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Rogers Sugar Inc.: 4th Quarter 2020 Results

GlobeNewswire - Wed Nov 25, 4:01PM CST

-- ADJUSTED EBITA OF $92.3 MILLION FOR FISCAL 2020 - 5% INCREASE OVER PRIOR YEAR

-- SUGAR REVENUES HIGHER DUE TO RECORD BREAKING SALES VOLUMES IN THE FOURTH QUARTER ACROSS ALL MARKET SEGMENTS

-- STRONG SALES VOLUME IN MAPLE DRIVING HIGHER REVENUE FOR THE QUARTER AND THE YEAR

Rogers Sugar Inc.'s (the "Company" or "Rogers") (TSX:RSI.TO) today reported fourth quarter and year-to-date fiscal 2020 results. The Company recorded adjusted EBITDA of $31.2 million and $92.3 million for fourth quarter and fiscal 2020, respectively, versus $22.2 million and $87.8 million for the comparable periods last year.

"Our strong fiscal 2020 performance is a direct result of the efforts of our agile committed team and our long-term strategic vision to continue to build a resilient, successful company," said John Holliday, President and Chief Executive Officer of Rogers and Lantic Inc. "During the year, we generated higher revenue, improved margins, and increased free cash flow, all while dealing with the impacts of a global pandemic, a severely curtailed beet harvest and rail blockades. During this time, the safety of our people has remained our top priority and by implementing thorough safety practices and protocols, our operations have continued to perform at full capacity. In addition, we successfully restructured our supply chain to ensure our customers' needs were met while also completing our capital improvement projects that will drive long-term efficiency and cost improvements. Looking forward to fiscal 2021, we expect that our strong performance will continue due to the continued firm demand from our customers and to a reduction in operational and distribution costs mostly related to the return of a normal harvest and beet sugar production in Taber."

Update on COVID-19

In December 2019, a novel strain of coronavirus, known as COVID-19 was identified. As of March 20, 2020, COVID-19 had spread to over 100 countries and been declared a pandemic by the World Health Organization. COVID-19 has negatively impacted the global economy, disrupted financial markets and supply chain, significantly restricted business travel and interrupted business activity.

Our business is considered essential services by the government and as such, the Company's plants have continued to operate at usual capacity. The Company has established extensive protection measures and protocols to ensure the health and safety of its employees. COVID-19 could have a material effect on our business as it relates to customer demand, supply and delivery chain, operations, financial market volatility, pension and benefits liabilities and other economic fundamentals.

The effect of COVID-19 on our business may continue for an extended period and the ultimate impact on the Company will depend on future developments that are uncertain and cannot be predicted, including and without limitations, the duration and severity of the pandemic, the duration of the government support measures, the effectiveness of the actions taken to contain and treat the disease, and the length of time it takes for normal economic and operating conditions to resume.

Fourth Quarter Highlights

Highlights of the consolidated results are as follows:

(unaudited)                                                        Fourth Quarter         Fiscal Year
(In thousands of dollars, except volume and per share information) 2020       2019        2020        2019
Sugar (metric tonnes)                                              225,396    196,903     761,055     741,144
Maple syrup ('000 pounds)                                          13,181     10,163      53,180      42,377
                                                                   $          $           $           $
Total revenues                                                     246,212    207,572     860,801     794,292
Gross margin                                                       37,890     29,073      126,199     122,575
Results from operating activities                                  22,829     (32,800   ) 68,010      24,147
Net (loss) earnings                                                12,952     (40,021   ) 35,419      (8,167    )
Net (loss) earnings per share (basic)                              0.13       (0.38     ) 0.34        (0.08     )
Net (loss) earnings per share (diluted)                            0.12       (0.38     ) 0.34        (0.08     )
Dividends per share                                                0.09       0.09        0.36        0.36
Non- IFRS results
Adjusted Gross Margin                                              40,065     29,026      126,118     116,578
Adjusted results from operating activities                         25,004     17,153      67,929      68,150
Adjusted EBITDA                                                    31,231     22,215      92,259      87,808
Adjusted net earnings                                              14,551     9,910       35,245      37,079
Adjusted net earnings per share (basic)                            0.14       0.09        0.34        0.35
Trailing twelve months free cash flow                              40,001     30,843      40,001      30,843
See "Non-GAAP Measures" section of the MD&A for definition and reconciliation to GAAP measures

Please refer to the MD&A for additional details on the consolidated results of the Company.

