John Holliday - President and CEO Manon Lacroix - VP, Finance and Secretary

Michael Van Aelst - TD Newcrest Stephen MacLeod - BMO Capital Markets

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

In keeping with last quarter's format, I will start by commenting on some of the highlights for the quarter and the full year. Thereafter, 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 new fiscal year.

We will then open the phone lines to answering any of the questions you might have. Fourth quarter volume increased by approximately 22,100 tonnes versus last year's comparable quarter, and without taking into consideration the additional week of shipments, fourth quarter fiscal 2015 volume was up approximately 9,100 metric tonnes as compared to the prior year.

Strong sales demand across the industrial, liquid, export segments accounted for most of the growth. Consumer volume was approximately 2,300 tonnes higher than the fourth quarter of last year.

The increase in export volume is attributable to the spread between the #11 raw sugar prices and the U.S. refined sugar price combined with a weaker Canadian dollar, which provided an opportunity for the Company to export more sugar to the United States.

In addition, the liquid volume has been strong in fiscal 2015, more specifically in the second half, due to an increased demand following the announced increases in – more specifically in the second half due to increased demand following increases in processing and tight supplies of High Fructose Corn Syrup, leading to some volume swapping between High Fructose Corn Syrup and sugar. On a fiscal year basis, the Company sold approximately 12,400 tonnes more than in fiscal 2014.

The increase in volume was largely due to an extra shipping week. Looking at the results by segment, we have seen the industrial segment continue to strengthen throughout the year.

The liquid segment also showed solid demand, especially in the second half of the year. And considering the loss of a High Fructose Corn Syrup substitutable account in April of 2014, we are satisfied to report that the volume excluding the impact of the 53rd week was only slightly below last year.

The export segment also ended the year higher than last year as the Company was able to leverage the well-developed customer relationships and market pricing opportunities to increase sales to the U.S. on a high tier duty paid basis and to Mexico.

Consequently, export volume finished the year approximately 6,400 tonnes above last year's result. Lastly, despite improved promotional support in the last quarter, which included our largest ever consumer and retail trade promotion, the consumer segment was unable to recover from a slow start of the year and ended the year approximately 3,600 metric tonnes below last year's level.

Overall, we see the weak Canadian dollar, the #11 versus #16 spread and consumer trends to cleaner and simpler labels as supportive to our business. For the quarter, the adjusted gross margin was C$124.69 per metric tonne as compared to C$140.47 per metric tonne in fiscal 2014, a decrease of C$15.78 per tonne.

The decrease is mostly attributable to a one-time profit of C$1.9 million recorded in the same quarter of fiscal 2014, triggered by an early receipt of a raw sugar vessel in advance of our needs. This one-time profit accounted for C$11.13 per metric tonne of the decrease in the adjusted gross margin.

Adjusted gross margin for the year was C$85.9 million or C$130.36 per metric tonne, an improvement to the C$81.9 million in fiscal 2014 or C$126.76 per metric tonne. Labor savings at the Montreal refinery contributed to this improvement.

And it goes without saying that the first few months of this changed management process were difficult. Despite these challenges, the teams remained focused on our commitment to supply our customers with quality products, reliable service at competitive prices.

The secondary noteworthy impact to the adjusted gross margins relates to the energy cost, which benefited from lower natural gas pricing and the conversion from an interruptible gas contract to a firm gas contract at the Montreal refinery. Free cash flow for the quarter was C$0.3 million higher than the comparable quarter of fiscal 2014.

Free cash flow for fiscal 2015 was C$7.2 million higher than the previous year. The increase is due mainly to higher adjusted gross margin of C$3.9 million, lower incomes taxes paid and pension plan contributions of, somewhat offset by higher capital expenditures net of operational excellence capital and higher interest paid.

During the quarter, the Corporation declared a quarterly dividend of C$0.09 per share for a total payout of C$8.5 million. For the full year fiscal 2015, adjusted earnings before interest and income tax were C$54.1 million, which represents an increase of C$5.2 million when compared to the fiscal financial results of fiscal 2014.

