Rogers Sugar
Annual Report 2023

Plain-text annual report

POISED FOR LONG-TERM GROWTH 2023 ANNUAL REPORT 01 POISED FOR LONG-TERM GROWTH Delivering consistent, profitable growth has been an integral part of the Rogers playbook for 135 years. Over the past decades, we have steadily invested in our operations to maintain our position as the leading supplier of sugar in Canada. On strategic occasions, we have gone beyond maintenance capital spending to fulfill a specific need in the marketplace. Given the rapidly expanding food manufacturing industry in Ontario and Québec, and related demand for sugar, we have announced a major capacity and logistics expansion project in Eastern Canada. This two-year initiative will increase the production capacity of our Montréal refinery plant by 20%, or 100,000 metric tonnes. On the maple syrup side, we have invested in automation to reduce the cost of our bottling operations and will pursue additional projects that enhance productivity. In short, Rogers is poised for long-term growth. $1.1B TOTAL REVENUES $37.0M CAPITAL EXPENDITURES $110.9M ADJUSTED EBITDA1 6.7% DIVIDEND YIELD ROGERS holds all of the common shares of Lantic LANTIC also owns all of the common shares of The Inc., which operates cane sugar refineries in Montréal, Maple Treat Corporation (“TMTC”). TMTC operates Québec and Vancouver, British Columbia, as well as the plants in Granby, Dégelis and in St-Honoré-de-Shenley, only Canadian sugar beet processing facility in Taber, Québec and in Websterville, Vermont. TMTC’s products Alberta. Lantic / Rogers’ products include granulated include maple syrup and derived maple syrup products (regular and organic), brown, icing, liquid, cubed sugars and are sold mainly under retail private labels brands and specialty syrups, as well as agave, organic coconut and various house brands. sugar, Nature’s Raw™ sugar, maple sugar and flakes and other dry blends. (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. 02 795,307 METRIC TONNES OF SUGAR SOLD 738,413 METRIC TONNES OF DOMESTIC SUGAR SOLD SUGAR VOLUME DOMESTIC SUGAR VOLUME 794,600 795,307 738,413 726,944 779,505 761,055 741,144 704,009 700,987 689,578 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 03 SUGAR VS. MAPLE SYRUP REVENUES 19% Maple Syrup Products 81% Sugar 57% Industrial SUGAR REVENUES BY SEGMENT 7% Export 24% Liquid 12% Consumer REVENUES BY GEOGRAPHIC DISTRIBUTION 3% Europe 3% Other 13% U.S. 81% Canada 04 DALLAS H. ROSS Chairman To my fellow shareholders, At our annual meeting in February, we laid out five focus areas for 2023 covering safety, market trends, value creation for shareholders, progress in Environmental, Social and Governance (ESG) and the advancement of the company’s expansion and optimization plans to meet and benefit from future growth. IN EACH CATEGORY WE DELIVERED, AND WE TAKE PRIDE IN SHARING THESE ACCOMPLISHMENTS WITH YOU. In 2023, we continued our focus on the well-being of our employees in each of our facilities. Going forward, we will continue to act purposefully every day to keep our employees and our visitors safe at all times. Fiscal 2023 was the second consecutive year of record results, outperforming our outstanding 2022 results in each category of sugar volumes sold, consolidated revenues and adjusted EBITDA. The strength of our Sugar segment continued to drive our strong financial results, contributing to approximately 90 per cent of our adjusted EBITDA. As the expansion in global demand for sugar-containing products remains intact, favourable pricing dynamics in Canada continue to make Rogers Sugar, the sugar supplier of choice for Canada’s growing food manufacturing industry. 05 For the second year in a row, the strength of our Sugar segment more than offset the lingering challenges in our Maple segment. While the whole maple industry is affected by the current slow-down of the global economy, we were able to maintain our leading position as the world’s largest bottler of maple syrup. We continue to see our Maple segment as an important sweetener alternative and remain committed to growing this business in the coming years. DURING THE YEAR, WE PAID A STABLE QUARTERLY DIVIDEND OF $0.09 PER SHARE, OR $0.36 PER SHARE FOR THE YEAR. RETURNING VALUE TO OUR SHAREHOLDERS PLAYS A SIGNIFICANT ROLE IN OUR STRATEGY FOR CAPITAL ALLOCATION. Our consistent results and healthy long-term prospects make Rogers Sugar an attractive option for investors seeking a stable dividend as well as future growth. In July, the company published its third ESG report, showcasing the strides that we have made to reduce our environmental footprint, promote transparency, and enhance our positive contribution to the communities we serve. Our enhanced monitoring practices will provide a strong starting point against which to measure our future progress. In fiscal 2023, we formally announced the construction of our eastern capacity and logistics expansion project after completing the related detailed design and planning activities. This project is expected to increase the supply of sugar in Eastern Canada by approximately 100,000 metric tonnes and should be completed in the first half of fiscal 2026. This initiative will position us to meet the needs of our customers in Eastern Canada, while also allowing us to benefit from healthy demand growth for years to come. While it is still early, we are pleased with the progress of this expansion project so far. We look forward to providing you with updates as we move forward in 2024. In the coming year, we expect the strength in demand and pricing to support stable organic growth for our Sugar business, which will continue to be the main driver of our overall financial performance. In Maple, we expect the financial performance to continue to benefit from the efficiency improvements made in fiscal 2023. I would like to thank our employees for their exceptional contributions throughout the year. Importantly, as we move forward, we appreciate and want to acknowledge the trust and ongoing support of our shareholders. We look forward to taking this journey with you. On behalf of the Board of Directors, Dallas H. Ross Chairman 06 OUR FACILITIES 6 7 4 5 3 8 1 2 Rogers TMTC 1. Head Office and Cane Refinery Vancouver, BC 2. Beet Plant Taber, AB 3. Distribution Centre Toronto, ON 4. Administrative Office and Cane Refinery Montréal, QC 5. Bottling Plant, Eastern Sales and Distribution Granby, QC 6 Bottling Plant, Warehousing and Shipping Saint-Honoré-de-Shenley, QC 7. Bottling Plant, Warehousing and Shipping Dégelis, QC 8. Bottling Plant, Warehousing and Shipping Websterville, VT 07 MICHAEL WALTON President and CEO FISCAL 2023 WAS A YEAR OF RECORD FINANCIAL PERFORMANCE, SURPASSING THE OUTSTANDING YEAR WE HAD IN 2022. STRONG FUNDAMENTALS FOR SUGAR CONTINUE TO FORTIFY OUR CONFIDENCE IN THE LONG-TERM OUTLOOK FOR THE BUSINESS AND UNDERPIN OUR CONSISTENT AND PROFITABLE GROWTH. Overall, our business generated record consolidated revenue of $1.1 billion in 2023 and record adjusted EBITDA of more than $110 million. Our strong financial performance allowed us to pay $38 million in common share dividends to our shareholders. I am proud to say that we have achieved these great financial results while maintaining our focus on providing a safe and healthy workplace for our employees and our business partners throughout all our facilities. In 2023, we continued to solidify our commitment to Environmental, Social and Governance (ESG) initiatives. Our annual ESG report, published in July, highlights several positive changes we have made in the past year aimed at increasing our transparency and the sustainability of our business. 08 We have seen a consistent increase in the production of sugar-containing products from our customers across the country in recent years. Domestic demand for high quality and reliable sugar is growing steadily, and that is where we are concentrating our efforts. A key part of our growth strategy is focused on supporting the increasing demand from the domestic food transformation industry, and the thousands of food manufacturing jobs in Canada it supports. This demand growth supports our recent announcement of a substantial investment to build new production capacity and to optimize our existing facilities. The recently announced capacity expansion of our sugar refining assets and related logistics infrastructure in Eastern Canada is directly targeted at supporting the next wave of increased industrial sugar demand. SUGAR DURING FISCAL 2023 WE ACHIEVED RECORD SALES VOLUMES OF OVER 795,000 METRIC TONNES, THE COMPANY’S HIGHEST VOLUME TO DATE. THIS VOLUME SUPPORTS THE DELIVERY OF OUR HIGHEST RECORD ADJUSTED EBITDA FOR OUR MAIN BUSINESS SEGMENT OF OVER $98 MILLION. The robust performance was anchored by industrial segment growth and improved margin for sugar refining activities. As expected, we experienced a decline in export volumes as we prioritized the growing demand of the domestic market. Our export business remains important to our overall strategy and our operating flexibility allows us to export excess supply, when available. The production out of our cane sugar refineries in Montréal and Vancouver was very strong in 2023, as we focused our efforts on improving and optimizing our refining process. The production volume from our Taber beet sugar refinery at 105,000 metric tonnes was slightly lower than anticipated due to unfavourable weather conditions late in the growing season. Throughout the year, we made use of our national network to meet any shortfall and ensure the domestic market was adequately supported. In the spring, we announced a two-year agreement with the Alberta Sugar Beet Growers for the supply of sugar beets to our Taber sugar-refining plant, covering the 2023 and 2024 crops. This agreement allows for the security of supply to our clients and ensures a predictable and favourable environment for the sugar beet industry. 09 MAPLE In Maple, we made improvements to operations throughout the year that helped mitigate an otherwise challenging business environment. Our adjusted EBITDA for this business segment, at over $13 million, was lower than initially anticipated due to the lingering inflationary pressures negatively impacting the global demand for maple syrup. Despite the difficult business environment, we delivered higher results than last year as we were able to maintain our world-leading position in the market. In the second half of the year, we implemented automation projects for the operations of our two main bottling facilities in Granby and Degelis. These targeted investments had an immediate impact on improving the performance and efficiency of our production process. We intend to continue to invest responsibly in our Maple business segment in the coming years as we see this business as a key element of our long-term strategic goals. PATH OF SUCCESS WE UNDERSTAND AND VALUE OUR IMPORTANT ROLE IN CANADA’S FOOD SUPPLY CHAIN, AS AN ESSENTIAL INGREDIENT SUPPLIER OF MANY OF THE PRODUCTS PEOPLE ENJOY EVERY DAY. Going forward, we are well positioned to meet the growing demand for sugar- containing products by optimizing our Western operations and investing in new production capacity, including our recently announced Eastern capacity increase project. This project is expected to provide approximately 100,000 metric tonnes of additional quality refined sugar to the market beginning in the first half of 2026. I am very proud of the success we achieved in 2023, and I want to thank all our employees, customers and shareholders for their support. I look forward to the continued growth of both of our business segments and I am confident we have laid a strong foundation and are well on the path to future success. Sincerely, Michael Walton President and Chief Executive Officer 10 ESG HIGHLIGHTS WE ARE PLEASED TO PRESENT AN OVERVIEW OF ROGERS’ THIRD ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORT, WHICH WAS PUBLISHED IN JULY 2023. To drive our ESG program forward, we have created a formal ESG structure and onboarded a new Director of Sustainability. This important step has led us to incorporate several changes within the report, targeting increased transparency and responsibility. As a food manufacturer with eight facilities across Canada and the US, we understand the impact our operations and products have on the environment and communities where we are located. This is why we have invested over $9 million since 2018 in projects that have improved our manufacturing process energy efficiency and reduced associated carbon emissions. We have also taken a significant step in meeting our target of 100% raw sugar supply being sourced from producers who follow verified or certified sustainable agricultural practices through a multi-year supply partnership with Raízen. This large exporter represents a source of certified non-genetically modified organism (“non-GMO”) and certified Bonsucro raw sugar for our Eastern Canada operations. We recognize the importance of our actions during the past year for measuring future performance as we streamlined the process for gathering and reporting ESG data. However, this is just the first step as we will use 2022 as a baseline to measure the success of future strategies and targets to reduce our environmental impact, increase our social awareness and review our governance practices. In summary, we made significant headway in 2022 that is presented in our third ESG report and we are committed to continuing our process of improvement in the coming years. 11 To view the complete ESG Report, go to: https://lanticrogers.com/media/financial-reports/2023/07/ rsi_esg_2023fy22_en_final.pdf ENVIRONMENT(1) 4,186,409 TOTAL ENERGY USE (GJ) 258,981(2) GHG EMISSIONS (TCO2E) SOCIAL(1) $231K CHARITABLE DONATIONS 34% PERCENTAGE OF WOMEN IN MANAGEMENT LEVEL ROLES GOVERNANCE(1) 33% WOMEN ON ROGERS’ BOARD 100% MANAGERS’ INCENTIVE PAY IS LINKED TO ONE OR MORE ESG OBJECTIVES (1) All figures based on the 2022 financial year. (2) Total Scope 1 & Scope 2 emissions. 12 TABLE OF CONTENTS OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Net finance costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Maple. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 USE OF FINANCIAL DERIVATIVES FOR HEDGING. . . . . . . . . . . . . . . . . 16 Summary of Quarterly Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 BUSINESS HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Capital resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SELECTED FINANCIAL DATA AND HIGHLIGHTS . . . . . . . . . . . . . . . . . . 18 OUTSTANDING SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Adjusted results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ENVIRONMENT, SOCIAL, AND GOVERNANCE (“ESG”) . . . . . . . . . . . 4 1 SEGMENTED INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 RISK AND UNCERTAINTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 NON-GAAP MEASURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Maple. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 CRITICAL ACCOUNTING ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 OUTLOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES NOT YET ADOPTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Maple products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 CONSOLIDATED RESULTS AND SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 DISCLOSURE CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . 55 INTERNAL CONTROL OVER FINANCIAL REPORTING . . . . . . . . . . . . . 56 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Results from operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 13 MANAGEMENT’S DISCUSSION AND ANALYSIS CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2023 AND OCTOBER 1, 2022 2023 Annual ReportManagement’s Discussion & Analysis14 T his Management’s Discussion and Analysis (“MD&A”) of Rogers Sugar Inc.’s (the “Company”, “Rogers”, “RSI” or “our”, “we”, “us”) dated November 29, 2023 should be read in conjunction with the audited consolidated financial statements and Lantic’s sugar products are marketed under the “Lantic” trademark in Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland (collectively, “Eastern Canada”), and the “Rogers” trademark in British Columbia, Alberta, Saskatchewan and related notes for the years ended September 30, 2023 and October 1, Manitoba (collectively, “Western Canada”). These products include 2022. The Company’s MD&A and consolidated financial statements granulated, icing, cube, yellow and brown sugars, liquid sugars are prepared using a fiscal year which typically consists of 52 weeks, and specialty syrups. Lantic also operates a distribution center in however, every five to six years, a fiscal year consists of 53 weeks. Toronto, Ontario. The fiscal years ended September 30, 2023 and October 1, 2022 consist of 52 weeks. TMTC operates bottling plants in Granby, Dégelis and St-Honoré- de-Shenley, Québec and in Websterville, Vermont. TMTC’s products All financial information contained in this MD&A and audited include maple syrup and derived maple syrup products supplied consolidated financial statements are prepared in accordance with under retail private label brands in approximately 50 countries and International Financial Reporting Standards (“IFRS”), as adopted by are sold under various brand names. the International Accounting Standards Board. All amounts are in Canadian dollars unless otherwise noted, and the term “dollar”, as Our business has two distinct segments - Sugar – which includes well as the symbol “$”, designate Canadian dollars unless otherwise refined sugar and by-products and Maple – which includes maple indicated. syrup and maple derived products. Management is responsible for preparing the MD&A. Rogers’ audited consolidated financial statements and MD&A have been SUGAR approved by its Board of Directors upon the recommendation of its Audit Committee prior to release. FACILITIES Additional information relating to Rogers, Lantic Inc. (“Lantic”) Canada with cane refineries in Montréal, Québec and Vancouver, (Rogers and Lantic together referred as the “Sugar segment”), British Columbia, and a sugar beet factory in Taber, Alberta. Lantic The Maple Treat Corporation (“TMTC”) and Highland Sugarworks also operates a distribution center in Toronto, Ontario. The strategic Inc. (“Highland”) (the latter two companies together referred to as location of these facilities provides operating flexibility and the “TMTC” or the “Maple segment”), including the annual information ability to service all customers across the country efficiently and on Lantic is the only sugar producer with operating facilities across form, quarterly and annual reports, annual environmental, social a timely basis. and governance report, management proxy circular, short form prospectus and various press releases are available on Rogers’ In the fourth quarter of fiscal 2023, the Board of Directors of Lantic website at www.LanticRogers.com or on the Canadian Securities approved the expansion of the production and logistic capacity Administrators’ System for Electronic Document Analysis and of its eastern sugar refining operations in Montréal and Toronto Retrieval+ (“SEDAR+”) website at www.sedarplus.ca. Information (the “Expansion Project”). This investment is expected to provide contained in or otherwise accessible through our website does not 100,000 metric tonnes of incremental refined sugar capacity to the form part of this MD&A and is not incorporated into the MD&A by growing Canadian market, at an estimated construction cost of reference. OUR BUSINESS approximately $200 million. The Expansion Project is made up of three key components: (i) the expansion of refining capacity with the addition of new sugar refining equipment at the Montréal plant; (ii) the construction of a new bulk rail loading section in Montréal to serve increased shipments to the Ontario market; and (iii) the Rogers has a long history of providing high quality sugar products to expansion of logistics and storage capacity in the Greater Toronto the Canadian market and has been operating since 1888. Area. We expect the incremental production and logistic capacity to be in service in the first half of fiscal 2026. Lantic, Rogers wholly owned subsidiary, operates cane sugar refineries in Montréal, Québec and Vancouver, British Columbia, as OUR PRODUCTS well as the only Canadian sugar beet processing facility in Taber, All Lantic operations supply high quality white sugar as well as a Alberta. broad portfolio of specialty products which are differentiated by colour, granulation, packaging format and raw material source. Rogers Sugar Inc.Management’s Discussion & Analysis15 Sales are focused in four specific market segments: industrial, In fiscal 2023, we concluded a new two-year agreement with the consumer, liquid and export products. The domestic market Alberta Sugar Beet Growers (“Growers”) for the supply of sugar represents over 90% of our company’s total volume. beets to the Taber beet plant, for which the crop harvested in the fall of 2023 will be the first year of the agreed contract. In fiscal 2023, Lantic’s domestic refined sugar sales volume grew by 2% which is higher than previous years and aligned with the overall PRICING growth of the Canadian market. The price of refined sugar deliveries from the Montréal and Vancouver raw cane facilities is directly linked to the price of the Raw #11 (“Raw The industrial granulated segment is the largest segment accounting #11”) market traded on the Intercontinental Exchange (“ICE”). All for 57% of all shipments. This segment is composed of a broad range sugar transactions are economically hedged, thus eliminating the of food processing companies that serve both the Canadian and impact of volatility in world raw sugar prices. This applies to all the American markets. In fiscal 2023, this segment sales volume refined sugar sales made by these plants. increased by 2% as compared to the previous year. In the consumer segment, a wide variety of products is offered under between US 17.36 cents and US 27.62 cents per pound and closed the Lantic and Rogers brand names. This segment has remained at US 26.48 cents per pound at the end of the fiscal year, which was stable in fiscal 2023 and is representing approximately 12% of all US 8.06 cents higher than the closing value at October 1, 2022. Price In fiscal 2023, the price of Raw #11 traded on the ICE fluctuated shipments. variation during the year was more volatile than in fiscal 2022 when Raw #11 prices fluctuated between US 17.20 cents and US 20.51 cents The liquid segment is composed of core users whose process or per pound. The average Raw #11 price in fiscal 2023 at US 22.48 products require liquid sucrose. Some customers in this segment cents was higher than the fiscal 2022 average of US 18.89 cents. group can substitute liquid sucrose with high fructose corn syrup The higher average price of Raw #11 was mainly due to sustained (“HFCS”). The purchasing patterns of substitutable users are largely strong global sugar demand and the effect of a global sugar supply influenced by the absolute price spread between HFCS and liquid shortage in the market. sugar. Increasingly, other considerations, such as ingredient labeling may bear some influence on the purchasing decision. The liquid segment sales increased by 1.5% this year and are representing MAPLE approximately 24% of all shipments in fiscal 2023. FACILITIES Lantic’s Taber plant is the only beet sugar factory in Canada and TMTC operates three plants in Québec, namely, in Granby, Dégelis is therefore the only producer of Canadian origin sugar. From this and in St-Honoré-de-Shenley, and one in Websterville, Vermont. facility, we service a mix of customers across Western Canada. We also sell into other North American markets through various quotas OUR PRODUCTS assigned through trade agreements. As such, this plant is the sole TMTC’s products are mainly comprised of the following: bottled participant in an annual Canadian-specific quota of refined sugar to maple syrup, bulk maple syrup and maple sugar and flakes. the United States (“US”) of 19,900 metric tonnes of Canadian-origin sugar. Bottled maple syrup is packaged in a variety of ways and sizes, including bottles, plastic jugs and the traditional cans. Bottled By-products relating to beet processing and cane refining activities maple syrup is available in all commercial grades and in organic and are sold in the form of beet pulp, beet pellets, and molasses. Beet non-organic varieties. TMTC’s bottled maple syrup is sold mainly pellets are sold domestically and to export customers for livestock under retail private label brands and under a variety house brand. feed. The production of molasses is dependent on the volume of sugar processed through the Taber, Montréal and Vancouver plants. Bulk maple syrup is mainly sold in large containers, drums and totes to foodservice retailers, food processors as well as other wholesalers. OUR SUPPLY The global supply of raw cane sugar is ample. Over the last several OUR SUPPLY years, Lantic has purchased most of its raw cane sugar from Central The production of maple syrup takes place over a period of six to and South America for its Montréal and Vancouver cane refineries. eight weeks during the months of March and April of each year. 2023 Annual ReportManagement’s Discussion & Analysis16 The biggest concentration of maple trees is located in the Provinces PRICING of Québec, New Brunswick, and Ontario, and in the US States of Pursuant to a marketing agreement entered into annually between Vermont, Maine and New Hampshire. Canada remains the largest the PPAQ and the Conseil de l’industrie de l’érable (the Maple Industry producer of maple syrup, with over 80% of the world’s production. Council) (the “Marketing Agreement”), authorized buyers must pay The Province of Québec alone represents 70% of the world’s a minimum price to the PPAQ for any maple syrup purchased from production. The US is the only other major producing country in the the producers. The price is fixed on an annual basis and depends world, representing approximately 20% of the global supply. on the grade of the maple syrup. In addition, a premium is added The maple syrup producers in Québec are represented by the Marketing Agreement, authorized buyers must buy maple syrup to the minimum price for any organic maple syrup. Pursuant to the Producteurs et Productrices Acéricoles du Québec (“PPAQ”). The from the PPAQ. PPAQ generally regulates the buying and selling of bulk maple syrup. The PPAQ represents approximately 13,300 producers and 8,000 individual businesses. USE OF FINANCIAL DERIVATIVES FOR HEDGING In Québec, nearly 90% of the total production of maple syrup SUGAR is sold through the PPAQ to the authorized buyers, leaving only In order to protect against fluctuations in the world raw sugar market, approximately 10% of the total production being sold directly by the we follow a rigorous hedging program for all purchases of raw cane producers to consumers or grocery stores. sugar and sales of refined sugar. The PPAQ manages a strategic maple syrup reserve in order to The Raw #11 market is only traded on the ICE, which trades in US mitigate production fluctuations caused by weather conditions and dollars. Sugar futures can be traded forward for a period of three prevent such fluctuations from causing maple syrup prices to spike years against four specific terminals per year (March, May, July or drop significantly. Each year, the PPAQ may organize a sale of a and October). The terminal values are used to determine the price portion of its accumulated reserve. This allows bottlers to respond to settlement upon the receipt of a raw sugar vessel or the delivery of supply shortages in the event of a poor harvest or unplanned growth sugar to our customers. The ICE rules are strict and are governed and demand. by the New York Board of Trade. Any amount owed, due to the movement of the commodity being traded, must be settled in cash The PPAQ is responsible to manage policy with respect to production the following day. and marketing quotas for production volume allocated to each maple syrup business in the Province of Québec. The main objective For the purchasing of raw sugar, we enter into long-term supply of the policy is to adjust the supply of maple syrup in response to contracts with reputable raw sugar suppliers (the “Seller”). These consumer demand, and more specifically, to stabilize selling prices long-term agreements will, amongst other things, specify the for producers and, ultimately, the buying price for consumers, foster yearly volume to be purchased, the delivery period of each vessel, investments in the maple industry and maintain a steady number of the terminal against which the sugar will be priced, and the freight maple-producing businesses in operation, regardless of their size. rate to be charged for each delivery. The price of raw sugar will be Outside of Québec, the maple syrup industry is generally organized delivery period will correspond to the terminal against which the determined later by the Seller, based upon the delivery period. The through producer-based organizations or associations, which sugar will be priced. promote maple syrup in general and its industry and serve as the official voice for maple syrup producers with the public. Our process of selling refined sugar is also done under the Raw #11 market. When a sales contract is negotiated with a customer, the TMTC has relationships with more than 1,400 maple syrup producers, sales contract will determine the period of the contract, the expected mainly in Québec and Vermont. Most of these producers sell 100% delivery period against specific terminals and the refining margin of their production to TMTC. Through our strong relationships with and freight rate to be charged over and above the value of the sugar. these producers, we have been able to develop a leading position in The price of the sugar is not yet determined but needs to be fixed by certified organic maple syrup. the customer prior to delivery. The customer will make the decision to fix the price of the sugar against the sugar terminal, as per the anticipated delivery period. Rogers Sugar Inc.Management’s Discussion & Analysis17 We purchase sugar beets from the Growers, for our Taber sugar • Consolidated adjusted net earnings for fiscal 2023 were refining facility under a fixed price negotiated from time to time. $44.5 million or $0.42 per share, as compared to $40.7 million or NATURAL GAS strong performance of our Sugar segment; The Board of Directors of Lantic approved an energy hedging policy to mitigate the overall price risks in the purchase of natural gas. • Consolidated revenues for fiscal year 2023 amounted to $1.1 billion, $0.39 per share for the same period in 2022, largely driven by the We purchase between 3.5 million gigajoules and 4.0 million gigajoules average raw sugar prices during the year, higher margin on sugar of natural gas per year for use in our refining operations. To protect refining related activities, and higher sugar sales volume at an increase of 10% as compared to last year, due mainly to higher against large and unforeseen fluctuations, we hedge forward our 795,307 metric tonnes; estimated usage on a longer-term basis based on prevailing market conditions. • Consolidated adjusted EBITDA for the fourth quarter was $28.6 million as compared to $29.0 million for the same period last Our gas hedges are unwound in the months that the commodity is year. The decrease in consolidated adjusted EBITDA for the fourth used in the operations, at which time any gains or losses incurred quarter was mainly due to lower adjusted EBITDA in the Sugar are then recognized for the determination of gross margins and segment, partially offset by higher adjusted EBITDA in the Maple earnings. segment; FOREIGN EXCHANGE • Adjusted EBITDA in the Sugar segment was $23.7 million for the Raw sugar costs for all sales contracts are denominated in US fourth quarter of fiscal 2023, a decrease of $2.5 million compared dollars. We also buy natural gas in US dollars. In addition, sugar to the same period last year, due largely to higher operating and export sales and some Canadian sugar sales are denominated in US distribution costs, partially offset by higher pricing; dollars. In order to protect ourselves against the movement of the Canadian dollar versus the US dollar, we, on a daily basis, reconcile • Adjusted EBITDA in the Maple segment for the fourth quarter all of our exposure to the US dollar and we hedge the net position was higher than last year by $2.1 million largely driven by improved against various forward months, estimated from the date of the average selling prices and lower operating costs; various transactions. • Free cash flow for the trailing 12 months ended September 30, Certain export sales of maple syrup are denominated in US 2023 was $45.8 million, a decrease of $1.0 million from the same dollars, Euros, Australian dollars, and British pounds. In order to period last year as a result of higher capital expenditures; mitigate against the movement of the Canadian dollar versus these currencies, we enter into foreign exchange hedging contracts. These • In the fourth quarter of fiscal 2023, we distributed $0.09 per share foreign exchange hedging contracts are unwound when the money to our shareholders for a total amount of $9.5 million; is received from the customer, at which time any gains or losses incurred are then recognized for the determination of gross margins • On August 14, 2023, RSI filed of a short-form base shelf prospectus and earnings. Foreign exchange gains or losses on any unhedged in connection with expected financing initiatives over the next two sales contracts are recorded when realized. years; BUSINESS HIGHLIGHTS • On August 11, 2023, the Board of Directors of Lantic approved the Expansion Project. This investment is expected to provide approximately 100,000 metric tonnes of incremental refined sugar capacity to the growing Canadian market, at an estimated • Consolidated adjusted EBITDA for the 2023 fiscal year was construction cost of approximately $200 million. The financing $110.9  million, up by 8.5% from the same period in 2022, mainly plan for the Expansion Project will include funding from debt and driven by the strong performance of the Sugar segment; equity or equity like instruments sources, along with the Company’s existing credit facilities and approved loans from Investissement Quebec for up to $65 million. We expect the incremental production and logistic capacity to be in service in the first half of fiscal 2026; 2023 Annual ReportManagement’s Discussion & Analysis 18 • On September 28, 2023, the unionized employee of the Vancouver • On November 1, 2023, we amended our revolving credit facility, sugar refinery, represented by the Public and Private Workers of by extending the term to October 31, 2027, and by increasing the Canada local 8 went on strike. As of the date of this MD&A, the amount available for working capital and for the Expansion Project strike is still ongoing. Management remains committed in reaching by $75 million to $340 million; and an agreement that is acceptable to both parties. Since the beginning of the strike, the Vancouver sugar refinery, which • On November 29, 2023, the Board of Directors declared a quarterly represents approximately 17% of our production of refined sugar, dividend of $0.09 per share, payable on or before February 1, 2024. has been operating at approximately a third of its capacity, and we have been using some of the production of our Taber facility to support our customers in Western Canada; SELECTED FINANCIAL DATA AND HIGHLIGHTS (unaudited) (In thousands of dollars, except volumes and per share information) Sugar (metric tonnes) Maple syrup (‘000 pounds) Total revenues Gross margin Adjustment to cost of sale(2) Adjusted gross margin(1) Q4 2023 Q4 2022 YTD 2023 YTD 2022 $ $ $ $ 215,500 214,672 795,307 794,600 10,363 9,838 43,871 47,063 308,036 267,406 1,104,713 1,006,134 41,192 28,472 165,726 130,805 999 (10,669) 10,395 (12,677) 40,193 39,141 155,331 143,482 Results from operating activities 22,815 (38,345) 94,963 Adjusted results from operating activities(1) 21,816 22,324 84,568 13,313 75,990 89,461 EBITDA(1) Adjusted EBITDA(1) Net earnings per share (basic) per share (diluted) 29,568 18,283 121,249 28,569 28,952 110,854 102,138 11,876 (45,502) 51,789 (16,568) 0.12 (0.44) 0.50 0.09 (0.44) 0.44 (0.16) (0.16) Adjusted net earnings(1) 11,283 12,161 44,494 40,659 Adjusted net earnings per share (basic)(1) 0.11 0.12 0.42 Trailing twelve months free cash flow(3) 45,765 46,751 45,765 Dividends per share 0.09 0.09 0.36 0.39 46,751 0.36 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. (3) See “Free cash flow” section. Rogers Sugar Inc.Management’s Discussion & Analysis Revenues ($000s) Sugar Maple Adjusted EBITDA ($000s) Sugar Maple 19 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Adjusted Net Earnings ($000s) Free Cash Flow TTM ($000s) Per share $0.16 $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 60,000 50,000 40,000 30,000 20,000 10,000 0 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Adj Net Earnings Adj Net Earning per share (basic) 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 30,000 25,000 20,000 15,000 10,000 5,000 0 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 price 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 that qualify under hedged accounting are accounted for in other comprehensive income. The unrealized gain/losses related to interest rate swaps that do not qualify under hedged accounting are accounted in the consolidated statement of earnings and 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 representative of our business to management, investors, analysts, and any other interested parties when financial results are adjusted by the gains/losses from financial derivative instruments that do not qualify for hedge accounting. 