AGT Food and Ingredients Inc. (AGTF) Earnings Call Transcript & Summary

Good morning, and welcome to the Annual Meeting of AGT Food and Ingredients Inc. My name is Bill McFarland, and I'm the Chair of the Board of AGT. This meeting is being held in a webcast format only. I'm joined today by Murad Al-Katib, President and Chief Executive Officer; and Kent Ren, Chief Legal Officer and Corporate Secretary of the company; and Harley Ulmer, Global Corporate Treasurer of the company. We will start by conducting the formal part of the meeting, and afterwards Murad will provide a business update followed by a question period. Murad's presentation will appear on your screen so you may easily follow along, and it will be posted on the AGT website after the meeting. I have a few administrative details to cover before we get going. Registered shareholders and duly appointed proxy holders may vote online during the meeting by clicking the voting icon. If you cannot see the full text of the resolution, please scroll down on your device in order to see the resolution as well as the voting options. If you've already voted by proxy, there is no need to vote again during the meeting since your vote has been recorded in accordance with your proxy instructions. Given the virtual format of the meeting, we have appointed certain individuals to motion and second items of business in advance. In order for us to efficiently address any online questions on the matters to be voted upon. We encourage shareholders who are attending online and have specific questions on any item of business to submit their questions now. To enter a question or comment, select the messaging icon compose your question or comment at the bottom of the screen and then click the arrow icon to submit. Please note that questions submitted during the meeting via the online platform will be moderated before being sent to me. All questions will be addressed before voting closes. I now request that the meeting come to order. With the consent of the meeting, I Bill McFarland will act as Chair of the meeting, and Ken Marine shall act as Secretary of the meeting. I appoint Patricia Selby of TSX Trust Company to a form of proxy were mailed to shareholders of record as of May 4, 2026, in advance of the time required for such notice. I will dispense with the reading of the notice. The Secretary has also advised that a quorum is present. I further direct that the formal report of the scrutineer be annexed to the minutes of this meeting as a schedule. I now declare that this meeting has been regularly called and is properly constituted for the transaction of business. Voting at today's meeting for those that are entitled to vote and have not already submitted a proxy will be conducted by online ballot for each matter. I now declare the polls open on all items of business. If you submitted a completed proxy in advance of the meeting, you have already voted and are not required to vote again. Voting panel on your screen should now display the voting options for registered shareholders and duly appointed proxy holders. The voting panel will remain open until discussion, if any, has concluded on all items of business. I will then declare voting on all items of business closed. The first item of business is the presentation of the audited consolidated financial statements of the corporation for the year ended December 31, 2025, and reported thereon by PricewaterhouseCoopers LLP. A copy of such financial statements and the report of the auditors thereon has been mailed to each registered shareholder of record at the close of business as of May 4, 2026. We elected to receive the financial statements and report of the auditors. These documents are now placed before the meeting. I will dispose with the reading of the auditor's report. Noble by the shareholders is required or proposed to be taken with respect to the financial statements. The next item of business is the election of directors of AGT. Other nominations of persons for election as directors in accordance with the advance notice provisions of AGT's bylaws, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in the management information circular and proxy statement prepared for this meeting. As there were no other individuals nominated prior to this meeting, those 8 nominees are Robert W. McFarland, Murad Al-Katib, Huseyin Arslan, Marry Garden, Cristoskasius, Brad Martin, JV, MRSA, Mary Lucie Moran. May I have a motion regarding the election of directors?

I make that motion.

Thank you. Could you make it formally Harley, please? Cooper's LP charter professional accountants be appointed auditor of AGT until the next Annual Meeting of Shareholders or until a successor is appointed at such remuneration [indiscernible] Thank you, Mr. Ryan. You now have heard the motion. Mr. Ryan, are there any online questions on this motion?

Mr. Chairman, there are no questions.

As a reminder, if you have previously submitted a completed proxy, you've already voted and it's not necessary to vote again online. We will pause briefly before closing the polls. [Voting] The polls are now closed, and I will ask the secretary to provide the report from the scrutineer.

