Rogers Sugar Inc.

Good morning, ladies and gentlemen, and welcome to the Roger Sugar Inc. Analyst Call February 6 Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press Store 0 for the operator. Before we begin, please be reminded that today's call may include forward-looking statements regarding our future operations and expectations. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. Please also note that we may refer to some non-IFRS measures in our call. Please refer to the forward-looking disclaimers and non-IFRS measure definitions included in our public filings with the Securities Commission for more information on these items. A replay of this call will be available later today, and the replay numbers and passcodes have been provided in our press release, and an archived recording of this call will also be available on our website. I'll now turn the call over to Mike Walton, President and CEO of Roger Sugars. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you all for joining us today. As we begin the review of our business and discuss the strong results of first quarter of 2025 for both of our business segments, I would like to tell you that we recognize the potential challenges related to the recent discussions in trade policies between the U.S. and Canada, and that we are committed to minimizing the impacts of such challenges on our business while meeting the needs of our customers. I'll begin the call today with some highlights of our strong results in our sugar and maple segments for the first quarter of fiscal 2025. I will also provide an update on our LEAP project and on work we are doing to meet the needs of our customers in our sugar segment over the long term. Then I will turn it over to JS, our Chief Financial Officer, for a detailed review of our financial results. I will conclude with an outlook for the remainder of fiscal 2025. We have an investor presentation accompanying this call. This presentation will be available on the investor section of our website after the call. Let me start by saying that we are in a really great business. Rogers is in a strong position to produce sugar for the North American market. We have refining facilities with easy access to western and eastern markets. Our cane refineries are located next to ports that are able to receive shipments of raw sugar year-round with excellent transportation links to key markets. We have a skilled workforce and a reputation for quality and reliability. And we are the only sugar company that is 100% Canadian-owned and operated in Canada. So turning to the tariff question. The first thing I will say is that you can be assured that we are monitoring the situation very closely. We understand that the imposition of tariffs could have an impact on our financial performance in the future. Should tariffs be applied, the magnitude of the impact will depend on the quantum of the tariffs, the timing and duration of such tariffs, and the potential impact on our domestic customers producing sugar-containing products for the U.S. market. Our sugar segment exports approximately 5 to 10% of its production directly to the US. Our industrial customers sell sugar-containing products to the US. Each year, between 40 and 50% of all of the sugar refined in Canada is exported to the US in the form of sugar-containing products by industrial food transformation companies located in Canada. Conversely, each year, a slightly lower amount of sugar-containing products are imported to Canada by US companies. For the maple segment, we do export to the US as there is not enough production capacity to meet the US demand for maple syrup. Canada produces 80% of the world's maple syrup. We currently estimate the proportion of Canadian maple syrup sold in the US to be approximately 50% per year on average. Considering what I have just described, We believe there are very little alternatives to supply in the US market for sugar-containing products and maple syrup in the near to medium term. Although we know that potential tariffs would likely have a negative impact, it is very difficult to estimate, especially on the sugar side, as counter tariffs are likely going to be in place on sugar-containing products coming from the US. Our responsibility in an environment like this is always to be thinking about how we can fortify ourselves even more. So that's what we are doing. And of course, we are focusing on meeting the needs of our customers, as we always have. It is important to remember, whatever happens, we have been in business for over 135 years, and we've seen all types of challenges in trade. We have not just survived these. but we have thrived within them. I personally participated in the last Kuzma negotiations, so I'm familiar with the noise we are hearing right now. What this situation does is bring a cloud of uncertainty to our business and that of our customers. One thing is certain. Everything we have accomplished during the last three years has strengthened our foundations. Our company is in the best shape in our history, and we are well positioned to weather and in new developments on this front. Our strategy for 2025 focuses once again on delivering value to our customers and our shareholders. Our Rogers refined framework sets out the pillars behind that strategy. They are modernizing and growing in our sugar business, driving profitability in maple, maintaining a strong balance sheet, and advancing our ESG program. We continue to make advances in these four key areas because we are confident that this is the right way forward to meet the needs of our customers while providing a fair return to our shareholders. In the last three years, we have reported 12 successive quarters of improved profit year over year, and that track record of growth continues with our results for the first quarter of 2025. Our first quarter results reflect our continued focus on consistent, profitable, sustainable growth. With stronger performance in both business segments, the first quarter was the best quarter in our history. The sugar segment in particular benefited from higher volumes compared with last year, which was impacted by the labor disruption in Vancouver. Consolidated revenue increased by 12% to 323 million. with higher contribution from both business segments. Our adjusted EBITDA increased by 29% to almost 40 million. The key contributors were solid revenue growth and improved operating efficiencies in both segments. In the first quarter, our sugar segment began to see a modest recovery in demand. Prices of other commodities, such as cocoa, continued to weigh on demand for sugar-containing products. Today, that inflationary pressure has moderated but not disappeared. As we expected, the pace of global food inflation has slowed. Consumers are adjusting over time to the new reality of food costs. The impact on our top line was a higher volume than anticipated in the first quarter. Together with the improvement in volumes from full production in Vancouver, This quarter saw sugar volumes increase by about 8% compared to the same time last year. Our maple segment continues to benefit from the market recovery that began in the second half of fiscal 2023. Sales volume increased by 13% for the quarter for a great start to the year, while pricing continues to be strong and consistent with the first quarter of 2024. Those factors drove growth in revenues in the first quarter. At the same time, we continue to focus on operational efficiency in our maple segment, and our efforts are paying off. The combination of higher sales volume and lower operating costs per unit drove a 22% increase in adjusted EBITDA at $5.7 million for the current quarter. Now turning to our eastern sugar expansion project. 