Chemtrade Logistics Income Fund · TSX:CHE.UN
Chemtrade Logistics Income Fund — Investor Presentation (August 2022)
41 slides from Chemtrade Logistics Income Fund's investor presentation, August 2022
Slide 1: 2022 Investor Presentation | August 2022
2022 INVESTOR PRESENTATION | August 2022 1
Slide 2: Caution Regarding Forward-Looking Statements
CAUTION Certain statements contained in this presentation constitute forward-looking statements within the meaning of certain securities laws, including the Securities Act (Ontario). Forward- REGARDING looking statements can be generally identified by the use of words such as “anticipate”, “continue
Slide 3: Chemtrade Business Overview
Chemtrade Business Overview ▪ Chemtrade operates a diversified business providing industrial chemicals and services to customers in North America and around the world ▪ Significant regional market share across products ▪ Defensive product portfolio and business model, focused on size, scale and dive
Slide 4: Chemtrade Financial Overview
Chemtrade Financial Overview CHE.UN Unit Price - Last Twelve Months Unit Price (1) $8.65 $9.50 $9.00 Market Capitalization (1) (2) $994.4 million $8.50 $8.00 $7.50 Enterprise Value (1) (2) $2.0 billion $7.00 $6.50 $6.00 Net Debt / Adjusted EBITDA (3) 3.2x Volume 2.0M 1.5M Distribution / Yield 1.0M $
Slide 5: Chemtrade Investment Highlights
Chemtrade Investment Highlights ▪ Extensive product portfolio offers diversified exposure to industrial and consumer end- Size, Scale and markets Diversity of Earnings ▪ Exposure to strong chlor-alkali backdrop and robust industrial activity ▪ Benefitting from global supply dislocations caused by ge
Slide 6: Chemtrade Company History
Chemtrade Company History December 2002 August 2003 August 2005 July 2001 Acquired Peak Chemicals Acquired SHS Operations Acquired Pulp Chemicals IPO on TSX (Expanded Sulphuric Acid business; (Sodium Hydrosulphite) (Sodium Chlorate; Crude Tall Oil) diversified end markets) (Spun out of Marsulex) US$
Slide 7: Strategic Blueprint for Success
Chemtrade Strategic Blueprint for Success Business Model Size, scale, and diversity of earnings with cyclical chlor-alkali exposure Financial Prudence Growth Maintain financial Organic growth and flexibility with opportunistic tuck- sound capital in M&A management Operational Excellence Continuous i
Slide 8: Chemtrade Operating Segments
Chemtrade Operating Segments Sulphur and Water Chemicals (SWC) LTM Revenue ▪ Manufactures and markets sulphur-based products, water treatment products, and specialty chemicals. ▪ One of North America’s largest suppliers of industrial sulphuric acid, including 40% Regen acid for the petroleum industr
Slide 9: SWC Segment Key Products
SWC Segment Key Products Key Products Primary End-Uses Competitive Advantages Key Competitors • Largest facilities are closely connected to Regen Ecoservices; Veolia North America; PVS Chemical Gasoline production customers (connected via pipeline at most sulphuric acid Solutions Inc. facilities) •
Slide 10: SWC Segment Outlook
SWC Segment Outlook Sulphuric acid ▪ Regen acid used in gasoline alkylate production, with demand tied to refinery utilization rates – Demand has rebounded with more normalized mobility of individuals (U.S. driving miles have returned to 2019 levels). ▪ Ultrapure acid demand from semiconductor indus
Slide 11: EC Segment Key Products
EC Segment Key Products Key Products Primary End-Uses Competitive Advantages Key Competitors Pulp & paper; soaps and detergents; aluminum; oil & gas exploration and Caustic soda refining; lithium-ion battery production; • North America: Access to low-cost hydroelectric • North America: Univar; ERCO
Slide 12: EC Segment Caustic Soda Outlook
EC Segment Caustic Soda Outlook Caustic Soda ▪ Prices remain very strong, supported by demand for aluminum and supply dislocations stemming from geopolitical conflicts, but below recent highs. ▪ NE Asia July price US$585/DMT. ▪ Revised 2022 guidance assumes US$640/DMT. ▪ Long-term outlook remains st
Slide 13: EC Segment Chlorine and HCl Outlook
EC Segment Chlorine and HCl Outlook Chlorine ▪ Demand and pricing benefitting from tight industry supply and recovery in industrial and construction Long Term Market Demand end-markets (PVC; bleach products). 2018: Oil WTI: $65/bbl ▪ Prices expected to remain elevated through the US & Can Rigs: 1,20
Slide 14: EC Segment Sodium Chlorate Outlook