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. 2023 Annual ReportManagement’s Discussion & Analysis20 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 gross margin percentage, adjusted gross margin rate, adjusted results from operating activities, adjusted EBITDA, adjusted net earnings, adjusted net earnings per share and trailing twelve months free cash flow. These non-GAAP measures are evaluated on a consolidated basis and at a segmented level, excluding adjusted gross margin percentage, adjusted gross margin rate, 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, adjusted net earnings, adjusted net earnings per share and trailing twelve months free cash flow 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) Mark-to-market on: Sugar futures contracts Foreign exchange forward contracts Total mark-to-market adjustment on derivatives Cumulative timing differences Total adjustment to costs of sales Income (loss) (In thousands of dollars) Mark-to-market on: Sugar futures contracts Foreign exchange forward contracts Total mark-to-market adjustment on derivatives Q4 2023 Maple Products $ — (727) (727) (64) (791) Sugar $ 3,444 (94) 3,350 (1,560) 1,790 YTD 2023 Maple Products $ — (111) (111) Sugar $ 11,018 1,085 12,103 Cumulative timing differences (3,728) 2,131 Total $ 3,444 (821) 2,623 (1,624) 999 Total $ 11,018 974 11,992 (1,597) Q4 2022 Maple Products $ — Sugar $ (190) (5,339) (2,384) (2,384) Total $ (190) (7,723) (7,913) (5,529) (3,037) (8,566) Sugar $ 1,325 (5,058) (3,733) (6,563) 281 (2,756) (2,103) (10,669) YTD 2022 Maple Products $ — (2,474) (2,474) 93 Total $ 1,325 (7,532) (6,207) (6,470) Total adjustment to costs of sales 8,375 2,020 10,395 (10,296) (2,381) (12,677) Fluctuations in the mark-to-market adjustment on derivatives are due to the price movements in Raw #11 sugar and foreign exchange variations. We recognize cumulative timing differences, as a result of mark-to-market gains or losses, only when sugar or maple product 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 three and twelve months periods ended on September 30, 2023, the total cost of sales adjustment is a gain of $1.0 million and $10.4 million, respectively to be deducted from the consolidated results. For comparable periods last year, the total cost of sales adjustment is a loss of $10.7 million and $12.7 million, respectively to be added to the consolidated results. See the “Non-GAAP measures” section for more information on these adjustments. Rogers Sugar Inc.Management’s Discussion & Analysis 21 SEGMENTED INFORMATION Segmented Results (In thousands of dollars) Revenues Gross margin Administration and selling expenses Distribution costs Goodwill impairment Q4 2023 Maple Products $ Sugar $ Total $ Sugar $ Q4 2022 Maple Products $ Total $ 256,229 51,807 308,036 220,142 47,264 267,406 35,512 7,703 7,414 — 5,680 2,777 483 — 41,192 10,480 7,897 — 26,758 9,138 4,958 1,714 2,411 310 — 50,000 28,472 11,549 5,268 50,000 Results from operating activities 20,395 2,420 22,815 12,662 (51,007) (38,345) Adjustment to cost of sales(2) Adjusted Gross margin(1) Adjusted results from operating activities(1)(3) EBITDA(1) Adjusted EBITDA(1) Additional information: Additions to property, plant and equipment and intangible assets, net of disposals Increase in asset retirement obligation provision included in property, plant and equipment Additions to right-of-use assets (1,790) 33,722 18,605 25,453 23,663 791 6,471 3,211 4,115 4,906 (999) 40,193 21,816 29,568 28,569 8,566 35,324 21,228 17,609 26,175 2,103 3,817 1,096 674 2,777 10,669 39,141 22,324 18,283 28,952 8,949 252 9,201 11,460 946 12,406 350 10,056 — 33 350 10,089 — 113 — — — 113 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. (3) Adjusted results exclude impact of goodwill impairment. Segmented Results (In thousands of dollars) Revenues Gross margin Administration and selling expenses Distribution costs Goodwill impairment YTD 2023 Maple Products $ Sugar $ Total $ Sugar $ YTD 2022 Maple Products $ Total $ 893,482 211,231 1,104,713 792,200 213,934 1,006,134 144,397 33,250 24,637 — 21,329 10,979 1,897 — 165,726 44,229 26,534 — 115,872 35,733 19,681 — 14,933 10,050 2,028 50,000 Results from operating activities 86,510 8,453 94,963 60,458 (47,145) Adjustment to cost of sales(2) Adjusted Gross margin(1) Adjusted results from operating activities(1)(3) EBITDA(1) Adjusted EBITDA(1) Additional information: Additions to property, plant and equipment and intangible assets, net of disposals (8,375) (2,020) (10,395) 136,022 19,309 155,331 78,135 106,021 97,646 6,433 84,568 15,228 13,208 121,249 110,854 10,296 126,168 70,754 79,838 90,134 2,381 17,314 5,236 9,623 12,004 102,138 36,151 951 37,102 22,642 1,364 24,006 Increase in asset retirement obligation provision included in property, plant and equipment 350 Additions to right-of-use assets, net of disposals 11,667 — 78 350 11,745 100 8,842 — — 100 8,842 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. (3) Adjusted results exclude impact of goodwill impairment. 130,805 45,783 21,709 50,000 13,313 12,677 143,482 75,990 89,461 2023 Annual ReportManagement’s Discussion & Analysis 22 SUGAR REVENUES (In thousands of dollars) Q4 2023 Q4 2022 $ $ ∆ $ YTD 2023 YTD 2022 $ $ ∆ $ Revenues 256,229 220,142 36,087 893,482 792,200 101,282 In the fourth quarter of 2023, revenues increased by $36.1 million, compared to the same period last year. The variance was driven mainly by higher average market-price for Raw #11, and improved average pricing for refining-related activities. Sugar Volume Variance (Metric tonnes) Sugar Volumes (Metric tonnes) Q4 2022 214,672 -3,381 Q4 2023 215,500 4,118 -963 1,054 Industrial Consumer Liquid Export 250,000 200,000 150,000 100,000 50,000 0 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Overall, sugar volume increased slightly in the fourth quarter of 2023 compared to the same quarter last year, as a result of higher export and liquid sales volumes, partially offset by lower volumes in our industrial and consumer categories. • Industrial volume decreased by 3,381 metric tonnes compared to the same period last year, largely due to the impact of an unforeseen peak in demand resulting from a temporary market disruption event that occurred in the second half of fiscal 2022. • Consumer volume decreased by 963 metric tonnes compared to the same quarter last year, mainly due to timing of orders from customers. • Liquid volume increased by 1,054 metric tonnes compared to the same period last year mainly due to stronger demand from existing customers. • Export volume increased by 4,118 metric tonnes compared to the same period last year, when in fiscal 2022, we focused our sales efforts on serving the domestic industrial market, which was experiencing a temporary increase in demand. In the 2023 fiscal year, revenues increased by $101.3 million compared to last year. The variance was driven mainly by higher average market- price for Raw #11, higher sales volume, improved average pricing for refining-related activities, and higher by-product sales revenues. The average prices for Raw #11 sugar increased by US 3.6 cents per pound to US 22.5 cents per pound for the 2023 fiscal year, when compared to last year. Rogers Sugar Inc.Management’s Discussion & Analysis 23 Sugar Volumes (Metric tonnes) Sugar Volume Variance (Metric tonnes) 2,614 9,056 -10,834 FY 2022 794,600 - FY 2023 795,307 800,000 750,000 700,000 650,000 600,000 Industrial Consumer Liquid Export 2016 2017 2018 2019 2020 2021 2022 2023 During fiscal year 2023, sugar volume totaled 795,307 metric tonnes, an increase of 707 metric tonnes compared to last year. • Industrial volume increased by 9,056 metric tonnes compared to last year as a result of the continued strong demand in the domestic market. • Consumer volume remained largely unchanged from last year. • Liquid volume increased by 2,614 metric tonnes compared to last year as a result of higher demand from existing customers. • Export volume decreased by 10,834 metric tonnes compared to last year, as we focussed our sales effort toward serving the domestic industrial market. GROSS MARGIN (In thousands of dollars, except per metric tonne information) Q4 2023 Q4 2022 $ $ ∆ $ YTD 2023 YTD 2022 $ $ ∆ $ Gross margin 35,512 26,758 8,754 144,397 115,872 28,525 Total adjustment to cost of sales(2) (1,790) 8,566 (10,356) (8,375) 10,296 (18,671) Adjusted gross margin(1) 33,722 35,324 (1,602) 136,022 126,168 Adjusted gross margin per metric tonne(1) 156.48 164.55 (8.07) 171.03 158.78 9,854 12.25 Included in Gross margin: Depreciation of property, plant and equipment and right-of-use assets 4,022 4,300 (278) 15,396 16,835 (1,439) (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. Gross margin was $35.5 million and $144.4 million for the current quarter and the 2023 fiscal year, and included gains of $1.8 million and $8.4  million respectively, for the mark-to-market of derivative financial instruments. For the same periods last year, gross margin was $26.8 million and $115.9 million, respectively, with mark-to-market losses of $8.6 million and $10.3 million, respectively. Adjusted gross margin was $33.7 million and $136.0 million for the current quarter and for the 2023 fiscal year, respectively, as compared to $35.3 million and $126.2 million in the same periods of 2022. 2023 Annual ReportManagement’s Discussion & Analysis 24 Adjusted gross margin decreased by $1.6 million in the current quarter compared to the same quarter last year mainly due to higher operating costs associated with unforeseen electrical maintenance at the Montréal plant and incremental costs associated with the importation of refined white sugar to support customer demand. These unfavourable variances were partially offset by higher sugar sales margin from improved average pricing on sugar refining-related activities. On a per-unit basis, adjusted gross margin for the fourth quarter was $156 per metric tonne, as compared to $165 per metric tonne for the same period last year. For the 2023 fiscal year, adjusted gross margin increased by $9.9 million driven mainly by improved average pricing on sugar refining-related activities, partially offset by higher production costs mainly driven by higher maintenance activities, market-based inflationary pressures on operating costs and higher energy prices. On a per-unit basis, for the fiscal 2023, adjusted gross margin amounted to $171 per metric tonne compared to $159 per metric tonne for the same period last year. The favourable variance of $12 per metric tonne was mainly due to improved average pricing, partially offset by higher production costs. $ per metric tonne Adjusted Gross Margin 200 180 160 140 120 100 80 60 40 20 0 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Adj Gross Margin Adj Gross Margin per metric tonne $000s 50,000 40,000 30,000 20,000 10,000 0 Rogers Sugar Inc.Management’s Discussion & Analysis25 OTHER EXPENSES (In thousands of dollars, except per metric tonne information) Q4 2023 Q4 2022 $ Administration and selling expenses 7,703 Distribution costs 7,414 Included in Administration and selling expenses: Depreciation of property, plant and equipment $ 9,138 4,958 ∆ $ (1,435) 2,456 YTD 2023 YTD 2022 $ $ ∆ $ 33,250 35,733 (2,483) 24,637 19,681 4,956 and right-of-use assets 194 223 (29) 929 867 62 Included in Distribution costs: Depreciation of right-of-use assets 842 424 418 3,186 1,679 1,507 In the fourth quarter of fiscal 2023, administration and selling expenses were lower by $1.4 million compared to the same quarter last year. The variance was mainly due to lower cash-settled share-based compensation expenses driven by a decrease in the share price used to estimate the related expense, partially offset by higher compensation costs and related employee benefits. Distribution costs increased by $2.5 million compared to the same quarter last year, mainly due to an increase in logistical costs to support the strong demand in Eastern Canada and the lower-than-expected production from our beet sugar facility in Taber in fiscal 2023. For the year, administration and selling expenses were $2.5 million lower than the comparable period last year. The variance was mainly due to lower cash-settled share-based compensation expenses driven by a decrease in the share price used to estimate the related expense, partially offset by higher compensation costs and related employee benefits. Distribution costs increased by $5.0 million compared to the 2022 fiscal year, mainly due to an increase in logistical costs to support the strong demand in Eastern Canada and the lower-than-expected production from our beet sugar facility in Taber. RESULTS FROM OPERATING ACTIVITIES AND ADJUSTD EBITDA (In thousands of dollars) Q4 2023 Q4 2022 $ $ ∆ $ YTD 2023 YTD 2022 $ $ ∆ $ Results from operating activities 20,395 12,662 7,733 86,510 60,458 26,052 Total adjustment to cost of sales(2) (1,790) 8,566 (10,356) (8,375) 10,296 (18,671) Adjusted results from operating activities 1) 18,605 21,228 (2,623) 78,135 70,754 7,381 Depreciation of property, plant and equipment, right-of-use assets, and amortization of intangible assets EBITDA(1) Adjusted EBITDA(1) 5,058 25,453 4,947 17,609 111 19,511 19,380 131 7,844 106,021 79,838 26,183 23,663 26,175 (2,512) 97,646 90,134 7,512 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. Results from operating activities for the fourth quarter and the 2023 fiscal year were $20.4 million and $86.5 million, respectively, an increase of $7.7 million and $26.1 million respectively, as compared to same periods last year. These results include gains and losses from the mark-to- market of derivative financial instruments. 2023 Annual ReportManagement’s Discussion & Analysis 26 Adjusted results from operating activities in the fourth quarter of fiscal 2023 were $2.6 million lower than the same period last year, mainly due to lower adjusted gross margin and higher distribution costs, partially offset by lower administration and selling expenses. Adjusted results from operating activities for the 2023 fiscal year were $7.4 million higher than the same period last year as higher adjusted gross margin and lower administration and selling expenses were partially offset by higher distribution costs. EBITDA for the fourth quarter and the 2023 fiscal year were $25.5 million and $106.0 million, respectively, an increase of $7.8 million and $26.2 million, respectively, as compared to same periods last year. These results include gains and losses from the mark-to-market of derivative financial instruments. Adjusted EBITDA for the fourth quarter decreased by $2.5 million compared to the same period last year, largely due to lower adjusted gross margin and higher distribution costs, partially offset by lower administration and selling expenses. Adjusted EBITDA for the 2023 fiscal year increased by $7.5 million largely due to higher adjusted gross margin and lower administration and selling expenses, partially offset by higher distribution costs, as mentioned above. MAPLE REVENUES (In thousands of dollars, except volumes) Q4 2023 Q4 2022 Volumes (‘000 pounds) Revenues $ 10,363 51,807 $ 9,838 47,264 ∆ $ 525 4,543 YTD 2023 YTD 2022 $ $ ∆ $ 43,871 47,063 (3,192) 211,231 213,934 (2,703) Revenues for the fourth quarter were $4.5 million higher than the same period last year due to improved average selling prices and an increase in sales volume. For the 2023 fiscal year, revenues were $2.7 million lower than last fiscal year largely due to lower volume, partially offset by higher average selling prices. Total volume sold decreased by 3.2 million lbs or 6.8% in 2023 as compared to 2022. The decrease in volume was mainly attributable to lower demand and unfavourable market dynamics impacting negatively the global demand for maple syrup. Maple Volumes (000s pounds) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Adjusted Gross Margin Adj. Gross Margin % 14% 12% 10% 8% 6% 4% 2% 0% $000 10,000 7,500 5,000 2,500 0 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Adj Gross Margin Adj Gross Margin percentage Rogers Sugar Inc.Management’s Discussion & Analysis GROSS MARGIN (In thousands of dollars, except adjusted gross margin rate information) Q4 2023 Q4 2022 $ Gross margin 5,680 Total adjustment to cost of sales(1)(2) 791 Adjusted gross margin(1) 6,471 Adjusted gross margin percentage(1) 12.5% Included in Gross margin: Depreciation of property, plant and equipment and right-of-use assets 818 $ 1,714 2,103 3,817 8.1% 27 ∆ $ 3,966 (1,312) 2,654 4.4% YTD 2023 YTD 2022 $ 21,329 (2,020) 19,309 9.1% $ 14,933 2,381 17,314 8.1% ∆ $ 6,396 (4,401) 1,995 1.0% 807 11 3,265 3,278 (13) (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. Gross margin was $5.7 million and $21.3 million for the three months and the current fiscal year and includes a loss of $0.8 million and a gain of $2.0 million respectively, for the mark-to-market of derivative financial instruments. For the same periods last year, gross margin was $1.7 million and $14.9 million, respectively, with a mark-to-market loss of $2.1 million and $2.4 million, respectively. Adjusted gross margin for the fourth quarter of fiscal 2023 was higher by $2.7 million due to higher average selling prices, higher sales volume and lower production costs from recent automation initiatives. Adjusted gross margin for fiscal 2023 was $2.0 million higher than the prior year, due to higher average selling prices and lower operating costs, partially offset by lower sales volume. Operating costs were slightly lower in 2023 as compared to 2022 as market-based inflationary increases in costs were more than offset by savings related to automation initiatives implemented in the second half of 2023. Adjusted gross margin percentage for the fourth quarter of 2023 was 12.5% as compared to 8.1% for the same quarter last year. The favourable variance was mainly related to higher average pricing and lower operating costs from savings related to automation initiatives. Adjusted gross margin percentage for fiscal year 2023 was 9.1% as compared to 8.1% for fiscal year 2022. The favourable variance was mainly related to higher average pricing and lower operating costs. OTHER EXPENSES (In thousands of dollars) Q4 2023 Q4 2022 Administration and selling expenses Distribution costs Goodwill impairment $ 2,777 483 $ 2,411 310 ∆ $ 366 173 YTD 2023 YTD 2022 $ 10,979 1,898 $ 10,050 2,028 ∆ $ 929 (130) — 50,000 (50,000) — 50,000 (50,000) Included in Administration and selling expenses: Amortization of intangible assets 877 874 3 3,510 3,490 20 Administration and selling expenses for the last three months and for the twelve months ended in the current fiscal year were $0.4 million and $0.9 million higher than the comparable periods last year. These variances were largely due to market-based cost increases for compensation- related expenses and administrative business support costs. Distribution costs for the fourth quarter were higher by $0.2 million compared to the same period last year, due to incremental logistics costs from higher sales volume. Distribution costs for the 2023 fiscal year were lower by $0.1 million due to lower volume sold, partially offset by market-based cost increases. 2023 Annual ReportManagement’s Discussion & Analysis 28 At the end of fiscal 2022, we performed our annual accounting impairment testing and concluded that the carrying value of the net assets of our Maple business segment exceeded the recoverable amount by $50.0 million at that point in time. As a result, we recorded a non-cash impairment charge to our goodwill balance of $50.0 million in the fourth quarter of fiscal 2022. This reduction in goodwill was mainly attributable to the lower-than-expected financial results of the Maple business segment in 2022, caused by unfavourable market dynamics and significant inflationary pressures. We performed our annual accounting impairment testing on the Maple business segment at the end of fiscal 2023 and concluded that the carrying value of the net assets was lower than the recoverable value of such assets. Accordingly, no impairment charge was recorded at the end of fiscal year 2023. RESULTS FROM OPERATING ACTIVITIES AND ADJUSTED EBITDA (In thousands of dollars) Q4 2023 Q4 2022 $ $ ∆ $ YTD 2023 YTD 2022 $ $ ∆ $ Results from operating activities 2,420 (51,007) 53,427 8,453 (47,145) 55,598 Total adjustment to cost of sales(1) 791 2,103 (1,312) (2,020) 2,381 (4,401) Goodwill impairment — 50,000 (50,000) — 50,000 (50,000) Adjusted results from operating activities(1)(3) 3,211 Depreciation and amortization 1,695 EBITDA(1) Adjusted EBITDA(1) 4,115 4,906 1,096 1,681 674 2,777 2,115 14 3,441 2,129 6,433 6,775 15,228 13,208 5,236 6,768 9,623 12,004 1,197 7 5,605 1,204 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. (3) Adjusted results for operating activities exclude goodwill impairment. Results from operating activities for the fourth quarter and the 2023 fiscal year were $2.4 million and $8.5 million respectively, compared to a loss of $51.0 million and $47.1 million respectively, in the same periods last year. These results include gains and losses from the mark-to-market of derivative financial instruments and the goodwill impairment recorded in the fourth quarter of 2022. Adjusted results from operating activities for the current quarter were $2.1 million higher than the comparable period last year, due mainly to higher adjusted gross margin, partially offset by higher distribution costs, administration and selling expenses. Adjusted results from operating activities for the 2023 fiscal year were $1.2 million higher than the comparable period last year, due mainly to higher adjusted gross margin, partially offset by higher administration and selling expenses, as explained above. EBITDA for the fourth quarter and the 2023 fiscal year were $4.1 million and $15.2 million, respectively, an increase of $3.4 million and $5.6 million, respectively, as compared to same periods last year. These results include gains and losses from the mark-to-market of derivative financial instruments. Adjusted EBITDA for the current quarter of fiscal 2023 increased by $2.1 million, due to higher sales volume and increased adjusted gross margin as explained above. Adjusted EBITDA for the 2023 fiscal year increased by $1.2 million, compared to the same period last year, largely driven by higher adjusted gross margins, partially offset by higher administration and selling expenses, as explained above. Rogers Sugar Inc.Management’s Discussion & Analysis 29 OUTLOOK Following a solid performance in 2023, we expect to continue to deliver a strong, stable financial performance in 2024. The continued strength in demand and pricing is expected to support stable organic growth for our Sugar business segment going forward. We expect our Maple segment to modestly recover during 2024 as the unfavorable inflationary pressures encountered over the last two years begin to recede. SUGAR We expect the Sugar segment to perform well in fiscal 2024. Underlying North American demand remains strong across all customer segments supported by favourable market dynamics. Improvements in pricing implemented over the last two years will continue to positively support our financial results, allowing us to mitigate the current impact of inflationary pressures on costs. However, the current labour disruption at our Vancouver refinery is expected to negatively impact our 2024 financial results, the extent of which is not yet known. The magnitude of the impact will depend mainly on the length of the strike and the potential internal incremental costs associated with servicing our Western customers impacted by the labour disruption. Since the beginning of the strike, on September 28, 2023, the Vancouver sugar refinery, which represents approximately 17% of our production of refined sugar, has been operating at approximately a third of its capacity, and we have been using some of the production of our Taber facility to support our customers in Western Canada. As at the time of preparation of this MD&A, we remain committed in reaching an agreement that is acceptable to both parties. The initial volume expectation for fiscal year 2024 was set at 800,000 metric tonnes, representing an increase of 4,700 metric tonnes as compared to fiscal year 2023. Considering the current labour situation at our Vancouver refinery, we expect our volumes will be lower in 2024 compared to 2023. The reduction in volume sold to customers will depend on the length of the labour disruption. We will continue to prioritize domestic sales and focus on meeting our commitments to our customers. We will provide updates on the expected impact of the labour disruption on sales volumes as the situation evolves. The harvest period for our sugar beet facility in Taber was completed in early November and we have received the expected quantity of beets from the growers. We are currently in the processing stage of the 2023 sugar beet campaign, with expected completion by the end of February. Based on our early assessment, we anticipate the 2023 crop to deliver between 105,000 metric tonnes and 110,000 metric tonnes of beet sugar, consistent with our expectations. The volume expectations align with the acreage contracted with the ASBG and the volume of sugar beets received. Production costs and maintenance programs for our three production facilities are expected to continue to be moderately impacted by the current inflationary market-based pressures. We continue to focus on cost control initiatives throughout our operations. Distribution costs are expected to be stable in 2024. These expenditures reflect the transfer of sugar produced between our facilities to serve our customers, including some of the costs associated with meeting the growing market demand with imported refined white sugar from Central America. Administration and selling expenses are expected to increase in 2024 as compared to 2023, due mainly to market-based increases for compensation expenditures and external services supporting our business. We anticipate our financing costs to increase in fiscal 2024 due to higher working capital needs, mainly associated with the purchase of raw sugar. We have been able to mitigate the impact of recent increases in interest rates and energy costs through our multi-year hedging strategy. We expect our hedging strategy will continue to mitigate such exposure in fiscal 2024. Spending on regular business capital projects is also expected to remain stable for fiscal 2024. We anticipate spending approximately $25 million on various initiatives. This capital spending estimate excludes expenditures relating to our recently announced Expansion Project in Eastern Canada, which are currently estimated to be at $70 million for fiscal 2024. 2023 Annual ReportManagement’s Discussion & Analysis30 MAPLE The Maple segment financial results were lower than anticipated for 2023. This was due mainly to lower volume and lingering inflationary pressures on costs. Although we expect these financial and operating pressures to remain in the first part of fiscal 2024, we expect the Maple business segment to continue to benefit from automation initiatives at its Granby and Dégelis plants. Such initiatives, combined with recently negotiated price increases, are supporting the anticipated modest recovery of our Maple business segment in 2024. The expected sales volume for 2024 is stable when compared to 2023 at approximately 43.5 million lbs. The sales volume expectations reflects the sector-wide challenging market dynamics, impacting the global demand for maple syrup. Capital investments have decreased significantly in recent years. The Maple segment is expected to spend between $1 million and $1.5 million annually on capital projects. The main driver for the selected projects is to improve productivity and profitability through automation. See “Forward-Looking Statements” section and “Risks and Uncertainties” section. CONSOLIDATED RESULTS AND SELECTED FINANCIAL INFORMATION (unaudited) (In thousands of dollars, except volumes and per share information) Sugar (metric tonnes) Maple syrup (000 pounds) Total revenues Gross margin Adjusted gross margin(1) Results from operating activities Adjusted results from operating activities(1) EBITDA(1) Adjusted EBITDA(1) Net finance costs Income tax expense Net (loss) earnings per share (basic) per share (diluted) Adjusted net earnings(1) per share (basic)(1) Dividends per share Q4 2023 Q4 2022 YTD 2023 YTD 2022 $ $ $ $ 215,500 214,672 795,307 794,600 10,363 9,838 43,871 47,063 308,036 267,406 1,104,713 1,006,134 41,192 40,193 22,815 21,816 29,568 28,569 6,687 4,252 28,472 39,141 (38,345) 22,324 18,283 28,952 5,057 2,099 11,876 (45,502) 0.12 0.09 11,283 0.11 0.09 (0.44) (0.44) 12,161 0.12 0.09 165,726 155,331 94,963 84,568 121,249 110,854 24,577 18,597 51,789 0.50 0.44 130,805 143,482 13,313 75,990 89,461 102,138 17,567 12,314 (16,568) (0.16) (0.16) 44,494 40,659 0.42 0.36 0.39 0.36 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. Rogers Sugar Inc.Management’s Discussion & Analysis 31 TOTAL REVENUES Revenues increased by $40.6 million and $98.6 million for the fourth quarter and for the 2023 fiscal year, respectively, compared to the same periods last year. The increase in revenues was mainly attributable to higher prices paid for Raw #11 sugar and higher average pricing for refining related activities in the Sugar segment, as well as higher pricing in the Maple segment. GROSS MARGIN Gross margin increased by $12.7 million and $34.9 million respectively for the current quarter and for fiscal 2023 compared to the same periods last year. Excluding the mark-to-market of derivative financial instruments, adjusted gross margin for the current quarter and for the 2023 fiscal year increased by $1.1 million and $11.8 million respectively, compared to the same period last year. These positive variances were mainly due to higher adjusted gross margin in both the Sugar and Maple segments largely driven by improved selling price. For the Sugar segment, the adjusted gross margin for the current quarter amounted to $156 per metric tonne, a decrease of $8 per metric tonne compared to the same period last year. Adjusted gross margin per metric tonne for fiscal 2023 in the Sugar segment at $171 per metric tonnes, was higher by $12 per metric tonne compared to last year, mainly due to improved average pricing, partially offset by higher production costs. For the Maple segment, the adjusted gross margin percentage for the current quarter and the 2023 fiscal year were higher by 4.4% and 1.0% respectively, when compared to the same period last year, mainly driven by higher pricing and lower operating costs. RESULTS FROM OPERATING ACTIVITIES Results from operating activities for the current quarter were $22.8 million compared to a loss of $38.3 million in the same quarter last year, representing an increase of $61.1 million. For fiscal 2023, results from operating activities were $95.0 million compared to $13.3 million last year, representing an increase of $81.7 million. Adjusted results from operating activities for the current quarter amounted to $21.8 million compared to $22.3 million in the same quarter last year, a decrease of $0.5 million. For fiscal 2023, adjusted results from operating activities were $84.6 million compared to $76.0 million, representing an increase of $8.6 million. The improvement of adjusted results from operating activities in both periods was mainly driven by higher contribution from the Sugar segment during the 2023 fiscal year. NET FINANCE COSTS (In thousands of dollars) Interest expense on convertible unsecured subordinated debentures, including accretion of $1,024 (2022 - $969) Interest on revolving credit facility Interest on senior guaranteed notes, including accretion of $158 (2022- $116) Amortization of deferred financing fees Interest on Producteurs et Productrices Acérioles du Québec supplier balance Other interest expense Interest accretion on discounted lease obligations Net change in fair value of interest rate swaps Q4 2023 Q4 2022 $ $ 2,140 1,946 2,125 1,113 917 308 840 ― 335 201 895 311 497 142 301 (328) ∆ $ 15 833 22 (3) 343 (142) 34 529 YTD 2023 YTD 2022 $ $ ∆ $ 8,530 7,293 3,639 1,231 2,265 21 1,075 8,413 5,063 3,595 1,240 900 157 1,000 117 2,230 44 (9) 1,365 (136) 75 523 (2,801) 3,324 Net finance costs 6,687 5,056 1,630 24,577 17,567 7,010 For the fourth quarter of 2023 and fiscal 2023, net finance costs were higher by $1.6 million and $7.0 million respectively, compared to the same periods last year, largely driven by the increase in interest expense on our revolving credit facility from higher average borrowing, the increase in interest expense related to the purchase of maple syrup from PPAQ and the impact of market-based changes in fair value related to interest rate swaps contracts. 2023 Annual ReportManagement’s Discussion & Analysis 32 TAXATION (In thousands of dollars) Current Deferred Income tax expense Q4 2023 Q4 2022 $ $ 3,606 1,595 646 504 4,252 2,099 ∆ $ 2,011 142 2,153 YTD 2023 YTD 2022 $ $ ∆ $ 14,676 14,275 401 3,921 (1,961) 5,882 18,597 12,314 6,283 The variations in current and deferred tax expense for the current quarter and the fiscal 2023 are consistent with the variation in earnings before income taxes compared to the same periods last year, excluding the impact of the goodwill impairment charge recorded in the fourth quarter of 2022. 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, losses carried forward, 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 fourth quarter and for the fiscal 2023 were higher by $57.4 million and $68.4 million, respectively, compared to the same periods last year. Excluding the goodwill impairment of $50.0 million recorded in the fourth quarter of fiscal 2022, net earnings in the fourth quarter and for the fiscal 2023 were higher by $7.4 million and $18.4 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, higher adjusted results from operating activities, partially offset by higher net finance costs and income tax expenses. Adjusted net earnings in the fourth quarter were $0.9 million lower compared to the same period last year, mainly due to higher net finance costs. Adjusted net earnings for the 2023 fiscal year were higher by $3.8 million compared to the same periods last year, largely attributable to higher adjusted results from operating activities, partially offset by higher net finance costs. Rogers Sugar Inc.Management’s Discussion & Analysis 33 SUMMARY OF QUARTERLY RESULTS The following is a summary of selected financial information of the consolidated financial statements and non-GAAP measures of the Company for the last eight quarters: QUARTERS (2) 2023 2022 (In thousands of dollars, except for volume and per share information) Fourth Third Second First Fourth Third Second First $ $ $ $ $ $ $ $ Sugar volumes (MT) 215,500 191,411 195,547 192,849 214,672 203,315 196,570 180,043 Maple products volume (‘000 pounds) Total revenues Gross margin 10,363 9,630 12,059 11,819 9,838 12,027 12,912 12,286 308,036 262,285 272,949 261,443 267,406 254,632 253,341 230,755 41,192 41,685 41,659 41,191 28,472 24,948 33,899 43,486 Adjusted gross margin(1) 40,193 34,912 38,233 41,993 39,141 32,654 35,887 35,800 Results from operations 22,815 24,008 21,856 26,284 (38,345) 8,822 15,499 27,337 Adjusted results from operations(1) 21,816 17,235 18,431 27,086 22,324 16,528 17,487 19,651 EBITDA(1) Adjusted EBITDA(1) Net (loss) earnings Per share - basic Per share - diluted 29,568 30,523 28,445 32,713 18,283 15,402 22,029 33,748 28,569 23,750 25,020 33,515 28,952 23,108 24,017 26,061 11,876 14,177 11,062 14,674 (45,502) 3,138 8,570 17,226 0.12 0.09 0.13 0.12 0.11 0.10 0.14 0.13 (0.44) (0.44) 0.03 0.03 0.08 0.08 0.17 0.15 Adjusted net earnings(1) 11,283 8,749 9,115 15,347 12,161 8,419 9,122 10,957 Per share - basic Per share - diluted Sugar - Adjusted gross margin rate per MT(1) Maple - Adjusted gross margin percentage(1) 0.11 0.10 0.08 0.08 0.09 0.09 0.15 0.31 0.12 0.11 0.08 0.08 0.09 0.09 0.11 0.10 156.48 159.31 174.62 195.29 164.55 138.68 159.11 174.25 12.5% 9.5% 7.2% 7.7% 8.1% 8.2% 8.0% 8.1% (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) All quarters are 13 weeks. Historically the first quarter (October to December) and the fourth quarter (July to September) of the fiscal year are the best quarters for the sugar segment for adjusted gross margin, adjusted EBITDA, and adjusted net earnings due to the favourable sales product mix associated with an increased proportion of consumer sales during these periods of the year. At the same time, the second quarter (January to March) and the third quarter (April to June) historically have the lowest volumes as well as an unfavourable sales product mix, resulting in lower adjusted gross margins, adjusted EBITDA, and adjusted net earnings. Over the last eight quarters, this trend was less correlated due to sustained strong demand in the domestic market and sales that were delayed from the first quarters of both, 2023 and 2022. Usually, there is minimal seasonality in the Maple products segment. However, over the last two years, we have experienced volatility in sales volume partially attributable to the highly competitive market and the global volatility in economic conditions. 