Operator: Good afternoon, ladies and gentlemen, and welcome to the Rogers Sugar's First Quarter 2019 Results Conference Call. After the presentation, we will conduct a question and answer session, which will be opened to financial analysts only. Instructions will be given at that time. Please note that this call is being recorded today January 31, 2019

at 5:30 PM Eastern time. I would now like to turn the meeting over to John Holliday, Chief Executive Officer.

Please go ahead, Mr. Holliday.

John Holliday: Thank you, operator, and good afternoon, ladies and gentlemen. Joining me for today's conference call is our CFO, Manon Lacroix. I will start today's call by commenting on some of the highlights for the quarter for both our Sugar and Maple segments and then provide some brief updates on our key strategies.

At the conclusion of my comments, I will turn the conference call over to Manon, who will review the financials in more detail and talk briefly about the outlook for the balance of the fiscal year. We will then open up phone lines to answer any questions that you might have. Commenting on our sugar volume we benefited from very strong overall volumes in the first quarter. Our results exceeded prior year shipments by approximately 14,200 metric tons or an increase of roughly 8%. Looking at each segment, we saw our Industrial business expand by approximately 5,900 metric tons; our Consumer Shipments for the quarter were higher by approximately 1,500 tons.

Strong promotional activity by our retail partners in the quarter underpinned the strong performance. Also noteworthy in this segment was the signing of a new national retail account to a three-year supply agreement. We will see the benefit of this volume beginning in our third quarter. We expect the incremental annualized volume from this contract to be approximately 10,000 metric tons. Liquid volumes continue to be very strong, new customer demand and the recovery of some temporary customer losses help these deliver approximately 3,800 metric tons more for the quarter.

We believe that the low #11 sugar prices and strong demand from our existing customers and just as importantly, customer and consumer interest in natural sweeteners is combining to create good tailwinds for our business in this segment. Export sales continue a strong continued to enjoy a strong quarter with shipments up approximately 3,000 metric tons. The strong quarter resulted from additional sale to Mexico and additional high tier opportunities, high tier sales continue to benefit from the weak Canadian dollar and relatively low #11 values. Overall, we are very pleased with the total business volume performance in the quarter and have the expectation that we should continue to see strong year-on-year results for the balance of the fiscal year. Turning to the Maple segment, I will provide an update on our integration progress and comment on some observations on our outlook for this newly acquired business.

During the quarter, we continue to make significant progress on a number of initiatives. One of the more complicated and difficult decisions we made and announced in January was a second phase of our optimization work. The first phase of the project was announced last fiscal year with the relocation from the current least bottling facility in Granby Quebec to a new 100,000 square foot built for purpose state the art leased property. This move will allow us to better align production flows, improve our distribution capability and install a new high capacity bottling line. The completion of the first phase is expected to occur at the end of fiscal year 2019, early fiscal 2020.

This fiscal year approximately $4.5 million will be spent on return on investment capital expenditures towards new equipment and leasehold improvements. The second phase of our manufacturing optimization initiative required a thorough analysis of our Canadian footprint. Company concluded that plant specialization offered the most efficient approach to reduce cost and respond to industry growth. This analysis determined that the Saint-Honoré-Deshenley facility, bottling facility should be repurposed to focus on the production of industrial products and the reception and storage of maple syrup barrels. The bottling production activities at this facility are being redistributed to our Granby or Dégelis operations reducing our overall maple workforce by approximately 15%.

Granby will focus on plastic bottling production while Dégelis will primarily produce on glass bottles and cans. The transfer of production is expected to be completed by the end of the second quarter. To support this plan approximately $1.8 million will be invested in Dégelis to increase the capacity of the bottling lines, increase automation and enhance site storage and logistics capabilities. The Dégelis investment will provide an attractive return and the investment should be completed by the end of March 2019. Once the two phases are fully executed, the new manufacturing footprint will double our capacity, lower our costs and improve our overall manufacturing capabilities allowing us to participate fully in the maple syrup market growth.

