Rogers Sugar Inc

TSX:RSI

Earnings Call Transcript 2021-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the Rogers Sugar First Quarter 2021 Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, February 3, 2021, at 8:00 a.m. Eastern Time. I would like to now turn the meeting over to John Holliday, Chief Executive Officer. Please go ahead, Mr. Holliday.

[John Holliday, President & CEO]

Thank you, operator, and good morning, ladies and gentlemen. Joining me for today's call is Jean-Sebastien, JS, Couillard, our VP, Finance and CFO. During today's call, I will provide some insights on trends in our industry and an update on our outlook for fiscal 2021. Please be reminded that today's call may include forward-looking statements regarding our future operations and expectations. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. Please note that may -- we may refer to some non-GAAP measures in our call. Please refer to the forward-looking disclaimers and non-GAAP measure definitions included in our public filings with the security commission for more information on these items. Before getting into the specifics of the first quarter, I wanted to touch briefly on how COVID-19 is affecting our business and what we are doing to manage through these challenging times. We continue to feel the impact of COVID-19 on our business in several ways, ranging from the obvious employee health and operational continuity challenges, to less predictable things such as unexpected swings in customer demand, supply chain distortions and disruptions and various packaging supply challenges, all of which we are adapting to and managing well. Since the beginning of the pandemic, our first priority has been the health and safety of our employees, and that has not changed. To help ensure the safety of our people, we continuously monitor risks in the workplace and are adapting our work environment, so our employees can safely perform their jobs. As numbers have increased in Canada, we've also seen similar patterns across our operations. Despite these increases, our thorough safety processes and committed staff has successfully protected our business. We have had no operational disruptions at any of our facilities and have responded to significant swings in demand with nothing less than reliable delivery of essential ingredients to critical supply chains. We have a trusting environment where open communication has provided early awareness of risks and helped maintain control of our operations. In the first quarter of fiscal 2021, we estimate that we have invested approximately $1 million across our Sugar and Maple business units in COVID-19-related expenses. Looking forward, we will not waver from our commitment to adapt our COVID-19 health and safety measures as necessary to provide a safe and reliable operating environment. Now let's look at our first quarter results. Adjusted EBITDA in the first quarter lowered from the same quarter last year and was also below our internal expectations, despite higher volumes and revenue and a stronger quarter in the Maple segment. Consolidated adjusted EBITDA was lower, largely as a result of direct and indirect impacts of COVID-19 in the Sugar business. A number of factors influencing our first quarter results are short term in nature, and we fully expect to see improved performance over the balance of the fiscal year. Our Sugar volumes in the first quarter reached 190,000 metric tons, 2,000 metric tons better than our last year, but below our expectations. After a record fourth quarter volumes, we were left with lower than usual inventory levels and made adjustments to our supply chain to allow us to meet our first quarter volume projections. Continued strong sales in October and November proved these plans to be necessary. However, as COVID-19 health measures ramped up, we experienced uncharacteristic holiday shutdown schedules, which resulted in a much softer-than-expected end to the quarter. The demand reduction over the holiday period represented the entire shortfall against our internal forecast, while our loss has proven to be purely a timing issue as the volume loss during the period has been picked up by an above-average shipping cadence in January. The adjustments we made to our supply chain in the quarter required us to leverage our western operations to support eastern sales demand and protect customer needs. While these changes led to additional costs in the first quarter, we do not expect the higher cost level to continue into future periods. Our Sugar segment financial results were also impacted by some additional costs incurred in our Taber operations in the first quarter. In order to recover from last year's crop losses and replenish our exhausted beet sugar supplies, we made investments in early