Rogers Sugar Inc.’s (“our,” “we”, “us” or “Rogers”) (TSX: RSI)
today reported third quarter fiscal 2022 results with consolidated
adjusted EBITDA of $23.1 million and $73.2 million for the current
quarter and the first nine months of the year, respectively.
We are announcing today our intention to proceed
with an expansion of our Montreal refining capacity along with an
increase of our Toronto distribution centre logistic and rail
infrastructures. The project would increase the eastern refined
sugar supply by up to 100,000 metric tonnes annually at
a current estimated construction cost of approximately $160
million. We are working with different stakeholders including
customers, suppliers, financial institutions, rail providers and
government authorities to finalize our plan. We are expecting to
deliver this additional capacity to the market within the next two
years. We intend to provide regular updates on the project in the
coming months.
"The demand for Canadian refined sugar remained
very strong in the third quarter of 2022, and we anticipate this
situation to continue for the foreseeable future as market dynamics
remain favourable,” said Mike Walton, President, and Chief
Executive Officer of Rogers and Lantic Inc. "We expect the strong
market conditions of our Sugar segment will more than offset the
challenges we are experiencing in our Maple segment from current
inflationary pressures; providing for improved overall financial
results in 2022 as compared to 2021.” "We are also very excited
about our expansion project aimed at supporting the growth of the
Canadian food manufacturing industry with quality refined
sugar.”
|
Third Quarter 2022 Consolidated
Highlights(unaudited) |
Q3 2022 |
Q3 2021 |
YTD 2022 |
YTD 2021 |
| Financials
($000s) |
|
|
|
|
| Revenues |
254,632 |
210,931 |
738,728 |
650,700 |
| Adjusted gross margin(1) |
32,654 |
25,932 |
104,341 |
89,792 |
| Adjusted EBITDA(1) |
23,108 |
17,214 |
73,187 |
66,237 |
| Net earnings |
3,138 |
6,836 |
28,934 |
31,387 |
|
per share (basic) |
0.03 |
0.07 |
0.28 |
0.30 |
|
per share (diluted) |
0.03 |
0.07 |
0.28 |
0.29 |
| Adjusted net earnings(1) |
8,419 |
4,247 |
28,498 |
24,246 |
| Adjusted net earnings per
share (basic)(1) |
0.08 |
0.04 |
0.27 |
0.23 |
| Trailing twelve months free
cash flow(1) |
49,480 |
42,084 |
49,480 |
42,084 |
| Dividends per share |
0.09 |
0.09 |
0.27 |
0.27 |
| |
|
|
|
|
| Volumes |
|
|
|
|
| Sugar (metric tonnes) |
203,315 |
190,563 |
579,928 |
564,752 |
| Maple
Syrup (thousand pounds) |
12,027 |
11,471 |
37,225 |
40,578 |
(1) See “Cautionary statement on Non-GAAP
Measures” section of this press release for definition and
reconciliation to GAAP measures.
- Consolidated
adjusted EBITDA for the third quarter and the first nine months of
fiscal 2022 was $23.1 million and $73.2 million respectively, an
increase of $5.9 million and $7.0 million from the same periods
last year, largely driven by higher adjusted EBITDA in the Sugar
segment;
- Adjusted EBITDA
in the Sugar segment was $20.0 million in the third quarter, an
increase of $5.7 million from the same quarter last year, driven by
higher volume, improved average pricing and higher production at
our Taber sugar beet facility; partly offset by increased
distribution costs and administrations and selling expenses;
- Sales volume in
the Sugar segment increased by 6.7% to 203,315 metric tonnes in the
third quarter of the current fiscal year, as sales volume increased
in all segments compared to the same period last year;
- Adjusted gross
margin in the Sugar segment improved by $24.73 per metric tonne in
the third quarter of fiscal 2022 compared to the same quarter last
year due to higher selling margin and a stronger contribution from
our Taber sugar beet facility;
- Adjusted EBITDA
in the Maple segment was $3.1 million in the third quarter, an
increase of $0.2 million from the same quarter last year largely as
a result of higher sales volume and improved average pricing,
partially offset by higher operating costs driven by increased
costs for packaging, freight and energy, as well as higher
compensation and employee benefits;
- Free cash flow
for the trailing 12 months ended July 2, 2022 was $49.5 million, an
increase of $7.4 million from the same period last year;
- In the third
quarter of fiscal 2022, we distributed $0.09 per share to our
shareholders for a total amount of $9.4 million;
-
On August 9, 2022, we signed a multi-year supply partnership
agreement with Raízen, the largest individual raw sugar exporter on
the international market based in Brazil, to source certified non
genetically modified organism (“non-GMO”) raw sugar for our eastern
Canada operations. This new supply agreement will allow our
Montreal facility to provide non-GMO refined sugar to our valued
customers; and
- On August 10,
2022, the Board of Directors declared a quarterly dividend of $0.09
per share, payable on or before October 12, 2022.
Sugar
|
Third Quarter 2022 Sugar
Highlights(unaudited) |
Q3 2022 |
Q3 2021 |
YTD 2022 |
YTD 2021 |
| Financials
($000s) |
|
|
|
|
| Revenues |
200,276 |
161,237 |
572,058 |
476,656 |
| Adjusted gross margin(1) |
28,195 |
21,714 |
90,844 |
74,204 |
|
Per metric tonne ($/ mt) (1) |
138.68 |
113.95 |
156.65 |
131.39 |
| Administration and selling
expenses |
8,067 |
8,163 |
26,594 |
21,202 |
| Distribution costs |
5,053 |
3,747 |
14,724 |
12,439 |
| Adjusted EBITDA(1) |
19,979 |
14,265 |
63,960 |
54,007 |
| |
|
|
|
|
| Volumes (metric
tonnes) |
|
|
|
|
| Total
volume |
203,315 |
190,563 |
579,928 |
564,752 |
(1) See “Cautionary statement on Non-GAAP
Measures” section of this press release for definition and
reconciliation to GAAP measures.
In the third quarter of fiscal 2022, revenue
increased by $39.0 million compared to the same period last year,
driven mainly by higher sales volume, higher prices for #11 world
raw sugar, improved average pricing and higher by-product sales
revenue. The average price for #11 world raw sugar increased by US
2.3 cent per pound to US 19.2 cent per pound during the current
quarter when compared to the same quarter last year.
Sugar volume increased by 12,752 metric tonnes
in the third quarter of fiscal 2022 compared to the same quarter
last year, due mainly to stronger industrial and liquid
volumes.
- Industrial
volume contributed the largest increase in the quarter, due mainly
to higher demand from existing customers producing sugar containing
products for consumption in North America.
- Liquid volume
during the current quarter also increased due to higher demand from
existing customers.
Adjusted gross margin increased by $6.5 million
in the current quarter compared to the same quarter last year
mainly as a result of higher sugar sales margin of $12.2 million
from higher sales volume, improved average pricing and increased
by-product net contribution of $0.5 million. The favourable
variance was partially offset by higher production costs mainly
driven by increased volume and higher energy and labour costs. On a
per unit basis, adjusted gross margin for the third quarter was at
$138.68 per metric tonne, higher than last year by $24.73 per
metric tonne. The favourable variance was mainly due to the
increase in overall margin from higher volume, improved selling
prices, and higher production of beet sugar out of our Taber
facility, as compared to last year. In 2021, our Taber facility
produced less sugar as the quality of the beets was negatively
impacted by unfavourable storage conditions.
Adjusted EBITDA for the third quarter of fiscal
2022 increased by $5.7 million compared to the same quarter last
year, largely as a result of higher adjusted gross margin, as
mentioned above, partially offset by higher distribution costs
largely driven by higher freight costs and additional logistical
costs incurred to support the strong demand in eastern Canada.
Maple
|
Third Quarter 2022 Maple
Highlights(unaudited) |
Q3 2022 |
|
Q3 2021 |
|
YTD 2022 |
|
YTD 2021 |
|
| Financials
($000s) |
|
|
|
|
|
Revenues |
54,356 |
|
49,694 |
|
166,670 |
|
174,044 |
|
| Adjusted gross margin(1) |
4,459 |
|
4,218 |
|
13,497 |
|
15,588 |
|
|
As a percentage of revenues (%) (1) |
8.2 |
% |
8.5 |
% |
8.1 |
% |
9.0 |
% |
| Administration and selling
expenses |
2,560 |
|
2,563 |
|
7,639 |
|
7,078 |
|
| Distribution costs |
447 |
|
529 |
|
1,718 |
|
1,864 |
|
| Adjusted EBITDA(1) |
3,129 |
|
2,949 |
|
9,227 |
|
12,230 |
|
| |
|
|
|
|
| Volumes (thousand
pounds) |
|
|
|
|
| Total
volume |
12,027 |
|
11,471 |
|
37,225 |
|
40,578 |
|
(1) See “Cautionary statement on Non-GAAP
Measures” section of this press release for definition and
reconciliation to GAAP measures.
Revenues for the third quarter of the current
fiscal year were $4.7 million higher than the same period last year
at $54.4 million, mainly due to higher volume and higher sales
price.
Adjusted gross margin for the current quarter of
fiscal 2022 was higher by $0.2 million due to higher volume and
higher sales price, partially offset by higher operating costs.
Operating costs increased largely as a result of higher packaging,
freight and energy costs as well as increased compensation cost and
employee benefits incurred to attract and retain employees in our
production facilities.
Adjusted gross margin percentage for the current
quarter decreased by 30 basis point compared to the same period
last year, mainly attributable to market-based production cost
increases discussed above and the timing of passing these increases
through to our customers.
Adjusted EBITDA for the third quarter of fiscal
2022 increased by $0.2 million, due to higher adjusted gross margin
as explained above.
OUTLOOK
The health and safety of our employees remains
our top priority. We are closely following all COVID-19 public
health authority recommendations and have safety protocols in
place. To date our plants have operated without any significant
disruption during the COVID-19 pandemic; however, the uncertainty
and increased demand volatility make it difficult to estimate the
impact on future sale volumes, operations, and financial results.
We are closely monitoring the situation and will continue to adapt
quickly to the changing circumstances.
As a result of the strong demand and improved
margins, we are experiencing in our Sugar segment, we continue to
expect improved financial performance in 2022 as compared to 2021.
The strength in our Sugar segment is expected to offset higher
costs from inflationary pressures and lower demand in the Maple
segment.
Sugar
We continue to expect the sugar segment to
perform well in fiscal 2022. Underlying domestic demand remains
strong across all customer segments supported by favourable market
dynamics.
In Taber, the sugar beet processing campaign was
completed and delivered the expected volume of sugar. Overall,
121,000 metric tonnes of sugar are expected from our Taber facility
in the current fiscal year, an increase of 6,000 metric tonnes from
last year.