Mr Chairman, I have received a report from the scrutineer. The shareholders have voted in favor of each of the items of business to be voted on at this meeting.

Thank you. Accordingly, I declare the election of each of the companies to the Board of Directors and the appointment of Pricewaterhousecooper, following the meeting, a report disclosing the final voting results of this meeting will be filed on SEDAR, and we will also issue a press release with such results. This now concludes the formal portion of the meeting. Accordingly, I declare this meeting terminated. On behalf of the Board of Directors of AGT, I would like to thank our shareholders, customers, employees, producers, suppliers and communities where we work for their continued support. As the formal portion of the annual meeting has now been completed, I will ask Murad to provide an update on the business. Please enter your questions during Murad's presentation by the online platform. This will assist in making the Q&A period efficient. To enter a question or comment, select the messaging icon compose your question or comment at the bottom of the screen and then click the arrow icon to submit. Questions submitted during the presentation via the online platform will be moderated and/or combined before being. [indiscernible]

Today is an interesting opportunity and the core strengths of AGT and the investor opportunity today. So I want to just on Slide 2, refer -- next slide to refer to the forward-looking statements. We claim the protection of these cautionary notes for forward-looking information. On Slide 3, let's just talk about who we are today. AGT Foods is a globally diversified company that produces healthy plant-based foods. So we're a diversified leader in plant-based food and ingredients, this really does reduce our tariff exposure and the susceptibility of our business to policy changes. We are global. We're not just in North America. We are around the world, close to where the consumption is growing in many of our main products. Our integrated supply chain and scaled manufacturing footprint gives us that scale and cost advantage in particular in cost-advantaged jurisdictions like Turkey and India. We're a trusted partner to major brands by our R&D innovation and our private label store brand manufacturing platform. We've shown the resiliency of our platform with a proven model led by an experienced management team. Our consolidated adjusted EBITDA CAGR at 26% when comparing TTM Q1 '26 to the 2021 full year results. Over the past 4.25 years, again, strong resilient growth in the entire platform of AGT and our packaged foods grew also by a CAGR of about 27% and $93 million, a transformation of the business that allows us to deliver adjusted free cash flow growth of a CAGR of 30% over the same period to over $100 million adjusted free cash flow in the TTM period ended March 31, 2026. And as I said earlier, I just wanted to reiterate experienced founder-led management team backed by a committed long-term shareholder in Fairfax, these give us a strong base from which to grow. Let's look at Slide 4 now, the next slide. Two major segments of our business really complement the growth and margin profile and transformation of this business. Packaged Foods is the core growth driver centered around our branded private label and co-manufacturing opportunity. Pasta is where we are seen as a global leader in the production of global store brands where we're investing in the future with high-return projects, both with the capacity expansion that's completed in Turkey and new capacity that's being built in India. We work directly as a partner with household brands and global retailers as a part of their supply chain, managing the procurement of their wheat, the production of their pasta and I want to remind you that Pasta is a need to have in retail stores around the world. This is not discretionary consumption. It's everyday consumption that is repeated by the consumer. Our value-added processing segment is a key part of our integrated supply chain, offering efficiency and quality. And access to commodities around the world provides us with flexibility to navigate weather, pricing changes and grow our margins over time and the large component in our food security business is also in this segment, making up approximately 50% of this segment, where revenues as a preferred supplier to local governments and NGOs and multilateral agencies will continue to expand. Broad global customer base across multiple sales channels has given us strong resilient earnings in this value-added processing, demonstrated, for instance, in our Q1 results, where revenues declined, yet earnings were very stable. So free cash flow and adjusted EBITDA are KPIs in this segment and across our business, not revenue. We go to the next slide, Slide 5. And we look at the overall market opportunity, Pasta and pulses are stable. [indiscernible] have long-term growth rates of 5.2% in pasta, 5.7%. So call it close to 6% CAGR, in these particular segments. They're affordable, protein-rich foods with everyday use and repeat consumption, not discretionary consumption, strong health trends driving plant-based nutrition dense demand GLP-1 drugs are driving a change in consumer behavior around the world where dietary fiber and protein are not a fad. They are fundamental consumption and fiber-rich foods such as pulses with protein and fiber are natural ingredients for the growth of food in the world. Our growth is aligned to Asia, Africa, rising food demand and demographics with global population growth and global food outputs will have to grow by nearly 50% by 2050 a feet a growing middle class and key partners retailers and global brands are supporting this growth, along with food security and multilateral agencies. On Slide 6, very simple business strategy, expand our margins through shift and operational excellence. The mix shift includes growth in past a better-for-you products and the move to higher-value pulses like beans, chickpeas and are value added, scale our global platforms, new Turkish capacity to be 70% utilized by the end of 2026. We expect new mine out lines to be mostly utilized by the end of 2026. We expect growth and expansion in our better-for-you platform in '27 and '28, along with the new India platform that's being driven, adding about 90,000 tonnes of capacity to our footprint, our modular CapEx strategy will target 3- to 4-year paybacks with very strong return on invested capital and strong ability to deliver free cash flow driving our adjusted EBITDA growth in excess of 10% per year in the Packaged Foods & Ingredients segment. Future CapEx and dividends are funded through our free cash flow. All of these are fundamentals to delivering a strategy. On Slide 7, there's a clear path to adjusted EBITDA growth through targeted investments in construction today, we know where we're winning and Turkey and India Pasta is a growth driver, better for our food ingredients and then the efficiency and our diversification of our value-added processing segment. These are, again, doubling down on our highest-performing businesses, these are our winners. On Slide 8, strategy is in place. I can tell you, we're working right? We're well positioned in attractive, growing global food markets, and we've had success for several years. The CAGRs that we talked about earlier, 30% adjusted free cash flow growth 6% adjusted EBITDA growth in Packaged Foods on a CAGR basis in the last 4.5 years are showing that we are indeed winning and the strong financial profile with adjusted free cash flow being driven by packaged food growth in excess of 10%, will give us -- our experienced and committed to driving long-term shareholder value. So we're here and we're winning -- and the clear opportunity here is to drive shareholder value, strong alignment between management [indiscernible] and investors. And currently, as Bill said, with AGT valued at 6x adjusted EBITDA as compared to our comparator group at 9x and greater, we're at a point now where there's a great investment opportunity. I'm going to stop there now and take some questions. I think I'm going to just ask Bill to just wrap up for me.

