Rogers Sugar Inc
TSX:RSI
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
5.15
5.94
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Rogers Sugar Inc
You don't have any saved screeners yet
Good morning, ladies and gentlemen, and welcome to the Rogers Sugar Inc. Fourth Quarter 2022 Results Conference Call. [Operator Instructions] This call is being recorded today, Thursday, December 1, 2022.
I would now like to turn the conference over to Mike Walton, President and CEO. Please go ahead.
Thank you, operator, and good morning, everyone. Joining me for today's call is Jean-Sebastien Couillard, VP Finance and CFO. During today's call, I will review the fourth quarter and year-end results of 2022, our expectations for fiscal 2023 and the trends in our industry.
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 also note that 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 Securities Commission for more information on these items. A replay of this call will be available later today. The replay numbers and passcodes have been provided in our press release, and an archived recording of this call will also be available on our website.
Given this quarter is also our financial year-end, I would like to give a quick review of our full year 2022 performance before I move on to our fourth quarter results. Overall, in fiscal 2022, we recorded very strong financial performance. We demonstrated excellent operating performance and agility as we carefully managed through the challenging environments while also identifying and capturing opportunities as they arose. As a result, we generated record performance in the year with our highest adjusted EBITDA in our 134-year history, and also our highest sugar volume to date. We started the year with lower volumes in sugar, impacted by road closures associated with the floods in British Columbia and lower retail demand from high inventory levels. However, we saw demand rebound over each of the next 3 quarters, and we achieved consecutive record volumes in the second and third quarter. Notably, we saw increased sales in our industrial segment from strong global demand for sugar-containing products.
We also opportunistically responded to several unforeseen supply events in the latter half of the year that drove incremental volume. Our strong performance was also underpinned by a successful Taber crop in 2021 and higher byproduct revenues. Altogether, these factors led to our best ever financial performance. All the more impressive considering it was achieved during extremely high inflationary pressure, supply chain challenges and the ongoing impacts of the pandemic. I am particularly proud of our employee safety record in the fiscal 2022, which has been steadily improving over the last number of years, leading to a record low incident rate across all sugar sites.
In Maple, our business faced pressures throughout the year and lower demand, inflation and global shipping challenges. In the latter half of the year, we implemented an updated pricing strategy aimed at recouping incremental costs as contracts came up for renewal. The competitive nature of this industry has made passing through price increases more challenging and led to lower margins from fiscal 2021.
Now I will turn to our fourth quarter results. Performance in our main business driver, our Sugar segment was strong in the fourth quarter. Sugar demand was robust, and we were able to capture some incremental supply opportunities in the quarter, which enhanced our product mix, improved sales volumes and increased gross margins. In Maple, the business continued to face pressures from lower demand and a delay between higher operating costs and selling price increases. Prices have begun to increase, although recovery continues to lag inflationary pressures. In Sugar, volumes reached 214,700 metric tonnes in sales, which was up about 6% from Q3 and in line with the same quarter last year.
During the quarter, strong growth in our industrial segment more than offset lower volumes in liquid, consumer and export categories. Our industrial segment increased by almost 10,000 metric tonnes compared to the same quarter last year. This was due to continued strong demand for sugar-containing products as well as an unforeseen peak in demand as a result of temporary tightness in the supply of North American market. We leveraged our operational flexibility to pivot from export sales to supply our domestic customers. The resulting favorable product mix led to a boost in revenue for the quarter. Our consumer business was slightly lower in the fourth quarter, mainly due to the timing of orders from customers. While we have seen increased variability quarter-to-quarter as inventory holding policies from retailers evolved, we believe that demand has now largely returned to pre-COVID levels on an annualized basis.
Adjusted gross margin in the quarter improved as a result of favorable pricing mix and strong demand when compared to the same period last year. This was partly offset by inflationary pressures and lower byproduct contribution due to timing. Despite inflationary pressures, we're proud of the work the team has done in managing higher costs. As sugar remains an essential ingredient of the food supply chain, we expect minimal impact from the potential recession and our volume to remain relatively stable.