harvest beet sugar premiums, which allowed us to start our campaign 3 weeks earlier than normal. Premiums are paid to growers to compensate for yield losses associated with short and growing -- with the shortened growing season. As commented on our last call, we also incurred some limited sugar beet crop losses due to the adverse weather experienced during the latter stages of the harvest. Our harvest has now been successfully completed with an estimated production of 128,000 metric tons of sugar. And finally, we saw slower-than-expected by-product sales as feed formulators were slow to adjust rations to the renewed supply of beet pellets. The delayed by-product revenues will be captured in subsequent quarters. Overall, we expect our Sugar business -- Sugar segment to perform well in fiscal 2021. Despite lower-than-expected volumes in the first quarter and the delayed timing of some revenues, we expect strong underlying demand and a successful beet harvest to result in higher sales volumes and improved financial performance over fiscal 2020. As a result of our positive outlook, we have increased our full year fiscal '21 sales volumes to approximately 776,000 tons, an increase of 50,000 metric tons over fiscal 2020, which you will recall, included an extra shipping week and 10,000 tons over our previous guidance. Higher volumes in fiscal 2021 are expected to be driven by improved demand in the industrial and liquid areas and higher export volumes as a result of new export quotas and the resumption of deferred sugar shipments to Mexico. Overall, we expect stronger volumes, the resumption of by-product sales and reduced nonstandard supply chain costs during the balance of the year will deliver improved year-on-year financial performance for the Sugar segment. In our Maple segment, we had a strong first quarter. Sales volumes have been very firm since the onset of COVID-19 and continued in the first quarter. Interestingly, similar to our Sugar segment, December shipments were softer-than-expected and have subsequently recovered. Price increases that we implemented in fiscal 2020 also began to be captured in revenues as new contract pricing took effect. In addition, manufacturing costs have continued to improve driven by operational optimization and efficiency improvements. Looking forward, we expect to see ongoing strong performance in our Maple segment in fiscal 2021. Improvements to -- in the sales margins and improve operational efficiencies, evident in the first quarter, are expected to continue throughout the year. Sales margins are expected to improve as the impact of successful contract negotiations with new and existing customers in 2020 come into effect. In addition, we expect ongoing optimization of our manufacturing facilities and efficiency improvements at our new Granby facility and existing Degelis plant to continue to drive lower operating costs in 2021. We expect COVID-related demand we have seen over the past few quarters to temper in 2021. However, we believe that firm underlying demand for maple syrup, combined with our improved margins and lower cost structure will result in improved financial performance for the full year fiscal 2021 compared to 2020. Before wrapping up, I wanted to brief -- I want to provide a brief update on our strategic collaboration with Doux-Matok, a food technology company and pioneer in the development of efficient flavor delivery technologies. Doux-Matok is focused on delivering a unique natural sugar reduction solution based on cane sugar to food companies in North America. With the benefit of Doux-Matok's recently hired sales and product development resources in the United States, customer prospecting efforts are now underway. During the quarter in Canada, Doux-Matok and Lantic also entered into a partnership with Caldic, an innovative food ingredient distributor with in-house research and development capabilities. This collaboration will support sales to Canadian businesses who are looking for sugar reduction solutions to export to the United States. With our partners, we now organized to build awareness and engage with customers who are interested in sugar reduction solutions. Incredo Sugar is a value-added ingredient that requires a commitment to product reformulation. Customer R&D resources are the first step in the product approval process. The selling cycles for Incredo will be long. Accordingly, we do not expect any material selling developments until fiscal 2022. I want to again thank our employees for their continued effort and collaboration, especially throughout the COVID-19 pandemic, where they have proudly demonstrated their commitment to each other and to our customers. Now I will turn the call over to JS, who will provide additional information on our quarterly results.

