Ag Growth International Q1 2026 Earnings Call Transcript

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Provided by Quartr
May 7, 2026

Key Takeaways

  • Negative Sentiment: Consolidated Q1 revenue was CAD 282 million (‑2% y/y) and adjusted EBITDA fell to CAD 25 million (‑19% y/y), with adjusted EBITDA margin down ~200 bps to 8.9%, signaling near‑term profitability pressure.
  • Neutral Sentiment: Farm revenue improved 7% to CAD 102 million and farm adjusted EBITDA held at CAD 18.9 million, but management says the gain was largely driven by tariff‑timing effects and normalized dealer inventories, so a sustained recovery remains uncertain.
  • Negative Sentiment: Commercial revenue declined 6% to CAD 180 million and segment adjusted EBITDA compressed to CAD 13.6 million (margins down ~520 bps), with the weakness concentrated in North America (permanent material handling) and India, prompting workforce reductions and short‑term pricing actions.
  • Positive Sentiment: Management is accelerating cost actions and balance‑sheet fixes — expecting annualized savings of at least CAD 30 million, cancelling the ERP program, and monetizing ~CAD 105 million of Brazilian receivables (CAD 55m received, CAD 50m pending) to pay down senior debt and support a path to positive full‑year free cash flow and lower leverage.
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Earnings Conference Call
Ag Growth International Q1 2026
00:00 / 00:00

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Operator

Welcome to the AGI First 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. 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 . 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 fourth quarter MD&A and press release, which are available on the AGI website. I would now like to turn the conference over to Paul Brisebois, Interim President and CEO of AGI. Please go ahead, sir.

Paul Brisebois
Interim President and CEO at AGI

Thank you, operator, and good morning, everyone. I'm pleased to speak with you today about AGI's first quarter 2026 results. Joining me is Nicolle Parker, our Interim Chief Financial Officer, who will walk through the financial results in more detail during her prepared remarks. As we've discussed over the last several quarters, AGI continues to operate in a cyclical environment, and 2026 is unfolding against a continued backdrop of uncertainty across North American and global agriculture markets. That uncertainty is influencing purchasing behavior across both farm and commercial customers, and it continues to weigh on near-term visibility, especially where our customers are making larger capital decisions.

Paul Brisebois
Interim President and CEO at AGI

Against that backdrop, we're concentrating on the things we can control, simplifying how we run the business, tightening operational execution, and improving the customer critical metrics that track how well we are managing the ongoing downturn, as well as the trajectory of our recovery when conditions in our markets eventually normalize. Importantly, while we saw some encouraging signals in parts of our farm segment, particularly on order intake activity, we still remain cautious on a full farm recovery, continuing to stay close to our dealers and supporting their stocking and in-season needs as they gauge the demand signals from customers. In commercial, the operating environment remained difficult and margins compressed year-over-year.

Paul Brisebois
Interim President and CEO at AGI

The pressure was most pronounced in North America and India, and we've taken initial actions to respond, aligning capacity and cost to current volumes, workforce right sizing actions, and protecting our ability to ramp up quickly when demand returns by staying close to our customers, even if ordering patterns are subdued in certain areas. Turning to Q1 results. Consolidated revenue in Q1 was CAD 282 million, down 2% year-over-year. Adjusted EBITDA was CAD 25 million, down 19% year-over-year, and our adjusted EBITDA margin was 8.9%, down approximately 200 basis points from last year. At a segment level, farm revenue increased 7% year-over-year to CAD 102 million, while commercial revenue declined 6% year-over-year to CAD 180 million.

Paul Brisebois
Interim President and CEO at AGI

Farm-adjusted EBITDA was CAD 18.9 million, effectively flat year-over-year, and Commercial adjusted EBITDA was CAD 13.6 million, down notably versus prior year. This was mostly due to softening margins in our North America Commercial and India rice milling equipment businesses, which are both navigating slow overall market conditions. There are three main themes I wanna highlight on the quarter, including tariff-related timing in Farm, margin pressure in Commercial, and continued restructuring actions to better align costs and improve resilience. First theme, Farm was heavily influenced by timing effects and underlying demand remains challenging. Farm segment performance reflected meaningful tariff-related timing dynamics between Canada and the U.S. markets. Canada Farm delivered a stronger year-over-year result, largely due to an unusually weak prior year comparable period that was impacted by tariff-related pre-shipments into the U.S. in Q1 2025.

