Rogers Sugar Inc.

Welcome to the Roger Sugar Inc. Third Quarter Results Conference Call. At this time, all lines are in 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 star zero 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 measures 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. 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 Rogers Sugar.

Thank you, Operator, and good morning, everyone. Welcome to our third quarter call. Today, I'll take you through the key developments in both Sugar and Maple, share an update on the LEAP project and the labor agreements we reached during the quarter, and then hand it to JS, our CFO, for the detailed financials. After JS, I'll return with our outlook for the balance of fiscal 2026 before we open the line for questions. Our investor presentation is posted on the investor section of our website if you would like to follow along. Let me start by stepping back for a moment. The operating environment we are navigating has not become simpler since we last spoke. Trade policy between Canada and the United States remains in flux. Global demand for some food products is softening, and cost pressures across our operations have not abated. We are not pretending otherwise. What we are also seeing, and what major North American grocery retailers have noted in recent weeks, is a more cautious consumer. Value-conscious shoppers in particular are pulling back on basket size and purchase frequency across prepared food categories. Food inflation is affecting purchasing behavior broadly. That is the environment our customers are navigating, and that is the environment we are managing through. More recently, we have seen some easing in input costs. Raw number 11 sugar prices have moderated from the elevated levels of recent years, and cocoa prices have also retreated from their highs. For our industrial customers in the confectionery sector, this is a welcome development. and one that may support a gradual improvement in demand over time. Within that macro and uncertain environment, our business is performing with the kind of stability that we have spent years building toward. Rogers Refined sets us up well for exactly this kind of setting. Sugar remains a fundamental ingredient in a wide range of food products. Domestic demand is steady. Our domestic franchise is intact. And on the operational side, This quarter delivered two milestones that matter well beyond fiscal 2026, which I'll speak to shortly. On to our results. For the third quarter of fiscal 2026, we reported adjusted net earnings of $16 million, compared with $17 million in the same quarter last year. On a per-sure basis, adjusted net earnings were 13 cents, consistent with the prior year. Consolidated adjusted EBITDA for the quarter was $36 million. For the first nine months of the year, adjusted EBITDA was nearly $121 million, compared with $111 million over the same period last year. That year-to-date improvement reflects the continued strength of our sugar segment through a period that has required real discipline to navigate. In the sugar segment, The underlying quarterly performance was essentially in line with last year, which, given the volume environment, is the result we are satisfied with. Sugar sales volume in the third quarter was approximately 188,000 metric tons, a decrease of approximately 3,000 metric tons compared to the same period last year. The largest driver was lower liquid volume, primarily related to the loss of a large customer that closed its facility in Western Canada. Industrial volume was modestly higher, reflecting improved demand from the confectionery sector. It is good to see this important segment of our business starting to show signs of recovery. Export volume was marginally positive, a slight recovery from the suppressed levels we saw in the first half of the year. In the maple segment, performance was in line with the same period last year, but below our expectations. Global demand for maple syrup has softened in recent months, driven by the impact of food inflation on consumer spending. We have adjusted our full year volume expectations accordingly. As you know, we are managing maple with commitment to cost discipline, and we aim to deliver top quality products and unparalleled customer service. The third quarter results reflect Rogers Refined is doing exactly what it is designed to do. The framework keeps us focused on the things we can control, providing excellent service to our customers, improving production efficiency, and managing costs prudently. Volume will move around. What we are building is a business that delivers consistently across variable market conditions. Today's results demonstrate that. I want to spend a moment on two exciting developments from the quarter. On June 11th, We reached a new five-year collective labor agreement with the main union at our Montreal facility, running through May 2031. Reaching that agreement during an active construction program while the refinery was operating took real commitment from both sides, and I want to acknowledge that. It gives us the workforce stability we need through the LEAP commissioning period and into the years when the new capacity begins contributing. Also, on June 26th, We extended the collective agreement at our Tabor sugar beet factory through March 2032. Taken together with a Vancouver agreement reached in 2024, we now have labour certainty across our production network. And we will now sharpen our focus on ensuring our operating models are efficient and effective in supporting the market. That matters as we move into fiscal 2027 and beyond. Now let me update you on the LEAP project. The project is moving into its final phase. Most major equipment is now installed at the Montreal plant, and we successfully tested the raw sugar melting process, one of the most significant operational steps we have taken to date. We have also advanced the deployment of logistics infrastructure, piping, and electrical assets. The focus now shifts to operational readiness and further commissioning activities. Our teams are working methodically through that process. with the same planning and safety discipline that has characterized this project from the start. LEAP remains within our expected total cost range of $280 to $300 million, and we continue to anticipate the incremental refining capacity starting to come online in the first half of calendar 2027. That timeline is unchanged. I want to set appropriate expectations on what LEAP will deliver in the near term. When this capacity comes into service, it will add optionality, particularly in the Ontario market. The ramp-up will be gradual. The full commercial contribution will build over time as domestic demand increases. We are building for the long term and are confident of the sustainable underlying demand for this essential product. Now I'll hand it over to JS for a review of our financial performance.

