Rogers Sugar Inc.

framework we put in place in 2024. The core idea is straightforward, consistent, sustainable, profitable growth. It deliberately aligned our focus toward disciplined execution, which means managing our cost base, running our refineries efficiently, and maintaining a proactive hedging program that protects our merchants from commodity and currency volatility. Sales volume is important, but our commercial approach strategy is It is underpinned by extracting value from our production facilities while meeting the needs of our customers. When you look at today's results, Rogers Refined is working exactly as intended. Now let me give you an update on our LEAP expansion project in eastern Canada. During the second quarter, we've continued to advance construction activities and the installation of new sugar refining equipment in the main expansion building at our Montreal refinery. We also continued the work related to the deployment of new logistics infrastructure, began the installation of utility-related assets, and completed the new 25 kilovolt electrical connection that will support the entire Montreal refinery in the future. Finally, we have advanced the development of our commissioning plan. This is an exciting time, and I'm pleased with the way our teams and contractors continue to work together to bring this project to life while still operating our Montreal refinery without interruption. And let me point out that the Rogers Refined Framework for sustainable operations has underpinned our work plan the whole way through. That means a focus on safety for all of our people and assets. It means planning and testing every step of the way. We are using this time to train our workforce on all aspects of the new equipment and working with our suppliers and business partners to prepare to bring the new capacity into service. In fact, in less than four weeks, we plan to begin melting raw sugar using some of the recently installed equipment of the LEAP project. This is one of the first steps as we move to our commissioning stage of the project. Our targeted start-up date for the first half of 2027 is unchanged, as is our cost event of $280 to $300 million. Having this production in our Montreal location is a vital strategic advantage. We are located near vital port and rail infrastructure, and more importantly, in proximity to where our customers are locating their production facilities. We continue to be confident that this capacity growth positions us to serve the customers on a timely, efficient basis over the long term. Now I'll hand the call over to JS for a financial review.

Thank you, Mike, and good afternoon, everyone.