As for our 2022 Taber beet crop, the harvest period was completed in early November, and we are currently in the processing stage. We have received the expected quantity of beets from the growers. However, unfavorable weather conditions, including hailstorms and warmer temperatures encountered in the later stage of the growing period have reduced the expected sugar content of the sugar beets. Due to the damage, we expect to produce between 100,000 and 110,000 metric tonnes of sugar from the 2022 campaign, below last year's production [ of ] 120,000 metric tonnes. We will provide an update to the market on final production number at the end of the second quarter.
Finally, we would like to share an update on our Montreal refining facility expansion. We are progressing well and we expect a detailed engineering study to be completed by the end of the second quarter. We continue to see strong interest in taking up the incremental 100,000 metric tonnes of capacity expected from the expansion. This project remains an exciting growth opportunity for Roger Sugar, and I look forward to updating you as it progresses.
Now turning to the Maple segment. In Maple, adjusted EBITDA lowered in the fourth quarter, largely due to increased operating costs that outpaced price increases and lower sales volumes. Sales volumes lowered in the fourth quarter driven mainly by lower demand from existing retail customers and market competitiveness, further exaggerated by a bumper crop -- bumper Maple syrup crop in 2022. Although we see overseas supply chains improving modestly, it is not translating into cost relief as quickly as we would hope. However, as inflationary pressures begin to recede, we expect to see improved performance in this business segment.
In the quarter, adjusted gross margin was negatively impacted by higher operating costs from inflationary pressures and increased compensation costs as well as lower volumes. The delay between recovering the increase from price increases from contract renewals continued to be felt in the fourth quarter. As we mentioned last quarter, we continued to focus on securing volumes and maintaining our share of the global market.
As we look outward to [ 2020 -- '23 ], we expect stable financial results driven by continued strong demand and steady gross margins in our Sugar segment, along with slightly improved financial performance in our Maple segment, as the unfavorable inflationary pressures begin to recede. In Sugar, we expect underlying demand in North America to remain strong, supported by favorable market dynamics. Pricing actions implemented in 2022 are expected to continue to mitigate impacts of higher operating costs. Volumes are expected to be slightly lower given the [ nonreoccurrence ] of the opportunistic sales we recorded in the past 2 quarters.
And finally, before turning the call over to J.S., I just want to say a quick word about my first full year as CEO. Throughout the year, I have seen the adaptability and the care our team has taken to overcome challenges and consistently meet the needs of our valued customers. I am extremely proud to work with you and grateful for the effort and dedication you have shown across all our teams from East to West. Thank you for all that you do.
Over to you, J.S.
Well, thank you, Mike, and good morning, everyone.
In the fourth quarter of 2022, our adjusted EBITDA was $29 million, an increase of $4.2 million from the same quarter last year. Higher adjusted EBITDA in the quarter was driven by the strong performance of our Sugar segment, which was partially offset by lower-than-expected results in our Maple segment. For fiscal 2022, adjusted EBITDA was $102.1 million, up $11.1 million from the same period last year, once again driven by the record-setting results of our Sugar segment. Despite the softer results of our Maple segment, we were able to improve our overall financial performance and exceed the outlook provided a year ago, including surpassing our anticipated volume by almost 25,000 metric tonnes for the Sugar segment. We currently anticipate that the Sugar segment will continue to perform well with firm customer demand to remain in 2023. And as inflationary pressures begin to recede, we expect our Maple business performance to begin to improve in the later part of 2023.
Let's start my remarks with a review of the Sugar segment. Adjusted EBITDA for our Sugar business was $26.2 million in the fourth quarter, up 27% from the same quarter last year. While volumes were largely in line with the prior year period, higher pricing and a favorable shift in product mix drove improved revenue and adjusted gross margin.
Adjusted gross margin increased in the quarter, up $9.3 million or 36% from the same quarter last year. On a per unit basis, adjusted gross margin increased by $43.39 per metric tonne to $164.55 per metric tonne. The impact of improved pricing on adjusted gross margin in the fourth quarter was partially offset by higher cost as inflation led to higher operating and labor expenditures.
Distribution costs increased by $1.4 million in the fourth quarter due to higher freight costs and additional logistical costs incurred to support our supply chain as we continue to move sugar produced in the West to Eastern Canada to meet customer demand. As Mike mentioned previously, a portion of the fourth quarter sales volume was attributable to nonrecurring issues encountered by one of our competitors leading to tight temporary market conditions. Our team did an excellent job of capturing these incremental sales and meeting customers' needs. However, we don't expect these additional volumes to continue into 2023.