Paul Brisebois
Interim President and CEO at AGI

In many cases, absent the introduction of tariffs, these products would have shipped within Canada but were prioritized for U.S. customers due to the pending U.S. tariff actions. Those same dynamics created an offsetting headwind in U.S. farm in Q1 2026, where the prior year period benefited from elevated pre-buying activity. Timing impacts aside, we did observe improved order intake activity in certain product groups within our farm segment through Q1. Though we remain cautious in interpreting these near-term signals as indicative of a turn in the cycle. Order book levels remain below historic levels, and it is too early to suggest a swift or sustained broad-based recovery in underlying demand is materializing.

Paul Brisebois
Interim President and CEO at AGI

Customer purchasing behavior continues to be influenced by elevated input costs, such as diesel and fertilizer, and uncertainty around trade and tariff dynamics, as well as broader macroeconomic pressures. In summary, while there is potential for a modest full year improvement in the farm segment, it remains challenging and should be viewed in the context of a low 2025 base. Second theme, commercial margins were compressed with pressure concentrated in North America and India, and we have levers in motion to mitigate. Commercial segment adjusted EBITDA declined from CAD 24.5 million in Q1 2025 to CAD 13.6 million in Q1 2026, and margins compressed from 12.8% to 7.6%, a contraction of roughly 520 basis points. The drivers were not evenly distributed.

Paul Brisebois
Interim President and CEO at AGI

Approximately half of the margin compression is attributable to North America Commercial, with the balance driven primarily by India and to a lesser extent, EMEA. In North America, lower volumes in the permanent material handling business were the primary driver of margin pressure. Given limited near-term workforce flexibility at our flagship North America permanent material handling facility, we absorbed the cost of maintaining skilled labor with a focus on increasing the order book going into Q2.

Paul Brisebois
Interim President and CEO at AGI

This impacted margins in Q1, but more aggressive pricing in a challenging market enabled us to build our Q2 order book to improve our labor force utilization, though it still will be at the cost of some margin compression from historical norms. In parallel, we're taking short-term pricing actions intended to support volumes while continuing to nurture product innovation to strengthen our competitive position over the medium-term.

Paul Brisebois
Interim President and CEO at AGI

We do not view pricing actions as a substitute for competitive differentiation, but in a soft volume environment, it's part of the toolkit to stay competitive and protect the long-term customer relationships. In India, the margin headwinds were driven by market-related volume softness, both domestically and in export markets, reflecting a difficult regional backdrop, including significant rice stocks, regional conflict, and evolving government policies. In response, we took significant workforce reduction action early in Q2, which we expect will help mitigate some of the pressure until volumes strengthen.

Paul Brisebois
Interim President and CEO at AGI

With these actions in motion, the company expects to see some sequential improvement in Q2 commercial segment margins relative to Q1, even against an overall soft volume and market backdrop. A more fulsome recovery to typical margin levels in commercial will require a corresponding recovery in volumes across our key commercial markets.

Paul Brisebois
Interim President and CEO at AGI

Third theme, we continued to streamline the business in Q1 and into Q2 to better align our cost structure with demand and improve resilience. As we've discussed, the absence of a broad-based demand recovery means we have to align the cost structure and operating model to today's reality, not yesterday's volumes. Through Q1 and into Q2, we continued to take actions to streamline the organization and advance restructuring initiatives, positioning AGI to better align operations with current demand levels and improve margin resilience.

Paul Brisebois
Interim President and CEO at AGI

We now expect annualized savings to exceed our previously disclosed target of at least CAD 20 million, with a refined estimate of at least CAD 30 million as actions are fully implemented. Since the decision to terminate the ERP transformation, we have successfully re-implemented the previous ERP system, enabling the teams to more effectively serve our customers.

Paul Brisebois
Interim President and CEO at AGI

Turning to some focused comments on adjusted EBITDA margin performance by segment for the quarter. Consolidated adjusted EBITDA margin declined 197 basis points from 10.9% in Q1 2025 to 8.9% in Q1 2026. The biggest driver was the Commercial segment, where adjusted EBITDA margin declined from 12.8% to 7.6%, reflecting pressure concentrated in North America and India. Farm margin declined from 20.2% to 18.5%, driven primarily by mix, a higher weighting of lower margin storage equipment, partially offset by benefits from cost-saving initiatives. Offsetting some of the margin pressure was our Other segment, which primarily represents corporate costs. Improvement here reflects cost actions taken across our corporate structure, office locations, and teams.