If you are following along, we are on slide nine. I will walk through the key financial results for the second quarter and the first six months of fiscal 2026 and then provide some additional context for the remainder of 2026. Adjusted net earnings for the second quarter were $19 million or $0.14 per share compared to $16 million or $0.13 per share in the same period last year. For the first six months, adjusted net earnings were $43 million or $0.34 per share. This represents an increase of 8 million, or 22%, compared with the first half of fiscal 2025. The improvement in adjusted EBITDA of 10% in the second quarter and 15% in the first half of 2026 were both largely driven by stronger performance in our sugar segment, where healthy and stable sales margins also benefited from some non-recurring and timing-related items. Revenues were $281 million compared with $338 million in the same quarter last year. For the first half of 2026, revenues came in at $579 million, roughly 14% below last year. The largest contributor was the decrease in the raw number 11 prices, which adds marginal impact on our overall profitability as we mitigate commodity price risk variation through our rigorous hedging program. The decrease was also partially due to the reduction in volume sold, as Mike mentioned earlier, reduction mainly attributable to lower margin export sales. Our free cash flow for the trading 12 months came in at about $93 million, an increase of 11% over the same period last year. That improvement was driven by higher adjusted EBITDA and lower capital expenditures in our ongoing operations, excluding the LEAP projects. Free cash flow is how we contribute to the financing of LEAP, service our debt, and fund our dividends. The trend is healthy and moving in the right direction. As I'm discussing our financial results, I would like to point out that our operations and related costs have not been materially impacted thus far by the current situation in the Middle East. Our proactive edging strategy was successful in mitigating the potential impact on energy costs raw number 11 price variation and transportation and logistic cost increases going forward we will continue to be proactive and prudent in our approach to manage the risk related to this evolving situation i am now turning to the individual business segments starting with our sugar segment which drives about 85 percent of our profitability overall the sugar segment delivered strong results in the second quarter Volume was down, but the business delivered improved adjusted EBITDA in the quarter compared to the same period last year. Trigger adjusted EBITDA was $33 million for the second quarter, an increase of $6 million compared to the same period last year. Let me walk through the moving parts. Adjusted gross margin increased by $8.5 million in the second quarter compared to the same period last year. The increase was due to a higher margin earned on refining activities of 6.5 million associated mainly with the mix of products sold during the quarter. Non-recurring adjustment recorded in the second quarter of 2025 for 6 million. Lower procurement costs for raw sugar impacting positively the inventory position at the end of the quarter for 3 million and lower costs in the current quarter for 1.5 million for maintenance. These variances were partially offset by an unfavorable variance on volume sold of 23,500 metric tons, valued at 8.7 million, and largely in the lower margin category of export sales. On a per unit basis, adjusted gross margin was $268 per metric ton in the quarter, compared to $194 per metric ton in the second quarter last year, an increase of $74 per metric ton. This improvement reflects a favorable mix of products sold, lower raw sugar procurement costs, and lower refining costs. In addition, the second quarter performance last year was affected by some higher maintenance costs in our Montreal refinery that were non-recurring in nature. For the first six months of 2026, adjusted gross margin at $100 million was $17.5 million higher than last year, of which almost $11 million should be considered non-recurring or timing related. The remaining increase was attributable mainly to improved pricing and favorable inventory valuation variance. The positive variance was partially offset by lower sales volume of 44,500 metric tons, largely in the lower margin category of export sales. Finally, our administration and selling expenses were higher by $4 million, driven primarily by cash settled share-based compensation, which was higher in the second quarter of 2026 due to an increase in our share price, along with market-based increases in compensation and employees' benefits. Now moving to our maple segment. For the second quarter of 2026, the maple segment delivered results aligned with our expectations. also lower than the same period last year. The reduction of 2 million in adjusted EBITDA compared with last year relates primarily to mix of products sold impacting production costs, including punctual favorable timing variances benefiting the second quarter of 2025. Adjusted growth margin percentage was 10.7% compared to 13.2% in the same quarter last year, driven by those same factors of production costs and mix. For the first six months of 2026, adjusted EBITDA of the maple segment was also aligned with our expectations, despite being lower than last year by 2 million. The unfavorable variance for the first six months was directly related to the factors impacting the second quarter discussed previously. Adjusted gross margin percentage for the first six months of 2026 was 10.6%, compared to 12.3% in the same period last year, driven by those same factors of production costs and mix. As mentioned previously, the results of our maple segment have been strong so far this year and aligned with our expectations. As Mike will discuss later, we anticipate overall strong results for the maple segment in 2026. which results in the second half of the year closely aligned with the performance seen in the first six months, reflecting our efforts at optimizing our production assets, stabilizing our sourcing strategy, and securing a reliable supply of syrup for our customers. Turning to our balance sheet, in January, we issued $57.5 million of ninth series convertible unsecured debentures, maturing in January of 2033. The net proceeds were used to reduce the balance on our revolving credit facility, further strengthening our liquidity position. This issue completes our refinancing program that began with the issue of the H-series of ventures in 2025. We maintain a prudent and diversified funding platform of convertible debt, equity, internally generated cash flow, and access to credit facilities. This strong financial position gives us the flexibility to complete the LEAP project and execute on our strategic priorities of investing in our businesses and maintaining a consistent distribution to our shareholders. On that note, our Board of Directors declared a dividend of $0.09 per share to be paid in the third quarter of fiscal 2026. We have paid a quarterly dividend to our shareholders without interruption for over 16 years through commodity cycle, the global pandemic, and now a period of significant trade uncertainty. That consistency is something we are proud of and committed to maintaining. With that, I will turn the call back over to Mike to provide a summary and outlook for 2026.