Continuous planned improvement and reliability are cornerstones for our operational goals. During the year, the Company continued to make planned investments in projects to upgrade critical processing equipment, improve infrastructure and continue the path of improvement to plant safety.

Fiscal 2015 saw the completion of some projects which will lower our operating costs in Vancouver and Montreal and we have continued to invest in equipment upgrades, typical for a business with largely depreciated assets. The last quarter of 2015 was characterized by significant international trade and tariff reviews.

Noteworthy, the TPP partnership negotiations included in October. We have an agreement in principle.

The ratified agreement will provide more certainty for Canadian exports, which although being below our desired outcome will nonetheless provide some benefits to our Western Canadian asset base. In addition, industry representations were made at the Canadian International Trade Tribunal in September in support of the continuance of the antidumping and countervailing duties against the U.S.

and the European Union. The CITT issued its decision on October 30, 2015 to continue its 1995 findings against dumped and subsidized sugar from the U.S.

and EU. The Company is extremely pleased with this decision since the duties on imports of U.S.

and EU refined sugar are important to Lantic and to the Canadian refined industry because they protect the market from adverse effects of unfairly traded imports from these sources. With generally positive market conditions, the Company will invest time and effort in fiscal 2016 to focus on three strategic priorities, operational excellence, access for existing products to new geographies and new distribution channels, and targeted acquisition of businesses and/or investments in our existing assets.

Our commitment to operational excellence will target improvement in refining throughput, packaging efficiencies, energy consumption and water usage. Improvements will be driven both by capital investments and leveraging best practices across our various locations.

Operating in a mature category and having limited access to largely protected export markets, the business will look for bolt-on acquisitions or investments in existing assets that will bring new growth and synergies to our core suite of products and potential expansion and extension of our brand portfolio. I will now turn the call over to Manon Lacroix.

Thank you, John. First of all, I will like to point out the fact that the fourth quarter of fiscal 2015 had 14 weeks of operation compared to 13 weeks in fiscal 2014, bringing the year to date at 53 weeks versus 52 weeks last year.

The additional week represents approximately 2% of total volume, revenues, adjusted gross margin and adjusted net earnings. I will now go over the fourth quarter results in more detail.

Adjusted gross margin for the fourth quarter was slightly above last year and ended at C$24.1 million versus C$24.0 million for the comparable quarter last year. On a per tonne basis, adjusted gross margin for the current quarter decreased by approximately C$16 per metric tonne to C$124.69 per metric tonne.

As John just mentioned, adjusted gross margin for the fourth quarter of fiscal 2014 included C$1.9 million profit for the early receipt of a raw sugar vessel in Montreal representing C$11.13 per metric tonne. During the quarter, the Montreal refinery suffered from a refining equipment breakdown, and as a result, operating cost inefficiencies were incurred.

Finally, maintenance costs for the quarter were higher due to timing. These negative variances were somewhat offset by labor savings at the Montreal refinery, which continued and amounted to C$0.4 million for the fourth quarter of fiscal 2015.

These savings occurred as a result of the process improvement analysis completed at the end of fiscal 2014. Distribution costs at C$2.9 million were C$0.8 million higher than the comparable quarter last year.

Additional costs were incurred due to transfers of inventory between locations as Taber had low inventory levels at the end of the fiscal year. In addition, the inefficiencies caused by the refining equipment breakdown in the Montreal plant created difficulties to keep up with the strong fourth quarter volume demand, and as a result the Company had to move inventory to the Eastern market.

Administration and selling expenses amounted to C$7 million, compared to C$9.2 million for the same quarter last year. Most of the decrease is explained by the additional consulting and severance costs incurred in the fourth quarter of fiscal 2014 due to the process improvement review at the Montreal refinery.

As we have mentioned in the previous quarters, the Company decided to terminate the last remaining salaried defined benefit pension plan. The termination process is well underway but has not been completed.

