Rogers Sugar Inc
TSX:RSI
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Rogers Sugar Inc
Earnings Call Analysis
Q4-2023 Analysis
Rogers Sugar Inc
Investors would be pleased to know the company has maintained its commitment to shareholder returns, again announcing a sizable dividend. The $0.36 per share distributed marks a maintained tradition of rewarding investors and emphasizes the company's confidence in its financial stability with an 85% payout ratio.
The Sugar segment emerged as a stellar performer, pushing revenues to a robust $308 million from last year's $267 million. However, the Maple segment's performance, though improved, remains subdued. Looking forward, we anticipate a modest recovery in Maple, propped up by automation initiatives and recent price hikes to alleviate pressures faced in fiscal 2024. The company expects sales volumes to match the prior year's performance, indicating a steady grip despite global market headwinds.
Maple's margin strength was noteworthy in the fourth quarter – 12.5% up from 8.1% in the prior year. This improvement, aided by automation and pricing actions, appears sustainable as the company adopts continuous improvement methodologies. Nevertheless, a cautious stance is maintained regarding consumer reactions and market growth in Maple products.
2023's hurdles, such as the Vancouver labor disruption and a shocking electrical issue in Montreal, tempered the company's stride. Despite these obstacles, the company displayed resilience, sustaining 99% industrial fill rates and offsetting strikes with strategic flexibility and existing inventories. These measures demonstrate a robust operational foundation capable of weathering unforeseen troubles.
The firm is also investing in expansion, notably in the Maple segment and Montreal facility, with plans to boost capacity. Interestingly, Vancouver's potential shift to a 7-day production schedule could significantly lift its capacity, offering a promising avenue to supersede sugar imports and further enhance domestic market support. However, with the specter of inflation, the company has been diligent to devise its budgets at peak levels, instilling confidence in the financial rapport of its growth projects.
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Good morning, ladies and gentlemen, and welcome to the Rogers Sugar Fourth Quarter 2023 Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, November 30, 2023, at 8 a.m. Eastern Time.Please be reminded that today's call may include forward-looking statements regarding 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 there may be references to some non-GAAP measures during the call. Please refer to the forward-looking disclaimers and non-GAAP measure definitions included in the 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 the press release and an archived recording of this call will also be available on the Rogers Sugar website.I would now like to turn the meeting over to Mike Walton, President and CEO. Please go ahead, Mr. Walton.
Thank you, operator, and good morning, everyone. Thank you all for joining us today. I'd like to start by discussing our strong quarterly and record annual results that once again demonstrate how our focus on consistent, profitable growth is delivering for our customers and our shareholders. I will also give a brief update on our work to position the business for long-term success for the benefit of all stakeholders by expanding capacity in Eastern Canada and seeking a labor agreement in Vancouver that enables us to run the site continuously to maximize its potential. I'll then discuss our high-level outlook for 2024. After that, I'll pass the microphone to Jean-Sebastien, our VP, Finance and CFO, who can add more detail.Let's start with our results. As always, our aim is to deliver consistent, profitable growth by concentrating our efforts on supplying the domestic market, which is very strong fundamentals that support long-term demand for our sugar. These strong fundamentals are particularly evident in Ontario and Quebec, where food manufacturers are expanding supply, domestic consumption as well as export markets. They are building factories in the region to take advantage of Canada's favorable sugar economics and proximity to millions of consumers on both sides of the border. That creates robust long-term demand for the sugar we produce.In 2023, our ability to leverage our network to supply that demand resulted in a second straight record for annual sugar sales volumes and a 8.5% increase in consolidated adjusted EBITDA to the highest total ever. We saw excellent performance in our Sugar segment with revenue increasing by $101 million for the year due to higher raw sugar prices, higher volumes, improved average pricing through refining related activities, and higher revenue from byproduct sales.In Maple, we also saw an improvement in margins as we reduced operating costs through automation at the same time as pricing increase. It can still be bumpy in Maple business, but we like what we have seen recently. We're not sitting still in Maple as we brought in external consultants in September to help us implement a continuous improvement methodology and identify additional cost savings to make that business even better.Turning to the fourth quarter. Consolidated adjusted EBITDA was relatively steady as we saw lower adjusted EBITDA in sugar by the stronger performance in Maple. This is an example of the diversification benefits of our Maple business. In sugar, EBITDA was impacted by higher operating and distribution costs, partially offset by improved pricing. Some of the cost impact is a result of an emergency maintenance in our Montreal plant due to an extreme weather event, which resulted in us having to replace damaged electrical assets. We also had some incremental