Thank you, JS. Now looking at the remainder of the year. As we move through 2026, the business environment remains complex. Trade policy is shifting. Geopolitical tensions are affecting supply chains, and some of the longer-term trends I mentioned earlier are starting to show up in our numbers. We are not immune to any of that, but we have navigated difficult conditions before, and our approach is the same as it always has been, to stay close to our customers, run our operations well, and manage our costs carefully. Our team remains disciplined in how we allocate capital and pursue opportunities. We are not chasing volume for its own sake. The focus is on long-term customer partnerships that generate sustainable profitability. That is the essence of Rogers Refined. On the trade front, the direct impact on our business has been limited so far. We are monitoring the situation and engaging with relevant stakeholders. If conditions change, we will adjust. It's as simple as that. The progress we have made over the last several years has put us in a strong position. and our focus for the remainder of 2026 is straightforward. Keep executing, keep delivering, and we will focus on what we control. In the sugar segment, we are revising our volume forecast for the fiscal 2026 from 750,000 metric tons to 735,000 metric tons, a reduction of approximately 6% compared with 2025. Most of that reduction is in export sales, where the trade environment for Brazilian origin refined sugar has reduced the volume of opportunistic sales available to us in the U.S. market. Our domestic Canadian business remains healthy, and we continue to prioritize serving those customers first. We expect the margin environment in the domestic market to remain stable, and we believe we will continue to offset the impact of lower overall volumes. At our Tabor facility, the processing of the 2025 beet campaign was completed in February. We produced 103,000 metric tons of beet sugar, slightly above our original expectation. Looking at our operating costs, we believe that our production and maintenance expenses across all three facilities will increase modestly, driven by market-based cost increases and annual wage adjustments. Also worth mentioning, that we do not anticipate significant impact on our energy costs from the current conflict in the Middle East. As JS mentioned previously, our multi-year hedging program should mitigate our exposure in the short and longer term. Administration and selling expenses will be somewhat higher, reflecting the recent increase in our share price, which flows through to our cash-settled share-based compensation, as well as general market increases in costs associated with the Plan Canadian International Trade Tribunal review in the second half of the year. Financing costs will increase as we draw on the funding we put in place for the LEAP project. Now looking at Maple. For Maple, we continue to expect a strong year. Our volume forecast remains 56 million pounds for fiscal 2026, representing a growth of approximately 5% over last year. That assumption reflects current global market conditions and the availability of maple syrup from producers. As I mentioned, we have secured sufficient supply to meet our customer demands for the remainder of fiscal 26 and into the first half of fiscal 27. Capital spending in total for fiscal 26, excluding LEAP, are focused on automation projects and improved productivity, profitability, and are mainly associated with the sugar segment. We anticipate that spending should be consistent with prior years at approximately $27 million. We anticipate spending $115 million in fiscal 26 on the LEAP project. In summary, the results of the second quarter were consistent with the trajectory we have been discussing recently. We are satisfied with our current performance, showing stable profitability in a volatile macro environment, which is exactly what Rogers Refined is designed to deliver. The great focus of the last few years is showing up in the numbers, and our priorities for the second half of the year are unchanged. Serve our customers well, manage costs carefully, and keep the LEAP project on track for its first half of 2027 in service day. Before I hand it back to the operator, I want to recognize our teams, delivering solid profitability in our most historically challenging quarter, while simultaneously building a major expansion of Montreal, takes real commitment. Thank you to our people and to our customers and partners for the trust they continue to place in this. With that, we are ready to take your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you're using a speakerphone, please lift the headset before pressing any keys. One moment please for our first question. Your first question comes from the line of Michael Van Elst from TD Cowen. Your line is now open.

Good afternoon.

I want to start Off talking about the sugar volumes a little bit because they do stand out. And you did say that you're not chasing volume, but are you losing any contracts to competitive bids or is it strictly just, you know, customer closed and the trade for the most part?

