Rogers (NYSE:ROG) Sugar Inc. reported a 12% increase in consolidated revenue, reaching $323 million for the first quarter of 2025. The company's adjusted EBITDA rose by 29% to nearly $40 million, and adjusted earnings per share climbed to $0.15 from $0.12 the previous year. The stock, currently trading near its 52-week high of $15.98, has delivered an impressive 166.91% return over the past year according to InvestingPro data. Despite these positive results, the company's stock showed a slight dip, reflecting broader market trends.
Key Takeaways
Consolidated revenue increased by 12% to $323 million.
Adjusted EBITDA rose by 29% to nearly $40 million.
Adjusted earnings per share improved to $0.15.
The LEAP project is on track for completion by the end of 2026.
North American sugar market remains tight, influencing strategic planning.
Company Performance
Rogers Sugar Inc. demonstrated strong performance in Q1 2025, with notable growth in both revenue and earnings. The sugar segment, a key contributor, saw a 12% revenue increase to $257 million, while the maple segment experienced a 13% rise. These results underscore the company's robust market positioning and operational efficiency improvements. InvestingPro analysis reveals the company has maintained strong revenue growth of 30.31% over the last twelve months, with analysts expecting continued growth this year. InvestingPro subscribers have access to 13 additional key insights about Rogers Sugar's financial health and growth prospects.
Financial Highlights
Revenue: $323 million, up 12% year-over-year
Adjusted EBITDA: nearly $40 million, up 29% year-over-year
Adjusted earnings per share: $0.15, up from $0.12 last year
Free cash flow: $86 million, up from $44 million in the trailing twelve months
Outlook & Guidance
Rogers Sugar expects sugar sales volume to reach approximately 800,000 metric tons for the full year. The company plans to invest $25-30 million in capital expenditures, excluding the LEAP project, which will see a capital spend of around $100 million in 2025. The project aims to enhance production capacity by 100,000 tons and is set for completion by 2026. With a market capitalization of $3.32 billion and an overall financial health score rated as "GOOD" by InvestingPro, the company appears well-positioned to execute these strategic initiatives. Discover detailed analysis and comprehensive insights about Rogers Sugar's investment potential through InvestingPro's exclusive Research Reports, available for over 1,400 top stocks.
Executive Commentary
CEO Mike Walton emphasized the company's strong financial position, stating, "We have never been in a stronger financial position." He also reassured stakeholders about the impact of potential U.S. tariffs, noting, "The quarter we just delivered had nothing to do with front loading for potential U.S. Tariffs."
Risks and Challenges
Potential U.S. tariffs could impact market dynamics and trade relationships.
Supply chain disruptions may affect production and distribution.
Fluctuations in consumer spending could influence maple segment performance.
Moderate food inflation requires strategic pricing adjustments.
The tight North American sugar market presents both opportunities and challenges.
Rogers Sugar remains confident in its ability to navigate these challenges, supported by strong customer relationships and a diversified operational base across Canada.
Full transcript - Rush Street Interactive Inc (RSI) Q1 2025:
Conference Operator: Good morning, ladies and gentlemen, and welcome to the Roger Sugar Inc. Analyst Call February six Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. 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.
Mike Walton, President and CEO, Rogers Sugar Inc.: 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 twenty twenty five 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 twenty twenty five. 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 J. S, our Chief Financial Officer, for a detailed review of our financial results. I will conclude with an outlook for the remainder of fiscal twenty twenty five.
We have an investor presentation accompanying this call. This presentation will be available on the Investors 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 U.
S. Our industrial customers sell sugar containing products to The U. S. Each year between 4050% of all of the sugar refined in Canada is exported to The U. S.
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 U. S. Companies. For the Maple segment, we do export to The U.
S. As there is not enough production capacity to meet The U. S. 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 U. S. 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 U. S.
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 U. S. Still, 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 one hundred and thirty five years and we have seen all types of challenges in trade. We have not just survived these, but we have thrived within them. I personally participated in the Las 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 any new developments on this front. Our strategy for 2025 focuses once again on delivering value to our customers and our shareholders. Our Rogers Refine 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 twenty twenty five. 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 $323,000,000 with higher contribution from both business segments. Our adjusted EBITDA increased by 29% to almost $40,000,000 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 twenty twenty three.