Paul Brisebois
Interim President and CEO at AGI

The bottom line is this: Q1 margin performance is a reflection of low volume in our commercial business, particularly in North America and India. Volume recovery remains a necessary ingredient for a full return to typical commercial margin levels. We ended Q1 with a consolidated order book of CAD 589 million, down 19% year-over-year, reflecting softness in commercial, partially offset by an uptick in Farm. Farm segment order book increased year-over-year, supported by early signs of improvement in both Canada and U.S. farm. That said, order book remains below historic levels. It is too early to indicate any meaningful or sustained shift in broader market conditions.

Paul Brisebois
Interim President and CEO at AGI

Commercial segment order book declined year-over-year, primarily reflecting skewed comparables from large project wins included in the prior year order book, particularly in EMEA, and continued softness in North America and India. This was partially offset by good momentum in traditional equipment-only project wins in Brazil, underscoring the breadth of the market opportunity in this region independent of how we go to market.

Paul Brisebois
Interim President and CEO at AGI

Moving on to an important corporate update as it relates to monetization of long-term accounts receivable in Brazil. After quarter end, approximately CAD 105 million related to long-term accounts receivable in Brazil was released from escrow, with CAD 55 million officially in hand currently. We are in the final administrative stages of transferring the additional CAD 50 million to AGI-controlled accounts, a process expected to be completed in May, and the proceeds will be applied to reduce outstanding debt on our senior credit facilities.

Paul Brisebois
Interim President and CEO at AGI

These funds relate to the large-scale comprehensive projects in Brazil that have carried longer payment terms and higher working capital intensity than our traditional operating model. The release of escrowed funds helps create additional breathing room under our senior facilities at a time when the ag cycle remains uncertain and flexibility on the timing and extent of additional strategic actions is helpful.

Paul Brisebois
Interim President and CEO at AGI

Consistent with the objective of managing our balance sheet and as previously discussed, we have paused offering general contractor and financing solutions in Brazil for new large-scale comprehensive projects until balance sheet conditions strengthen. We will continue to execute on remaining commitments already in progress. Our intention is to participate in Brazil primarily as an equipment supplier under normal commercial terms going forward. To wrap up, we're not satisfied with the quarter, particularly on commercial margins. Our priorities are clear and we're taking action.

Paul Brisebois
Interim President and CEO at AGI

We're focused on disciplined execution and improving customer outcomes. We've put mitigation levers in motion and will continue to tighten operations so we're positioned for a stronger performance as markets normalize. With that, I'll turn it over to Nicolle.

Nicolle Parker
Interim CFO at AGI

Thank you, Paul. Good morning, everyone. I'll review our first quarter results by segment and then get into more detail on key financial metrics. Farm segment revenue increased 7% year-over-year to CAD 102 million, driven primarily by timing-related impacts in Canada and the U.S. Canada Farm delivered a meaningful year-over-year improvement, though the improvement was driven primarily by a favorable comparable as Q1 2025 was impacted by tariff-related pre-shipments into the U.S. that would otherwise have been directed to Canadian customers.

Nicolle Parker
Interim CFO at AGI

While Q1 benefited from that timing effect, underlying market conditions remain generally soft. U.S. Farm declined year-over-year as Q1 2025 benefited from elevated pre-buy activity ahead of the U.S. trade tariffs, pulling demand forward and creating a difficult comparison. Excluding these timing effects, underlying conditions remain challenging and customer purchasing behavior continues to reflect macro uncertainty, escalating input costs and soft commodity prices.

Nicolle Parker
Interim CFO at AGI

Adjusted EBITDA for the Farm segment was CAD 18.9 million, essentially flat year-over-year. Adjusted EBITDA margin was 18.5%, down 162 basis points, driven primarily by a higher mix of low-margin storage equipment, partially offset by cost-saving initiatives. Commercial segment revenue declined 6% year-over-year to CAD 180.2 million, with performance varying by region. Brazil delivered higher revenue, driven by continued execution of legacy large-scale projects secured in prior periods. EMEA declined year-over-year against a tough prior year comparable that included significant Middle East contract wins. India experienced near-term headwinds from regional conflict, significant domestic rice inventories, and evolving government policies on rice content that dampened incremental demand. In North America Commercial, results reflected a challenging market environment with lower permanent material handling volumes and some continued softness with parts of the U.S. commercial food platform.

