Mr. Don Hill reports

SUCRO ANNOUNCES FOURTH QUARTER AND YEAR-END 2023 RESULTS

Sucro Ltd. has released financial results for the three and 12 months ended Dec. 31, 2023. All amounts are shown in United States dollars ("U.S. $" or "$") unless otherwise noted.

Financial Highlights

• Full-year revenues of $496.8-million on sugar deliveries of 476,778 metric tons; Q4 of $114.6-million and 95,883 metric tons, respectively
• Full-year net income of $20-million; Q4 net loss of $10.4-million
• Full-year adjusted gross profit1 of $49.1-million and adjusted gross profit margin1 percentage of 9.9 per cent; Q4 of $9.5-million and 8.3 per cent, respectively
• Full-year EBITDA1 of $54.1-million and Adjusted EBITDA1 of $33.1-million; Q4 of ($5.5-million) and $8.3-million, respectively
• Full-year Adjusted gross profit per metric ton delivered1 2 of $94.37; Q4 of $55.64
• For our refineries, Full-year volumes of 160,323 metric tons; Q4 of 34,287 metric tons
• For our refineries, Full-year Adjusted gross profit per metric ton delivered of $143.49; Q4 of $182.12

"The Sucro team delivered a strong operational performance in 2023, which included valuable contributions from our US-based Lackawanna refinery during its first full year of operations," expressed Jonathan Taylor, Founder and Chief Executive Officer of Sucro. "The addition of our new refinery capacity has had the desired effects - significant growth in our refined volumes and higher per ton profitability, the combination of which supported a 48 per cent year-over-year increase in our Adjusted EBITDA."

Taylor further commented "Our expectation in 2024 is to deliver further production growth from our existing operations while executing our refinery expansion plans. Our investment program for the year is focused on construction activities for our new refinery in Hamilton, and on advancing our recently announced new cane refinery at our University Park site in Illinois. Our teams remain highly focused on capitalizing on the strong, steady growth in sugar market demand we see on both sides of the border to deliver profitable growth to our shareholders."

Q4 and Year-end 2023 Investor Call

The company will host a conference call on Friday, April 19, 2024, at 10:00 am Eastern time during which Jonathan Taylor, Founder and Chief Executive Officer, and Stefano D'Aniello, Chief Financial Officer, will discuss Sucro's financial performance for the fourth quarter and year ended Dec. 31, 2023.

Date: Friday, April 19, 2024

Time: 10:00 a.m. ET

Conference Call: Toll-Free (888) 664-6392

Local (GTA) (416) 764-8659

Please dial in at least five minutes before the call begins.

Replay: Available through May 6, 2024

Replay Access: Toll-Free (888) 390-0541

Local (GTA) (416) 764-8677

Passcode 011068 #

Customer sugar deliveries increased by 17.0 per cent from 81,947 MTs for the quarter ended Dec. 31, 2022, to 95,883 MTs for the corresponding 2023 period, primarily due to the increase of deliveries from our facility in Lackawanna that offset decreased deliveries in Mexico (a market where we have now prioritized strategic opportunities over low margin sales) and decreased deliveries of organic sugar (as we have shifted free on board sales at origin for higher margin delivered sales in the U.S.).

Adjusted Gross Profit decreased to $9.5-million for the quarter ended Dec. 31, 2023, from $15.4-million for the corresponding 2022 period. This decrease was driven by lower Adjusted Gross Profit Margin (8.3 per cent compared with 16.3 per cent for the year ended Dec. 31, 2023 and 2022, respectively), driven mainly by very favorable non-refinery sugar deliveries in the U.S. in the last quarter of 2022, as well as the year-over-year cost increases associated with having a full operating quarter for the Lackawanna refinery, which began operations in December 2022. For the same reason, Adjusted EBITDA was $8.3-million for the quarter ended Dec. 31, 2023, compared with $10.4-million for the corresponding 2022 period, a 25.0 per cent decrease. Likewise, EBITDA was $(5.5)-million for the quarter ended Dec. 31, 2023, compared with $18.1-million for the corresponding period in fiscal 2022, a 107.0 per cent decrease driven by the growth of favorably priced physical forward contracts booked in the last quarter of 2022 (for deliveries in 2023), which was not replicated in 2023, in which we saw more gradual growth over the entire year, as well as due to period-end differences in forward commodity contracts' mark-to-market adjustments.

