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Chemtrade Logistics Income Fund
Symbol CHE
Shares Issued 92,596,006
Close 2020-01-27 C$ 10.85
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Chemtrade estimates 2020 adjusted EBITDA of $300M

2020-01-27 18:26 ET - News Release

Mr. Mark Davis reports

CHEMTRADE LOGISTICS INCOME FUND ISSUES 2020 GUIDANCE

Chemtrade Logistics Income Fund has issued 2020 guidance.

2020 guidance

Chemtrade expects its 2020 adjusted EBITDA (net earnings before any deduction for net finance costs, taxes, depreciation and amortization excluding net earnings before any deduction for net finance costs, taxes, depreciation and amortization) (1) to range between $300-million and $350-million.

Chemtrade's guidance is based on numerous assumptions. Certain key assumptions that underpin the guidance are as follows:

  • None of the principal manufacturing facilities (as set out in Chemtrade's annual information form) incur significant unplanned downtime;
  • Key assumptions in the electrochemicals (EC) segment are as follows:
    • North American metric electrochemical unit (MECU) production volume of approximately 190,000 tonnes;
    • A 2020 average caustic soda price based on the 2020 average IHS NE Asia caustic price index being $15 (U.S.) per tonne lower than the 2019 average IHS NE Asia caustic price index;
    • North American production volume of sodium chlorate of approximately 420,000 tonnes;
  • A foreign exchange rate of 77 U.S. cents per $1 (Canadian);
  • Chemtrade also expects:
    • Maintenance capital expenditures to range between $80-million and $90-million;
    • Lease payments to range between $55-million and $60-million;
    • Cash interest (excluding the impact of international financial reporting standard 16) to range between $70-million and $75-million;
    • Cash taxes to range between $5-million and $10-million.

Two thousand twenty's adjusted EBITDA range is below that of 2019 due to the following reasons:

  1. A higher number of maintenance turnarounds in 2020 relative to 2019, particularly the biennial turnaround at the North Vancouver chlor-alkali facility and a major turnaround at a key refinery customer that takes place once every five years;
  2. The assumption for spot northeast Asia caustic index is that the 2020 average will be below the 2019 average; this index value is a key variable in establishing Chemtrade's selling price for caustic soda;
  3. An assumption that there will not be a recovery in hydrochloric acid (HCl) demand from the higher netback fracking industry; the amount of realized netback revenue is typically higher from the fracking industry than from the industrial market; however, the industrial market is less cyclical; to increase stability, Chemtrade added more industrial customers partway through 2019; thus, the 2020 guidance includes a full year of the lower realized netback revenue as compared with 2019.

Commenting on the guidance for 2020, Mark Davis, president and chief executive officer of Chemtrade, said: "Generally, our businesses are performing well, but 2020 will be affected by a biennial turnaround at our North Vancouver chlor-alkali plant and by a once-every-five-year turnaround by a key refinery customer. Also, while we are assuming near-term caustic soda weakness, we continue to believe that the long-term fundamentals for caustic soda, particularly in NE Asia, remain favourable."

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, chlor-alkali products, liquid sulphur dioxide, potassium chloride and zinc oxide. Additionally, Chemtrade provides industrial services such as processing byproducts and waste streams.

(1) A non-international financial reporting standard measure.

We seek Safe Harbor.

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