Nicolle Parker
Interim CFO at AGI

Adjusted EBITDA for the Commercial Segment declined to CAD 13.6 million from CAD 24.5 million in the prior year quarter, with adjusted EBITDA margin compressing to 7.6% from 12.8%. Approximately half of this margin compression is attributed to North America Commercial, with the balance driven primarily by India and, to a lesser extent, EMEA. Paul covered most of the details related to this in his prepared remarks. The overall adjusted EBITDA reconciliation includes a couple of notable items. The ERP system transformation costs include program termination expenses. Going forward, this line item should effectively be minimal, in line with the strategic decision to forego this project, serving to increase earnings quality and overall free cash flow generation.

Nicolle Parker
Interim CFO at AGI

Transactional, transitional, and other costs are also elevated versus prior year given the extensive restructuring activities completed in the quarter. Finally, there is also a heightened impairment charge this quarter. This relates to a terminated business transaction in Brazil that is non-core to normal operations, as well as the impact of the Chicago office closure. On an LTM basis, free cash flow in Q1 was negative CAD 123 million, primarily reflecting additional working capital requirements in Q1 and growth in non-current accounts receivable related to Brazil's large scale comprehensive projects executed throughout 2025 and into 2026. The monetization of approximately CAD 105 million of long-term accounts receivable in Brazil, together with cost savings initiatives in flight through 2026, is expected to support a step change in our free cash flow profile.

Nicolle Parker
Interim CFO at AGI

In addition, a halt on new large-scale comprehensive projects in Brazil that require financing support should further stabilize our free cash flow profile as we progress through 2026 and beyond. Our expectation is for free cash flow to be positive for the full year, including approximately CAD 30 million of additional incremental investment required for Brazil large-scale projects already in place. With the first tranche of monetization nearing completion and clear visibility on outstanding cash costs remaining for projects already committed to, we are beginning to turn our attention to our options for a second smaller tranche of monetization to substantially clear up remaining long-term accounts receivable connected to Brazil. The CAD 1.5 million in long-term receivable monetization on a pro forma basis would have held our leverage ratio flat at 4.7 times relative relative to last quarter.

Nicolle Parker
Interim CFO at AGI

The reported ratio of 5.2 times reflects the typical 1st quarter build in working capital as well as continued progress on the Brazil large scale projects, both of which are temporary in nature. With the proceeds of the long-term receivables going towards senior debt repayments, there is an important benefit to our bank covenant calculations. 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. The first question comes from Gary Ho with Desjardins Capital Markets. Please go ahead.

Gary Ho
Analyst at Desjardins Capital Markets

Thanks. Good morning. My first question, can you talk about the overall increase in the North American farm sales and comments around signs of improvement in underlying demand as it relates to dealer inventory levels, Paul?

Paul Brisebois
Interim President and CEO at AGI

Yeah, you bet. Thanks, Gary. We were pleased with our order intake through our early order program across the board, which was typically in Q4. What we've seen is that that order intake has continued to move forward both on the portable side and on our permanent side of the business. We feel quite good about our Q2. As I mentioned on our previous call, you know, planting season is in progress in the U.S. We're in around 25% planted so far. It's been delayed slightly in Western Canada, they'll catch up quickly. Farmers, you know, typically at this time of year, everything slows down as they get focused on planting season. They see how the crop's coming.

Paul Brisebois
Interim President and CEO at AGI

Once the crop is coming out of the ground and they feel confident, then we may see more intake coming going forward. You know, it is kind of a bit of a wait and see right now, but for Q2, feel very good about where our order intake is at. Once we see, like I said, the results coming in from the farm and how dealer inventory is progressing, we will have a better take on what H2 will look like for the farm business.

Gary Ho
Analyst at Desjardins Capital Markets

Okay, great. While I have you, second question, just in the quarter, there was a bunch of noise on the Section 232 tariffs. Maybe can you walk us through if and how that impacts your business, pricing pass-through, and potential margin implications as you look out?

