President and CEO at AGI

Since July, North America Commercial has won projects in our quoting pipeline much more consistently, with approximately 60% of decided customer projects won since July, above our 55% target. In addition, versus the first half of the year, our average won deal size is up over 20%, and our quoting activity is up nearly 20%. The pipeline is getting larger, with bigger individual opportunities in it, and we are winning more often. To further support the overall simplification of our business and reduce EBITDA drag where it exists, we continue to simplify our footprint. Over the past several months, we have closed or are in the process of closing several commercial facilities that were not economically viable at current volumes, and we are consolidating that activity into our other plants. This includes the closure of several subscale facilities in North America and subleasing of our 44,000-square-foot Chicago area office.

Paul Brisebois
President and CEO at AGI

These actions do two things. They remove EBITDA drag today, and by running more volume through fewer facilities, they improve absorption and give us better scale on lower volumes. That means more earnings torque as the market and volumes come back. At the same time, we continue to invest selectively where we can win. Our Clay Center bin line remains on track to launch in the first quarter of 2027, supporting our effort to recapture U.S. storage volumes. A recovery in North America Commercial and the full impact and implementation of our corrective actions will take time, but the foundation is improving. Moving on to an update on Brazil, where we see two things are happening at once. First, as planned, our long-term finance projects are rolling off.

Paul Brisebois
President and CEO at AGI

Revenue from these projects declined CAD 30 million, or 50%, year-over-year, and the related order book is now under CAD 10 million compared with CAD 159 million a year ago. This was a deliberate decision to reduce balance sheet credit and execution risk, and it was the right one. But it does mean Brazil will continue to be a headwind in 2027 to year-over-year comparisons as these contributions roll off. The cash benefit of halting the long-term finance projects is already visible. Our incremental investment in non-current receivables was CAD 17 million in the quarter compared with CAD 42 million a year ago, and this builds off the CAD 100 million plus we collected from legacy project receivables in the prior quarter. Further cash investment should continue to drop off to nominal amounts moving forward. Second, the operating environment has become more difficult.

Paul Brisebois
President and CEO at AGI

Interest rates remain high, credit conditions are tight, and the political environment is changing. Credit conditions in Brazil remain challenging, and we continue to assess collectability across the portfolio. We are staying close to our customers while managing credit carefully. Our traditional equipment Brazil business has a long history and a strong market position, and we intend to keep it lean and disciplined through this period with tightened credit terms and approvals. Strengthening the balance sheet remains our top priority. Net debt has now declined for two consecutive quarters, and we have extended both our senior credit facilities and our nearest debenture maturity. in October, our third series debenture holders approved amendments that extend the maturity of the 85 million debentures from December 2026 to December 2030.

Paul Brisebois
President and CEO at AGI

This addresses our nearest maturity, and when combined with the covenant relief and maturity extension of our senior credit facilities, it provides us with additional time to execute our plan. Our next priority is the convertible debentures maturing in 2027. The Strategic Review Committee, together with our financial advisors, are actively reviewing refinancing and recapitalization alternatives to address these maturities. Looking ahead, we expect the commercial segment to remain under pressure due to geopolitical turmoil, the roll-off of the Brazil long-term finance projects, and the final work-through of lower-margin North America projects all filtering through our results. Our farm business will continue to show improvement with further progress in our early order program, primarily populating our production schedules for the first half of 2027. In closing, we know what the issues are, we are fixing them, and the progress is measurable.

Paul Brisebois
President and CEO at AGI

This has been a difficult year for AGI, and I want to be direct. Our commercial results are not where they need to be, but the actions we have taken are real, and they are showing up where we can control them. Stronger farm performance, positive free cash flow, lower net debt, a lower cost base, a simpler footprint, and the nearest debt maturity addressed. Every dollar of debt repaid, every dollar of cost removed, and every facility we make more accountable increases AGI's flexibility and long-term earnings power. I believe the business we are building will be leaner, more resilient, and better positioned to generate sustainable returns through the cycle, with meaningful upside as markets recover. Thank you to our employees for staying focused and showing up for our customers, and to our partners and shareholders for your continued support. I will now hand the call over to Haaris.