Due to the strong market conditions in our Sugar
segment, we are increasing our sales volume forecast for 2022 by
10,000 metric tonnes to 785,000 metric tonnes. We expect domestic
volumes to grow by 2.5% from 2021, while our export volumes are
expected to be lower as a result of reduced CUSMA quota
opportunities in the current year. Overall, 2022 volumes are
expected to be approximately 5,000 metric tonnes higher than 2021,
with volumes expected to change as follows in 2022:
- Industrial, our
largest segment, is expected to grow at 3% as demand for
sugar-containing products remains steady both in Canada and the
US.
- Liquid volume is
expected to deliver growth of 3% driven by continued demand from
existing customers.
- Consumer volume
is expected to decrease by 2.5%, as volumes return to normalized
pre-COVID levels.
- We anticipate
selling less in the export markets in 2022, due to reduced CUSMA
opportunities.
The combination of higher volume and favourable
price adjustments are expected to improve profitability as compared
to 2021.
Maintenance programs for the Montreal and
Vancouver operating facilities are expected to follow the trend of
previous years and are expected to result in a market-based
increase in operating costs. For the Taber facility, a return to
normal crop volume and an improvement in the quality of the sugar
beets over 2021 is expected to yield an improvement in operating
costs.
Distribution costs are expected to increase
overall by 30% from 2021, reflecting additional transfers of volume
from the west to the east to meet customer demand and higher market
prices for warehousing, rail and ground transportation.
Administration and selling expenses are expected
to increase by 25% due to a non-cash increase in share-based
compensation expense driven by the increase in share price noted in
recent quarters, partially offset by lower COVID-19 related
expenditures.
Spending on capital projects is also expected to
be lower for fiscal 2022, due to timing and supply chain
challenges. We anticipate spending approximately $20.0 million on
various capital projects.
We have been able to mitigate the potential
unfavourable impact on our business of the recent increases in
interest rates and energy costs through our multi-years hedging
strategy. We do not anticipate these increases to have a material
impact on our financial results in the near future, as we expect
our hedging strategy will continue to mitigate such risks.
Maple
The Maple segment financial results were lower
than anticipated for the first nine months of 2022, due mainly to
lower volume and unexpected inflationary pressure on costs for
packaging material, freight, and labour; along with global shipping
challenges related to the availability of carriers. We expect these
financial and operating pressures to continue for the remainder of
2022. At the end of the second quarter, we began implementing an
updated pricing strategy with our customers, aimed at recouping
these incremental costs going forward. The expected improvement in
pricing to customers to recover these unanticipated cost increases
is not occurring as fast as initially anticipated. This is due to
the current market conditions and the competitiveness of the Maple
Syrup market, which has been impacted by a strong crop in 2022.
A full copy of Rogers third quarter 2022,
including management’s discussion and analysis and unaudited
condensed consolidated interim financial statements, can be found
at www.LanticRogers.com.
Conference Call and Webcast
We will host a conference call to discuss our
third quarter of fiscal 2022 results on August 11, 2022 starting at
8:00a.m. ET. To participate, please dial 1-888-400-2425. A
recording of the conference call will be accessible shortly after
the conference, by dialing 1-800-770- 2030, access code 9031006#.
This recording will be available until August 25, 2022. A live
audio webcast of the conference call will also be available via
www.LanticRogers.com.
About Rogers Sugar
Rogers is a corporation established under the
laws of Canada. The Corporation holds all of the common shares of
Lantic and its administrative office is in Montréal, Québec.
Lantic operates cane sugar refineries in Montreal, Québec and
Vancouver, British Columbia, as well as the only Canadian sugar
beet processing facility in Taber, Alberta. Lantic also operate a
custom blending and packaging operation and distribution center in
Toronto, Ontario. Lantic’s sugar products are marketed under the
“Lantic” trademark in Eastern Canada, and the “Rogers” trademark in
Western Canada and include granulated, icing, cube, yellow and
brown sugars, liquid sugars and specialty syrups. Lantic owns all
of the common shares of TMTC and its head office is headquartered
in Montréal, Québec. TMTC operates bottling plants in Granby,
Dégelis and in St-Honore-de-Shenley, Québec and in Websterville,
Vermont. TMTC’s products include maple syrup and derived maple
syrup products supplied under retail private label brands in over
fifty countries and also sold under various brand names, such as
TMTC, Uncle Luke’s, Great Northern, Decacer and Highland
Sugarworks.
For more information about Rogers please visit
our website at www.LanticRogers.com.
Cautionary Statement Regarding
forward-looking information
This report contains statements or information
that are or may be “forward-looking statements” or “forward-looking
information” within the meaning of applicable Canadian Securities
laws. Forward-looking statements may include, without limitation,
statements and information which reflect our current expectations
with respect to future events and performance. Wherever used, the
words “may,” “will,” “should,” “anticipate,” “intend,” “assume,”
“expect,” “plan,” “believe,” “estimate,” and similar expressions
and the negative of such expressions, identify forward-looking
statements.
Although this is not an exhaustive list, we
caution investors that statements concerning the following subjects
are, or are likely to be, forward-looking statements:
- our intention to
increase sugar refining capacity and the related eastern Canada
distribution network
- the impact of
the COVID-19 pandemic on our operations
- future prices of
raw sugar
- expected
inflationary pressures on costs
- natural gas
costs
- beet production
forecasts
- growth of the
maple syrup industry and the refined sugar industry
- the status of
labour contracts and negotiations
- the level of
future dividends
- the status of
government regulations and investigations
Forward-looking statements are based on
estimates and assumptions made by us in light of our experience and
perception of historical trends, current conditions and expected
future developments, as well as other factors that we believe are
appropriate and reasonable in the circumstances, including with
respect to our ability to finance and complete the expansion
project of our Montreal plant and eastern distribution network, the
continuity of our operations despite the COVID-19 pandemic, but
there can be no assurance that such estimates and assumptions will
prove to be correct. Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. Actual performance
or results could differ materially from those reflected in the
forward-looking statements, historical results or current
expectations. Readers should also refer to the section “Risks and
Uncertainties” in our current quarter MD&A for additional
information on risk factors and other events that are not within
our control. These risks are also referred to in our Annual
Information Form in the “Risk Factors” section.
Although we believe that the expectations and
assumptions on which forward-looking information is based are
reasonable under the current circumstances, readers are cautioned
not to rely unduly on this forward-looking information as no
assurance can be given that it will prove to be correct.
Forward-looking information contained herein is made as at the date
of this press release and we do not undertake any obligation to
update or revise any forward-looking information, whether as a
result of events or circumstances occurring after the date hereof,
unless so required by law.
Cautionary Statement Regarding non-GAAP
measures
In analyzing results, we supplement the use of
financial measures that are calculated and presented in accordance
with IFRS with a number of non-GAAP financial measures. A non-GAAP
financial measure is a numerical measure of a company’s
performance, financial position or cash flow that excludes
(includes) amounts or is subject to adjustments that have the
effect of excluding (including) amounts, that are included
(excluded) in most directly comparable measures calculated and
presented in accordance with IFRS. Non-GAAP financial measures are
not standardized; therefore, it may not be possible to compare
these financial measures with the non-GAAP financial measures of
other companies having the same or similar businesses. We strongly
encourage investors to review the unaudited condensed consolidated
interim financial statements and publicly filed reports in their
entirety, and not to rely on any single financial measure.
We use these non-GAAP financial measures in
addition to, and in conjunction with, results presented in
accordance with IFRS. These non-GAAP financial measures reflect an
additional way of viewing aspects of the operations that, when
viewed with the IFRS results and the accompanying reconciliations
to corresponding IFRS financial measures, may provide a more
complete understanding of factors and trends affecting our
business. See “Non-GAAP measures” section at the end of the
MD&A for the current quarter for additional information.
Financial Report Q3 2022
This Management’s Discussion and Analysis
(“MD&A”) of Rogers Sugar Inc.’s (“Rogers”, “RSI” or “our,”
“we”, “us”) dated August 10, 2022 should be read in conjunction
with the unaudited condensed consolidated interim financial
statements and related notes for the three- and nine-month periods
ended July 2, 2022, as well as the audited consolidated financial
statements and MD&A for the year ended October 2, 2021. The
quarterly unaudited condensed consolidated interim financial
statements and any amounts shown in this MD&A were not reviewed
nor audited by our external independent auditors. This MD&A
refers to Rogers, Lantic Inc. (“Lantic”) (Rogers and Lantic
together referred as the “Sugar segment”), The Maple Treat
Corporation (“Maple Treat”) and Highland Sugarworks Inc.
(“Highland”) (the latter two companies together referred to as
“TMTC” or the “Maple segment”).
Management is responsible for preparing the
MD&A. This MD&A has been reviewed and approved by our Audit
Committee of Rogers and our Board of Directors.
OUR BUSINESS
Rogers has a long history of providing high
quality sugar products to the Canadian market and has been
operating since 1888.
Lantic, Rogers wholly owned subsidiary, operates
cane sugar refineries in Montreal, Québec and Vancouver, British
Columbia, as well as the only Canadian sugar beet processing
facility in Taber, Alberta. Lantic’s sugar products are marketed
under the “Lantic” trademark in Eastern Canada, and the “Rogers”
trademark in Western Canada and include granulated, icing, cube,
yellow and brown sugars, liquid sugars and specialty syrups. We
also operate a custom blending and packaging operation and
distribution center in Toronto, Ontario.
Maple Treat operates bottling plants in Granby,
Dégelis and St-Honoré-de-Shenley, Québec and in Websterville,
Vermont. Maple Treat’s products include maple syrup and derived
maple syrup products supplied under retail private label brands in
over fifty countries and are sold under various brand names, such
as TMTC, Uncle Luke’s, Great Northern, Decacer and Highland
Sugarworks.
Our business has two distinct segments - Sugar –
which includes refined sugar and by-products and Maple – which
includes maple syrup and maple derived products.
UPDATE ON COVID-19
The ongoing COVID-19 pandemic has negatively
impacted the global economy, disrupted financial markets and supply
chain, significantly restricted business travel and interrupted
business activity.
Our business is considered an essential service
by the government and as such, our plants have continued to operate
at usual capacity. We have established extensive protection
measures and protocols to ensure the health and safety of our
employees. COVID-19 could have a material effect on our business as
it relates to customer demand, supply and delivery logistics,
operations, financial market volatility, pension and benefits
liabilities and other economic fundamentals. For the third quarter
and the first nine months of fiscal 2022, we incurred direct costs
amounting to $0.2 million and $1.0 million respectively in relation
to COVID-19. These costs were largely due to health and safety
measures implemented across all production facilities.
The effect of COVID-19 on our business may
continue for an extended period and the ultimate impact 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 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.