EC Segment Sodium Chlorate Outlook Sodium Chlorate ▪ Have seen a modest pick-up in volumes, but overall market demand remains subdued given ongoing softness in demand for office paper. ▪ Industry operating rates expected to improve, owing to: 1) Sodium chlorate capacity rationalizations taking place
Slide 15: Organic Growth Projects: Ultrapure Acid
Organic Growth Projects Ultrapure Acid ▪ Demand expected to increase by 2-3x over next 5 years, given semiconductor industry production capacity expansion taking place in North America. Global Semiconductor Market ▪ Chemtrade is the leading North American producer of ultrapure acid to the semiconduc
Slide 16: Organic Growth Projects: Ultrapure Acid
Organic Growth Projects Ultrapure Acid Joint Arrangement - KPCT Advanced Chemicals LLC ▪ Joint Arrangement formed with privately held Kanto Group for the greenfield construction of a high purity sulphuric acid plant, with Chemtrade owning 49% of the arrangement. ▪ The Joint Arrangement will build th
Slide 17: Organic Growth Projects: Hydrogen
Organic Growth Projects Hydrogen ▪ Hydrogen expected to become a more significant energy source in a low carbon future. ▪ “Green hydrogen” already produced by Chemtrade through sodium chlorate and chlor-alkali manufacturing processes, using hydro-electric power. ▪ Developing projects at Prince Georg
Slide 18: Organic Growth Projects: Water Chemicals
Organic Growth Projects Water Chemicals ▪ Chemtrade is one of North America’s largest suppliers of inorganic coagulents for water treatment. Water Coagulant Market Demand Growth ▪ Increasing regulations and population growth Municipal Drinking Water: 1-2% pa support heightened demand for coagulents
Slide 19: Operational Excellence: Productivity and Reliability
Operational Excellence Productivity and Reliability ▪ Launched both Productivity and Reliability initiatives in 2020 ▪ Targeting to achieve ~$10 M in savings each year, which will help to offset annual inflation ▪ Black and Green Belts leading projects using Lean Six Sigma Tools ▪ Implemented real-t
Slide 20: Operational Excellence: ESG Approach
Operational Excellence ESG Approach ESG approach and disclosure aligned to the four pillars of the Task Force on Climate Related Financial Disclosures (TCFD): ▪ Governance (Board and Management) ▪ Strategy ▪ Risk Management ▪ Metrics and Targets We reviewed the Sustainability Accounting Standards Bo
Slide 21: Key ESG Targets for 2022 and Beyond
Operational Excellence Key ESG Targets for 2022 and Beyond ENVIRONMENTAL SOCIAL GOVERNANCE GHG and other air emissions Workforce Health and Safety Governance of Environmental and Social Issues • Reduce or offset 2021 baseline direct GHG • Achieve employee occupational injury/illness • Demonstrate ES
Slide 22: Financial Prudence: Capital Structure and Capital Allocation
Financial Prudence Capital Structure and Capital Allocation Equity (CHE.UN) ▪ 115.0 million units outstanding, pro-forma $86.5 million bought deal equity offering of 10.0 Capital Allocation Priorities: million trust units (including the over-allotment), closed on August 22, 2022. 1. Maintaining bala
Slide 23: Financial Prudence: Balance Sheet
Financial Prudence Balance Sheet ▪ Net Debt / Adjusted EBITDA (1) of 3.2x at end of Q2 2022, down from 6.1x in Q2 2021. ▪ Numerous initiatives were recently undertaken to improve the balance sheet and increase financial flexibility: 1. Sale of specialty chemicals businesses (potassium chloride and v
Slide 24: Financial Prudence: Defensive Attributes
Financial Prudence Defensive Attributes While market conditions remain robust across the business, Chemtrade is well-positioned for a potential economic downturn, given numerous defensive attributes and its strengthened balance sheet. SWC Segment ▪ Water treatment chemicals are non-discretionary and
Slide 25: Chemtrade Investment Highlights
Chemtrade Investment Highlights ▪ Extensive product portfolio offers diversified exposure to industrial and consumer end- Size, Scale and markets Diversity of Earnings ▪ Exposure to strong chlor-alkali backdrop and robust industrial activity ▪ Benefitting from global supply dislocations caused by ge
Slide 26: Appendix
APPENDIX 26 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 27: Chemtrade Management Team
Chemtrade Management Team Management Team Scott Rook Rohit Bhardwaj Tim Montgomery Alan Robinson Emily Powers Susan Paré President and Chief Chief Financial Officer Group Vice-President Group Vice-President, Group Vice-President General Counsel and Executive Officer Manufacturing and Commercial Huma
Slide 28: Chemtrade Board of Trustees