Haaris Uddin
CFO at AGI

Thank you, Paul, and good morning, everyone. I am pleased to be joining my first call with AGI. I will focus my remarks on the following areas: margins for the quarter, free cash flow and capital spending, leverage and liquidity, and the order book. Starting off with margins for the quarter. Consolidated adjusted EBITDA margin declined approximately 700 basis points from 18.2% to 11.5%. This reflected lower sales volume and the resulting under-absorption of fixed costs, the roll-off of higher-margin Brazil long-term finance project contributions, the cost overrun and bad debt expense in Brazil that Paul referenced earlier, as well as the margin impact from the mix of projects currently being executed in North America.

Haaris Uddin
CFO at AGI

Farm was a meaningful offset, with margin expanding over 300 basis points to 23.8% on higher volumes, pricing discipline, and our lower cost structure. On SG&A, third quarter expenses, excluding specified items, increased slightly year-over-year. The increase was driven by the CAD 5.4 million bad debt expense in Brazil. Excluding that item, SG&A had a slight decline during the current quarter. Year-to-date, SG&A is down CAD 15 million, or CAD 20.4 million, excluding the Brazil bad debt expense, which keeps us on pace for the CAD 30 million of annualized run cost savings. For clarity, the structural cost savings we reference will be captured primarily, but not entirely, in the SG&A line item. Free cash flow was CAD 27 million in the third quarter, a significant improvement from a use of CAD 2 million in the prior year period.

Haaris Uddin
CFO at AGI

This quarter also marks our second consecutive quarter of generating free cash flow, a trend we are focused on continuing. This improvement in free cash flow during the current quarter was driven primarily by disciplined working capital management and strong collections in North America. We also continue to tightly manage capital spending. Maintenance capital expenditures were 0.5% of revenue, below our historical range of 1%-1.5%, and investment in intangibles has reduced versus historical levels as well. Our limited growth capital is concentrated almost entirely at Clay Center, where we are adding a new bin line that we believe is a critical investment in a strategically important market for AGI. Moving on to leverage and liquidity. Net debt declined for the second consecutive quarter to CAD 954 million versus CAD 977 million in Q2, and just over CAD 1 billion in Q1.

Haaris Uddin
CFO at AGI

Our all-in net debt leverage ratio increased to 6.1 from 5.2 at the end of the second quarter. The increase was driven by lower trailing 12-month adjusted EBITDA, as a strong third quarter of 2025 rolled out of the calculation, rather than an increase in debt. Under our senior credit facilities, the leverage ratio as calculated under the credit agreement was 4.12 at September 30th, compared with a maximum of 4.75. As a reminder, the covenant steps down to 4.50 through year-end, 4.25 through March 2027, and 4.0 through June 2027, before reverting to 3.75 thereafter. At September 30th, liquidity was approximately CAD 78 million, comprised of CAD 45 million of cash and CAD 33 million of availability under our senior credit facilities. With respect to order book, our total order book was CAD 432 million at September 30th, down 35% year-over-year.

Haaris Uddin
CFO at AGI

Excluding Brazil long-term finance projects, the order book was CAD 422 million, down 17%. This distinction is important, as a significant portion of the year-over-year decline reflects our deliberate shift away from large, capital-intensive, long-term finance projects, rather than a comparable reduction in our underlying equipment business. The composition tells the same story as our results. Our farm order book was up roughly 65%, led by North America. Pressure remains concentrated in commercial, where the order book was down about 44%. That reflects the roll-off of the Brazil long-term finance projects, lower traditional order intake in Brazil, a significantly lower order book in EMEA amid geopolitical uncertainty and increased competition, and lower North American commercial backlog following slow order intake through recent quarters. India was roughly flat year-over-year. In short, the North American farm cycle is turning, and the visibility it provides is improving.

Haaris Uddin
CFO at AGI

However, our commercial business is not there yet, and our focus there is on converting improving quoting activity into profitable orders. Before I close, I want to reiterate the mandate I have from Paul and our board as AGI's new CFO. We are focused on driving greater cost discipline across the organization, improving cash generation, and strengthening our balance sheet through a sustained reduction in debt and leverage. We are approaching each of these priorities with urgency and discipline, whether that is through improving our compressed margins in our commercial segment, exploring non-core asset sales, or any of the other initiatives we have in motion. While there is more work to do, I am optimistic that a consistent focus on execution will put us in a stronger financial position over time. Change takes time and will not happen overnight.