Administration and selling expenditures in the fourth quarter increased by $2.5 million as compared to last year. The increase is mainly due to higher compensation expenditures driven by higher accruals for share-based compensation, reflecting the impact of the recent increase in our share price and higher performance pay accrual attributable to our strong 2022 financial results.
Our outlook for the Sugar segment remains positive as we move into fiscal 2023. Underlying North American demand remains strong across all our customer segments, and we expect the increased pricing implemented in the last year will mitigate the current inflationary pressures. Sales volumes in 2023 are expected to reach 790,000 metric tonnes. This is a slight reduction from fiscal 2022, reflecting the unexpected additional sales opportunities noted in the past 2 quarters that we don't expect will reoccur in 2023.
Our overall domestic volume is expected to grow slightly in 2023. We are anticipating steady growth in our liquid and consumer volumes, which will be partially offset by a small decrease in our industrial volume, reflecting the onetime sales opportunities of the last 2 quarters of 2022. Finally, we expect our export volumes to decrease as we focus our sales efforts on meeting the demand of the strong Canadian domestic market.
I will now move to our Maple segment. Our overall maple results were lower than the same quarter last year as inflationary pressures and increased competition continued to negatively impact our business. This unfavorable trend has impacted our Maple business segment throughout the year in 2022. As a result, adjusted EBITDA in the fourth quarter was down $1.4 million as lower sales volume and higher costs more than offset the benefit of increased pricing. Revenue decreased by $4.5 million as volumes were lower by [ GBP 1.8 million ], reflecting increased industry competition.
Inflationary pressures continue to affect operating costs particularly in higher packaging, freight, energy and labor costs. As a result, adjusted gross margin was 8.1% in the quarter, a reduction of 160 basis points from the same quarter last year, but largely in line with the third quarter of 2022. As Mike mentioned, we have experienced some delays in passing through increased cost to customers due to the competitive nature of the Maple industry.
In the fourth quarter of 2022, we performed our annual accounting impairment testing and concluded that the carrying value of the net assets of our Maple segment exceeded the current estimated recoverable [ amount ]. Accordingly, in compliance with IFRS, we recorded a noncash, nonrecurring charge of $50 million to our income statement in the fourth quarter. This charge is a noncash accounting adjustment and has no impact on our ongoing operations or on our commitment to this business. It reflects the weaker results of 2022 and current state of the maple product market, which has been impacted by the recent challenges in the global economy.
Moving forward, we anticipate improvement in the results of our Maple business segment. We believe the unfavorable financial and operating pressures might remain for the first part of 2023. However, as the year progresses, we expect Maple to slowly recover and to deliver slightly improved financial performance as the impact of additional volumes from new customers and price increases on recently negotiated agreements flow through to the bottom line.
Before closing, I would like to highlight a few other related financial items. Our consolidated adjusted net earnings for the fourth quarter were $12.2 million or $0.12 per share compared to $9.6 million or $0.09 per share for the comparable period last year. For the full fiscal year, adjusted net earnings were $40.7 million or $0.39 per share up from $33.9 million or $0.33 per share last year. These figures exclude the noncash impact of the $50 million goodwill impairment charge that we recorded in the fourth quarter. Free cash flow for the last 12 months was $46.8 million, an increase of $1.7 million compared to the same period last year. The increase was mainly due to higher adjusted EBITDA, excluding noncash items, partially offset by higher interest and income taxes paid.
Our capital expenditures for fiscal 2022 amounted to $23.7 million and were aligned with recent years. The expenditures are mainly related to improvement to our current facility and development of improved business processes aimed at increasing financial performance. For 2023, we expect our capital expenditures to follow the same trend with an approximate spending of $25 million on various capital projects. This estimate does not include potential expenditures related to our planned capacity expansion projects. As Mike mentioned, we are progressing and planning all aspects of this exciting growth opportunity, and we will provide further updates when it is appropriate.
Today, we are also announcing that the Board of Directors approved a payment of a $0.09 per share dividend in relation with the results of the fourth quarter consistent with the dividends paid in previous quarters for the last several years.