Paul Brisebois
Interim President and CEO at AGI

Another good question, Gary. Obviously, we dealt through a lot of the tariffs in 2025. It had an impact on our business. We throughout the year managed it, you know, based on having conversations on a weekly basis with our team in terms of how do we minimize the impact of the tariffs going forward. We feel like we've put a good plan in place. We really minimized the impact of those tariffs in Q4 of 2025 and which has benefited us obviously in Q1 and we hope going forward. That environment changes continuously. Because of the changing environment, we continue to look at our options with regards to managing those tariffs on a go-forward basis.

Paul Brisebois
Interim President and CEO at AGI

We're fortunate enough that we have manufacturing both in Canada and the U.S., and we're looking at options to leverage that North American manufacturing base to mitigate tariffs going forward or whatever the tariff environment looks like going forward. I feel like we're in a decent spot with regards to managing those tariffs. It's definitely a heightened concern and a risk for us.

Operator

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

Steve Hansen
Steve Hansen
Managing Director and Equity Analyst at Raymond James

Good morning, guys. Thanks for the time. I just wanted to ask about a little more detail on the India policy shifts that's driven some of the weakness in the grain business, the rice business there. Is there something that's changed specifically in the last event? You referenced regional conflicts and high rice inventories, but I was curious about the policy shifts issue specifically, just trying to get a sense for the impact on that and the duration of that impact might be.

Paul Brisebois
Interim President and CEO at AGI

Yeah. Thanks, Steve. The two policies specifically are the policy around fortified rice kernel, FRK. There's been a pause on that. What it is essentially adding nutrients to the rice kernel to address malnutrition across India. There's been a pause on that and so that obviously impacts rice millers because they're doing the fortification. The other one actually, that is the main one that really impacts our rice milling business is that change in the program.

Steve Hansen
Steve Hansen
Managing Director and Equity Analyst at Raymond James

Okay. Helpful. Thanks. Just to circle back on the Brazil issue and the tranche of capital coming out of long-term AR, which is a positive development. I think you referenced another tranche, albeit smaller, you're working on now. Just curious about the size of that. Just as a related point is if we're looking at the order book today, how much of that is still represented by these large scale projects that are, you know, in process or in flight and working down here? Just trying to get a sense for how much longer you'll be grappling with a couple of these projects and when we can look forward to sort of your new paradigm of more traditional operations. Thanks.

Nicolle Parker
Interim CFO at AGI

Hi, Steve. I can take that one. The second tranche that we're referring to is the cash flows that would be left that we call the tail. We're looking at different ways to monetize the tail to free up more cash flow during the year. Also, it should basically be done by the end of 2026. We're hoping during 2026 we'd be able to do something for these additional cash flows besides the CAD 105 that we've currently got in.

Paul Brisebois
Interim President and CEO at AGI

Steve, I would just say we're continuing to make progress on equipment-only sales. And that is a focus for us, without the financing obviously, and the team is making good progress with regards to just equipment-only sales in Brazil.

Nicolle Parker
Interim CFO at AGI

Yeah. Order backlog in traditional businesses is up.

Operator

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

Andrew Wong
Andrew Wong
Analyst at RBC Capital Markets

Hey, good morning. Just regarding the debt reduction focus here today, can you talk about your target and expectations on the debt reduction path? Is there a specific leverage ratio you're targeting by a specific time? Or is there a specific, like, gross debt number maybe? Just obviously because the leverage ratio depends on EBITDA, which seems a little bit in flux right now.

Paul Brisebois
Interim President and CEO at AGI

Thanks, Andrew. You know, the goal has always been to get it to 2.5 times, that we're a long ways away from that. We continue to focus on ways to pay down our debt. That's why we've done the restructuring. We're talking about greater than CAD 30 million in cost savings. We canceled the ERP implementation, which preserves CAD 20 million over the next couple of years. Halting the financing of our large scale products, being very selective on CapEx and our working capital. The last one is selling off non-core assets to pay down debt. You know, the team is completely focused on that. The board is aligned with our focus on reducing our debt load. The goal, as I mentioned, was 2.5 times.

Paul Brisebois
Interim President and CEO at AGI

We'll be diligent with regards to paying down our debt. I would say even though we've talked about it in the past, yeah, the alignment between the board and management is 100% aligned with regards to what our objectives are on debt reduction.