Haaris Uddin
CFO at AGI

It will be a journey, but we would like to thank our shareholders for their continued support during this period. Thank you for joining us this morning. Operator, we can now open the line 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 queue if you have additional questions. The first question comes from Hamir Patel with CIBC Capital Markets. Please go ahead.

Hamir Patel
Analyst at CIBC Capital Markets

Hi, good morning. Paul, you referenced price increases underway in some product categories. How large are those increases, and what percent of your business is benefiting from those?

Paul Brisebois
President and CEO at AGI

Yeah, good morning, Hamir. So as you know, steel prices have escalated substantially in the market. Obviously, on different product lines that we have, we have to take different approaches based on steel content in particular, and there is other cost bases that are going up. On average, we are looking at, on our galvanized bin lines, we have escalated pricing a couple of times to order of magnitude 10%-15%, and on our portable lines, in around 3%-5%. Then obviously, when we quote projects, we take current steel pricing and take that into account.

Hamir Patel
Analyst at CIBC Capital Markets

Great. Thanks, Paul. That is helpful. Just thinking about Q4, looks like consensus is currently at CAD 43 million of EBITDA. Based on what you have seen so far this quarter, do you see sequential EBITDA improvement from the CAD 39 million in Q3?

Paul Brisebois
President and CEO at AGI

Obviously, we are not giving guidance at all. We continue to have a drag on our commercial business. The farm business continues to be optimistic, which is good going into early order program into Q4. I would see continued results similar to Q3 going into Q4, not in terms of the absolute number, but the trend. It will be a challenge for the remainder of the year as we go forward, and we are really setting the base for having a successful 2027 with all the changes we are making.

Hamir Patel
Analyst at CIBC Capital Markets

Okay, fair enough. Thanks. That is all I had. I will turn it over.

Paul Brisebois
President and CEO at AGI

Thank you.

Operator

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

Steve Hansen
Steve Hansen
Analyst at Raymond James

Yeah, good morning, guys. Congrats on the progress you have made thus far. I just wanted to ask about the free cash flow profile. You have had some good success at managing working capital down and tightening up different areas like CapEx, but how should we think about the free cash flow profile going forward? I am just thinking about the order book growing in particular North American farm and whether you need to start restocking dealer inventory or start restocking your own systems. How do you feel about that free cash flow profile going into the next couple quarters? Thanks.

Haaris Uddin
CFO at AGI

Hey, Steve. Thanks for the question. Really appreciate it. Obviously, cash generation is one of our highest priorities. As you mentioned, we generated about CAD 26.8 million of free cash flow in Q3, and that is about following CAD 63 million in Q2. At the end of the day, we have seen some benefits from, as you mentioned, from our working capital being released.

Haaris Uddin
CFO at AGI

However, it's fair to say that we can't expect that much working capital to obviously be released every quarter. Q1 is typically more of a quarter where we build up inventory as we look for our higher demand seasons in Q2 and Q3. Based on the seasonality of the business, we can't necessarily say that we're going to have this much free cash flow every single quarter. However, it is definitely still a priority, and we're still looking to generate as much cash as we can, whether that's through working capital efficiencies or through selling non-core assets, et cetera. That's basically what we expect moving forward.

Paul Brisebois
President and CEO at AGI

Just to add to that, Steve, specifically on dealer inventory and the buildup at warehouses, it is low right now. We do see a buildup happening in Q4, Q1.

Steve Hansen
Steve Hansen
Analyst at Raymond James

Okay, that's helpful. Thanks. Just as a follow-on, it's a broader question on the refi effort still in flight here. Can you maybe just speak to some of the most likely outcomes or maybe the options you're evaluating to refi the converts as they stand today? Just as a related note, is how the asset sale pipeline is maturing? I noticed the CAD 50 million number was referenced, and just trying to get a sense for how those are all going to sequence. Thanks.

