Chemtrade Logistics Income Fund · TSX:CHE.UN
Chemtrade Logistics Income Fund — Corporate Update (March 2009)
38 slides from Chemtrade Logistics Income Fund's corporate update, March 2009
Slide 1: Business Update March 2009
BUSINESS UPDATE / MARCH 2009 1
Slide 2: Special Note Regarding Forward-Looking Statements
SPECIAL NOTE REGARDING FORWARD- LOOKING STATEMENTS This presentation contains certain statements which may constitute “forward-looking” statements within the meaning of certain securities laws, including the “safe harbour” provisions of the Securities Act (Ontario). The use of any of the words “anti
Slide 3: Agenda
AGENDA ^ Business Overview ^ Key Markets / Products ^ Historical Financial Performance Overview ^ 2008 Results ^ Recent Developments and Outlook 3
Slide 4: Business Overview
alta (@ > CHEMTRADE ‘© LOGTSTINGS TNIGOMES FUND BUSINESS OVERVIEW
Slide 5: Chemtrade Platform
CHEMTRADE PLATFORM ^ One of the world’s largest suppliers of sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite ^ Leading processor of refinery spent acid, particularly in the U.S. Gulf Coast region ^ Leading regional supplier of sodium chlorate and elemental sulphur ^ Largest producer
Slide 6: Chemtrade Platform: Result of Seven Years of Growth
CHEMTRADE PLATFORM ^ Result of seven years of growth Significantly enhanced size and scope through acquisitions Diversified products, geographic reach, sources of earnings and distributable cash 6
Slide 7: Acquisitions
ACQUISITIONS Building on Assets, Increasing Quality of Earnings SHS Operation ^ Became a leading global (December 2002) supplier of SHS ^ Emerged as leading regional supplier of Pulp Chemicals sodium chlorate, toll processor of CTO (August 2003) ^ Improved quality of earnings with risk sharing agree
Slide 8: Geographic Breadth
GEOGRAPHIC BREADTH North America Europe ^ Facilities include 9 owned manufactured sites 4 tolling facilities 3 customer service storage centres 8 intermodal transfer stations 6 warehouses South America 2 ocean terminals ^ Sites are strategically located in close Ocean Terminals proximity
Slide 9: Business Model
BUSINESS MODEL ^ Designed to generate strong cash flow through: Diversity of customers, industries and products Competitive positioning Service and product differentiation Risk sharing contracts with customers, suppliers Significant portion of revenue generated through risk sharing contracts
Slide 10: Risk Mitigating Contracts Reducing Typical Commodity Risk
RISK MITIGATING CONTRACTS REDUCING TYPICAL COMMODITY RISK ^ Supply Based Vale Inco – acid, SO2 (net back sharing) ZhongCheng – powder SHS (selling price changes shared) ^ Customer Based Canfor Sodium chlorate (price adjusted for raw material changes) Crude Tall Oil (“CTO”) (tolling / fixed
Slide 11: Key Markets / Products
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Slide 12: Key Markets / Products
KEY MARKETS / PRODUCTS ^ Sulphur Products & Performance Chemicals Segment North American Merchant Acid Refinery Services Performance Chemicals ^ International Acid ^ Pulp Chemicals 12
Slide 13: Merchant Acid
MERCHANT ACID North American Industry ^ One-third of total North American demand for acid falls into the “merchant” market ^ U.S. and Canadian markets (excluding western Canada) are mainly serviced by smelter or regen sources ^ Chemtrade’s market share of the North American merchant non-fertilizer m
Slide 14: Chemtrade's Merchant Acid Business Overview
CHEMTRADE’S MERCHANT ACID Business Overview ^ Consists of product sourced through marketing arrangements and owned manufacturing facilities Approximately 70% of North American merchant acid sold is obtained from third party Producers ^ Smelter sourced product is based on mandatory capture of by-pr
Slide 15: Merchant Acid Competitive Advantages
MERCHANT ACID Competitive Advantages ^ Low cost supply of by-product and co-product acid ^ Logistics / freight advantage in regional markets ^ Facilities are strategically located near customers ^ Infrastructure present for efficient shipping > 1,400 rail cars Terminals with storage and transfer
Slide 16: Merchant Acid Competitive Advantages
MERCHANT ACID Competitive Advantages ^ Broad and diversified market coverage provides advantageous insight into optimum market opportunities ^ Core markets protected by balanced competitive positioning ^ Long term supplier and customer relationships 16