In closing, I would like to highlight once again our overall record results of 2022. We we expect ongoing stability and strength in our sugar business moving forward. A firm need for sugar-containing product across North America is providing stable demand for our sugar production. This underlying strength, along with our ability to maintain our margins during this current challenging economy provides me with confidence in our operations and our financial results expectations. We remain committed to growing our Maple business going forward. In 2023, we anticipate improved financial results as the inflationary pressures should begin to [ recede ] in the second half of the year.
With that, I would like to turn the call back over to the operator for questions.
[Operator Instructions] Your first question will come from George Doumet at Scotiabank. Mr. Doumet?
Your first question will come from Michael Van Aelst of TD.
So I guess I'll start with Sugar. You talked about the opportunistic sales in Canada. Are you able to quantify how much that was? And I'm assuming this is from your primary competitor having some operational challenges?
Yes, Michael, it would be in the area of 5,000 metric tonnes.
Okay. And do you know what the nature of the issue was?
No, we do not.
Okay. And that all came in this quarter?
Yes, some in Q3 and some in Q4.
Okay. And then the liquid was lower than, I think, what you were guiding, if I remember correctly, in this quarter. Was there any -- was there a possibility of delaying the liquid sales so that you could you supply some more commercial and industrial? Or is it just -- or is there something else that happened?
Yes. No, it's just timing in the market. We wouldn't delay any domestic customer shipments especially liquid as you appreciate, is usually just-in-time delivery. So it's just the timing in the market amongst various customers, there was nothing material.
Okay. All right. And then the capacity expansion in Montreal and [ Toronto that you see ], you're not budgeting any CapEx for that this year. When should we expect the CapEx to be recognized?
Michael, it's J.S. here. We are in the design and engineering process right now. So I think we -- our expectation is in the third -- second or third quarter, we'll have a more firm finalization of the total detail of the project, and then we will shortly thereafter, probably start spending the project assuming the project moves forward as expected.
Okay. And what's the -- how do you plan on funding that?
Well, we're currently looking at a few options -- without overly stressing our balance sheet. We're going to take advantage of some of our existing tools. And there's other options available to us. Right now, there's different [indiscernible] in the year that we're looking at in order to finance that and we're confident in our ability that we'll be able to execute that and within the anticipated timeline for construction.
So I didn't understand what you said you were looking at what, sorry.
While there are different options that we have, several options, and we don't want -- that will allow us to do so without overly stressing our balance sheet. And as the final detail of the project will be coming along, then we will firm up those options and select our plan.
Okay. All right. And then on the Maple side, have you written off all the goodwill now?
There's a small negligible amount that is still left on the balance approximately like $3 million in some customer contracts. But most of it, I would say, the vast majority of the goodwill has been written on.
Okay. And then I guess, -- coming into the year, I think you're expecting better volumes. I guess I'd like to dig in a bit as to what were the major changes in the competitive dynamics during the year. Did it -- you had new investors in the Canadian maple syrup industry, including another financial player jumping in this year. So how has those -- the market dynamics changed over the past year?
And Michael, the -- as we've said in most quarters, the Maple business remains very competitive. And as you pointed out, a new financial player involved as well. The Maple business will just remain competitive. It is what it is. The difficulty in Maple for us was passing through cost increases through pricing. During the year, the pricing or the cost pressures came quickly and because the supply chains and the global supply chains, especially on freight and packaging and components from overseas, and we're not able to get those costs put into new pricing and [ to ] the customers as quickly as we would like. And of course, being a highly competitive segment, it makes it even a little more difficult to get the cost recovery as quickly as you'd like. But -- we remain focused on it. We're focused on maintaining our share of the global volume in the global market in Maple, and we'll continue to [ toil away ] at maintaining that share.
So. The price increases that you've started to implement, are you getting full pass-through? Or like it doesn't sound like you're expecting a full recovery by the second half of next year in margins. So is it -- are you assuming that the competitive nature of the industry stays pretty elevated and therefore, you don't get full pass-through? Or do you -- is there any signs that you will be able to get some pass-through and what are those signs?
Yes, Michael, the pass-through would be great if we could get it all through. The whole industry is facing the same cost pressures -- and so over time, one would think those pricing increases would get through. But we'll continue to push on them. One of the other competitive factors that developed out of the -- coming out of the year was that we had a bumper crop. So there's a lot to serve now as well, and many producers are sitting on syrup, and so [ in order to keep ] the market for different reasons, it's just more competitive and we'll remain engaged in it to make sure we maintain our share.