Segmented Information

The following is a table showing the key results by segments:

Consolidated results                                            Fourth Quarter Fiscal 2020                  Fourth Quarter Fiscal 2019
(In thousands of dollars)
                                                                      Sugar     Maple Products   Total      Sugar     Maple        Total
                                                                                                                      Products
Revenues                                                        $     188,666 $ 57,546         $ 246,212  $ 159,432 $ 48,140     $ 207,572
Gross margin                                                          32,198    5,692            37,890     24,643    4,430        29,073
Administration and selling expenses                                   7,803     2,589            10,392     4,730     2,622        7,352
Distribution costs                                                    4,197     472              4,669      3,465     1,056        4,521
Goodwill impairment                                                   -         -                -          -         50,000       50,000
Results from operating activities (EBIT)                        $     20,198  $ 2,631          $ 22,829   $ 16,448  $ (49,248  ) $ (32,800 )
Non- GAAP results
Adjusted Gross Margin                                           $     35,503  $ 4,562          $ 40,065   $ 24,358  $ 4,668      $ 29,026
Adjusted results from operating activities (Adjusted EBIT)      $     23,503  $ 1,501          $ 25,004   $ 16,163  $ 990        $ 17,153
Adjusted EBITDA                                                 $     27,982  $ 3,249          $ 31,231   $ 19,662  $ 2,553      $ 22,215
Additional information:
Addition to property, plant and equipment and intangible assets       8,394     578              8,972      7,054     1,081        8,135
Consolidated results                                            Fiscal 2020                                 Fiscal 2019
(In thousands of dollars)
                                                                      Sugar     Maple Products   Total      Sugar     Maple        Total
                                                                                                                      Products
Revenues                                                        $     631,263 $ 229,538        $ 860,801  $ 595,878 $ 198,414    $ 794,292
Gross margin                                                          105,088   21,111           126,199    100,301   22,274       122,575
Administration and selling expenses                                   27,959    10,981           38,940     21,609    9,962        31,571
Distribution costs                                                    16,266    2,983            19,249     13,153    3,704        16,857
Goodwill impairment                                                   -         -                -          -         50,000       50,000
Results from operating activities (EBIT)                        $     60,863  $ 7,147          $ 68,010   $ 65,539  $ (41,392  ) $ 24,147
Non- GAAP results:
Adjusted Gross Margin                                           $     106,212 $ 19,906         $ 126,118  $ 94,032  $ 22,546     $ 116,578
Adjusted results from operating activities (Adjusted EBIT)      $     61,987  $ 5,942          $ 67,929   $ 59,270  $ 8,880      $ 68,150
Adjusted EBITDA                                                 $     78,877  $ 13,382         $ 92,259   $ 73,135  $ 14,673     $ 87,808
Additional information:
Addition to property, plant and equipment and intangible assets       20,711    6,569            27,280     22,645    4,468        27,113
See "Non-GAAP Measures" section of the MD&A for definition and reconciliation to GAAP measures

Sugar

Strong performance in the sugar segment in the fourth quarter and full year fiscal 2020 was driven by increased volumes across almost all segments of the sugar business and improved adjusted gross margin. Approximately 14,000 metric tonnes of the volume increase in the fourth quarter and the current year is attributable to the extra week of fiscal 2020.

(In thousands of dollars, except volume)   Fourth Quarter          Fiscal Year
                                           2020        2019        2020          2019
Revenues                                 $ 188,666 $   159,432 $   631,263    $  595,878
Volume (MT) as at September 28, 2019       196,903                 741,144
Variation:
Industrial                                 10,367                  (10,850 )
Consumer                                   5,818                   19,770
Liquid                                     5,418                   5,642
Export                                     6,890                   5,349
Total variation                            28,493                  19,911
Volume as at October 3, 2020               225,396                 761,055

Revenues increased in the fourth quarter of fiscal 2020 and for the year due to an extra week of operation in fiscal 2020, higher weighted average raw sugar values in Canadian dollars as well as an increase in overall volumes.

Volumes in the industrial market segment increased in the fourth quarter mostly due to the extra week of shipments and the return to normal demand for certain large industrial accounts earlier impacted by the COVID-19 pandemic. For the full year, industrial volumes were lower than last year due to reduced demand in the third quarter driven by the COVID-19 pandemic which resulted in less demand for manufacturing of food products destined for the food service sector. Industrial volumes were also impacted by the non-recurring sales to a competitor that occurred in the first quarter of fiscal year 2019 and by the rail blockades that took place in the second quarter of the current fiscal year, which created difficulties in servicing our Ontario customers.

