11:53:47 EDT Tue 07 Jul 2020
Enter Symbol
or Name
USA
CA



Login ID:
Password:
Save
Chemtrade Logistics Income Fund
Symbol CHE
Shares Issued 92,596,006
Close 2019-11-06 C$ 10.27
Recent Sedar Documents

Chemtrade Logistics loses $163,000 in Q3

2019-11-06 17:22 ET - News Release

Mr. Mark Davis reports

CHEMTRADE LOGISTICS INCOME FUND REPORTS THIRD QUARTER 2019 RESULTS

Chemtrade Logistics Income Fund has released its results for the three and nine months ended Sept. 30, 2019. The financial statements and MD&A (management's discussion and analysis) will be available on Chemtrade's website and on SEDAR.

Chemtrade's president and chief executive officer, Mark Davis, said: "Our results for the third quarter reflect a continuation of the operating conditions we experienced in the second quarter. In general, all our plants operated well. We are continuing to see the benefits of the initiatives we took last year to strengthen our operations and adjust to changing market conditions. This is most evident in our SPPC [sulphur products and performance chemicals]segment that continues to benefit from changes we made to our operations and from strong selling prices for sulphuric acid. In our WSSC [water solutions and specialty chemicals] segment, water treatment products continue to improve margins as pricing in contract renewals more than offset raw material cost increases. Our EC [electrochemicals] segment continued to be negatively affected by low caustic soda and HCl [hydrochloric acid] prices."

The 2019 results include the application of IFRS (international financial reporting standards) 16 at Jan. 1, 2019. In relation to leases that were previously classified as operating leases, Chemtrade now recognizes depreciation and interest expense, instead of operating lease expense. This results in an increase in EBITDA (earnings before interest, taxes, depreciation and amortization), but it does not affect distributable cash after maintenance capital expenditures. Also, comparative information is not restated.

During the second quarter of 2018, a litigation reserve of $65.0-million was established to cover the costs of resolving the civil actions commenced against General Chemical entities related to the antitrust matter inherited with Chemtrade's 2014 acquisition of General Chemical. During the third quarter of 2018, this reserve was increased by $35.0-million, and during the first quarter of 2019 it was further increased by $40.0-million. The litigation reserve is reflected in both EBITDA and distributable cash after maintenance capital expenditures for all the affected periods.

Revenue for the third quarter of 2019 was $395.7-million, which was $22.5-million lower than the third quarter of 2018. The decrease was primarily due to lower prices for caustic soda and HCl in the EC segment that more than offset higher sales of water products in the WSSC segment.

Net loss for the third quarter of 2019 was $200,000, compared with net earnings of $9.2-million in 2018. Net earnings for the third quarter of 2019 were lower than the third quarter of 2018, as there was a writedown of assets during the quarter, whereas there was a gain on sale of assets in the third quarter of 2018. Additionally, relative to the third quarter of 2018, during the third quarter of 2019 there were higher net finance costs, partially offset by lower selling and administrative expenses.

Adjusted EBITDA (1) for the third quarter of 2019 was $90.0-million, compared with $88.8-million in the third quarter of 2018, excluding the litigation reserve. The increase in adjusted EBITDA was due to better results in the SPPC segment and due to the adoption of IFRS 16, which had a positive impact of $14.0-million. However, this was more than offset by lower results in the EC segment.

Cash flows from operating activities were $80.5-million, compared with $102.6-million during the third quarter of 2018. Adjusted cash flow from operating activities (1) was $56.8-million, compared with $36.2-million generated during the third quarter of 2018.

Distributable cash after maintenance capital expenditures (1) for the third quarter of 2019 was $37.1-million or 40 cents per unit, compared with $54.0-million or 58 cents per unit in 2018 (excluding the litigation reserve).

For the nine months ended Sept. 30, 2019, excluding the litigation reserve, distributable cash after maintenance capital expenditures was $120.6-million or $1.30 per unit, compared with $131.8-million or $1.42 per unit in 2018, excluding the litigation reserve and financing costs. Revenue for the nine months was $1.2-billion (2018: $1.2-billion). Excluding the litigation reserve, adjusted EBITDA was $265.3-million (2018: $231.2-million). Adjusted cash flows from operating activities were $126.5-million (2018: $70.6-million).

In the third quarter of 2019, SPPC generated revenue of $127.8-million, compared with $129.6-million in 2018. Adjusted EBITDA for the quarter was $43.7-million, which was $21.5-million higher than 2018. Although sales volumes were generally lower than last year, higher selling prices for merchant sulphuric acid, combined with better operations, resulted in significantly higher margins. While IFRS 16 contributed $5.3-million to the improvement, most of the increased EBITDA came from improvements in the business itself.

The WSSC segment reported third quarter revenue of $122.4-million, compared with $116.6-million in 2018. Adjusted EBITDA was $24.3-million, including the positive IFRS 16 impact of $1.1-million, compared with $24.1-million generated in 2018, which included a $2.2-million insurance recovery relating to an issue that occurred in 2016. Higher selling prices for water products more than compensated for higher raw material costs; however, in total, the segment generated lower EBITDA during the third quarter of 2019 compared with the third quarter of 2018, due to continuing market weakness for some specialty chemicals.

The EC segment reported revenue of $145.4-million for the third quarter of 2019, which was $26.6-million lower than the same period of 2018. Sales volumes of caustic soda were essentially level with last year; however, continued weakness in selling prices of HCl and caustic soda resulted in lower revenue. Chlorate volumes were lower than last year due to reduced demand from pulp mills. Adjusted EBITDA for the third quarter of 2019, including the $7.3-million benefit from IFRS 16, was $14.3-million lower than the same period of 2018. This was primarily due to lower selling prices for caustic soda and HCl.

