Ed Makin - President and CEO Manon Lacroix - VP, Finance

Michael Van Aelst - TD Securities Stephen MacLeod - BMO Capital Markets Christine Healy - Scotia Bank

Thank you, operator, and good afternoon, ladies and gentlemen. Joining me today for our conference call is our Vice President of Finance, Manon Lacroix.

In keeping with our usual format, I'll start by commenting on some of the highlights for the quarter and the full year. Thereafter, I will then turn the conference call over to Manon who will review the financials in more detail and talk briefly about the outlook for the new fiscal year.

We will then open up the phone lines to answer any questions you might have. For the fourth quarter 2014 we sold approximately 5,900 tonnes less this past quarter as compared to the fourth quarter of 2013.

The decrease in volume was mostly due to lower liquid and industrial sales. However, the lower volumes in these categories were partially offset with high volumes in consumer sales.

Exports were also slightly weaker during the quarter when compared to last year. For the full year, volume decreased in 2014 by 2,900 tonnes or less than one half of 1% when compared to 2013.

Industrial sales were higher by 5,400 tonnes due to volume gains with new and existing customers. Consumer sales also increased by approximately 2,900 tonnes, as we benefited from a new multiyear agreement with a major retail account.

These increases were partially offset by lower liquid volumes and export sales. Liquid volumes were lower by approximately 1,700 tonnes due to timing of deliveries to certain accounts.

Exports declined by 9,500 tonnes as the Company had limited access to Mexico and United States as both countries enjoyed good crops combined with more than adequate inventories. For the quarter, our adjusted gross margin increased by approximately $6.4 million and our adjusted EBIT increased to $12.6 million or some $600,000 more than the comparable quarter of 2013.

On a per metric tonne basis, our adjusted gross margin increased by approximately $41 per metric tonne. The increase in the margin rate was due to a onetime profit, whereby Lantic exceptionally advanced the purchase of raw sugar cargo to take advantage of the spreads in the #11 sugar market, positive sale mix and several negative events that occurred during the last quarter of 2013.

Free cash flow for the fourth quarter amounted to $8.6 million and this compares to $4.2 million for the same period last year. The increase of $4.4 million was mainly due to higher adjusted operating results and lower cash pension contributions, offset by slightly higher capital expenditures.

During the quarter, the corporation declared a quarterly dividend of $0.09 per share for a total payout of $8.5 million. For the full year 2014 adjusted earnings before interest and income taxes were $48.8 million, which represented a decrease of $7 million when compared to the financial results of 2013.

Our adjusted gross margin rate for 2014 was actually comparable to 2013 that included several offsetting items. As mentioned above, we recorded a one-time profit of 1.9 million on an early receipt of raw sugar and in 2013 we incurred a charge of $1.9 million for future pension benefit updates.

These positive variances were offset by higher energy costs in Montreal of $1.4 million due to the purchase of auxiliary natural gas last winter and lower by product revenues of approximately $1.3 million due to lower beet acreage. Finally an unfavorable sales mix of higher industrial sales combined with lower exports which usually have a high margin also impacted the adjusted margin rate.

This past spring, a total of 22,000 acres were planted by the Alberta sugar beet growers. The harvest has been completed under grocery favorable conditions and barring any unforeseen events, the completion of the thick juice campaign, we anticipate an amount of approximately 85,000 tonnes of refine sugar from this year’s crop.

And finally Canada and the EU have recently concluded a trade agreement that will benefit the Canadian sugar industry once the agreement is ratified. The Canadian sugar industry is also very supportive of the objectives currently being pursued by Canada with respect to the Trans Pacific Partnership negotiations.

The interest of the sugar industry could be enhanced further should an agreement to be reached with this extremely important trading volume [ph]. And at this point in time I’d like to turn the conference call over to Manon.

Thank you, Ed. I will now go over the fourth quarter results in more detail.

Adjusted gross margin for the quarter was $24 million, compared to $17.5 million last year, an increase of $6.5 million. On a per tonne basis, adjusted gross margin was approximately $140 per metric tonne, compared to approximately $99 per metric tonne for the comparable quarter.

As Ed just mentioned, in the fourth quarter of this year, we reported a one-time profit of $1.9 million, representing $11.13 per metric tonne. This profit was triggered by a decision to bring in a raw sugar vessel early in advance of our need in order to capitalize on beneficial spreads on the #11 raw sugar market in fiscal 2014.