2023 Annual ReportManagement’s Discussion & Analysis 34 FINANCIAL CONDITION (In thousands of dollars) Total assets Total liabilities September 30, 2023 $ 960,901 654,005 October 1, 2022 $ 937,956 646,537 October 2, 2021 $ 879,930 560,972 The increase in total assets of $22.9 million in the current fiscal year was mainly due to an increase in inventory of $20.6 million, an increase in property, plant, and equipment of $19.2 million and incremental right-of-use assets of $7.0 million. These positives variances were partially offset by a decrease in derivative financial instruments assets of $17.9 million, a decrease in intangible assets of $3.4 million and lower trade and other receivables of $2.0 million. Total liabilities for the current fiscal year increased by $7.5 million due mainly to an increase in outstanding balance under the revolving credit facility of $32.0 million, higher lease obligations of $7.3 million and an increase in deferred tax liabilities of $3.3 million. These variances were partially offset by a decrease in trade and other payables of $13.0 million, a reduction in the employee benefits liabilities of $15.6 million and a decrease in derivative financial instruments liabilities of $6.6 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 compliance with financial covenants for the year. (In thousands of dollars) FY 2023 FY 2022 Net cash flow from operating activities Cash flow used in financing activities Cash flow used in investing activities Effect of changes in exchange rate on cash Net decrease in cash $ 44,318 (8,886) (35,398) (139) (105) $ 21,552 (13,554) (23,730) 240 (15,492) Cash flow from operating activities for the current year increased by $22.8 million compared to last year, due mainly to higher net earnings adjusted for non-cash items of $11.4 million, a positive non-cash working capital variation of $8.2 million and lower income taxes paid of $6.7 million. These positive variances were partially offset by higher interest paid of $3.6 million. Cash flow used in financing activities decreased by $4.7 million for the current year compared to last year due mainly to an increase in borrowings from the revolving credit facility, partially offset by increase in payment of financing fees. The cash flow used in investing activities increased by $11.7 million in the current year compared to last year due mainly to the capitalization of $9.7 million in expenditures in connection with the planning and design stage of our planned Expansion Project in Eastern Canada. Rogers Sugar Inc.Management’s Discussion & Analysis 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 and intangible assets, net of value-added capital expenditures, and the payment of lease obligations. 35 FREE CASH FLOW (In thousands of dollars) Cash flow from operations Adjustments: Changes in non-cash working capital Mark-to-market and derivative timing adjustments Payment of deferred financing fees Financial instruments non-cash amount Capital expenditures and intangible assets Value added capital expenditures Payment of lease obligations Free cash flow(1) Declared dividends Trailing twelve months 2023 $ 44,318 35,039 (9,871) (1,308) 5,687 (35,398) 12,717 (5,419) 45,765 37,752 2022 $ 21,552 43,195 9,876 (268) (4,030) (23,730) 5,306 (5,150) 46,751 37,500 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. Free Cash Flow ($000s) 60,000 8,716 50,000 46,751 6,728 -4,596 -5,644 45,765 -4,526 -1,663 40,000 30,000 20,000 10,000 0 Trailing 2022 Income taxes Interest and deferred financing fees Adjusted EBITDA Other non-cash variances including share-based compensation accrual variance Capital spending and capital lease Pension net of contribution Trailing 2023 2023 Annual ReportManagement’s Discussion & Analysis 36 Free cash flow for the trailing twelve months ending September 30, 2023 amounted to $45.8 million, representing a decrease of $1.0 million compared to the same period last year. This decrease in free cash flow was mainly due to higher capital expenditures, intangible assets and value-added capital expenditures of $4.3 million, the reduction of non-cash impact of $5.8 million related to the variance in the accrual for cash-settled share-based compensation of senior managements, and the increase in payment of interest and deferred financing fees of $4.6 million. This variance was partially offset by higher adjusted EBITDA of $8.7 million and the decrease in income taxes paid of $6.7 million. Capital and intangible assets expenditures, net of value-added capital expenditures, increased by $4.3 million compared to last year’s rolling twelve months due mainly to higher investment in production assets. 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 increase in the amount spent in value-added capital expenditures for 2023 as compared to the same period in 2022, was mainly related to costs amounting to $9.7 million incurred in connection with the planning and design stage of our planned Expansion Project in Eastern Canada. The Board of Directors declared a quarterly dividend of $0.09 per common share every quarter, totalling $0.36 for the trailing twelve-month 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 and financial instruments non-cash amount of $4.2 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 The following table identifies the outstanding contractual obligations of our company as at year-end, and the effects such obligations are expected to have on liquidity and cash flow over the next several years: (In thousands of dollars) Revolving credit facility Senior Guaranteed Notes Interest on convertible debentures Interest based on swaps Interest on Senior Guaranteed Notes Lease obligations Purchase obligations Sugar purchase obligations (‘000 MT) Maple purchase obligations (‘000 pounds) Total $ 158,000 100,000 11,700 3,370 26,466 38,731 92,062 430,329 901 4,700 58,000 100,000 Under 1 year $ — 7,506 2,422 3,490 5,965 92,062 169,445 711 4,700 1 to 3 years 4 to 5 years After 5 years $ — 4,194 948 6,980 11,302 — $ — — — — 3,490 6,975 — $ — 100,000 — — 12,506 14,489 — 23,424 110,465 126,995 190 — — — — — Rogers Sugar Inc.Management’s Discussion & Analysis 37 The Sixth and Seventh series debentures, which mature in December 2024 and June 2025, respectively, have been excluded from the above table due to the holders’ conversion option and the Company’s option to satisfy the obligations at redemption or maturity in common shares. Interest has been included in the above table to the date of maturity. Lantic has a revolving credit facility to support its financial and operational needs. The revolving credit facility is syndicated with six Canadian chartered banks and includes an accordion feature allowing for the borrowing of up to $400 million. This agreement has been amended and extended from time to time. The revolving credit facility is subject to covenants and is secured by the assets of Lantic and TMTC. As of September 30, 2023, the approved amount available for borrowing was $265 million, of which $158 million was drawn. On November 1, 2023, Lantic amended its revolving credit facility, by extending its term to October 31, 2027, and by increasing the amount available for borrowing for working capital and for the Expansion Project by $75 million to $340 million. In addition, in order to conform with the IBOR reform, Lantic will borrow at prime rate, SOFR Rate or under Adjusted Term CORRA loan, plus 20 to 250 basis points, based on achieving certain financial ratios. On April 30, 2021, Lantic issued a private placement of $100 million in the form of senior guaranteed notes (the “Notes”) under a note purchase agreement entered into with certain institutional investors. The Notes are guaranteed and rank pari-passu with our existing revolving credit facility. The Notes mature on April 30, 2031. The interest of the Notes was set at 3.49% and the interest is payable semi-annually in arrears in equal installments on April 30th and October 30th of each year, commencing on October 30, 2021. The proceeds received from the private placement of the Notes were used to repay existing credit facility indebtedness. As at September 30, 2023, Lantic was in compliance with all the covenants under its revolving credit facility and its private placement and a total of $630.0 million have been pledged as security, compared to $590.6 million as at October 1, 2022 including trade receivables, inventories and property, plant and equipment. In order to fix the interest rate on a substantial portion of the expected drawdown of the revolving credit facility, we enter into interest rate swap agreements. The following table provides the outstanding swap agreements as at September 30, 2023 as well as their respective value, interest rate and time period: Fiscal year contracted (in thousands of dollars) Fiscal 2019 Fiscal 2019 Fiscal 2020 Fiscal 2020 Fiscal 2020 Total outstanding value as at September 30, 2023 Date Total value March 12, 2019 to June 28, 2024 – 2.08% June 28, 2022 to June 28, 2024 – 2.17% October 3, 2019 to June 28, 2024 – 1.68% February 24, 2020 to June 28, 2025 – 1.60% June 28, 2024 to June 28, 2025– 1.18% $ 20,000 80,000 20,000 20,000 80,000 220,000 2023 Annual ReportManagement’s Discussion & Analysis 38 Lease obligations relate mainly to the leasing of facilities and various mobile equipment for our Sugar and Maple products segment operations. Purchase obligations represent all open purchase orders as at year-end along with an amount of approximately $50.4 million for sugar beets that will be harvested and processed in fiscal 2024. However, it excludes any raw sugar priced against futures contracts. The purchase obligation regarding the sugar beets represents our best estimate of the amount expected to be payable in fiscal 2024 as of the date of this MD&A. A significant portion of our sales are made under fixed-price, forward-sales contracts, which extend up to three years. Lantic also contracts to purchase raw cane sugar substantially in advance of the time it delivers the refined sugar produced from the purchase. To mitigate our exposure to future price changes, we manage the volume of refined sugar sales contracted for future delivery in relation to the volume of raw cane sugar contracted for future delivery. We use derivative instruments to manage exposures to changes in raw sugar prices, natural gas prices and foreign exchange. Our objective for holding derivatives is to minimize risk using the most efficient methods to eliminate or reduce the impacts of these exposures. To reduce price risk, our risk management policy is to manage the forward pricing of purchases of raw sugar in relation to its forward refined sugar sales. We attempt to meet this objective by entering into futures contracts to reduce our exposure. Such financial instruments are used to manage our exposure to variability in fair value attributable to the firm commitment purchase price of raw sugar. We have hedged the majority of our exposure to raw sugar price risk movement through to March 2026. As at September 30, 2023, we had a net short sugar position of 10,189 metric tonnes with a current net contract value of $12.8 million. This short position is mainly related to hedging activities related to the sale of beet sugar and the offset of a larger volume of sugar priced from suppliers than sugar priced with customers. We use forward contracts and commodity swaps to help manage our natural gas costs. As at September 30, 2023, we had $56.8 million in natural gas derivatives, with a current contract value of $61.2 million. Our activities, which result in exposure to fluctuations in foreign exchange rates, consist of the purchasing of raw sugar, the selling of refined sugar and maple products and the purchasing of natural gas. We manage this exposure by creating offsetting positions through the use of financial instruments. These instruments include forward contracts, which are commitments to buy or sell at a future date and may be settled in cash. The credit risk associated with foreign exchange contracts arises from the possibility that counterparties to a foreign exchange contract in which we have an unrealized gain, fail to perform according to the terms of the contract. The credit risk is much less than the notional principal amount, being limited at any time to the change in foreign exchange rates attributable to the principal amount. Forward foreign exchange contracts have maturities of less than three years and relate mostly to US dollar, and to a much smaller extent, to Euro and Australian dollar. The counterparties to these contracts are major Canadian financial institutions. We do not anticipate any material adverse effect on our financial position resulting from our involvement in these types of contracts, nor do we anticipate non-performance by the counterparties. As at September 30, 2023, we had a net short position of $89.7 million in foreign currency forward contracts with a current contract value of $90.7 million, representing an unrealized loss of $1.0 million. Rogers Sugar Inc.Management’s Discussion & Analysis39 As part of our normal business practice, we also enter into multi-year supply agreements with raw sugar processors for raw cane sugar. Contract terms will state the quantity and estimated delivery schedule of raw sugar. The price is determined at specified periods of time before such raw sugar is delivered based upon the value of Raw #11 as traded on the ICE world raw sugar market. As at September 30, 2023, we had commitments to purchase a total of 901,000 metric tonnes of raw sugar, of which approximately 228,136 metric tonnes had been priced, for a total dollar commitment of $187.2 million. TMTC has $4.1 million remaining to pay related to an agreement to purchase approximately 4.7 million pounds of maple syrup from the PPAQ. We have no other off-balance sheet arrangements. CAPITAL RESOURCES As at September 30, 2023, Lantic had a total of $265.0 million of available working capital from its revolving credit facility, from which it can borrow at prime rate, SOFR rate or under bankers’ acceptances, plus 20 to 250 basis points, based on achieving certain financial ratios. This balance was increased to $340 million on November 1, 2023. As at September 30, 2023, a total of $630.0 million of assets have been pledged as security for the revolving credit facility, compared to $590.6 million as at October 1, 2022; including trade receivables, inventories and property, plant and equipment. As at September 30, 2023, $158.0 million had been drawn from the working capital facility and $2.6 million in cash was also available. The Taber beet operation requires seasonal working capital in the first half of the fiscal year, when inventory levels are high and a substantial portion of the payments due to the Growers is made. TMTC also has seasonal working capital requirements. Although the syrup inventory is received during the third quarter of the fiscal year, its payment terms with the PPAQ requires cash payment in the first half of the fiscal year. We have sufficient cash and availability under our line of credit to meet such requirements. Future commitments of approximately $18.8 million have been approved for completing capital expenditures presently in progress. In addition, subsequent to year end, the Company entered into commitments related to the Expansion Project for a total value of $24.0 million. We also have funding obligations related to our employee future benefit plans, which include defined benefit pension plans. As at September 30, 2023, our Montréal and Taber registered defined benefit pension plans were in a net asset position. The most recent actuarial valuation of the pension plans for funding purposes was as of January 1, 2022, and the next required valuation will be as of December 31, 2024. We monitor our pension plan assets closely and follow strict guidelines to ensure that pension fund investment portfolios are diversified in line with industry best practices. Nonetheless, pension fund assets are not immune to market fluctuations and, as a result, we may be required to make additional cash contributions in the future. In fiscal 2023, cash contributions to defined benefit pension and other plans amounted to $4.3 million. In total, we expect to incur cash contributions of approximately $3.8 million for fiscal 2024 relating to employee defined benefit pension plans. For more information regarding our employee benefits and related assets and liabilities, please refer to Note 20 of the audited consolidated financial statements. Cash requirements for working capital and other capital expenditures are expected to be paid from available cash resources and funds generated from operations. The Expansion Project is expected to be financed using a combination of various financial instruments, including the revolving credit facility, approved loans from Investissement Quebec for up to $65 millions, and other debt and/or equity instruments. Management believes that the unused credit under the revolving facility along with the loans from Investissement Quebec related to the Expansion Project are adequate to meet our expected cash requirements. 2023 Annual ReportManagement’s Discussion & Analysis40 OUTSTANDING SECURITIES A total of 105,096,120 shares were outstanding as at September 30, 2023 and November 29, 2023, respectively (104,372,045 as at October 1, 2022). During fiscal 2023, the total amount outstanding under the Sixth and Seventh series debentures were $57.4 million and $97.6 million respectively. No conversion of debentures into common shares has been done during the current fiscal year or the last fiscal year. We currently have a share option plan that was established in 2011 and amended in 2021. Under this plan, we have set aside 6,000,000 common shares to be granted to key personnel. As at September 30, 2023, a total of 3,789,786 options had been granted, of which 3,025,711 were outstanding, at exercise prices ranging between $4.28 per share and $6.51 per share. These share options are exercisable to a maximum of twenty percent per year, starting after the first anniversary date of the granting of the options and will expire after a term of ten years. In fiscal 2018, a Performance Share Unit plan (“PSU”) was created. The following table provides the detail of the grants under the PSU: Grant date December 7, 2020 December 6, 2021 December 12, 2022 PSUs Additional PSUs(1) Total PSUs Performance Cycle 491,412 386,709 310,964 98,920 42,563 14,476 590,332 429,272 325,440 2021-2023 2022-2024 2023-2025 (1) Additional PSUs refer to aggregate of PSUs that were allocated from the dividend earned during the quarters since inception. During fiscal 2023, the grant related to fiscal 2020 was cash settled for an amount of $640,000. The grant related to fiscal 2021 will be cash settled in December 2023, representing an expected payout of $3,908,000. The PSUs were granted to executives and other key management employees and will vest at the end of the Performance Cycle based on the achievement of total shareholder returns set by the Human Resources and Compensation Committee (“HRCC”) and the Board of Directors of the Company. If the level of achievement of total shareholder returns is within the specified range, the value to be paid-out to each participant will be equal to the result of: the number of PSUs granted to the participant which have vested, multiplied by the volume weighted average closing price of the Common Shares on the Toronto Stock Exchange (the “TSX”) for the five trading days immediately preceding the day on which the Company shall pay the value to the participant under the PSU Plan. If the level of achievement of total shareholder returns is below the minimum threshold, the PSU will be forfeited without any payments made. Rogers Sugar Inc.Management’s Discussion & Analysis41 ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) to awareness and adoption of new environmental standards. The economic and reputational importance of energy and natural resources in our business is managed with a continuous improvement Rogers and its board of directors recognize the importance of mindset, which includes the review of new available technologies corporate governance in effectively managing the business, and business practices that minimize our environmental footprint protecting employees and shareholders, and enhancing shareholder and in parallel, when possible, strengthen our financial position. We value. We believe that our corporate governance practices are in have made significant commitments over the past years to leverage compliance with applicable Canadian requirements for TSX-listed new technologies and process improvements to recover waste issuers. The Company is committed to monitoring governance energy, improve energy efficiency and lower energy intensity. developments to ensure its practices remain current and appropriate. With respect to potential environmental remediation of our The board of directors of the Rogers has appointed an environmental, properties, which could occur in the event of a building demolition social and governance committee (the “ESG Committee”) or a sale, it is worth noting that the Vancouver and Montreal facilities responsible for: • overseeing and assessing the functioning of the board of directors of the Company and the committees thereof; have a lengthy history of industrial use, and fill materials have been used on the properties in the normal course of business. We recorded provisions under asset retirement obligations for known and quantifiable potential remediation activities in connection • developing, recommending to the board of directors, with these properties. No assurance can be given that material implementing and assessing effective governance principles; expenditures will not be required in excess of the current asset • overseeing and advising the board of directors on management of the Company’s strategy, initiatives, risks, opportunities and reporting in respect of material ESG matters; • as may be required, identifying candidates for director and recommending to the board of directors of Rogers qualified director candidates for election at the next annual meeting of shareholders of the Company; and retirement obligation provisions in connection with contamination from such industrial use or fill materials. Although we are not aware of any specific problems at the Toronto distribution centre, the Taber plant and any of the TMTC properties, no assurance can be given that expenditures will not be required to deal with known or unknown contamination at the property or other facilities or offices currently or formerly owned, used or controlled • reviewing and/or approving any other matter specifically by Lantic. delegated to it by the board of directors of Rogers and undertake on behalf of the board of directors such other governance Rogers is engaged socially and promotes core values aligned with initiatives as may be necessary or desirable to enable the board environmental stewardship, respect, diversity, equity and inclusion. of directors to provide effective governance for the Company We promote a workplace that focuses on workplace safety, and contribute to the success of Rogers. empowerment, leadership, accountability, and recognition. We expect all suppliers, including contractors, agents, and consultants, The ESG Committee is comprised of four members: Dean Bergmame to adhere to the business ethics and behaviours described in our (Chair), M. Dallas H. Ross, Gary M. Collins and Stephanie Wilkes, code of conduct, and to comply with all applicable and relevant all of whom are considered independent within the meaning of labour, employment, health and safety, and environmental laws and National Instrument 58-101 – Disclosure of Corporate Governance regulations. Practices of the Canadian Securities Administrators (“NI 58-101). Bill Maslechko, who is on the Lantic board of directors and has extensive The board of directors of Rogers has overall responsibility for governance expertise, attends all meetings of the ESG Committee monitoring, evaluating, and contributing to the strategic and as guest, and is also considered independent within the meaning of operational direction of the business. This includes establishing a National Instrument 58-101 – Disclosure of Corporate Governance governance framework to support the business and meet all the Practices of the Canadian Securities Administrators (“NI 58-101”). applicable regulatory and legal requirements. Since 2022, Rogers has an ESG team within its management group to support the ESG Our governance and business management systems are design strategy. to monitor compliance with relevant environmental regulatory standards. We comply, in all material respects, with environmental During the third quarter of 2023, we published our annual ESG laws and regulations and we maintain an open dialogue with report. The report can be accessed on SEDAR or on our website at regulators and the different levels of government, with respect www.Lanticrogers.com. 2023 Annual ReportManagement’s Discussion & Analysis 42 ESG REPORTS associated Ethical and Sustainable Sourcing Supplier Code of In July 2023, we published the 2022 ESG Report, the report which Conduct to include governance and land rights aspects, and created incorporates key performance indicators from the Agricultural a robust distribution and tracking plan to monitor the updated Products Sustainability Accounting Standard Board (“SASB”), documents distribution to all suppliers across the sugar and maple builds on the 2021 ESG Report and the 2020 ESG Report and includes business segments. more information around our sustainability program, including our efforts to improve workplace safety and diversity. Rogers is also committed to promoting responsible management of its resources and the environment through addressing the In its 2022 ESG Report, we present our ESG performance, priorities, environmental risks associated with the impact of its operations and and initiatives for the fiscal year 2022, which ended on October its supply chain. We recognize that climate change, including the 1, 2022. The report covers the following topics: climate action, impacts of global warming and extreme weather events, represents operational waste, water management, packaging, health and safety, a risk that could adversely affect both of our business segments. diversity, equality and inclusion, human rights, employee wellbeing Rogers is proud to have invested over $9 million since 2018 in projects and development, food safety, community involvement, responsible that have improved its manufacturing process energy efficiency and sourcing, and governance. reduced the associated carbon emissions, an investment strategy that will continue in the coming years. One of the key aspects of our ESG program is the implementation of an occupational health and safety management system that In previous years, Rogers has reported greenhouse gas (“GHG”) aims to provide a safe work environment for all its employees emissions associated only with fuel combustion. The results provided and contractors. Rogers has a health and safety policy and in the 2022 ESG Report form a more complete organizational standards that are regularly reviewed and updated, and a team GHG emission inventory, calculated based on the World Resource that collaborates with local health care and safety professionals to Institute’s Greenhouse Gas Protocol. In 2022, we expanded our monitor and suggest improvements. Rogers also benchmarks itself reported GHG emissions inventory to include all known Scope 1 and against the Occupational Safety and Health Administration (OSHA) Scope 2 emissions sources, along with a limited Scope 3 inventory. standards and sets continuous improvement objectives to reduce This more comprehensive accounting approach will allow us to risk and achieve a culture of zero harm. Our efforts have resulted in a develop future oriented carbon reduction strategies and measurable significant reduction in our recordable injury frequency (“RIF”) and targets going forward, using 2022 as its baseline. lost time incident rate (“LTIR”) over the last five years, as well as zero fatal accidents in fiscal 2022. In 2022, Rogers achieved a record low In 2022, Rogers also conducted its first water risk assessment and incidence rate across its operations, with a 47% reduction in RIF and identified that eight of its nine facilities were located in areas of low a 41% reduction in LTIR compared to 2021. overall water risk, and one facility in an area of low-medium overall water risk. Rogers strives to reduce water use through initiatives that Another important aspect of Rogers’ ESG program is the include water recycling and water conservation, and to monitor the implementation of measures to further ensure the labour rights of quality of water it discharges to protect the aquatic ecosystems in its employees and its suppliers. We are a proud equal opportunity which it operates. We have a published target to source 100% of raw employer that ensures there is no discrimination of any type on sugar from producers who follow certified or verified sustainable hiring and that there is pay equity, regardless of gender, ethnicity or agricultural practices by 2027, and in 2022, we took a significant step any other factors not related to performance. We maintain policies in meeting this target by entering into a multi-year supply partnership and a Code of Business Conduct that outline its expectations and with Raízen, a source of certified non-GMO and certified Bonsucro guidelines on topics such as equality and diversity, harassment sugar for our Eastern Canada operations. Rogers currently traces and offensive behavior, freedom of association, and no child or almost 100% of its sugar beets and maple syrup supply to the farms forced labour. In 2019, Rogers released its Human Rights Policy, where they are sourced in Canada and the US, and ensures that the which applies to all its employees and reflects its commitment to beets are grown using sustainable agriculture practices verified by social responsibility and respect for human dignity. In 2022, Rogers the Farm Sustainability Assessment (FSA) performance assessment developed and released its Ethical and Sustainable Sourcing Policy from the Sustainable Agriculture Initiative (SAI). and the associated Ethical and Sustainable Sourcing Supplier Code of Conduct, which encompass comprehensive criteria on Rogers is committed to using sustainable packaging across both anti-bribery and corruption, labour rights, fair and safe working its sugar and maple segments, and to minimizing the impact of conditions, and environmental compliance. In 2023, we expanded its product packaging on the environment. We conducted an the scope of our Ethical and Sustainable Sourcing Policy and the assessment of the primary packaging components used in our Rogers Sugar Inc.Management’s Discussion & Analysis43 own brand retail packaging and found that approximately 93% of Code is available on our website at www.lanticrogers.com or under our branded retail packaging utilized plastic alternative materials Rogers’ profile on SEDAR+ at www.sedarplus.ca. and consisted of materials that generally have well developed recycling systems and end-markets. Rogers recognizes that making Our business and operations are substantially affected by many its packaging more sustainable and recyclable will provide it with factors and as such, are exposed to various risks and uncertainties. a competitive advantage and place it in a strong position as more We have outlined below the risks and uncertainties that we believe Extended Producer Responsibility (EPR) regulations are released by are currently material. There may also exist additional risks and both Provincial/State and Federal Governments. uncertainties that are not currently known to us or that are not considered material at this time. Those risks could have a material Lastly, we are proud to support the communities in which we operate adverse effect on our business, operation, financial conditions, and and to provide financial support to various local and international results. charitable organizations each year. Rogers has a Donation Policy that guides its contributions to organizations active in the local DEPENDENCE UPON LANTIC community, including those supporting underprivileged families, Rogers is entirely dependent upon the operations and assets agricultural education, community welfare and employees in crisis. of Lantic through its ownership of securities of this company. We support our employees volunteering for causes that they support Accordingly, interest payments to debenture holders and dividends and provide them with a process to do so with the support of Rogers. to shareholders are dependent upon the ability of Lantic and/or In 2022, Rogers donated to various charities, including the Red TMTC to pay its interest obligations under the subordinated notes Cross, Le Chic-Resto-Pop, and the Taber Food Bank. and to declare and pay dividends on or return capital in respect of the common shares. The terms of Lantic’s bank and other indebtedness Copies of the ESG Reports are available on the Corporation’s restricts its ability to pay dividends and make other distributions on website at www.lanticrogers.com or under the Corporation’s profile its shares or make payments of principal or interest on subordinated on SEDAR+ at www.sedarplus.ca. debt, including debt which may be held, directly or indirectly, by Rogers, in certain circumstances. In addition, Lantic may defer payment of interest on the subordinated notes at any given time for RISKS AND UNCERTAINTIES a period of up to 18 months. We are committed to proactive risk governance and oversight NO ASSURANCE OF FUTURE PERFORMANCE practices. The Board of Directors is responsible for reviewing and Historic and current performance of the business of Rogers, Lantic assessing material risks associated with the business. The governance and TMTC may not be indicative of success in future periods. The process ensures that we implement systems that effectively identify, future performance of the business may be influenced by economic manage, and monitor the principal risks associated with both of downturns and other factors beyond the control of Rogers, Lantic our business segments, to mitigate or reduce potential negative and TMTC. As a result of these factors, the operations and financial impacts. Management provides periodic updates to the Board performance of Lantic and TMTC may be negatively affected, which of Directors on the risks and the related mitigation strategies and may materially adversely affect our performance, and financial activities. Responsibility for risk management is shared across the results and conditions. organization and is an integral part of our management reporting system. CHANGES IN GENERAL ECONOMIC CONDITIONS Changes in general economic conditions could have a material We maintain policies and a Code of Business Conduct (the “Code”), effect on the profitability of both of our business segments and on applicable to all directors, officers, and employees, as well as the assessment of the value of our assets, affecting our ability to consultants and contractors. Such documents are reviewed at least execute our business strategy. The current inflationary pressures are annually by the Board of Directors. These policies and the Code aim increasing operating costs and there is no assurance that we will be to promote sound risk management throughout the organization, able to recover the extent of such costs with timely commensurate delegate appropriate authority among officers and set limits for increases in price to our customers. authorizations required to approve and execute certain business transactions. The Code addresses specifically the measures put The recent changes in general economic conditions and the forward to prevent corruption, anti-competitive practices, and potential for further worsening of the global economy could impact unethical behaviors. It also includes clear directions to govern the performance, and the financial results and conditions of Rogers. relationships with customers, suppliers, and other stakeholders. The 2023 Annual ReportManagement’s Discussion & Analysis44 GOVERNMENT REGULATIONS AND FOREIGN TRADE SUPPLY OF RAW CANE SUGAR POLICIES WITH REGARD TO THE SUGAR SEGMENT There are approximately 180 million metric tonnes of sugar produced In 1995, Revenue Canada made a determination that there was worldwide. Of this, approximatively 55 million metric tonnes of sugar dumping of refined sugar from the US, Denmark, Germany, the are traded on the world market. Lantic, through its cane refining United Kingdom (“UK”), the Netherlands and the Republic of Korea plants, buys approximately 0.7 million metric tonnes of raw sugar into Canada, and that subsidized refined sugar was being imported per year. Even though worldwide raw sugar supply is much larger into Canada from the European Union (“EU”). The Canadian than Lantic’s yearly requirements, concentration of supply in certain International Trade Tribunal (“CITT”) conducted an inquiry and ruled countries like Brazil, combined with an increase in cane