BUSINESS HIGHLIGHTS
- Consolidated
adjusted EBITDA for the third quarter and the first nine months of
fiscal 2022 was $23.1 million and $73.2 million respectively, an
increase of $5.9 million and $7.0 million from the same periods
last year, largely driven by higher adjusted EBITDA in the Sugar
segment;
- Adjusted EBITDA
in the Sugar segment was $20.0 million in the third quarter, an
increase of $5.7 million from the same quarter last year, driven by
higher volume, improved average pricing and higher production at
our Taber sugar beet facility; partly offset by increased
distribution costs and administrations and selling expenses;
- Sales volume in
the Sugar segment increased by 6.7% to 203,315 metric tonnes in the
third quarter of the current fiscal year, as sales volume increased
in all segments compared to the same period last year;
- Adjusted gross
margin in the Sugar segment improved by $24.73 per metric tonne in
the third quarter of fiscal 2022 compared to the same quarter last
year due to higher selling margin and a stronger contribution from
our Taber sugar beet facility;
- Adjusted EBITDA
in the Maple segment was $3.1 million in the third quarter, an
increase of $0.2 million from the same quarter last year largely as
a result of higher sales volume and improved average pricing,
partially offset by higher operating costs driven by increased
costs for packaging, freight and energy, as well as higher
compensation and employee benefits;
- Free cash flow
for the trailing 12 months ended July 2, 2022 was $49.5 million, an
increase of $7.4 million from the same period last year;
- In the third
quarter of fiscal 2022, we distributed $0.09 per share to our
shareholders for a total amount of $9.4 million; and
- On August 9,
2022, we signed a multi-year supply partnership agreement with
Raízen, the largest individual raw sugar exporter on the
international market based in Brazil, to source certified non
genetically modified organism (“non-GMO”) raw sugar for our Eastern
Canada operations. This new supply agreement will allow our
Montreal facility to provide non-GMO refined sugar to our valued
customers;
- On August 10,
2022, the Board of Directors declared a quarterly dividend of $0.09
per share, payable on or before October 12, 2022; and
- On August 10,
2022, we announced our intention to proceed with an expansion of
our Montreal refining capacity along with an increase of our
Toronto distribution centre logistic and rail infrastructures. The
project would increase the eastern refined sugar supply by up to
100,000 metric tonnes annually at a current estimated construction
cost of approximately $160 million.
SELECTED FINANCIAL DATA AND HIGHLIGHTS
|
(unaudited) (In thousands of dollars, except volume and per share
information) |
Q3 2022 |
Q3 2021 |
YTD 2022 |
YTD 2021 |
|
Sugar (metric tonnes) |
203,315 |
190,563 |
579,928 |
564,752 |
| Maple syrup (000 pounds) |
12,027 |
11,471 |
37,225 |
40,578 |
| Total revenues |
254,632 |
210,931 |
738,728 |
650,700 |
| Gross margin |
24,948 |
30,064 |
102,333 |
100,128 |
| Adjusted gross margin(1) |
32,654 |
25,932 |
104,341 |
89,792 |
| Results from operating
activities |
8,822 |
15,062 |
51,658 |
57,545 |
| Adjusted results from
operating activities(1) |
16,528 |
10,930 |
53,666 |
47,209 |
| Adjusted EBITDA(1) |
23,108 |
17,214 |
73,187 |
66,237 |
| Net earnings |
3,138 |
6,836 |
28,934 |
31,387 |
|
per share (basic) |
0.03 |
0.07 |
0.28 |
0.30 |
|
per share (diluted) |
0.03 |
0.07 |
0.28 |
0.29 |
| Adjusted net earnings(1) |
8,419 |
4,247 |
28,498 |
24,246 |
| Adjusted net earnings per
share (basic)(1) |
0.08 |
0.04 |
0.27 |
0.23 |
| Trailing twelve months free
cash flow(1) |
49,480 |
42,084 |
49,480 |
42,084 |
|
Dividends per share |
0.09 |
0.09 |
0.27 |
0.27 |
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP measures.
Revenue and Adjusted
EBITDA: https://www.globenewswire.com/NewsRoom/AttachmentNg/255e0fc0-2820-4c6d-b494-fe19b3419f8b
Adjusted Net Earnings and Free Cash Flow
TTM: https://www.globenewswire.com/NewsRoom/AttachmentNg/d1271835-4943-4c30-bb5e-5d757102156d
Adjusted results
In the normal course of business, we use
derivative financial instruments consisting of sugar futures,
foreign exchange forward contracts, natural gas futures and
interest rate swaps. We have designated our natural gas futures and
our interest rate swap agreements entered into in order to protect
us against natural gas prices and interest rate fluctuations as
cash flow hedges. Derivative financial instruments pertaining to
sugar futures and foreign exchange forward contracts are
marked-to-market at each reporting date and are charged to the
consolidated statement of earnings. The unrealized gains/losses
related to natural gas futures and interest rate swaps qualified
under hedged accounting are accounted for in other comprehensive
income. The amount recognized in other comprehensive income is
removed and included in net earnings under the same line item in
the consolidated statement of earnings and comprehensive income as
the hedged item, in the same period that the hedged cash flows
affect net earnings, reducing earnings volatility related to the
movements of the valuation of these derivatives hedging
instruments.
We believe that our financial results are more
meaningful to management, investors, analysts, and any other
interested parties when financial results are adjusted by the
gains/losses from financial derivative instruments. These adjusted
financial results provide a more complete understanding of factors
and trends affecting our business. This measurement is a non-GAAP
measurement. See “Non-GAAP measures” section.
We use the non-GAAP adjusted results of the
operating company to measure and to evaluate the performance of the
business through our adjusted gross margin, adjusted results from
operating activities, adjusted EBITDA, adjusted net earnings,
adjusted net earnings per share and trailing twelve months free
cash flow. In addition, we believe that these measures are
important to our investors and parties evaluating our performance
and comparing such performance to past results. We also use
adjusted gross margin, adjusted EBITDA, adjusted results from
operating activities and adjusted net earnings when discussing
results with the Board of Directors, analysts, investors, banks and
other interested parties. See “Non-GAAP measures” section.
OUR RESULTS ARE ADJUSTED AS FOLLOWS:
|
Income (loss)(In thousands of dollars) |
|
Q3 2022 |
|
|
Q3 2021 |
|
|
|
Sugar |
|
Maple Products |
|
Total |
|
Sugar |
|
Maple Products |
|
Total |
|
|
Mark-to-market on: |
|
|
|
|
|
|
|
Sugar futures contracts |
(795 |
) |
- |
|
(795 |
) |
(489 |
) |
- |
|
(489 |
) |
|
Foreign exchange forward contracts |
205 |
|
(494 |
) |
(289 |
) |
(416 |
) |
341 |
|
(75 |
) |
|
Total mark-to-market adjustment on derivatives |
(590 |
) |
(494 |
) |
(1,084 |
) |
(905 |
) |
341 |
|
(564 |
) |
|
Cumulative timing differences |
(6,327 |
) |
(295 |
) |
(6,622 |
) |
5,785 |
|
(1,089 |
) |
4,696 |
|
|
Total adjustment to costs of sales |
(6,917 |
) |
(789 |
) |
(7,706 |
) |
4,880 |
|
(748 |
) |
4,132 |
|
|
Income (loss)(In thousands of dollars) |
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
Sugar |
|
Maple Products |
|
Total |
|
Sugar |
Maple Products |
|
Total |
|
Mark-to-market on: |
|
|
|
|
|
|
|
Sugar futures contracts |
1,515 |
|
- |
|
1,515 |
|
552 |
- |
|
552 |
|
Foreign exchange forward contracts |
281 |
|
(90 |
) |
191 |
|
3,406 |
2,233 |
|
5,639 |
|
Total mark-to-market adjustment on derivatives |
1,796 |
|
(90 |
) |
1,706 |
|
3,958 |
2,233 |
|
6,191 |
|
Cumulative timing differences |
(3,526 |
) |
(188 |
) |
(3,714 |
) |
7,196 |
(3,051 |
) |
4,145 |
|
Total adjustment to costs of sales |
(1,730 |
) |
(278 |
) |
(2,008 |
) |
11,154 |
(818 |
) |
10,336 |
Fluctuations in the mark-to-market adjustment on
derivatives are due to the price movements in #11 world raw sugar
and foreign exchange variations.
We recognize cumulative timing differences, as a
result of mark-to-market gains or losses, only when sugar is sold
to a customer. The gains or losses on sugar and related foreign
exchange paper transactions are largely offset by corresponding
gains or losses from the physical transactions, namely sale and
purchase contracts with customers and suppliers.
The above described adjustments are added to or
deducted from the mark-to-market results to arrive at the total
adjustment to cost of sales. For the third quarter of the current
fiscal year, the total cost of sales adjustment is a loss of $7.7
million to be added to the consolidated results versus a gain of
$4.1 million to be deducted from the consolidated results for the
comparable period last year. For the first nine months of fiscal
2022, the total cost of sales adjustment is a loss of $2.0 million
to be added to the consolidated results compared to a gain of $10.3
million to be deducted from the consolidated results for the same
period last year.
See the “Non-GAAP measures” section for more
information on these adjustments.
