Good morning everyone, and welcome to Sucro Limited's fourth quarter and full year 2025 earnings conference call. Today's call is being recorded. Joining us are Jonathan Taylor, Chief Executive Officer, and Stefano D'Aniello, Chief Financial Officer. At this time, I will turn the call over to Jonathan Taylor. Jonathan, please go ahead.
Thanks, operator, and good morning, everyone. Before we begin, I'd like to remind listeners that management's comments today may include forward-looking statements. Please refer to our filings for a full discussion of the associated risk and uncertainties. 2025 was a challenging but ultimately very productive year for Sucro. Across the business, we faced meaningful margin pressure driven by lower sugar prices, a volatile tariff environment in the U.S., and structural changes such as the elimination of the U.S. specialty sugar quota. These dynamics impacted physical supply chains and pricing across both conventional and organic markets, and in many cases limited our ability to fully pass through costs. At the same time, the year clearly demonstrated the resilience, flexibility and strengths of our business model.
We increased volumes significantly across our network, particularly through wholesale trading and origin flows, and continue to optimize our integrated platform, balancing, refining, trading and logistics to capture opportunities wherever they emerge. Operationally, we also made substantial progress. We reduced SG&A and interest expense despite higher activity levels. We improved working capital efficiency and reduced balance sheet intensity. We continued to execute on two major refinery builds. All of this was achieved while remaining focused on free cash flow generation and disciplined capital deployment. In short, 2025 was a transition year, where we absorbed external headwinds while strengthening the underlying business and building the capacity that will drive our next phase of growth. With that, I'll hand it over to Stefano to walk through the financials. Stefano?
Thanks, Jonathan, and good morning, everyone. Let me start with a brief overview of Q4 and full year performance. Q4 results continued to reflect the broader trends we saw throughout 2025. Strong volume performance, particularly in wholesale and origin trading, and margin compression across the NAFTA region, driven by the unique dynamics of each market. For the full year, volumes increased materially up over 29% year-over-year to 839,000 metric tons, driven by higher wholesale activity in the U.S., and increased raw sugar flows at origin. However, this was offset by 21% lower average pricing year-over-year and tighter margins of $59 per metric ton in 2025 compared to $87 per metric ton in 2024. While margin compression was driven by several market-related factors, the company incurred almost $9 million of tariff-related costs that were not fully passed on to customers.
Adjusted gross profit declined year-over-year, reflecting lower conventional and organic sugar margins in the U.S., lower profitability in Mexico, and the consumption of higher cost inventory in certain segments. That said, we were able to partially offset this through disciplined cost management, resulting in only a modest decline in adjusted EBITDA levels, which was $31 million in 2025 compared to $34 million in 2024. Hence, for the full year, adjusted EBITDA remained resilient, supported by reductions in SG&A, which include payroll and professional fees of $2 million. As a percentage of sales and on a volume basis, SG&A continued to decline year-over-year. Interest expense declined by approximately $1.4 million, driven by a nearly 20% reduction in working capital year-over-year. This is an impressive result considering the 2% increase in annual revenue and the 29% increase in volume.
Our existing Lackawanna and Hamilton refineries achieved consistent output and margins year-over-year. On an unadjusted basis, EBITDA of $65 million for 2025 compared to $62 million in 2024, was supported by strong unrealized mark-to-market gains in forward contracts, reflecting favorable forward contract bookings, especially in volumes and margins of organic sugar deliveries into 2026 and 2027. Likewise, net income for 2025 was $41 million compared to net income of $24 million in 2024, supported by mark-to-market gains, as mentioned earlier, and a reversal of deferred tax balances relating to unrealized positions and property, plant, and equipment timing differences. From a cash and balance sheet perspective, 2025 was a very strong year. Cash flow from operations increased by approximately $48 million year-over-year, driven by a significant reduction in working capital. Working capital decreased by roughly 20% despite higher volumes.
Our cash conversion cycle improved materially, reflecting tighter inventory and receivables management. Free cash flow was $6.4 million in 2025 compared to $10 million in 2024, primarily due to lower adjusted gross profit, but remained positive and within our internal forecast. Adjusted leverage at year-end was approximately 3.8 times, and our ratio of total liabilities to tangible net worth was 1.42 times, well within financial covenant requirements. The company's liquidity position remains strong with substantial unused credit capacity, both on a committed and uncommitted basis. Our capital structure remains fully aligned with our growth and CapEx plans. In CapEx, 2025 reflects the peak construction activity, continued investment in Hamilton and University Park, both of which are now operational, and early-stage development of the Belize project, which will become operational in the second half of 2026. All financing remains secured, and we maintain strong visibility over remaining project costs.
Overall, 2025 results reflect a disciplined response to a difficult margin environment with strong execution on cost, liquidity, and capital allocation. More importantly, 2025 was a year that culminated in a successful build-out of significant additional capacity that will transform the company going forward, leaving Sucro well-positioned and confident about our business outlook for the future. With that, I'll pass it back to Jonathan.
Thanks, Stefano. Let me start with our project updates. Both of our major refinery projects are now operational and represent a key part of our future growth. Hamilton has been open since the beginning of the year and is completing its initial startup commissioning, with steadily increasing commercial activity expected to follow throughout the remainder of the year. University Park just opened last month and is starting to produce sugar and ramp up production during its initial commissioning. These projects are being delivered very close to budget and have been brought to market on their original timeline expectations, which is a significant achievement given the scale and complexity involved. We also made important progress on the Caribbean Sugar Refinery project in Belize, which represents our first expansion outside North America and a compelling long-term opportunity.
From a market perspective, 2025 was marked by margin pressure in the markets in which we operate, tariff impact in the U.S., and structural changes such as the elimination of the U.S. specialty sugar quota. While these factors created short-term pressure, we believe their long-term impact is manageable and, in some cases, positive for Sucro, particularly given our positioning in specialty and organic refining. Looking ahead, we see 2026 as an inflection point for the business. We expect to benefit from significantly increased refining capacity, leading to volume growth in refined sugar shipments, an improved and optimized cost structure, greater specialty product capacity, and capabilities delivering higher margins, a continually expanding customer base, and a platform that has already proven its ability to scale and adapt. As a direct result of these improvements, we expect to see meaningful improvement in profitability and returns going forward.
Before we close, I want to thank our entire team across the organization. 2025 required discipline, adaptability, and execution, and our people delivered on all three. With that, we'll conclude today's remarks. There will be no Q&A session. Please reach out to our IR team for any follow-up questions. Operator, you may now end the conference.
Thank you, ladies and gentlemen. That concludes our conference call for today. Thank you all for joining. You may now disconnect your lines.