normal course maintenance in Taber. The improvement in Maple was driven by improved average selling prices and lower operating costs. All in all, the quarter was a solid finish to a very good year.We're proud of what we accomplished in 2023, and we believe our work over the course of the year is setting the company up for a more sustainable and successful future. The strong sugar fundamentals I talked about off the top are driving our thinking on positioning the company for the long term. We want to keep optimizing the business to capture the upside from those encouraging demand trends. That's why we are expanding in Eastern Canada and seeking a collective agreement that allows us to run our Vancouver plant continuously, just as we do our other plants and just as most normal manufacturers do in Canada and around the world.The Eastern Canada expansion project, which includes adding new refining equipment and our Montreal plant is on track. We have ordered the major equipment and construction is starting. As a reminder, this will increase our refining capacity by approximately 20% in Eastern Canada. We expect the new capacity will begin to come on stream in the first half of fiscal 2026. By expanding refining capacity close to our customer base in Eastern Canada and the U.S., we reduce our reliance on transporting sugar from our over Vancouver plant. This will reduce freight costs and improve margins. It will also leave our Western capacity available to support our growth opportunities in both domestic and export markets.Now, I'd like to spend a few minutes talking about the situation in Vancouver. I'm not going to negotiate in public, so we won't be answering questions about details of what we've put forward or anything like that. But I want to stress that we are fully committed to reaching a new collective bargaining agreement with our unionized staff that works for both the company and for employees and looks beyond the short term that should secure a long-term future for our Vancouver plant. This means negotiating an agreement that provides fair wages, benefits and working conditions, including an adjustment to work schedules for roughly 1/4 of the Vancouver workforce. It also means negotiating an agreement that allows us to serve customer needs, meet growing demand and position the Vancouver refinery for long-term health and future success for the benefit of all.Last week, we applied to the B.C. Labour Relations Board for mediation and the Union has accepted. That mediation begins today and tomorrow. Our goal is to use the opportunity to work constructively with the Union toward a fair collective agreement that gets the Vancouver plant back to full production as soon as possible. In the meantime, we are working hard to support the Western market throughout the disruption. Since the beginning of the strike, the Vancouver sugar refinery has continued to operate at a reduced level, and we have used our other facilities to support our valued customers in Western Canada.The Canadian market remains well supplied, though there are localized impacts in Western Canada for some sugar products, particularly brown sugar and packaged white sugar sold through retailers and distributors. When it comes to the bulk and liquid sugars that make up roughly 90% of the market in Canada, there is ample supply. We recognize that this has created inconvenience for some customers, and we apologize for that. We believe that with effort from both parties, we can reach a fair agreement.The fact is, the best way to ensure there is ample sugar on shelves for Canadians to support food manufacturing jobs in Canada and to position the Vancouver plant for the future is to reach an agreement with the Union on operating the refinery continuously. Reaching an agreement that enables continuous operations will also make the Vancouver site much more investable when we think about where to allocate capital in the future. It's hard to justify much incremental capital under the current operating lines. Finally, I'll just touch on Taber. It's been a good harvest and a good crop. There are some impacts in cold weather, but we see them as minor.Now, let's turn to the outlook for 2024. At a high level, we expect a modest recovery in Maple as our efforts to lower costs and improve pricing continue to improve results. And in sugar, given the positive sugar demand trends, all else being equal, we expect to see another strong year in that segment in fiscal 2024. Of course, all else is not equal because of the Vancouver strike. As I stated earlier, we have been working hard to serve as many customers as possible in Western Canada by leveraging other parts of our network and by drawing down inventories.However, the current labor disruption at our Vancouver refinery is expected to have a negative impact on our Q1 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 a potential internal incremental costs associated with serving our Western customers impacted by the labor disruption. It is important to remember that the Vancouver plant, which represents about 17% of our overall production is running, albeit at a reduced capacity and that we are leveraging our other facilities to support the domestic demand in Western Canada during the labor disruption.Stepping back though, the favorable demand trends continue and the long-term outlook for the business is strong, and we will be even stronger once the East Canada expansion comes online and once the Vancouver strike is settled with an agreement that enables us to service the growth in the market. Before I finish, I would also like to recognize the tremendous efforts of all of our employees across both companies and all regions for their tireless efforts to serve our customers and remain safe in doing so every day.I'll now turn the call over to JS.