Each of the three Quebec facilities will continue to receive and store maple syrup barrels no changes are expected in our Vermont facility. Management remains positive on the future outlook for this segment as the maple syrup market growth remains strong. With the sales team that is now fully organized a clear operational path forward and procurement initiatives beginning to benefit the bottom line, we are confident that we are well positioned to capture and participate in a market growth and further strengthen our earnings. Commenting briefly on our key overarching business strategies, we continue to push a big operational excellence agenda with a solid portfolio of ROI projects that will improve our operational capabilities and lower our costs and unlock manufacturing capacity by identifying and eliminating operational bottlenecks. In the quarter, a significant amount of effort which focused on commissioning and new sugar decolorization system at our Vancouver facility.

That will lead which will lead to energy savings. This project once fully commissioned will lower our operating costs, improve our throughput and give access to sugar customers who manufacture products that meet Deegan labeling standards. In the quarter we continue to add to our ROI pipeline with the approval of new investments that will further lower energy costs -- energy consumption in Vancouver and unlock additional processing capability or capacity in Montreal. In the Sugar segment, we continue to project the fiscal -- in fiscal 2019 we will spend $20 million of CapEx and an additional one-off spend of $6.5 million to $8.5 million to reduce air emissions in Taber to meet the new regulatory standards. Our market access strategy continues to benefit from the relatively low #11 market and weak Canadian dollar.

The renegotiation of NAFTA remains unchanged from last quarter. We continue to hold the view that the new agreement, USMCA which provides -- will provide us with an additional 9,600 metric tons of Canadian beet sugar to the USA and 9,600 metric tons of incremental sugar containing product quota will be ratified by the respective governments. We estimate that the implementation of the agreement will take approximately a year post ratification. On the acquisition front, our efforts remain largely on integration and delivering new growth in the Maple segment. As time permits, we will continue to investigate other opportunities in the adjacent natural sweetener space and or traditional sugar market that deliver on consumer manufacturers' interest in alternative healthier natural sweetener solutions.

Finally, I'm pleased to confirm the corporation declared a dividend of $0.09 per share to shareholders of record on March 31 which will be paid on or about April 19. The total payout is estimated at $9.5 million. In conclusion, we had a good first quarter. We're pleased with our progress on the maple segment and encouraged by the strength in our core sugar business. With that, I would like to thank all our employees for their efforts and contributions to our first quarter results.

I will now hand the phone call over to Manon Lacroix who will provide more detail on our financials.

Manon Lacroix: Thank you, John. I will now go over the first quarter results in more detail. I will start with the results of our sugar segment. Adjusted gross margin for the first quarter amounted to $29.2 million compared to $31.2 million for the same quarter last year.

During the current quarter the company's sales volume increased by approximately 14,200 metric tons which was clearly beneficial to our adjusted gross margin. However, there are three elements that contributed to more than offset the benefit from additional volume. First off, a non-cash pension plan income of $1.5 million was recorded in the first quarter of last fiscal for a pension plan amendment. Secondly, similar to last half of fiscal 2018 the impact of a lower #11 raw sugar value continued to have a negative impact on the adjusted gross margin. The price exposure effect is approximately 10% of Lantic sales volume and is entirely dependent on the timing of pricing by our customers.

Finally, during the quarter, the company completed the installation of a $5 million capital investment project in Vancouver focused on energy saving and the commissioning efforts resulted in additional operating expenses during the quarter. We expect that the commissioning issue should be behind us by the end of the second quarter. On a per metric ton basis adjusted gross margin stood at approximately $155 per metric ton versus approximately $179 per metric ton during the same period last year. The pension plan income had a negative impact of 8.49 per metric tons. The remainder of the decrease is mostly driven by the reduction in #11 or the raw sugar price and to a lesser extent by the unfavorable sales mix.

Even though all sugar categories were higher than the comparable quarter last year. The strongest increases were in lower margins Industrial, Liquid, and Export segment. Finally, the additional operating costs intake in Vancouver also contributed to the reduction in adjusted gross margin rate. For the quarter administration and selling costs were $0.4 million higher than the comparable quarter last year mainly explained by timing. Distribution costs were $0.5 million higher than the first quarter of fiscal 2018 due to an increase in transfer costs mainly attributable to an increase in sales volume.