[Jean-Sebastien Couillard]

Well, thank you, John, and good morning, everyone. As John mentioned, COVID-19 is having a variety of impacts on our business. While we are currently experiencing higher sales volumes in both our Sugar and Maple segments, we are also seeing increased volatility in customer demand, which impacted our cost structure and compressed margins in our Sugar business this quarter. In the first quarter of fiscal 2021, consolidated adjusted EBITDA decreased to $27.6 million, down 9% from the same quarter last year as lower-than-anticipated financial results in the Sugar segment was partially offset by the improvement of our financial performance in the Maple segment. While adjusted EBITDA was lower quarter-over-quarter, most of the factors influencing our operations were either timing related, nonrecurring or short term in nature and we continue to forecast improved financial and operational performance for fiscal 2021. Turning to our Sugar segment now. In the quarter, sales volume increased to 190,000 metric tons, an increase of 1.1% over the same quarter last year, driven by improvements across most customer segments, partially offset by a temporary reduction in industrial volume. The underlying factors that drove increased volumes in the quarter include: continued growth in home-based baking and meal preparation in our customer retail segment; the growth in liquid volumes, driven by additional volume from new and existing customers and higher export volumes, largely due to higher beet sugar sales to the United States under the recently ratified CUSMA. It is worth noting that in our industrial segment, after a strong first 2 months in the quarter, we experienced an unexpected postponement of industrial orders that we believe are largely attributable to a slowdown of the foodservice business sector during the last holiday season. This unexpected postponement led to lower year-over-year volumes for industrial customers in the first quarter. Adjusted gross margin was largely unchanged from the prior quarter as the benefit of increased volumes and a positive sales mix was mostly offset by increased operating costs. We incurred slightly higher cost this quarter in relation to the early harvest of beets at Taber and the timing of maintenance cost in our production facility. Adjusted EBITDA for the Sugar segment was lower for the quarter due to higher administration and selling expenses and higher distribution costs. Selling and administrative costs increased largely due to the cost associated with COVID-19 with about $1 million COVID-related cost incurred in the quarter. As for distribution cost, as John mentioned earlier, we faced nonrecurring logistical challenges in the first quarter as we needed to leverage our western operations to support anticipated eastern sales. This situation was mainly due to the exceptionally strong shipment at the end of the fourth quarter of 2020. Now looking at our Maple segment. In Maple, we had a strong quarter with higher volumes and lower costs, leading to adjusted EBITDA of $4.9 million, an increase of 20% compared to the same period last year. Maple volumes continue to improve as demand remains strong. The situation continues to be driven by the shifting in retail customer habits due to the COVID-19 pandemic. In the quarter, we sold more than 14 million pounds of Maple products, an increase of over 2 million pounds from the same quarter last year. Adjusted gross margin were largely unchanged from the same period last year. However, it was lower on a percentage basis at 8.9% compared to 10.6% last year. This variance is mainly due to the lagging impact of lower-margin customer contracts, which are progressively expiring. While margin percentage was lower quarter-over-quarter, the impact of improved pricing negotiated in the later part of 2020 has started to benefit the company and when compared with the average of the last 3 quarters, gross margin percentage increased by 90 basis point this quarter. As the old contracts roll off, we expect margin to continue to improve throughout the year. Adjusted EBITDA in the quarter also benefited from the lower administrative and selling costs and from reduced distribution costs. These reductions were a direct consequence of efficiencies driven by the integration of our operations at the recent -- and the recent investments made in our business. Finally, I would like to close with some comments on our financials. Free cash flow for the last 12 months decreased by about $1 million compared to the period of last year, despite higher trailing 12 months adjusted EBITDA, mainly due to non-business operation factors, such as share repurchases initiative. During the first quarter, we continue to return capital to shareholders through dividend. In the first quarter of 2021, we paid out $9.3 million in dividend. The payment of our quarterly dividend continue to be an important part of our financial strategy. We currently have over 10 years of steady quarterly return to our shareholders. To this point, I would also add that on February 2, 2021, the Board of Directors declared a dividend of $0.09 per share. The total payout is estimated at $9.3 million and will be paid next April. In conclusion, I would like to highlight that despite the lower-than-anticipated financial performance of our Sugar segment in the first quarter of 2021, we are currently expecting, under the current conditions, a strong financial performance for the remainder of 2021. Our Maple segment financial results are improving and should continue to do so throughout 2021. The volumes and margin projections for both of our business segments are on a positive trend and are expected to deliver improved financial performance in 2021 compared to prior year. With that, I would like to turn the call back over to the operator for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of George Doumet from Scotiabank.

[George Doumet, Analyst]

Just a quick clarification on Sugar -- the Sugar segment. Do you guys still expect modest EBITDA growth in fiscal '21?

[John Holliday, President & CEO]

Yes, we do. Absolutely.

[George Doumet, Analyst]

Okay. Great. And John, there's been a few iterations on the revenue profile of the Maple business since we've acquired it. Looking at fiscal '21, maybe after accounting for, I guess, the COVID hangover, how much do you think this business can grow out? Or what cadence?