Okay. And just finally, in terms of maintaining your share, your -- the -- I'm assuming the industry demand wasn't down this year.
Down a little bit, Michael. We did see volume drop in the U.S. and in Europe in the whole sector. But it was modest. I remember, coming off of '20 and '21 back-to-back 20% compound annual growth rates. And so the Maple is softening. And of course, with the food inflation, Maple, we would see as a luxury item. So we may see further softening in global demand because of those factors.
Your next question comes from Endri Leno of National Bank.
I'll start with Sugar. First, you [indiscernible] that you expect to increase. I mean that there is growing demand in the Canadian market. Can you talk a little bit about what is driving this growth? Is the expansion in Montreal related to this growth that you referenced or is it new demand?
Yes. Thanks, Endri, It's Mike. Yes, the growth in the Canadian market is really the phenomena of food manufacturing, sugar-containing products. Food manufacturers that are making high sugar-containing product items like chocolate and confectionery and other food stuffs that are manufactured in Canada, taking advantage of the strong sugar supply chain network and favorable world pricing, manufacturing just continues to grow here to take advantage of those things. We've seen, in fact, I think publicly it was announced in the last quarter, one of our large customers is building a brand-new plant in Ontario, that is also a sugar-containing product manufacturer. So it's just the market dynamics of producing goods here in Canada for export to U.S. and other markets.
That's great to hear. And the other question I had on Sugar and especially if you expect volumes to shift from more exports to more domestic. I mean if I recall correctly, historically, export volumes at higher margins versus domestic ones. I mean do you -- any color you can give us on margin expectations for next year?
Sure. With pleasure. The export margins typically are lower margins than domestic margins unless there's some specific specialties or special TRQs that we would have, for example, our beet quota, which would be tariff-free. But otherwise, exports are seen as opportunistic sales to take and use up any available remaining capacity we might have. [ At ] certain timing of quarters, which might be softer than other, we can pivot to the export market to make sure we maximize our output.
That's great. And then on the Maple, a couple of questions there. The first one, you mentioned in the last quarter you might bring in foreign labor. Do you have any updates on that? I mean we've seen some reports that integration applications are pretty slowly being processed. The government is a bit overwhelmed, but any color you can share there?
Yes, it's a great question. And we're quite proud of the work the team has done with bringing in [indiscernible]. Half of the team that we have recruited are here now. The other half will be here in mid-December. And the Maple team and our HR team have worked diligently for a year to get this done, and we're very happy to see that the process has come to a conclusion. They're here. They're working in our plants. And we've had great success in getting the final documentation done to have them here.
Great. And the last one I have for Maple, is that -- I mean, you referenced in some of the prior questions and in your prepared remarks that you expect to pass through pricing in Maple. But if we're expecting demand in Maple to soften because of inflation input cost, and Maple usually -- I mean, as you also mentioned, the luxury items, it usually doesn't sell well if we have a slowdown next year, what gives you confidence that you can pass those prices in the second half of '23?
Well, we'll continue the toil away of putting price increases in as contracts come up for renewal. As I said earlier, I think one dynamic is pretty obvious. Everybody in the maple business has the same cost pressures and -- because it's a global issue, it's not a Lantic issue. And I would think that over time, people will have no choice but to put those cost pressure prices through to contracting.
Okay. But volumes perhaps a little bit down for next year in [ Maple ]?
Yes. We're seeing a modest recovery in our volume with some contracts moving back and forth. So too early to tell, but we're cautiously optimistic on the volume for next year, then we're working at maintaining our share of the global market.
Your next question comes from Frederic Tremblay of Desjardins.
Question on Maple for me. Maybe sticking with that segment a little bit here. On the -- aside from pricing, I'm just wondering in terms of the consumer behavior and that product being a luxury item. Is there other ways for you guys to maybe stimulate demand. And there, I'm taking maybe tweaking some SKUs, maybe reducing formats so that the product [ sizes ] so that the sticker shock is maybe not as visible for the customer. Any thoughts on initiatives such as those or other initiatives to sort of stimulate demand there?
