Rogers Sugar Income Fund
TSX : RSI.UN

Rogers Sugar Income Fund

November 21, 2007 16:00 ET

Rogers Sugar Income Fund: Fourth Quarter 2007 Results

Record earnings achieved in fiscal 2007. Strong distributable cash for the quarter and the year. Increase of 4.5% in monthly distributions, effective December 1, 2007.

MONTREAL, QUEBEC--(Marketwire - Nov. 21, 2007) - Message to Unitholders:

On behalf of the Board of Trustees, I am pleased to present the highlights of the financial results of Rogers Sugar Income Fund (the "Fund")(TSX:RSI.UN) for the three months and year ended September 30, 2007.

Results for the fourth quarter and year ended September 30, 2007 and 2006 as follows:



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For the three months For the year
ended September 30 ended September 30
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2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
(In metric tonnes)
Volume 177,382 199,316 689,742 759,689
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(In thousands of dollars)

Gross margin $19,542 $38,458 $107,064 $110,837

Expenses:

Administration and
selling 5,305 6,421 19,355 21,524

Distribution 3,528 4,062 10,838 13,536

Product withdrawal/recall
(reversal) provision (600) - (600) 2,000
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Earnings before interest,
provision for income
taxes and depreciation
and amortization ("EBITDA") 11,309 27,975 77,471 73,777

Depreciation and
amortization 3,182 3,021 12,606 12,211

Interest expense 3,784 4,194 15,402 15,985

Provision for (recovery of)
income taxes (3,225) 4,126 4,336 4,659
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Net earnings $7,568 $16,634 $45,127 $40,922
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Fourth quarter volume decreased by approximately 21,900 metric tonnes from the comparable quarter in fiscal 2006. This was due mainly to export volume which was lower by 15,000 metric tonnes. In fiscal 2006, the U.S. exceptionally opened some additional refined sugar quotas during the year, due to a refined sugar shortage caused by hurricane Katrina. As such, Rogers benefited from additional export volume in fiscal 2006. In addition to lower export volume, liquid and industrial volumes were also lower by 3,300 and 3,500 metric tonnes respectively. The decrease in industrial volume is due mainly to timing in the production of sugar containing products.

For the year, volume was down almost 70,000 metric tonnes. Export volume was down 33,300 metric tonnes due to the shipment of approximately 48,000 metric tonnes done in fiscal 2006 against the U.S. special quotas, which was partially offset with export shipments to Mexico in fiscal 2007. Liquid volume was down 23,600 metric tonnes as HFCS substitutable margin accounts were not re-signed during the year.

There were no thick juice sales in fiscal 2007, as opposed to 19,300 metric tonnes in fiscal 2006. The sole thick juice customer did not re-sign for supply as that customer reduced its processing capacity. These unfavourable volume variances were partially offset with slightly higher industrial and consumer volume in fiscal 2007.

Due to the adoption of new accounting policies, effective October 1, 2006, for derivative financial instruments, the Fund's operating results could have large fluctuations. These fluctuations are due to the mark-to-market of all derivative financial instruments and embedded derivatives in non-financial instruments and reversal of transitional balances at the end of the reporting period. This accounting income does not reflect the economic performance of the Fund. We therefore prepared adjusted gross margin and adjusted earnings results to reflect the economic performance of the Fund during the reporting period. This economic performance is comparable to the earnings reported in previous interim reports. In this press release, we will discuss adjusted gross margins, which reflect the operating income without the impact of the transitional results from adopting this new accounting policy, mark-to-market of derivative financial instruments and embedded derivatives in non-financial instruments.



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(Gain) / Loss For the three months For the year
ended September 30 ended September 30
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2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
(In thousands of dollars)
Mark-to-market adjustment,
including transitional
amortization $2,649 $(6,367) $(2,824) $(6,367)
Timing in recognition of
liquidation (gain) or
loss for sugar inventory,
sales & purchase contracts,
natural gas contracts and
foreign exchange futures 6,217 - 3,600 -
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Total $8,866 $(6,367) $776 $(6,367)
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Adjusted financial
information is as follows:
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For the three months For the year
ended September 30 ended September 30
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2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
(In thousands of dollars)

Gross margin as per above $19,542 $38,458 $107,064 $110,837

Adjustment as per above 8,866 (6,367) 776 (6,367)
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Adjusted gross margin 28,408 32,091 107,840 104,470
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EBITDA as per above 11,309 27,975 77,471 73,777
Adjustment as per above 8,866 (6,367) 776 (6,367)
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Adjusted EBITDA 20,175 21,608 78,247 67,410
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Net earnings as per above 7,568 16,634 45,127 40,922
Adjustment as per above 8,866 (6,367) 776 (6,367)
Deferred taxes on above (2,844) 2,075 (296) 2,075
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Adjusted net earnings $13,590 $12,342 $45,607 $36,630
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For the quarter, adjusted gross margin rate was $160.15 as compared to $161.00 in fiscal 2006. Higher operations costs were incurred reducing gross margins for the quarter. Maintenance costs were $1.3 million higher than the comparable quarter in fiscal 2006, as many large maintenance projects were completed in Montreal to ensure plant reliability. These maintenance projects were undertaken in lieu of capital projects in fiscal 2007. This was partially offset with higher selling margins than the previous year due in large part to the sales mix and Taber's pre-hedge income of $2.3 million from the liquidation of 14,900 metric tonnes.

For the year, adjusted gross margin rate was $156.35 in fiscal 2007 compared to $137.52 in fiscal 2006. The Taber pre-hedge contributed $6.6 million or almost $9.60 per metric tonne in fiscal 2007. Favourable sales mix due to lower liquid and thick juice sales, combined with higher selling margins were the other major reasons for the increase in gross margin rate.