Also the sales mix had a positive impact on adjusted gross margin rate per metric tonne with lower liquid and industrial volume and an increase in consumer volume with the latter typically having a better margin than the other two segments. Finally, we reported in the fourth quarter last year that the Company incurred additional costs relating to higher cost of raw material in Taber, higher maintenance cost in Vancouver due to an unusual equipment breakdown and lower overall plant performances.

These negative events also explain the improved adjusted gross margin and per adjusted gross margin per metric tonne for the current quarter. However, administration and selling expenses increased by $5.8 million versus the fourth quarter of fiscal 2013, which offset most of the positive variance coming from the adjusted gross margin.

Earlier this year, the Company hired a process improvement firm to review the cost structure and the manufacturing process of the Montreal refinery. They announced this was completed in September and after a review with our production team, we announced a work force reduction of 59 employees through a combination of early retirement, voluntary departures and layoffs.

As a result of this analysis, we incurred $2.8 million in additional consulting fees and severance cost in the quarter. Another reason for higher administration costs was an increase in non-cash pension expense.

In the third quarter, the Company announced the termination of the only remaining salary defined benefit pension plan for which years of service has been frozen since 2008. As a consequence of this announcement, the Company had to record an additional non-cash pension expense, which was increased from $1 million to $2.2 million in the fourth quarter of 2014.

Finally the Company incurred additional marketing expenses for the launch of new products and higher employee benefits, both of which explain the remainder of the variation when compared to the fourth quarter of last year. As a result adjusted EBIT for the quarter was $12.6 million, compared to $12 million last year.

Now turning to results year-to-date, adjusted gross margin was $81.9 million compared to $82.1 million in fiscal 2013, approximately $127 per metric tonne compared to approximately $126 per metric tonne last year. Although the adjusted growth margin was comparable, it includes offsetting items that are worth noting.

First of all the, one-time profit of $1.9 million on the early arrival of the raw sugar vessel also had an impact on the year-to-date results. Furthermore in the third quarter of 2013 we recorded a $1.9 charge for committed defined benefit pension plan upgrades.

Combined, these two variations had a positive impact on growth margin rate of approximately $6 per metric ton. Offsetting these variances are items, one of which is higher energy cost.

The Montreal refinery has had for many years an interruptible gas contract that allows our national gas provider to interrupt our gas supply during cold winter months. As a result the Company was interested 49 days in fiscal 2014, compared to 27 days in the prior year which resulted in additional energy cost of 1.4 million when compared to the last year due to the purchase of auxiliary natural gas and oil.

In addition, by-product revenues were 1.3 million lower than the prior year as the acreage in Taber was reduced by 6,000 acres to 24,000 acres for the 2013 crop. Taber beet factory is the most significant contributor of revenues from by-products in the form of beet pulp and beet molasses.

Finally the unfavorable sales mix also had a negative impact on the adjusted gross margin with an increase in industrial volume and a decrease in export sales, which are typically higher margin. Year-to-date administration and selling costs increased by approximately $6.1 million year-over-year.

The process improvement analysis and the termination of salary defined pension fund I just discussed explained $2.8 million and $2.2 million of the variations respectively. Finally higher legal costs and marketing expenses account for the remainder of the increase in administration and selling cost.

Distribution cost were $700,000 higher than last year due to one-time emerged cost incurred earlier this year and additional storage cost due to the large carryover of beet sugar inventory at the end of last fiscal year. Year-to-date the adjusted EBIT was $48.8 million compared to $55.8 million in fiscal 2013.

When we exclude the mark-to-market gain or loss on the interest rate swaps, finance costs for the quarter were comparable to the same period last year and $700,000 lower than fiscal 2013 due to lower interest rates on the credit agreement and related interest rate swap agreement. During the third quarter, the Company entered into a new $10 million five year interest rate swap agreement at a rate of 2.09% and in the second quarter of 2014, we exercised our auction to expand our revolving credit facility through June 2019.

I will now turn to the outlook for the year. Total sales volume in fiscal 2015 is expected to be slightly decreased from the level of fiscal 2014.

With the decrease in corn prices in 2014, the Company was not able to provide a competitive bid to renew the one-year contract with an HFCS substitutable account. Therefore we anticipate liquid volume to decrease by approximately 10,000 metric ton in fiscal 2015.