2025 is going to be a year of significant activity and progress on our LEAP project. We continue to work hard to advance this very important enhancement to our production and distribution capability in Eastern Canada. Construction is well underway at our Montreal refinery. Our people are meeting the challenge of implementing a significant facilities upgrade and expansion, while ensuring that our customers continue to receive timely deliveries of the sugar they require. This is no small feat. Our estimate for the total cost to complete the LEAP project remained consistent with our update from last quarter of between 280 and 300 million. And LEAP is on track for completion by the end of 2026. We should remember that this project addresses the long-term needs of our customers and is integral part of our business strategy to support our business in Eastern Canada. This project will add 100,000 tons of capacity. located close to our customers in the eastern domestic market. This production growth, together with an enhanced rail deliverability, will allow us to leverage our location to support the food transformation industry in eastern Canada. LEAP represents an important opportunity to solidify our position as the supplier of choice for our customers. As they plan for their own long-term growth, we will be there to supply the sugar they need. I'll now turn the call over to JS for discussion on her financials.

Thank you, Mike, and good morning, everyone. The improved business performance translated to an increase in adjusted net earnings per share. For the first quarter of 2025, the adjusted earnings per share were 15 cents compared with 12 cents for the same period last year. The adjusted EPS number for the first quarter includes the impact of the equity issue done in the second quarter of 2024, which increased our share outstanding by about 22%. As Mike said in his remarks, we are pleased with the continued momentum in both of our business segments as we are reporting growth in revenues and profitability in the first quarter. Consolidated revenues for the quarter were $323 million, an increase of 12% compared with the first quarter of 2024. Consolidated adjusted EBITDA increased by close to 30% year-over-year to just under $40 million. Consistent with 2024, our maple segment accounted for just over 20% of consolidated revenues and 14% of adjusted EBITDA. Together, the strong performance from both of our segments drove an increase in free cash flow of $42 million for the last 12 months. Free cash flow was $86 million for the trailing 12 months compared to $44 million for the same period last year. Now let's turn to the individual business segments, beginning with sugar. Revenue increased by about 12% to $257 million in the quarter for the sugar segment. Volume growth was the main driver for this increase, reflecting the impact of the labor disruption in Vancouver on the first quarter of 2024. Export volumes, which increased by about 20,000 tons in the period, were the most significant contributor to year-over-year volume growth. You may recall that we had focused on supplying our domestic market during the strike in Vancouver. Revenue growth also benefited from higher pricing for refining-related activities. Adjusted gross margin per ton of sugar was $225 in the first quarter, an increase of $26 per ton compared to $199 in the first quarter of 2024. Note that this increase includes the non-recurring proceeds of $2.7 million from an insurance settlement related to prior periods. The positive variance is also associated to the impact on profitability of the labor disruption in Vancouver last year. Adjusted EBITDA for the sugar segment increased by 30% to $34 million in the first quarter, compared to $26 million for the same period last year. Our maple segment has delivered another quarter of solid financial results. Maple benefited from higher sales volumes to existing customers and robust pricing consistent with the first quarter of 2024. Together, these factors drove revenue growth by 13% year over year. adjusted gross margin, improved to 11.5% in the first quarter. Adjusted EBITDA in maple increased by 22% compared with last year, reflecting the ongoing benefits from higher volumes and lower operating costs from the ongoing investment we have made in operational improvements over the last two years. The strong results from both of our business segments support the strengths of our balance sheet and associated financial metrics. As you heard previously, our strong financial performance over the last three years has led to a sizable increase in our internally generated cash flow. Apex for the quarter for both segments totaled $22 million, of which $20 million was attributable to our LEAP project. We currently anticipate to spend about $100 million in connection with the LEAP project this year. Our financing plan for LEAP is scalable, as we have some options. It includes a combination of CAG generated from the recent increase in operational cash flows, debt, equity instruments, our existing revolving credit facilities, and loans with Investissement Québec. During the quarter, the six series debentures, totaling $57.4 million, matured, and we repaid this amount to the holders. Taking into account our available liquidity and future financing needs, we are considering all options regarding the seven series convertible debentures which mature at the end of June 2025. Some of those options include cash repayment, conversion to common shares, or refinancing with a similar debt or equity instrument. Looking ahead, we will monitor the financial market and the current situation regarding the potential implementation of export tariffs. We will adjust our spending and our financing strategy accordingly to meet our business objectives. In closing, I would like to say that we are maintaining our dividend of $0.09 per share for our shareholder this quarter. Once again, this dividend is supported by our excellent financial results. With that, I will turn the call back over to Mike to provide a summary and outlook for 2025.