Refined sugar deliveries from our own refineries increased by 77.2 per cent from 19,345 MT in the three months ended Dec. 31, 2022, to 34,287 MT in the corresponding 2023 period, primarily due to our Lackawanna refinery which started operations in December 2022. Adjusted gross profit margins per metric ton on these volumes increased by 54.8 per cent from $117.67 per MT in the three months ended Dec. 31, 2022, to $182.12 per MT in the corresponding 2023 period, primarily due to scaling of our Lackawanna facility in 2023, the first full year of operations, and favorable pricing conditions for refined sugar in some North American geographies, where we have been able to allocate significant volumes in 2023.

For the year ended Dec. 31, 2023, customer deliveries decreased by 8.1 per cent, from 518,557 MTs in 2022 to 476,778 MTs in 2023, primarily due to our exit from low-margin local deliveries in Mexico that are unrelated to origination for our U.S. and Canadian businesses and, to a lesser extent, decreased deliveries of organic sugar, as we decreased large volume free on board ("FOB") sales to focus on more profitable delivered contracts in the U.S. The decrease was offset by an increase in volume from our refineries, in particular our Lackawanna facility which started operations in December 2022.

Adjusted EBITDA was $33.1-million for the year ended Dec. 31, 2023, compared with $22.4-million for the corresponding 2022 period, a 47.5 per cent increase, mainly as a result of higher Adjusted Gross Profit ($49.1-million for the year ended Dec. 31, 2023, compared with $38.3-million for the corresponding 2022 period). This improvement was driven by higher Adjusted Gross Profit Margin (9.9 per cent compared with 8.7 per cent for the year ended Dec. 31, 2022) realized from our strategic focus on higher margin business at our U.S. and Canada refining and wholesale operations. As our refining operations in Lackawanna grow relative to the size of our overall sales book until we achieve full operating capacity, we expect margins to continue improving. Likewise, EBITDA was $54.1-million for the year ended Dec. 31, 2023, compared with $54.5-million for the corresponding period in fiscal 2022, a 0.7 per cent decrease driven mainly by lower unrealized mark-to-market gains on physical sugar contracts, inventory, sugar futures contracts, and foreign exchange positions.

Net income for the year ended Dec. 31, 2023, amounted to $20-million, a decrease of $15.6-million when compared to net income of $35.6-million for the year ended December 2022. This decrease was driven primarily by lower unrealized mark-to-market gains on physical sugar contracts, inventory, sugar futures contracts, and foreign exchange positions, and increases in selling, general and administrative expenses, interest expense, and tax expense, as the company continued to grow in size and scale.

Revenue for the year ended Dec. 31, 2023, increased by 13.1 per cent to $496.8-million from $439.3-million for the year ended Dec. 31, 2022. Higher average sugar prices during the year ended Dec. 31, 2023 (due to market conditions), partially offset a decrease in volumes sold. During the year ended Dec. 31, 2023, the company's volume of sugar sold decreased by 41,779 MTs, or 8.1 per cent, which was driven by lower sales volumes in Mexico, a market where we intend to focus on strategic opportunities, as opposed to low-margin volume sales, and, to a lesser extent, decreased deliveries of organic sugar, as we decreased large volume FOB sales to focus on more profitable delivered contracts in the U.S.

Revenues are anticipated to increase in the 2024 fiscal year as commissioning of the Lackawanna refinery is completed and production and optimization rates move to anticipated operating levels. Sales from our Lackawanna refinery are now estimated at a range between 120,000 MT and 135,000 MT in Fiscal 2024. See "Outlook" below for additional details of the events and circumstances that caused the company to revise this estimate.

During the year ended Dec. 31, 2023, the company's futures and options losses were $0.8-million, compared with a $0.2-million gain for the corresponding 2022 period, a $1-million decrease relating to market losses on our Sugar 11 Contract futures contracts positions, which are used as hedging instruments for our physical positions. For the same periods, tolling revenues declined by $3.9-million (74.9 per cent), primarily as a result of the shutdown of our Atlanta facility in February 2023, which was mostly used to provide services to a third party, while warehousing revenues remained relatively flat.

Cost of sales increased by $59.7-million (16.3 per cent) from $366.8-million for the year ended Dec. 31, 2022, to $426.5-million for the year ended Dec. 31, 2023. The drivers for the increase in cost of sales during the year ended Dec. 31, 2023, compared to the 2022 period included production and processing (a $19.7-million or 58.4 per cent increase), logistics and freight (a $1.4-million or 3.3 per cent increase), labor (a $1.4-million or 24.0 per cent increase), overheads (a $5.5-million or 105.7 per cent increase), and depreciation on plant and equipment (a $1.4-million or 82.8 per cent increase), all of which saw increases relating to our Lackawanna refinery's first full year of operations.