The export segment is also expected to decrease by approximately 5000 metric ton due to a reduction in the Canada specific quarter and the return to our normal level on the allocation of the global quota. The decreases in these two segments will be partially offset by an increase in consumer volume.

As previously reported, in fiscal 2014 the Company secured a multiyear agreement with a major customer account but do not re-sign an important Eastern consumer account. The industrial segment is expected to be comparable to fiscal 2014.

The Company expects significant savings in fiscal 2015 with regards to labor and energy cost. As a result of the productivity improvement analysis at the Montreal refinery, the Company expects to achieve labor savings of approximately $5 million when compared to fiscal 2014.

Secondly, in September the Company received confirmation from its national gas providers that a firm gas contract was expected starting in fiscal 2015. Therefore we will no longer be subject to interruptions due to cold winter conditions and we anticipate energy cost savings of approximately $1.8 million when compared to fiscal 2014.

However, we expect the above savings to be generally offset by lower adjusted gross margin due to a combination of lower sales volume and lower selling margins due to market competitiveness. Another important factor is the fact that the Company will not benefit in fiscal 2015 from a $1.9 million profit recorded for an early better [ph] arrival in fiscal 2014.

Administration and selling costs are expected to be lower in fiscal 2015, considering the non-recurrence of the productivity improvement analysis and the non-cash pension expense. Now looking at cash flow for fiscal 2015, the Company expects defined benefit cash contribution to be approximately $3.5 million lower than in fiscal 2014.

The reduction relates to the fact that in fiscal 2014 the Company funded the withdrawal of a senior executive retirement plan. In addition favorable returns on pension assets, combined with an increase in discount rates as at December 31, 2013 contributed to the deficit of all pension plans to be significantly reduced or eliminated and therefore should reduce cash contributions for fiscal 2015.

At the end of the fiscal year the Company had commitments amounting to $7.3 million for the completion of capital expenditure projects in progress. As a result we expect an increase in total capital expenditure which is anticipated to be approximately $13 million in fiscal 2015, including approximately $3 million in the return on investment capital projects.

With that I would like to turn the call back to the operator for the question-and-answer session.

So a few questions for you and then I’ll get back into the queue, but can I start with the mix? Is it possible to give us an idea of the benefit on a per tonne basis in the fourth quarter and is this something that is going to reverse next quarter or is this something that balanced out throughout fiscal ‘14?

No Michael, we don’t give any forward-looking statements and we don’t give that kind of detail on the volume mix for that. And in general we’ve given additional information on liquid and export reduction for next year and I would say that this is approximately flat.

Michael, the only guidance we’ll give you on that, and its standard is that typically on the liquid volumes, they tend to be the lower margin business and we will be lower in sales. So you can draw your own conclusions as to what that will mean to the overall net margin.

I was just trying understand -- I wasn’t trying to get the impact for next year. I was just trying to figure out whether the timing, because you’ve commented on industrial export and consumer all being a different year-over-year because of timing and I was just wondering, was that timing shifted from earlier in fiscal ‘14 into Q4 or is that something the timing going to impact next year.

It’s usually quarter-by-quarter Michael when we refer to something like that. If we’re a little light in one particular quarter, the expectation would be to make it up in the following quarter and vice versa.

Yes, and the only one is the liquid where we had the one year contract that ended at the end of the second quarter, and obviously we didn’t have that in the fourth quarter of this year we had liquid sales under that contract last year.

On the gross margin, gross profit guidance for next year, I just want to make sure I understand the way you’ve worded this. You said that lower volume and lower margins is going to offset the labor savings and the gas -- the interruptible gas savings I guess for this year.

And then so that will be offset. And then you’re saying on top of that you’re also going to have $2 million lower from the one-time vessel shipment timing?

It’s combined. We’re saying that combined the gas and the productivity improvement will have savings of 7 million.

But of course next year we won’t have the $2 million on the vessel. So that they offset generally the gas impact.

And then what we're left with is the variation in volume and selling margin.

And Michael, we've also use the word generally. It’s not specific.

Clearly we've still got ways to go in the project in Montreal. But when we use the $5 million savings, we’re quite comfortable with that, but we’re not comfortable coming up with anything different from that right now, but that’s why we use word generally.

Okay, and just on the admin and selling number, that was up $5.8 million I think in the quarter. So you said $2.8 million of that was consulting?