Chemtrade Board of Trustees Board of Trustees Douglas Muzyka Lucio Di Clemente Daniella Dimitrov Emily Moore Luc Doyon Katherine Rethy Scott Rook Chair of the Board Chair of the Chair of the Audit Chair of the Corporate Corporate CEO, Corporate Compensation and Committee Responsible Care Director Di
Slide 29: Q2 2022 Consolidated Results
Q2 2022 Consolidated Results C$ Millions, except per unit metrics and ratios Q2 2022 Q2 2021 Change ($) Change (%) Revenue 446.4 337.3 109.1 32% Net Earnings (Loss) (1) 34.8 (14.1) 48.9 n/a Adjusted EBITDA (2) 81.7 65.2 16.6 25% Cash Flows from Operating Activities 84.0 50.8 33.1 65% Distributable C
Slide 30: Updated 2022 Guidance
Updated 2022 Guidance C$ Millions ▪ 2022 Adjusted EBITDA guidance increased for second consecutive quarter, primarily reflecting strong year-to-date results and ongoing strength across chlor-alkali chemicals. ▪ Midpoint of 2022 Adjusted EBITDA guidance is $370 million, a $121.5 million improvement o
Slide 31: 2022 Guidance Key Assumptions
2022 Guidance Key Assumptions Updated 2022 Prior 2022 2021 Key Assumptions Assumption Assumption Actuals Approximate North American MECU sales volume ~180K ~175K ~181K 2022 average CMA (1) NE Asia Caustic price index being higher US$350 US$285 N/A per tonne than the 2021 average North American produ
Slide 32: Key Sensitivities: Annual Impact on EBITDA
Key Sensitivities Annual Impact on EBITDA Caustic Soda Price ▪ Change of US$50/DMT = CAD$10 million Sodium Chlorate Price ▪ Change of $50/metric tonne = $17.5 million CA$/US$ exchange rate ▪ Change of 1 cent = $3.8 million 32 Organic Operational Financial Investment Business Overview SWC Segment EC
Slide 33: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Non-IFRS financial measures are financial measures disclosed by an entity that (a) depict historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to their composition, exclude amounts that are included in, or in
Slide 34: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Distributable cash after maintenance capital expenditures – Most directly comparable IFRS financial measure: Cash flows from operating activities Definition: Distributable cash after maintenance capital expenditures is calculated as cash flow from operating activities le
Slide 35: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Distributable cash after maintenance capital expenditures per unit – Definition: Distributable cash after maintenance capital expenditures per unit is calculated as distributable cash after maintenance capital expenditures divided by the weighted average number of units
Slide 36: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios C$ Thousands, except per unit metrics and ratios Three months ended June 30 Twelve months ended 2022 2021 June 30, 2022 Cash flow from (used in) operating activities $ 83,976 $ 50,846 $ 295,698 Add (Less): Lease payments net of sub-lease receipts (12,586) (12,671) (51,30
Slide 37: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Net Debt – Most directly comparable IFRS financial measure: Total long-term debt, convertible unsecured subordinated debentures, lease liabilities, long-term lease liabilities, less cash and cash equivalents Definition: Net Debt is calculated as the total of Long-term de
Slide 38: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios C$ Thousands, except ratios Three months ended June 30 2022 2021 Long-term debt (1) $ 498,305 $ 730,194 Add (Less): Convertible unsecured convertible debentures (1) 517,365 531,115 Lease liabilities 43,856 48,452 Long-term lease liabilities 90,663 113,205 Cash and cash e
Slide 39: Total of Segments Measures
Total of Segments Measures Total of segments measures are financial measures disclosed by an entity that (a) are a subtotal of two or more reportable segments, (b) are not a component of a line item disclosed in the primary financial statements of the entity, (c) are disclosed in the notes of the fi
Slide 40: Total of Segments Measures
Total of Segments Measures C$ Thousands Adjusted EBITDA – Most directly comparable IFRS financial measure: Net earnings (loss) Three months ended June 30 2022 2021 Net earnings (loss) $ 34,835 $ (14,078) Add (Less): Depreciation and amortization 53,229 60,571 Net finance costs 9,801 19,122 Income ta
Slide 41: Supplementary Financial Measures
Supplementary Financial Measures Supplementary financial measures are financial measures disclosed by an entity that (a) are, or are intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of an entity, (b) are
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