Mark-to-market gains on forward contracts and, to a lesser extent, inventory, drove the $20.8-million gains on unrealized mark-to-market positions for the year ended Dec. 31, 2023 (compared with $33.9-million for the same period in fiscal 2022). Unrealized mark-to-market gains on inventory for the year ended Dec. 31, 2023, was $4.7-million ($0.5-million in 2022). This result was driven by favorable market conditions in the U.S. and Mexico. During the year ended Dec. 31, 2023, the company had net unrealized mark-to-market gains on forward sugar contracts of $26.3-million compared with $32.5-million in 2022. The mark-to-market gains on commodity forward contracts were primarily driven by higher margins on booked forward contracts as of Dec. 31, 2023, while 2022 results were driven by both margins and volume, due to the startup of our Lackawanna facility.

During the year ended Dec. 31, 2023, the company had unrealized losses of $9.1-million and $1.1-million on sugar futures contracts and foreign currency forwards, respectively (2022 - $0.9-million, and $0-million, respectively). These losses relate to hedging of Sugar 11 Contract and Mexican Peso positions on our inventory, forward contracts, and accounts receivable.

The company's selling, general and administrative expenses amounted to $23.5-million for the year ended Dec. 31, 2023, an increase of $1.1-million (4.9 per cent) when compared to expenses of $22.4-million for the year ended Dec. 31, 2022. As our operations continue to grow and scale, we expect selling, general and administrative expenses as a percentage of revenue to continue to decrease over time.

Administrative expenses, which include staff payroll, benefits and pension costs, professional fees, insurance, bank service charges and other office expenses were $18.5-million for the year ended Dec. 31, 2023, an increase of $4.1-million (28.5 per cent) from $14.4-million for the year ended Dec. 31, 2022. The most significant driver of the increase in these expenses is additional personnel expenses at our newly commissioned refinery in Lackawanna, additional sales staff to support our growing sales volumes, and professional fees for legal and accounting as the company increases the overall size of its operations and completed its initial public offering in October 2023.

During the year ended Dec. 31, 2023, the company saw an increase in its selling and distribution expenses of $0.3-million, or 59.2 per cent, from $0.5-million incurred during the year ended Dec. 31, 2022, to $0.9-million in the year ended Dec. 31, 2023. The marketing campaigns were consistent year over year and the main reason for this increase was related to commissions paid to third parties for sugar origination.

During the year ended Dec. 31, 2023, other operating expenses, including travel, business taxes and licenses, bad debts, outside labor and IT expenses, amounted to $2.6-million, a decrease of $1.4-million (34.8 per cent) when compared to expenses of $4-million for the year ended Dec. 31, 2022. This decrease was mainly driven by the reversal of accrued expenses relating to the disposition of our Atlanta facility, as well as lower write-offs of accounts receivable and bad debt provision.

During the year ended Dec. 31, 2023, a net equity-based compensation recovery of $0.5-million was realized on the forfeiture of unvested incentive units awarded to a former employee who left the business.

During the year ended Dec. 31, 2023, the company incurred interest expense of $22.9-million, an increase of $12.8-million, or 128.4 per cent, over the year ended Dec. 31, 2022. The increase is a combination of increases to the company's overall borrowings, primarily to fund inventory and accounts receivable, but also an overall increase in the SOFR rate by 108 basis points in the U.S. from Dec. 31, 2022, to Dec. 31, 2023, which affects interest incurred on Sucro's short-term financial liabilities.

The company's current and deferred income tax expense increased by $0.2-million from $6.2-million for the year ended Dec. 31, 2022, to $6.4-million for the year ended Dec. 31, 2023. The company recognized $1.1-million and $5.3-million in current and deferred income tax expense, respectively, during the year ended Dec. 31, 2023, owing to deductions associated with unrealized gains on inventory and forward, futures and foreign exchange contracts, as well as with the difference between accounting and tax depreciation rates of property, plant, and equipment.

Outlook

In November 2023, the company updated its full-year 2023 earnings estimates, which were originally provided in the company's final prospectus dated October 19, 2023. Adjusted EBITDA was revised to between $30-million and $32-million, while EBITDA was re-affirmed at between $63-million and $70-million. As noted above, the reported Adjusted EBITDA for 2023 was $33.1-million, above the revised estimate, and the reported 2023 EBITDA was $60-million, which is below our estimate.