Thank you, Mike, and good morning, everyone. I will begin my remarks by discussing our overall results for the year and the current quarter. Consolidated revenues for fiscal 2023 were $1.1 billion, a 10% increase from 2022 and total sugar sales volume was higher than last year at just over [ 795,000 metric tons ]. Consolidated adjusted EBITDA for fiscal 2023 surpassed our expectations at $111 million, an 8.5% increase over 2022. Consolidated adjusted net earnings for fiscal 2023 were $45 million or $0.42 per share, as compared to $41 million or $0.39 per share for 2022.Our strong financial results allowed us once again to pay a dividend of $0.36 per share, representing a payout of $38 million and a payout ratio of 85%. The driver for both revenues and adjusted earnings improvement in fiscal 2023 was the strong performance of our Sugar segment. For the quarter, revenues increased to $308 million from $267 million the year before. Consolidated adjusted EBITDA at $29 million was closely aligned with the results of last year for the same quarter.In the fourth quarter of 2023, higher operating and distribution costs in the Sugar segment combined to outweigh the benefit of improved pricing and improved results in the Maple segment. Adjusted net earnings for the fourth quarter of 2023 were $11 million or $0.11 per share compared to $12 million or $0.12 per share for the same period in 2022.Now, I will provide more details on the fourth quarter results of the Sugar segment. Sales volume was up slightly in the fourth quarter of 2023, thanks to higher export and liquid sales volumes, partially offset by lower volumes in our industrial and consumer categories. Revenues increased by $36 million to $256 million, with a large portion of the increase associated with the recent increase in the commodity price of Raw #11 in sugar.Adjusted gross margin decreased in the quarter by $1.6 million or 4.5% from the same quarter last year. On a per unit basis, adjusted gross margin decreased by approximately $8 to $156 per metric ton, driven by unexpected maintenance costs at our Montreal plant and the costs associated with importing white sugar from Central America to support customer demand.Distribution costs increased by $2.5 million from the prior year period, mainly due to incremental logistical costs incurred to move sugar across our facilities to support the strong domestic demand and the lower-than-expected production in Taber.Administration and selling expenditures were down $1.4 million compared to the prior year quarter due to lower compensation costs attributable mainly to lower share-based compensation expense associated with the recent variation in our share price.For the fourth quarter, adjusted EBITDA in the Sugar segment was $24 million, down by $2 million from the same quarter last year. Looking ahead, we expect the Sugar segment to perform well in fiscal 2024. We have provided details on our sugar outlook in the MD&A, but let me give you a few highlights.In addition to our belief in strong underlying demand, we expect improvements in pricing implemented over the last 2 years will support our financial results, allowing us to mitigate the current impact of inflationary pressures. In fiscal 2024, we will continue to prioritize domestic sales and focus on meeting our commitments to our customers.The initial volume expectation for fiscal year 2024 was set at 800,000 metric tons. This would have represented an increase of approximately 5,000 metric tons as compared to fiscal year 2023. Considering the current labor situation at our Vancouver refinery, we now anticipate our volumes to be lower in 2024, the extent of which we cannot quantify at this time.There are a lot of moving parts when it comes to calculating the impact of the Vancouver labor disruption, starting with the fact that we don't know how long this will last. While it's ongoing, we are saving some operating costs, but at the same time, they are added expenditures from factors such as transportation to bring sugar from other site. And of course, the Vancouver plant is still running, but at a reduced capacity.Moreover, it's important to remember that Vancouver has been our swing plant in recent years, meaning that it's not a plant that would always run at full capacity over the course of the year. In fact, one of the reasons we want to move to continuous operations in Vancouver is precisely because the demand for quality of refined sugar is increasing throughout Canada, and we see great potential for this site in the future. To leverage the Vancouver refinery going forward, we aim to move to a 7 days production schedule, which will provide predictability, consistency and a better visibility on production. We will provide updates on the expected impact of the labor disruption on sales volumes as the situation evolves.Turning our attention to our Taber facility where the recently