Corporate costs during the third quarter of 2019 were $20.8-million, compared with $14.7-million in the third quarter of 2018, excluding the litigation reserve in 2018. The increase is due primarily to higher legal costs in 2019 and higher compensation accruals.

Mr. Davis said: "Our SPPC segment and water products continued to perform well in the third quarter. The biggest impediment to better financial results was caustic soda prices. Although current prices are disappointing, the long-term outlook remains positive."

Despite the near-term weakness in chloralkali products, Chemtrade is maintaining its adjusted EBITDA guidance for 2019, although it expects that results will be at the low end of the range. Further details of this, including updated assumptions, are contained in Chemtrade's third quarter MD&A.

Distributions

Distributions declared in the third quarter totalled 30 cents per unit, comprising monthly distributions of 10 cents per unit.

1. Non-IFRS measures -- EBITDA and adjusted EBITDA

Management defines EBITDA as net earnings before any deduction for net finance costs, taxes, depreciation and amortization. Adjusted EBITDA also excludes other non-cash charges such as gains and losses on the disposal and writedown of assets, as well as unrealized foreign exchange gains and losses. EBITDA and adjusted EBITDA are metrics used by many investors and analysts to compare organizations on the basis of ability to generate cash from operations. Management considers adjusted EBITDA (as defined) to be an indirect measure of operating cash flow, which is a significant indicator of the success of any business. Adjusted EBITDA is not intended to be representative of cash flow from operations or results of operations determined in accordance with IFRS or cash available for distribution.

EBITDA and adjusted EBITDA are not recognized measures under IFRS. Chemtrade's method of calculating EBITDA and adjusted EBITDA may differ from methods used by other income trusts or companies, and accordingly may not be comparable with similar measures presented by other organizations.

A reconciliation of net earnings to EBITDA and adjusted EBITDA is provided in the accompanying table.

                                                 Three months ended Sept. 30,     Nine months ended Sept. 30,
(in thousands of dollars)                                 2019          2018            2019            2018

Net (loss) earnings                                    $  (163)    $   9,194      $  (87,057)     $  (34,332)
Add
Depreciation and amortization                           65,380        53,596         197,036         160,667
Net finance costs                                       22,675        13,092          75,997          48,863
Income tax recovery                                     (8,825)      (10,627)        (28,701)        (38,032)
EBITDA                                                  79,067        65,255         157,275         137,166
Add
Impairment of goodwill                                       -             -          65,600               -
Loss (gain) on disposal and writedown of assets          9,917        (8,413)         10,522          (5,070)
Unrealized foreign exchange loss (gain)                  1,046        (3,064)         (8,127)           (870)
Adjusted EBITDA                                         90,030        53,778         225,270         131,226

Segmented information

                                                    SPPC 
                                                                                                       
                                                 Three months ended Sept. 30,     Nine months ended Sept. 30,
(in thousands of dollars)                                 2019          2018            2019            2018        
                                                                                                              
Revenue                                              $ 127,798     $ 129,572       $ 385,318       $ 380,683    
Gross profit                                            11,086        15,006          45,894          27,018       
Adjusted EBITDA                                         43,689        22,237         126,502          69,164       
(Loss) gain on disposal and writedown of assets         (9,221)        8,413          (9,973)          5,070 
EBITDA                                                  34,468        30,650         116,529        $ 74,234     


                                                    WSSC
                                                                                                  
                                                 Three months ended Sept. 30,     Nine months ended Sept. 30,
(in thousands of dollars)                                 2019          2018            2019            2018
                                                                                                      
Revenue                                              $ 122,432     $ 116,601       $ 343,330       $ 327,869   
Gross profit                                            12,836        11,402         (34,457)         33,082
Adjusted EBITDA                                         24,335        24,114          63,261          65,371
Impairment of goodwill                                       -             -         (65,600)              -
(Loss) on disposal and writedown of assets              (1,661)            -          (1,657)              -
EBITDA                                                  22,674        24,114          (3,996)         65,371    


                                                     EC                                             
                                                                                                  
                                                 Three months ended Sept. 30,     Nine months ended Sept. 30,
                                                          2019          2018            2019            2018
North American sales volumes                                                                                
Sodium chlorate sales volume (000s MT)                      98           103             294             305
Chloralkali sales volume (000s MECU)                        49            48             140             129
Revenue                                              $ 145,423     $ 172,021       $ 448,992       $ 496,395
Gross profit                                            17,495        37,361          62,133          88,051
Adjusted EBITDA                                         42,804        57,121         137,298         147,246
(Loss) gain on disposal and writedown of assets           (178)            -             873               -
EBITDA                                                  42,626        57,121         138,171         147,246

Further information can be found in the disclosure documents filed by Chemtrade with the securities regulatory authorities, available on SEDAR.

A conference call to review the third quarter 2019 results will be webcast live on Thursday, Nov. 7, 2019, at 10 a.m. ET.

About Chemtrade Logistics Income Fund

Chemtrade operates a diversified business providing industrial chemicals and services to customers in North America and around the world. Chemtrade is one of North America's largest suppliers of sulphuric acid, spent acid processing services, inorganic coagulants for water treatment, sodium chlorate, sodium nitrite, sodium hydrosulphite and phosphorus pentasulphide. Chemtrade is a leading regional supplier of sulphur, chloralkali products, liquid sulphur dioxide, potassium chloride and zinc oxide. Additionally, Chemtrade provides industrial services such as processing byproducts and waste streams.

We seek Safe Harbor.

© 2020 Canjex Publishing Ltd. All rights reserved.