Overall, adjusted EBITDA for the Sugar segment was $24.5 million versus $27.1 million for the first quarter of last year. Now, we'll turn to the Maple Products segment. The company acquired Decacer on November 18, 2017 and therefore the first quarter of last year is missing seven weeks of operation. The effect of the full quarter mainly explains the increases quarter-over-quarter of the revenues adjusted gross margin, adjusted EBIT and adjusted EBITDA. Revenues for the quarter amounted to $54.9 million an increase of $5.8 million.

Adjusted gross margin amounted to $7.8 million, which was $1.7 million higher than last year's results and represents 14.2% of revenue compared to 12.4% last year. In addition to the Decacer impact, the increase versus the prior year in dollars and in as a percentage of sale is explained by an improvement in net selling prices by the benefit of -- and by the benefit of procurement initiative stating. I should also mention that fiscal 2018 include the finished goods inventory adjustment that did not occur in the current quarter. Administration and selling expenses for fiscal 2018 including $1 million in non-recurring costs incurred mostly for the Decacer acquisition. Therefore excluding these non-recurring charges administration and selling expenses were $0.2 million higher than last year due to the impact of Decacer once again and additional amortization expense.

However, offsetting some of the negative variance our savings from operational excellence initiative that took place in the second quarter of last year. Adjusted EBITDA amounted to $5.8 million an increase of $1.6 million versus fiscal 2018. On a consolidated basis adjusted EBITDA was $30.2 million or $1 million lower than last year. For the quarter, we have modified our free cash table to present a trailing 12-month free cash flow as opposed to a quarterly free cash flow. We believe that a trailing 12-month is more indicative of the company's performance and reduces the timing effect within the free cash flow.

Therefore, for the current trailing 12 months free cash flow amounted to $46.4 million or $3 million higher than the comparable – then compared to the previous trailing 12 months. The increase is mostly explained by an improvement in adjusted EBITDA which was somewhat offset by higher interest and income taxes paid and the payment of $4 million to purchase and cancel shares under the normal course issuer bid. I will now turn to the outlook for the remainder of fiscal 2019. Once again, I will start with the Sugar segment. We have revised our volume expectations for the year and we now anticipate that we should end the year approximately 25,000 metric tons higher than fiscal 2018.

The liquid volume should take the bulk of the increase by approximately 15,000 metric tons as a result of a new account contract to dispatch order as well as some additional conversion from high fructose corn syrup to liquid sucrose. During the quarter, the company was also able to gain incremental volume for the Consumer segment as Lantic secured additional region with an existing customer which should be beneficial in the last half of the fiscal year. This should result in an increase of approximately 5,000 metric tons. The Industrial segment should be slightly higher than last year mainly due to the impact from the strong first quarter results while the export market should be comparable to fiscal 2018. We expect that distribution expenses should increase compared to fiscal 2018 as a result of the first quarter incremental spend and the additional volume expected for the year.

Beet slicing campaign should be completed by the end of February and should derive approximately 125,000 metric tons of refined sugar. As for the Maple Products segment, our fiscal 2019 expectations remain unchanged with an adjusted EBITDA of approximately $21 million when excluding non-recurring costs. As John mentioned, we now have a clear path forward for Canadian footprint which should derive savings in the second half of fiscal 2019. Capital spending for the sugar segment will increase this year due to the execution of the air emission project in Taber whereby a range of $6.5 million to $8.5 million should be spent in the current year. The remaining spend on capital expenditures should be comparable to the prior year.

In addition, the Maple Product segment is expected to spend approximately $6 million in fiscal 2019 in Granby individually for the footprint optimization project. With that, I would like to turn the call back to the operator for the question session.

Operator: Your first question comes from the line of George Doumet from Scotiabank. Your line is open.

George Doumet: Yes, good evening guys and thanks for taking my questions.

John Holliday: Hi George.

Manon Lacroix: Hi George.

George Doumet: Hi. Manon, you did call our some of the corporates for the gross margins being weaker in the legacy business, so Taber impacts the high operating costs. But you also called out I guess mix given the strong liquid volumes outlook we have for the rest of the year.

How should we think of the overall margin compare to this year? Like should it be so much below or are there kind of some offsetting factors that you can maybe kind of play some there as we go through the rest of the year?

Manon Lacroix: Yes, it should be in about the same ballpark last year. The impact of Taber will continue to hurt us in the second quarter, but in the last half we should be more comparable to the prior year.