Consumer volumes increased in the fourth quarter and full year in 2020 due to the extra week of shipments in the current year and continued strong retail demand driven by the increase in home baking associated with the COVID-19 pandemic.

Liquid volumes increased in the current quarter and the current year as a result of the extra week of shipments in 2020 along with additional demand from existing customers.

Finally, export volumes increased in the current quarter and the full year driven by additional U.S. global refined Tariff-Rate Quotas ("TRQ") in fiscal 2020. In total the Company sold 5,349 metric tonnes more than in the previous year. Most of the extra volume was sold in the fourth quarter of 2020. The export sales for 2020 amounted to approximately 57,000 metric tonnes of which approximately 18,000 metric tonnes were entered against the various US refined TRQs.

(In thousands of dollars, except per metric tonne information)          Fourth Quarter        Fiscal Year
                                                                        2020       2019                2020       2019
Gross margin                                                          $ 32,198   $ 24,643     $        105,088  $ 100,301
Total adjustment to cost of sales                                       3,305      (285     )          1,124      (6,269   )
Adjusted gross margin                                                 $ 35,503   $ 24,358     $        106,212  $ 94,032
Gross margin per metric tonne                                         $ 142.85   $ 125.15     $        138.08   $ 135.33
Adjusted gross margin per metric tonne                                $ 157.51   $ 123.71     $        139.56   $ 126.87
Included in Gross margin:
Depreciation of property, plant and equipment and right-of-use assets $ 3,920    $ 3,298      $        14,918   $ 13,072
See "Non-GAAP Measures" section of the MD&A for definition and reconciliation to GAAP measures
See "Adjusted results" section of the MD&A

Adjusted gross margin for the current quarter was $11.1 million or 45.8% higher than the last quarter of fiscal 2019. For the fourth quarter of 2020, the adjusted gross margin per metric tonne was $33.80 higher than the prior year. The favourable variance in adjusted gross margin per metric tonne was mainly related to higher sales volume in the grocery and exports segments.

For fiscal 2020, adjusted gross margin increased by $12.2 million or 13%. For fiscal 2020, adjusted gross margin per metric tonne increased by $12.69 compared to fiscal 2019. The favourable variance in adjusted gross margin per metric tonne was again mainly related to higher sales volume in the grocery and export segments and from lower volume originating from our beet sugar plant in Taber.

(In thousands of dollars)                                                Fourth Quarter        Fiscal Year
                                                                         2020       2019                2020       2019
Results from operating activities                                      $ 20,198   $ 16,448     $        60,863   $ 65,539
Total adjustment to cost of sales                                        3,305      (285     )          1,124      (6,269   )
Adjusted results from operating activities (Adjusted EBIT)             $ 23,503   $ 16,163     $        61,987   $ 59,270
Depreciation of property, plant and equipment, right-of-use assets and   4,479      3,499               16,890     13,865
amortization of intangible assets
Adjusted EBITDA                                                        $ 27,982   $ 19,662     $        78,877   $ 73,135
See "Non-GAAP Measures" section of the MD&A for definition and reconciliation to GAAP measures
See "Adjusted results" section of the MD&A

Adjusted EBITDA for the fourth quarter and the year of 2020 increased by $8.3 million and $5.7 million, respectively compared to last year. The improvement was mainly driven by increased adjusted results from operation, as described above, along with a larger adjustment for the impact of non-cash depreciation and amortization expenses largely caused by the implementation of IFRS 16. The adoption of the new IFRS 16 Leases standard resulted in a $0.9 million and $3.0 million increase in adjusted EBITDA for the current quarter and the year, respectively.

Maple products

(In thousands of dollars, except volume)   Fourth Quarter     Fiscal Year
                                           2020        2019      2020       2019
Volume ('000 pounds)                       13,181      10,163    53,180     42,377
Revenues                                 $ 57,546 $    48,140 $  229,538 $  198,414

Revenues increased in the fourth quarter and fiscal 2020 by $9.4 million and $31.1 million compared to the same periods last year mainly due to higher sales volumes from new and existing customers. Volumes in the fourth quarter and full year increased by 29.7% and 25.5%, respectively, in part driven by higher demand associated with the COVID-19 pandemic.