Paul Brisebois
President and CEO at AGI

Sure. Highest priority for our Strategic Review Committee and our financial advisors, they have a clear mandate with regards to the refinancing of our two convertible debentures that are coming up in 2027. We'd like to get those cleared out sooner rather than later. That is the highest priority, and we're working closely with them. Obviously, we were happy with the current one on the amend and extend and the positive result on that December 2026 debenture. The SRC and financial advisors are looking at all options. We've, in talking to shareholders, they've made it very clear that they would like non-dilutive options, and we take that to heart. We take it seriously, and we're looking at how do we move forward with non-dilutive options with regards to those two debentures.

Paul Brisebois
President and CEO at AGI

As it relates to the asset monetization of the CAD 50 million, we are making progress, but it is slower than we would like it to be. I anticipate that we will get some small wins before the end of the year, and we will get a couple more before the end of Q1. But the goal is to have it all finalized, the CAD 50 million in hand by H1 of 2027.

Steve Hansen
Steve Hansen
Analyst at Raymond James

Okay, very good. Appreciate the time.

Paul Brisebois
President and CEO at AGI

Thanks, Steve.

Operator

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

Michael Tupholme
Michael Tupholme
Analyst at TD Cowen

Thank you. I was wondering if you can talk about the amount of revenue that was generated in the quarter from the Brazil long-term finance projects, and then also remind us on what that looked like in H1. As we think about those projects, this additional cost that was incurred, the CAD 4.7 million in the quarter, is there any risk of additional costs of that nature as you close out the remainder of those projects in future quarters?

Paul Brisebois
President and CEO at AGI

Yeah. Hey, Michael. I'll take the last question first, and I'll get Haaris to answer the first question you had. The projects, this is the last project, and it's ending at the end of November. So we don't foresee any incremental costs beyond this. We're actually going into running that facility. So this is really the last that we're going to see of these long-term finance projects, and we're going to be happy to have that done and out of the way. I'll let Haaris talk about your other question.

Haaris Uddin
CFO at AGI

Yeah, thanks. As Paul mentioned, again, we don't really expect a significant amount of revenue from these long-term projects moving forward, as they will be completed, and we don't plan on doing any additional of these long-term finance projects in the future. A big part of that is again, because of our focus on the balance sheet, focus on cash generation. At the end of the day, we need to ensure that we're doing sales that are paying in the short term so we can address our leverage as soon as possible. So our focus really is more on the traditional business in Brazil, and that's consistent with the farm equipment sales and basically lower-sized projects, which are a bit more of a less of a credit risk and less of a risk based on the current macroeconomic factors in Brazil.

Michael Tupholme
Michael Tupholme
Analyst at TD Cowen

Okay. Yeah, I guess just trying to understand, though, contribution as well, like in the quarter, as well as in the first half, more from the perspective as we look to 2027, which is clearly where we need to focus at this point. But what the sort of the void from those is, just as we think year-over-year. That's what I was trying to get at, I guess.

Paul Brisebois
President and CEO at AGI

Yeah, I'd say in the past, we have talked about a gap of about CAD 180 million, is the gap that we are going to need to fill from a revenue perspective.

Michael Tupholme
Michael Tupholme
Analyst at TD Cowen

Okay, and that is the gap that exists as we look at 2027, look backward to the comp in 2026?

Paul Brisebois
President and CEO at AGI

That is typically, yeah.

Michael Tupholme
Michael Tupholme
Analyst at TD Cowen

Okay, thanks. Hopefully, I did not use up all my questions. That was meant to be kind of one there, but if I can actually ask one more follow-up there.

Paul Brisebois
President and CEO at AGI

Yeah, go ahead.

Michael Tupholme
Michael Tupholme
Analyst at TD Cowen

Yeah, so we talked earlier in the call about working capital, I mean, free cash flow in the quarter, working capital, potential needs going forward. There was some discussion around the asset sale and the timing there. As we think about all of this together, are you able to comment on how we should think about the leverage ratio and sort of if there's a new target and how we should think about the pathway to getting there, just to give us some sort of parameters to think about this?

Haaris Uddin
CFO at AGI

Yeah, so I can kind of take that one and perhaps Paul can jump in. But at the end of the day, I obviously don't want to provide any guidance because that's obviously not what we're looking to do. But in terms of what we're doing, it's not going to be a quick fix. We didn't get into this sort of situation over a single quarter or even a single year, so the recovery is also not going to happen in a single quarter. It's going to take some time. But I agree, I still think we've made some meaningful headway when it comes to reducing our leverage. Like in Q1, we were over CAD 1 billion in total debt, and now we're down to about CAD 954 million.