As a result of this decision, the Company recorded a non-cash pension expense that was C$0.4 million lower than the fourth quarter of fiscal 2014. However, offsetting some of these positive variances are an increase in allowance for doubtful accounts, higher marketing expenses as well as an increase in consulting fees that are not related to the process improvement review in Montreal.

Adjusted EBIT for the quarter was C$14.1 million compared to C$12.6 million last year. Now turning to the results year to date, adjusted gross margin was C$85.9 million compared to C$81.9 million last year.

The adjusted gross margin increased by C$3.9 million year to date, due mainly to labor and energy savings of approximately C$4.5 million and C$2.6 million respectively. The energy savings occurred due to the conversion from an interruptible to a firm gas contract at the Montreal refinery in fiscal 2015.

These positive variances were somewhat offset by higher operating costs in Taber due to severe beet deterioration at the end of the slicing campaign following a warmer than usual winter in southern Alberta as well as operating inefficiencies at the Montreal refinery following an equipment breakdown, and finally the non-reoccurrence of the C$1.9 million profit for fiscal 2014 vessel that we just mentioned. Adjusted EBIT was C$54.1 million year to date, compared to C$48.8 million for the comparable period last year.

Year to date, distribution costs increased by C$0.6 million and administration and selling expenses decreased by C$1.9 million, due to the same reasons I just explained for the quarter. When we exclude the mark-to-market adjustments on the interest rate swaps, finance costs were C$100,000 and C$600,000 higher than the comparable quarter and year-to-date respectively, due to a higher average debt level when compared to last year.

Inventories were higher throughout the year versus fiscal 2014 due to a higher beet inventory carryover at the start of the fiscal year and timing in raw sugar vessel deliveries. Inventory level went back to a more normal level at the end of fiscal 2015.

During the quarter, the Company repurchased and cancelled 30,100 common shares as part of the normal course issuer bid put in place in November 2014. After year end, the Company purchased another 80,800 common shares.

I will now turn to the outlook for fiscal 2016. We expect industrial and consumer volume to be comparable to fiscal 2015 when we exclude the impact of the additional week of operation in the last quarter of fiscal 2015.

We ended the year with good momentum with regards to liquid volume but we remain cautious and we forecast a slight decrease in liquid volume in fiscal 2016. Export volume is also expected to decrease by approximately 5,000 metric tonnes next year since the current contracted volume for Mexico and the U.S.

is lower than fiscal 2015. In fiscal 2016, the Company has hedged approximately 90% of its gas consumption requirements.

In addition, we have received confirmation from our natural gas supplier that a firm gas contract was approved long-term and will now expire in November 2019. This past spring, a total of approximately 22,000 acres were planted by the Alberta sugar beet growers.

This year's harvest has been completed under mostly favorable conditions. Barring any unforeseen events and the completion of the thick juice campaign, an amount of 85,000 metric tonnes of refined sugar is anticipated in fiscal 2016.

We do not expect a reoccurrence of the negative operational variance associated with the processing of the 2014 crop. With that, I would like to turn the call back over to the operator for the questions session.

So a few questions for you. Can you go over some of those administration, general and selling expenses, maybe the consulting fees and marketing expenses, and maybe explain a little bit what those extra consultant fees were for this year and whether those marketing expenses will stick around?

On the consulting front, obviously there was some of the recruiting. There was also CITT expenses that we had to incur.

Marketing expenses, it's mostly timing. As we've discussed in the past, we're doing more promotional activities and being more active in the market.

So those will continue.

So marketing will continue but the consulting fees, since you don't have to do the CITT for another five years, and your recruiting I'd assume is completed, so how much could consulting fees come down?

We can't give you the detail that precisely but it's not going to be like a huge decrease, it was just mostly not significant.

Okay. But that expense line was up meaningfully year over year.

Yes, but it was mostly like the pension plan had an impact and also the [PBA] [ph], the consulting that we did that last with the Montreal refinery.

All right. And can you also help me understand the pension, where you stand with your pension plan actually?