Distribution costs were $0.5 million lower than the comparable quarter in fiscal 2006 due in large part to Taber's selling practices of migrating from a delivered basis to an FOB basis, and lower transfers from Vancouver to the Prairie market. This was partially offset with higher outside warehousing costs incurred due to the larger beet crop in fiscal 2007.

Administration costs were lower by $0.9 million due to year-end adjustments in incentive, pension and other major expenses and to a final credit of $0.4 million on the sale of a Seat on the New York Commodity Exchange.

On March 22, 2006, Lantic announced a product withdrawal/recall due to metallic strands inadvertently entering the distribution system for certain products shipped to the Ontario and Maritime markets. After reviewing the incident with the Canadian Food Inspection Agency (the "CFIA"), it was decided to recall all sugar and products manufactured with such sugar during the period concerned.

An initial provision of $2.0 million was recorded in fiscal 2006, as an estimate for the costs to be incurred by Lantic. To date, over 80% of the claims have been settled. Based on previous settlements achieved, and the level and complexity of the remaining claims, the provision has been reduced to approximately $0.6 million at September 2007. As a result $0.6 million was reversed to income in fiscal 2007.

Interest expense for the quarter was lower by $0.4 million from the comparable quarter of fiscal 2006. This favourable variance was due mainly to interest income earned on short term cash balances.

The Fund measures distributable cash. Distributable cash is not intended to be representative of cash flows or results of operations determined in accordance with GAAP, and does not have a standardized meaning prescribed by Canadian GAAP. It may also not be comparable to similar measures used by other companies or income trusts. Distributable cash is meant to show to the Unitholders the ability of the Fund to pay distributions based on the operating performance of the Fund and its operating subsidiaries during the specified period. It is not meant to explain the cash flow from operations shown in the financial statements.



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For the three months For the year
(In thousands of dollars) ended September 30 ended September 30
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2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
Operating activities:
Cash flow from operating
activities $28,188 $47,495 $88,607 $30,833
Changes in non-cash
operating working capital (26,553) (22,356) (24,669) 29,062
Mark-to-market and
derivative timing
adjustment 8,866 (6,367) 776 (6,367)
Derivative financial
instruments non-cash amount 5,724 - (1,460) -
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16,225 18,772 63,254 53,528
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Investing activities:
Total capital expenditures (2,188) (3,563) (6,945) (9,004)
Less: Investment capital
expenditures 206 738 929 2,839
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Maintenance capital
expenditures (1,982) (2,825) (6,016) (6,165)
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Financing activities:
Buy-back of trust
units-Normal Course
Issuer Bid (1,317) - (4,665) -
Other financing activities - - - (6,844)
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(1,317) - (4,665) (6,844)
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Distributable cash 12,926 15,947 52,573 40,519
Declareddistributions to
Unitholders (9,657) (9,181) (37,728) (35,869)
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Available cash $3,269 $6,766 $14,845 $4,650
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Distributable cash for the quarter was $3.0 million lower than the comparable quarter in fiscal 2006. This was due to lower operating results caused by, in large part, to the lower sales volume and higher maintenance costs.

In fiscal 2007, the Fund distributed $37.7 million, or $0.4285 per unit, compared to $35.9 million, or $0.404 per unit in fiscal 2006. On a consolidated basis, distributable cash for fiscal 2007 was $52.6 million compared to $40.5 million in fiscal 2006. The increase was due mainly to the improved operating results of Lantic and Rogers. The Fund distributed 71.8% of its distributable cash in fiscal 2007 compared to 88.5% in fiscal 2006.

For the quarter, the Fund repurchased and cancelled an additional 305,600 units under its Normal Course Issuer Bid for a value of $1.3 million. For the year, the Fund repurchased and cancelled 1,205,600 units under its Normal Course Issuer Bid, for a total value of $4.7 million. This Normal Course Issuer Bid expires on November 23, 2007. Our intent is to continue with a new Normal Course Issuer Bid for next year. The Fund will again purchase units if the price trading range does not reflect what we consider to be the fair value of the units.

Effective October 31, 2007, Lantic acquired additional dry blending capacity along with an additional 2,000 metric tonnes quota of U.S. sugar-containing product. The intent is to engage in additional volumes of sugar blending products, and therefore improve revenues through value-added activities.

On November 21, 2007, the Board of Trustees approved an increase of 4.5% to the current distribution level, effective December 1, 2007. On an annualized basis, this represents an increase of 2 cents per unit for a total yearly distribution of 46 cents per unit. Since August 2006, distributions have been increased by 15%, for a total of 6 cents per unit.

Even with the above increase in distributions, the Fund's operating companies each retained a substantial amount of cash. Some of this cash will be used by Rogers in the first quarter to pay the Taber Beet Growers, but a significant cash balance will still remain. This cash is available to take advantage of potential acquisition opportunities, which senior management continues to explore. It will also be used to invest in capital projects that will help us further reduce costs and solidify our low-cost producer status. It may also be used to repay some of the senior term debt coming due in fiscal 2008.

On October 31, 2006, Canada's Minister of Finance made an announcement concerning the imposition of a distribution tax on distributions from publicly traded income trusts. This legislation was enacted in June 2007, and if no further changes are brought forward in legislation over the next three years, a distribution tax on distributions from traded income trusts will be imposed in calendar 2011. This may negatively impact the level of cash distributions when this distribution tax takes effect.

At present, we do not plan to change the structure of the Fund into a Corporation. However, we will continue to monitor the situation and through tax planning try to mitigate the impact of this distribution tax on our Unitholders.



FOR THE BOARD OF TRUSTEES,

(Signed)

Edward Y. Baker,
Vancouver, British Columbia
November 21, 2007

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