The company's final prospectus also contained full-year 2024 EBITDA and Adjusted EBITDA estimates of between $73-million and $81-million and $49-million and $51-million, respectively. Production estimates for the company's refinery operations in Hamilton, Ontario and Lackawanna, New York were also provided in the company's final prospectus, with full-year 2024 production from Hamilton estimated at 130,000 MT, and Lackawanna production projected at 132,000 MT. We are revising our 2024 production estimate for our Hamilton facilities to between 105,000 MT and 115,000 MT, and for Lackawanna to a range of 120,000 to 135,000 MT. However, management is not revising 2024 EBITDA and Adjusted EBITDA estimates at this time.

As estimates for 2024 EBITDA and Adjusted EBITDA had been originally provided in the company's prospectus, we intend to update such guidance through the end of the 2024 reporting period. Due to the variable nature of Sucro's trading operations and the developmental stage of the company's refining operations, Management intends to discontinue providing earnings guidance going forward. Given the growing importance of the company's refinery operations and its expected expansion as a proportion of its overall business activities, we intend to focus our forward guidance on delivery volumes from our refineries, along with information on Adjusted Gross Margin per metric ton of sugar delivered from our refineries, capital expenditures, and the debt and equity composition of the financing of any capital projects. We believe that these measures better align our targets and guidance with Management's vision and long-term goals for Sucro.

Notwithstanding the above, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

Management has recently reviewed the company's commitments and opportunities for the application of its capital and has determined not to pay a dividend on the company's shares at this time in order to invest in more accretive opportunities, including funding planned capital expenditures. Any determination to pay dividends in the future will be at the discretion of the Board and will depend on many factors, including, among others, the company's financial condition, current and anticipated cash requirements, contractual restrictions and financing agreement covenants, solvency tests imposed by applicable corporate law and other factors that the Board may deem relevant.

Longer-term Outlook for our Refinery Operations

Sucro's strategic plan is to grow its sugar sourcing, refining and distribution infrastructure, with an emphasis on low-capital-cost refining assets, and actively and efficiently manage the entire supply-chain cost of sugar, from the point of origin to the delivery to end-use customers in North America. Based on the company's announced plans for expansion of its refinery capabilities in the United States and Canada, and subject to several company and market factors that may impact its announced plans for expansion, Sucro currently forecasts material growth in its refinery production volumes over the next several years of operation. As the volume of sugar refined within facilities owned and operated by Sucro increases, refined volumes are expected to comprise a majority of the sugar deliveries made to Sucro's sugar customers located throughout North America. Included below is a summary of the refinery production volumes to date, and estimated ranges of aggregate production based on the timing of expected production from each of our announced facilities.

Awards of Stock Options and Restricted Share Units

The company announced today that, subject to regulatory approval, it has awarded stock options and restricted share units ("RSUs") pursuant to its Omnibus Equity Incentive Plan. The company has granted stock options to acquire an aggregate of 342,846 Subordinate Voting Shares to employees, consultants and officers of Sucro subsidiaries, with each option exercisable until Dec. 31, 2028 to acquire one Subordinate Voting Shares at a price of C$11.00 per share and vesting over a 30-month period from the date of grant. Subject to regulatory approval, the company has also awarded 29,344 RSUs to non-executive directors and a consultant under the company's Omnibus Equity Incentive Plan. The RSUs awarded will vest after a one-year period.

Annual Meeting

The company has called an annual and special meeting of shareholders to be held in Toronto, Canada on Thursday, May 30, 2024.

About Sucro

Sucro is a growth-oriented sugar company that operates throughout the Americas, with a primary focus on serving the North American sugar market. The company operates a highly integrated and interconnected sugar supply business, utilizing the entire sugar supply chain to service its customers. Sucro's integrated supply chain includes sourcing raw and refined sugar from countries throughout Latin America, and refined sugar from its own refineries, and delivering to customers in North America and the Caribbean. Since its inception in 2014, Sucro has achieved significant growth by creating value for customers through continuous process innovation and supply chain re-engineering. Sucro has established a broad production, sales and sourcing network throughout North America with two cane sugar refineries and an additional value-added processing facility. The company has offices in Miami, Mexico City, Sao Paulo, and Port of Spain. For more information, visit sucro.us and follow us on LinkedIn .

We seek Safe Harbor.