Andrew Wong
Andrew Wong
Analyst at RBC Capital Markets

Okay, great. Thank you. Just on that point around non-core businesses, I understand the broader diversification strategy, but there's obviously a lot of moving parts here and across different geographies and products. Can you just talk about what the benefits of that diversification strategy is? Does it maybe make more sense? Like, you're talking about simplifying and focusing on core competencies. Is that really the path then? What parts of the business would be considered non-core versus core?

Paul Brisebois
Interim President and CEO at AGI

Thanks, Andrew. I'll speak specifically to our core. At the end of the day, our strategy really hasn't changed from when it first began 30 years ago, so we're celebrating our 30th year as AGI. The vision there was to be in the grain storage handling and conditioning business on a global basis with diversification in commercial and farm. That continues to be our strategy going forward. There are some outliers within that strategy that we would say are not core. Those are the ones that we're looking at which will help us simplify and get focused on what we really do well.

Paul Brisebois
Interim President and CEO at AGI

I can't really go into detail with regards to what those assets are, Andrew, but just know that we're focused on what our core has been all along. We're a manufacturing business that sells equipment in the grain storage, handling, and conditioning business, both commercial and farm on a global basis.

Operator

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

Tim Monachello
Tim Monachello
Analyst at ATB Capital Markets

Hey, good morning.

Paul Brisebois
Interim President and CEO at AGI

Morning, Tim.

Tim Monachello
Tim Monachello
Analyst at ATB Capital Markets

As you look across the portfolio of businesses and given, I guess, you know, a heightened focus on return on capital, I assume you guys have done a fairly intense analysis across your operations where you're meeting those hurdle rates and where you're not. Maybe you can give us a little bit of insight into where you think the business is performing at expectations or above and where you're lagging.

Paul Brisebois
Interim President and CEO at AGI

Yeah. Thank, thanks, Tim. You know, if we look at specifically performance, you saw in the release, our commercial margins were down. That's a target for us. We believe that there You know, we have mitigation measures in place to improve that performance. The team, David Postill, who leads our North American business, is completely focused on the commercial turnaround, with regards to top-line sales, as well as operational efficiency. That would be one of the areas in particular where we have a strong focus in terms of improving our results. Our overall farm business is operating well. I can tell you, in 2025, we had some hiccups on our farm business that we specifically focused on and have addressed.

Paul Brisebois
Interim President and CEO at AGI

I feel like we're in a much better spot with regards to our overall farm business, both portable and the permanent side of the business, to perform at historical levels, like we've done in the past. I know that we can do it. I know we have the right team that's focused on it. That North American commercial business is where we're focusing right now. Just maybe I'll add a little bit there. India was another spot that was affected. We have very good management team in India. Volumes were down. We wanna leverage our learnings that we get across our business to benefit all of our facilities. We use those metrics, operational metrics, across all of our businesses.

Paul Brisebois
Interim President and CEO at AGI

You know, the focus is how do we improve that regardless of volume, whether it's going up or down, and we pull the right levers in a timely fashion so that we avoid margin compression overall.

Tim Monachello
Tim Monachello
Analyst at ATB Capital Markets

Okay. I guess maybe ask a different way. Like, what do you think your weighted average cost of capital is and what's like the return thresholds that you target across the business? I mean, obviously, you're in a cyclical business and those are gonna fluctuate quarter to quarter against that target, but just understanding that would be helpful.

Paul Brisebois
Interim President and CEO at AGI

Yeah. The board's direction with regards to ROIC is greater than WACC, and the goal is 15%. We're below that mark today. No different than the debt leverage and getting to 2.5, that's a key metric for us, and ROIC at 15% is a key metric for us. Without getting into any detail with regards to the different facilities or regions that are achieving that's our overall goal across AGI.

Operator

Again, to ask a question, press star then one. We have a follow-up from Steve Hansen with Raymond James. Please go ahead.

Steve Hansen
Steve Hansen
Managing Director and Equity Analyst at Raymond James

Thanks, guys. just actually 2 quick ones. One, I think there's a reference to in one of the impairments to a business entity that stopped in Brazil. I'm just curious what that was or what the relationship change was there specifically to start.

Paul Brisebois
Interim President and CEO at AGI

Yeah, you bet, Steve. So we got into a business venture around management of a grain facility with a partner. It's a great example of what's not core to our business. Made a quick decision that and an easy decision, quite honestly, that isn't core to our business. We sold that off.