Yeah, Michael, thanks for the question. Your view is exactly right. The domestic market remains competitive as always, but we're not losing business in the domestic market, other than the closure that was a year-over-year number that we talked about in Western Canada, and then the production problems that one of our major customers had in Eastern Canada. Other than that, our business is stable. The losses are exactly in the export business. As you know, there were high tariffs on Brazilian-origin sugars, and refining doesn't change the origin. And therefore, the duties were prohibited to enter into the United States.

So what's happening with all the beet sugar that you're producing? And if the exports are down and liquid sugar volumes are down, where is that volume going?

Well, the beet sugar, it goes into the mix like we do from all of our sites. And it's not specific for liquid or specific for exports. The beet sugar consistently has about 20,000 tons of quota access to the United States that goes back through WTO and the last Kuzma negotiation. Other than that, beet sugar stays in the domestic market and mostly in the market where it's produced. And that business is very stable.

Okay. Because your volume, like now you're expecting volumes to be down 6%. I think you're 750. I seem to remember capacity... is around $800 or so. When you consider the market conditions today and the trade environment and everything like that and all the trends that you mentioned, if you had to make the decision over again, would you still think LEAP is a good return on investment at this stage?

It is absolutely the right position to take long-term for this business. As you know, when we announced, we were moving 20,000 tons and more a year from Western Canada to support Eastern Canada. When you look at all the public announcements that have been made in the last few months in Central Canada for new plant expansions and new capacity, absolutely this capacity is required on the medium-long term in Eastern Canada.

Okay, that's good to hear. Are your customers' facilities... or are going to be ready, or is the demand going to be there, do you think, when you open in the first half of 27, or is it going to be a more, like, a very gradual ramp up?

Yeah, we've said all along it'll be a gradual ramp up. It could be 12 to 18 months, maybe longer, depending on the demand, and commissioning an asset of the size that we've built in Montreal. So that's been part of our plan all along. But if you look at other major customers that we have that have been reporting publicly as well lately, Yeah, there's been softness in demand because of food inflation and population decline and calorie consumption decline in developed countries. But everybody's got an outlook because of food inflation easing on cocoa, which is a big driver for us for SEPs to foreign markets. We see that recovering because our customers are calling it recovering. Also, the other investments that we've talked about notably since the last quarter, a big plant expansion of a customer of ours in Montreal made an announcement. of a $250 million plant expansion. So the market, despite all the headwinds and the volatility, remains very interested in developing more SCP production in Canada.

Okay. Thank you very much. I'll let somebody else ask questions.

Thanks, Michael. Thanks. Your next question comes from the line of John Zamparo from Scotiabank. Please go ahead.

Thanks. Good afternoon. I wanted to ask about the gross margin performance in the quarter. It was up sharply year over year. You called out the one-time items from last year, and mix is obviously a component here with the lower export sales. But I wonder if you could talk about some of the other factors that are driving your gross margin performance.

Hi, John. It's JS here. Yeah, so if we look at the year over year, last year was unusually low. And then because of the reason we just mentioned, so we had, you know, significant maintenance costs that were mainly one-time in nature. And then this year, we have benefited from the mix of having less export, which are lower, you know, we have lower contributed margin for those. And we've also had, we benefit from a lift on our inventory valuation because of the, you know, the demand. some of the pricing that we are pricing at in going in the future for this type of inventory. So if we look at the two together, you can see one is unusually high, the other one is unusually low. But if you look at the, you know, in trying to look and going forward, I think there's probably a better proxy if we look at the, you know, the last eight quarters together.

Okay, that's helpful. Thank you. On GLP-1s, I wonder what you're hearing from your larger customers in terms of how to address that or how to offset that. Is there anything you can share that would help us understand how this might evolve over the next couple of years, particularly as generics come into play?

Yeah, John, it's an interesting question. We're not going to speculate. We're following it as close as everybody else. The fact is sugar is a functional ingredient. It's not just for sweetness. It's also a functional ingredient for cooking and baking and preserving food products. So I think it's going to be a bit of an anomaly, but we're paying attention to it like everybody else and seeing where this is going to go.