Well, thank you, Mike, and good morning, everyone. I will now take you through the financial results of the third quarter and the first nine months of fiscal 2026. For both periods, the sugar segment has exceeded our expectations, supported by domestic demand and improved margin, while the maple segment has delivered results below our expectations due to recent challenging market dynamics. Adjusted net earnings for the third quarter were $16 million, or 13 cents per share, compared to $17 million, or 13 cents per share in the same period last year. For the first nine months of 2026, adjusted net earnings were $60 million, or 47 cents per share, an improvement of $7 million, or 6 cents per share compared with the first nine months of fiscal 2025. Consolidated Adjusted EBITDA was $36 million for the quarter, compared with $37 million last year for the same period. For the first nine months of 2026, Adjusted EBITDA at $121 million was $10 million higher than the same period last year. Revenues were $294 million for the quarter compared to $320 million in the same quarter last year, a decrease of 8%, primarily driven by lower average raw number 11 prices, which have limited impact on our profitability given our hedging program. Lower volumes in both business segments also contributed to the reduction in revenues for the quarter. Our free cash flow for the trailing 12 months came in at $90 million, a slight increase from the same period last year. That improvement was driven by higher adjusted EBITDA and lower capital expenditures in our ongoing operations, excluding the LEED project, partially offset by timing of income tax payments and higher interest costs. Free cash flow is how we contribute to the financing of LEED, service our debt, and fund our dividends. The recent trend is healthy and providing us with the expected flexibility. 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 hedging strategy was successful in mitigating the potential impacts on energy costs, round 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'm now turning to the individual business segments, starting with our sugar segment, which drives almost 90% of our profitability thus far this year. For this segment, adjusted EBITDA was $32 million for the quarter, compared with $33 million last year. Let me walk you through the main drivers. adjusted gross margin for the quarter was $46 million, slightly down from the same period last year. Worth noting, this segment absorbed a $3 million non-recurring non-cash pension charge for past service costs related to the collective agreement we reached in Montreal a few weeks ago. Beyond that, higher production costs and the effect of lower sales volume contributed to the lower Those unfavorable variances were largely offset by higher contribution from refining related activities reflecting a favorable pricing and mix of products sold and lower raw sugar procurement related costs. On a per unit basis, adjusted gross margin was $245 per metric ton in the third quarter compared with $243 per metric ton in the same period last year, a modest improvement reflecting the items previously discussed, including the non-recurring pension adjustment of $3 million. For the first nine months of fiscal 2026, sugar adjusted gross margin was $146 million, an increase of $17 million compared to the same period last year. The improvement reflects higher refining contribution, lower sugar procurement costs, and certain non-recurring favorable items recognized in previous quarters, partially offset by lower volume sold and the non-recurring pension charge recorded in the third quarter. Distribution costs were slightly higher in the quarter, reflecting increased shipment from Western Canada to support Eastern market demands. administration and selling expenses were lower in the third quarter by half a million dollars compared with the same period last year as prior year severance costs were partially offset by higher compensation expense related to long-term incentive which are based on our share price. Now moving on to the maple segment where challenging market dynamics have negatively impact financial results in 2026 especially in the third quarter as our results were below our expectations. Adjusted gross margin for the third quarter is a story of offsetting factors. Improved pricing and lower syrup costs held adjusted gross margin essentially flat at $5.5 million, despite lower volume and market-based increases in production costs. The adjusted gross margin percentage for the quarter was slightly higher than last year, but still below our expectations at 8.6%. Adjusted EBITDA in the maple segment for the third quarter was slightly lower than last year at approximately $4 million. For the first nine months of 2026, adjusted EBITDA was just below $17 million, a decrease of approximately $3 million from the same period last year, reflecting the challenging market conditions discussed previously. The focus for the remainder of fiscal 2026 is straightforward. Continue to manage costs carefully, protect margin and market share, and ensure we are well positioned to serve our customer and deliver quality products for both of our business segments. Turning to our balance sheet and related liquidity position. At the end of the third quarter, we had drawn $116 million on our revolving credit facility. The total face value of convertible debentures outstanding was $173 million following the January assurance of the ninth series debentures. The Leap Financing Plan is working as designed. The combination of equity raised, the IQ loans, our credit facility, and the free cash flow this business generates gives us the funding to see this project through to completion. Thus far, we have spent $207 million on the LEAP project, and as Mike mentioned previously, we are maintaining our cost forecast for the project, which is ranging between $280 and $300 million. Regarding our liquidity, I'm glad to report that we have recently extended the term of our revolving credit facility from March 2030 to July 2031. Finally, the Board has declared a quarterly common share dividend of $0.09 per share at its meeting yesterday, payable on or before October 21st. We have paid a quarterly dividend to our shareholders without interruption for over 16 years. True commodity cycle, a 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.