refining that the dumping of refined sugar from the US, Denmark, Germany, operations in certain countries, may create tightness in raw sugar the UK, and the Netherlands, as well as the subsidizing of refined availability at certain times of the year. To prevent any raw sugar sugar from the EU, was threatening material injury to the Canadian supply shortage, Lantic normally enters into long-term supply sugar industry. The ruling resulted in the imposition of protective contracts with reputable suppliers. For raw sugar supply not under duties on these unfairly traded imports. contract, significant premiums may be paid on the purchase of raw sugar on a nearby basis, which may have a material impact on our Under Canadian laws, these duties must be reviewed every five performance, and financial results and conditions. years. In August 2021, the CITT concluded its fifth review of the 1995 findings and issued its decision to continue the duties for another SUPPLY AND QUALITY OF SUGAR BEETS IN ALBERTA five-year period against (i) dumped sugar from the US, Denmark, The availability of sugar beets to be processed in Taber, Alberta Germany, the Netherlands, and the UK, and (ii) subsidized sugar is dependent on a supply contract with the Growers, and on the from the EU. The Canadian Sugar Institute (“CSI”) and its members, Growers planting the necessary acreage every year. In the event that including Lantic, participated fully in the review and submitted sufficient acreage is not planted in a certain year, or that Lantic and detailed evidence and witness testimony to the CITT. The CITT the Growers cannot agree on a supply contract, sugar beets might agreed that imports of dumped and subsidized sugar would likely not be available for processing, thus requiring transfer of products cause material injury to the Canadian industry if the duty protection from Lantic’s cane refineries to the Prairie market, normally supplied was removed. by Taber. This would increase Lantic’s distribution costs and may have a material impact on our performance, and financial results and Following the CITT’s review, the Canadian Border Services Agency conditions. (“CBSA”) concluded a re-investigation in March 2022 to update the levels of duty protection applicable to dumped sugar from the US, Sugar beets, as is the case with most other crops, are affected by Denmark, Germany, the Netherlands, and the UK and subsidized weather conditions during the growing season. Additionally, weather sugar from the EU. The CBSA determined that anti-dumping duties conditions during the harvesting and processing season could affect will continue to apply to imports of dumped sugar from the US, Lantic’s total beet supply and sugar extraction from beets stored for Denmark, Germany, the Netherlands and the UK and ruled that a processing. A significant reduction in the quantity or quality of sugar countervailing duty will continue to apply to imports of subsidized beets harvested due to adverse weather conditions, disease or other EU sugar. factors could result in decreased production, with negative financial consequences to Lantic. The duties on imports of US, EU, and UK refined sugar are important to Lantic and to the Canadian refined sugar industry in general RAW #11 PRICE AND FOREIGN EXCHANGE RISK FOR because they protect the market from the adverse effects of unfairly SUGAR SEGMENT traded imports from these sources. The government support and The price of raw sugar cane purchased for the Montréal and trade distorting attributes of the US and EU sugar regimes continue Vancouver refineries is based on the Raw #11 sugar market traded on to generate surplus refined sugar production and exports that the ICE. The price of refined sugar sold to customers is also based on threaten the Canadian sugar market. the Raw #11 sugar market. All purchase of raw cane sugar and sales of refined sugar are economically hedged with financial instruments Although the recent ruling is for a period of five years, it could be such as future contracts to mitigate risk, thus eliminating the impact challenged by market participants for review if there is a material of volatility in Raw #11 sugar price. change in market conditions. If the duties were to be eliminated or significantly reduced in the future, there could be a material financial These purchases of raw cane sugar and sales of refined sugar impact to Lantic and other members of the Canadian refined sugar are denominated in US dollars and could potentially expose us to industry. fluctuation in the value of the Canadian dollar. Our strategy is to Rogers Sugar Inc.Management’s Discussion & Analysis45 hedge the foreign exchange exposure of these transactions using COMPETITION IN THE SUGAR SEGMENT available financial instruments, such as future contracts, to eliminate For the Sugar segment, Lantic faces domestic competition from the impact of volatility. Redpath Sugar Ltd. and smaller regional operators and or distributors of both foreign and domestic refined sugar, such as Sucro Sourcing There can be no assurance that we will be able to continue to LLC. Differences in proximity to various geographic areas within mitigate efficiently this exposure to Raw #11 price and related foreign Canada and elsewhere result in differences in freight and shipping exchange risk in the future. If effective financial instruments were costs, which in turn affect pricing and competitiveness in general. not available to mitigate such exposures, there could be material impacts on our performance, and financial results and conditions. In addition to sugar, the overall sweetener market also includes corn- based sweeteners, such as HFCS, an alternative liquid sweetener, RECENTLY ANNOUNCED EASTERN CAPACITY which can be substituted for liquid sugar in soft drinks and certain EXPANSION PROJECT other applications; and non-nutritive, high intensity sweeteners The completion of the recently announced Expansion Project is such as aspartame, sucralose and stevia. Differences in functional subject to several conditions and risks, certain of which are outside properties and prices have tended to define the use of these various of the control of Lantic. The detailed engineering plan for the project sweeteners. The substitution of other sweeteners for sugar has has been completed and includes estimates as it relates to costs, occurred in certain products in the past. We are not able to predict construction period and incremental production capacity. The the availability, development or potential use of these sweeteners expected total cost of the project is estimated at approximately $200 and their possible impact on Lantic’s business. million. PRICE OF NATURAL GAS Delays and cost overruns may occur in completing the construction Natural gas represents an important cost in our refining operations. of the Expansion Project. A number of factors that could cause such Our three sugar refineries consume natural gas in their refining delays or cost overruns include, without limitation, permitting delays, process. The Taber beet factory production also includes agricultural construction pricing escalation, changing engineering and design processing and as a result, uses more energy in its operations than requirements, the performance of contractors, labour disruptions, the cane facilities in Vancouver and Montréal, principally from the adverse weather conditions and the availability of financing. Even need to heat the sliced sugar beets, to evaporate water from juices when complete, the new installed capacity and other related assets containing sugar, and to dry wet beet pulp. Our Maple segment may not operate as planned due to design or manufacturing flaws, bottling plants also use natural gas in their process although to a which may not all be covered by warranty. Mechanical breakdown lower extent. could occur in equipment after the period of warranty has expired, resulting in loss of production as well as the cost of repair. Changes in the costs and sources of energy may affect the financial results of Lantic’s operations. In addition, all natural gas purchased In addition, in order to complete the project, Lantic might need to is priced in US dollars. Therefore, fluctuations in the Canadian/ further amend existing credit facilities and potentially enter into US dollar exchange rate will also impact the cost of energy. Lantic additional financing agreements in order to finance the construction. hedges a portion of its natural gas price exposure through the use of Lantic’s ability to secure the overall financing for the project is related natural gas contracts to lessen the impact of fluctuations in the price to several factors, including market demand for refined sugar, the of natural gas. Provincial application of some form of carbon tax has final cost for the project and the borrowing conditions in the financial been increasingly important across Canada and for some provinces market. with a carbon tax, rates have been increasing, which could increase the overall energy costs for Lantic. There can be no assurance that the Expansion Project will be completed, or that it will be completed in the expected timeframe of approximately two years, providing the expected incremental volume at the expected cost. Failure by Lantic to complete the Expansion Project under the expected conditions could have a material impact on the performance, and financial results and conditions of Rogers. 2023 Annual ReportManagement’s Discussion & Analysis 46 REGULATORY REGIME GOVERNING THE PURCHASE AND to half of year of production. The reserve fluctuates yearly based on SALE OF MAPLE SYRUP IN QUÉBEC the size of the crop. Each year, the PPAQ may organize a sale of a Producers of maple syrup in Québec are required to operate within portion of its accumulated reserve. There can be no assurance that the framework provided for by the Marketing Act, which empowers TMTC will have access to some of such reserve to offset decreases the PPAQ to manage the production and marketing of Maple syrup in production due to weather conditions or that such reserve will in Québec. As part of its regulating and organizing functions, the be sufficient to cover a gap in the production in any given year. Any PPAQ is responsible for establishing and managing a governance decrease in production or incapacity to purchase additional reserves framework aimed at maintaining supply to the market and fair prices from the PPAQ may affect TMTC’s supply of its sales of maple syrup for all producers for bulk maple syrup sold in container of five litres and other Maple products and, ultimately, its performance and or more. This includes managing production surpluses and their financial results. storage to stabilize the pricing of maple syrup. MAPLE SEGMENT RELYING SUBSTANTIALLY ON EXPORTS Bulk maple syrup may be sold to the PPAQ or to authorized The size of the global market for maple syrup is currently estimated buyers accredited by the PPAQ. In Québec, nearly 90% of the total at $1.4 billion, the US being by far the world’s largest importer, production of maple syrup is sold to the PPAQ or the authorized followed by Japan and Germany. Despite the increase of sales of buyers, leaving only approximately 10% of the total production being maple products that the Canadian market has experienced in recent sold directly by the producers to consumers or grocery stores. TMTC years, the industry largely relies on the international market. Over the is an authorized buyer with the PPAQ. The authorized buyer status last few years, New York, Vermont and Maine have increased their is renewed on an annual basis. There is no certainty that TMTC will production of maple syrup and have now become competitors of be able to maintain its status as an authorized buyer with the PPAQ. Québec, which however remains the largest producer and exporter Failure by TMTC to remain an authorized buyer with the PPAQ would of maple syrup in the world. affect our capacity to supply our bottling facilities and therefore would impact materially the performance, and financial results of While we continue to develop our selling efforts outside of Canada, the Maple segment. including increasing our sales efforts in countries where the maple syrup market is developing, we are facing high competition from The PPAQ, in its capacity as bargaining and sales agent for the other bottlers and distributers, including from other Canadian and producers of maple syrup in Québec sets the minimum purchase US companies, for our share of the international market. price for Maple syrup for the authorized buyers. The PPAQ sets price based on market intelligence, available supply and expected Our Maple segment international operations are also subject to demand. If the PPAQ increases the price of maple syrup significantly, inherent risks, including change in the free flow of food products there could be no assurance that TMTC will be able to recover between countries, fluctuations in currency values, discriminatory such increase from its customers and therefore this could impact fiscal policies, unexpected changes in local regulations and laws and materially the performance, and financial results of the Maple the uncertainty of enforcement of remedies in foreign jurisdictions. segment. Such jurisdictions could impose tariffs, quotas, trade barriers and other similar restrictions on our international sales and subsidize Pursuant to the PPAQ rules and regulations, authorized buyers must competing agricultural products. commit to buying Maple syrup in barrels corresponding to their anticipated sales volume. The anticipated volume must be realistic All of these risks could result in increased costs or decreased and in line with volumes purchased in previous years. The refusal revenues, either of which could materially adversely affect the from the PPAQ to accept our anticipated volume or failure by us to performance and financial results of the Maple segment. properly estimate the anticipated volume for a given year may affect our ability to increase our production capacity and therefore this COMPETITION IN THE MAPLE SEGMENT could impact materially the performance, and financial results of the Our Maple segment is the largest branded and private label maple Maple segment. syrup bottling and distributing company in the world. We have five major competitors located in Canada and US and also compete SUPPLY OF MAPLE SYRUP against a multitude of US bottlers and distributing companies. The PPAQ set up a strategic maple syrup reserve to mitigate production fluctuations caused by weather conditions and prevent A large majority of our Maple segment revenues are made under such fluctuations from causing maple syrup prices to spike or drop the private label line. We anticipate that for a foreseeable future, significantly. The PPAQ objective is to have in reserve the equivalent the relationship with our top private label customers will continue Rogers Sugar Inc.Management’s Discussion & Analysis47 to be key and will continue to have a material impact on our sales. The security measures we have put in place cannot provide absolute Although we consider the relationship with our top private label security, and our information technology infrastructure may be customers to be excellent, the loss of, or a decrease in the amount vulnerable to cyberattacks in the future. The impacts of such attack of business from, such customers, or any default in payment on their may subject our operations to increased risks, as well as increased part could significantly reduce our sales and negatively impact the costs, and, depending on their ultimate magnitude, could materially performance and, financial results of the Maple segment. and adversely affect our operations, performance, and financial results and conditions. FOREIGN EXCHANGE EXPOSURE IN THE MAPLE SEGMENT A significant portion of sales of maple syrup are exports and EMPLOYEE RELATIONS WITH UNIONIZED EMPLOYEES are denominated in US dollars, in Euros or in Australian dollars. The majority of our operations are unionized, and agreements are Fluctuations in the value of the Canadian dollar impacts the currently in place in each unionized facility, with the exception of profitability of these sales. In order to mitigate against the movement our Vancouver sugar refinery. On September 28, 2023, the unionized of the Canadian dollar versus the US dollar, Euro or Australian dollar, employee of the Vancouver sugar refinery, represented by the Public we enter into foreign exchange hedging contracts with certain and Private Workers of Canada Local 8 went on strike. As of the customers to mitigate the currency risk. date of this MD&A, the strike is still on-going. This labour disruption is expected to negatively impact our financial results for 2024, the There is no assurance that we will be able to continue to mitigate extent of which is not yet known, and will depend mainly on the efficiently this exposure to foreign exchange risk in the future. If length of the strike, and the potential internal incremental costs effective financial instruments were not available to mitigate such associated with servicing our western customers impacted by the risk, there could be a material impact for the performance, and labour disruption. financial results of the Maple segment. CYBERSECURITY We face various security threats, including cybersecurity threats to During fiscal 2023, we signed a new collective agreement with the union at our Granby maple syrup bottling plant facility. gain unauthorized access to sensitive information, to render data We have contingency plans in place to mitigate the potential impact or systems unusable, or otherwise affect our ability to operate. of labour disruptions at our facilities. However, such potential Our business operations are dependent on various information disruptions in current and future years could restrict our ability to technology systems. A cyber intrusion, such as, and not limited to, service our customers in the affected regions, consequently affecting unauthorized access, confidential information leak (or identity theft), our performance and, financial results and conditions. malicious software or other violations on systems that control our production operations and financial management could severely INTEREST RATE FLUCTUATIONS disrupt or otherwise affect our business. Such attacks on our data We use our revolving credit facility to finance our day-to-day information systems and the inability to recover promptly could operations and a portion of the Expansion Project. We face interest impact individuals, business partners, our operation capabilities, rate risks in respect to the floating rate nature of our revolving short generate unexpected expenses impacting profitability, damage our term credit facility. We are mitigating the risk of volatility in short reputation and result in additional liabilities. term interest rate by hedging a portion of our exposure using interest We seek to manage cybersecurity risk by continuing to invest in rate swap agreements will be available to mitigate such risk in the rate swap agreements. There is no assurance that effective interest appropriate information technology systems, infrastructure, and future. security, including disaster plans, reviewing our existing technologies, processes and practices on a regular basis and ensuring employees PANDEMICS, EPIDEMICS OR OTHER PUBLIC understand and are aware of their role in protecting the integrity of HEALTH EMERGENCIES our technological security and information. We rely on third-party Our business, results of operations, financial conditions, cash flows products and services to assist us in protecting our information and stock price can by adversely affected by pandemics, epidemics, technology infrastructure and our proprietary and confidential or other public health emergencies, such as the COVID-19 pandemic. information. We seek to be proactive in the area of cybersecurity and Such events could result in health or other government authorities consequently anticipate that we will continue to incur expenses in requiring the closure of offices or other businesses and could also relation to these increasingly complex threats and risks. result in a general economic decline, impacting economic activity through disruption in supply and delivery chains. 2023 Annual ReportManagement’s Discussion & Analysis48 FOOD SAFETY AND CONSUMER HEALTH compliance expenditures. Violation of these regulations can result Our Sugar and Maple business segments are subject to risks that in fines or other penalties, which in certain circumstances can affect the food industry in general, including risks posed by accidental include clean-up costs. Consequently, no assurance can be given contamination, product tampering, consumer product liability, and that additional health, safety and environmental issues relating to the potential costs and disruptions of a product recall. We actively currently known and unknown matters will not require expenditures manage these risks by maintaining strict and rigorous controls and in the future, or result in fines, penalties or other consequences processes in our manufacturing facilities and distribution systems. material to our business and operations and potentially impacting our performance, financial results and conditions. Our facilities are subject to audit by federal health agencies in Canada and similar institutions outside of Canada. We also perform GLOBAL CLIMATE CHANGE our own audits designed to ensure compliance with our internal Global climate change, including the impacts of global warming standards, which are generally at, or higher than, regulatory agency and sudden change in weather conditions causing extreme standards in order to mitigate the risks related to food safety. weather events, represents a risk that could adversely affect both Consumers, public health officials and government officials are as average temperatures are rising and extreme weather events are of our business segments. This risk has increased in recent years increasingly concerned about the public health consequences more frequent. of obesity, particularly among young people. In addition, some researchers, health advocates and dietary guidelines are suggesting The production of refined sugar for our Sugar segment is based that consumption of sugar, in various forms, is a primary cause of on the availability of raw cane sugar and sugar beets. Extreme increased obesity rates and are encouraging consumers to reduce weather events create a risk of damage for the annual crops of sugar their consumption of sugar. Increasing public concern about obesity cane and sugar beet. The size and quality of the crops are directly and other health conditions; possible new or increased taxes on impacted by weather conditions. The adverse effect of global climate products containing sugar, such as sugar-sweetened beverages by change could result in supply disruption and or significant increase government entities to reduce consumption or to raise revenues; shift in purchase price for our Sugar segment. in consumer preferences from sugar to other types of sweeteners; additional governmental regulations concerning the marketing, The production of maple syrup takes place over a period of six to labeling, packaging or sale of products and negative publicity may eight weeks during the months of March and April of each year. reduce demand for our products and each of the aforementioned Maple syrup production is intimately tied to the weather as sap only factors could materially adversely affect our performance, financial flows when temperatures rise above freezing level during the day results and conditions. and drop below it during the night, such temperature difference creating enough pressure to push sap out of the maple tree. Given HEALTH, SAFETY AND ENVIRONMENTAL RISKS the sensitivity to temperature in the process of harvesting maple Our operations carry inherent risk of liability related to employee’s sap, climate change and global warming may have a material impact hOur operations carry inherent risk of liability related to employee on such process as the maple syrup production season may become health and safety and the environment, including the risk of shorter. Reducing the production season for maple syrup may also government-imposed orders to remedy unsafe conditions or address have an impact on the level of production. potential environmental issues. Compliance with current and future health, safety and environmental laws remains material for our These risks associated with global climate change could result in business to operate efficiently. We have incurred and will continue lower sales, increased costs and market disruptions, which could to incur expenditures to comply with related federal, provincial, and materially adversely affect our performance, and financial results municipal regulations to manage our potential liability exposure. and conditions. We believe RSI and its subsidiaries are currently in compliance, in all material respects, with health, safety and environmental laws and regulations. This includes environmental regulations relating to the treatment and disposal of wastewater and cooling water, air emissions, contamination, and spills of substances. However, these regulations have become progressively more stringent, and we anticipate this trend will continue, potentially resulting in incremental Rogers Sugar Inc.Management’s Discussion & Analysis 49 CARBON PRICING MECHANISMS INCOME TAX MATTERS The Company operates three facilities that are regulated under The income of Rogers and its subsidiaries must be computed and provincial carbon pollution pricing in Canada, our Montréal and is taxed in accordance with Canadian and US tax laws, all of which Vancouver refineries and our Taber sugar beet processing plant. We may be changed in a manner that could adversely affect the ability have completed a detailed risk assessment of the different provincial to pay dividends in the future. There can be no assurance that regulatory regimes to understand the level of risk and identify taxation authorities will accept the tax positions adopted including potential mitigation measures. the determination of the amounts of taxable income, which could materially adversely affect dividends. Potential future changes to the current rules and regulations, including increases to the current related taxation level could The current corporate structure involves a significant amount of materially adversely affect our performance, and financial results inter-company or similar debt, generating substantial interest and conditions. WATER STRESS expense, which impacts earnings and therefore income tax payable. There can be no assurance that taxation authorities will not seek to challenge the amount of interest expense deducted. If such Our sugar refining operations and the farming activities of our a challenge were to succeed against Lantic, it could materially suppliers depend on the availability of usable water. To better adversely affect the amount of cash transferred to Rogers for understand this risk, we conduct water risk assessments periodically dividend payment. Management believes that the interest expense to prioritize actions and investments in our facilities, with the inherent in the structure is supportable and reasonable considering objective of optimizing the water consumption in our production the terms of the debt owed by Lantic to Rogers. process. We also engage with our suppliers relying on water for their farming activities to monitor our potential exposure and to ensure MANAGEMENT AND OPERATION OF LANTIC a steady and sustainable supply of raw material for our production The Board of Directors of Lantic is currently controlled by Lantic facilities. Capital, an affiliate of Belkorp Industries. As a result, holders of shares have limited say in matters affecting the operations of Potential future changes to the current rules and regulations Lantic; if such holders disagree with the decisions of the Board of regarding the use of water, including increases to the current cost of Directors of Lantic, they have limited recourse. The control exercised water supporting our production process could materially adversely by Lantic Capital over the Board of Directors of Lantic may make it affect our performance, and financial results and conditions. more difficult for others to attempt to gain control of or influence the activities of Lantic and Rogers. ABILITY TO RETAIN OFFICERS AND KEY EMPLOYEES OR TO ATTRACT NEW TALENT The officers and other key employees of Rogers, Lantic and TMTC play a significant role in our success. Our future performance and growth depend to a significant extent on the abilities, experience, and efforts of our management team. Our ability to retain our management team or to attract suitable replacements should key members of the management team leave is dependent on the competitive nature of the employment market. The loss of services from key members of the management team or a limitation in their availability could adversely impact the performance, financial results, and condition of Rogers. Further, such a loss could be negatively perceived in the capital markets. Our success depends largely upon our continuing ability to attract, develop, and retain skilled employees to meet the needs of the business. 2023 Annual ReportManagement’s Discussion & Analysis50 NON-GAAP MEASURES • EBITDA is defined as earnings before interest, taxes, depreciation, amortization and goodwill impairment. In analyzing results, we supplement the use of financial measures that are calculated and presented in accordance with IFRS with a • Adjusted EBITDA is defined as adjusted results from operating number of non-GAAP financial measures. A non-GAAP financial activities adjusted to add back depreciation and amortization measure is a numerical measure of a company’s performance, expenses. financial position or cash flow that excludes (includes) amounts or is subject to adjustments that have the effect of excluding (including) • Adjusted net earnings is defined as net earnings adjusted for the amounts, that are included (excluded) in most directly comparable adjustment to cost of sales, goodwill impairment and the income measures calculated and presented in accordance with IFRS. tax impact on these adjustments. Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with the • Adjusted gross margin rate per MT is defined as adjusted gross non-GAAP financial measures of other companies having the same margin of the Sugar segment divided by the sales volume of the or similar businesses. We strongly encourage investors to review the Sugar segment. audited consolidated financial statements and publicly filed reports in their entirety, and not to rely on any single financial measure. • Adjusted gross margin percentage is defined as the adjusted gross margin of the Maple segment divided by the revenues generated We use these non-GAAP financial measures in addition to, and in by the Maple segment. conjunction with, results presented in accordance with IFRS. These non-GAAP financial measures reflect an additional way of viewing • Adjusted net earnings per share is defined as adjusted net earnings aspects of the operations that, when viewed with the IFRS results divided by the weighted average number of shares outstanding. and the accompanying reconciliations to corresponding IFRS financial measures, may provide a more complete understanding of • Free cash flow is defined as cash flow from operations excluding factors and trends affecting our business. changes in non-cash working capital, mark-to-market and derivative timing adjustments, financial instruments non-cash The following is a description of the non-GAAP measures we used amount, goodwill impairment and includes deferred financing in the MD&A: charges, funds received from stock options exercised, capital and intangible assets expenditures, net of value-added capital • Adjusted gross margin is defined as gross margin adjusted for expenditures, and payments of capital leases. “the adjustment to cost of sales”, which comprises the mark- to-market gains or losses on sugar futures and foreign exchange forward contracts 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 and foreign exchange forward contracts. • Adjusted results from operating activities are defined as results from operating activities adjusted for the adjustment to cost of sales and goodwill impairment. Rogers Sugar Inc.Management’s Discussion & Analysis 51 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 our 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 Consolidated results (In thousands of dollars) Q4 2023 Maple Products $ Sugar $ Total $ Gross margin 35,512 5,680 41,192 Total adjustment to the cost of sales (1) (1,790) 791 (999) Adjusted gross margin 33,722 6,471 40,193 Q4 2022 Maple Products $ 1,714 2,103 3,817 Sugar $ 26,758 8,566 35,324 Total $ 28,472 10,669 39,141 Results from operating activities 20,395 2,420 22,815 12,662 (51,007) (38,345) Total adjustment to the cost of sales(1) Goodwill impairment (1,790) — 791 — (999) 8,566 2,103 — — 50,000 Adjusted results from operating activities 18,605 3,211 21,816 21,228 1,096 10,669 50,000 22,324 Results from operating activities 20,395 2,420 22,815 12,662 (1,007) (38,345) Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets 5,058 1,695 6,753 4,947 1,681 6,628 Goodwill impairment — — — — 50,000 50,000 25,453 4,115 29,568 17,609 674 18,283 EBITDA(1) EBITDA(1) 25,453 4,115 29,568 Total adjustment to the cost of sales(1) (1,790) 791 (999) Adjusted EBITDA 23,663 4,906 28,569 Net (loss) earnings Total adjustment to the cost of sales(1) Goodwill impairment Net change in fair value in interest rate swaps(1) Income taxes on above adjustments Adjusted net earnings Net (loss) earnings per share (basic) Adjustment for the above Adjusted net earnings per share (basic) (1) See “Adjusted results” section. 11,876 (999) — 201 205 11,283 0.12 (0.01) 0.11 17,609 8,566 26,175 674 2,103 2,777 18,283 10,669 28,952 (45,502) 10,669 50,000 (328) (2,678) 12,161 (0.44) 0.56 0.12 2023 Annual ReportManagement’s Discussion & Analysis 52 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO IFRS FINANCIAL MEASURES (CONTINUED) Consolidated results (In thousands of dollars) Fiscal 2023 Maple Products $ Sugar $ Total $ Gross margin 144,397 21,329 165,726 Total adjustment to the cost of sales(1) (8,375) (2,020) (10,395) Adjusted gross margin 136,022 19,309 155,331 Results from operating activities 86,510 8,453 94,963 Total adjustment to the cost of sales(1) (8,375) (2,020) (10,395) Sugar $ 115,872 10,296 126,168 60,458 10,296 Fiscal 2022 Maple Products $ Total $ 14,933 130,805 2,381 17,314 12,677 143,482 (47,145) 13,313 2,381 12,677 50,000 Goodwill impairment — — — — 50,000 Adjusted results from operating activities 78,135 6,433 84,568 70,754 5,236 75,990 Results from operating activities 86,510 8,453 94,963 60,458 (47,145) 13,313 Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets 19,511 6,775 26,286 19,380 6,768 Goodwill impairment — — — — 50,000 106,021 15,228 121,249 79,838 9,623 26,148 50,000 89,461 EBITDA(1) EBITDA(1) 106,021 15,228 121,249 Total adjustment to the cost of sales(1) (8,375) (2,020) (10,395) Adjusted EBITDA(1) 97,646 13,208 110,854 Net (loss) earnings Total adjustment to the cost of sales(1) Goodwill impairment Net change in fair value in interest rate swaps(1) Income taxes on above adjustments Adjusted net earnings Net (loss) earnings per share (basic) Adjustment for the above Adjusted net earnings per share (basic) (1) See “Adjusted results” section. 51,789 (10,395) — 523 2,577 44,494 0.50 (0.08) 0.42 79,838 10,296 90,134 9,623 2,381 89,461 12,677 12,004 102,138 (16,568) 12,677 50,000 (2,800) (2,650) 40,659 (0.16) 0.55 0.39 Rogers Sugar Inc.Management’s Discussion & Analysis 53 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO IFRS FINANCIAL MEASURES (CONTINUED) (In thousands of dollars, except for volumes and per share informations) QUARTERS(1) For the fiscal year ended September 30, 2023 Gross margin Total adjustment to the cost of sales(2) Adjusted gross margin Results from operating activities Total adjustment to the cost of sales(2) Goodwill impairment Adjusted results from operating activities Fourth $ 41,192 (999) 40,193 22,815 (999) — 21,816 Third $ 41,685 (6,773) 34,912 24,008 (6,773) — 17,235 2022 Second $ 41,658 (3,425) 38,233 21,856 (3,425) — First $ 41,191 802 41,993 26,284 802 — Total $ 165,726 (10,395) 155,331 94,963 (10,395) — 18,431 27,086 84,568 Results from operating activities 22,815 24,008 21,856 26,284 94,963 Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets Goodwill impairment EBITDA EBITDA Total adjustment to the cost of sales(2) Adjusted EBITDA Net (loss) earnings Total adjustment to the cost of sales(2) Goodwill impairment Net change in fair value in interest rate swaps(2) Income taxes on above adjustments Adjusted net earnings (1) All quarters are 13 weeks. (2) See “Adjusted results” section. 