SEGMENTED INFORMATION
|
Segmented Results(In thousands of dollars) |
|
Q3 2022 |
|
|
Q3 2021 |
|
|
|
Sugar |
Maple Products |
Total |
Sugar |
|
Maple Products |
Total |
|
|
Revenues |
200,276 |
54,356 |
254,632 |
161,237 |
|
49,694 |
210,931 |
|
| Gross margin |
21,278 |
3,670 |
24,948 |
26,594 |
|
3,470 |
30,064 |
|
| Administration and selling
expenses |
8,067 |
2,560 |
10,627 |
8,163 |
|
2,563 |
10,726 |
|
|
Distribution costs |
5,052 |
447 |
5,499 |
3,747 |
|
529 |
4,276 |
|
|
Results from operating activities |
8,159 |
663 |
8,822 |
14,684 |
|
378 |
15,062 |
|
| |
|
|
|
|
|
|
| Adjustment to cost of
sales(2) |
6,917 |
789 |
7,706 |
(4,880 |
) |
748 |
(4,132 |
) |
| Adjusted Gross margin(1) |
28,195 |
4,459 |
32,654 |
21,714 |
|
4,218 |
25,932 |
|
| Adjusted results from
operating activities(1) |
15,076 |
1,452 |
16,528 |
9,804 |
|
1,126 |
10,930 |
|
| Adjusted EBITDA(1) |
19,979 |
3,129 |
23,108 |
14,265 |
|
2,949 |
17,214 |
|
| Additional information: |
|
|
|
|
|
- |
|
|
Additions to property, plant and equipment
and intangible assets, net of disposals |
4,089 |
63 |
4,152 |
5,215 |
|
247 |
5,462 |
|
|
Increase in asset retirement obligation
provision included in property, plant and
equipment |
- |
- |
- |
3,131 |
|
- |
3,131 |
|
|
Additions to right-of-use assets |
691 |
- |
691 |
1,475 |
|
823 |
2,298 |
|
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP
measures(2) See “Adjusted results” section
|
Segmented Results(In thousands of dollars) |
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
Sugar |
Maple Products |
Total |
Sugar |
|
Maple Products |
Total |
|
|
Revenues |
572,058 |
166,670 |
738,728 |
476,656 |
|
174,044 |
650,700 |
|
| Gross margin |
89,114 |
13,219 |
102,333 |
85,358 |
|
14,770 |
100,128 |
|
| Administration and selling
expenses |
26,594 |
7,639 |
34,233 |
21,202 |
|
7,078 |
28,280 |
|
|
Distribution costs |
14,724 |
1,718 |
16,442 |
12,439 |
|
1,864 |
14,303 |
|
|
Results from operating activities |
47,796 |
3,862 |
51,658 |
51,717 |
|
5,828 |
57,545 |
|
| |
|
|
|
|
|
|
| Adjustment to cost of
sales(2) |
1,730 |
278 |
2,008 |
(11,154 |
) |
818 |
(10,336 |
) |
| Adjusted Gross margin(1) |
90,844 |
13,497 |
104,341 |
74,204 |
|
15,588 |
89,792 |
|
| Adjusted results from
operating activities(1) |
49,526 |
4,140 |
53,666 |
40,563 |
|
6,646 |
47,209 |
|
| Adjusted EBITDA(1) |
63,960 |
9,227 |
73,187 |
54,007 |
|
12,230 |
66,237 |
|
| Additional information: |
|
|
|
|
|
|
|
Additions to property, plant and equipment
and intangible assets,
net of disposals |
11,182 |
418 |
11,600 |
18,180 |
|
725 |
18,905 |
|
|
Increase in asset retirement obligation
provision included in property, plant and
equipment |
- |
- |
- |
3,131 |
|
- |
3,131 |
|
|
Additions to right-of-use assets |
8,729 |
- |
8,729 |
1,858 |
|
823 |
2,681 |
|
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP
measures(2) See “Adjusted results” section
Sugar
REVENUES
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars) |
200,276 |
161,237 |
39,039 |
572,058 |
476,656 |
95,402 |
Sugar Volume Variance and Sugar
Volumes: https://www.globenewswire.com/NewsRoom/AttachmentNg/0d1c1574-6e2b-4f79-85fe-8c8082a03c85
In the third quarter and first nine months of
fiscal 2022, revenue increased by $39.0 million and $95.4 million
respectively, compared to the same periods last year, driven mainly
by higher sales volume, higher prices for #11 world raw sugar,
improved average pricing and higher by-product sales revenue. The
average prices for #11 world raw sugar increased by US 2.3 cent per
pound to US 19.2 cent per pound during the current quarter and by
US 3.2 cent per pound to US 19.1 cent per pound for the first nine
months of the current fiscal year, when compared to the same
periods last year.
Sugar volume increased by 12,752 metric tonnes
in the third quarter of fiscal 2022 compared to the same quarter
last year, due mainly to stronger industrial and liquid
volumes.
- Industrial
volume contributed the largest increase in the quarter, due mainly
to higher demand from existing customers producing sugar containing
products for consumption in North America.
- Liquid volume
during the current quarter also increased due to higher demand from
existing customers.
Sugar Volume Variance and Sugar
Volumes: https://www.globenewswire.com/NewsRoom/AttachmentNg/4d141af4-f6a5-4e21-bb00-cd67ae557879
In the first nine months of fiscal 2022, sugar
volume totaled 579,928 metric tonnes, an increase of 2.7% compared
to the same period last year, as stronger industrial, consumer and
liquid volumes were largely offset by an expected reduction in
export volume.
- Industrial
volume increased by 12,631 metric tonnes compared to the same
period last year due mainly to higher demand from existing
customers in the second and third quarter of 2022.
- Liquid volume
increased by 5,789 metric tonnes during the first nine months of
the current fiscal year due to higher demand from existing
customers.
- Consumer volume
remained largely unchanged as delayed orders in the first quarter
of the year were recovered in the following two quarters, bringing
retail consumer volume to pre-covid growth levels.
- Export volume
decreased during the first nine months of the current fiscal year
when compared to the same period last year, as we prioritized
Canadian domestic opportunities, consistent with our business
strategy. Furthermore, 2021 export volume included a one-time
opportunistic quota under the ratified Canadian United States
Mexico Agreement (“CUSMA”).
GROSS MARGIN
|
|
Q3 2022 |
Q3 2021 |
|
∆ |
|
YTD 2022 |
YTD 2021 |
|
∆ |
|
(In thousands of dollars, except per metric tonne information) |
|
Gross margin |
21,278 |
26,594 |
|
(5,316) |
|
89,114 |
85,358 |
|
3,756 |
|
Total adjustment to cost of sales(2) |
6,917 |
(4,880 |
) |
11,797 |
|
1,730 |
(11,154 |
) |
12,884 |
|
Adjusted gross margin(1) |
28,195 |
21,714 |
|
6,481 |
|
90,844 |
74,204 |
|
16,640 |
| Adjusted gross margin per
metric tonne(1) |
138.68 |
113.95 |
|
24.73 |
|
156.65 |
131.39 |
|
25.25 |
|
Included in gross margin: Depreciation of
property, plant and equipment and
right-of-use assets |
4,262 |
3,757 |
|
505 |
|
12,535 |
11,332 |
|
1,203 |
(1) See “Non-GAAP Measures” section for definition
and reconciliation to GAAP measures(2) See “Adjusted
results” section
Gross margin was $21.3 million and $89.1 million
for the current quarter and the first nine months of fiscal 2022
and included a loss of $6.9 million and $1.7 million, respectively,
for the mark-to-market of derivative financial instruments. For the
same periods last year, gross margin was $26.6 million and $85.4
million, respectively, with a mark-to-market gain of $4.9 million
and $11.2 million respectively.
Adjusted gross margin was $28.2 million and
$90.8 million for the third quarter and for the first nine months
of fiscal 2022, respectively, as compared to $21.7 million and
$74.2 million in the same periods of 2021.
Adjusted gross margin increased by $6.5 million
in the current quarter compared to the same quarter last year
mainly as a result of higher sugar sales margin of $12.2 million
from higher sales volume, improved average pricing and increased
by-product net contribution of $0.5 million. The favourable
variance was partially offset by higher production costs mainly
driven by increased volume and higher energy and labour costs. On a
per unit basis, adjusted gross margin for the third quarter was at
$138.68 per metric tonne, higher than last year by $24.73 per
metric tonne. The favourable variance was mainly due to the
increase in overall margin from higher volume, improved selling
prices, and higher production of beet sugar out of our Taber
facility, as compared to last year. In 2021, our Taber facility
produced less sugar as the quality of the beets was negatively
impacted by unfavourable storage conditions.
Adjusted gross margin for the first nine months
of fiscal 2022 was $16.6 million higher than the comparable period
last year, mainly due to higher adjusted gross margin in the second
and third quarter of fiscal 2022. On a per unit basis, for the
first nine months of fiscal 2022, adjusted gross margin amounted to
$156.65 per metric tonne compared to $131.39 per metric tonne for
the same period last year. The favourable variance of $25.25 per
metric tonne was mainly due to higher volume sold to customers,
improved average pricing, and higher production of beet sugar out
of our Taber facility.
Adjusted Gross
Margin: https://www.globenewswire.com/NewsRoom/AttachmentNg/d6da1616-4355-4ae0-ba46-88e05b41b0d3
OTHER EXPENSES
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars, except per metric tonne information) |
|
Administration and selling expenses |
8,067 |
8,163 |
(96) |
|
26,595 |
21,202 |
5,393 |
|
| Distribution costs |
5,053 |
3,747 |
1,306 |
|
14,724 |
12,439 |
2,285 |
|
| Included in Administration and
selling expenses: Depreciation of property, plant
and equipment and right-of-use
assets |
220 |
49 |
171 |
|
644 |
676 |
(32) |
|
|
Included in Distribution costs: Depreciation of
right-of-use assets |
420 |
654 |
(234) |
|
1,255 |
1435 |
(180) |
|
In the third quarter of fiscal 2022,
administration and selling expenses remained largely unchanged
compared to the same quarter last year. This includes a reduction
in COVID-19 related costs of $0.6 million, offset by an increase in
share-based compensation expense driven by an increase in share
price. Distribution costs increased by $1.3 million compared to the
same quarter last year largely driven by higher freight costs and
additional logistical costs incurred to support the strong demand
in eastern Canada.
For the first nine months of fiscal 2022,
administration and selling expenses were $5.4 million higher than
the comparable period last year, mainly due to higher share-based
compensation expense driven by an increase in share price in recent
quarters, partially offset by lower COVID-19 related costs.
Distribution costs increased by $2.3 million compared to the first
nine months of last year, largely driven by higher freight costs
and additional logistical costs incurred to support the strong
demand in Eastern Canada, as mentioned above.
RESULTS FROM OPERATING ACTIVITIES AND ADJUSTED EBITDA
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars) |
|
Results from operating activities |
8,159 |
14,684 |
|
(6,525) |
47,796 |
51,717 |
|
(3,921) |
| Total
adjustment to cost of sales (2) |
6,917 |
(4,880 |
) |
11,797 |
1,730 |
(11,154 |
) |
12,884 |
|
Adjusted results from operating activities(1) |
15,076 |
9,804 |
|
5,272 |
49,526 |
40,563 |
|
8,963 |
|
Depreciation of property, plant and equipment, right-of-use
assets, and
amortization of intangible assets |
4,903 |
4,461 |
|
442 |
14,434 |
13,444 |
|
990 |
|
Adjusted EBITDA(1) |
19,979 |
14,265 |
|
5,714 |
63,960 |
54,007 |
|
9,953 |
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP
measures(2) See “Adjusted results” section
Results from operating activities for the third
quarter and the first nine months of fiscal 2022 were $8.2 million
and $47.8 million, respectively, as compared to $14.7 million and
$51.7 million in the same periods last year. These results include
gains and losses from the mark-to-market of derivative financial
instruments, as well as timing differences in the recognition of
any gains and losses on the liquidation of derivative instruments.
In addition, higher non-cash depreciation and amortization expense
mainly from increased asset retirement obligations had a negative
impact on the results from operating activities.
Adjusted results from operating activities for
the third quarter of fiscal 2022 were $5.3 million higher than the
same period last year, mainly due to higher adjusted gross margin,
partially offset by higher distribution costs. Adjusted results
from operating activities for the first nine months of fiscal 2022
were $9.0 million higher than the same period last year as higher
adjusted gross margin was partially offset by higher distribution
costs and administration and selling expenses.