(In thousands of dollars, except adjusted gross margin rate information)   Fourth Quarter        Fiscal Year
                                                                           2020        2019              2020        2019
Gross margin                                                             $ 5,692     $ 4,430     $       21,111    $ 22,274
Total adjustment to cost of sales                                          (1,130  )   238               (1,205  )   272
Adjusted gross margin                                                    $ 4,562     $ 4,668     $       19,906    $ 22,546
Gross margin percentage                                                    9.9     %   9.2     %         9.2     %   11.2    %
Adjusted gross margin percentage                                           7.9     %   9.7     %         8.7     %   11.4    %
Included in Gross margin:
Depreciation of property, plant and equipment and right-of-use assets    $ 809       $ 557       $       3,083     $ 1,855
See "Non-GAAP Measures" section of the MD&A for definition and reconciliation to GAAP measures
See "Adjusted results" section of the MD&A

Adjusted gross margin for the current quarter and the year amounted to $4.6 million and $19.9 million, respectively. Adjusted gross margin in the fourth quarter and for the year on a percentage basis was lower than prior year due largely to lower average pricing resulting from increased market competition. Adjusted gross margin was also impacted in fiscal 2020 by non-recurring operational costs incurred in connection with the relocation of the Granby production facility.

Administration and selling expenses for the fourth quarter and for the year were $2.6 million and $11.0 million, respectively. Fourth quarter levels were consistent with the same quarter last year and the increase of $1.0 million compared to fiscal 2019 was mainly related to additional costs incurred to support the business, including costs related to the COVID-19 pandemic.

Distribution expenses were $0.6 million and $0.7 million lower in the fourth quarter and for the year when compared to the same periods last year driven largely by changes in the sales product mix.

(In thousands of dollars)                                    Fourth Quarter        Fiscal Year
                                                             2020        2019              2020        2019
Results from operating activities                          $ 2,631     $ (49,248 ) $       7,147     $ (41,392 )
Total adjustment to cost of sales                            (1,130  )   238               (1,205  )   272
Adjusted results from operating activities (Adjusted EBIT)   1,501       (49,010 )         5,942       (41,120 )
Non-recurring expenses:
Other one-time non-recurring items                           63          131               852         437
Depreciation and amortization                                1,685       1,432             6,588       5,356
Goodwill impairment                                          -           50,000            -           50,000
Adjusted EBITDA                                            $ 3,249     $ 2,553     $       13,382    $ 14,673
See "Non-GAAP Measures" section of the MD&A for definition and reconciliation to GAAP measures
See "Adjusted results" section of the MD&A

Adjusted EBITDA for the fourth quarter and the year of 2020 increased by $0.7 million and decreased by $1.3 million, respectively compared to last year. For the fourth quarter, the favorable variance was mainly related to lower distribution costs. For the year, the variance was mainly related to unfavourable adjusted gross margin and higher administration and selling expenses, partially offset by lower distribution costs.

At the end of 2019, the Company reviewed the valuation of the Maple cash generating unit and concluded that the carrying value of goodwill exceeded the expected recoverable amount. As a result, the Company recorded a non-cash impairment of $50.0 million to its goodwill balance in the fourth quarter of fiscal 2019.

Outlook

The health and safety of our employees remains our top priority. With respect to COVID-19, the Company is closely following all public health authority recommendations and has put in place enhanced safety protocols. While our plants have continued to operate without any disruption during the COVID-19 pandemic, it remains difficult to estimate or forecast the impact going forward on operations and/or financial results. The Company is closely monitoring the situation and will react quickly to the changing circumstances.

Sugar

The Company expects the sugar segment to continue to perform well in fiscal 2021. A combination of strong underlying demand resulting in increased volumes along with a successful beet harvest are expected to result in improved fiscal 2021 operational and financial performance.

Sales volume and Adjusted EBITDA

Market conditions are expected to remain favourable for the sugar business segment in fiscal 2021, despite the ongoing impact of COIVD-19. The Company expects sales volume and adjusted EBITDA to improve moderately over fiscal 2020. Sales volumes for fiscal 2021 are expected to increase by approximately 5,000 metrics tonnes notwithstanding the extra week of 2020, to reach approximately 766,000 metric tonnes.

Volume for industrial customers

The Company anticipates that volume for the industrial customer group will increase by approximately 4,000 metric tonnes in 2021, representing a return to normal demand levels with minimal impact from the COVID-19 pandemic in 2021.

For the liquid portion of the industrial customer group, the Company expects volume for 2021 to be comparable to 2020.