completed harvest delivered the expected quantity of sugar beets. Based on our early assessment, we anticipate the 2024 crop to deliver between 105,000 metric tons and 110,000 metric tons of beet sugar, consistent with the yield expected from the contracted acreage with the Alberta growers. We are entering the slicing stage of our production cycle in Taber, which could be impacted by weather conditions. Needless to say that a strong production out of our Taber facility could help us mitigate some of the unfavorable impact of the Vancouver labor disruption on the financial results of our Sugar segment for 2024.Looking at the cost side of our business, we expect production costs and maintenance programs to continue to be moderately impacted by the current market-based inflationary pressures, while distribution costs are expected to be stable in 2024. Administration and selling expenses are expected to increase slightly in 2024 due mainly to market-based increases for compensation expenditures and external services supporting the business. We do anticipate higher net financing costs in fiscal 2024, mainly from higher working capital requirements. Our hedging strategy should continue to mitigate the impact of recent increases in interest rates and energy costs.Looking at the CapEx program supporting our current sugar operation, we anticipate spending about $25 million on various initiatives for fiscal 2024, consistent with recent years. This estimate excludes expenditures relating to our expansion project in Eastern Canada for which we plan to spend approximately $70 million in fiscal 2024. Our financing plan for the Eastern expansion project still includes a combination of debt and equity or equity-like instruments, including the recently announced support of $65 million in loan from the Quebec government.Also of note, on November 1st, we increased the available amount on our revolving credit facility by $75 million to $340 million, building more flexibility to accommodate increases in working capital and for the Eastern Canada expansion project. We also expanded the lender group with the addition of 2 financial institutions to our banking [indiscernible], which is now composed of 6 strong business partners. As the project advances, we will continue to evaluate our financing options, and we'll update the market at the appropriate time. What's important is that we are in no rush and that we are well positioned to access the market at the opportune time.Now moving on to the Maple segment. The quarter was a positive one in Maple. 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. Adjusted EBITDA for the Maple segment for the fourth quarter at $5 million was higher than last year by $2 million, largely driven by higher revenues combined with lower operating costs. We continue to see the benefits of our investments in automation, which are resulting in savings that are lowering the recent inflationary impacts on costs.Looking forward, we expect these financial and operating pressures to remain in the first part of fiscal 2024. We expect 2024 total sales volume to come in at about the same level as in 2023, reflecting the ongoing challenges in the global market demand for Maple syrup. We expect the Maple business segment to continue to benefit from automation initiatives at its Granby and Degelis plan. These initiatives, along with recently negotiated price increases will support what we anticipate will be a modest recovery of our Maple business segment in 2024. As we continue to look for ways to make this business better, we intend to invest around $1 million on capital projects in Maple in fiscal 2024, mainly to further improve productivity and profitability through automation.Before I end my remarks, I would like to highlight a few other related financial items. Free cash flow for fiscal 2023 was $46 million, consistent with last year despite slightly higher capital expenditures. Our free cash flow continues to support our dividend distribution policy to our shareholders. On that note today, we are announcing that the Board of Directors approved a payment of a dividend of $0.09 per share. This is consistent with the level of quarterly dividend paid for the last several years.In closing, I will just echo Mike in saying that we remain optimistic about the outlook for our overall business. While we expect an unfavorable impact in 2024 from the current Vancouver labor disruption, we believe the fair agreement we are seeking will support the future needs of the Western and the overall Canadian sugar market, especially when combined with our Eastern production and logistic expansion project. In the coming years, 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 2023.With that, I would like to turn the call back over to the operator for questions.
[Operator Instructions] Our first question comes from the line of George Doumet from Scotiabank.