Adjusted EBITDA for the third quarter and the
first nine months of fiscal 2022 increased by $5.7 million and $
10.0 million, respectively, compared to the same periods last year,
largely as a result of higher adjusted results from operating
activities in the second and third quarters.
Maple
REVENUES
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars, except volume) |
|
Volume (000 pounds) |
12,027 |
11,471 |
555 |
37,225 |
40,578 |
(3,353) |
|
Revenues |
54,356 |
49,694 |
4,662 |
166,670 |
174,044 |
(7,374) |
Maple Volumes and Adjusted Gross
Margin: https://www.globenewswire.com/NewsRoom/AttachmentNg/50ee7aad-5247-40a2-835d-d6ad3f7043bd
Revenues for the third quarter of the current
fiscal year were $4.7 million higher than the same period last year
at $54.4 million, mainly due to higher volume and higher sales
price.
Revenues for the first nine months of 2022 were
$7.4 million lower than the same period last year at $166.7
million. The unfavourable variance was mainly due to lower volume
related to lower demand, partially offset by higher sales
price.
GROSS MARGIN
|
|
Q3 2022 |
|
Q3 2021 |
|
∆ |
YTD 2022 |
|
YTD 2021 |
|
∆ |
|
(In thousands of dollars, except adjusted gross margin rate
information) |
|
Gross margin |
3,670 |
|
3,470 |
|
200 |
13,219 |
|
14,770 |
|
(1,551) |
| Total
adjustment to cost of sales (1) (2) |
789 |
|
748 |
|
41 |
278 |
|
818 |
|
(540) |
|
Adjusted gross margin (1) |
4,459 |
|
4,218 |
|
241 |
13,497 |
|
15,588 |
|
(2,091) |
| Adjusted gross margin
percentage (1) |
8.2 |
% |
8.5 |
% |
(0.3%) |
8.1 |
% |
9.0 |
% |
(0.9%) |
|
Included in Gross margin: Depreciation of
property, plant and equipment and
right-of-use assets |
805 |
|
954 |
|
(149) |
2,471 |
|
2,722 |
|
(251) |
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP
measures(2) See “Adjusted results” section
Gross margin was $3.7 million and $13.2 million
for the three and nine months ended in the current fiscal year and
include a loss of $0.8 and $0.3 million respectively, for the
mark-to-market of derivative financial instruments. For the same
periods last year, gross margin was $3.5 million and $14.8 million,
respectively, with a mark-to-market loss of $0.7 million and $0.8
million.
Adjusted gross margin for the current quarter of
fiscal 2022 was higher by $0.2 million due to higher volume and
higher sales price, partially offset by higher operating costs.
Operating costs increased largely as a result of higher packaging,
freight and energy costs as well as increased compensation cost and
employee benefits incurred to attract and retain employees in our
production facilities.
Adjusted gross margin for the first nine months
of 2022 was lower by $2.1 million as compared to 2022, due to lower
volume and higher operating costs, largely driven by higher
packaging, freight and energy costs as well as increased
compensation cost and employee benefits incurred to attract and
retain employees in our production facilities.
Adjusted gross margin was negatively impacted by
a delay between operating cost increases and the associated
expected selling price increases. Pricing increases were delayed
largely as a result of the competitive nature of the maple syrup
market, combined with a larger than anticipated crop for 2022 and
the timing of pricing negotiations on large contracts.
Adjusted gross margin percentage for the current
quarter and the first nine months of fiscal 2022 decreased by 30
basis point and 90 basis points respectively, compared to the same
periods last year. These variances were mainly attributable to
market-based production cost increases discussed above and the
timing of passing these increases through to our customers.
OTHER EXPENSES
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars) |
|
Administration and selling expenses |
2,560 |
2,563 |
(3) |
7,639 |
7,078 |
561 |
| Distribution costs |
447 |
529 |
(82) |
1,718 |
1,864 |
(146) |
|
Included in Administration and selling expenses:
Amortization of intangible assets |
873 |
869 |
4 |
2,616 |
2,615 |
1 |
Administration and selling expenses for the
current quarter remained unchanged and for the first nine months
increased by $0.6 million compared to the same periods last year.
The increase in the first nine months of 2022 was due mainly to
higher compensation and employees benefits as well as higher
recruitment expenses.
Distribution costs for the third quarter and the
first nine months of fiscal 2022 were lower by $0.1 million and
$0.1 million respectively compared to the same period last
year.
RESULTS FROM OPERATING ACTIVITIES AND ADJUSTED EBITDA
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars) |
|
Results from operating activities |
663 |
378 |
285 |
3,862 |
5,828 |
(1,966) |
| Total
adjustment to cost of sales (1) |
789 |
748 |
41 |
278 |
818 |
(540) |
|
Adjusted results from operating activities (1) |
1,452 |
1,126 |
326 |
4,140 |
6,646 |
(2,506) |
|
Non-recurring expenses: |
|
|
|
|
|
|
|
Other one-time non-recurring items |
- |
- |
- |
- |
247 |
(247) |
|
Depreciation and amortization |
1,677 |
1,823 |
(146) |
5,087 |
5,337 |
(250) |
|
Adjusted EBITDA (1) |
3,129 |
2,949 |
180 |
9,227 |
12,230 |
(3,003) |
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP
measures(2) See “Adjusted results” section
Results from operating activities for the third
quarter and the first nine months of fiscal 2022 were $0.7 million
and $3.9 million respectively, compared to $0.4 million and $5.8
million in the same periods last year. These results include gains
and losses from the mark-to-market of derivative financial
instruments, as well as timing differences in the recognition of
any gains and losses on the liquidation of derivative
instruments.
Certain non-cash items and non-recurring
expenses had an impact on the results from operating activities. As
such, we believe that the Maple segment’s financial results are
more meaningful to management, investors, analysts, and any other
interested parties when financial results are adjusted for the
above-mentioned items.
Adjusted results from operating activities for
the current quarter was $0.3 million higher than the comparable
period last year, due mainly to higher adjusted gross margin.
Adjusted results from operating activities for the first nine
months of fiscal 2022 was $2.5 million lower than the comparable
period last year, due mainly to lower adjusted gross margin and
higher administration and selling expenses, as explained above.
Adjusted EBITDA for the third quarter of fiscal
2022 increased by $0.2 million, due to higher adjusted gross margin
as explained above. Adjusted EBITDA for the first nine months of
fiscal 2022 decreased by $3.0 million, respectively, compared to
the same periods last year, largely driven by lower adjusted gross
margins and higher administration and selling expenses, as
explained above.
OUTLOOK
The health and safety of our employees remains
our top priority. We are closely following all COVID-19 public
health authority recommendations and have safety protocols in
place. To date our plants have operated without any significant
disruption during the COVID-19 pandemic; however, the uncertainty
and increased demand volatility make it difficult to estimate the
impact on future sale volumes, operations, and financial results.
We are closely monitoring the situation and will continue to adapt
quickly to the changing circumstances.
As a result of the strong demand and improved
margins, we are experiencing in our Sugar segment, we continue to
expect improved financial performance in 2022 as compared to 2021.
The strength in our Sugar segment is expected to offset higher
costs from inflationary pressures and lower demand in the Maple
segment.
Sugar
We continue to expect the sugar segment to
perform well in fiscal 2022. Underlying domestic demand remains
strong across all customer segments supported by favourable market
dynamics.
In Taber, the sugar beet processing campaign was
completed and delivered the expected volume of sugar. Overall,
121,000 metric tonnes of sugar are expected from our Taber facility
in the current fiscal year, an increase of 6,000 metric tonnes from
last year.
Due to the strong market conditions in our Sugar
segment, we are increasing our sales volume forecast for 2022 by
10,000 metric tonnes to 785,000 metric tonnes. We expect domestic
volumes to grow by 2.5% from 2021, while our export volumes are
expected to be lower as a result of reduced CUSMA quota
opportunities in the current year. Overall, 2022 volumes are
expected to be approximately 5,000 metric tonnes higher than 2021,
with volumes expected to change as follows in 2022:
- Industrial, our
largest segment, is expected to grow at 3% as demand for
sugar-containing products remains steady both in Canada and the
US.
- Liquid volume is
expected to deliver growth of 3% driven by continued demand from
existing customers.
- Consumer volume
is expected to decrease by 2.5%, as volumes return to normalized
pre-COVID levels.
- We anticipate
selling less in the export markets in 2022, due to reduced CUSMA
opportunities.
The combination of higher volume and favourable
price adjustments are expected to improve profitability as compared
to 2021.
Maintenance programs for the Montreal and
Vancouver operating facilities are expected to follow the trend of
previous years and are expected to result in a market-based
increase in operating costs. For the Taber facility, a return to
normal crop volume and an improvement in the quality of the sugar
beets over 2021 is expected to yield an improvement in operating
costs.
Distribution costs are expected to increase
overall by 30% from 2021, reflecting additional transfers of volume
from the west to the east to meet customer demand and higher market
prices for warehousing, rail and ground transportation.
Administration and selling expenses are expected
to increase by 25% due to a non-cash increase in share-based
compensation expense driven by the increase in share price noted in
recent quarters, partially offset by lower COVID-19 related
expenditures.
Spending on capital projects is also expected to
be lower for fiscal 2022, due to timing and supply chain
challenges. We anticipate spending approximately $20.0 million on
various capital projects.
We have been able to mitigate the potential
unfavourable impact on our business of the recent increases in
interest rates and energy costs through our multi-years hedging
strategy. We do not anticipate these increases to have a material
impact on our financial results in the near future, as we expect
our hedging strategy will continue to mitigate such risks.
Maple
The Maple segment financial results were lower
than anticipated for the first nine months of 2022, due mainly to
lower volume and unexpected inflationary pressure on costs for
packaging material, freight, and labour; along with global shipping
challenges related to the availability of carriers. We expect these
financial and operating pressures to continue for the remainder of
2022. At the end of the second quarter, we began implementing an
updated pricing strategy with our customers, aimed at recouping
these incremental costs going forward. The expected improvement in
pricing to customers to recover these unanticipated cost increases
is not occurring as fast as initially anticipated. This is due to
the current market conditions and the competitiveness of the Maple
Syrup market, which has been impacted by a strong crop in 2022.
See “Forward Looking Statements” section and
“Risks and Uncertainties” section.