[John Holliday, President & CEO]

So I think we're going to do 1 -- we'll take 1 year at a time. We are on the right trajectory now. We're starting to be able to recover our costs and get moderate increases in margins. So that's a very positive thing. Volumes actually have kind of exceeded our expectations. And I think if we're patient and we stay the course of reducing our operating costs and continuing to recover costs and improve our margins at a moderate rate, that we will move towards the -- our initial goals that we had with the business. But it's going to take time. These things are, I guess, patience and perseverance are important, but we're happy with what we did in this quarter, and we think we're on the right trajectory to positive growth -- positive EBITDA growth.

[George Doumet, Analyst]

Okay. And if I remember correctly, the initial goals were kind of mid to high single-digit top line. Was that kind of what you guys were calling for when it was acquired?

[John Holliday, President & CEO]

High to mid-single-digit top line, are you talking on a percentage basis? Can you clarify that?

[George Doumet, Analyst]

Yes. On a percentage basis. Yes.

[John Holliday, President & CEO]

Yes. Yes. So we're right now...

[Jean-Sebastien Couillard]

Yes. That's...

[John Holliday, President & CEO]

We're at 9%.

[George Doumet, Analyst]

Okay. And when would you expect the bulk of the contract renewals over there to happen? I'm just trying to get a sense of when we can see, I guess, most of the margin improvement.

[John Holliday, President & CEO]

Yes. So most of the contract renewals have occurred, but it's similar to our Sugar business. It's in kind of as a continuous process, right? So we did lot of work last year on, again, recovering our costs and improving our margins. So that work has been done. We'll be getting into another cycle shortly, and we'll continue that process. As I said, it's kind of we're on the right trajectory. It's perseverance we need. And we stay on the strategy of recovering new costs and finding moderate margin increases over time. So cycle 1 is largely done. We're going to be moving into cycle 2 next.

[George Doumet, Analyst]

Okay. Great. And just maybe one last one, maybe for JS. What's the CapEx number for this year from Maple? And can you maybe remind us what the maintenance CapEx would be for both segments?

[Jean-Sebastien Couillard]

Yes. On the Maple side, it's fairly minimal. I think we're talking less than $1 million. I mean we've done our investment in the prior year, specifically at the Granby facility. So now we're starting to put that into motion with the production. And I think we're seeing that in our cost. Overall for the organization, we're looking at approximately $25 million. So we're aligned with the guidance that we gave at year-end.

[George Doumet, Analyst]

Okay. How much of the $25 million will be maintenance -- just general maintenance?

[Jean-Sebastien Couillard]

I would -- yes, go ahead, John.

[John Holliday, President & CEO]

Yes, and I can answer that. Generally speaking, we've got about 6 -- 70-30 split. So stay in business kind of 70%, 30% return on investment kind of activities.

[Operator]

Your next question comes from the line of Stephen MacLeod from BMO Capital Markets.

[Stephen MacLeod, Analyst]

I just wanted to follow-up quickly on the question that George has asked around the Maple contracts. You mentioned that cycle 1 is done and you're sort of moving into cycle 2 on the renewals. Are you able to give any -- like some color on what percentage of the contract base like cycle 1 versus cycle 2 represents? Or is that maybe not the right to think about it?

[John Holliday, President & CEO]

Well, we -- in most cases, we have year-on-year contract, so we've finished. Last year, we kind of -- we did the full set. And now we're -- through the year, we're going to be renewing contracts on an as they come up. And we'll do -- as I said, we'll pursue the same kind of process. They don't come up all in 1 day, obviously. So pursue the same process, recover costs and look for moderate margin improvements.

[Stephen MacLeod, Analyst]

Right. Okay. Okay. Now that's helpful. And then I just wanted to clarify on the Sugar volume side. Just a couple of things. In terms of the industrial shortfall that impacted this quarter, am I right to understand that a lot of that or most of that or all of that was recovered actually in January? Or is it something that will take a couple more months or quarters to recover?

[John Holliday, President & CEO]

It's fully recovered in January. What we -- there's loss, if you want to call it disappointment in terms of the volume outcomes in December, which really happened in the last 2 weeks have been all recovered in January. As you can see that we still have a -- even a more optimistic outlook on volume in -- across the business here for the fiscal year.

[Jean-Sebastien Couillard]

And John and Stephen, if I might add here. Not only that the volume is recovered, but also our level of inventory is such now that we're more comfortable from a logistic point of view and the -- our ability to serve our eastern customers.