It was relating to the productivity improvement project, yes.

And the other increase was why?

It’s a pension plan; the non-cash pension plan for the termination of salaried plans.

Just wanted to just circle around on some of the cost savings that you’ve highlighted in the outlook section. So the $5 million that you expect to get on labor, is that mostly or all in cost of goods sold?

Yes, it’s all the available [ph] work force.

All right, okay. And then with respect to the new gas supply contract, is that something that’s expected to begin to impact positively the current winter that we’re about to enter?

Yes, it applies to fiscal 2015 and most of our interruptions were in the second quarter, you would recall this year.

Okay, all right, great. And then I think you just referenced some further projects that are happening in Montreal.

Is there still -- are there still projects on the go in terms of cost savings, either on the employee or process improvement side?

Well, we’re always looking at ways to reduce our costs and improve our bottom line, but as far as the productivity improvement in Montreal, it's been completed and as a result we announced the results in September. We are looking at other projects, mostly in Vancouver actually, where we’re going to put new palletizer.

And I guess for Montreal you were referring to the extra storage space that -- where we expect storage costs to be reduced.

Okay.

So, as part of the -- and generally we try to invest $3 million a year on the return on investment projects. So it’s always part of the normal process.

We’re always looking at other ways to reduce our cost.

All right, okay. Okay, that’s great.

And then just to circle back on the previous questions about the outlook for adjusted gross margin per metric ton. Is it -- I know you said it’s sort of -- generally still have some work to do, but would you expect that the savings are more than offset by lower volumes and lower selling margins or is it sort of an evening out effect?

We normally don’t give any forward-looking statements. So all we could say right now is that our gross margin rates are very important.

What we aim to do is at least maintain it and improve it. So everything that we’ve done this year, steps that we’ve taken, whether it’s the process improvement project or the gas or all of the ROI projects that we’re doing, it’s always to improve our results and increase our gross margin rate.

And Stephen, this is not to say obviously that we’re not looking to increase our margin rate with our customer base. We start with that premise and go forward from there and clearly the secondary side would be from the cost saving aspect as well.

And then on customer contracts, are you seeing sort of the selling margins being compressed across the board?

As is historical by this time of year, most of our long-term contracts are typically in place. This year is no exception, and in fact a lot of business is actually being concluded in 2016.

So I would say that we’re not seeing any surprises. We’re comfortable with where we’re at on the contracting side of the stage again.

So on that comment about your long-term contracts now in place, some into 2016, can you give is an idea, just at least a general idea of what your split is between -- it falls under longer term contracts versus kind of shorter term business?

We typically don’t do that Stephen. All I would say is anybody that is a long-term contract, and as I said in the previous question, by this time of year those folks usually are covered off one form or another and that has been the case this year, where we would not break out specifically what is left to cover up.

But on the long-term basis, we haven’t had any surprises. What we expected to cover has already been covered and as I said earlier, even some into ‘16 with acceptable margin rates to ourselves.

Versus what you’re getting this year, I guess, or what you’re getting -- because…

Well, we’re always looking to get increases and so if we can see something out there that makes sense to us, then we’ll take that on our books.

You talked about the potential for exports to the U.S. not really being -- while I guess exports to the U.S.

not necessarily increasing until there is a resolution to the dispute. Do you have any insight as to when that maybe?

We honestly could spend a couple of hours debating that particular question. Clearly there is an awful lot that’s going on both sides from the U.S.

and Mexico right now. The only thing I would say on that front is perhaps two or three weeks ago when the deal was announced, everybody thought that was it.

It was all concluded. But it was clear right at the onset that there was still a lot of unanswered questions and in short order they started to resurface.

And our understanding right now is that there are constituents and parts of the U.S. industry that are not typically enamored with the existing so called deal and any changes to any of that, I'm sure will probably upset the balance of whatever favorable impression the Mexican industry might have.

So I think we’re still a long way from a complete settlement on this, if even indeed there is to be a settlement.

So the opening of -- so even with the lower stocks to use ratios that are out there right now, you still don’t think there’s a chance that the market opens up to you.

Again, I think it’s really going to depend on how the situation plays out. Let’s take one extreme completely, that there is no deal, the dumping and countervailing duty stay in place and Mexico is basically prevented from shipping into the United States.

That then leads to United States 2 million tonnes short of sugar. Six months will have come and gone in terms of refining capacity, utilization.