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 twenty twenty four. Those factors drove growth in revenues in the first quarter. At the same time, we continued to focus on operational efficiency in our Maple segment and our efforts are paying off. The combination of higher sales volume and lower operating cost per unit drove a 22% increase in adjusted EBITDA at $5,700,000 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 remains consistent with our update from last quarter of between February and $300,000,000 dollars and LEAP is on track for completion by the end of twenty twenty six. 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 a 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 our financials.
J.S., Chief Financial Officer, Rogers Sugar Inc.: 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 twenty twenty five, the adjusted earnings per share were $0.15 compared with $0.12 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 twenty twenty four, 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 $323,000,000 an increase of 12% compared with the first quarter of twenty twenty four. Consolidated adjusted EBITDA increased by close to 30% year over year to just under $40,000,000 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 $42,000,000 for the last twelve months. Free cash flow was $86,000,000 for the trailing twelve months compared to $44,000,000 for the same period last year. Now let's turn to the individual business segments, beginning with Sugar.
Revenue increased by about 12% to two fifty seven million dollars 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 twenty twenty four. 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 tonneage sugar was $225 in the first quarter, an increase of $26 per tonne compared to $199 in the first quarter of twenty twenty four. Note that this increase includes the non recurring proceeds of $2,700,000 from an insurance settlement related to prior periods. The positive variance is also associated to the impact of profitability of the labor disruption in Vancouver last year. Adjusted EBITDA for the Sugar segment increased by 30% to $34,000,000 in the first quarter compared to $26,000,000 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 twenty twenty four. 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 strength 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. CapEx for the quarter for both segments totaled 22,000,000 of which $20,000,000 was attributable to our LEAP project. We currently anticipate to spend about $100,000,000 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 cash generated from the recent increase in operational cash flows, debt, equity instruments, our existing revolving credit facility and loans with Investis Marketech.
During the quarter, the six Series debentures totaling $57,400,000 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 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.
Mike Walton, President and CEO, Rogers Sugar Inc.: Thank you, JS. I'm pleased that we are making a healthy start to 2025. With all of our facilities back to full production, we are executing and well on track to deliver consistent and stable financial results in 2025. Starting with sugar, our sales volumes in the first quarter are consistent with our stated expectation of approximately 800,000 metric tons in sales for the full year. Now as mentioned earlier, our volume expectations for 2025 could be impacted if tariffs on exports are imposed by The U.
S. In the near future. At our Taber facility, we are still processing the 2024 sugar beet harvest. We are modestly revising our expectation for the 2024 crop to between 205,000 metric tons of beet sugar due to some unfavorable weather conditions affecting the quality of harvested beets. Based on the current market conditions, gross margin should align with the last few quarters, reflecting strength in market pricing for sugar and sugar containing products, allowing us to mitigate any pressure on our production costs.
We do expect moderate increases in operating and maintenance costs at our facilities with the impacts of market based increases in costs as well as employee wages. We are committed to a responsible approach to cost management and regular facility maintenance. We will also adapt our operational strategy if the market conditions change in the near term. Looking at our Maple segment, we expect another strong year in 2025. Thanks to the market recovery we've seen over the last few quarters and the solid results for
Michael Van Aelst, Analyst, TD Cowen: the first
Mike Walton, President and CEO, Rogers Sugar Inc.: quarter. Once again, here our volume and profitability expectations for 2025 could be impacted if tariffs on exports are imposed by The U. S. In the near future. We continue to expect our CapEx spend to fall between $25,000,000 and $30,000,000 for the year across our business segments, excluding the expenditures related to our LEAP project.
This will be an important year for our LEAP project as the majority of the construction work will take place in 2025. Spending is expected to come in at approximately $100,000,000 for the year. As you heard from J. S, this overall capital spend is manageable within the financing tools we have in place. However, if market conditions were to change materially, we could adjust the pace and level of our spending to the needs of our business.
In summary, we had a great first quarter for both our business segments in terms of revenue, profits and free cash flow with encouraging contributions from both sugar and maple. We have confidence in our products, which are essential ingredients to so many foods that people enjoy. We have confidence in our people who are providing those customers with top notch products and top notch service while working to build our capability for the future. We recognize that the market conditions are uncertain right now, but we remain confident in the long term demand for Canadian Sugar. As I said earlier, we are focused on managing this business through uncertainty to meet the needs of our customers just as we always have done through the past economic cycles.
Finally, I am confident in our ability to navigate any bumps in the road that may arise as we have never been in a stronger position financially in our history. We thank our people and our customers for their dedication and for placing their confidence in us. And we thank you for joining us on the call today and your interest in Roger Sugar. I will now ask the operator to poll for questions.