Yeah. Okay. Fair enough. And then one last one and I'll pass it on. You referenced the multi-year hedging program on energy costs. I think this is a subject on many investors' minds. I wonder if you could elaborate a bit more on that. How far ahead precisely have you hedged natural gas costs? And is it 100% through that timeline or is there some variability?

Um, it's a very good questions. And, uh, you know, when all issue of the war broke in, uh, in the middle East, um, you know, we, we, we, there's not a material impact for us. We look at it five years ahead and, uh, and we are in a risk management business. So, you know, we've through the years, we've always tried to hedge, you know, a significant portion of our future consumption. So if you look in the next five years, obviously the shorter term is, is almost back to back. And then as you go longer, you know, to the third, fourth, and fifth year, well, there's still a majority of our position that's hedged.

Okay. That's very helpful. Thank you. I'll pass it on.

Thank you, John. Your next question comes from the line of Frederick Tremblay from Desjardins. Please go ahead.

Thank you. I wanted to ask a couple of questions on Maple. First, we noticed that employees at one of your large Maple peers went on strike recently, a strike that lasted over a month. Just wondering if you're seeing any positive volume impacts from that?

No, unfortunately, that's the environment for these kinds of things in the market these days. No impact in our business one way or another of any material way. Just a little bit of noise, as you would expect. But as far as we understand, they continue to serve their customers. And I assume, like us, we play long term and we defend our customers and look after them in times like this.

Perfect. That's helpful. And then still in Maple there, you did point out some less favorable mix of products sold in the quarter. Is that something that was isolated to this quarter or is that expected to continue?

Actually, a mix of products. So there's also last quarter was very favorable. So that's, you know, that's why the anomaly was more the second quarter last year, where this quarter it's a bit more flat and aligned with our expectations. And so it was mainly in the industrial sectors where we had a greater inventory of what we call industrial products. to serve some of those customers, and therefore we were able to benefit. And if you recall last year, the second half of the year was a bit more difficult because servicing those customers, we had to use more expensive syrup. Now this year, it's going to be more balanced.

Yeah, perfect. Thanks for that reminder. I'll get back to you. Thanks.

Thanks, Fred. Your next question comes from the line of Nathan Poe from National Bank Financial. Please go ahead.

Hi, good evening, everyone. Thanks for taking my question. The first question I have is with the U.S. looking at new potential tariffs under Section 301 and potential for big changes to USMCA this year, can you walk us through how you're thinking about your exposure there?

Yeah, 301 is interesting, and we've been paying attention to it, obviously. And, you know, Nathan, I've been around 45 years, so I find this stuff fascinating, as crazy as that sounds. But just a reminder that from a refined sugar point of view on a high tier, which is Bill 301 that's focused on, it's a very small amount of sugar. Five to eight percent of what we refine goes to the US as refined sugar. So very minimal impact to us and not going to feature big in my worry list. And as far as Kuzma, look, we're not going to speculate on Kuzma. We haven't all along. We're paying attention to it. We're working with officials to Make sure everybody understands the importance overall to the Canadian economy. Sugar is just about one part. The food manufacturing, it's a huge implication. So we're staying close to it, but I won't speculate on what may or may not happen coming out of Kuzma.

Thanks for that, Keller. And with the electrical connection and sugar melting starting up in about a month, what are the major milestones you still have to hit to make sure you stay on side for the LEAP commissioning?

That's a really great moving piece. The electrical connection is a huge change. It's a big change in an asset like that, and we're glad to get that done. And starting to commission as we build in order to save time and money and train our employees on it is a really clever idea the team came up with to maximize what we're doing. The next big step after the melting starts is the pan will go in. It's the biggest piece in a sugar refinery. It's not as complex as everything else we've already done, but it's kind of the big milestone where the last big lift, the last big piece of gear goes in and we close up the roof. And then we're now just into ticking and tying everything together and getting it ready for full commissioning.

