Rogers Sugar Inc.: Interim Report for the 1st Quarter 2013 Results

Rogers Sugar Inc. (TSX: RSI)

Message to Shareholders: On behalf of the Board of Directors, I am pleased to present the unaudited condensed consolidated interim financial results of Rogers Sugar Inc. (the "Company") for the three months ended December 29, 2012.

On January 30, 2013, the Board of Directors has authorized and declared a special dividend of 36 cents per share to be paid to Shareholders of record on February 8, 2013, payable on or before February 28, 2013. This special dividend totalling approximately $33.9 million will be financed through the working capital line of credit and available cash. The payment of the special dividend reflects the distribution of a portion of the previously earned but undistributed free cash flow generated over the five fiscal years from October 2007 to September 2012 which totalled approximately $64.7 million.

Volume for the first quarter was 156,415 metric tonnes, as opposed to 172,754 metric tonnes in the comparable quarter of last year, a decrease of approximately 16,300 metric tonnes. Industrial volume was higher by approximately 4,700 metric tonnes due to the gain of additional volume with existing and new customers. Consumer volume was higher by approximately 500 metric tonnes due mainly to timing in customers' retail promotions. Liquid volume also increased by approximately 300 metric tonnes due mainly to timing in some deliveries and increases in deliveries to existing customers. These increases were offset with lower export volume of approximately 21,800 metric tonnes due to sugar sold under a special quota to the U.S in fiscal 2012. A special quota of 136,078 metric tonnes was opened, effective October 3, 2011 by the U.S. Department of Agriculture, of which 25,000 metric tonnes was allocated specifically to Canada and the balance of 111,078 to global suppliers on a first-come, first-served basis. The Company, through its cane refineries, was able to enter approximately 10,000 metric tonnes against the global quota by the time it closed on October 25, 2011. As the sole producer of Canadian origin sugar in Taber Alberta, the Company was able to enter approximately 17,600 metric tonnes by the time that quota closed on November 30, 2011.

With the mark-to-market of all derivative financial instruments and embedded derivatives in non-financial instruments at the end of each reporting period, our accounting income does not represent a complete understanding of factors and trends affecting the business. Consistent with previous reporting, we therefore prepared adjusted gross margin and adjusted earnings results to reflect the performance of the Company during the period without the impact of the mark-to-market of derivative financial instruments and embedded derivatives in non-financial instruments. At the end of the first quarter the accounting results had a mark-to-market gain of $1.1 million before income taxes, which was deducted to arrive at the adjusted results.

For the quarter, adjusted gross margin decreased by approximately $8.2 million, when compared to the same quarter of last year, due in large part to lower export volume. On a per metric tonne basis, adjusted gross margin was $189.02 compared to $218.74 for the first quarter of last year. The decrease in the adjusted gross margin rate of $29.72 is due mainly to the sales mix, as a higher margin rate was realized on export sales under the special quota in the first quarter of fiscal 2012.

Adjusted EBIT of $22.6 million was $8.3 million lower when compared to the same quarter last year due to the decrease in export volume against U.S. special quotas and to the lower adjusted gross margin rate as discussed above.

For the quarter, free cash flow was $18.1 million, as compared to $21.7 million in fiscal 2012. The decrease was due mainly to the lower adjusted operating results and higher investment in capital expenditures, somewhat offset by the payment of $2.7 million in deferred financing charges on the issue of a new convertible debenture in the comparable quarter of fiscal 2012.

Industrial volume will be higher in fiscal 2013 as additional volume has been contracted with new and existing accounts. In addition the Company was able to contract additional liquid sugar volume with one large bottler in western Canada. Shipments against this new contract are forecast to start in the spring of 2013. Export volume is forecast to be lower this fiscal year as no special U.S. quotas are expected during the year as a result of large crops in the U.S. and Mexico. Overall volume for fiscal 2013 is expected to be higher than fiscal 2012.

The Taber beet sugar slicing campaign is estimated to be completed by mid-February. We are now estimating total sugar beet production at approximately 118,000 metric tonnes, when the thick juice campaign will be completed in the spring of 2013. This total production volume is larger than our current sales estimate for Taber, including the additional liquid sales starting in the spring of 2013. The additional beet refined sugar inventory will be warehoused or sold against additional opportunities that may arise over the balance of the fiscal year.

FOR THE BOARD OF DIRECTORS
Signed
Stuart Belkin, Chairman
Vancouver, British Columbia - January 30, 2013

MANAGEMENTS' DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") dated January 30, 2013 of Rogers Sugar Inc. ("Rogers") should be read in conjunction with the unaudited condensed consolidated interim financial statements and notes thereto for the period ended December 29, 2012, as well as the audited consolidated financial statements and MD&A for the year ended September 29, 2012. The quarterly condensed consolidated financial statements and any amounts shown in this MD&A were not reviewed nor audited by our external auditors.

Management is responsible for preparing the MD&A. This MD&A has been reviewed and approved by the Audit Committee of Rogers and its Board of Directors.

Non-GAAP measures

In analyzing our results, we supplement our use of financial measures that are calculated and presented in accordance with GAAP, with a number of non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's historical per

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