CONSOLIDATED RESULTS AND SELECTED
FINANCIAL INFORMATION
|
|
Q3 2022 |
Q3 2021 |
YTD 2022 |
YTD 2021 |
|
(unaudited)(In thousands of dollars, except volume and per share
information) |
|
|
|
Sugar (metric tonnes) |
203,315 |
190,563 |
579,928 |
564,752 |
| Maple syrup (000 pounds) |
12,027 |
11,471 |
37,225 |
40,578 |
| Total revenues |
254,632 |
210,931 |
738,728 |
650,700 |
| Gross margin |
24,948 |
30,064 |
102,333 |
100,128 |
| Adjusted gross margin(1) |
32,654 |
25,932 |
104,341 |
89,792 |
| Results from operating
activities |
8,822 |
15,062 |
51,658 |
57,545 |
| Adjusted results from
operating activities(1) |
16,528 |
10,930 |
53,666 |
47,209 |
| Adjusted EBITDA(1) |
23,108 |
17,214 |
73,187 |
66,237 |
| Net finance costs |
4,385 |
5,345 |
12,509 |
14,424 |
| Income tax expense |
1,299 |
2,881 |
10,215 |
11,734 |
| Net earnings |
3,138 |
6,836 |
28,934 |
31,387 |
|
per share (basic) |
0.03 |
0.07 |
0.28 |
0.30 |
|
per share (diluted) |
0.03 |
0.07 |
0.28 |
0.29 |
| Adjusted net earnings(1) |
8,419 |
4,247 |
28,498 |
24,246 |
|
per share (basic)(1) |
0.08 |
0.04 |
0.27 |
0.23 |
|
Dividends per share |
0.09 |
0.09 |
0.27 |
0.27 |
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP measures
Total revenues
Revenues increased by $43.7 million and $88.0
million for the third quarter and for the first nine months of
fiscal 2022 respectively versus comparable periods last year. The
increase in revenue was mainly attributable to higher average
pricing and sales volume and higher by-product sales in the Sugar
segment, as well as higher sales price in the Maple segment,
partially offset by lower sales volume in the Maple segment in the
first two quarters of 2022.
Gross margin
Excluding the mark-to-market of derivative
financial instruments, adjusted gross margin for the third quarter
of the current fiscal year increased by $6.7 million compared to
the same period last year, mainly as a result of higher adjusted
gross margin in both business segments. For the Sugar segment, the
adjusted gross margin per metric tonne was higher by $24.73 per
metric tonne and for the Maple segment, the adjusted gross margin
percentage was lower by 0.3% when compared to the same period last
year.
For the first nine months of fiscal 2022,
adjusted gross margin was $14.5 million higher than the same period
last fiscal year, driven largely by increased adjusted gross margin
in the Sugar segment partly offset by lower adjusted gross margin
in the Maple segment.
Results from operating activities
Excluding the mark-to-market of derivative
financial instruments, adjusted results from operating activities
for the current quarter amounted to $16.5 million compared to $10.9
million in the same quarter last year, an increase of $5.6 million.
For the first nine months of fiscal 2022, adjusted results from
operating activities were $53.7 million compared to $47.2 million,
representing an increase of $6.5 million. The improvement in both
periods was mainly driven by higher contribution from the Sugar
segment during the first nine months of the current fiscal
year.
Net finance costs
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars) |
|
Interest expense on convertible unsecured subordinated
debentures |
2,119 |
|
2,101 |
18 |
6,288 |
|
6,241 |
47 |
| Interest on revolving credit
facility |
1,308 |
|
1,314 |
(7) |
3,950 |
|
4,670 |
(720) |
| Interest on private
placement |
897 |
|
612 |
285 |
2,699 |
|
612 |
2,087 |
| Amortization of deferred
financing fees |
311 |
|
316 |
(5) |
928 |
|
909 |
19 |
| Net change in fair value of
interest rate swaps |
(633 |
) |
611 |
(1,244) |
(2,473 |
) |
611 |
(3,084) |
| Other interest expense |
383 |
|
391 |
(8) |
1,116 |
|
1381 |
(265) |
|
Net finance costs |
4,385 |
|
5,345 |
(961) |
12,509 |
|
14,424 |
(1,916) |
For the third quarter and first nine months of
the current fiscal year, net finance costs were lower by $1.0
million and $1.9 million respectively, compared to the same periods
last year, largely driven by the favourable impact of changes in
fair value related to interest rate swap contracts and lower
average interest cost on the revolving credit facility from lower
average balance outstanding. This reduction was partially offset by
additional interest expense on the senior guaranteed notes issued
during the third quarter of fiscal 2021.
Other interest expense pertains mainly to
interest payable to the Producteurs et Productrices Acericoles du
Quebec (“PPAQ”) on syrup purchases, in accordance with the PPAQ
payment terms and interest accretion on discounted lease
obligations.
Taxation
|
|
Q3 2022 |
Q3 2021 |
∆ |
YTD 2022 |
YTD 2021 |
∆ |
|
(In thousands of dollars) |
|
Current |
2,522 |
|
2,458 |
64 |
12,680 |
|
10,713 |
1,967 |
|
Deferred |
(1,223 |
) |
423 |
(1,646) |
(2,465 |
) |
1021 |
(3,486) |
|
Income tax expense |
1,299 |
|
2,881 |
(1,582) |
10,215 |
|
11,734 |
(1,519) |
The variation in current and deferred tax
expense period-over-period is consistent with the variation in
earnings before income taxes during the current quarter compared to
the same quarter last year.
Deferred income taxes reflect temporary
differences, which result primarily from the difference between
depreciation claimed for tax purposes and depreciation amounts
recognized for financial reporting purposes, employee future
benefits and derivative financial instruments. Deferred income tax
assets and liabilities are measured using the enacted or
substantively enacted tax rates anticipated to apply to income in
the years in which temporary differences are expected to be
realized or reversed. The effect of a change in income tax rates on
future income taxes is recognized in income in the period in which
the change occurs.
Net earnings
Net earnings in the third quarter and for the
first nine months of fiscal 2022 were lower by $3.7 million and
$2.5 million respectively, compared to the same periods last year.
These variances were mainly attributable to non-cash variances in
the mark-to-market of derivative financial instruments associated
with sugar futures contracts and foreign exchange forward
contracts, partially offset by lower net finance costs and income
tax expenses.
Adjusted net earnings in the current quarter and
the first nine months of fiscal 2022 were higher by $4.2 million
and $4.3 million respectively, compared to the same periods last
year, largely attributable to higher adjusted results from
operating activities from the Sugar segment.
Summary of Quarterly Results
The following is a summary of selected financial
information of the unaudited condensed consolidated interim
financial statements and non-GAAP measures of the Company for the
last eight quarters:
| (In
thousands of dollars, except for volume and per share
information) |
QUARTERS(2) |
|
|
2022 |
|
2021 |
|
2020 |
|
|
|
Third |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
First |
|
Fourth |
|
|
Sugar Volume (MT) |
203,315 |
|
196,570 |
|
180,043 |
|
214,753 |
|
190,563 |
|
183,749 |
|
190,440 |
|
225,396 |
|
| Maple products volume (000
pounds) |
12,027 |
|
12,912 |
|
12,286 |
|
11,678 |
|
11,471 |
|
14,214 |
|
14,892 |
|
13,181 |
|
| Total revenues |
254,632 |
|
253,341 |
|
230,755 |
|
243,231 |
|
210,931 |
|
215,929 |
|
223,840 |
|
246,212 |
|
| Gross margin |
24,948 |
|
33,899 |
|
43,486 |
|
39,616 |
|
30,064 |
|
31,451 |
|
38,613 |
|
37,890 |
|
| Adjusted gross margin (1) |
32,654 |
|
35,887 |
|
35,800 |
|
31,020 |
|
25,932 |
|
27,407 |
|
36,452 |
|
40,065 |
|
| Results from operations |
8,822 |
|
15,499 |
|
27,337 |
|
26,952 |
|
15,062 |
|
19,151 |
|
23,332 |
|
22,829 |
|
| Adjusted results from
operations (1) |
16,528 |
|
17,487 |
|
19,651 |
|
18,356 |
|
10,930 |
|
15,107 |
|
21,171 |
|
25,004 |
|
| Adjusted EBITDA |
23,108 |
|
24,017 |
|
26,062 |
|
24,786 |
|
17,214 |
|
21,375 |
|
27,647 |
|
31,231 |
|
| Net earnings (loss) |
3,138 |
|
8,570 |
|
17,226 |
|
16,140 |
|
6,836 |
|
10,778 |
|
13,773 |
|
12,952 |
|
|
Per share - basic |
0.03 |
|
0.08 |
|
0.17 |
|
0.16 |
|
0.07 |
|
0.10 |
|
0.13 |
|
0.13 |
|
|
Per share - diluted |
0.03 |
|
0.08 |
|
0.15 |
|
0.15 |
|
0.07 |
|
0.10 |
|
0.13 |
|
0.12 |
|
| Adjusted net earnings (1) |
8,419 |
|
9,122 |
|
10,957 |
|
9,620 |
|
4,247 |
|
7,751 |
|
12,248 |
|
14,551 |
|
|
Per share - basic |
0.08 |
|
0.09 |
|
0.11 |
|
0.09 |
|
0.04 |
|
0.07 |
|
0.12 |
|
0.14 |
|
|
Per share - diluted |
0.08 |
|
0.09 |
|
0.10 |
|
0.09 |
|
0.04 |
|
0.07 |
|
0.11 |
|
0.14 |
|
| Sugar - Adjusted gross margin
rate per MT (1) |
138.68 |
|
159.11 |
|
174.25 |
|
121.16 |
|
113.95 |
|
118.60 |
|
161.18 |
|
157.51 |
|
| Maple -
Adjusted gross margin percentage (1) |
8.2 |
% |
8.0 |
% |
8.1 |
% |
9.7 |
% |
8.5 |
% |
9.4 |
% |
8.9 |
% |
7.9 |
% |
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP
measures(2) All quarters are 13 weeks with the
exception of the fourth quarter of 2020 which is 14 weeks
Historically the first quarter (October to
December) of the fiscal year is the best quarter of the sugar
segment for adjusted gross margin and adjusted net earnings due to
the favourable sales mix associated with an increased proportion of
consumer sales during that period of the year. At the same time,
the second quarter (January to March) historically has the lowest
volumes as well as an unfavourable customer mix, resulting in lower
revenues, adjusted gross margins and adjusted net earnings. This
trend was different in the second quarter of 2022 as several sales
that were delayed in the first quarter of the year materialized in
the second quarter.
Usually, there is minimal seasonality in the
Maple products segment. However, since the third quarter of fiscal
2020, we are experiencing volatility in sales volume partially
attributable to the pandemic.
Financial condition
| (In
thousands of dollars) |
July 2, 2022 |
July 3, 2021 |
October 2, 2021 |
|
Total assets |
$ |
985,166 |
$ |
885,667 |
$ |
879,930 |
| Total
liabilities |
|
650,382 |
|
605,396 |
|
560,972 |
The increase in total assets of $99.5 million in
the current fiscal quarter compared to the same quarter last year
was mainly due to an increase in inventory of $43.9 million, trade
and other receivables of $30.7 million, and derivatives financial
instruments assets of $21.8 million.