Conference Operator: Thank you. And your first question comes from the line of Michael Van Aelst with TD Cowen. Please go ahead.
Michael Van Aelst, Analyst, TD Cowen: Hi, good morning. I'll start off with some of the easier ones. First of all, the lost customer that you alluded to in Western Canada in the liquid business, When did you actually lose that customer? And was that did you lose it to high fructose corn syrup?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes. Michael, good morning. Exactly. That was kind of a planned transition as domestic volumes were in demand and continue to be in demand. Typical high fructose substitutable volume brings you, as you know, a lower margin, and that was a planned exit on both parties.
Michael Van Aelst, Analyst, TD Cowen: Okay. And when was that? In,
Mike Walton, President and CEO, Rogers Sugar Inc.: it would have been two years ago, the contract would have been negotiated, I believe.
Michael Van Aelst, Analyst, TD Cowen: And I'm sorry, when did you actually lose the business? Was it just this quarter?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes, sorry. Started, the volume started to come out of the business this quarter.
Michael Van Aelst, Analyst, TD Cowen: Okay. And then I guess this quarter, it looks like it was replaced by export volumes. What's more profitable for you at this stage? Is it the export volumes or the liquid volumes?
Mike Walton, President and CEO, Rogers Sugar Inc.: In that case, as you can appreciate with the tightness we've seen in the last twelve, eighteen months in the North American market, particularly in Mexico and The United States, our high tier sales still make a heck of a lot of sense for this business. And we always take opportunities when that market presents the economics that are favorable to what we want in our mix.
Michael Van Aelst, Analyst, TD Cowen: Okay. All right. And then you had that $2,700,000 insurance gain. Is there anything else like this coming in the next few quarters? Or was there anything that I'm not I can't think of that was last year except for the strike or the labor disruption?
J.S., Chief Financial Officer, Rogers Sugar Inc.: Hey, Mike, it's Jeff. No, we obviously, that was a claim that we made on sugar we had purchased that was contaminated. Hopefully, we don't have any more of those. But right now, we don't have anything ongoing on that.
Michael Van Aelst, Analyst, TD Cowen: Okay. All right. Thank you. So I wanted to move on to the tariffs. Obviously, you gave us some numbers here to work with.
But the 5% to 10% that is exported directly, So when you look at the 10,000 metric tons of sugar that you actually have that's tariff free, would you expect that part of your business to be impacted? Would you think there's a lot of tariffs on product that is already tariff free?
Mike Walton, President and CEO, Rogers Sugar Inc.: Hey, Michael, that's such a great question. You and ourselves and everybody is asking that. And as you can appreciate, that particular playbook changes by the second with zero clarity. So the first thing is I want to clarify, we have two Canadian beef quotas. One is the old WTO and the new CUSMA.
So it totals about 20,000 tons of tariff for free B quota for The United States that we ship annually. And we have no clarification yet because until the federal register is out and we all get to look at facts, we don't know how any potential duties will be applied if they're going to be applied. And if there will be the stacking of duties, it's the same question every manufacturer in Canada has. There is zero clarity on that.
Michael Van Aelst, Analyst, TD Cowen: Okay. I missed the number that you said. Like what percentage, I guess, comes back into Canada as part of sugar containing products?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes. That's the great question, right? Because we only look at one side of the equation when everybody is trying to manage risk and understand what the impact would be, but you have to look at the other side as well, which is the countervailing tariffs on imports of similar goods and sectors similar goods, whether it's FCPs and or possibly high fructose corn syrup. And when you look at those kinds of baskets together, then it's close to balance. I won't say it's fully balanced, but it's close to balance, Michael.
Slight deficit in The U. S. Favor actually on the trade balance.
Michael Van Aelst, Analyst, TD Cowen: Okay. I'm surprised it's that big considering the challenges and like the tightness of sugar in The U. S. I was surprised that much is coming up into Canada in sugar containing products. So it's close to that 40%, I guess you said 40% to 50% of all the sugar refined in Canada goes down into The U.
S. In sugar containing products. So you're saying just under that comes back?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes. Slightly under that would be what comes back. And look, this is what's so complex. And you raised a really good question. Why is some you're surprised some goods are coming back into Canada given the thickness of sugar.
It just shows how difficult it is to shift manufacturing platforms on a dime. Manufacturing platforms get set up for running specific products in niche channels and you sometimes don't move those plants. So
Michael Van Aelst, Analyst, TD Cowen: have you had I mean, I'm sure you have, but is there any insight you can share from your customers that would be impacted by this and how they're thinking about both their existing capacity and the capacity that's under construction right now?