Thank you very much. Those are all the questions I had. Thank you. Thanks, David.

Your next question comes from the line of Michael Van Elst from TD Cowen. Please go ahead.

Hi again. So last quarter, when you talked about the sugar outlook, you said that you expected EBITDA to be slightly better for the year. And now you're up 15% in the first half of the year. What does that mean for the second half?

It's a good question. I think we're expecting, you know, there was a few things in the first half, as we mentioned, that kind of played in our favor, some timing difference and some, uh, in some one times, you know, for example, we had settlement of a sand flame in the first quarter that we had last year. I think we are expecting a more regular type of operation in the second half. I think we are maintaining, you know, our outlook that we will do slightly better than what we did before, exactly like you said. But, you know, I'm not expecting us to be 15% ahead, definitely not for the second half of the year.

Right, but I mean, if you're only slightly better for the full year, then it could mean a meaningful drop in the second half of the year, like 10%, let's call it. Is that what you're suggesting?

No, we're not suggesting that. What I'm suggesting is something more closely aligned with what we had last year as far as outlook for the rest of the year. Okay. Okay.

Patrick Corbett- All right, that's helpful and what I could look back because I know you've gone through the CIA, a lot of times number of times since i've been covering you guys, but can you just remind me what those legal costs would be in and and such.

Yeah, we're expecting, you know, it's probably somewhere between, you know, $1 and $2 million, depending on the work that's going to be done this year and next year. There's a bit of a timing here. So it's not 100% clear when everything is going to happen. So I think some of it will hit us this year, and some of it will probably be in fiscal year 2027.

All right. Thanks again. Thanks, Michael.

Your next question comes from Stephen McLeod from BMO Capital Markets. Please go ahead.

Thank you. Good evening, guys. I hopped on a little bit late for the call, so I apologize if maybe some of my questions have been answered. But I just wanted to zero in on the very strong adjusted gross margin per metric ton in the quarter. And I was just wondering, can you – two questions. What would the number have been excluding – the non-recurring adjustments? And then secondly, how do you expect that strong number that you've seen now for two quarters to evolve for the balance back half of 2026?

It's a good question. When we're looking at adjusted growth margin going forward, we think it's going to be closely aligned with what we had last year from a normalized basis. And if you look from a normalized basis, you know, in the current quarter, we probably have, you know, somewhere around like $50 of lift from some of those, you know, between $40 and $50 of lift from those either one time or the mix because the mix actually, you know, tend to push us at a higher level because with lower exports that are carrying lower margin and obviously, you know, everything else takes a little bit of a boost.

Okay. Okay. That's helpful. And then maybe just turning to the maple business, you know, in terms of the adjusted gross margin and what was down year over year. And I'm just wondering if you can isolate what sort of the key drivers were there. And then similarly, do you still think that the full year gross margin in the maple business will kind of be in that 10 to 10.5% range?

The first part of your question regarding last year, last year we had a second quarter that was a bit of an anomaly. And even if you're looking at the whole first half of the year, we were higher. And then we kind of went down a little bit in the second half. And the main reason was some of the mix of the product we sold, we had what we call more industrial syrups. to match some of those industrial sales. And therefore, and we've used it faster than we've done in the past, instead of like, you know, trying to level it throughout the year. This year is a bit different. Our supply is a bit different and it's going to be more, you know, you won't see peaks between quarter. It should be fairly stable. And going through the second part of your question, margin to be between 10 and 11% is what we have achieved so far this year. And that's what we're expecting for the remainder of the year.

Okay, that's great. Thanks, JS. I appreciate it. Thanks, Stephen.

There are no further questions at this time. I will now turn the call over to Mr. Mike Walton. Please continue.

Thank you all for joining us today. As a 100% Canadian-owned and operated sweetener company, we are proud of what this company has built over nearly 140 years, and I hope today's results give you a sense of why. We look forward to speaking with you again when we report our third quarter and wish you a good evening. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.