Total liabilities for the current fiscal quarter
increased by $45.0 million compared to the same quarter last year
due mainly to an increase in trade and other payables of $40.5
million, higher outstanding balance under the revolving credit
facility of $21.0 million, higher deferred tax liabilities of $11.6
million and higher lease obligations of $4.0 million. This variance
was partially offset by a reduction in the employee benefits
liabilities of $ 30.7 million.
Liquidity
Cash flow generated by Lantic is mainly paid to
Rogers by way of interest on the subordinated notes of Lantic held
by Rogers, after taking a reasonable reserve for capital
expenditures, debt reimbursement and working capital. The cash
received by Rogers is used to pay administrative expenses, interest
on the convertible debentures, income taxes and dividends to its
shareholders. Lantic had no restrictions on distribution of cash
arising from the compliance of financial covenants for the
year.
|
|
Q3 2022 |
|
Q3 2021 |
|
YTD 2022 |
|
YTD 2021 |
|
|
(In thousands of dollars) |
| Net cash
flow from operating activities |
(406 |
) |
24,752 |
|
(15,308 |
) |
29,715 |
|
| Cash flow used in
financing activities |
(3,878 |
) |
(16,263 |
) |
12,123 |
|
(9,608 |
) |
| Cash flow used in
investing activities |
(3,387 |
) |
(5,689 |
) |
(9,784 |
) |
(17,785 |
) |
| Effect
of changes in exchange rate on cash |
129 |
|
1 |
|
70 |
|
(18 |
) |
|
Net increase (decrease) in cash |
(7,542 |
) |
2,801 |
|
(12,899 |
) |
2,304 |
|
Cash flow from operating activities for the
current quarter decreased by $25.2 million compared to the same
quarter last year, due mainly to a negative non-cash working
capital variation of $15.0 million, lower net earnings adjusted for
non-cash items of $5.6 million and higher interest and income taxes
paid of $4.6 million. For the first nine months of 2022, cash flow
from operating activities decreased by $45.0 million, mainly
attributable to a negative non-cash working capital variation of
$32.7 million, and higher interest and income taxes paid of $10.7
million and lower net earnings adjusted for non-cash items of $1.5
million.
Cash flow used in financing activities increased
by $12.4 million for the current quarter compared to the same
quarter last year due mainly to an increase in borrowings from the
combination of the reduction of the revolving credit facility and
the issuance of the senior guaranteed notes in 2021. For the first
nine months of fiscal 2022, cash flow from financing activities
increased by $21.7 million compared to the same period last year.
The increase was largely due to an increase in borrowings from the
combination of the reduction of the revolving credit facility and
the issuance of the senior guaranteed notes in 2021 for $19.1
million and the cash received from the issuance of shares related
to stock options that have been exercised during the period of $2.6
million.
The cash outflow used in investing activities
for the current quarter and the first nine months of fiscal 2022
were lower by $2.3 million and $8.0 million respectively, compared
to the same periods last year. The variances were mainly related to
lower capital expenditures.
In order to provide additional information, we
believe it is appropriate to measure free cash flow that is
generated by our operations. Free cash flow is a non-GAAP measure
and is defined as cash flow from operations excluding changes in
non-cash working capital, mark-to-market and derivative timing
adjustments and financial instruments’ non-cash amounts, and
including capital expenditures, net of value-added capital
expenditures, and the payment of lease obligation.
FREE CASH FLOW
|
|
Trailing twelve months |
|
(In thousands of dollars) |
2022 |
|
2021 |
|
|
Cash flow from operations |
33,557 |
|
45,197 |
|
| Adjustments: |
|
|
|
Changes in non-cash working capital |
43,934 |
|
28,771 |
|
|
Mark-to-market and derivative timing adjustments |
(9,223 |
) |
(7,527 |
) |
|
Amortization of transitional balances |
- |
|
(23 |
) |
|
Financial instruments non-cash amount |
287 |
|
(1,296 |
) |
|
Capital expenditures and intangible assets |
(16,678 |
) |
(27,416 |
) |
|
Value added capital expenditures |
2,701 |
|
9,751 |
|
|
Payment of leases obligation |
(5,098 |
) |
(5,373 |
) |
|
Free cash flow (1) |
49,480 |
|
42,084 |
|
|
Declared dividends |
37,439 |
|
37,287 |
|
(1) See “Non-GAAP Measures” section for
definition and reconciliation to GAAP measures.
Free Cash
Flow: https://www.globenewswire.com/NewsRoom/AttachmentNg/50d0d86f-2afc-4b64-ae11-7f661a4f48e1
Free cash flow for the trailing twelve months
ending July 2, 2022 amounted to $49.5 million, representing an
increase of $7.4 million compared to the same period last year.
This increase in free cash flow was mainly due to higher adjusted
EBITDA of $8.0 million, excluding non-cash items related to future
pension liabilities included in the Montreal collective agreement
and senior management compensation related to our performance share
units program, lower capital expenditures net of value added
capital expenditures of $3.7 million and lower interest paid of
$2.0 million. These favourable variances were partially offset by
higher income taxes paid of $6.2 million.
Capital and intangible assets expenditures, net
of value-added capital expenditures, decreased by $3.7 million
compared to last year’s rolling twelve months due mainly to lower
expenditures incurred in the first three quarters of fiscal 2022.
Free cash flow is not reduced by value-added capital expenditures,
as these projects are not necessary for the operation of the plants
but are undertaken because of the operational savings that are
realized once the projects are completed.
The Board of Directors declared a quarterly
dividend of 9.0 cents per common share every quarter, totalling
36.0 cents for the trailing twelve months periods.
Changes in non-cash operating working capital
represent year-over-year movements in current assets, such as
accounts receivable and inventories, and current liabilities, such
as accounts payable. Movements in these accounts are due mainly to
timing in the collection of receivables, receipts of raw sugar and
payment of liabilities. Increases or decreases in such accounts are
due to timing issues and therefore do not constitute free cash
flow. Such increases or decreases are financed from available cash
or from our available credit facility. Increases or decreases in
bank indebtedness are also due to timing issues from the above and
therefore do not constitute available free cash flow.
The combined impact of the mark-to-market and
derivative timing adjustments, amortization of transitional
balances and financial instruments non-cash amount of $8.9 million
for the current rolling twelve months does not represent cash items
as these contracts will be settled when the physical transactions
occur, which is the reason for the adjustment to free cash
flow.
Contractual obligations
There are no material changes in the contractual
obligations table disclosed in the Management’s Discussion and
Analysis of the October 2, 2021 Annual Report.
As at July 2, 2022, Lantic had commitments to
purchase a total of 746,000 metric tonnes of raw sugar, of which
196,727 metric tonnes had been priced for a total dollar commitment
of $168.8 million.
Capital resources
Lantic has a total of $200 million of available
working capital under the revolving credit facility, which matures
on November 23, 2026, from which it can borrow at prime rate, LIBOR
rate or under bankers’ acceptances, plus 20 to 250 basis points,
based on achieving certain financial ratios. As at July 2, 2022, a
total of $588.3 million of assets have been pledged as security for
the revolving credit facility, compared to $519.7 million as at
July 3, 2021; including trade receivables, inventories and
property, plant and equipment.
As at July 2, 2022, $141.0 million had been
drawn from the revolving credit facility and $2.7 million in cash
was also available.
Cash requirements for working capital and other
capital expenditures are expected to be paid from available cash
resources and funds generated from operations. We believe that the
unused credit under the revolving credit facility is adequate to
meet our expected cash requirements.
As at July 2, 2022, Lantic was in compliance
with all the covenants under its revolving credit facility.
OUTSTANDING SECURITIES
A total of 104,372,045 shares were outstanding
as at July 2, 2022 and August 10, 2022, respectively (103,686,923
as at July 3, 2021).
On June 1, 2020, Rogers received approval from
the Toronto Stock Exchange to proceed with a Normal Course Issuer
Bid (“2020 NCIB”), under which it may purchase up to 1,500,000
common shares. In addition, Rogers entered into an automatic share
purchase agreement with Scotia Capital Inc. in connection with the
2020 NCIB. Under the agreement, Scotia may acquire, at its
discretion, common shares on Rogers’ behalf during certain
“black-out” periods, subject to certain parameters as to price and
number of shares. The 2020 NCIB commenced on June 3, 2020 and
terminated on June 2, 2021. No shares have been purchased under the
2020 NCIB.
RISK AND UNCERTAINTIES
Rogers’ business and operations are
substantially affected by many factors, including prevailing
margins on refined sugar and its ability to market sugar and maple
products competitively, sourcing of raw material supplies, weather
conditions, operating costs and government programs and
regulations.
Risk factors in our business and operations are
discussed in the Management’s Discussion and Analysis of our Annual
Report for the year ended October 2, 2021. This document is
available on SEDAR at www.sedar.com or on our website at
www.LanticRogers.com.
NON-GAAP MEASURES
In analyzing results, we supplement the use of
financial measures that are calculated and presented in accordance
with IFRS with a number of non-GAAP financial measures. A non-GAAP
financial measure is a numerical measure of a company’s
performance, financial position or cash flow that excludes
(includes) amounts or is subject to adjustments that have the
effect of excluding (including) amounts, that are included
(excluded) in most directly comparable measures calculated and
presented in accordance with IFRS. Non-GAAP financial measures are
not standardized; therefore, it may not be possible to compare
these financial measures with the non-GAAP financial measures of
other companies having the same or similar businesses. We strongly
encourage investors to review the unaudited condensed consolidated
financial statements and publicly filed reports in their entirety,
and not to rely on any single financial measure.
We use these non-GAAP financial measures in
addition to, and in conjunction with, results presented in
accordance with IFRS. These non-GAAP financial measures reflect an
additional way of viewing aspects of the operations that, when
viewed with the IFRS results and the accompanying reconciliations
to corresponding IFRS financial measures, may provide a more
complete understanding of factors and trends affecting our
business.
The following is a description of the non-GAAP
measures used by RSI in the MD&A:
- Adjusted gross
margin is defined as gross margin adjusted for:
- “the adjustment
to cost of sales”, which comprises the mark-to-market gains or
losses on sugar futures, foreign exchange forward contracts and
embedded derivatives as shown in the notes to the consolidated
financial statements and the cumulative timing differences as a
result of mark-to-market gains or losses on sugar futures, foreign
exchange forward contracts and embedded derivatives as described
below; and
- “the
amortization of transitional balance to cost of sales for cash flow
hedges”, which is the transitional marked-to-market balance of the
natural gas futures outstanding as of October 1, 2016 amortized
over time based on their respective settlement date until all
existing natural gas futures have expired, as shown in the notes to
the consolidated financial statements.
- Adjusted results
from operating activities are defined as results from operating
activities adjusted for the adjustment to cost of sales, the
amortization of transitional balances to cost of sales for cash
flow hedges.
- Adjusted EBITDA
is defined as adjusted results from operating activities adjusted
to add back depreciation and amortization expenses and the Maple
segment non-recurring expenses.