Mike Walton, President and CEO, Rogers Sugar Inc.: So on the sugar side, I would say we saw zero. We got zero insights and saw next to nothing that would tell us that the world's order was changing. It was like us, everybody else, same thing in the dark with a blindfold on some of this. And we're just managing our business prudently. The when you look at what's been installed and is running in Canada for decades, it's not easy to flip that switch and move a cookie from Canada to suddenly being a cookie being made in The United States because they're complex moves.
None of that change is going to happen immediately. And so companies are doing much the same as we and every other manufacturer in Canada is again waiting to see the details in the federal register so we can have some facts should they come so that we can manage our businesses accordingly. But as we said previously, we don't we're optimistic here. I mean anything can happen, the rain could come and anything can happen. But you got to think about the logic.
It takes decades to set up manufacturing plants that run efficiently and to be competitive in the food production environment that we all compete in. And to flip that and move it to across the border to another country in moments in time, it's just not practical.
Michael Van Aelst, Analyst, TD Cowen: Right. And I guess, I'd assume that there's just not the capacity, the sugar production capacity in The U. S. To open that much more production in The U. S?
Mike Walton, President and CEO, Rogers Sugar Inc.: That is such a great observation because don't listen to what I keep coming at. We've got to look at the facts folks. The facts are The U. S. Is a deficit market.
They still import 3,000,000 tons of sugar plus FCP products made in other foreign jurisdictions. There is no way to change that on the diet.
Michael Van Aelst, Analyst, TD Cowen: So is the capacity there to refine it if they didn't have higher cost or higher prices down there? Or is there would they have to add would the sugar refiners in The U. S. Have to add capacity?
Mike Walton, President and CEO, Rogers Sugar Inc.: So I'm not an expert in capacity in The United States. But my intuition tells me that if the capacity existed, they would be doing more on their own. So I think there is some capacity. But as in our business, it's the same south of the border. It's the seasonality.
You may have some capacity sitting in your refineries in January, February, March, but you're sure as hell not going to have it sitting in July, August and September.
Michael Van Aelst, Analyst, TD Cowen: And then, and so just back on the, I know that your customers don't have any better visibility, but I'm sure they're already going through their contingency planning the same way you are. And that was what I was trying to ask you about like is there any insight from them in terms of what their contingency plans would be should this happen? Do you get the sense that they would be I guess, bottom line is do you get the sense that they would put a halt to their facility, like their capacity expansion that's underway in Canada and consider moving it into The States?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes, that's a good question. So no, the answer is no, we're not getting any signs of that. And people just like us are making these investments for the long term. The long term sugar economics are going to favor the current structure that exists today. And plants are expensive, they take a long time to build and capacity that's under construction or has been installed, I would bet it's going to continue to produce and run.
If you look at the trade value, the difference in sugar economics I keep talking about, but the spreads in The U. S. And Canada. And even with the 25%, proposed duty, 25% duty, and we don't know what that's going to be, maybe zero or whatever. But even with that and given the changes in foreign exchange, it's not all that dramatic.
So I'm pretty sure the Canadian industry will continue to manage through this and recognize the long term proposition. Food manufacturers don't move in knee jerk reactions. They tend to look for long stable runs. And I think that's what we'll win in the day at the end of the day in this conversation.
Conference Operator: And your next question comes from the line of Jan Zimbardo with Scotiabank (TSX:BNS). Please go ahead.
Jan Zimbardo, Analyst, Scotiabank: Thank you. Good morning. I just want to follow-up on Michael's question first. I just want to understand if there's a cost advantage here in Canada from raw pricing of 11 versus 16, if there's a wage advantage in Canada, if there's an FX advantage in Canada and if there's a shortage of production in The U. S, why is U.
S. Produced sugar crossing the border into Canada?
Mike Walton, President and CEO, Rogers Sugar Inc.: Well, as I said earlier, there are some niche goods that it's just not it doesn't create the opportunity to move a factory. We have seen over the last four or five years that trade deficits widening because of the economics and the long term durability in Canada. But there are some food sectors in specifics that maybe don't move across back and forth and don't easily move back and forth. And you've seen some channel changes in recent headlines and consolidations on bakeries, for example. So as companies consolidate smaller sites and smaller operations and look at putting more scalable plants in food manufacturing, we've seen the evidence they tend to be putting those in Canada.
So over time, I think that's a good road. But there will always be some niche goods that are just going to be made south of the border and coming to Canada.
