A very small research note.
Rogers Sugar (TSX: RSI) reported their year-end yesterday.
The sugar side of the industry remains rock-solid stable (and this is primarily the reason why the stock has been trading as a bond-like security). There are glimmers of hope that they are slowly turning around their maple operations – although gross profits are still relatively flat on a comparative basis, the top line is up and presumably they are still ironing out the issues on this segment of the business.
As a result, the stock has risen – from the beginning of the month to today, by just over 10% which is an unusual fluctuation for the stock.
In terms of cash generation, while the underlying business is indeed making plenty of it, they are over-leveraged. After subtracting interest, taxes, lease payments and capital expenditures, they pulled in $34 million in cash for the year, while their dividend payout is $37.5 million. In the previous fiscal year, that was $29 million generated. In light of the current stock price, just in terms of cash generation, it would make them fairly expensive – about 17 times, unadjusted for leverage. The only solace is the relatively safe moat of having control of most of the sugar refining industry in Canada, and having the industry mostly trade-protected.