[Stephen MacLeod, Analyst]

Right. Okay. Okay. That's helpful. And then just with respect to the volume outlook, you mean there were some movements on the volume side in terms of the 2021 expectations. So the industrial number moved higher. And I'm just wondering, just could you talk a little bit about what led to the export volume outlook being moderated slightly and consumer volume being increased from where you were previously?

[John Holliday, President & CEO]

I'm going to try. And I'm not sure if I've been syncing up totally with that. I'll give it -- I'll kind of give you my feedback and JS may want to kind of add some color if needed. But if you're looking at it from the quarter that we just went through, we had -- we did better than last year on our consumer business. And our export business, I think, versus what you might have expected, could have been a little bit weaker because we didn't shift, quite frankly, as much high-tier sugar into the United States because of market conditions. We're not as positive in this past quarter with the strengthening of the Canadian dollar and the increase in number 11s. So that would have impacted this quarter that we went to. Those are kind of the 2 things that were substantially different, better consumer business and maybe a slight underperformance on exports. Looking forward, our view on the business is that the export volumes will be strong. And that primarily, the liquid business will also outperform our original expectations. Those are the 2 key areas of kind of growth in the last part of the year.

[Stephen MacLeod, Analyst]

Okay. That's great. And is that largely driven by higher demand? Or is it just the timing of shipments?

[John Holliday, President & CEO]

On the consumer -- on the liquid side, we're -- we've onboarded some new customers. We are seeing good strength in the customers that we have, so some of it's organic. So it's both a combination of organic growth and customer acquisitions.

[Stephen MacLeod, Analyst]

Okay.

[John Holliday, President & CEO]

On the export side, it's largely due to the fact we have the TRQ that is new, additional volume on TRQ, and we've renewed our export shipments to Mexico this year, which we suspended or curtailed last year because of the crop situation.

[Operator]

Your next question comes from the line of Michael Van Aelst from TD Securities.

[Michael Van Aelst, Research Analyst]

I want to start off with some cost questions and some of the volumes have already been dealt with. But -- so you said in the quarter, you pulled forward some maintenance costs. So can you tell us roughly how much that was? And was it taken from the future quarters equally? Or 1 period in particular?

[Jean-Sebastien Couillard]

I mean I can answer that. So it is -- in the scheme of a quarter, it is not significant to a certain extent. It's less than $1 million. But overall, it's really more about the timing of our shutdown. And some of the timing kind of like were done a bit more in the first quarter versus the kind of like in between the first and second quarter. So we don't expect this to carry on for the rest of the year. It's more a question of like how we executed it, and it's kind of spill over 2 quarters.

[Michael Van Aelst, Research Analyst]

Okay. And that -- and then on the early harvest of the beets and the, I guess, the payments or the premium you had to pay to the farmers. How material could -- is that?

[Jean-Sebastien Couillard]

Well, on an overall annual basis, it will get spread into the year. In the first quarter, I would say it's the same range and some of the maintenance contract that we just discussed.

[Michael Van Aelst, Research Analyst]

Okay. And then I didn't catch what the reason was for the delay in the by-product sales, the molasses -- its molasses.

[John Holliday, President & CEO]

It's -- so it's by-product pellets so we -- most of our by-product pellets go to feed formulators. And feed formulators because of the prior crop year were not able to include in their formulations, the by-product, the pellets. And when we start ramp-up production, they have -- had delays, and we saw delays in their ability to change their feed formulations to incorporate the pellets. So that's a major delay. That's probably about $1 million worth of timing effect as a consequence of that. To add to that, just to maybe to [ bucket-ize ] it in big buckets, so we had about $1 million of pellets that were timing. We obviously had the COVID versus the prior year, which was about $1 million. In our supply chain costs, more or less are around $2 million, so it's about $4 million of costs versus the prior year that we incurred. Some of them are, I guess, recurring, not COVID. Pellets is timing, and the supply chain, we made the investment to protect our business. And we didn't fully benefit from all the volume that we should have as a consequence of those investments, but that volume has come -- is coming now.

[Michael Van Aelst, Research Analyst]

Okay. And that the COVID cost, we should assume that those are going to persist for the foreseeable future?