George Doumet: Okay. That's helpful. Thanks.

Maybe for John, I guess looking at the maple syrup business longer term. I was just maybe hoping to get some color on what you guys see as the revenue growth trajectory there? How should we think of the base level there and how much of that is going to be from existing versus potentially new customers and how much are we expecting from pricing versus volume. I think you can give us there, I guess as we go beyond this year next?

John Holliday: Okay. So, maybe just try and quickly scorecard it. We are growing the business at basically the growth rate of the business.

If you – what we haven't done in this quarter or we didn't go at the end of last year is recapture volume any volume we lost to some strategic account losses at the very, very first quarter of our acquisition. So, we are maintaining all the accounts. We're growing at market pace and we are looking for opportunities to find ways to get that I guess a growth rate that is incremental to winning some new opportunities. And we are well organized now to be able to do that and that's our plan for the future on the kind of the traditional side and on the ingredient side, we continue to prospect, prospect hard and we think that activity will bear fruit in time.

George Doumet: Okay.

When you see market base is at more, should we think more, high single-digit or should we think low double-digits?

John Holliday: I'd say mid-single, just over mid-single digit grow is how the market is performing.

George Doumet: Okay great. Thanks a lot.

Operator: Your next question comes from the line of Michael Van Aelst from TD Securities. Your line is open.

Michael

Van Aelst: Thanks. So, I didn't catch everything. So, on the Industrial customer – Industrial business where you said you had a competitor that had a production issue and you're able to capitalize on that. Can you talk about the timing of that did that flow through into the next quarter at all and?

John Holliday: Into next quarter like Q2?
Michael

Van Aelst: Well, did it flow into the current quarter? So, is that customer still having a -- competitor is still having a problem?

Manon Lacroix: No, it was just the first quarter. Michael

Van Aelst: Okay.

And then I didn't quite catch what you said on the new retail account. Was this strictly for sugar I guess, and you said it was a customer that you had in some parts of the country but not everywhere?

Manon Lacroix: That's correct. Yes. Customer that we had, we added region and it's on the sugar side. Michael

Van Aelst: Okay.

And you should get the full benefit starting in Q3?

Manon Lacroix: Yes.

John Holliday: And the annualized incremental benefit is around 10,000 tons. Michael

Van Aelst: All right. I'll leave it at that for now. Thank you.

Operator: Your next question comes from the line of Endri Leno from National Bank Financial. Your line is open.

Endri Leno: I just have a couple of questions. I was wondering when do you plan, or is it started already that the emission project in Taber? When do you plan to start and when do you plan to finish that or is it throughout the year and the same thing especially with the new facility that's being built in Granby?

John Holliday: The emission, the Taber emission project will start in fall at the end of our campaign. And our campaign will end in month by mid-February.

So, end of Feb, beginning of March we'll start and the question about.

Manon Lacroix: At the Granby facility, we are -- the construction will start in the spring. So, second half of the fiscal year.

Endri Leno: And I think, just one more, following-up on Taber. I mean if you start in mid-February there.

Do you think you can finish it by the time the variance ends in May or do you think you can get an extension to that one?

John Holliday: We don't need until September because there is no activity at the facility So, our window to install complete is from March to mid-September.

Endri Leno: So, the other question is that you mention a 15% decrease in workforce when all the projects are set and done for the Maple segment.

John Holliday: Yes.

Endri Leno: What timing do you have on that one? When do you expect that to complete? What kind of costs do you have upfront and the overall savings that you expect over time?

Manon Lacroix: Well, see ultimately, it's from the repurposing of the Great Northern location. So, there is approximately 30 employees that will be terminated by the end of March.

Endri Leno: And are there any upfront costs that come with them or are they unionized at all or anything like that?

Manon Lacroix: No, they are not unionized and there are some severance cost and restructuring costs that are included in our non-recurring costs.

Endri Leno: Okay. Thanks. And are you able to quantify how are you going to save over time there or?

Manon Lacroix: Well, it's all part of our EBITDA number.

John Holliday: Yes.

And it's a combination as well. It's not just ground [ph], it's also works that we're doing additionally; work that we're doing at Granby. So in total, we look at it as a total as opposed to its individual parts.