I would guess, and this is strictly a guess, as where we’re today, November 18th that the U.S. will have to have a refined sugar quota.

They will not be in a position to refine adequately their needs for the balance of the year. They will be very reluctant to do that, given what's happened over the last little bit.

But if there is zero deal in place and Mexico is not going to get any sugar in there, then the U.S. will be short.

It’s as simple as that. It will not have the refining capacity nor the beet production to see themselves through.

That’s probably an extreme, but there is equally all sorts of permutations and combinations up to an accommodated settlement that still might leave the U.S. a little bit short.

So we have not put anything in our plans going forward because I think that would be a little bit suspect at this stage. We’re trying to be conservative and say that where we sit today obviously the door is closed.

We’re not likely to see any. But there are lots of permutations and combinations yet to play out that may well lead to a bit of a crack in the door that allows us to participate in the refined sugar quota.

And the only thing I would like to add to what Ed just said is that we’ve been very good in the past of taking an opportunity and reacting very quickly. And that would be no different.

We’re always listening and are ready to react.

Can you comment on your search for a new President?

All I can tell you is its underway, Michael and I'm going to be around for quite a bit yet. So we have at least another five months odd to go.

And frankly, even on that, if takes a little bit longer, I'm flexible on that. I’ve already told our Chairman that.

But the search is underway and I daresay, we will end up with a good replacement in due time.

I’ve seen ads posted for the position. So is this now an external search rather than an internal search?

It went that way right off the bat but we have very good internal candidates. But our Board felt that they would like to look external as well as internal and that was a decision right at the onset.

And finally, can you just explain this one-time, this early vessel shipment, whatever you want to call it? Can you just explain the accounting behind that and how that works?

Again, we'd take a long time to explain this. But the short version really is when you get in a spread position that justifies an advancement of a cargo, in other words, you effectively pay for cheaper terminal position than the one that you normally would bring it in against.

If the storage costs associated with the early arrival more than offset the savings, then to your advantage to bring the ship in early and that’s effectively what we did in this case.

So it sounds like overall you expect fiscal 2015 to be a pretty flat earnings year, but you could have some benefits on the cash flow side due to the pension. So maybe you could provide us with some updates on your’s and the Board’s current thoughts on the dividend and how you see it looking going into fiscal 2015?

Well again, we can’t give any forward looking statements. But what I could tell you is that we always review our quarterly dividends on a quarterly basis.

We look at all the information we have and we’re very confident at this point on the dividend.

Yes, Christine, we’ve had that question raised probably for at least the last 12 months. And I think we’ve been each time saying that we’re very confident.

We knew that 2014 was going to be a rough year but we were looking forward and felt very comfortable. And I think that still stands today, that where we sit here right now we are very comfortable with the current dividend policy.

Okay. Yes, I think just providing the outlook today on fiscal 2015 in more detail, it's probably the key questions.

Investors are probably looking for an update there. And I guess just lastly, it sounds like the reduction in the Canada specific quota from U.S.

it sounds like you feel pretty confident that it’s temporary and it’s mainly related to the Mexico dispute. But just wanted to confirm that that you expect that this is more of a temporary thing and that the quota should go back to the old level after that dispute as a result.

Is that the case?

Yes, I think if the dispute is resolved and there is in accommodation, then U.S. has a decision to make.

Where they were obviously under free trade, it was not really required and the USDA felt comfortable reallocating that back out in Canada benefited us in particular. It really is going to depend on the details of that settlement as to where that goes forward.

One would expect, all things being equal for that to be reallocated back to Canada. But it certainly isn’t guaranteed.

Just as we had asked in the past, that that be allocated on a permanent basis and I think the U.S. took actually those -- we obviously were hoping for it, but as it turns out, it was the correct decision, that they obviously had to hold it in abeyance.

As far as Mexico is concerned, it is their quota, it is not ours. They can allocate it yearly, which they did do and we certainly hoping that’s the case in the future.

And then opening up new export markets to help offset some of the niche markets, any update there or just nothing at this time?

Nothing of significance that I'd report other than to say we’re actively pursuing all venues on that and stay tuned. I think we’ve got some irons in the fire there, but for competitive reasons I wouldn’t want to give that out right now anyway.

Thank you, operator. And if there are no further calls, I'd just like to thank everybody for tuning in today and we’ll talk to you again in three months' time.

Thank you very much.