So as far as operating expenses on your income statement versus cash expenses as going through your cash flow statement, given that you have terminated the plan but I guess you're close to completing that, are you going to continue to have cash expenses going – I guess cash outflows but not expenses on the income statement, is that the way to look at it?

The plan that we are terminating this year was recorded only non-cash expenses. We're in the last stage of the termination process, basically the liquidation.

We are going to go to insurance bids for the annuities and then we'll be transferring the annuities to an insurance company. So once we have done that, then they may or may not be a cash impact in a final termination cost associated with the pension plan, but we expect that to be terminated completely in the first quarter of this year, of 2016.

Okay, so you'll have some sort of a charge in Q1 2016? I think you said about I guess possibly the C$1.2 million deficit charge related and then where you talked about defined benefit contribution being higher by about C$1.5 million in fiscal 2015.

Yes, that's as a result of our actuarial evaluations on the other plans that there is no change to that.

So that plan is sticking around?

Yes. The other plans are – the only change to our defined benefit pension plans are the Salaried Plan that we have terminated.

Okay, understood. That's great.

Thank you. And then as far as acquisition, you talked about acquisitions a little bit more this time around.

Can you talk a little bit about your criteria when you're looking for in a geography, is it Canada, is it U.S., what should we be thinking about?

Geographically, I mean because of the commercial sensitivity of some of the discussions here, clearly we're not going to get into a lot of detail, but I would share with you from a geographic perspective North America is sort of the landscape that we would be looking at. We would be looking for businesses that we think are opportunities to bolt-on to our business, who will provide some synergies.

They may have a large sugar component or they may be in a different sweetener category. So we've set a bit of a game-board together and we've got some pretty clear filters that we're going to look at the opportunities through.

So we want to be spending some more time in that space in the year to come.

So is this about buying a strong business that you can just use as an opportunity to grow along with, or is it about buying a business that you think you can improve?

I don't think I'd answer that question. I won't differentiate between either of those opportunities.

Okay, all right. And then the CapEx, you said it's supposed to go up this year, I mean your maintenance CapEx.

So can you give us an idea of how much it should be?

No, we don't give forward-looking statements.

Okay, you always have given your CapEx expectations in the past.

Yes, we could tell you that it's going to be a bit higher than this year.

Okay. Alright, thank you.

I just wanted to circle back around on the administrative and selling expenses. So it sounds like even if you exclude some of the one-time items in Q4 2014 and Q4 2015, the number appeared to be still up quite a bit on a year-over-year basis.

And just so I can clearly understand, I think, Manon, you said that the consulting numbers, the consulting impact was actually not that material in the quarter, [or did I misunderstand that] [ph]?

The issue I haven't said, it's various little components that added together. Maybe we needed to provide those items for the explanation for the quarter.

Okay. But the consulting fees, I'm just trying to get a sense of what the elevated – [indiscernible] marketing expenses will continue going forward, so are you able to sort of decipher or would tell us what that number was in the quarter and what it will be going forward?

For the quarter, I would say that it's not, like the decrease is not going to be that significant going forward, probably less than C$0.5 million.

Okay, great. Thank you.

And then I just wanted to circle on Taber as well. So we saw some I guess higher distribution expenses because of lower inventory levels at Taber.

Do you sort of expect with 85,000 metric tonnes for this year that your supply will meet your demand sort of thing or do you foresee any inventory shortfall along the way?

No, I think we will definitely supply the market. It was more of a timing issue.

It was just the beginning of the campaign and the inventory in Taber, Alberta was low. So we had to supply to aid the domestic market.

Okay, so Q4 2015 was a bit unusual.

Yes.

Q4 2015, and the last month of the quarter in particular was very strong.

Okay, that's great. And then you talked a little bit about your volume expectations for the year.

We've had a couple of strong quarters of adjusted gross margin per metric tonne as well. So heading into 2016, are you able to sort of directionally comment on what you would expect to see on the profitability side?

That's the kind of forward information that definitely we never disclose.

Yes, okay. That's great.

Thank you very much.

With this, we have no further questions, so we would like to thank everyone for attending and we look forward to speaking to you next quarter.