[John Holliday, President & CEO]

Yes, I think we should. We -- so, yes. I think, probably -- I've lost a lot of bets on when we're -- when COVID is going to be over with my wife. So I'm going to say, yes, they're going to persist.

[Michael Van Aelst, Research Analyst]

But are these PPE changes and things like that? Are they -- do you expect them to stick around after the vaccination program has kind of run its course?

[John Holliday, President & CEO]

To be honest with you, I think some of the PPE, we'll probably say will stick around. But there's 2 components associated with it, probably -- and they may be equal. We didn't really that much. But one of them is we spent quite a bit of money on allowing individuals that we think have a risk to be at home and be fully paid with their wages or paid their wages so that they're, I guess, financial well-being isn't impacted. And we have -- I don't know, I'll give you just a magnitude. We have at times 10 or 15 people who could be out of a -- out of work that we're paying. So those are part of the costs. And that is what I -- when I make reference to a trusting environment, we want to make sure that our employees engage with our health professionals and advise us to where they're at, so we can take their -- that situation and understand the risk fully and not make -- not learn about the risk through having transmissions at our facilities. So that part will probably go -- that part, well I hope, honestly, as I'm sure you do, will go away. The PPE, I think, we'll probably maintain higher PPE investments and costs in our business on a going-forward basis. And that's probably not just us. I'm sure that's the rest of the world as well.

[Michael Van Aelst, Research Analyst]

Okay. And...

[Jean-Sebastien Couillard]

And, Mike, if I may just -- yes, if I may.

[Michael Van Aelst, Research Analyst]

[indiscernible] distribution. Go ahead then.

[Jean-Sebastien Couillard]

Sorry, Stephen -- sorry, Michael. No, I just -- the only thing I was going to add is on the cost is like we're at the same pace, about $1 million a quarter than we were last year. I mean COVID impacted us for about 3/4 last year. So we're at about the same pace. And as John mentioned, those are the same type of costs and some of them might stick afterward. Sorry for the interruption.

[Michael Van Aelst, Research Analyst]

Okay. All right. And that extra $2 million of distribution cost to move product, I think you said from the West to the East. Is that -- was that strictly a Q1 issue? Or like are your inventories back to normal levels?

[John Holliday, President & CEO]

Yes. We finished Q1 with good inventories. And we're -- we have got a -- based on the current forecast, we're in good shape relative to that. So that should be a onetime cost. I mean, the only caveat to put -- Michael to put out there is we see a ship -- ton of volatility in our business. Trying to figure out what's going to happen 1 month or 1 quarter to the next has been difficult. So based on our forecast and our expectations, we're in good shape from an inventory perspective and from a manufacturing capabilities perspective on a going-forward basis.

[Michael Van Aelst, Research Analyst]

So are you doing anything to build inventories to try and give yourself a buffer?

[John Holliday, President & CEO]

Yes. We're using all available capacity to do that. And some of that's per normal. We tend to have a -- be in a period now between Q2 and Q4, where we do build inventories for Q1. So yes, we're absolutely building to the extent we can. You have to remember as well, a good chunk of our business is bulk, right? So bulk can't build. You just have a limited amount of inventory. So that, we have to respond to just-in -- on a just-in-time basis.

[Michael Van Aelst, Research Analyst]

Okay. And then last question on the cost. You highlighted some additional employee benefit costs and then maintenance costs. Are those specific to the quarter? Or are those -- did you take on additional staff?

[Jean-Sebastien Couillard]

Yes. In some instance, we took some additional staff, and there's also the annual salary review or compensation review that we have in our cost. There's the -- it should continue -- most of the variance will continue probably quarter-over-quarter.

[Michael Van Aelst, Research Analyst]

Okay. Right. So on the last quarter conference call, you were asked whether the Sugar -- your Sugar EBITDA guidance for a modest improvement was considered conservative. Do you still feel that way? Or does this -- that this -- does the kind of Q1 performance make you think that you can't go that far anymore?

[Jean-Sebastien Couillard]

Well, I mean, I can start quickly. I mean, I guess, yes, we said it was conservative. When we look at our volume outlook for the year, I mean, I agree that the first quarter was not as we had initially anticipated. However, some of the volume has been displaced. So if you exclude the onetime costs that we just talked about, which is mainly logistics, I think we're still, I would say, cautiously optimistic for our EBITDA level for 2021 versus 2020. John you want to add something. Go ahead.

