Sucro Limited (SUGR) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Sucro Limited's First Quarter 2025 Earnings Conference Call. Today's call is being recorded. Joining us are Jonathan Taylor, Chief Executive Officer; and Stefano D’ Aniello, Chief Financial Officer. At this time, I'll turn the call over to Jonathan Taylor. Jonathan, please go ahead.

Thanks, operator, and good morning, everyone. It's been another strong start to the year for Sucro. Our U.S. business continues to grow, deliveries into the U.S. grew while Mexican volumes normalize, showcasing the flexibility of our model to move product to the most attractive markets as conditions evolve. We're now servicing every major sugar consuming region in North America through a diversified platform that blends refining, tolling and wholesale. That mix lets us capture margin, whether the opportunity is in refining raw cane sugar at Lackawanna. We're simply merchandising that raw sugar to a customer that may have more urgent requirements, resulting in optimized margin generation. Our integrated footprint also underpins the culture we like to call super speed. We closed the quarter with 3 fully operating sites and 2 new refineries rising fast, a wholesale network that stretches from Quebec bakeries to beverage plants in Texas and a risk management desk that keeps our price exposure tight even in the face of macro risk around tariffs or freight. The result is steady, profitable growth built on the optionality of an asset-driven integrated and flexible transnational supply chain. With that, let me hand things over to our CFO, Stefano D’ Aniello, for the financial rundown, Stefano?

Thanks, Jonathan, and good morning, everyone. Let me begin with 2025 Q1 performance. We delivered 176,000 metric tons of sugar, which is in line with prior year figures. These results reflect a delivered pullback in lower-margin Mexican volumes, a market that has by now stabilized after significant shortages in 2023 to 2024, offset by higher U.S. shipments and the continued ramp-up at our Lackawanna refinery. This continues to showcase our ability to capitalize on market opportunities as conditions develop. This brought in revenue of $155 million, which is 12% less than revenue in Q1 2024. This decline is explained by a significant drop in market prices year-over-year. For reference, [ Sugar 11 ] contract spot prices saw a 16% decrease between March 31, 2024, and March 31, 2025. So revenue declines were matched by corresponding cost decreases. While adjusted gross profit margin has remained consistent year-over-year, total adjusted gross profit saw a decline due to the usage of sugar from crop years 2023, 2024 with relatively higher prices for our Lackawanna refinery, which was sold in Q1 at current lower market prices. While our operations were and remained back-to-back and fully hedged delays in the ramp-up of our Lackawanna refinery volumes led to this mismatch, which we expect to be over in the second half of 2025. Our selling, general and administrative expenses, SG&A, amounted to $6.3 million for the 3 months ended March 31, 2025, a decrease of 16.4% when compared to 2024, driven by improvements in our payroll expenses and professional fees, which reflect management's ongoing efforts to reduce these costs in 2025. All these led to an adjusted EBITDA figure of $9.9 million or a 9% decrease from Q1 2024 and adjusted EBITDA margin of 6.4%, a full 50 basis point improvement over Q1 2024. Net income came in at $12 million compared to $20 million in Q1 2024, mostly due to a difference in unrealized results due to lower contract volumes being both in Q1 2025 compared to Q1 2024, which we see as a temporary difference driven by market dynamics rather than a reflection of our position in the market. Last but not least, we remained free cash flow positive for the 50th straight quarter. Turning to liquidity and leverage. We exited March with $245 million of unused credit capacity, including $50 million of committed revolver headroom. And our adjusted net debt-to-capital ratio sits at 30.6% with an adjusted leverage of 2.8x, comfortably within covenant limits and fully consistent with our growth and CapEx plan. For our capital program in 2025, we still expect approximately $30 million of CapEx, roughly half of last year's spend as we complete Hamilton Phase 1 and the initial build-out of University Park. All financing for this program is already secured. And importantly, roughly 2/3 of the budget has been committed or spent, giving us clearly -- clear line of sight on cost. Looking ahead, we anticipate a more back-weighted earnings profile this year as Lackawanna works through higher cost 2024 raw sugar inputs and the expected startup of the new Hamilton refinery and commencement of initial commissioning and testing later in the year. We feel very good about the expected trajectory of our 2025 business results. With that, I'll pass it back to Jonathan for an update on the projects and some closing thoughts.

Thanks, Stefano. Let's start with project status. First, Hamilton. Construction is moving nicely along, major equipment is on site, building envelopes are closed in and utility tie-ins are progressing smoothly. University Park is following closely behind. Both projects remain very close to original budgets and ahead of originally announced schedules, which is pretty remarkable in today's construction market and speaks to the front-end engineering discipline of our team and Sucro's hands-on project management approach. It places a significant demand and commitment upon our management team that not only manages the ongoing operational demands of a rapidly growing business, but also playing essential roles in multiple refinery construction projects. We have exceptional people and they are doing a fantastic job. Turning to tariffs. There have been a lot of headlines about the 10% across-the-board tariff scenario. For Sucro, this impact is minimal for 2 simple reasons. First, the critical refinery equipment for both new plants was delivered before any tariffs took effect. And second, our sourcing relationships in Mexico and origin largely exempt from the proposed measures continue to provide reliable raw sugar supply. And I remind the audience of our strategic relationship with Beta San Miguel, the leading Mexican milling group. On the demand side, Canadian sugar-containing products have so far faced minimal change or disruption, and customers tell us their order books remain steady. 2025 is a bridge year. We're focused on consistent profitability, paying down working capital, managing expenses and finishing our new refinery construction projects. That sets the stage for what we believe will be a breakout 2026 with 2 fresh refineries online, a significantly increased refining base and a platform that can flex between refining and wholesale distribution to maximize margins depending on market opportunities. In closing, and before we wrap up, I want to thank every member of the Sucro family, whether you're welding in the new Hamilton refinery, crystallizing sugar in Lackawanna, scheduling railcars in Chicago or balancing our hedge book in Coral Gables. Your commitment drives this company's momentum. With that, we'll conclude today's prepared remarks. There will be no Q&A session on this call. If you have follow-up questions, please reach out to our IR team. Operator, you may now end the conference.

This conference call. Thank you very much for your participation. You may now disconnect.