Yes. It's a great question, Fred. And we're always looking at our product assortment and our mix and our packaging -- packing capabilities across various plants and looking to make sure we optimize what we produce to capture the share of the market that we're after, and I wouldn't be prepared to share any details of those strategies on this call, but we're constantly looking at our strategy and adjusting our strategy in Maple to make sure we're executing against our long-term plan.
Perfect. And maybe on competition in Maple, I'm just curious to see if there's -- if it's a broad-based behavior? Or like if there [ was ] 2 smaller players that are maybe less disciplined. Just your view on sort of how the market is reacting here. Is this just a few players just being less disciplined? Or is it a broad-based issue, let's call it?
Yes. That's a great question. I wish I knew. It's largely a private label business. So you really don't know who's on the shelf in this business. But overall, it just remains a highly competitive sector of our business, and we're committed to the Maple, and we'll continue to [ toil away ] at earning our share.
Okay. Last question for me, maybe for J.S. Just given the upcoming expansion and you're looking at different funding options, can you remind us what's your leverage comfort level?
I think our leverage is about comfortable around the, I think, [ 3.5% ] was something that we had. I think I'm looking at where we are right now. We're at approximately [ 2.2% ]. So I think somewhere in between that. So I think that's what we'd be looking at. So -- but the [ 3.5% ] number is what we've had and [ stayed ] in the past and that hasn't changed.
[Operator Instructions] Your next question will come from George Doumet of Scotiabank.
I wanted to ask a little bit -- in the past, you gave us a little bit of kind of [ a bit ] directional point of view on the EBITDA in the Sugar segment. So obviously, there's quite some puts and takes on the gross margins. I think you've called them out. But maybe give us a sense of directionally, it feels like you want -- you guys expect EBITDA to be up, but anything you can provide there and maybe any commentary on kind of the net effect on the gross margins expected in the next year?
George, it's J.S. here. So when we look at our outlook, I think one other point that we're making is we had some opportunistic sales in the later part of '22, mainly in the fourth quarter, but also in the third quarter, as Mike mentioned. So we're not expecting those to be there. And so if we look at the volume guidance we have, I think we're fairly consistent with what we have had that delivered this year less those opportunistic sales [indiscernible]. So I think we are expecting our sugar business to be fairly stable. I think from our perspective, the market -- there is demand in the market. We're trying to address the domestic demand as much as possible as we are moving forward in our expansion -- the development of our expansion project.
Okay. And maybe on that topic, can you -- maybe just tell us how much of the 100,000 tonnes would have been made out [ West ]? And maybe by when do you expect the [ 400,000 ] tonnes to be consumed by?
Yes, George, it's Mike. The 100,000 tonnes that the expansion will add to our network is attracting a lot of attention from existing and new accounts. And so it's selling well. Our commitment level is looking very good. We move -- depending on what's going on in the business in the peaks and valleys, we can move anywhere from 10,000 to 20,000 tonnes a year out of Vancouver, depending on what's going on in the market and how much time we get to plan for some of these events that take place without any forewarning.
Okay. And would you expect that [ 400,000 ] to be consumed, I guess, 12 to 18 months after the facility is built? Just kind of the time frame.
[indiscernible] I was going to make a guess. Given current environment, I would say, yes, that would be our expectation.
Okay. Just 1 last 1 for me on to J.S. For the big working capital drag this year, maybe how should we think of working capital next year? Any color you could provide there.
Yes, George. I mean working capital this year, the reduction in working capital is mainly timing. If you -- if we look -- we can make a very close link to our inventory level and a lot of it is timing and when we're receiving some vessels [ for rocking ] sugar from -- in our Vancouver and Montreal facility and also the timing of some of the purchase of maple syrup. As Mike mentioned, we had a bumper crop this year. So we didn't have to go and buy later in the year in the [ feedback ] reserves. So a lot of those are timing related. We're not expecting to have working capital drag, actually should rebalance the following year.
There are no other questions. So at this time, I will turn the conference back to Mike Walton for any closing remarks.
Thank you, operator, and we look forward to speaking to everybody in Q2 as we update results of our Q1 [ program ]. So have a safe, happy holiday season, and we'll talk to you later.
Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating and ask you to kindly disconnect your lines.