Thank you, Murad. We would now be pleased to entertain any questions to enter a question or comment, select the messaging icon, compose your question or comment at the bottom of the screen and then click on the arrow icon to submit Mr. [indiscernible] are there any online questions?

Yes, Mr. Chairman, we have received the following question. What is the current and expected ongoing impact of the war in the Middle East.

Yes, I'll take that question. So again, a very timely question, a very dynamic situation. I guess we are in a great position now where there is a cease fire that seems to be holding discussions going on between the U.S. and Iran and the Switzerland talks. But I think I want to just kind of talk about what's already kind of what I would call water under the bridge. Governments are rethinking food security strategies and expected to increase future revenues. So we are seeing that the tail wins or the push after this Middle East war now, if stocks are depleted in the region. Initial Q1 disruption delayed our shipments hurt Q1 by approximately $5 million to $7 million of EBITDA. We are expecting that to be recaptured in the Q2 to Q4 period. So we're seeing that play out with robust shipments in April, May into June and continuing on in quarter 3. We've remained operational through the whole disruption. We're pleased the straight is open. But regardless, it hasn't been a big impact on our business. and it wouldn't be if there's a reversal. So the reversal that's going to happen now will only be positive. I mean even the oil future is coming down so drastically and dramatically will again lead to the normalization of freight rates in short order. Supply chains have adapted, shipments are rerouted. We're expecting it to take 2 to 3 months to get all back to normal shipping. But in the meantime, these multimodal land bridges and other things that are being done by large global organizations like DP World into the United Arab Emirates, these are continuing to make sure that products are flowing and governments are prioritizing food shipments over other discretionary goods. So in general, I think that what we'll see is there might be a little bit of what I would call ebbs and flows, but it's very manageable going forward. We can maybe go to the next question.