Haaris Uddin
CFO at AGI

We have seen some progress, and we're hoping to sort of put more fuel to the fire by doing some additional non-core asset sales to bring that leverage down even further. It's really the top priority, and it's really the mandate that I've been given from Paul and our board to really focus on.

Michael Tupholme
Michael Tupholme
Analyst at TD Cowen

Okay, thank you.

Operator

Thank you. The next question comes from Tim Monachello with ATB Cormark. Please go ahead.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Hey, good morning. First question is just on the, I guess, the Brazilian credit situation that you flagged in the MD&A. Can you speak to how much of your receivable balance sits in Brazil and might be at risk? And I guess related, were those receivable, the bad debt expense, that was not related to the large projects in Brazil, is that correct?

Haaris Uddin
CFO at AGI

Yeah. Hey, Tim. Thanks for the question. It's Haaris here. Yeah, so that bad expense, it did relate to the receivables in Brazil. It was quite unfortunate because without that and the cost overrun on the long-term project, we were actually looking at a pretty strong quarter. So it's a bit unfortunate that that happened, but the reality is Brazil is going through some tough times. You look at the recent political election, from our feedback from farmers and our customers, it wasn't favorable for them. You look at the rising interest costs, you look at the rising inflation, you look at the rising bond yields. So all of these sort of factors go into our credit assessment when we're looking at our receivables.

Haaris Uddin
CFO at AGI

Based on that, we decided that we should probably take a bit of an allowance to ensure that we are, based on where we think the economy is going, it is obviously something we are going to continue to revisit on a quarter-by-quarter basis to ensure that we do have a big enough reserve in place. With regards to our receivables, we have about, I would say about CAD 90 million from the traditional business in our current receivables. So again, that is something that we are currently managing quite closely just to ensure that there is no more bad debt and no more surprises. Now, can I for sure tell you right now that there won't be any bad debt moving forward? Absolutely not.

Haaris Uddin
CFO at AGI

But again, it is something we are really trying to limit, and we have really put in a lot of safeguards in place, whether that is ensuring that we have a higher customer deposit up front or ensuring that the payment terms are not as long. We are really trying to get away from these long-term finance projects because they have done us no benefit, and there is no point in making sales if you are not going to collect at the end of the day.

Paul Brisebois
President and CEO at AGI

Just maybe just to add to it, we are no longer doing financing on any projects.

Haaris Uddin
CFO at AGI

Yeah.

Paul Brisebois
President and CEO at AGI

The bad debt was related to our traditional business, not to the finance projects.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Okay, got it. Project E, which sounds like it is near completion, I think there is still about CAD 110 million of long-term finance-related receivables on the balance sheet. What do you think the prospects are for selling that receivable on the last project?

Haaris Uddin
CFO at AGI

Sorry, could you repeat that last part of the question?

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

I am just curious if you are going to end up selling the remaining long-term finance receivables, what the prospects are?

Haaris Uddin
CFO at AGI

Oh, sure. Honestly, it is definitely something on the table. With that being said, it is not something we obviously want to sell for CAD 0.10 on the dollar. It is obviously something we want to get a meaningful return on. When it comes to evaluating these things, you have to also look at how the current economy is doing there as well, right? Obviously, the bigger the risk, the higher the discount rate would be. So we are still assessing it, but again, we do not want to. It is obviously definitely on the table. It is just something we do not want to sell for pennies on the dollar. I am not saying that is what we would get right now, but it is just something that we are going to continue to look at and monitor.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Okay. If I could just sneak one more in. I am just curious if you could speak a little bit about additional levers that you might be able to pull to monetize additional assets or business lines before the converts mature or start maturing in June.

Paul Brisebois
President and CEO at AGI

Yeah, Tim, we are in process on other initiatives beyond the CAD 50 million that would have a meaningful impact to delever and put cash onto the balance sheet and onto our debt. Those are in progress right now.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Would those be scale opportunities, like business line sales, perhaps?

Paul Brisebois
President and CEO at AGI

Yes.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Okay. I will turn it back, guys.

