(1) See "Non-IFRS Measures".
(2) See "Mepu Goodwill Impairment" below.
Results in the first half of 2012 reflected strong operational and financial performance as the Company capitalized on positive industry fundamentals including a record number of planted corn acres in the U.S. and excellent crop conditions in western Canada. In addition, Ag Growth's international sales backlog was significantly higher than the prior year as the Company built upon on recent international success and growing relationships in offshore markets.
The Company enjoyed great success in Canada and internationally in 2012, with both regions attaining record sales levels. Results in the U.S., however, were significantly impacted by a historic drought. The drought signs first appeared in June 2012 and as the drought became more firmly entrenched and its severity more apparent, demand for grain handling equipment, particularly higher margin portable equipment, decreased substantially. The U.S. drought of 2012 is widely considered to be one of the most severe on record, encompassing most major grain growing areas of the U.S. and materially reducing corn production and yield per acre by 13% and 16%, respectively, compared to the prior year.
Trade sales in the year ending December 31, 2012 increased $13.6 million or 5% over 2011. The largest single driver of sales growth was a substantial increase in international business, particularly in the countries of the former Soviet Union. Also contributing to growth in sales was robust demand in western Canada and the acquisition of Airlanco. Adjusted EBITDA decreased compared to 2011 as the U.S. drought significantly impacted demand for grain handling and aeration equipment, particularly higher margin portable grain handling equipment, in the Company's largest market. Profit per share decreased due to lower adjusted EBITDA and a smaller gain on foreign exchange that negatively impacted profit per share by approximately $0.22 compared to 2011.
Trade sales, adjusted EBITDA and profit per share decreased significantly in the fourth quarter of 2012 compared to 2011. Although fourth quarter trade sales in Canada and internationally continued on their very strong pace, demand in the U.S. decreased significantly due to the severe drought that resulted in a 13% decrease in U.S. corn production. In addition, extremely dry and hot conditions in the U.S. resulted in an exceptionally early harvest that limited in-season demand for portable grain handling equipment.
"Our fourth quarter results, as anticipated, reflect the impact of the 2012 U.S. drought," said Gary Anderson, President and Chief Executive Officer. "Although we continued to enjoy strong fourth quarter sales in Canada and offshore, growth in these regions was not sufficient to offset the impact of the devastating crop conditions farmers experienced in our largest market, the United States."
"As we work our way through the impact of this historic U.S. drought I think it is important to step back and assess the state of the Ag Growth franchise. We enjoy dominant market share in portable grain handling and our brand strength and exceptional distribution will allow us to benefit significantly from a return to normal crop production volumes. Our commercial grain handling brands are amongst the most widely recognized in the world with significant market penetration in the U.S. and overseas. Our ability to bundle industry leading commercial grain handling equipment with our recently developed grain storage product line has enabled Ag Growth to establish a significant offshore market presence and our relationships in these regions are growing and becoming more firmly entrenched. All said, Ag Growth remains an industry leader in grain handling, storage and conditioning."
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