A quick clarification on the Eastern Expansion. Are we only expected to see the first incremental capacity starting in first half '26? I guess, but when do you expect to see the full run rate contribution from a volume standpoint and then I guess from a normalized EBITDA standpoint?
It's a good question, George. We're -- our target is to be online in the first half of 2026, probably a bit earlier as thing goes according to plan. We think in the first year, we will hit probably close to 70% to 80% of the capacity. And in the second year, we'll be hitting our strides at about 100%.
All right. That's helpful. And then on the Maple business, margins were really strong this quarter. I'm just wondering to what extent they're sustainable? And what is your embedded industry growth outlook, I guess, in your guidance for fiscal '26 -- sorry, fiscal '24?
Thanks, George. Yes, the margin in Maple in Q4 were quite strong. We did 12.5%. It was 8.1% last year. The overall margin for the year is 9.1%. I think Maple is the margins that we are seeing now. There is impact from our automation that you've seen there and some of the increased pricing. If you recall, some of the price increase were a bit lagging the inflationary pressures over the last few quarters. So we've seen a bit of that. I think we're cautiously optimistic on Maple. So we are looking at next year, and we're somehow optimistic, but I think we still remain very careful as this market has been in taking our pressures are impacting consumers. And then we've seen that the overall market for Maple has not grown as much as we had initially anticipated or as much as we've seen in the past. So I think we want to be careful and see how these results will carry on.
And George, just add to that. Looking investments in automation and the new continuous improvement methodologies we're putting into the business, driving cost part of the business is generating a much more predictable return on the volumes that we are servicing.
Okay. Got it. And just one last one for me. There's been obviously a lot of headline around a weight-loss drug out there. I just wanted to get your view maybe on the impact that can have on your business longer term.
Yes. We've seen a lot of media on that, George. And I'd be speculating. So I would say no impact on the sugar industry at this time.
We have our next question coming from the line of Michael Van Aelst from TD Cowen.
So I just wanted to continue on Maple because -- and congratulate you on the strong quarter in Maple. But I'm a little confused as to the source of the strength in Q4 and why you don't seem to see that continuing in the first half of next year? Because that 12.5% gross margin is the highest we've seen in almost 5 years. So what's -- I guess, what drove that? How much of that is temporary? And why are you expecting it to not be sustained at that level in the first half of the year?
I think -- and maybe in my answers, I was not -- [ you say ] earlier on. I think we are on the road to recovery in Maple. The automation we will take. I mean, this is something that we've implemented. So we're going to see some savings there. And I would say probably half of the incremental margin comes from that. The other half also comes from a bit of a mix of the product we sold in the fourth quarter, so which have a bit of a higher margin than if you were to take it overall, sometimes I know it's Maple syrup, but sometimes it's based on blend and the different type of blends and the type of SKUs that we're selling customers. So there was a bit of favorable impact of that in the fourth quarter.I think one of the things that helped us, if you look at overall, we had less volume on the per pound perspective, our profitability has increased. So some of the customers that we've had in the past where we might have made as much as we used to. I've not kind of disappeared. Some of those contracts are no longer there. So it tends to push our margin higher.
What's going to change, I guess, because that's -- you're at a good margin now, you're back to kind of where you were 5 years ago. But why is that going to go down next year then -- we're going to have?
Well, I think the point I'm trying to make, Mike, is 12.5% is a very, very strong quarter if you compare it to the quarter before in the year. I do believe we will be improving in Maple, but it might not get to the 12.5% every quarter. That was more the point I was trying to make.
Sorry. The other side of this is, as you've pointed out and then see this journey with us, we've seen this moving. So we're being a little cautious in our look right now, we'll have a better view when we get into the next call in February of 2024. We like what we see. The trend is good so far. We've taken some good constructive actions on pricing and cost management through automation and that was this continuous improvement program. But we're just remaining cautious to see the durability that we expect to be in the business is actually there.
Okay. And then on sugar, I know it's very difficult, given the known around or unknown around the strike. But you're saying you expect to perform well, but that's -- I guess you're just -- you're including -- excluding the strike from all those comments, you're expecting to operate well and I guess, sustaining your profitability, excluding the strength. Is that the right way to think about it?