[John Holliday, President & CEO]

All right. Yes. So maybe just to add, I would say versus 2020, we're optimistic. We'll do better than 2020. I'm very confident in that.

[Michael Van Aelst, Research Analyst]

Okay. And then just finally on the Maple side, wondering how you would rate the operational efficiency of the new supply chain versus what you ultimately were hoping to get to with the investments?

[John Holliday, President & CEO]

I would say we're very close to where we expected to get to on that trend. We've got a little ways to go, not a long ways, but the plan, operating efficiencies are -- we're very close. We set ambitious goals in that business, and we're getting very close to those goals.

[Michael Van Aelst, Research Analyst]

Okay. So to get to your original targets from initial -- at the time of the acquisition, it's more of a gross margin recovery from pricing, but...

[John Holliday, President & CEO]

Totally -- yes, totally. Yes.

[Operator]

[Operator Instructions] Your next question is from the line of Endri Leno from National Bank.

[Endri Leno, Associate]

A lot of them have been answered actually, but just a quick one on the Doux-Matok agreement that you have. I was wondering, I mean, you mentioned, John, that, that it requires some R&D commitment, and you've already talked to a food manufacturer. But from some of the materials out there, it seems that there is a major reconstitution needed of the product that Doux-Matok has used? And I mean have you or them have had any discussion with major food manufacturers? And what is their stand on this? And as a follow-up to that, will Rogers Sugar only be responsible for manufacturing of the product? Or will you be doing some of the sales as well?

[John Holliday, President & CEO]

Okay. That's a multiple question. So on the product, Sugar reduction solutions that are offered, Doux-Matok or others. Every single one of those requires a significant reformulation undertaken by any customer. So really, we're trying to engage, quite frankly, with customers who have a view of a healthier -- delivering a healthier product or have a view of trying to reduce sugar content in their products to respond to maybe future front-of-pack labeling thing challenges that will come. So nobody -- our product and any product in that segment requires significant reformulation. I would argue potentially that our reformulation on Doux-Matok's because it's still -- 60% sugar is probably less than some of the other alternatives, but all the same, it requires a significant R&D effort. So that's -- hopefully, that answers that question. From a selling perspective, we have 2 relationships with Doux-Matok. We have a North American agreement. The product is approved for sale in the United States. And in the United States, Doux-Matok employ the individuals in the sales and marketing area, and they -- we are strictly or strictly, we're quite frankly a co-manufacturer, I guess, an exclusive tool processor for their product and to sell into the United States. In Canada, when the product is approved for sale in Canada. Right now, it's not, then Lantic will take on the sales and marketing efforts for that product. But at this point in time, that's -- it's not available to us.

[Endri Leno, Associate]

Okay. No, that was a great answer. And would you have any time lines when it might be approved in Canada? Do you have any discussions there at all, or?

[John Holliday, President & CEO]

I would say 2 to 3 years. It's not right in front of us. Let's put it that way.

[Operator]

Our next question comes from the line of Frederic Tremblay from Desjardins.

[Frederic Tremblay, Analyst]

Most of my questions have been answered. But I was just curious on maybe your thoughts on what you've seen in January with more stringent COVID restrictions in Québec and Ontario. Have you seen maybe another round of pantry loading for the consumer segment given just the measures that have been implemented in Maple and Sugar?

[John Holliday, President & CEO]

We continue to see strong kind of sales on Maple. That's no doubt about it. We're going to -- our January performance has been good. And on our Sugar, I'd say it's harder to say because we get a lot of -- it's more -- depends on the promotional activity of our retailers. So if we're looking at a retail segment. It's hard to have a good view because it does tend to be in chunks. So I really can't comment on that. I think what you can say is the environment is no different than what it has been through these last, whatever, 9 months. So where we've seen performance, it's better than normal. We're continuing to see performance that's better than normal.

[Operator]

There are no further questions at this time. I'll turn the call back over to the presenters.

[John Holliday, President & CEO]

Okay. With that, that's all the questions. Thanks for the questions. Thanks for your continued support and following of our business, and we look forward to catching up at the end of Q2. Thanks, everyone.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.