Volume for retail customers

The retail consumer demand in 2020 was better than expected due to the effects of COVID-19 and additional week of operations. In fiscal 2021, the Company does not expect to experience the same level of COVID-19 related demand and anticipates retail customer volume to decrease by approximately 8,000 metric tonnes or 7.0% as compared to 2020.

Volume related to export sales

The Company anticipates export volumes for 2021 to be approximately 10,000 metric tonnes above 2020 driven by the implementation of new export quotas and the resumption of deferred beet shipments to Mexico. The increase also includes 14,400 metric tonnes for 2021 to be supplied by the Taber factory, under the CUSMA special quotas that took effect on July 1, 2020.

Other considerations

In fiscal 2021, the Company expects Adjusted EBITDA to benefit from the return to normal operating conditions in its Taber beet sugar facility. In the fall of 2019, the beet harvest was suspended early due to the impact of severe adverse weather in Alberta. As a result, the crop derived a much inferior quantity of refined sugar resulting in a shortfall of approximately 62,000 metric tonnes. For the 2020 crop, the Company contracted 30,000 acres for planting in Taber, an increase of 2,000 acres from last year. In addition, Taber started harvesting and slicing earlier than previous years and, under normal growing conditions, the new crop is expected to yield approximately 132,000 metric tonnes of beet sugar.

Maintenance programs for the three operating facilities are expected to follow the trend of previous years. Spending on capital projects is also expected to be similar to recent periods. For fiscal 2021, the Company anticipates spending between $25.0 million and $30.0 million on various capital projects, with approximately a quarter allocated to return on investment projects.

In October 2020, the Company announced a strategic collaboration with DouxMatok, a food-tech company and pioneer in the development of efficient flavor delivery technologies, to deliver a unique sugar reduction solution based on cane sugar, to food companies in North America. Although this is a small portion of the sweetener market, we believe this could provide a competitive offering in this niche market.

Maple products

In fiscal 2021, the Company expects to see continued improvement in sales margins, driven by successful contract negotiations with new and existing customers. In addition, the Company expects to lower its operating costs and improve its gross margin through ongoing optimization at its manufacturing facilities and efficiency improvements provided by the investments made in the past two years in its new Granby facility and existing Degelis plant. Competitive pressures in the Maple industry have stabilized over the past few quarters; however, the Company remains focused on maintaining its market share and improving its sales margins.

Capital investments are expected to be reduced significantly for the Maple segment considering the expenditures incurred over the last two years to improve and increase the production capacity. We continue to expect steady growth in demand for Maple-related products although we expect a tempering from the increase seen during the period of COVID-19.

See "Forward Looking Statements" section and "Risks and Uncertainties" section.

Mark-to-Market Measures

With the mark-to-market of all derivative financial instruments at the end of each reporting period, our accounting income does not represent a complete understanding of factors and trends affecting the business. Consistent with previous reporting, we prepared adjusted gross margin and adjusted earnings results to reflect the performance of the Company during the period without the impact of the mark-to-market of derivative financial instruments. Earnings before interest and income taxes ("EBIT") included a mark-to-market loss of $2.2 million and a gain of $0.1 million for the fourth quarter and year-to-date of fiscal 2020, respectively, which was deducted to calculate the adjusted EBIT and adjusted gross margin results. Adjusted EBITDA represents EBIT, adjusted for the total adjustment to cost of sales for mark-to-market of derivative financial instruments, depreciation and amortization expenses, non-cash goodwill impairment and the Maple products segment non-recurring costs. See "Non-GAAP measures" section in the MD&A.

Access to Quarterly Results Information

Rogers Sugar Inc. (RSI) will be holding a conference call to discuss their 2020 fourth quarter results on Wednesday, November 25th, 2020 at 17:30 (Eastern Time).

The conference call will be chaired by Mr. John Holliday, Chief Executive Officer and Mr. Jean-Sebastien Couillard, Chief Financial Officer.

Conference Call and Webcast Presentation

If you wish to participate, please dial 1-877-223-4471. A recording of the conference call will be accessible shortly after the conference, by dialing 1-800-585-8367, access code 1577637#. This recording will be available until December 2, 2020.

FOR THE BOARD OF DIRECTORS,

M. Dallas H. Ross, Chairman

Vancouver, British Columbia - November 25, 2020

For further information:

Mr. Jean-Sebastien Couillard, Vice President of Finance, Chief Financial Officer and Corporate Secretary

Tel: (514) 940-4350 - email: jscouillard@lantic.ca or Visit our Website at www.LanticRogers.com

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