The Motley Fool

TFSA Picks: 1 Value Stock in a Boring and Regulated Industry

Image source: Getty Images

Rogers Sugar (TSX:RSI) is the largest refined sugar producer in Canada and the largest maple syrup bottler in the world. The company aspires to become a leading North American natural sweetener supplier by executing on three core strategies, namely, operational excellence, market access and acquisition.

Rogers encompasses two reportable segments, the sugar segment and the maple product segment. Rogers’ head office is in Vancouver, British Columbia and the company’s administrative office is located in Montréal, Québec. Each of the company’s manufacturing operations incorporates occupational health and safety components in a consolidated annual plan which gets reviewed weekly by senior management.

Strategically located facilities

The strategic location of Rogers’ facilities confers operating flexibility and the ability to service all customers across the country efficiently and on a timely basis. All of Rogers’ operations supply high quality white sugar as well as a broad portfolio of specialty products which are differentiated by colour, granulation, and raw material source. Sales are focused in three specific market segments, which include industrial, consumer, and liquid products.

The domestic market represents more than 90% of the company’s total volume. In fiscal 2020, the domestic refined sugar market continued to show modest growth and increased by approximately 2% versus last fiscal year. The industrial granulated segment is the largest segment accounting for approximately 60% of all shipments.

The 10 Best Stocks to Buy This Month

Click here to learn more!

Diverse product segments

The industrial segment is composed of a broad range of food processing companies that serve both the Canadian and American markets. In the consumer market segment, a wide variety of products are offered under Rogers brand name. This segment has remained fairly stable during the past several years although volume sold within this market in fiscal 2020 by Canadian refiners had a slight decrease of approximately 1% year over year.

The liquid market segment is comprised of core users whose process or products require liquid sucrose and another customer group that can substitute liquid sucrose with high fructose corn syrup (HFCS). The purchasing patterns of substitutable users are largely influenced by the absolute price spread between HFCS and liquid sugar. Increasingly, other considerations, such as ingredient labeling could also bear some influence on the purchasing decision.

The liquid segment grew by approximately 11% during the current fiscal year as a result of an increase in overall demand and conversion from HFCS to sucrose that was beneficial for the Canadian refiners.

Reduced impact of sugar price volatility

Since 2017, the global sugar market has been in a surplus situation driven by increased output in India and Thailand while world consumption remained flat. The price of refined sugar deliveries from the Montréal and Vancouver raw cane facilities is directly linked to the price of the world raw sugar market traded on the Intercontinental Exchange.

All sugar transactions are economically hedged, thus eliminating the impact of volatility in world raw sugar prices. This applies to all refined sugar sales made by these plants. Liquid sales to HFCS substitutable customers are normally priced against competing HFCS prices and are historically the lowest margin sales for the company.

Overall, Rogers is an inexpensive stock in a profitable and regulated industry.

If you enjoyed this article, click the link below for top market insight delivered directly to your inbox!

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.

Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.