- Adjusted net
earnings is defined as net earnings adjusted for the adjustment to
cost of sales, the amortization of transitional balances to cost of
sales for cash flow hedges, the amortization of transitional
balance to net finance costs and the income tax impact on these
adjustments. Amortization of transitional balance to net finance
costs is defined as the transitional marked-to-market balance of
the interest rate swaps outstanding as of October 1, 2016,
amortized over time based on their respective settlement date until
all existing interest rate swaps agreements have expired, as shown
in the notes to the consolidated financial statements.
- Adjusted gross
margin rate per MT is defined as adjusted gross margin of the Sugar
segment divided by the sales volume of the Sugar segment.
- Adjusted gross
margin percentage is defined as the adjusted gross margin of the
Maple segment divided by the revenues generated by the Maple
segment.
- Adjusted net
earnings per share is defined as adjusted net earnings divided by
the weighted average number of shares outstanding.
- Free cash flow
is defined as cash flow from operations excluding changes in
non-cash working capital, mark-to-market and derivative timing
adjustments, amortization of transitional balances, financial
instruments non-cash amount, and includes deferred financing
charges, funds received from stock options exercised, capital and
intangible assets expenditures, net of value-added capital
expenditures, and payments of capital leases.
In the MD&A, we discuss the non-GAAP
financial measures, including the reasons why we believe these
measures provide useful information regarding the financial
condition, results of operations, cash flows and financial
position, as applicable. We also discuss, to the extent material,
the additional purposes, if any, for which these measures are used.
These non-GAAP measures should not be considered in isolation, or
as a substitute for, analysis of the Company’s results as reported
under GAAP. Reconciliations of non-GAAP financial measures to the
most directly comparable IFRS financial measures are as
follows:
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
IFRS FINANCIAL MEASURES
|
|
|
Q3 2022 |
|
|
Q3 2021 |
|
|
Consolidated results(In thousands of dollars) |
Sugar |
Maple Products |
Total |
|
Sugar |
|
Maple Products |
Total |
|
|
Gross margin |
21,278 |
3,670 |
24,948 |
|
26,594 |
|
3,470 |
30,064 |
|
| Total
adjustment to the cost of sales(1) |
6,917 |
789 |
7,706 |
|
(4,880 |
) |
748 |
(4,132 |
) |
|
Adjusted gross margin |
28,195 |
4,459 |
32,654 |
|
21,714 |
|
4,218 |
25,932 |
|
| Results from operating
activities |
8,159 |
663 |
8,822 |
|
14,684 |
|
378 |
15,062 |
|
| Total
adjustment to the cost of sales(1) |
6,917 |
789 |
7,706 |
|
(4,880 |
) |
748 |
(4,132 |
) |
|
Adjusted results from operating activities |
15,076 |
1,452 |
16,528 |
|
9,804 |
|
1,126 |
10,930 |
|
| Results from operating
activities |
8,159 |
663 |
8,822 |
|
14,684 |
|
378 |
15,062 |
|
| Total adjustment to the cost
of sales(1) |
6,917 |
789 |
7,706 |
|
(4,880 |
) |
748 |
(4,132 |
) |
| Depreciation of property,
plant and equipment, amortization of intangible assets and
right-of-use assets |
4,903 |
1,677 |
6,580 |
|
4,461 |
|
1,823 |
6,284 |
|
| Maple
Segment non-recurring costs |
- |
- |
- |
|
- |
|
- |
- |
|
|
Adjusted EBITDA |
19,979 |
3,129 |
23,108 |
|
14,265 |
|
2,949 |
17,214 |
|
| Net earnings |
|
|
3,138 |
|
|
|
6,836 |
|
| Total adjustment to the cost
of sales(1) |
|
|
7,706 |
|
|
|
(4,132 |
) |
| Net change in fair value in
interest rate swaps(1) |
|
|
(632 |
) |
|
|
611 |
|
| Income
taxes on above adjustments |
|
|
(1,793 |
) |
|
|
932 |
|
|
Adjusted net earnings |
|
|
8,419 |
|
|
|
4,247 |
|
| Net earnings per share
(basic) |
|
|
0.03 |
|
|
|
0.07 |
|
|
Adjustment for the above |
|
|
0.05 |
|
|
|
(0.03 |
) |
|
Adjusted net earnings per share (basic) |
|
|
0.08 |
|
|
|
0.04 |
|
(1) See “Adjusted results” section
|
|
YTD 2022 |
YTD 2021 |
|
Consolidated results(In thousands of dollars) |
Sugar |
Maple Products |
Total |
|
Sugar |
|
Maple Products |
Total |
|
|
Gross margin |
89,114 |
13,219 |
102,333 |
|
85,358 |
|
14,770 |
100,128 |
|
| Total
adjustment to the cost of sales(1) |
1,730 |
278 |
2,008 |
|
(11,154 |
) |
818 |
(10,336 |
) |
|
Adjusted gross margin |
90,844 |
13,497 |
104,341 |
|
74,204 |
|
15,588 |
89,792 |
|
| Results from operating
activities |
47,796 |
3,862 |
51,658 |
|
51,717 |
|
5,828 |
57,545 |
|
| Total
adjustment to the cost of sales(1) |
1,730 |
278 |
2,008 |
|
(11,154 |
) |
818 |
(10,336 |
) |
|
Adjusted results from operating activities |
49,526 |
4,140 |
53,666 |
|
40,563 |
|
6,646 |
47,209 |
|
| Results from operating
activities |
47,796 |
3,862 |
51,658 |
|
51,717 |
|
5,828 |
57,545 |
|
| Total adjustment to the cost
of sales(1) |
1,730 |
278 |
2,008 |
|
(11,154 |
) |
818 |
(10,336 |
) |
| Depreciation of property,
plant and equipment, amortization of intangible assets and
right-of-use assets |
14,434 |
5,087 |
19,521 |
|
13,444 |
|
5,337 |
18,781 |
|
| Maple
Segment non-recurring costs |
- |
- |
- |
|
- |
|
247 |
247 |
|
|
Adjusted EBITDA |
63,960 |
9,227 |
73,187 |
|
54,007 |
|
12,230 |
66,237 |
|
| Net earnings |
|
|
28,934 |
|
|
|
31,387 |
|
| Total adjustment to the cost
of sales(1) |
|
|
2,008 |
|
|
|
(10,336 |
) |
| Net change in fair value in
interest rate swaps(1) |
|
|
(2,473 |
) |
|
|
611 |
|
| Income
taxes on above adjustments |
|
|
29 |
|
|
|
2,584 |
|
|
Adjusted net earnings |
|
|
28,498 |
|
|
|
24,246 |
|
| Net earnings per share
(basic) |
|
|
0.28 |
|
|
|
0.30 |
|
|
Adjustment for the above |
|
|
(0.01 |
) |
|
|
(0.07 |
) |
|
Adjusted net earnings per share (basic) |
|
|
0.27 |
|
|
|
0.23 |
|
(1) See “Adjusted results” section
CRITICAL ACCOUNTING ESTIMATES
For the third quarter and the first nine month of fiscal 2022,
there were no significant changes in the critical accounting
estimate as disclosed in our Management’s Discussion and Analysis
of the October 2, 2021 Annual Report.
CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES NOT YET
ADOPTED
A number of new standards, and amendments to
standards and interpretations, are not yet effective and have not
been applied in preparing the unaudited consolidated interim
financial statements for the third quarter of fiscal 2022.
Management has reviewed such new standards, proposed amendments and
does not anticipate that they will have a material impact on
Rogers’ financial statements. Refer to note 3 (a) of the unaudited
condensed interim financial statements and to note 3 (r) of the
2021 audited consolidated financial statements for details.
CONTROLS AND PROCEDURES
In accordance with Regulation 52-109 respecting
certification of disclosure in issuers’ interim filings, the Chief
Executive Officer and Chief Financial Officer have designed or
caused it to be designed under their supervision, disclosure
controls and procedures (“DC&P”).
In addition, the Chief Executive Officer and
Chief Financial Officer have designed or caused it to be designed
under their supervision internal controls over financial reporting
(“ICFR”) to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes.
The Chief Executive Officer and Chief Financial
Officer have evaluated whether or not there were any changes to
Rogers’ ICFR during the nine-month period ended July 2, 2022 that
have materially affected, or are reasonably likely to materially
affect, Rogers’ ICFR. No such changes were identified through their
evaluation.
FORWARD-LOOKING STATEMENTS
This report contains statements or information
that are or may be “forward-looking statements” or “forward-looking
information” within the meaning of applicable Canadian Securities
laws. Forward-looking statements may include, without limitation,
statements and information which reflect our current expectations
with respect to future events and performance. Wherever used, the
words “may,” “will,” “should,” “anticipate,” “intend,” “assume,”
“expect,” “plan,” “believe,” “estimate,” and similar expressions
and the negative of such expressions, identify forward-looking
statements.
Although this is not an exhaustive list, we
caution investors that statements concerning the following subjects
are, or are likely to be, forward-looking statements:
- our intention to
increase sugar refining capacity and the related eastern Canada
distribution network
- the impact of
the COVID-19 pandemic on our operations
- future prices of
raw sugar
- expected
inflationary pressures on costs
- natural gas
costs
- beet production
forecasts
- growth of the
maple syrup industry and the refined sugar industry
- the status of
labour contracts and negotiations
- the level of
future dividends
- the status of
government regulations and investigations
Forward-looking statements are based on
estimates and assumptions made by us in light of our experience and
perception of historical trends, current conditions and expected
future developments, as well as other factors that we believe are
appropriate and reasonable in the circumstances, including with
respect to our ability to finance and complete the expansion
project of our Montreal plant and eastern distribution network, the
continuity of our operations despite the COVID-19 pandemic, but
there can be no assurance that such estimates and assumptions will
prove to be correct. Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. Actual performance
or results could differ materially from those reflected in the
forward-looking statements, historical results or current
expectations. Readers should also refer to the section “Risks and
Uncertainties” in this MD&A for additional information on risk
factors and other events that are not within our control. These
risks are also referred to in our Annual Information Form in the
“Risk Factors” section.
Although we believe that the expectations and
assumptions on which forward-looking information is based are
reasonable under the current circumstances, readers are cautioned
not to rely unduly on this forward-looking information as no
assurance can be given that it will prove to be correct.
Forward-looking information contained herein is made as at the date
of this MD&A and we do not undertake any obligation to update
or revise any forward-looking information, whether a result of
events or circumstances occurring after the date hereof, unless so
required by law.
The complete financial statements are available at the following
link: http://ml.globenewswire.com/Resource/Download/19fd824a-cec9-45bc-8026-b4a25d5b4f8b
For further informationMr.
Jean-Sébastien CouillardVice President of Finance, Chief Financial
Officer and Corporate SecretaryPhone: (514)
940-4350Email: jscouillard@lantic.ca
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