Jan Zimbardo, Analyst, Scotiabank: We've heard in some industries a pulling forward of demand in order to get in front of potential tariffs. Have you seen that at all or has there been no change to order patterns? I know you referenced in the prior answer that there's no change to CapEx plans for any of your large customers that are that have capacity expansion projects underway. But have you seen any change in immediate demand to try to avoid potential tariffs?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes, of course. And we've seen some of that in specifically in our Maple segment, which is more U. S. Sensitive because of customer mix. And so we've seen since the events of last weekend, we've seen more earnest pulling and building of inventories, pulling earlier quarters in the maple business, not so much in the sugar because we've already had taken some measures and positioned some inventory in The United States to hold some short term orders should the need arise.
But the maple has seen some pull by large U. S. Retailers as they build some buffer stocks in and but that's only started in the last days.
J.S., Chief Financial Officer, Rogers Sugar Inc.: Yes. Maybe if I might just add, Maple had a very, very strong quarter. And I don't want to give the impression that that was related to pull in Q1. So the pull that Mike is talking about, it's been literally like over the last week that we've seen on especially on the maple side this week.
Jan Zimbardo, Analyst, Scotiabank: Okay, great. I want to shift gears. We've heard lots about interprovincial trade in Canada and how that's become a priority for regulators now. I wonder how you describe cross province trade in your industry or industries. Is there potential or imminent desire for that to improve?
I wonder how that might impact Rogers' sugar, if at all? And if there is an opportunity, would it be sales related? Would it be margins? I wonder how we should think about that?
Mike Walton, President and CEO, Rogers Sugar Inc.: So great question. That is one of the dialogues of the day, of course. And right now in sugar and maple, there are no barriers in trade between provinces in Canada. And as you know, we operate in several provinces in Canada with a plant in Vancouver, plant in Taber, Distribution Center Toronto, large sugar refinery plant in Montreal and three maple syrup production plants in Eastern Quebec. So we're well diversified across Canada for serving the needs of our customers and there are no interprovincial trade barriers in moving goods of sugar and maple currently.
Jan Zimbardo, Analyst, Scotiabank: Okay. Just a couple more. Looking from the consumer's lens, we've seen a pretty rapid reaction from consumers or some consumers at least towards buying Canadian. I wonder how you're thinking about this and how this might impact your strategy. Are you considering changes to labeling or advertising or messaging to consumers?
And if so, how long a process might that be?
Mike Walton, President and CEO, Rogers Sugar Inc.: That's a great question. I'm glad you asked that. It's almost like a free commercial for us, Doug. As you'll pick up a two kilograms bag of our sugar anywhere in Canada, you will see on a label or a badge on the front package that says proudly owned and operated by Canadians. So we are 100% Canadian owned and operated.
We are the only sugar company in Canada that can say that and we always have been and that has been displayed on our retail packaging for decades.
Jan Zimbardo, Analyst, Scotiabank: And are there conversations underway with retailers about how this can be better brought to the attention of consumers?
Mike Walton, President and CEO, Rogers Sugar Inc.: It's early days, but I'm sure that's going to be prominent in our sales business reviews, our sales teams and our customers in the coming days.
Jan Zimbardo, Analyst, Scotiabank: And then last one, specific to you, Mike, you mentioned that you were involved in the last round of trade agreement negotiations. Can you talk about what you're seeing or hearing this time around versus last time? Does it feel materially different? Obviously, there's a different start to these, but I wonder how much you think is posturing and no one's got a crystal ball. But it feels like you've got kind of an inside playbook from the last time this happened.
And I wonder if you could talk about your experience last time and how this round differs?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes. Thanks. The one thing I won't do and I've said it many times is and I try and counsel our whole group of employees not to, is we won't speculate. This is a different environment. It's unique to itself.
And that's, I guess, as kind as I can be about it. Yes, the last time, as I said, there's a lot of noise around this type of negotiation style. And it's not unfamiliar to me. We've been there before. It's a little louder right now, a little short term a little more intense on a shorter term, but I don't think characteristically materially different.
And we continue to engage with government parties across the country. And we encourage government parties on both sides of the border to come together, find a resolution and let cooler heads prevail because in the end, that's what everybody needs. And I'm we're doing our part in behind the scenes to encourage people to take that approach. It's just noise. We should not get distracted by the noise.
We should focus on delivering against our strategy and delivering value for our shareholders.
Conference Operator: And your next question comes from the line of Frederic Tremblay with Daterland. Please go ahead.