Operator

Thank you. The next question comes from Ali Meklai with RBC Capital Markets. Please go ahead.

Ali Meklai
Ali Meklai
Analyst at RBC Capital Markets

Hey, guys. Stepping in for Andrew Wong, who couldn't make it today. Thanks for taking the question. On the commercial segment, with Brazil unwinding, long-term projects rolling off, flat quarter-over-quarter revenues, is it fair to say that the segment is at a trough, at least the core part of it?

Paul Brisebois
President and CEO at AGI

I missed the first part of that, sorry.

Ali Meklai
Ali Meklai
Analyst at RBC Capital Markets

Oh, yeah. I was just saying that, on the commercial segment, Brazil is unwinding, long-term projects rolling off, quarter-over-quarter revenue was flat. Is it fair to say it's at a trough?

Paul Brisebois
President and CEO at AGI

Yeah. I think that is fair to say. Quite honestly, the way that I am looking at our commercial business is similar to the farm business in 2025. We believe 2025 was the bottom, and we are seeing that with 2026 being better and seeing some momentum. I would call 2026 the bottom. Particularly from a margin perspective for us, the initiatives that we have in place to restructure the business, reprioritize and decentralize our business with a focus on margin improvement will absolutely play out in 2027, regardless of whether the market comes around or not. If the market comes around as well, which we cannot control any of the geopolitical issues or trade issues that are out there, but if the market comes around, that will be a nice multiplier for us as we go into 2027.

Ali Meklai
Ali Meklai
Analyst at RBC Capital Markets

Okay, thanks. That is helpful. Just one more. As you work through the asset dispositions, can you help us just understand what the other side of that might be, if there is any top-line impact from the CAD 50 million of real estate sales or further business simplification?

Paul Brisebois
President and CEO at AGI

On the CAD 50 million, there is really no impact with regards to EBITDA. Those are assets where we have already made consolidation activities. So, they are idle assets that we are selling off. So, no impact.

Ali Meklai
Ali Meklai
Analyst at RBC Capital Markets

Okay, thanks. That is all for me.

Paul Brisebois
President and CEO at AGI

Okay.

Operator

Thank you. The next question is a follow-up from Tim Monachello with ATB Cormark. Please go ahead.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Thanks. Just a quick follow-up. The liquidity on your senior facilities, I think you said was about CAD 33 million. Correct me if I am wrong. It sounds like you have got an improving outlook for farm, and if commercial is getting out of bottom in 2026 and going to improve in 2027, your working capital requirements might be significant. So, what is the plan to manage liquidity, repay debt in a, I guess, rising or potentially rising activity environment?

Haaris Uddin
CFO at AGI

Yeah, for sure. Nice to hear from you again, Tim. Thanks for the question.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Yeah, it has been a while.

Haaris Uddin
CFO at AGI

So, when it comes to our sort of our liquidity, yeah, we did actually ask for We did get covenant relief, as we disclosed in our statements at the end of Q3. And obviously, it's a bit of a Like any good relationship, it's a bit of give and take between us and our bank syndicate. So, basically, one of the things they had asked for was basically a temporary cap on our current credit facility. So, that is why that number is showing as 33 available. With that being said, we've done a fair amount of forecasting around this, and we are quite comfortable. And this wasn't sort of a limit imposed to us by our bank syndicate.

Haaris Uddin
CFO at AGI

This was basically an open conversation that we had had, and basically, we had ensured, and they wanted to ensure also, that we had enough to manage our working capital moving forward. So, despite the decrease in availability, which you're noting in the 33 million, we are so confident that we have enough to sort of manage our cash moving forward and have enough for that Q1 buildup that we've historically had.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark

Okay, great. I appreciate it.

Haaris Uddin
CFO at AGI

Yeah, no problem.

Operator

Thank you. This concludes the question and answer session. I would like to turn the conference back over to Paul Brisebois for any closing remarks.

Paul Brisebois
President and CEO at AGI

Thank you very much, everyone, for joining the call. I want to just thank, again, our employees, our customers, and shareholders for their continued support as we continue to make progress against our plans and rebuild AGI. Hope everyone has a great day.

Operator

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Analysts
Powered by Quartr