Endri Leno: And the last question from me and I will return back in the queue. You mentioned so the total CapEx now for Maple is going to be $6 million, right?

John Holliday: Yes.

Manon Lacroix: Yes.

Endri Leno: Okay. Thank you.

John Holliday: For purpose, maybe I'm answering a question you didn't ask. But that's an unusual that is here.

We're doing reorganisation of the assets to set ourselves up for the future. It's not a planned rhythm like we have on a sugar platform where we are most recently spending it to around 20. Maple has less capital intensity. Okay?

Endri Leno: Okay. Thank you very much.

Operator: Your next question comes from Stephen MacLeod with BMO Capital Markets. Your line is open.

Stephen MacLeod: Just regarding the new consumer business that you've acquired and that kicks in Q3. Are you able to say what margin wise is it pretty consistent with consumer business you had in the past or was it more of a competitive win on price?

Manon Lacroix: It's comparable.

Stephen MacLeod: Okay, that's great.

And then just on the maple syrup side; I know previously you talked about some just may be going back couple quarters now, but there have been competitive issues in the market. I'm just curious have you seen anything change in terms of the competitive landscape on the maple products side?

John Holliday: No, we haven't. And if we said all along that the dawdling traditional sized competitive, it remains competitive segment for sure.

Stephen MacLeod: Okay, that's it from me. Thank you.

John Holliday: Okay.

Operator: Next question comes from Frederic Tremblay from Desjardins Capital Markets. Your line is open.

Frederic Tremblay: In the press release you mentioned increase in net selling prices in the maple segment. Are you able to build your growth in maple in pricing environment?

Manon Lacroix: Sorry, you're breaking.

Can you come closer to the phone?

Frederic Tremblay: Yes, I was just wondering in terms of the Maple segment you mentioned a net selling price increase. Can you split the mid-single-digit growth that we're seeing between pricing and volume?

Manon Lacroix: Well, when you're comparing the quarter-over-quarter the increase in gross margin percentage there is the impact of [indiscernible] from the full quarter, so that definitely had an impact. Also, we've got some packaging savings and then there is the net selling prices that includes foreign exchange gain as well as some modest price increases. If you look at the bucket, also I should mention that last year we had an expense on the finished goods inventories that hit the gross margin. So that gross margin impact from the inventories that's about 0.5% of the increase let's say.

And then what I said there's three buckets, the packaging there's the selling margins and also the customer [ph] has more sugar, the customer has the sale of sugar and maple flakes which has a better margin. And you can put basically those buckets into one-third, one-third, one-third.

Frederic Tremblay: Okay. And I was just curious, you may have seen the revision to the trade and food guide which basically suggest that people should use water as their beverage of choice as beverage sugar drinks. I'm wondering your thoughts on the potential impact in your liquids business.

John Holliday: Yes, I don't have. We don't have a view on that. I mean there is a lot of I guess public news on the issues of the health issues associated with consumption of sugar and I don't know how those will impact that category.

Frederic Tremblay: Okay. And last question.

John Holliday: Yes, the only thing we've shared is as we pointed that out, we see more liquid sugar being sold and we're seeing that our product liquid sugar is being substituted more often than it had been in the past right. Fructose, corn syrup. That might off set that trend or potential threat that you brought to. Thank you mentioned.

Frederic Tremblay: And then last question would be now that you've made a decision on the second phase of the optimization in Maple segment.

Are you still confident to meet $25 million EBITDA number that you provided or does that change now?

Manon Lacroix: Well, for 2019 we're confident on the 21 EBITDA.

John Holliday: We're confident on our guidance. And then for the business, if you're looking into the future, we think we'll get where we need to -- where we said we get to. We got -- we're doing the right things, we need to be patient they don't all happen exactly when you want them to but we are very confident in what we're doing and what we do will deliver what we promised.

Frederic Tremblay: Okay.

Thank you very much.

Manon Lacroix: Thanks Frederic.

Operator: We have no further questions at this time. I will now turn the conference over back to the presenters.

John Holliday: Well, with that thank you everybody for your questions and we will catch up to you in the end of Q2.

Manon Lacroix: Thank you, everybody.

John Holliday: All right. Take care.

Operator: This concludes today's conference. You may now disconnect.