Frederic Tremblay, Analyst, Daterland: Thanks for the all the insights on the Patterson trade situation. Much appreciated. Just maybe switching to the Maple volume outlook. We noticed that it seems like you're now expecting £2,000,000 increase in volume in Maple and that's up from £500,000 in your prior outlook. So just wondering if there's anything market related that is providing you with this increased confidence on the outlook or is it that you maybe won some larger pieces of business recently?
Just maybe a bit more color on that volume side in Maple.
Mike Walton, President and CEO, Rogers Sugar Inc.: Thanks, Fred. Yes, we're as I said in my comments earlier, we're more optimistic in the Maple side as we see compound annual growth rates in across the globe starting to pick up and grow again. Coming out of this period of food inflation where people slowed down procurement of maple products in particular, we're seeing a return to more normal, more traditional buying patterns and growth in the business. And as far as winning customers, we can continue to peed every single day in this business. We intend to maintain and certainly improve our market share in key markets and that we're going to stick to that strategy and continue to grow this business.
Michael Van Aelst, Analyst, TD Cowen: Okay, great. And then can
Frederic Tremblay, Analyst, Daterland: you speak to the operating leverage in that business in Q1? We saw gross margin in Maple was improved quite a bit. Is that something that you feel is sustainable given the more positive volume outlook that you have there?
J.S., Chief Financial Officer, Rogers Sugar Inc.: Hi, Craig. It's J. S. Here. Maple our maple business, we've done a fair bit of work over the last two years on automation and cost improvement in control or cost improvement in efficiencies.
About half of our costs in Maple, I would say, are fixed costs. So obviously, whenever there's good volume, it gives a bit of a lift to our gross margin. So we believe if the volume continues to be where we think it's going to be from a target standpoint and we think that the cyber margin were at 11.5% in Q1, we believe we can continue on the same front.
Frederic Tremblay, Analyst, Daterland: Great. That's all I had. Thank you. Thank you. Thanks,
Conference Operator: Brad. Your next question comes from the line of Zachary Evershed with National Bank Financial. Please go ahead.
Michael Van Aelst, Analyst, TD Cowen: So just a follow-up on Fred's questions on Maple. How are discussions around pricing evolving this year?
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes. We continue to extract value where we can in that business. We're getting improved pricing in some sectors and continue to create that value. Equally, as Jaya said, we've been as we've reported in previous quarters, we've invested in the maple business in automation and some other things that allow that business to run at a lower cost as well. So we're extracting value in pricing and extracting value in excellent operating performance at the plant level.
Conference Operator: Sorry, Zack, are you on mute? We'll proceed with the next question. So, we do have from Nathan Powell with National Bank Financial. Please go ahead.
Michael Van Aelst, Analyst, TD Cowen: Hi. Thanks for taking my question. And apologies, Zack's VPN just reset it. So Can you ask a quick question? Yes.
That's just how it goes nowadays.
Mike Walton, President and CEO, Rogers Sugar Inc.: Yes.
Michael Van Aelst, Analyst, TD Cowen: So in Q1, we saw a bigger inventory build higher than we've seen in historic years. Can you give any color on what's driving that working capital investment? Is it related to what you said regarding sugar and maple and those customers perhaps building up inventories in anticipation of any tariffs or anything like that?
J.S., Chief Financial Officer, Rogers Sugar Inc.: It's JS here. A lot of it is timing for raws. So vessels of raw sugar rise at different times, and it was really more of a timing. We had vessels arriving towards the end of the quarter in both of our location, and that's what drives that's what drove the price. We also I mean, our plants have been running well.
So from a finished product standpoint, we had a fair bit of inventory from a timing perspective. But it's just working capital. It's not I wouldn't call that a sustainable investment in working capital. This is all about timing.
Mike Walton, President and CEO, Rogers Sugar Inc.: And I want to add to that. Some of this is done with purpose. As you refer to our Rogers Refined program, we want to satisfy our customers giving them products when they need it and where they want it. And so we as part of one of our strategies this year, got really focused on making sure we had sugar available because it's been a tight market in the last few years. We're proud of the team and what they were able to deliver.
It's one of the first years that I can remember. I've been around here for about forty plus years where we had a 100% fill rate against our retail customers in most channels for a difficult Q1, which is a critical quarter for Christmas baking and fall baking. So really great execution and you get there by a good plant performance and building some inventory to carry us through to fill those orders. We'll continue to use that inventory in Q2 and provide excellent service to our customers.