Steve Hansen
Steve Hansen
Managing Director and Equity Analyst at Raymond James

Okay. That's helpful. Just wanted to go back quickly to the farm side again. Appreciate things are starting to crawl off the bottom, which is great news. Do you have a sense though, Paul, for how those inventories stack up relative to where you want them to be? Are we still, you know, 10%-15% above normalized levels? Are we sort of at the level you need it to be and we're just waiting on demand? Just trying to get a sense for, you know, what the puts and takes might be there as demand might start to show here. Especially as it relates to your policy lever or your pricing lever you described earlier. How long do you think you need to have these pricing actions in place?

Paul Brisebois
Interim President and CEO at AGI

Yeah, you bet. Good question, Steve. Just to be clear, the pricing actions are more on the commercial business where that doesn't involve dealer stocking at all. It's really project-based. We haven't implemented any pricing actions on our traditional farm business at all. Speaking about dealer inventories on the farm business, as an organization with our sales team, we monitor that on a monthly basis. Happy to say that dealer inventories are at normalized levels.

Paul Brisebois
Interim President and CEO at AGI

What we typically see, when there's overstocking of product, which we saw in, you know, late 2024 and into 2025, where there was just too much inventory on hand, is dealers get very aggressive with regards to getting out of that inventory position and very aggressive with regards to not ordering a lot. That was the impact in 2025. That's where we were very pleased with our early order program in Q4. Because based on inventory levels, we thought that it wasn't gonna be as good at it as it was. They, you know, dealers are seeing that the farmer demand was better than anticipated. All dealers do not want to get in a high inventory position again.

Paul Brisebois
Interim President and CEO at AGI

The bottom line is that we see dealer inventories normalized across North America, which is a good sign.

Operator

We have a follow-up from Tim Monachello with ATB Capital Markets. Please go ahead.

Tim Monachello
Tim Monachello
Analyst at ATB Capital Markets

Hey there. Just follow up on the Brazilian equipment only business. Good to see that that backlog is increasing year over year. Can you just talk about, I guess, the way that customers are looking at things? Obviously, you coming out of the market with or pulling back on financing options probably reduces the optionality for some of your customers but doesn't change the demand in the market. Are you seeing some of those projects that may have been financed or look for dealer financing, finding other options? Like is your, is the TAM of that market relatively less changed than the revenue or the order throughput? You understand what I'm getting at?

Paul Brisebois
Interim President and CEO at AGI

Yeah. Yeah, thanks, Tim. The overall market in Brazil is challenging right now. Interest rates are high. Input costs have gone up. Government programs have gone away. There's an election in Brazil that happens in October. Typically, in election years all around the world, for some reason, farmers kind of hold off with regards to purchases. Maybe I'll split it up into three segments. The farm segment, that traditional farm segment is soft with regards to demand right now. Farmers are struggling with loan payments and financials.

Paul Brisebois
Interim President and CEO at AGI

The port facility segment, so commercial segment where we're selling equipment only, we have an excellent backlog, order book, and we continue to be successful with regards to owning port facilities in Brazil and doing a great job of it. The large turnkey projects that are financed, I would say that there's not as many of them going forward, and we've been successful in getting equipment only sales in those large scale projects. In fact, yesterday just secured a number of them going into 2027 on large scale projects.

Tim Monachello
Tim Monachello
Analyst at ATB Capital Markets

All right. That's super helpful. Thanks.

Operator

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
Interim President and CEO at AGI

Thanks, Andrew Wong. Thank you for all the questions. I just wanna reiterate that, you know, when I think about success and when our management team thinks about success in 2026, it's that customers tell us that we've substantially improved from quote to delivery execution and improved our product quality. Employees tell us that they feel empowered to do good work and feel like they can win and be successful every day in their role. Shareholders see stabilized margin performance, improved cash flow, and tangible progress on debt reduction. Thanks, everyone. Have 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
    • Andrew Wong
      Analyst at RBC Capital Markets
    • Gary Ho
      Analyst at Desjardins Capital Markets
    • Nicolle Parker
      Interim CFO at AGI
    • Paul Brisebois
      Interim President and CEO at AGI
    • Steve Hansen
      Managing Director and Equity Analyst at Raymond James
    • Tim Monachello
      Analyst at ATB Capital Markets
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