6,753 — 6,515 — 6,589 — 6,429 26,286 — — 29,568 30,523 28,445 32,713 121,249 29,568 (999) 28,569 11,876 (999) — 201 205 11,283 30,523 (6,773) 23,750 14,177 (6,773) — (203) 1,548 8,749 28,445 (3,425) 25,020 11,062 (3,425) — 479 999 9,115 32,713 802 33,515 14,674 802 — 46 (175) 121,249 (10,395) 110,854 51,789 (10,395) — 523 2,577 15,347 44,494 2023 Annual ReportManagement’s Discussion & Analysis 54 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO IFRS FINANCIAL MEASURES (CONTINUED) (In thousands of dollars, except for volumes and per share informations) QUARTERS(1) For the fiscal year ended October 1, 2022 Gross margin Total adjustment to the cost of sales(2) Adjusted gross margin Results from operating activities Total adjustment to the cost of sales(2) Goodwill impairment Adjusted results from operating activities Fourth $ 28,472 10,669 39,141 (38,345) 10,669 50,000 22,324 Third $ 24,948 7,706 32,654 8,822 7,706 — 16,528 2022 Second $ 33,899 1,988 35,887 15,499 1,988 — 17,487 First $ 43,486 (7,686) 35,800 27,337 (7,686) — 19,651 Total $ 130,805 12,677 143,482 13,313 12,677 50,000 75,990 Results from operating activities (38,345) 8,822 15,499 27,337 13,313 Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets Goodwill impairment EBITDA EBITDA Total adjustment to the cost of sales(2) Adjusted EBITDA Net (loss) earnings Total adjustment to the cost of sales(2) Goodwill impairment Net change in fair value in interest rate swaps(2) Income taxes on above adjustments Adjusted net earnings (1) All quarters are 13 weeks. (2) See “Adjusted results” section. 6,628 50,000 18,283 18,283 10,669 28,952 (45,502) 10,669 50,000 (328) (2,678) 12,161 6,580 — 15,402 15,402 7,706 23,108 3,138 7,706 — (632) (1,793) 8,419 6,530 — 22,029 22,029 1,988 24,017 8,570 1,988 — (1,246) (190) 9,122 6,410 — 33,747 33,747 (7,686) 26,061 17,226 (7,686) — (594) 2,011 10,957 26,148 50,000 89,461 89,461 12,677 102,138 (16,568) 12,677 50,000 (2,800) (2,650) 40,659 Rogers Sugar Inc.Management’s Discussion & Analysis 55 CRITICAL ACCOUNTING ESTIMATES CONTROLS AND PROCEDURES The preparation of our audited consolidated financial statements in In compliance with the provisions of Canadian Securities conformity with IFRS requires us to make estimates and judgements Administrators’ Regulation 52-109, we have filed certificates signed that affect the reported amounts of assets and liabilities, net by the President and Chief Executive Officer (“CEO”) and by the revenues and expenses, and the related disclosures. Such estimates Vice-President Finance and Chief Financial Officer (“CFO”), in that, include the valuation of goodwill and intangible assets. These among other things, report on: estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates • their responsibility for establishing and maintaining disclosure and assumptions on an ongoing basis using historical experience, controls and procedures and internal control over financial knowledge of economics and market factors, and various other reporting for RSI; and assumptions that management believe to be reasonable under the circumstances. We adjust such estimates and assumptions when • the design and effectiveness of disclosure controls and procedures facts and circumstances dictate. Our actual results could differ from and the design and effectiveness of internal controls over financial these estimates. Changes in those estimates and assumptions are reporting. recognized in the period in which the estimates are revised. Refer to note 2 (d) to the audited consolidated financial statements for more detail. DISCLOSURE CONTROLS AND PROCEDURES CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES NOT YET ADOPTED The CEO and the CFO, have designed the disclosure controls and procedures (“DC&P”), or have caused them to be designed under their supervision, in order to provide reasonable assurance that: A number of new standards and amendments to standards and • material information relating to the Company is made known to interpretations are not yet effective for the year ended September the CEO and CFO by others, particularly during the period in 30, 2023 and have not been applied in preparing these consolidated which the interim and annual filings are being prepared; and financial statements. New standards and amendments to standards and interpretations that are currently under review include: • information required to be disclosed by the Company in its annual • Definition of Accounting Estimates (Amendments to IAS 8) under securities legislation is recorded, processed, summarized • Disclosure initiative – Accounting Policies (Amendments to IAS 1 and reported within the time periods specified in securities filings, interim filings or other reports filed or submitted by it and IFRS Practice Statement 2) legislation. • Classification of Liabilities as Current or Non-current (Amendments to IAS 1) As at September 30, 2023, an evaluation was carried out, under the • Deferred tax related to assets and liabilities arising from a single supervision of the CEO and the CFO, of the design and operating transaction (Amendments to IAS 12) effectiveness of the Company’s DC&P. Based on this evaluation, • Lease liability in a sale and leaseback (Amendments to IFRS 16 the CEO and the CFO concluded that the Company’s DC&P Leases) were appropriately designed and were operating effectively as at • Supplier finance arrangements (Amendments to IAS 7 and IFRS 7) September 30, 2023. We do not intend to adopt the Amendments in our consolidated financial statements before the annual period beginning on October 1, 2023 and we do not expect the amendments to have a material impact on the consolidated financial statements. 2023 Annual ReportManagement’s Discussion & Analysis 56 INTERNAL CONTROL OVER FINANCIAL REPORTING this is not an exhaustive list, we caution investors that statements concerning the following subjects are, or are likely to be, forward- The CEO and CFO have also designed internal controls over looking statements: financial reporting (“ICFR”), or have caused them to be designed under their supervision, in order to provide reasonable assurance • demand for refined sugar and maple syrup; regarding the reliability of financial reporting and the preparation of • our recently announced Expansion Project; financial statements for external purposes in accordance with IFRS • future prices of raw sugar; using the framework established in “Internal Control – Integrated • expected inflationary pressures on costs; Framework (COSO 2013 Framework) published by the Committee • natural gas costs; of Sponsoring Organizations of the Treadway Commission (COSO)”. • beet production forecasts; As at September 30, 2023, an evaluation was carried out, under the • growth of the maple syrup industry and the refined sugar industry; supervision of the CEO and the CFO, of the design and operating • the status of labour contracts and negotiations, including the effectiveness of Rogers’ ICFR. Based on that evaluation, they have impact of the current labour disruption in Vancouver; concluded that the design and operation of the Company’s internal • the level of future dividends; and controls over financial reporting were effective as at September 30, • the status of government regulations and investigations 2023. Forward-looking statements are based on estimates and In designing and evaluating such controls, it should be recognized assumptions made by us in light of our experience and perception that, due to inherent limitations, any controls, no matter how well of historical trends, current conditions and expected future designed and operated, can provide only reasonable assurance of developments, as well as other factors that we believe are achieving the desired control objectives and may not prevent or appropriate and reasonable in the circumstances, but there can be detect misstatements. Projections of any evaluations of effectiveness no assurance that such estimates and assumptions will prove to be to future periods are subject to the risk that controls may become correct. Forward-looking statements involve known and unknown inadequate because of changes in conditions, or that the degree risks, uncertainties and other factors that may cause actual results of compliance with the policies or procedures may deteriorate. or events to differ materially from those anticipated in such forward- Additionally, management is obliged to use judgement in evaluating looking statements. Actual performance or results could differ controls and procedures. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING 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. There were no changes in the Company’s internal controls over financial reporting during the year that have materially affected, or Although we believe that the expectations and assumptions on are reasonably likely to materially affect, the Company’s internal which forward-looking information is based are reasonable under the control over financial reporting. FORWARD-LOOKING STATEMENTS 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, This report contains statements or information that are or may be whether a result of events or circumstances occurring after the date “forward-looking statements” or “forward-looking information” hereof, unless so required by law. 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 Rogers Sugar Inc.Management’s Discussion & Analysis RESPONSIBILITY FOR FINANCIAL REPORTING 57 The accompanying consolidated financial statements of Rogers Sugar Inc. and all the information in this annual report pertaining to the Corporation are the responsibility of the Administrator and have been approved by the Board of Directors. The consolidated financial statements have been prepared by the Administrator in accordance with International Financial Reporting Standards by applying the detailed accounting policies set out in the notes to the financial statements. The Administrator is of the opinion that the consolidated financial statements were prepared based on reasonable and material criteria and using justifiable and reasonable estimates. The Administrator has prepared the financial information presented elsewhere in the annual report and has ensured that it is consistent with the financial statements of the Corporation. The Administrator maintains systems of internal accounting and administrative controls of high quality, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Corporation’s assets are appropriately accounted for and adequately safeguarded. The Board of Directors is responsible for ensuring that the Administrator fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements of the Corporation. The Board carries out this responsibility through its Audit Committee. The Audit Committee is appointed by the Board and all of its members are outside and unrelated directors. The committee meets with the Administrator, as well as external auditors, to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities and to review the annual report, the financial statements and the external auditor's report. The committee reports its findings to the Board for consideration when approving the financial statements for issuance to the Shareholders. The committee also considers, for review by the Board and approval by the Shareholders, the engagement or re-appointment of the external auditors. The consolidated financial statements of the Corporation have been audited by KPMG LLP, the external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the Shareholders. KPMG LLP has full and free access to the Audit Committee. Michael Walton, Jean-Sébastien Couillard, President and Chief Executive Officer Vice President Finance, Chief Financial Officer and Corporate Secretary Lantic Inc., Administrator Lantic Inc., Administrator November 30, 2023 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 58 INDEPENDENT AUDITOR'S REPORT To the Shareholders of Rogers Sugar Inc. OPINION We have audited the consolidated financial statements of Rogers Sugar Inc. (the "Entity"), which comprise: • the consolidated statements of financial position as at September 30, 2023 and October 1, 2022 • the consolidated statements of earnings (loss) and comprehensive income for the years then ended • the consolidated statements of changes in shareholders’ equity for the years then ended • the consolidated statements of cash flows for the years then ended • and notes to the consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at September 30, 2023 and October 1, 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board. BASIS FOR OPINION We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our auditor's report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended September 30, 2023. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matter described below to be the key audit matter to be communicated in our auditor’s report. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 59 Goodwill and brand names impairment assessment for the Maple products cash-generating unit DESCRIPTION OF THE MATTER As discussed in Notes 3(i) and 15 to the financial statements, the Entity performs impairment testing annually for goodwill and brand names and when circumstances indicate that there may be an impairment. The Entity assesses impairment by comparing the carrying amount of the cash-generating unit ("CGU") to its recoverable amount. The recoverable amount is based on the higher of the value in use and fair value less costs to sell. Value in use is based on estimates of discounted future cash flows expected to be recovered from the CGU through its use. Fair value less costs to sell is the estimated amount obtainable from the sale of the CGU in an arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal. The Entity determined that the fair value less costs to sell exceeded the carrying amount of the CGU. The Entity’s significant assumption in determining the fair value less costs to sell relates to the range of earning multiples. The goodwill balance as of September 30, 2023 is $233.0 million, of which $3.1 million relates to the Maple products CGU. The brand names balance as at September 30, 2023 is $5.9 million and relates to the Maple products CGU. WHY THE MATTER IS A KEY AUDIT MATTER We identified the evaluation of the goodwill and brand names impairment assessment for the Maple products CGU as a key audit matter. This matter represented an area of higher risk of misstatement given the magnitude of goodwill and indefinite life brand names and the high degree of estimation uncertainty in assessing the assumptions used to determine the recoverable amounts. Significant auditor judgement and the involvement of professionals with specialized skills and knowledge was required to evaluate the evidence for the Entity’s significant assumptions. Minor changes to these assumptions could have a significant effect on the recoverable amount of the CGU and result in impairment charges. HOW THE MATTER WAS ADDRESSED IN THE AUDIT The following are the primary procedures we performed to address this key audit matter. We involved valuation professionals with specialized skills and knowledge, who assisted in developing an independent expectation of the fair value less costs to sell for the Maple product CGU. The procedures performed included the following: • Developed a range of earnings before interest, tax, depreciation and amortization ("EBITDA") multiples using available market information from third party sources and observed in recent comparable transactions; • Developed a range of an estimated EBITDA amount based on quantitative and qualitative considerations; • Developed a range of recoverable amounts by multiplying the EBITDA multiples by an estimated EBITDA amount; and • Compared the independently developed range of recoverable amounts to the recoverable amount determined by the Entity. OTHER INFORMATION Management is responsible for the other information. Other information comprises: • the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions. • the information, other than the financial statements and the auditor’s report thereon, included in a document likely to be entitled "Glossy Annual Report". Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 60 In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report. We have nothing to report in this regard. The information, other than the financial statements and the auditor’s report thereon, included in a document likely to be entitled "Glossy Annual Report" is expected to be made available to us after the date of this auditor’s report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s financial reporting process. AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc.61 • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. • Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. • Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this auditor’s report is Aaron Fima. Montréal, Canada November 29, 2023 * CPA auditor, public accountancy permit No. A125211 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 62 Consolidated Statements of Earnings (Loss) and Comprehensive Income (In thousands of dollars except per share amounts) Consolidated statements of earnings (loss) Revenues (note 32) Cost of sales Gross margin Administration and selling expenses Distribution expenses Goodwill impairment (note 15) Results from operating activities Net finance costs (note 5) Earnings (loss) before income taxes Income tax expense (recovery) (note 6): Current Deferred Net earnings (loss) Net earnings (loss) per share (note 27): Basic Diluted Fiscal years ended September 30, 2023 $ 1,104,713 938,987 165,726 44,229 26,534 — 70,763 94,963 24,577 70,386 14,676 3,921 18,597 51,789 0.50 0.44 Consolidated statements of comprehensive income Net earnings (loss) Other comprehensive income: Items that are or may be reclassified subsequently to net earnings (loss): Cash flow hedges (note 9) Income tax on cash flow hedges (note 6) Foreign currency translation differences Items that will not be reclassified to net earnings (loss): Defined benefit actuarial gains (note 20) Income tax on defined benefit actuarial gains (note 6) Other comprehensive income (loss) Comprehensive income The accompanying notes are an integral part of these consolidated financial statements. Fiscal years ended September 30, 2023 $ 51,789 (16,994) 4,362 (456) (13,088) 14,530 (3,708) 10,822 (2,266) 49,523 October 1, 2022 $ 1,006,134 875,329 130,805 45,783 21,709 50,000 117,492 13,313 17,567 (4,254) 14,275 (1,961) 12,314 (16,568) (0.16) (0.16) October 1, 2022 $ (16,568) 17,323 (4,447) 1,784 14,660 11,332 (2,909) 8,423 23,083 6,515 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. Consolidated Statements of Financial Position (In thousands of dollars) 63 September 30, 2023 $ October 1, 2022 $ 46 118,252 2,280 267,268 8,912 5,019 401,777 267,185 29,973 20,890 783 7,286 233,007 559,124 960,901 58,000 164,404 1,415 4,364 1,140 229,323 100,000 2,898 287 ― 26,086 151,711 98,212 45,488 424,682 654,005 107,210 300,968 5,085 (146,635) 40,268 306,896 151 120,207 3,096 246,706 8,868 11,582 390,610 247,969 22,932 24,264 564 18,610 233,007 547,346 937,956 26,000 177,435 1,503 3,991 7,643 216,572 100,000 18,529 1,333 76 19,198 149,699 98,901 42,229 429,965 646,537 103,550 300,922 5,085 (160,672) 42,534 291,419 960,901 937,956 ASSETS Current assets: Cash Trade and other receivables (note 7) Income taxes receivable Inventories (note 8) Prepaid expenses Derivative financial instruments (note 9) Total current assets Non-current assets: Property, plant and equipment (note 10) Right-of-use assets (note 11) Intangible assets (notes 12 and 15) Other assets (note 13) Derivative financial instruments (note 9) Goodwill (note 15) Total non-current assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Revolving credit facility (note 16) Trade and other payables (note 17) Provisions (note 18) Lease obligations (note 19) Derivative financial instruments (note 9) Total current liabilities Non-current liabilities: Revolving credit facility (note 16) Employee benefits (note 20) Provisions (note 18) Derivative financial instruments (note 9) Lease obligations (note 19) Convertible unsecured subordinated debentures (note 21) Senior guaranteed notes (note 22) Deferred tax liabilities (note 14) Total non-current liabilities Total liabilities Shareholders’ equity: Share capital (note 23) Contributed surplus Equity portion of convertible unsecured subordinated debentures (note 21) Deficit Accumulated other comprehensive income (loss) Total shareholders’ equity Commitments (notes 19 and 25) Contingencies (note 26) Total liabilities and shareholders’ equity The accompanying notes are an integral part of these consolidated financial statements. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 64 Consolidated Statements of Changes in Shareholders’ Equity (In thousands of dollars except number of shares) 3 2 0 2 , 0 3 r e b m e t p e S d e d n e r a e y l a c s i f e h t r o F i n g e r o f y c n e r r u c l d e t a u m u c c A l d e t a u m u c c A e e y o p m e l f o n o i t r o p i n a g d e z i l a e r n u l d e t a u m u c c A n o ) s s o l ( y t i u q E $ l a t o T $ $ $ $ $ $ $ t i c i f e D s e c n e r e ff d i i n a g e g d e h s n a p l s e r u t n e b e d l s u p r u s s e r a h s s e r a h s n o i t a l s n a r t w o l f h s a c t i f e n e b l e b i t r e v n o c d e t u b i r t n o C n o m m o C f o r e b m u N 9 1 4 , 1 9 2 ) 2 7 6 0 6 1 ( , 5 4 5 , 1 6 1 1 , 0 2 3 7 8 0 2 , 5 8 0 5 , , 2 2 9 0 0 3 0 5 5 3 0 1 , , 5 4 0 2 7 3 4 0 1 , 8 7 1 8 2 5 3 , ) 2 3 6 2 1 ( , ) 6 5 4 ( 2 2 8 0 1 , — — — — — 9 8 7 , 1 5 9 8 7 , 1 5 ) 2 5 7 , 7 3 ( ) 2 5 7 , 7 3 ( — — — — — — ) 6 5 4 ( — — — — — — ) 2 3 6 2 1 ( , — — — — — — 2 2 8 0 1 , — — — — — — — — — ) 2 3 1 ( 8 7 1 — — — — — — — 2 2 0 2 , 1 r e b o t c O , e c n a a B l r a e y e h t r o f i s g n n r a e t e N ) 3 2 e t o n ( s d n e d v D i i 0 6 6 3 , 5 7 0 4 2 7 , ) 3 2 e t o n ( s e r a h s f o e c n a u s s I — — — — — — — — ) 4 2 e t o n ( n o i t a s n e p m o c d e s a b - e r a h S ) 9 e t o n ( x a t f o t e n , s e g d e h w o l f h s a C , i s n a g l a i r a u t c a t i f e n e b d e n i f e D ) 0 2 e t o n ( x a t f o t e n s n o i t a r e p o n g e r o f i f o n o i t a l s n a r T 6 9 8 6 0 3 , ) 5 3 6 6 4 1 ( , 9 8 0 , 1 4 8 4 , 7 5 9 6 , 1 3 5 8 0 5 , 8 6 9 0 0 3 , 0 1 2 , 7 0 1 0 2 1 , 6 9 0 5 0 1 , 3 2 0 2 , 0 3 r e b m e t p e S , e c n a a B l . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i i n a e r a s e t o n g n y n a p m o c c a e h T (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. Consolidated Statements of Changes in Shareholders’ Equity (continued) (In thousands of dollars except number of shares) 65 T h e a c c o m p a n y n g n o t e s a r e a n i i n t e g r a l p a r t o f t h e s e c o n s o l i d a t e d f i n a n c a i l s t a t e m e n t s . , 1 0 4 3 7 2 0 4 5 , , 1 0 3 5 5 0 3 0 0 9 2 2 , , 5 0 8 5 , 2 0 8 7 3 2 0 , 1 1 6 i i D v d e n d s ( n o t e 2 3 ) N e t l o s s f o r t h e y e a r l B a a n c e , O c t o b e r 2 , 2 0 2 1 l B a a n c e , O c t o b e r 1 , 2 0 2 2 T r a n s l a t i o n o f i f o r e g n o p e r a t i o n s n e t o f t a x ( n o t e 2 0 ) D e f i n e d b e n e f i t a c t u a r i a l g a n s i , C a s h f l o w h e d g e s , n e t o f t a x ( n o t e 9 ) S h a r e - b a s e d c o m p e n s a t i o n ( n o t e 2 4 ) I s s u a n c e o f s h a r e s ( n o t e 2 3 ) 6 8 5 , 1 2 2 , 3 4 1 1 — — — — — — — — — — — — — — — 1 4 3 ( 1 0 8 ) — — — — — — — — — , 8 4 2 3 — — — — — — , 1 0 3 6 8 6 9 2 3 , 1 0 0 , 1 3 9 3 0 0 8 8 7 , , 5 0 8 5 , 1 2 4 5 0 $ $ $ $ N u m b e r o f C o m m o n C o n t r i b u t e d s h a r e s s h a r e s s u r p u s l E q u i t y ( l o s s ) o n d e b e n t u r e s c o n v e r t i b e l p o r t i o n o f l e m p o y e e A c c u m u a t e d l b e n e f i t l p a n s h e d g e g a n i c a s h f l o w A c c u m u a t e d l u n r e a l i z e d g a n i , 1 2 8 7 6 — — — — 7, 2 4 0 $ — — 1 , 5 4 5 1 , 7 8 4 — — — — — — , ( 1 6 0 6 7 2 ) 2 9 1 , 4 1 9 — — — — — 1 , 7 8 4 , 8 4 2 3 , 1 2 8 7 6 , 3 3 0 3 1 4 3 ( 3 7, 5 0 0 ) ( 3 7, 5 0 0 ) , ( 1 6 5 6 8 ) , ( 1 6 5 6 8 ) ( 2 3 9 ) , ( 1 0 6 6 0 4 ) , 3 1 8 9 5 8 i d ff e r e n c e s t r a n s l a t i o n c u r r e n c y f o r e g n i A c c u m u a t e d l $ D e f i c i t $ T o t a l $ F o r t h e f i s c a l y e a r e n d e d O c t o b e r 1 , 2 0 2 2 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 66 Consolidated Statements of Cash Flows (In thousands of dollars) Cash flows from operating activities: Net earnings (loss) Adjustments for: Depreciation of property, plant and equipment and right-of-use assets (note 4) Amortization of intangible assets (note 4) Changes in fair value of derivative financial instruments included in cost of sales Income tax expense (note 6) Pension contributions Pension expense Net finance costs (note 5) Loss on disposal of property, plant and equipment and right-of-use assets (notes 10 and 11) Share-based compensation - equity settled (note 24) Share-based compensation - cash settled (note 24) Goodwill impairment (note 15) Changes in: Trade and other receivables Inventories Prepaid expenses Trade and other payables Provisions (note 18) Cash generated from operating activities: Interest paid Income taxes paid Net cash flows from operating activities Cash flows used in financing activities: Dividends paid Increase in revolving credit facility (note 16) Payment of lease obligations (note 19) Issuance of shares (note 23) Payment of financing fees Net cash flows used in financing activities Cash flows used in investing activities: Additions to property, plant and equipment, net of proceeds on disposal Additions to intangible assets (note 12) Net cash flows used in investing activities Effect of changes in exchange rate on cash Net decrease in cash Cash, beginning of year Cash, end of year Supplemental cash flow information (note 28). The accompanying notes are an integral part of these consolidated financial statements. For the fiscal years ended September 30, 2023 $ October 1, 2022 $ 51,789 22,480 3,806 (6,210) 18,597 (11,085) 9,984 24,577 139 178 3 — 114,258 1,879 (20,778) (44) (14,612) (1,484) (35,039) 79,219 (21,049) (13,852) 44,318 (37,687) 32,000 (5,419) 3,528 (1,308) (8,886) (34,966) (432) (35,398) (139) (105) 151 46 (16,568) 22,283 3,865 6,831 12,314 (10,363) 10,925 17,567 44 143 5,779 50,000 102,820 (23,709) (65,811) (4,292) 51,707 (1,090) (43,195) 59,625 (17,493) (20,580) 21,552 (37,439) 26,000 (5,150) 3,303 (268) (13,554) (23,635) (95) (23,730) 240 (15,492) 15,643 151 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 67 1. REPORTING ENTITY Rogers Sugar Inc. ("Rogers" or the "Company") is a company domiciled in Canada, incorporated under the Canada Business Corporations Act. The head office of Rogers is located at 123 Rogers Street, Vancouver, British Columbia, V6B 3V2. The consolidated financial statements of Rogers as at September 30, 2023 and October 1, 2022 comprise Rogers and the directly and indirectly controlled subsidiaries, Lantic Inc. ("Lantic") and The Maple Treat Corporation ("TMTC"), (together referred to as the "Company"). The principal business activities of the Company are the refining, packaging and marketing of sugar, and the packaging, marketing and distribution of maple products. The Company’s fiscal year ends on the Saturday closest to the end of September. All references to 2023 and 2022 represent the years ended September 30, 2023 and October 1, 2022. 2. BASIS OF PREPARATION (A) STATEMENT OF COMPLIANCE: These consolidated financial statements have been prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). These consolidated financial statements were authorized for issue by the Board of Directors on November 29, 2023. (B) BASIS OF MEASUREMENT: These consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated statements of financial position: (i) derivative financial instruments are measured at fair value; (ii) equity-settled share-based compensation, cash-settled share appreciation rights and cash-settled performance share units are measured at fair value; (iii) the defined benefit liability is recognized as the net total of the present value of the defined benefit obligation less the total of the fair value of the plan assets and the unrecognized past service costs; (iv) assets acquired and liabilities assumed in business combinations are measured at fair value at acquisition date, less any subsequent impairment, if applicable; and (v) lease obligations which are measured at the present value of minimum lease liabilities in accordance with IFRS 16 Leases. (C) FUNCTIONAL AND PRESENTATION CURRENCY: These consolidated financial statements are presented in Canadian dollars, since it is the Company’s functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousands, except as noted and per share amounts. (D) USE OF ESTIMATES AND JUDGEMENTS: The preparation of these consolidated financial statements, in conformity with IFRS, requires management to make judgements, estimates and assumptions about future events that affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting years. The following is a summary of areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements: Goodwill and unamortizable intangibles impairment: The Company makes a number of estimates when calculating the recoverable amount of a cash-generating unit containing goodwill and unamortizable intangibles using discounted future cash flows or other valuation methods. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 68 3. SIGNIFICANT ACCOUNTING POLICIES (A) BASIS OF CONSOLIDATION: Subsidiaries: The consolidated financial statements include Rogers and the subsidiary it controls, Lantic and its subsidiaries, TMTC and Highland Sugarworks Inc. (the latter two companies together referred to as "TMTC"). Control exists where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date control commences until the date that control ceases. The accounting policies of subsidiaries are aligned with the policies adopted by the Company. The Company owns 100% of the common shares of Lantic. Lantic Capital Inc., a wholly-owned subsidiary of Belkorp Industries Inc., owns the two outstanding Class C shares of Lantic. These Class C shares are non-voting, have no rights to return or risk of loss and are redeemable for a nominal value of one dollar each. The Class C shares entitle the holder to elect five of the seven directors of Lantic but have no other voting rights at any meetings of Lantic’s shareholders except as may be required by law. Notwithstanding Lantic Capital Inc.’s ability to elect five of the seven directors of Lantic, Lantic Capital Inc. receives no benefits or exposure to losses from its ownership of the Class C shares. As the Class C shares are non-dividend paying and redeemable for a nominal value of one dollar, there is no participation in future dividends or changes in value of Lantic resulting from the ownership of the Class C shares. There is also no management fee or other form of consideration attributable to the Class C shares. The determination of control involves judgement. Based on all the facts and available information, management has concluded that Rogers has control of Lantic. Inter-company balances and transactions, and any unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the consolidated financial statements. (B) FOREIGN CURRENCY TRANSACTIONS: Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate in effect at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated at the rate prevailing at the date that the fair value was determined. Foreign denominated non-monetary assets and liabilities that are measured at the historical costs are translated at the rate prevailing at the transaction date. Revenues and expenses denominated in foreign currencies are translated into the functional currency at the rate in effect on the dates they occur. Gains or losses resulting from these translations are recorded in net earnings (loss) of the period. (C) FOREIGN OPERATIONS: The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on business combinations, are translated to Canadian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Canadian dollars at the average exchange rate in effect during the reporting period. Foreign currency differences are recognized in other comprehensive income (loss) in the accumulated foreign currency translation differences account. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Company disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to income or loss. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 69 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (D) CASH: Cash includes cash on hand, bank balances and bank overdraft when the latter forms an integral part of the Company’s cash management. (E) INVENTORIES: Inventories are valued at the lower of cost and net realizable value. The cost of inventories is determined on a first-in, first-out basis and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (F) PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment, with the exception of land, are recorded at cost less accumulated depreciation and any accumulated impairment losses. Land is carried at cost and is not depreciated. Cost includes expenditures that are directly attributable to the acquisition of the asset less any government grants received for capital expenditures. The cost of assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Construction-in-progress assets are capitalized during construction and depreciation commences when the asset is available for use. The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. Gains and losses on disposal of items of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment and are recognized in cost of sales for assets used in production and in administration and selling expenses for all other assets. Depreciation related to assets used in production is recorded in cost of sales while the depreciation of all other assets is recorded in administration and selling expenses. Depreciation is calculated on a straight-line basis, after taking into account residual values, over the estimated useful lives of each component of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Significant components of individual assets are assessed and, if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 70 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (F) PROPERTY, PLANT AND EQUIPMENT: (CONTINUED) The estimated useful lives are as follows: Barrels Buildings Furniture and fixtures Machinery and equipment 6 years 20 to 60 years 3 to 10 years 5 to 40 years Depreciation methods, useful lives and residual values are reviewed at each financial year-end and depreciation is adjusted on a prospective basis, if necessary. (G) INTANGIBLE ASSETS: (i) Goodwill: Goodwill is measured at the acquisition date as the fair value of the consideration transferred less the fair value of the net identifiable assets of the acquired company or business activities. Goodwill is not amortized and is carried at cost less accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. (ii) Other intangible assets: Intangible assets that are acquired by the Company and have finite useful lives are initially measured at cost. Following initial recognition, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred. Amortization is calculated over the cost of the asset, less its residual value. Amortization is recognized in administrative expenses on a straight-line basis over the estimated useful lives of the intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Amortization of intangible assets not in service begins when they are ready for their intended use. The estimated useful lives are as follows: Software Customer relationships Other 5 to 15 years 10 years 10 years Brand names are not amortized as they are considered to have an indefinite life and are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. For intangible assets with finite life, useful lives and residual values are reviewed at each financial year-end and amortization is adjusted on a prospective basis, if necessary. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 71 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (H) LEASES: The Company recognizes a right-of-use asset and a lease liability based on the present value of future lease payments when the leased asset is available for use by the Company. The lease payments include fixed and in-substance fixed payments and variable lease payments that depend on an index or rate, less any lease incentives receivable. The lease payments are discounted using the interest rate implicit in the lease or the lessee’s incremental borrowing rate. The Company uses their incremental borrowing rate for its present value calculations. Lease payments are discounted over the lease term, which includes the fixed term and renewal options that the Company is reasonably certain to exercise. Lease payments are allocated between the lease liability and a finance cost, which is recognized in finance costs over the lease term in the consolidated statement of earnings. Lease payments for assets that are exempt through the short-term exemption and variable payments not based on an index or rate are recognized in administration and selling expenses or distribution expenses as incurred. Right-of-use assets are measured at cost, less any accumulated depreciation and accumulated impairment losses, and adjusted for any re-measurement of lease liabilities. Cost is calculated as the initial measurement of the lease liability plus any initial direct costs and any lease payments made at or before the commencement date. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term or the useful life. (I) IMPAIRMENT: The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives, the recoverable amount is estimated yearly at the same time, at year-end, and whenever there is an indication that the asset might be impaired. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit", or "CGU"). The Company’s corporate assets do not generate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets in the CGU. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or group of assets. Fair value less costs to sell (the “FVLCS”) is the estimated amount obtainable from the sale of the CGU in an arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal. In assessing the fair value less cost to sell, the market approach is used which incorporates comparable transaction multiples applied to adjusted EBITDA less an estimate of the cost to sell to derive a range of the FVLCS. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 72 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (J) EMPLOYEE BENEFITS: (i) Pension benefit plans: The Company provides post-employment benefits through defined benefit and defined contribution plans. The Company also sponsors Supplemental Executive Retirement Plans ("SERP"), which are neither registered nor pre-funded. Finally, the Company sponsors defined benefit life insurance, disability plans and medical benefits for some retirees and employees. Defined contribution plans The Company’s obligations for contributions to employee defined contribution pension plans are recognized as employee benefit expense in profit or loss in the years during which services are rendered by employees. Defined benefit plans The Company maintains some contributory defined benefit plans that provide for pensions to employees based on years of service and the employee’s compensation. The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior years, discounting that amount and deducting the fair value of any plan assets. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income (loss). The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. Costs related to plan settlements are recorded at the time the Company is committed to a settlement as a separate constructive obligation. Subsequent to the Company being committed to a settlement, the plan liability is measured at the expected settlement amount using settlement interest rates. (ii) Short-term employee benefits: Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under cash incentive if the Company has a present legal or constructive obligation to pay the amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 73 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (J) EMPLOYEE BENEFITS (CONTINUED): (iii) Share-based compensation: The Company has a Share Option Plan. Share-based payment awards are measured at fair value at the grant date, which is recognized as a personnel expense, with a corresponding increase in contributed surplus over the vesting period, which is normally five years. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service conditions are expected to be met. Any consideration paid by employees on exercise of share options is credited to share capital. (iv) Employee share purchase plan: The Company has an Employee Share Purchase Plan that is an equity-settled share-based payment with employees; the measurement is based on the grant-date fair value of the equity instrument granted. As such, the expense is recognized when the employee purchases the shares. (v) Cash-settled Performance Share Units: The Company has a Performance Share Units plan ("PSU") entitling certain senior personnel and executives to a cash payment. A liability is recognized in payables for the services acquired and is recorded at fair value based on the share price of the Company’s Common Shares with a corresponding expense recognized in administration and selling expenses. The amount recognized as an expense is adjusted to reflect the number of units for which the related service and performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the units of awards that do meet the related service and non-market performance conditions at the vesting date. At the end of each reporting period until the liability is settled, the fair value of the liability is re-measured, with any changes in fair value recognized in the consolidated statement of earnings. The fair value of the employee benefits expense of the PSUs is measured using the Monte Carlo pricing model. (vi) Termination benefits: Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognizes costs for a restructuring. If benefits are not expected to be fully settled within 12 months of the end of the reporting period, they are discounted. (K) PROVISIONS: A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance costs. (i) Asset retirement obligation: The Company recognizes the estimated liability for future costs to be incurred in the remediation of site restoration in regards to asbestos removal and disposal of such asbestos to a landfill for hazardous waste, and for oil, chemical and other hazardous materials, only when a present legal or constructive obligation has been determined and that such obligation can be estimated reliably. Upon initial recognition of the obligation, the corresponding costs are added to the carrying amount of the related items of property, plant and equipment and amortized as an expense over the economic life of the asset, or earlier if a specific plan of removal exists. This obligation is reduced every year by payments incurred during the year in relation to these items. The obligation might be increased by any required remediation to the owned assets that would be required through enacted legislation. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 74 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (K) PROVISIONS: (CONTINUED) (ii) Contingent liability: A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the Company, or a present obligation that arises from past events (and therefore exists), but is not recognized because it is not probable that a transfer or use of assets, provision of services, or any other transfer of economic benefits will be required to settle the obligation, or the amount of the obligation cannot be estimated reliably. (L) FINANCIAL INSTRUMENTS: (i) IFRS 9, Financial Instruments: The Company initially recognizes trade receivables when they are originated and other financial instruments on the trade date at which the Company becomes a party to the contractual provisions of the instrument. Financial instruments are initially measured at fair value except for trade receivables without a financing component which are initially measured at the transaction price. In the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability are added to or deducted from the fair value. (ii) Financial assets: Financial assets are classified into the following categories: a. Financial assets measured at amortized cost: A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment loss, if: • • the asset is held within a business model whose objectives is to hold assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principals and/or interest. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost. The Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in income or loss and reflected in an allowance account against trade and other receivables. b. Financial assets measured at fair value through profit or loss: These assets are measured at fair value through profit or loss and changes therein, including any interest are recognized in profit or loss. The Company currently has no significant financial assets measured at fair value, except for derivative financial instruments. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 75 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FINANCIAL INSTRUMENTS (CONTINUED): (iii) Financial liabilities: Financial liabilities are classified into the following categories: a. Financial liabilities measured at amortized cost: Financial liability subsequently measured at amortized cost, is accounted for using the effective interest method. b. Financial liabilities measured at fair value through profit or loss: Financial liabilities at fair value through profit or loss are initially recognized at fair value and are re-measured at each reporting date with any changes therein recognized in net earnings (loss). The Company currently has no significant financial liabilities measured at fair value except for derivative financial instruments. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired. Financial assets and liabilities are offset and the net amount is presented in the consolidated statements of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. (iv) Fair values of financial instruments: Financial assets and liabilities measured at fair value use a fair value hierarchy to prioritize the inputs used in measuring fair value as follows: Level 1 – valuation based on observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – valuation techniques based on inputs that are other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); and Level 3 – valuation techniques with observable market inputs (involves assumptions and estimates by management of how market participants would price the asset or liability). a. Cash: Cash includes cash on hand, bank balances and bank overdraft when the latter forms an integral part of the Company’s cash management. b. Derivative financial instruments: The Company uses derivative financial instruments to manage its exposure to changes in raw sugar, foreign exchange, and natural gas prices. In addition, the Company entered into interest rate swap contracts to fix a portion of the Company’s exposure to floating interest rate debt on its short-term borrowings. The Company’s objective for holding derivatives is to minimize risk using the most efficient methods to eliminate or reduce the impacts of these exposures. Fair value estimates are made as of a specific point in time, using available information about the financial instruments. These estimates are subjective in nature and may not be determined with precision. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 76 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FINANCIAL INSTRUMENTS (CONTINUED): (iv) Fair values of financial instruments (continued): b. Derivative financial instruments: (continued) The fair value of derivative instruments is the estimated amount that the Company would receive or pay to terminate the instruments at the reporting date. The fair values have been determined by reference to prices available from the markets on which the instruments trade, subject to credit adjustments as applicable. The fair values of the sugar future contracts and options are measured using Level 1 inputs, using published quoted values for these commodities. The fair values for the natural gas futures contracts, foreign exchange forward contracts and interest rate swap contracts are measured using Level 2 inputs. The fair values for these derivative assets or liabilities are estimated using industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market- based observable inputs including interest rate curves, credit spreads, natural gas prices, foreign exchange rates, and forward and spot prices for currencies. The fair values of all derivative instruments approximate their carrying value and are recorded as separate line items on the consolidated statements of financial position. The Company’s natural gas futures and a portion of interest rate swap agreements were designated as cash flow hedges and qualified for hedge accounting. For sugar futures contracts, the amounts are netted with the variation margins paid or received to/from brokers at the end of the reporting period. c. Compound financial instruments: The Company’s convertible unsecured subordinated debentures are accounted for as compound financial instruments. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition. Interest, dividends, gains and losses relating to the financial liability are recognized in profit or loss. d. Financing charges: Financing charges, which reflect the cost to obtain new financing, are offset against the debt for which they were incurred and recognized in finance costs using the effective interest method. Financing charges for the revolving credit facility are recorded with other assets. e. Share capital: Common shares Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects. Dividends to the equity holders are recorded in equity. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 77 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FINANCIAL INSTRUMENTS (CONTINUED): (v) Cash flow hedges: When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect net earnings (loss), the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in accumulated other comprehensive income as part of equity. The amount recognized in other comprehensive income is removed and included in net earnings under the same line item in the consolidated statements of earnings and comprehensive income as the hedged item, in the same period that the hedged cash flows affect net earnings (loss). If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, or exercised, the hedge accounting is discontinued prospectively. If the forecasted transaction is no longer expected to occur, then the balance in accumulated other comprehensive income (loss) is recognized immediately in net earnings (loss). When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to net earnings (loss) in the same period that the hedged item affects net earnings (loss). The Company has designated as cash flow hedges its natural gas futures and a portion of its interest rate swap agreements entered into in order to protect itself against natural gas price and interest rate fluctuations. (M) REVENUE RECOGNITION: The Company derives revenue from the sale of finished goods, which include sugar and maple products. The Company recognizes revenue when all performance obligations have been met which is generally at a point in time when it transfers control of the finished goods to a customer, which occurs upon shipment of the finished goods from the Company’s facilities or upon delivery of the finished goods to the customer’s premises. Some arrangements for the sale of finished goods provide for customer price discounts and/or volume rebates based on aggregate sales over a specified period, which gives rise to variable consideration. At the time of sale, estimates are made for items giving rise to variable consideration based on the terms of the sales program or arrangement. The estimate is based on historical experience, current trends, and other known factors. Sales are recorded net of customer discounts, rebates, and exclude sales taxes. (N) FINANCE INCOME AND FINANCE COSTS: Finance income comprises interest income on funds invested and finance costs comprise interest expense on borrowings. Changes in the fair value of interest rate swaps are recorded initially in other comprehensive income since inception of the cash flow hedge and transferred to finance income and finance costs in the same period that the hedged cash flows affect net earnings (loss). Net change in fair value of interest rate swap that do not meet hedge accounting is recognized in net finance costs. Interest expense is recorded using the effective interest method. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 78 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (O) INCOME TAXES: Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income (loss). Current tax is the expected tax payable or recoverable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous years. Deferred taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxes are not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred taxes are not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. In addition, the effect on deferred tax assets or liabilities of a change in tax rates is recognized in profit or loss in the period in which the enactment or substantive enactment takes place, except to the extent that it relates to an item recognized either in other comprehensive income (loss) or directly in equity in the current or in a previous period. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. (P) EARNINGS PER SHARE: The Company presents basic and diluted earnings (loss) per share ("EPS") data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding, for the effects of all dilutive potential common shares from the conversion of the convertible debentures and in-the-money stock options. (Q) NEW STANDARDS AND INTERPRETATIONS ADOPTED: The Company adopted the following standards and interpretations in its consolidated financial statements for the annual period beginning on October 2, 2022. • Annual Improvements to IFRS Standards 2018-2020 • Onerous Contracts – Cost of fulfilling a contract (Amendments to IAS 37) • Reference to the Conceptual Framework (Amendments to IFRS 3) The adoption of the amendments did not have an impact on the consolidated financial statements. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 79 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (R) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED: A number of new standards and amendments to standards and interpretations are not yet effective for the year ending September 30, 2023 and have not been applied in preparing these consolidated financial statements. New standards and amendments to standards and interpretations that are currently under review include: • • • • • • Definition of Accounting Estimates (Amendments to IAS 8) Disclosure initiative – Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) Classification of Liabilities as Current or Non-current (Amendments to IAS 1) Deferred tax related to assets and liabilities arising from a single transaction (Amendments to IAS 12) Lease liability in a sale and leaseback (Amendments to IFRS 16 Leases) Supplier finance arrangements (Amendments to IAS 7 and IFRS 7) The Company does not intend to adopt the Amendments in its consolidated financial statements before the annual period beginning on October 1, 2023. The Company does not expect the amendments to have a material impact on the consolidated financial statements. 4. DEPRECIATION AND AMORTIZATION EXPENSES Depreciation and amortization expenses were charged to the consolidated statements of earnings (loss) and comprehensive income as follows: Depreciation of property, plant and equipment: Cost of sales Administration and selling expenses Depreciation of right-of-use assets: Cost of sales Administration and selling expenses Amortization of intangible assets: Administration and selling expenses Total depreciation and amortization expenses For the fiscal years ended September 30, 2023 $ October 1, 2022 $ 17,161 633 17,794 1,500 3,186 4,686 3,806 26,286 17,276 492 17,768 2,836 1,679 4,515 3,865 26,148 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 80 5. NET FINANCE COSTS Recognized in net earnings (loss): Interest expense on convertible unsecured subordinated debentures, including accretion of $1,024 (2022 - $969) (note 21) Interest on revolving credit facility Interest on senior guaranteed notes, including accretion of $158 (2022- $116) Amortization of deferred financing fees Interest on Producteurs et Productrices Acéricoles du Québec supplier balance Other interest expense Interest accretion on discounted lease obligations Net change in fair value of interest rate swap (note 9) Net finance costs 6. INCOME TAX EXPENSE (RECOVERY) Current tax expense: Current period Adjustments for prior year periods Current tax expense Deferred tax expense (recovery): Recognition and reversal of temporary differences Adjustments for prior year periods Deferred tax expense (recovery) Total income tax expense For the fiscal years ended September 30, 2023 $ 8,530 7,293 3,639 1,231 2,265 21 1,075 523 24,577 October 1, 2022 $ 8,413 5,063 3,595 1,240 900 157 1,000 (2,801) 17,567 For the fiscal years ended September 30, 2023 $ October 1, 2022 $ 15,024 (348) 14,676 3,564 357 3.921 18,597 15,263 (988) 14,275 (2,774) 813 (1,961) 12,314 Income tax recognized in other comprehensive income (loss): September 30, 2023 October 1, 2022 For the fiscal years ended Before tax Tax effect Net of tax Before tax Tax effect Net of tax Cash flow hedges (16,994) 4,362 (12,632) Defined benefit actuarial gains 14,530 (3,708) 10,822 $ $ $ $ 17,323 11,332 $ (4,447) (2,909) $ 12,876 8,423 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 6. INCOME TAX EXPENSE (RECOVERY) (CONTINUED) Reconciliation of effective tax rate: The provision for income taxes differs from the amount computed by applying the Canadian federal and provincial tax rates to earnings (loss) before provision for income taxes. The reasons for the difference and the related tax effects are as follows: 81 Earnings (loss) before income taxes Income taxes using the Company’s statutory tax rate Changes due to the following items: Effect of differences in tax rates in other jurisdictions Non-deductible impairment of goodwill Non-deductible expenses (income) Adjustments for prior year periods 7. TRADE AND OTHER RECEIVABLES Trade receivables Less expected credit loss Other receivables Initial margin deposits with commodity brokers September 30, 2023 October 1, 2022 For the fiscal years ended % — 27.00 (0.77) — 0.18 0.01 26.42 $ 70,386 19,004 (540) — 124 9 18,597 % — 27.00 0.93 (317.36) (4.18) 4.12 (289.49) $ (4,254) (1,149) (40) 13,500 178 (175) 12,314 September 30, 2023 October 1, 2022 $ 109,353 (598) 108,755 7,953 1,544 118,252 $ 110,758 (567) 110,191 8,277 1,739 120,207 The Company grants credit to its customers in the ordinary course of business. Management believes that the Company’s exposure to credit risk and impairment losses related to trade and other receivables is limited due to the following reasons: • • There is a broad base of customers with dispersion across different market segments. Bad debt write-offs to total revenue have been less than 0.1% for each of the last five years (averaging less than $0.2 million per year). Write-offs for fiscal 2023 were $0.1 million (October 1, 2022 - $0.1 million). All bad debt write-offs are charged to administration and selling expenses. • Less than 1% of trade receivables are outstanding for more than 90 days (October 1, 2022 - less than 2%), while over 90% are current (less than 30 days) as at September 30, 2023 (October 1, 2022 - 84%). Through general security agreements with its lenders, trade and other receivables have been granted as continuing collateral security for all present and future indebtedness to the current lenders. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 82 8. INVENTORIES Raw materials Work in progress Finished goods Packaging and operating supplies Spare parts and other September 30, 2023 October 1, 2022 $ 172,444 10,511 47,770 230,725 17,733 18,810 267,268 $ 166,125 10,000 38,146 214,271 15,795 16,640 246,706 Costs of sales expensed during the year were all inventorial items, except for fixed costs incurred in Taber, Alberta, after the beet slicing campaign, and mark-to-market adjustments of derivative financial instruments. As at September 30, 2023, inventories recognized as cost of sales amounted to $949.4 million (October 1, 2022 - $862.7 million). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 83 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (A) CLASSIFICATION AND FAIR VALUES: The following table shows the carrying amount and fair values of financial assets and financial liabilities, including their level in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value (which is the case for cash, trade and other receivables, bank overdraft, revolving credit facility and trade and other payables). September 30, 2023 Carrying Amount Fair Value Fair value - hedging Fair value through instruments profit or loss Amortized cost $ $ $ Fair value hierarchy level Amount $ $ Total $ Financial assets measured at fair value Sugar futures contracts Foreign exchange forward contracts Natural gas futures contracts used for hedging Interest rate swaps used for hedging Other interest rate swaps — — 4,445 5,606 331 69 — — — 1,854 10,051 2.254 — — — — — — 331 69 Level 1 Level 2 4,445 Level 2 5,606 Level 2 1,854 Level 2 12,305 331 69 4,445 5,606 1,854 Financial assets not measured at fair value Cash Trade and other receivables — — — — — — 46 118,252 118,298 46 118,252 118,298 Financial liabilities measured at fair value Natural gas futures contracts used for hedging (28) Foreign exchange forward contracts Financial liabilities not measured at fair value Revolving credit facility Trade and other payables Senior guaranteed notes Convertible unsecured subordinated debentures — (28) — — — — — — (1,112) (1,112) — — — (28) Level 2 (1,112) Level 2 (28) (1,112) (1,140) — — — — — (158,000) (158,000) (164,404) (164,404) (98,212) (98,212) Level 2 (81,800) (151,711) (151,7 11) Level 1 (150,700) (572,327) (572,327) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 84 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (A) CLASSIFICATION AND FAIR VALUES: (CONTINUED) October 1, 2022 Financial assets measured at fair value Sugar futures contracts Foreign exchange forward contracts Natural gas futures contracts used for hedging Interest rate swaps used for hedging Other interest rate swaps Carrying Amount Fair Value Fair value - hedging instruments Fair value through profit or loss Amortized cost $ $ $ — — 21,634 5,383 561 237 — — — 2,377 27,017 3,175 — — — — — — Fair value hierarchy level $ Amount $ Level 1 Level 2 561 237 Total $ 561 237 21,634 Level 2 21,634 5,383 Level 2 2,377 Level 2 5,383 2,377 30,192 Financial assets not measured at fair value Cash Trade and other receivables Financial liabilities measured at fair value Foreign exchange forward contracts Financial liabilities not measured at fair value Revolving credit facility Trade and other payables Senior guaranteed notes Convertible unsecured subordinated debentures — — — — — — — — — — — — — 151 151 120,207 120,207 120,358 120,358 (7,719) (7,719) — — (7,719) Level 2 (7,719) (7,719) — — — — — (126,000) (126,000) (177,435) (177,435) (98,901) (98,901) Level 2 (85,200) (149,699) (149,699) Level 1 (152,100) (552,035) (552,035) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 85 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (B) DERIVATIVES AND HEDGING: As at September 30, 2023 and October 1, 2022, the Company’s financial derivatives carrying values were as follows: Financial Assets Financial Liabilities Current Non-current Current Non-current September 30, 2023 September 30, 2023 Derivative financial instruments measured at fair value through profit or loss: Sugar futures contracts Foreign exchange forward contracts Interest rate swap Derivative financial instruments designated as effective cash flow hedging instruments: Natural gas futures contracts Interest rate swaps $ 331 — 1,373 — 3,315 5,019 $ — 69 481 4,445 2,291 7,286 $ — 1,112 — 28 — 1,140 $ — — — — — — Financial Assets Financial Liabilities Current Non-current Current Non-current October 1, 2022 October 1, 2022 Derivative financial instruments measured at fair value through profit or loss: Sugar futures contracts Foreign exchange forward contracts Interest rate swap Derivative financial instruments designated as effective cash flow hedging instruments: Natural gas futures contracts Interest rate swaps $ 561 — 965 7,858 2,198 11,582 $ — 237 1,412 13,776 3,185 18,610 $ — 7,643 — — — 7,643 $ — 76 — — — 76 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 86 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (B) DERIVATIVES AND HEDGING: (CONTINUED) For the fiscal years ended Charged to cost of sales Unrealized gain (loss) Charged to finance income (costs) Other comprehensive income September 30, 2023 October 1, September 30, 2023 2022 October 1, September 30, 2023 2022 October 1, 2022 $ $ 11,018 974 — 1,325 (7,532) — $ — — $ — — (523) 2,801 $ — — — $ — — — — — — — — — — — (17,217) 223 11,992 (6,207) (523) 2,801 (16,994) 10,132 7,191 17,323 Derivative financial instruments measured at fair value through profit or loss: Sugar futures contracts Foreign exchange forward contracts Interest rate swap Derivative financial instruments designated as effective cash flow hedging instruments: Natural gas futures contracts Interest rate swap The following table summarizes the Company’s hedging components of accumulated other comprehensive income (loss) ("AOCI") as at September 30, 2023 and October 1, 2022: September 30, 2023 October 1, 2022 Natural gas futures contracts Interest rate swap $ 22,344 (6,247) 16,097 (17,217) 4,419 3,299 $ 4,574 (555) 4,019 223 (57) 4,185 Natural gas futures contracts $ 12,212 (3,646) 8,566 10,132 (2,601) 16,097 Total $ 26,918 (6,802) 20,116 (16,994) 4,362 7,484 Interest rate swap $ (2,617) 1,291 (1,326) 7,191 (1,846) 4,019 Total $ 9,595 (2,355) 7,240 17,323 (4,447) 20,116 Opening AOCI Income taxes Opening AOCI – net of income taxes Change in fair value of derivatives designated as cash flow hedges Income taxes Ending AOCI – net of income taxes For the fiscal year ended September 30, 2023, the derivatives designated as cash flow hedges were considered to be fully effective and no ineffectiveness has been recognized in net earnings (loss). Approximately $2.4 million of net gains presented in accumulated other comprehensive income (loss) are expected to be reclassified to net earnings (loss) within the next twelve months. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 87 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (C) COMMODITY PRICE RISK: Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices. There are two types of commodity contracts, which are entered into by the Company: (i) Sugar: In order to protect itself against fluctuations of the world raw sugar market, the Company follows a rigorous hedging program for all purchases of raw cane sugar and sales of refined sugar. Anytime raw sugar is priced by a sugar supplier, a corresponding sugar futures contract is sold for the same quantity, period and underlying value. Anytime refined sugar is priced by a customer, the corresponding volume of raw sugar is purchased for the same quantity, period and underlying value. The Company’s policy is to cover all raw cane purchases and refined sugar sales as they are priced by the Company’s suppliers and customers. On a daily basis, the Company monitors all net sugar futures contract positions against the physical priced purchases and sales commitments to ensure that appropriate hedge positions are in place. For the Company’s beet operation, the Board of Directors approved an economic pre-hedge, using sugar futures contracts, of some of the beet sugar sales that will occur in the future, provided there is a contract in place with the Alberta Sugar Beet Growers to grow sugar beets. The Board of Directors also approved a trading book up to a maximum of 15,000 metric tonnes of sugar derivative contracts. The Company's raw sugar futures contracts as well as the fair value of these contracts relating to purchases or sales of raw sugar as at September 30, 2023 and October 1, 2022 are as follows: September 30, 2023 October 1, 2022 Original futures contractual amount Current contractual amount Fair value gain/(loss) Original futures contractual amount Current contractual amount Fair value gain/(loss) (US$) (US$) (US$) (US$) (US$) (US$) 103,167 119,965 8,102 166 9,950 186 16,798 1,848 20 113,148 45,243 4,195 111,435 130,101 18,666 162,586 110,436 44,277 4,046 158,759 (2,712) (966) (149) (3,827) (128,088) (139,517) (11,429) (139,108) (132,030) 7,078 ― ― ― ― ― ― (28,224) (28,157) (56) (54) (128,088) (139,517) (11,429) (167,388) (160,241) Purchases 0 - 12 months 12 - 24 months Over 24 months Sales 0 - 12 months 12 - 24 months Over 24 months Net position (16,653) (9,416) 7,237 (4,802) (1,482) Foreign exchange rate at the end of the period Net value (CA$) Margin call (receipt) payment at year-end Net asset (liability) (CA$) 1.3560 9,814 (9,483) 331 67 2 7,147 3,320 1.3814 4,586 (4,025) 561 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 88 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (C) COMMODITY PRICE RISK: (CONTINUED) (i) Sugar: (continued) All sugar futures contracts are traded through a large exchange clearing house on the New York Intercontinental Exchange. Regulation of the US futures industry is primarily self-regulation, with the role of the Federal Commodity Futures Trading Commission being principally an oversight role to determine that self-regulation is continuous and effective. The exchange clearing house used is one of the world’s largest capitalized financial institutions with excellent long-term credit ratings. Daily cash settlements are mandatory (margin calls) for resulting gains and/or losses from futures trading for each customer’s account. Due to the above, the Company does not anticipate a credit risk from the raw sugar futures derivative instruments. As at September 30, 2023 and October 1, 2022, the Company had the following sugar futures contracts: September 30, 2023 Contractual average value per M.T. Total contractual amount Volume October 1, 2022 Contractual average value per M.T. Total contractual amount Volume M.T. (US$) (US$) M.T. (US$) (US$) Purchases Sales Beet pre-hedge 235,421 552.63 130,101 422,122 (235,726) 567.94 (133,878) (424,307) (9,884) 570.47 (10,189) n/a (5,639) (9,416) — (2,185) 376.10 377.65 — n/a Foreign exchange rate at the end of the period Total contractual amount (CA$) 1.3560 (12,767) 158,759 (160,241) — (1,482) 1.3814 (2,047) If, on September 30, 2023, the raw sugar value would have increased by US$0.05 per pound (being approximately US$110.0 per metric tonne), and all other variables remained constant, the impact on net earnings (loss) would have been a decrease of approximately $1.1 million (calculated only on the point-in-time exposure on September 30, 2023) (October 1, 2022 - decrease in net earnings (loss) of $0.2 million for US$0.05 per pound increase). If the raw sugar value would have decreased by US$0.02 per pound (being approximately US$44.00 per metric tonne), and all other variables remained constant, the impact on net earnings (loss) would have been an increase of approximately $0.4 million (October 1, 2022 - increase in net earnings (loss) of $0.1 million for US$0.02 decrease). Except for the beet pre-hedge, management believes that the above is not representative, as the Company has physical raw sugar purchases and refined sugar selling contracts that would offset most gains or losses realized from such decrease or increase in the commodity value, when such contracts are liquidated. For the beet pre-hedge, if, on September 30, 2023, the raw sugar value would have increased by US$0.05 per pound (being approximately US$110.00 per metric tonne), and all other variables remained constant, the impact on net earnings (loss) would have been a decrease of approximately $1.1 million (calculated only on the point- in-time exposure on September 30, 2023). If the raw sugar value would have decreased by US$0.02 per pound (being approximately US$44.00 per metric tonne), and all other variables remained constant, the impact on net earnings (loss) would have been an increase of approximately $0.4 million. The Company had no beet pre-hedge contracts as at October 1, 2022. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 89 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (C) COMMODITY PRICE RISK: (CONTINUED) (ii) Natural gas: In order to mitigate the overall price risks in the purchase of natural gas for use in the manufacturing operations, the Board approved the use of natural gas futures contracts. Natural gas futures contracts cannot be entered into for speculative reasons. The Company monitors its positions and the credit ratings of its counterparties and does not anticipate losses due to counterparty’s non-performance. The Company’s natural gas contracts as well as the fair value of these contracts relating to purchases of natural gas are as follows: September 30, 2023 October 1, 2022 Contracts Original Current futures (10,000 contractual contractual amount amount MM BTU) Fair value gain/ (loss) Contracts (10,000 MM BTU) Original future contractual amount Current contractual amount Fair value gain/ (loss) Purchases Less than 1 year 1 to 2 years 2 to 3 years 3 years and over Foreign exchange rate at the end of period Net asset (liability) (CA$) (US$) (US$) (US$) (US$) (US$) (US$) 7,848 5,828 6,966 21,234 41,876 1,300 7,827 7,697 (21) 1,869 9,343 2,377 20,266 (968) 9,445 4,788 4,673 6,167 15,134 5,689 7,964 8,188 3,176 3,515 9,448 3,281 45,133 3,257 974 25,073 40,734 15,661 1.3560 4,417 1.3814 21,634 The forecasted purchases of natural gas, the hedged items, are used for calculating the hedge ineffectiveness. No ineffectiveness was recognized in net earnings (loss) as the change in value of the hedging instrument for calculating ineffectiveness was the same or smaller as the change in value of the hedged items used for calculating the ineffectiveness. If, on September 30, 2023, the natural gas market price would have increased by US$1.00, and all other variables remained constant, other comprehensive income (loss) would have increased by $13.0 million (October 1, 2022 – increase in other comprehensive income (loss) of $10.1 million) as a result of the change in fair value of our natural gas futures. If the natural gas value would have decreased by US$1.00, and all other variables remained constant, would have an equal but opposite effect on other comprehensive income (loss). Management believes that this impact for natural gas is not representative as this variance will mostly offset when the actual natural gas is purchased and used. At such time, a gain or loss on the liquidation of the natural gas contracts would mostly offset the same increase or decrease in the actual physical transaction. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 90 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the foreign exchange rate. The Company’s significant cash flow exposure to foreign currency is due mainly to the following: • • • • • • • sales in US dollars for both the sugar and maple products segments; purchases of imported refined white sugar; purchases of natural gas; sales of by-products; Taber refined sugar and by-products sales; ocean freight; and purchases of property, plant and equipment for both the sugar and maple products segments. The Company mitigates its exposure to foreign currency by entering into forward exchange contracts. The credit risk associated with foreign exchange contracts arises from the possibility that a counterparty to a foreign exchange contract, in which the Company has an unrealized gain, fails to perform according to the terms of the contract. The credit risk is much less than the notional principal amount, being limited at any time to the change in foreign exchange rates attributable to the principal amount. Forward foreign exchange contracts have maturities of less than four years and relate mostly to US currency, and from time to time, Euro, Sterling pound and Australian dollar currencies. The counterparties to these contracts are major Canadian financial institutions. The Company does not anticipate any material adverse effect on its financial position resulting from its involvement in these types of contracts, nor does it anticipate non-performance by the counterparties. The Company’s foreign currency forward contracts relating to the purchase of raw sugar, the sale of refined sugar, the purchase of natural gas and purchases of property, plant and equipment for the sugar segment are detailed below. In addition, for the maple products segment, the Company hedges its exposure to fluctuations in foreign currency related to its anticipated cash flows from sales to specific US customers, using a foreign exchange forward contract. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 91 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) The Company’s foreign exchange contracts as at September 30, 2023 and October 1, 2022 are as follows: September 30, 2023 Original contract value (US/EUR/GBR/AUD$) 89,510 7,402 615 97,527 (107,470) (4,710) (60) (112,240) (14,713) Original contract value (CA$) 119,999 9,844 837 130,680 (143,600) (6,284) (79) (149,963) (19,283) Current contract value (CA$) 121,214 9,987 832 132,033 (145,568) (6,356) (81) (152,005) (19,972) Fair value gain/(loss) (CA$) 1,215 143 (5) 1,353 (1,968) (72) (2) (2,042) (689) 2,100 2,821 2,846 25 (44,468) (2,919) (47,387) (45,287) 185 74 259 (4,131) (229) (4,360) (4,101) (59,859) (3,935) (63,794) (60,973) 275 111 386 (5,930) (343) (6,273) (5,887) (60,201) (3,951) (64,152) (61,306) 267 108 375 (5,942) (334) (6,276) (5,901) (342) (16) (358) (333) (8) (3) (11) (12) 9 (3) (14) SUGAR Purchases U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Sales U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Total U.S. dollars - Sugar MAPLE PRODUCTS Purchases U.S. dollars Less than 1 year Sales U.S. dollars Less than 1 year 1 to 2 years Total U.S. dollars - Maple MAPLE PRODUCTS Purchases EUR Less than 1 year 1 to 2 years MAPLE PRODUCTS Sales EUR Less than 1 year 1 to 2 years Total EUR - Maple (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 92 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) September 30, 2023 Original contract value (US/EUR/GBR/AUD$) Original contract value (CA$) Current contract value (CA$) Fair value gain/(loss) (CA$) (3,250) (3,250) (2,849) (2,849) (2,844) (2,844) (416) (416) (694) (694) (687) (687) 5 5 7 7 MAPLE PRODUCTS Sales AUD Less than 1 year Total AUD - Maple MAPLE PRODUCTS Sales GBR Less than 1 year Total GBR - Maple Total Foreign Exchange (67,767) (89,686) (90,710) (1,024) In addition, the Company holds 1,000 US dollars options to exercise foreign exchange contracts in fiscal 2024 at US/Can. Exchange rate of 1.50. The fair value of these options is a loss of $19 (2022 – no options outstanding). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) 93 Original contract value (US$/EUR/AUD$) 75,969 12,882 2,720 91,571 (147,127) (9,009) (440) (156,576) (65,005) October 1, 2022 Original contract value (CA$) 98,821 16,718 3,552 119,091 (191,697) (11,511) (553) (203,761) (84,670) Current contract value (CA$) 104,840 17,632 3,707 126,179 (203,043) (12,336) (598) (215,977) (89,798) Fair value gain/(loss) (CA$) 6,019 914 155 7,088 (11,346) (825) (45) (12,216) (5,128) 500 688 691 3 (34,788) (549) — (35,337) (34,837) (2,457) (1,019) (3,476) (3,102) (3,102) (45,801) (709) — (46,510) (45,822) (3,304) (1,381) (4,685) (2,750) (2,750) (48,017) (756) — (48,773) (48,082) (3,371) (1,410) (4,781) (2,748) (2,748) (2,216) (47) — (2,263) (2,260) (67) (29) (96) 2 2 SUGAR Purchases U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Sales U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Total U.S. dollars - Sugar MAPLE PRODUCTS Purchases U.S. dollars Less than 1 year Sales U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Total U.S. dollars - Maple MAPLE PRODUCTS Sales EUR Less than 1 year 1 to 2 years Total EUR - Maple MAPLE PRODUCTS Sales AUD Less than 1 year Total AUD - Maple Total Foreign Exchange (106,420) (137,927) (145,409) (7,482) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 94 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) The Company had the following significant foreign currency exposures at year-end: Financial instruments measured at amortized cost: Cash Trade and other receivables, including initial margin deposits Trade and other payables Financial instruments at cash flow hedging instruments or at fair value through profit or loss: Net current contractual amount of raw sugar futures contracts Natural gas contracts Total exposure from above Forward exchange contracts Gross exposure Sugar purchases priced not received Committed future sales in US dollars Ocean freight Other Net exposure September 30, 2023 (US$) October 1, 2022 (US$) 604 27,478 (7,136) 20,946 9,416 (41,876) (32,460) (11,514) (60,000) (71,514) (143,006) 181,232 (500) ― 5,602 29,991 (9,883) 25,710 1,482 (25,074) (23,592) 2,118 (99,842) (97,724) (162,315) 236,570 (289) 67 (33,788) (23,691) As at September 30, 2023, the US/Can. Exchange rate was $1.3560 (October 1, 2022 - $1.3814). Based on the above gross exposure at year-end, and assuming that all other variables remain constant, in particular the price of raw sugar and natural gas, a $0.05 increase in the Canadian dollar would result in an increase in net earnings (loss) of $2.6 million, (October 1, 2022 – increase in net earnings (loss) of $3.6 million) while a $0.05 decrease would have an equal but opposite effect on net earnings (loss). Management believes that the impact on the gross exposure is not representative as it needs to be adjusted for transactions, which are not recorded on the consolidated statements of financial position as at year-end but were committed during the fiscal year, and will be accounted for as the physical transactions occur. The net exposure is due mainly to the Company’s policy not to hedge its foreign exchange exposure on natural gas futures contracts with maturities exceeding 12 months. The impact of a $0.05 increase in the Canadian dollar would result in an increase in net earnings (loss) by $1.2 million in 2023 (October 1, 2022 – increase in net earnings (loss) of $0.9 million) while a decrease would have an equal but opposite effect on net earnings (loss). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 95 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) Sugar futures sales contracts represent, in large part, contracts entered into when sugar is priced to a customer. As both the raw sugar component of futures sales contracts and the sugar purchases priced not received are in US dollars, there is no need to hedge the currency of the raw sugar component, hence the adjustment for sugar purchases priced not received. It also includes the Taber sales of refined sugar in US dollars. As all beet sugar is paid in Canadian dollars, Taber sales contracts in US dollars need to be financially hedged for currency exposure. Some sales are transacted in US dollars. For these sales, the raw sugar value is not hedged, as the corresponding futures contract is also in US dollars. Only the US dollar refined sugar margin and ocean freight contribution are hedged for the currency exposure. Ocean freight for raw sugar is denominated in US dollars and therefore forward exchange contracts are used to cover the foreign exchange exposure. (E) INTEREST RATE RISK: Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. In order to fix the interest rate on a substantial portion of the expected drawdown of the revolving credit facility, the Company enters into interest rate swap agreements. The outstanding swap agreements by maturity are as follows: Fiscal year contracted Date Fiscal 2019 Fiscal 2019 Fiscal 2020 Fiscal 2020 Fiscal 2020 March 12, 2019 to June 28, 2024 - 2.08% June 28, 2022 to June 28, 2024 - 2.17% October 3, 2019 to June 28, 2024 - 1.68% February 24, 2020 to June 28, 2025 - 1.60% June 28, 2024 to June 28, 2025 - 1.18% Total value $ 20,000 80,000 20,000 20,000 80,000 The counterparties to these swap agreements are major Canadian financial institutions. The Company does not anticipate any material adverse effect on its financial position resulting from its involvement in these types of swap agreements, nor does it anticipate non-performance by the counterparties. As at September 30, 2023, the Company has a short-term cash borrowing of $58.0 million (October 1, 2022 - $26.0 million) and a long-term cash borrowing of $198.2 million (October 1, 2022 - $198.9 million). The Company has $98.2 million in senior guaranteed notes bearing fixed interest rate and therefore may be exposed to fair value variance (October 1, 2022 - $98.9 million). Remaining borrowing is normally entered into a 30 - or 90-day bankers’ acceptance for an amount varying between $110.0 million to $195.0 million of the borrowings and will borrow either under prime rate loans or shorter term bankers’ acceptances. To mitigate the risk in future cash flows due to interest rate fluctuations, the Company enters into interest rate swap agreements from time to time. All other borrowings over and above the aggregate notional amount of the swap agreements are therefore exposed to interest rate fluctuations, to the exception of the senior guaranteed notes that bear fixed interest rate. For the fiscal year ended September 30, 2023, if interest rates had been 50 basis points higher, considering all borrowings not covered by the interest rate swap agreements designated for hedge accounting, net earnings (loss) would have been $0.3 million lower (October 1, 2022 - $0.1 million lower net earnings (loss)) while a decrease would have an equal but opposite effect on net earnings (loss). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 96 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (E) INTEREST RATE RISK: (CONTINUED) (i) Interest rate benchmark reform: London Interbank Offered Rate (“LIBOR”) Effective June 30, 2023, the remaining USD LIBOR 1-month, 3-month, 6-month and 12-month tenors have either ceased, or ceased being representative. The LIBOR administrator will continue to publish the 1-month, 3-month and 6-month tenors under an unrepresentative synthetic methodology until September 30, 2024. Canadian Dollar Offered Rate (“CDOR”) The Company currently holds interest rate swaps that have floating legs to CAD CDOR. On June 28, 2024, the remaining CAD CDOR 1-month, 2-month and 3-month tenors will either cease or no longer be representative. The Company’s CAD CDOR swaps and cash flow hedging relationships extend the anticipated cessation date of CDOR. The recommended alternative reference rates for LIBOR and CDOR are the Secured Overnight Financing Rate (SOFR) and Canadian Overnight Repo Rate Average (CORRA), respectively. The Company has evaluated the extent to which its cash flow relationships are subject to uncertainty driven by the IBOR reform. The Company’s hedged items and hedging instruments continue to be indexed to CDOR. The benchmark rates are quoted each day and the CDOR cash flows are exchanged with counterparties as usual. (F) CREDIT RISK: Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation. The Company believes it has limited credit risk other than those explained in Note 7, Trade and other receivables and Note 9, Financial instruments. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 97 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (G) LIQUIDITY RISK: Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The following are the contractual maturities of financial liabilities, including estimated interest payments: Non-derivative financial liabilities: Revolving credit facility Trade and other payables Senior guaranteed notes Derivative financial instruments measured at fair value through profit or loss: Sugar futures contracts (1) September 30, 2023 Carrying Contractual cash flows amount 0 to 12 months 12 to 24 months $ $ 158,000 164,404 98,212 158,000 164,404 100,000 $ — 164,404 — 420,616 422,404 164,404 $ — — — — (331) (12,768) (26,512) 13,492 Forward exchange contracts (net) (1) 1,043 (89,686) (89,837) Interest on swap agreements (1,854) 812 572 (607) 240 After 24 months $ 158,000 — 100,000 258,000 252 758 — Derivative financial instruments designated as effective cash flow hedging instruments: Natural gas contracts (1) Interest on swap agreements (1) Based on notional amounts as presented above. (4,417) (5,606) (11,165) 61,200 2,558 10,614 1,850 (37,884) (103,313) 409,451 384,520 61,091 10,437 708 24,270 24,270 40,149 — 41,159 299,159 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 98 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (G) LIQUIDITY RISK: (CONTINUED) October 1, 2022 Carrying amount Contractual cash flows 0 to 12 months 12 to 24 months $ $ 126,000 177,435 98,901 126,000 177,435 100,000 $ — 177,435 — 402,336 403,435 177,435 $ — — — — After 24 months $ 126,000 — 100,000 226,000 (561) 7,482 (2,377) (2,047) (29,831) 22,268 (137,927) (144,043) 1,549 737 3,117 572 5,516 2,999 240 (21,634) (5,383) 56,270 4,719 20,906 2,152 (22,473) (77,436) (150,079) 379,863 325,999 27,356 11,001 1,850 38,808 38,808 24,363 717 33,835 259,835 Non-derivative financial liabilities: Revolving credit facility Trade and other payables Senior guaranteed notes Derivative financial instruments measured at fair value through profit or loss: Sugar futures contracts (1) Forward exchange contracts (net) (1) Interest on swap agreements Derivative financial instruments designated as effective cash flow hedging instruments: Natural gas contracts (1) Interest on swap agreements (1) Based on notional amounts as presented above. The convertible unsecured subordinated debentures of $151.7 million (October 1, 2022 - $149.7 million) have been excluded from the above due to the Company’s option to satisfy the obligations at redemption or maturity in shares. The Company borrows under its revolving credit facility (see Note 16, Revolving credit facility). It is the Company’s intention to keep a debt level under its revolving credit facility ranging between $140.0 million and $265.0 million. All other non-derivative financial liabilities are expected to be financed through the collection of trade and other receivables and cash flows generated from operations. The eastern expansion project is expected to be financed using a combination of various financial instruments, including the revolving credit facility, loans from Investissement Quebec for up to $65 millions, and other debt and/or equity instruments. Derivative financial instruments for raw sugar, natural gas and forward exchange contracts are expected to be financed from the working capital of the Company. As at September 30, 2023, the Company had an unused available line of credit of $107.0 million (October 1, 2022 - $74.0 million), a cash balance of $0.1 million (October 1, 2022 - $0.2 million). On November 1, 2023, the Company increased its revolving credit facility by $75.0 million to $340 million. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 99 10. PROPERTY, PLANT AND EQUIPMENT Cost or deemed cost Balance at October 2, 2021 Additions Transfers Disposals Effects of movements in exchange rate Balance at October 1, 2022 Additions Transfers Disposals Effects of movements in exchange rate Balance at September 30, 2023 Accumulated depreciation Balance at October 2, 2021 Depreciation for the year Disposals Effect of movements in exchange rate Balance at October 1, 2022 Depreciation Disposals Balance at September 30, 2023 Net carrying amounts At October 1, 2022 At September 30, 2023 Land Buildings Machinery and equipment $ $ $ Furniture and Construction in progress fixtures $ $ Barrels $ Total $ 18,089 84,351 348,388 — — — — 61 1,617 — 4 288 11,824 (117) 3 2,797 153 — — 2 8,145 27,537 489,307 151 721 — 4 23,402 24,055 (14,162) — — — (117) 13 18,089 86,033 360,386 2,952 9,021 36,777 513,258 — — — — 6 11,137 — (1) 230 31,097 (1,614) (8) — — — — (30) 1,230 — (1) 37,210 37,416 (43,464) — — — (1,614) (10) 18,089 97,175 390,091 2,952 10,220 30,523 549,050 — — — — — — — — 30,589 209,777 2,431 — — 14,165 (73) — 1,767 366 — — 5,461 806 — — — — — — 247,594 17,768 (73) — 33,020 223,869 2,133 6,267 — 265,289 3,216 — 13,308 (1,218) 285 — 985 — — — 17,794 (1,218) 36,236 235,959 2,418 7,252 — 281,865 18,089 18,089 53,013 60,939 136,517 154,132 819 534 2,754 2,968 36,777 247,969 30,523 267,185 There were no impairment losses during fiscal 2023 and 2022. Any grants received are offset against property, plant and equipment additions. During the year, an amount of $0.7 million was recorded (October 1, 2022 - $Nil). All property, plant and equipment have been pledged as security for the revolving credit facility (see Note 16, Revolving credit facility). The Company has capitalized costs of $11.2 million in fiscal 2023, associated with the expansion of the production and logistic facility of its eastern sugar refining operations in Montreal and Toronto. Included in this amount are capitalized borrowing costs of $0.4 million, calculated using a capitalization rate of 6.3%. These costs are included in construction in progress. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 100 11. RIGHT-OF-USE ASSETS Cost: Balance at October 2, 2021 Additions Disposals Effect of movements in exchange rate Balance at October 1, 2022 Additions Disposals Effect of movements in exchange rate Balance at September 30, 2023 Accumulated depreciation: Balance at October 2, 2021 Depreciation Disposals Balance at October 1, 2022 Depreciation Disposals Balance at September 30, 2023 Net carrying amounts: At October 1, 2022 At September 30, 2023 Land $ Buildings $ Machinery and equipment $ 40 — — — 40 — — — 40 — — — — — — — 40 40 18,914 7,861 — 68 26,843 5,555 (1,629) (16) 30,753 6,211 3,327 — 9,538 3,253 (1,281) 11,510 17,305 19,243 7,952 981 (243) 11 8,701 6,538 — (2) 15,237 2,169 1,188 (243) 3,114 1,433 — 4,547 5,587 10,690 Total $ 26,906 8,842 (243) 79 35,584 12,093 (1,629) (18) 46,030 8,380 4,515 (243) 12,652 4,686 (1,281) 16,057 22,932 29,973 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 101 Customer Software relationships $ $ Brand names(1) $ Other $ 4,413 95 4,508 432 4,940 2,942 414 3,356 335 3,691 34,513 — 34,513 — 34,513 14,101 3,422 17,523 3,442 20,965 5,857 — 5,857 — 5,857 — — — — — 1,152 1,249 16,990 13,548 5,857 5,857 574 — 574 — 574 280 29 309 29 338 265 236 Total $ 45,357 95 45,452 432 45,884 17,323 3,865 21,188 3,806 24,994 24,264 20,890 12. INTANGIBLE ASSETS Cost Balance at October 2, 2021 Additions Balance at October 1, 2022 Additions Balance at September 30, 2023 Accumulated amortization Balance at October 2, 2021 Amortization for the year Balance at October 1, 2022 Amortization for the year Balance at September 30, 2023 Net carrying amounts At October 1, 2022 At September 30, 2023 (1) Indefinite life. 13. OTHER ASSETS Deferred financing charges represent the fees and costs related to the revolving credit facility agreement (see Note 16, Revolving credit facility). These fees are amortized over the life of the revolving credit facility, which matures on November 23, 2026. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 102 14. DEFERRED TAX LIABILITIES The deferred tax liabilities comprise the following temporary differences: Net assets (liabilities): Property, plant and equipment Right-of-use assets Intangibles Employee benefits Lease obligations Derivative financial instruments Losses carried forward Goodwill Provisions Deferred financing charges Other September 30, 2023 $ October 1, 2022 $ (41,618) (7,737) (5,566) 739 7,857 (5,307) 7,832 (2,934) 434 (640) 1,452 (37,289) (5,977) (6,488) 4,757 6,039 (6,803) 5,283 (2,863) 728 (857) 1,241 (45,488) (42,229) As at September 30, 2023, no deferred tax liability was recognized for temporary differences arising from investments in subsidiaries because the Company controls the decisions affecting the realization of such liabilities and it is probable that the temporary differences will not reverse in the foreseeable future. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 14. DEFERRED TAX LIABILITIES (CONTINUED) The movement in temporary differences during the current years is as follows: 103 Property, plant and equipment Right-of-use assets Intangibles Employee benefits Lease obligations Derivative financial instruments Losses carried forward Goodwill Provisions Deferred financing charges Other Property, plant and equipment Right-of-use assets Intangibles Employee benefits Lease obligations Derivative financial instruments Losses carried forward Goodwill Provisions Deferred financing charges Other Balance October 1, 2022 Recognized in profit (loss) Recognized in other comprehensive income (loss) Balance September 30, 2023 $ (37,289) (5,977) (6,488) 4,757 6,039 (6,803) 5,283 (2,863) 728 (857) 1,241 (42,229) Balance October 2, 2021 $ (35,926) (4,855) (7,705) 6,847 4,840 (3,834) 6,918 (2,729) 982 (874) (464) (36,800) $ (4,330) (1,766) 923 (310) 1,823 (2,866) 2,549 (79) (294) 217 212 (3,921) $ 1 6 (1) (3,708) (5) 4,362 — 8 — — (1) 662 $ (41,618) (7,737) (5,566) 739 7,857 (5,307) 7,832 (2,934) 434 (640) 1,452 (45,488) Recognized in profit (loss) Recognized in other comprehensive income (loss) Balance October 1, 2022 $ (1,358) (1,096) 1,208 819 1,175 1,478 (1,635) (95) (254) 17 1,702 1,961 $ (5) (26) 9 (2,909) 24 (4,447) — (39) — — 3 $ (37,289) (5,977) (6,488) 4,757 6,039 (6,803) 5,283 (2,863) 728 (857) 1,241 (7,390) (42,229) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 104 15. GOODWILL AND INDEFINITE LIFE INTANGIBLE ASSETS RECOVERABILITY OF CASH GENERATING UNITS (“CGU”): For the purpose of impairment testing, goodwill and intangibles with indefinite useful life are allocated to the Company’s operating segments, which represent the lowest level within the Company at which the goodwill and intangibles are monitored for internal management purposes, as follows: Sugar: Goodwill Maple products: Goodwill Brand names September 30, 2023 $ October 1, 2022 $ 229,952 229,952 3,055 5,857 238,864 3,055 5,857 238,864 In assessing whether goodwill and indefinite life intangible assets are impaired, the carrying amount of the segments (including goodwill and indefinite life intangible assets) are compared to their recoverable amount. The recoverable amounts of segments are based on the higher of the value in use and fair value less costs of disposal. (A) SUGAR SEGMENT: The Company performed the annual impairment review for goodwill as at September 30, 2023, and the estimated recoverable amounts exceeded the carrying amounts of the segments and, as a result, there was no impairment identified. The recoverable amount was based on the value in use. The key assumptions used in the estimation of the recoverable amount are set out below. The key assumptions represent management's assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources. Pre-tax discount rate Terminal growth rate Budgeted EBITDA growth rate (average of next 5 years) 2023 % 12.1 2.6 3.2 2022 % 10.7 2.3 2.0 The discount rate was a pre-tax measure estimated based on historical industry weighted-average cost of capital adjusted for impacts on risk and taxes. The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was based on management's best estimate of the long-term compound annual EBITDA growth rate. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 105 15. GOODWILL AND INDEFINITE LIFE INTANGIBLE ASSETS (CONTINUED) (A) SUGAR SEGMENT (CONTINUED): Budgeted EBITDA was estimated taking into account past experience, adjusted to factor revenue growth for the first year based on budgeted sales volumes, and the following years taking into account the average growth levels experienced over the past 5 years and the estimated sales volumes excluding the expansion project and price growth for the next five years. It was assumed that the sales price would increase in line with forecasted inflation over the next five years. Management has identified the two key assumptions that could cause the carrying amount to exceed the recoverable amount. The following table shows the amount by which these two assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount. Pre-tax discount rate Budgeted EBITDA growth rate (B) MAPLE SEGMENT: 2023 2022 % Basis point % Basis point 3.4 (4.4) 2.9 (2.3) The Company performed the annual impairment review for goodwill and indefinite life intangible assets as at September 30, 2023, and determinated the estimated recoverable amounts using the higher of the value in use and fair value less costs to sell (the “FVLCS”). The FVLCS is the amount obtainable from the sale of the cash generating unit in an arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal. The fair value hierarchy used to measure the FVLCS is level 3. Management has estimated this amount by using the market approach which incorporated comparable and transaction multiples which were applied to adjusted EBITDA of fiscal 2023 and budgeted EBITDA for fiscal 2024 to derive a range of the FVLCS. The key assumption was the multiple selected based on comparable companies in the same sector as the Maple CGU. Other assumptions include a size discount, the cost to dispose and a control premium. The estimated multiple ranged from 7.4x to 17.5x adjusted EBITDA. The Company determined that the FVLCS exceeded the carrying amount. A reasonable change in any of the key assumptions would result in an impairment. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 106 16. REVOLVING CREDIT FACILITY The Company has a total of $265.0 million of available working capital under the revolving credit facility, which matures on November 23, 2026, from which it can borrow at prime rate, SOFR rate or under bankers’ acceptances, plus 20 to 250 basis points, based on achieving certain financial ratios. Certain assets of the Company, including trade receivables, inventories and property, plant and equipment, have been pledged as security for the revolving credit facility. As at September 30, 2023, a total of $630.0 million of assets are pledged as security (October 1, 2022 - $590.6 million). The Company must comply with certain financial covenants related to the revolving credit facility on a quarterly basis. The Company was in compliance with the financial covenants at year end. The following amounts were outstanding under the revolving credit facility as at: Current Non-current September 30, 2023 $ 58,000 100,000 158,000 October 1, 2022 $ 26,000 100,000 126,000 The carrying value of the revolving credit facility approximates fair value. The valuation model considers the present value of expected payments, discounted using a risk-adjusted discount rate. On November 1, 2023, Lantic amended its revolving credit facility, by extending its term to October 31, 2027, and by increasing the amount available for borrowing for working capital and for the eastern expansion by $75 million to $340 million. In addition, in order to conform with the IBOR reform, Lantic will borrow at prime rate, SOFR Rate or under Adjusted Term CORRA loan (which is Term CORRA plus an adjustment varying between 29.547 to 32.138 basis points), plus 20 to 250 basis points, based on achieving certain financial ratios. 17. TRADE AND OTHER PAYABLES Trade payables Other non-trade payables Personnel-related liabilities Dividends payable to shareholders September 30, 2023 October 1, 2022 $ 125,873 4,081 24,991 9,459 164,404 $ 142,236 3,603 22,203 9,393 177,435 Considering that Maple products syrup is harvested once a year, the Producteurs et Productrices Acericoles du Québec ("PPAQ") offers to authorized purchasers the possibility to pay their purchases throughout the year, and before the end of February. The outstanding balance of $71.8 million as at September 30, 2023 (October 1, 2022 - $78.2 million) is included in trade payables, bears interest at 5.5% and is paid in five monthly installments (October, November, December, January and February). During the year, approximately 90% of the maple syrup purchases were made through the PPAQ process. Personnel-related liabilities represent the Company’s obligation to its current and former employees that are expected to be settled within one year from the reporting period as salary and accrued vacation. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 18. PROVISIONS Opening balance Additions Provisions used during the period Closing balance Presented as: Current Non-current 107 September 30, 2023 October 1, 2022 $ 2,836 350 (1,484) 1,702 1,415 287 1,702 $ 3,825 100 (1,089) 2,836 1,503 1,333 2,836 Provisions are comprised of asset retirement obligations, which represent the future cost the Company estimated to incur for the removal of asbestos in the operating facilities and for oil, chemical and other hazardous materials for which the Company has been able to identify the costs. The estimate of the total liability for future asset retirement obligations is subject to change, based on amendments to laws and regulations and as new information concerning the Company’s operations becomes available. Future changes, if any, to the estimated total liability as a result of amended requirements, laws, regulations and operating assumptions would be recognized prospectively as a change in estimate, when applicable. 19. LEASE OBLIGATIONS The Company’s leases are primarily for warehouses, operating properties, railcars and production equipment. The following table presents lease obligations recorded in the consolidated statements of financial position: Current Non-current September 30, 2023 $ 4,364 26,086 October 1, 2022 $ 3,991 19,198 The following table summarizes the reconciliation of the lease obligations for the periods ended: Opening balance Additions Disposal Payment of lease obligations Interest accretion Other Closing balance September 30, 2023 October 1, 2022 $ 23,189 12,093 (498) (5,419) 1,075 10 30,450 $ 18,492 8,842 ― (5,150) 1,000 5 23,189 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 108 19. LEASE OBLIGATIONS (CONTINUED) Certain leases contain extension or termination options exercisable by the Company before the end of the non-cancellable contract period. The Company has applied judgement to determine the lease term for the contracts with renewal and termination options and has included renewal and termination options in the measurement of lease obligations when it is reasonably certain to exercise the options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or a significant change in circumstances which impacts the original assessments made. Expenses relating to short-term leases, and for leases of low-value assets were not significant for the period ended September 30, 2023 and for October 1, 2022. The total cash outflow for leases (including interest) for the period ended September 30, 2023 was $5.4 million (October 1, 2022-$5.2 million), which was included as part of cash outflows from financing activities. The lease obligations are payable as follows: September 30, 2023 October 1, 2022 Future minimum lease payments $ 5,965 18,277 14,489 38,731 Present value of minimum lease payments $ 4,364 13,994 12,092 30,450 Future minimum lease payments $ 4,969 14,113 8,845 27,927 Interest $ 1,601 4,283 2,397 8,281 Present value of minimum lease payments $ 3,991 11,861 7,337 23,189 Interest $ 978 2,252 1,508 4,738 Less than one year Between one and five years More than five years (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 20. EMPLOYEE BENEFITS The Company sponsors defined benefit pension plans for its employees ("Pension benefit plans"), as well as health care benefits, medical plans and life insurance coverage ("Other benefit plans"). The following table presents a reconciliation of the pension obligations, the plan assets and the funded status of the benefit plans: 109 Fair value of plan assets: Pension benefit plans Defined benefit obligation: Pension benefit plans Other benefit plans Funded status: Pension benefit plans Other benefit plans Experience adjustment arising on plan liabilities Experience adjustment arising on plan assets September 30, 2023 $ October 1, 2022 $ 115,940 105,868 108,413 10,425 118,838 7,527 (10,425) (2,898) (7,406) 7,292 112,550 11,847 124,397 (6,682) (11,847) (18,529) (28,127) (16,901) The Company has determined that, in accordance with the terms and conditions of the defined benefit pension plans, and in accordance with statutory requirements (such as minimum funding requirements) of the plans of the respective jurisdictions, the present value of refunds or reductions in the future contributions is not lower than the balance of the total fair value of the plan assets less the total present value of the obligations. As such, no decrease in the defined benefit liability is necessary as at September 30, 2023 and October 1, 2022. The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes at year-end. The most recent actuarial valuation of the pension plans for funding purposes was as of January 1, 2022, the next required valuation will be as of December 31, 2024. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 110 20. EMPLOYEE BENEFITS (CONTINUED) The asset allocation of the major categories in the plan was as follows: Equity instruments Government bonds Cash and short-term securities September 30, 2023 October 1, 2022 % 61.5 34.7 3.8 100.0 $ 71,303 40,231 4,406 115,940 % 58.4 38.7 2.9 100.0 $ 61,827 40,971 3,070 105,868 The pension committee prepares the documentation relating to the management of asset allocation, reviews the investment policy and recommends it to the Board of Directors for approval in the event of material changes to the policy. Semi-annually monitoring of the asset allocation of the pension benefit plans allows the pension committee to ensure that the limits of asset allocation of the pension benefit plans are respected. Based on historical data, contributions to the defined benefit pension plans in fiscal 2024 are expected to be approximately $3.8 million. The pension plan exposes the Company to the following risks: (i) Investment risk: The defined benefit obligation is calculated using a discount rate. If the fund returns are lower than the discount rate, a deficit is created. (ii) Interest rate risk: Variation in bond rates will affect the value of the defined benefit obligation. (iii) Inflation risk: The defined benefit obligation is calculated assuming a certain level of inflation. An actual inflation higher than expected will have the effect of increasing the value of the defined benefit obligation. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 111 20. EMPLOYEE BENEFITS (CONTINUED) The movement in the pension and other benefit plans is as follows: For the fiscal years ended September 30, 2023 Pension benefit plans $ Other benefit plans $ Total $ Pension benefit plans $ October 1, 2022 Other benefit plans $ Total $ 112,550 11,847 124,397 135,729 15,005 150,734 1,853 5,680 1,021 (5,795) 185 573 — — 2,038 6,253 1,021 2,989 4,633 998 (5,795) (6,067) 311 507 — — 3,300 5,140 998 (6,067) (970) (700) (1,670) (841) (740) (1,581) Movement in the present value of the defined benefit obligation: Defined benefit obligation, beginning of the year Current service cost Interest cost Employee contributions Benefit payments from plan Benefit payments from employer Actuarial (gains) losses arising from changes in demographic assumptions — (681) (681) — (671) (671) Actuarial (gains) losses arising from changes in financial assumptions Actuarial (gains) losses arising from member experience Defined benefit obligation, end of year Movement in the fair value of plan assets: Fair value of plan assets, beginning of the year Interest income Return on plan assets (excluding interest income) Employer contributions Employee contributions Benefit payments from plan Benefit payments from employer Plan expenses Fair value of plan assets, end of year (6,170) (707) (6,877) (25,937) (2,758) (28,695) 244 (92) 152 1,046 193 1,239 108,413 10,425 118,838 112,550 11,847 124,397 105,868 5,441 7,292 3,607 1,021 (5,795) (970) (524) 115,940 — — — 700 — — (700) — — 105,868 121,435 5,441 4,100 7,292 4,307 1,021 (5,795) (1,670) (524) (16,901) 3,534 998 (6,067) (841) (390) 115,940 105,868 — — — 740 — — (740) — — 121,435 4,100 (16,901) 4,274 998 (6,067) (1,581) (390) 105,868 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 112 20. EMPLOYEE BENEFITS (CONTINUED) The net defined benefit obligation can be allocated to the plans’ participants as follows: September 30, 2023 October 1, 2022 Pension benefit plans Other benefit plans Pension benefit plans Other benefit plans Active plan participants Retired plan members Deferred plan participants % 40.0 55.4 4.6 100.0 % 28.4 71.6 — 100.0 % 42.3 54.1 3.6 100.0 The Company’s defined benefit pension expense was as follows: For the fiscal years ended September 30, 2023 October 1, 2022 Pension benefit plans $ Other benefit plans $ Pension benefit plans $ Other benefit plans $ Total $ Pension costs recognized in net earnings (loss): Current service cost 1,853 185 2,038 2,989 Expenses related to the pension benefit plans Net interest cost Re-measurements of other long-term benefits Pension expense Recognized in: Cost of sales Administration and selling expenses 524 239 (19) 2,597 — 573 (149) 609 524 812 (168) 3,206 390 430 16 3,825 2,047 530 2,577 3,351 550 2,597 79 609 629 3,206 474 3,825 311 — 507 90 908 616 292 908 % 36.1 63.9 — 100.0 Total $ 3,300 390 937 106 4,733 3,967 766 4,733 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 113 20. EMPLOYEE BENEFITS (CONTINUED) The following table presents the change in the actuarial gains and losses recognized in other comprehensive income (loss): For the fiscal years ended September 30, 2023 October 1, 2022 Pension benefit plans $ Other benefit plans $ Pension benefit plans $ Other benefit plans $ Total $ Total $ Cumulative amount in comprehensive income (loss) at the beginning of the year (15,767) (12,819) (28,586) Recognized during the year (13,199) (1,331) (14,530) (7,761) (8,006) (9,493) (3,326) (17,254) (11,332) Cumulative amount in comprehensive income (loss) at the end of the year Recognized during the year, net of tax (28,966) (14,150) (43,116) (15,767) (12,819) (28,586) (9,831) (991) (10,822) (5,951) (2,472) (8,423) Principal actuarial assumptions used were as follows: For the fiscal years ended September 30, 2023 October 1, 2022 Pension benefit plans % 5.65 3.00 5.10 3.00 Other benefit plans % 5.65 3.00 5.10 3.50 Pension benefit plans % 5.10 3.00 3.50 3.00 Other benefit plans % 5.10 3.50 3.50 3.00 Company’s defined benefit obligation: Discount rate Rate of compensation increase Net benefit plan expense: Discount rate Rate of compensation increase (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 114 20. EMPLOYEE BENEFITS (CONTINUED) Assumptions regarding future mortality are based on published statistics and mortality tables. The current longevities underlying the value of the liabilities in the defined benefit plans are as follows: Longevity at age 65 for current pensioners: Males Females Longevity at age 65 for members aged 45: Males Females September 30, 2023 October 1, 2022 22.3 24.9 23.8 26.2 22.2 24.9 23.7 26.2 The assumed health care cost trend rate as at September 30, 2023 was 5.47% (October 1, 2022 - 5.56%), decreasing uniformly to 4.00% in 2040 (October 1, 2022 - 4.00% in 2040) and remaining at that level thereafter. The following table outlines the key assumptions for the fiscal year ended September 30, 2023 and the sensitivity of a percentage change in each of these assumptions on the defined benefit plan obligations and the net defined benefit plan costs. The sensitivity analysis provided in the table is hypothetical and should be used with caution. The sensitivities of each key assumption have been calculated independently of any changes in other key assumptions. Actual experience may result in changes in a number of key assumptions simultaneously. Changes in one factor may result in changes in another, which could amplify or reduce the impact of such assumptions. (Decrease) increase in Company’s defined benefit obligation: Discount rate Impact of increase of 1% Impact of decrease of 1% Rate of compensation increase Impact of increase of 0.5% Impact of decrease of 0.5% Mortality 99% of expected rate For the fiscal year ended September 30, 2023 Pension benefit plans $ (10,506) 13,496 714 (661) 207 Other benefit plans $ (1,098) 1,363 2 (3) 29 Total $ (11,604) 14,859 716 (664) 236 Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend would have the following effects: Effect on the defined benefit obligations Increase Decrease $ 1,127 $ (925) As at September 30, 2023, the weighted average duration of the defined benefit obligation amounts to 11.5 years (October 1, 2022 - 11.9 years). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 21. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES The outstanding convertible debentures are as follows: Non-current Sixth series (i) Seventh series (ii) Total face value Less net deferred financing fees Less equity component (i), (ii) Accumulated accretion expense 115 September 30, October 1, 2023 $ 57,425 97,575 155,000 (1,547) (6,930) 5,188 2022 $ 57,425 97,575 155,000 (2,535) (6,930) 4,164 Total carrying value ― non-current 151,711 149,699 (i) Sixth series: On July 28, 2017, the Company issued $57.5 million Sixth series, 5.00% convertible unsecured subordinated debentures ("Sixth series debentures"), maturing on December 31, 2024, with interest payable semi-annually in arrears on June 30 and December 31 of each year. The debentures may be converted at the option of the holder at any time prior to maturity, at a conversion price of $8.26 per share. The debentures are redeemable at a price equal to the principal amount thereof plus accrued unpaid interest. On redemption or at maturity, the Company will repay the indebtedness of the convertible debentures by paying an amount equal to the principal amount of the outstanding convertible debentures, together with accrued and unpaid interest thereon. The Company may, at its option, elect to satisfy its obligation to repay the principal amount of the convertible debentures, which are to be redeemed or which have matured, by issuing shares to the holders of the convertible debentures. The number of shares to be issued will be determined by dividing the indebtedness related to the convertible debenture by 95% of the then current market price on the day preceding the date fixed for redemption or the maturity date, as the case may be. The Company allocated $2.6 million of the Sixth series debentures into an equity component (net of tax an amount of $2.0 million). During the year, the Company recorded $0.4 million (October 1, 2022 - $0.4 million) in finance costs for the accretion of the Sixth series debentures. The Company incurred underwriting fees and issuance costs of $2.7 million, which are netted against the convertible debenture liability. The fair value of the Sixth series convertible unsecured subordinated debentures is measured based on Level 1 of the three-tier fair value hierarchy and was based upon market quotes for the identical instruments. The fair value as at September 30, 2023 was approximately $56.3 million (October 1, 2022 - $56.9 million). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 116 21. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES (CONTINUED) (ii) Seventh series: On March 28, 2018, and on April 3, 2020, the Company issued $85.0 million and $12.8 million for a total of $97.8 million, Seventh series, 4.75% convertible unsecured subordinated debentures (“Seventh series debentures”), maturing on June 30, 2025, with interest payable semi-annually in arrears on June 30 and December 31 of each year. The debentures may be converted at the option of the holder at any time prior to maturity at a conversion price of $8.85 per share. The debentures are redeemable at a price equal to the principal amount thereof plus accrued unpaid interest. On redemption or on the maturity date, the Company will repay the indebtedness of the convertible debentures by paying an amount equal to the principal amount of the outstanding debentures, together with accrued and unpaid interest thereon. The Company may, at its option, elect to satisfy its obligation to repay the principal amount of the convertible debentures, which are to be redeemed or which have matured, by issuing shares to the holders of the convertible debentures. The number of shares to be issued will be determined by dividing the indebtedness related to the convertible debenture by 95% of the then current market price on the day preceding the date fixed for redemption or the maturity date, as the case may be. The Company allocated $4.3 million ($3.1 million net of tax) of the Seventh series debentures into an equity component. During the year, the Company recorded $0.6 million (October 1, 2022 - $0.6 million) in finance costs for the accretion of the Seventh series debentures. The Company incurred underwriting fees and issuance costs of $4.5 million, which are netted against the convertible debenture liability. The fair value of the Seventh series convertible unsecured subordinated debentures is measured based on Level 1 of the three- tier fair value hierarchy and was based upon market quotes for the identical instruments. The fair value as at September 30, 2023 was approximately $94.4 million (October 1, 2022 - $95.2 million). 22. SENIOR GUARANTEED NOTES In 2021, the Company issued a private placement of $100 million in the form of senior guaranteed notes (“Notes”) under a note purchase agreement entered into with certain institutional investors. The Notes are guaranteed and rank pari passu with the existing revolving credit facility. The Notes are due on April 30, 2031, bear interest at 3.49%, and interest is payable semi-annually in arrears in equal installments on April 30th and October 30th of each year and represent interest accrued from and including the date of issue of the Notes. The Notes are classified and measured at amortized cost, using the effective interest method. The valuation model considers the present value of expected payments, discounted using a risk-adjusted discount rate. The fair value as at September 30, 2023 was approximately $81.8 million (October 1, 2022 - $85.2 million). The Company must comply with certain financial covenants related to these Notes on a quarterly basis. The Company was in compliance with the financial covenants at year end. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 117 23. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY As of September 30, 2023, a total of 105,096,120 common shares (October 1, 2022 - 104,372,045) were outstanding. During the year, 724,075 stock options have been exercised for proceeds of $3.5 million and reversal of previously recognized share-based compensation recorded in contributed surplus of $0.1 million (note 24) (685,122 stock options were exercised for net proceeds of $3.3 million and reversal of previously recognized share-based compensation recorded in contributed surplus of $0.1 million for fiscal 2022). The Company declared a quarterly dividend of $0.09 per share for fiscal years 2023 and 2022. The following dividends were declared by the Company: Dividends For the fiscal years ended September 30, 2023 $ 37,752 October 1, 2022 $ 37,500 On November 29, 2023, the Board of Directors declared a quarterly dividend of $0.09 per share, payable on or before February 1, 2024. Contributed surplus: The contributed surplus account is used to record amounts arising on the issue of equity-settled share-based payment awards (see Note 24, Share-based compensation). Capital management: The Company's objectives when managing capital are: • • • • • To ensure proper capital investment is done in the manufacturing infrastructure to provide stability and competitiveness of the operations; To have stability in the dividends paid to shareholders; To have appropriate cash reserves on hand to protect the level of dividends made to shareholders; and meet its operations needs to manage the business; To maintain an appropriate debt level so that there is no financial constraint on the use of capital, and; To have an appropriate line of credit, considering its leverage ratio. The Company typically invests in its operations approximately $25.0 million yearly in capital expenditures. On an exceptional basis, the Company may invest more than $25.0 million when special capital requirements arise. Management believes that these investments, combined with approximately $45.0 to $50.0 million spent on average annually on maintenance expenses, allow for the stability of the manufacturing operations and improve its cost competitiveness through new technology or process procedures. The Board of Directors aims to ensure proper cash reserves are in place to maintain the current dividend level. Dividends to shareholders will only be approved after the Directors have carefully assessed a variety of factors that include the overall competitive landscape, volume and selling margin sustainability, the operating performance and capital requirements of the manufacturing plants and the sustainability of any increase. The Company has a $265.0 million revolving credit facility in addition to $100 million senior guaranteed notes that have been issued in 2021. The Company estimates to use between $140.0 million and $265.0 million of its revolving credit facility to finance its normal operations during the year. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 118 23. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY (CONTINUED) Capital management: (Continued) The Company monitors, on a quarterly basis, the ratio of total debt to earnings before interest, income taxes, depreciation and amortization, adjusted for the impact of all derivative financial instruments ("adjusted EBITDA") of the operating company. Through required lenders’ covenants, the debt ratio must be kept below 3.75:1. At year-end, the operating company’s debt ratio was 2.52:1 for fiscal 2023 and 2.29:1 for fiscal 2022. The Board of Directors of the Company has approved an expansion of the production and logistic capacity of its eastern sugar refining capacity. The project is expected to provide incremental capacity of 100,000 metric tonnes of refined white sugar, at an estimated cost of $200 million. The Company is expected to finance the construction of this project using a combination of debt and equity instruments. In connection with this project the Company has increased its revolving credit facility by $75 million to $340 million on November 1, 2023, and has negotiated some temporarily reliefs to the covenants associated with such facility during the construction period estimated to be completed in the first half of fiscal 2026. The Company does not use equity ratios to manage its capital requirements. 24. SHARE-BASED COMPENSATION (A) EQUITY-SETTLED SHARE-BASED COMPENSATION: The Company has reserved and set aside for issuance an aggregate of 6,000,000 common shares (October 1, 2022 – 6,000,000 common shares) at a price equal to the average market price of transactions during the last five trading days prior to the grant date. Options are exercisable to a maximum of twenty percent of the optioned shares per year, starting after the first anniversary date of the granting of the options and will expire after a term of ten years. Upon termination, resignation, retirement, death or long-term disability, all share options granted under the Share Option Plan not vested shall be forfeited. On December 12, 2022, a total of 666,347 share options were granted at a price of $5.85 per common share to certain executives. The measurement date fair values were measured based on the Black-Scholes option pricing model. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values of the share-based payment plans granted for fiscal 2023 are the following: Total fair value of options Share price Exercise price Expected volatility (weighted average volatility) Option life (expected weighted average life) Expected dividends Weighted average risk-free interest rate (based on government bonds) $233,000 $5.83 $5.85 14.926% to 16.208% 4 to 6 years 6.17% 2.930% to 3.339% On December 6, 2021, a total of 802,564 share options were granted at a price of $5.85 per common share to certain executives. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 119 24. SHARE-BASED COMPENSATION (CONTINUED) (A) EQUITY-SETTLED SHARE-BASED COMPENSATION: (CONTINUED) The measurement date fair values were measured based on the Black-Scholes option pricing model. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values of the share-based payment plans granted for fiscal 2022 are the following: Total fair value of options Share price Exercise price Expected volatility (weighted average volatility) Option life (expected weighted average life) Expected dividends Weighted average risk-free interest rate (based on government bonds) $227,000 $5.94 $5.85 15.057% to 16.877% 4 to 6 years 6.06% 1.323% to 1.415% Total share-based compensation expense is amortized over the service period and included in administration and selling expenses with an offsetting credit to contributed surplus. An expense of $178,000 was recorded for the fiscal year ended September 30, 2023 (October 1, 2022 - $143,000). The following table summarizes information about the share option plan as of September 30, 2023: Exercise price per option Outstanding number of options at October 1, 2022 Options granted during the period $4.28 $4.59 $4.68 $5.58 $5.85 $5.85 $6.23 $6.51 200,000 263,200 496,448 375,905 — — — — — 666,347 802,564 625,322 360,000 — — — Options exercised during the period (36,000) (263,200) (233,036) (175,172) — (16,667) Options Outstanding number of forfeited options at during the September 30, 2023 period Weighted average remaining life Number of options exercisable — — — — — — 164,000 — 263,412 200,733 666,347 785,897 6.47 — 6.17 5.18 9.20 8.18 4.18 3.18 n/a 64,000 — 38,012 111,298 — 143,846 585,322 360,000 1,302,478 3,123,439 666,347 (724,075) (40,000) 3,025,7 1 1 — — (40,000) 585,322 — 360,000 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 120 24. SHARE-BASED COMPENSATION (CONTINUED) (A) EQUITY-SETTLED SHARE-BASED COMPENSATION: (CONTINUED) The following table summarizes information about the Share Option Plan as of October 1, 2022: Exercise price per option Outstanding number of options at October 2, 2021 Options granted during the period $4.28 $4.59 $4.68 $5.58 $5.61 $5.85 $6.23 $6.51 200,000 730,000 563,500 447,1 75 80,000 — — — — — — 802,564 705,322 360,000 — — Options exercised during the period — (466,800) (67,052) (71,270) (80,000) — — — Options forfeited during the period Outstanding number of options at October 1, 2022 Weighted average remaining life Number of options exercisable — — — — — — 200,000 263,200 496,448 375,905 — 802,564 (80,000) 625,322 — 360,000 7.47 2.64 7.17 6.17 — 9.18 5.18 4.18 n/a 50,000 263,200 158,348 197,035 — — 500,258 360,000 1,528,841 3,085,997 802,564 (685,122) (80,000) 3,123,439 Options outstanding held by key management personnel amounted to 2,325,487 options as at September 30, 2023 and 2,883,439 options as at October 1, 2022 (see Note 29, Key management personnel). (B) CASH-SETTLED SHARE-BASED COMPENSATION-PERFORMANCE SHARE UNITS ("PSU"): The value to be paid-out to each participant will be equal to the result of: the number of PSUs granted to the participant which have vested, multiplied by the volume weighted average closing price of the Common Shares on the Toronto Stock Exchange (the “TSX”) for the five trading days immediately preceding the day on which the Company shall pay the value to the participant under the PSU plan, and such date will in no event occur after December 31 of the third calendar year following the calendar year in which the PSUs are granted. The Board of Directors of the Company has the discretion to determine that all or a portion of the PSUs granted to a participant for which the vesting conditions have not been achieved shall vest to such participant. Fiscal 2023 grant: On December 12, 2022, a total of 310,964 PSUs were granted to executives of the Company at a price of $5.85 per units. In addition, an aggregate of 14,476 PSUs at a weighted-average share price of $5.89 were allocated as a result of the dividend paid since inception, as the participants also receive dividend equivalents paid in the form of PSUs. As at September 30, 2023, an aggregate of 325,440 PSUs were outstanding in relation with this grant. These PSUs will vest at the end of the 2023-2025 performance cycle based on the achievement of total shareholder returns, as set by the Board of Directors. Following the end of a performance cycle, the Board of Directors will determine, concurrently with the release of the Company’s financial results for the fiscal year ended at the end of the performance cycle, whether the vesting conditions for the PSUs granted to a participant relating to such performance cycle have been achieved. Depending on the achievement of the vesting conditions, between 0% and 200% of the PSUs will become vested. The Board of Directors of the Company has the discretion to determine that all or a portion of the PSUs granted to a participant, for which the vesting conditions have not been achieved, shall vest to such participant. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 24. SHARE-BASED COMPENSATION (CONTINUED) (B) CASH-SETTLED SHARE-BASED COMPENSATION-PERFORMANCE SHARE UNITS ("PSU"): (CONTINUED) 121 Fiscal 2023 grant: (continued) The fair values of the PSUs were established using a Monte Carlo simulation model. The fair value as at grant date was $980,000 and $260,000 as at September 30, 2023. An expense of $100,000 related to this specific grant was recorded for the year ended September 30, 2023 in administration and selling expenses. The liabilities arising from these PSUs as at September 30, 2023 were $100,000. On December 12, 2022, the Board of Directors established a new PSU program for specific members of the management team of the Company, excluding executives. In connection with this new program, 95,283 PSUs were granted to specific members of the management team at a price of $5.85 per units. Under the approved program, these PSUs vest in equal tranches over a three-year period (one-third per year) based on certain performance measures, and are payable in cash three years after the grant date. On September 30, 2023, none of the PSUs granted under this new program had vested. The value of the payout is determined by multiplying the number of PSUs expected to vest at the payout date by the volume weighted average closing price of the Common Shares on the TSX for the five trading days immediately preceding the day on which the Company shall pay the value to the participant under the new PSU plan, and such date will in no event occur after December 31 of the third calendar year following the calendar year in which the PSUs are granted. The fair value of the PSUs under this new plan is recognized over the vesting period and is adjusted based of the applicable terms for the performance-based components. An expense of $207,000 was recorded for year ended September 30, 2023 in administration and selling expenses. The liabilities arising from the PSUs as at September 30, 2023 were $207,000. Fiscal 2022 grant: On December 6, 2021, a total of 386,709 PSUs were granted to executives of the Company. In addition, an aggregate of 42,563 PSUs at a weighted-average share price of $5.99 were allocated as a result of the dividend paid during the quarters since inception, as the participants also receive dividend equivalents paid in the form of PSUs. As at September 30, 2023, an aggregate of 429,272 PSUs was outstanding. These PSUs will vest at the end of the 2022-2024 performance cycle. The fair values were established using the Monte Carlo model. The fair value as at grant date was $1,493,000 and $1,361,000 as at September 30, 2023 (October 1, 2022 - $2,683,000). A gain of $318,000 was recorded for the year ended September 30, 2023 (October  1, 2022 – expense of $1,359,000) in administration and selling expenses. The liabilities arising from the PSUs as at September 30, 2023 were $1,041,000 (October 1, 2022 - $1,359,000). Fiscal 2021 grant: On December 7, 2020, a total of 491,412 PSUs were granted to executives of the Company. In addition, an aggregate of 98,920 PSUs at a weighted-average share price of $5.85 were allocated as a result of the dividend paid during the quarters since inception, as the participants also receive dividend equivalents paid in the form of PSUs. As at September 30, 2023, an aggregate of 590,332 PSUs was outstanding. These PSUs will vest at the end of the 2021-2023 performance cycle. The fair values were established using the Monte Carlo model. The fair value as at grant date was $664,000 and $3,908,000 as at September 30, 2023 (October 1, 2022 - $4,863,000). An expense of $29,000 was recorded for the year ended September 30, 2023 (October 1, 2022 – expense of $3,762,000) in administration and selling expenses. The liabilities arising from the PSUs as at September 30, 2023 were $3,849,000 (October 1, 2022 - $3,820,000). Fiscal 2020 grant: During fiscal 2023, the grant related to fiscal 2020 was cash settled for an amount of $640,000, and a gain of $15,000 was recorded for the year ended September 30, 2023 (October 1, 2022 – expense of $648,000) in administration and selling expenses. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 122 25. COMMITMENTS As at September 30, 2023, the Company had commitments to purchase a total of 901,000 metric tonnes of raw cane sugar up to fiscal 2025 (October 1, 2022 - 585,000 up to fiscal 2024), of which 228,136 metric tonnes had been priced (October 1, 2022 - 374,479), for a total dollar commitment of $187.2 million (October 1, 2022 - $224.2 million). In addition, the Company has a commitment of approximately $50.4 million (October 1, 2022 - $43.5 million) for sugar beets to be harvested and processed in fiscal 2024. TMTC has $4.1 million (October 1, 2022 - $2.4 million) remaining to pay related to an agreement to purchase approximately $16.1 million (4.7 million pounds) (October 1, 2022 - $2.4 million; 1.2 million pounds) of maple syrup from the PPAQ in fiscal 2023. In order to secure bulk syrup purchases, the Company issued an insurance bond for an amount of $15.6 million in favor of the PPAQ (October 1, 2022 – insurance bond in the amount of $17.4 million). The insurance bond expires on March 1, 2024. During the fiscal year ended September 30, 2023, the Company entered into capital commitments to complete its capital projects for a total value of $19.9 million (October 1, 2022 - $13.6 million) to be incurred in fiscal 2024. In addition, subsequent to year end, the Company entered into commitments related to the expansion project for a total value of $24.0 million. 26. CONTINGENCIES The Company, in the normal course of business, becomes involved from time to time in litigation and claims. While the final outcome with respect to claims and legal proceedings pending as at September 30, 2023 cannot be predicted with certainty, management believes that no provision was required and that the financial impact, if any, from claims related to normal business activities will not be material. 27. EARNINGS PER SHARE Reconciliation between basic and diluted earnings (loss) per share is as follows: Basic earnings (loss) per share: Net earnings (loss) For the fiscal years ended September 30, 2023 $ October 1, 2022 $ 51,789 (16,568) Weighted average number of shares outstanding 104,561,422 103,904,615 Basic earnings (loss) per share Diluted earnings (loss) per share: Net earnings (loss) Plus impact of convertible unsecured subordinated debentures and share options Weighted average number of shares outstanding: Basic weighted average number of shares outstanding Plus impact of convertible unsecured subordinated debentures and share options 0.50 51,789 6,314 58,103 (0.16) (16,568) — (16,568) 104,561,422 28,795,036 133,356,458 103,904,615 — 103,904,615 Diluted earnings (loss) per share 0.44 (0.16) As at October 1, 2022, the share options, the Sixth series debentures and the Seventh series debentures representing 18,243,788 common shares, were excluded from the calculation of diluted earnings (loss) per share as they were deemed anti-dilutive. There are no exclusions for the calculation of diluted earnings (loss) per share for the period ending September 30, 2023. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 123 28. SUPPLEMENTARY CASH FLOW INFORMATION September 30, 2023 $ October 1, 2022 $ October 2, 2021 $ Non-cash transactions: Additions of property, plant and equipment and intangible assets included in trade and other payables Increase in asset retirement obligation provision included in property, plant and equipment Additions to right-of-use assets 3,951 350 12,093 1,958 100 8,842 1,638 3,231 2,724 29. KEY MANAGEMENT PERSONNEL The Board of Directors as well as the executive team, which include the President and all the Vice-Presidents, are deemed to be key management personnel of the Company. The following is the compensation expense for key management personnel: Salaries and short-term benefits Attendance fees for members of the Board of Directors Post-employment benefits Share-based compensation (note 24) 30. PERSONNEL EXPENSES Wages, salaries and employee benefits Expenses related to defined benefit plans (note 20) Expenses related to defined contributions plans Share-based compensation (note 24) For the fiscal years ended September 30, 2023 October 1, 2022 $ 5,612 1,188 143 181 7,124 $ 4,431 1,076 152 5,922 11,581 For the fiscal years ended September 30, 2023 $ 118,595 3,206 6,778 181 128,760 October 1, 2022 $ 107,850 4,733 6,192 5,922 124,697 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 124 30. PERSONNEL EXPENSES (CONTINUED) The personnel expenses were charged to the consolidated statements of earnings (loss) and comprehensive income or capitalized in the consolidated statements of financial position as follows: Cost of sales Administration and selling expenses Distribution expenses Property, plant and equipment For the fiscal years ended September 30, 2023 October 1, 2022 $ 98,610 27,606 2,14 4 128,360 400 128,760 $ 94,380 28,040 1,984 124,404 293 124,697 31. RELATED PARTIES Lantic has outstanding redeemable Class B special shares of $44.5 million that are retractable and can be settled at Lantic’s option by delivery of a note receivable from Belkorp Industries Inc., having the same value. The note receivable bears no interest and has no fixed terms of repayment. The Class B special shares are entitled to vote, but on a pro rata basis at a meeting of shareholders of Lantic. Under the terms of a voting trust agreement between Belkorp Industries Inc. and Rogers, Rogers is entitled to vote the Class B special shares so long as they remain outstanding. Due to the fact that Lantic has the intent and the legal right to settle the note receivable with the redeemable Class B special shares, these amounts have been offset and, therefore, are not presented on the consolidated statements of financial position. Belkorp Industries Inc. also controls, through Lantic Capital, the two Lantic Class C shares issued and outstanding. The Class C shares entitle Lantic Capital to elect five of the seven directors of Lantic, but have no other voting rights at any meetings of shareholders of Lantic, except as may be required by law. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 125 32. SEGMENTED INFORMATION The Company has two operating and reportable segments, sugar and maple products. The principal business activity of the sugar segment is the refining, packaging and marketing of sugar products. The Maple products segment processes pure maple syrup and related maple products. The reportable segments are managed independently as they require different technology and capital resources. Performance is measured based on the segments’ gross margins and results from operating activities. These measures are included in the internal management reports that are reviewed by the Company’s President and CEO, and management believes that such information is the most relevant in the evaluation of the results of the segments. Transactions between reportable segments are interest receivable (payable), which are eliminated upon consolidation. Revenues Cost of sales Gross margin Depreciation and amortization Results from operating activities Additions to property, plant and equipment and intangible assets, net of disposals Increase in asset retirement obligation provision included in property, plant and equipment Additions to right-of-use assets Sugar $ 893,482 749,085 144,397 19,511 88,915 36,151 350 11,667 For the fiscal year ended September 30, 2023 Maple products Corporate and eliminations $ 211,231 189,902 21,329 6,775 8,453 951 — 78 $ — — — — (2,405) — — — Total assets Total liabilities For the fiscal year ended September 30, 2023 Sugar $ 925,990 (1,014,984) Maple products $ 199,866 (147,478) Corporate and eliminations $ (164,955) 508,457 Total $ 1,104,713 938,987 165,726 26,286 94,963 37,102 350 11,745 Total $ 960,901 (654,005) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual Report 126 32. SEGMENTED INFORMATION (CONTINUED) Revenues Cost of sales Gross margin Depreciation and amortization Results from operating activities Additions to property, plant and equipment and intangible assets, net of disposals Increase in asset retirement obligation provision included in property, plant and equipment Additions to right-of-use assets Total assets Total liabilities Sugar $ 792,200 676,328 115,872 19,380 62,344 22,642 100 8,842 Sugar $ 871,332 (972,962) For the fiscal year ended October 1, 2022 Maple products $ 213,934 199,001 14,933 6,768 (47,145) 1,364 — — Corporate and eliminations $ — — — — (1,886) — — — For the fiscal year ended October 1, 2022 Maple products $ 232,402 (179,598) Corporate and eliminations $ (165,778) 506,023 Total $ 1,006,134 875,329 130,805 26,148 13,313 24,006 100 8,842 Total $ 937,956 (646,537) Revenues were derived from customers in the following geographic areas: Canada United States Europe Other Substantially all of the non-current assets are located in Canada. For the fiscal years ended September 30, 2023 $ 893,043 146,989 36,746 27,935 October 1, 2022 $ 783,132 151,536 34,185 37,281 1,104,713 1,006,134 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 127 ROGERS SUGAR INC. Corporate Information DIRECTORS M. Dallas H. Ross, (1) (3) Chairman and General Partner Kinetic Capital Limited Partnership Dean Bergmame, (2) (3) Director Gary Collins, (2) (3) Director Daniel Lafrance, (1) (2) Director Shelley Potts, Director Stephanie Wilkes, (3) Director (1) Nominees to Board of Directors of Lantic Inc. (2) Audit Committee Members (3) Environmental, Social and Governance Committee Members LEGAL COUNSEL Davies, Ward, Phillips & Vineberg Montreal, Quebec TRADING SYMBOL RSI STOCK EXCHANGE LISTING The Toronto Stock Exchange ANNUAL MEETING The annual meeting of Shareholders will be held virtually February 7, 2024 at 1:00pm PST ADMINISTRATIVE OFFICE 4026 Notre-Dame Street East Montreal, Quebec H1W 2K3 Tel: (514) 527-8686 Fax: (514) 527-8406 REGISTRAR & TRANSFER AGENT Computershare Investor Services Inc. Toronto, Ontario AUDITORS KPMG LLP Montreal, Quebec INVESTOR RELATIONS Jean-Sébastien Couillard Toll-free: 844 913-4350 Tel (local): 514 940-4350 Email: investors@lantic.ca WEBSITE lanticrogers.com (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2023 Annual ReportMAPLE FACILITIES 1150, rue Arthur-Danis Granby, Québec J2J 0T3 Tel: 450 777-4464 331 rue Principale, Saint-Honoré-de-Shenley, Québec G0M 1V0 Tel: 418 485-7777 21 rue Industrielle, Dégelis, Québec G5T 2J8 Tel: 418 853-6265 PO Box 58, Websterville Vermont, 05678, USA Tel: 802 479-1747 Designed and written by MBC Capital Markets Advisors Printed in Canada 128 OPERATING COMPANIES Corporate Information — Management Rod Kirwan, Vice President, Sales and Marketing Louis Turenne, Vice President & General Manager, The Maple Treat Corporation AUDITORS KPMG LLP Montreal, Quebec MANAGEMENT OFFICE 4026 Notre-Dame Street East Montreal, Quebec H1W 2K3 Tel: 514 527-8686 SUGAR FACILITIES 123 Rogers Street, Vancouver, British Columbia V6B 3N2 Tel: 604 253-1131 5405 – 64th Street Taber, Alberta T1G 2C4 Tel: 403 223-3535 198 New Toronto Street Toronto, Ontario M8V 2E8 Tel: 416 252-9435 4026 Notre-Dame Street East Montreal, Quebec H1W 2K3 Tel: 514 527-8686 DIRECTORS M. Dallas H. Ross, (1) Chairman and General Partner Kinetic Capital Limited Partnership Gary Collins, (2) Director Michael Heskin, (2) Vice President Finance and CFO Belkorp Industries Inc. Donald G. Jewell, Managing Partner RIO Industrial Daniel Lafrance, (1) (2) Director William Maslechko, Partner Burnet, Duckworth & Palmer LLP Michael Walton, President and Chief Executive Officer Lantic Inc. (1) Rogers Sugar Inc. Nominees (2) Audit Committee Members OFFICERS Michael Walton, President and Chief Executive Officer Jean-Sébastien Couillard, Vice President Finance, Chief Financial Officer and Corporate Secretary Patrick Dionne, Vice President, Operations Services, Supply Chain & Sustainability Adam James Vice President, Sugar Manufacturing Jean-François Khalil, Vice President, Human Resources (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc.R o g e r s S u g a r I n c . 2 0 2 3 A n n u a l R e p o r t lanticro g e rs .c om the mapletre at . c om 

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