I think that's a fair comment. Our plants are operating well right now. I guess the impact of the strike is it's tough to analyze or to predict because we're still -- it's still going on. What we put -- it's not in the script, but it's actually in the MD&A. So Vancouver represents about 17% of our production. We're currently operating at about 30%. We're delivering about 30% of the volume out of Vancouver, but we're also leveraging some of our other facilities. And so a lot of it will be known more as the strike situation evolves and as we get to an agreement, and we're all pushing for this.But -- and also, there will be an impact on how the Taber is going to be because we've been using Taber as a main swing facility to support the demand out West. And it's Taber. We're in the slicing campaign right now, which is always a bit tricky because of weather. We like what we've seen so far as far as the amounts of beets and the content of the beet that we have received. And if they -- would weather collaborate, that will go to mitigate some of the impact. But there is definitely going to be a financial impact. I think it's just difficult right now to put a number on.
Are you able to give us a sense as to what your rates are on a national basis at this point?
Yes. We would be hitting, Michael, on a national basis on industrial, we'd still be probably in excess of 99% fill rate on industrials and on some of the consumer products, especially on the specialties, probably in the 90% to 92% forward.
Okay. And I guess, export is quite a bit lower then?
Yes. We've moved some contracts around where we can. As you know, in the United States right now, it's also their beet crop and they're having a great crop. So they're not started with sugar. So our partners that we work with in those markets are a little more flexible in moving contracts around, and we'll deliver them later.
Okay. You mentioned to George, that you expect to get -- be running at 100% of capacity in year 2 for the Montreal expansion. Do you just mean that the facility will be up and running fully in year 2? Or do you expect to actually get -- produce all the volumes that all the capacity you're adding?
Yes. Mike, we expect the expansion, of course, we're in early days. But according to the plans we have now and what we've seen thus far after 15 months of detailed engineering and assessment is the plant should start up in, in year 2 of the startup being at full capacity. We don't see any risk to that at this stage today.
Okay. But I mean, does that -- what kind of room does that leave you for growth beyond year 2?
Well, that's why we continue to invest every year in our plants to get more out of the facilities that you're seeing production other Montreal is up as well. And we're pushing and this gives us the motivation to leverage the capacity that's in Vancouver, and that's why we're working with the Union to try and achieve a continuous operation there. It unlocks a lot of volume that we haven't had access to over the previous years.
Okay. And just finally, can you just explain the Montreal -- what happened with the electrical issue of Montreal? Or was it isolated to Q4? And can you quantify the impact?
I can tell you a little bit about the event and JS can give you some -- maybe some numbers around that. But it was -- we've seen all over the world, some extreme weather events. We had a crazy rainstorm at Montreal one day and one of many. But basically, the short answer is, over a period of 10 days, we lost 2 major transformers in the building that were outside through the water. And so both of those have to be replaced and we're hard to get into short notice. So we had some temporary measures to keep the plant running to minimize the impact on operations. So that's the extent of the event and although those things have now [ been deltas ] and hopefully, we won't have the 100-year event again next year.
Any financial impact?
Well, there's definitely financial impact, and it's like to explain most of our incremental maintenance costs as we have disclosed. We don't -- we're not going to isolate the impact directly because there's -- there's an impact on inventory, for example. So we have to eat some of our inventory. So there's not an immediate impact, but there is an impact that might [ care ] and as we are rebuilding our inventory.
We have our next question coming from the line of Nevan Yochim from BMO Capital Markets.
I was just hoping you could provide a little bit of detail on current run rates, including the impact from the Vancouver strike, based on my math would be around somewhere around the 110,000 range. And then maybe once you come to an agreement, is there any ramp-up time to get back to, let's say, the 800,000?
Well, I'll start here. I think your numbers -- I look to do your math, but if we're looking at Vancouver being at 17% and we're running at 30%, I think the last production of Vancouver on a quarterly basis is somewhere around 25,000 tons. But then that being said, we are also mitigating some of that impact with our auto facilities and Taber's, which we're hoping to be able to leverage. So I think on an annual basis, we certainly do not expect the -- this labor disruption to last until the end of the year as we're working very closely, we're in mediation starting to sweep. And so from that -- from the perspective, we are at right now, we are sorting the -- we are basically working at about 30% in our Vancouver facility, which represents about 17% of our production.
And if I can add to the ramp-up part of your question, the plants running, as JS just said, it's continued to operate through the entire duration of the strike. So ramp-up would be as quickly as we want to start it, it will be ready to go.
Okay. Great. And then once you guys come to an agreements on Vancouver and you start to operate at 7 days a week, where could you see volumes moving over the longer term? And would there be an associated CapEx costs with that?
Yes. So first part I want to address is that I'm not going to make that predetermination that we will reach an agreement at 7 days a week. That's our intention. So I want to be is we're clear to our partners and we're working with in Vancouver, that's the item we're negotiating together to achieve for the benefit of the long term of the business and supply the growth in Canada. And so we'll continue, as JS said, we're working through mediation today and tomorrow, and we'll see where that takes us towards getting to that ultimate objectively running continuous operations in Vancouver.And as far as CapEx and other needs for the plant, we spend about $25 million a year across our businesses and CapEx, and we just allocated to the plants where most needs are and where we can get the most capacity out of the facilities to support the growth in the market. So those determinations will continue to be made on an annual basis and some on a more long-term basis, but they'll be made to support the growth in the industry over the longer term versus short-term basis.
Okay. Understood. Last one for me on the refined way that you're importing to support customer demand. Can you talk a little bit about which channels this is going into maybe anything around the magnitude and then your expectations for those volumes into 2024?
Yes, that's a good question. We are -- and if you look at 2023, we probably use imports to compensate for some of the issue, the weather issue we had in Taber. So in a [ field ] given that, you're somewhere between 10,000 tons and 20,000 tons. And it's directly -- it's easily directed to bulk markets.
Okay. Great. Is that sort of what you would expect looking forward like into 2024? Any early indications there as to how much you might be importing?
I think that's a fair assessment. I think it's a bit early. We are monitoring the market very closely. We're using this for demand. Obviously, with the situation in Vancouver, it might also cause for us to actually go through some imports as well to meet the needs of our customers. So we'll be monitoring the situation. But I think this is -- the quantity should not vary significantly from what we have done in 2023.
And if I can add to that, the whole context for importing sugar is to support our customers in the domestic market. While we sort out our production where it was last year, as JS just said, a problem with our beet crop last year precipitated the need to import sugar to support our volume. So our customers in the domestic market, and we'll continue to import and support that market until we get capacity that brings domestically produced sugar in our own refineries in [ the plant ] to service that market. Imports just fill part of that gap in between now and then.
[Operator Instructions] We have our next question coming from the line of Zachary Evershed from National Bank.
First question, how much confidence do you guys have in the $200 million budget for the Eastern expansion, how well is that de-risked versus inflation?
So we've taken a long time to look at this. And as I said earlier, I think we're 15 months now in detailed engineering and assessments and big packages to bid to land on a price. There's a fair amount of certainty to it, but nothing is guaranteed over a long period of time, as you know, in the world. We think that when we costed the project, it was at the peak of inflation. So we have to continue to build into the budget. And at this stage, as we sit today, we still remain confident that we can land the project as we've described it on [ union ] budget.
Good color. And then switching to Vancouver, if the building moves up to a 7-day production schedule, would that represent a lift of its annual capacity versus the 17% number we'll be talking about?
Yes, that's correct. It would be a fairly significant increase in refined sugar [ exports ] for the Canadian market should we get to a continuous operation in Vancouver.
And if we weigh those against the imports that you've been doing to support your domestic customers, do you think you can place all of those volumes domestically if and when it ramps up?
Yes, absolutely. And that's our preference is to produce, service for the domestic market and Canadian plants.
There are no further questions at this time. I'd now like to turn the call back over to Mr. Walton for final closing comments.
Well, thank you for participating in today's call. And on behalf of all of the employees at Lantic to wish you a happy holiday season, and we look forward to updating you again in February. Bye.
Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.