Slide 17: Refinery Services Industry
REFINERY SERVICES Industry ^ Removes spent acid from oil 2006 Market Share (2.6 million MT) refineries and other chemical 1% producers and processes it to Chemtrade 7% PVS produce fresh sulphuric acid, 10% 24% 9% Rhodia referred to as “regen” acid General Chemical 10% Marsulex ^ Used by refineries t
Slide 18: Refinery Services Business Overview
REFINERY SERVICES Business Overview ^ Comprised of Chemtrade’s spent acid regeneration activities at three sites ^ Generally sold under multi-year contracts ^ Regen sales contracts adjust pricing for changes in natural gas, the key raw material Significant energy required for spent acid combustion
Slide 19: Refinery Services Competitive Advantages
REFINERY SERVICES Competitive Advantages ^ Security of service due to multiple plants ^ Minimal turnover of customers due to proximity of infrastructure (pipeline, truck accounts) ^ Long-term contracts ^ Cost mitigating contract pricing ^ Ability to use cheaper alternative fuels to lower costs 19
Slide 20: Performance Chemicals - Industry
PERFORMANCE CHEMICALS - INDUSTRY Sodium Hydrosulphite ^ SHS is used as a reducing agent in a number of different applications - Demand by Industry 300 million lbs the largest uses are newsprint, kaolin clay and recycled fibre 1% 8% ^ Business comprised of Chemtrade’s 13% SHS production and marketing
Slide 21: International Acid
INTERNATIONAL Acid 2006 Supply Origin for Deep Sea Acid (7.3 million MT) ^ Primarily created as a by- product of the smelter industry ^ Mainly transported by ship to 38% Asia and South America 45% ^ Industry consists of traders who match producers and customers 2% 12% 3% as well as arrange logistics
Slide 22: International Business Overview
INTERNATIONAL Business Overview ^ Focused on removing, marketing, trading and distributing acid and sulphur ^ Within Europe, the business performs a key supply / demand balancing function with long-term supply agreements ^ Functions as a marketer through “matched” contracts 22
Slide 23: Pulp Chemicals Industry
PULP CHEMICALS Industry ^ Worldwide chemical pulp production exceeds 87 million annual tonnes, of N.A. Market Share by Capacity (1.7 million MT) which 85% is bleached using chlorine dioxide derived from sodium chlorate ^ North American sodium chlorate 7% 4% capacity is 1.7 million MT 12% 30% Marke
Slide 24: Pulp Chemicals Business Overview
PULP CHEMICALS Business Overview ^ Capacity is sold under a blend of long-term and annual contracts Up to 70% of Chemtrade’s sodium chlorate capacity is sold to Canfor’s Prince George operations ^ Processes Canfor’s soap skimmings into crude tall oil under a 10-year tolling agreement 24
Slide 25: Historical Financial Performance Overview
HISTORICAL FINANCIAL PERFORMANCE OVERVIEW 25
Slide 26: Track Record: Revenue
TRACK RECORD Revenue (C$M) $1,178.8 3 3 .6% AG R: C $552.1 $546.6 $425.4 $346.4 $290.6 $207.0 2002 2003 2004 2005 2006 2007 2008 26
Slide 27: Track Record: Business EBITDA
TRACK RECORD Business EBITDA * (C$M) $140.0 : 3 2 .1% CAGR $86.5 $77.5 $64.4 $67.9 $54.5 $26.3 2002 2003 2004 2005 2006 2007 2008 * Pre- Pre-corporate expenses 27
Slide 28: Track Record: Distributable Cash
TRACK RECORD Distributable Cash (C$M) $83.5 : 2 5 .0% C A GR $46.4 $47.5 $43.1 $43.2 $34.9 $21.9 2002 2003 2004 2005 2006 2007 2008 28
Slide 29: 2008 Results
oO SEEN Setar INCOME FUND 2008 RESULTS
Slide 30: Financial Performance
FINANCIAL PERFORMANCE EBITDA (C$M) ^ 2008 was a record year ^ Strength in sulphuric acid in $118.9 North America and International $68.6 ^ Generated distributable cash per unit of $2.50 (2007 - $1.41) ^ Distribution rate of $1.20 per unit ’07 ’08 ^ Debt / EBITDA ratio ≈1.5X 30
Slide 31: Sulphur Products & Performance Chemicals
SULPHUR PRODUCTS & PERFORMANCE CHEMICALS 2008 vs. 2007 (C$M) ^ Revenue increase reflects Significantly higher prices $538.9 $86.5 for merchant acid and sulphur $309.4 Higher prices for all $52.0 products ^ EBITDA ’07 ’08 Acid margin expansion ’07 ’08 Price increases, more than offset high su
Slide 32: Pulp Chemicals
PULP CHEMICALS 2008 vs. 2007 (C$M) $58.1 $53.3 $19.5 $18.6 ^ Revenue / EBITDA decline mainly due to reduced customer demand towards the end of 2008, including largest customer taking ’07 ’08 ’07 ’08 downtime in December Revenue EBITDA 32
Slide 33: International
INTERNATIONAL 2008 vs. 2007 (C$M) $586.5 $34.9 ^ Results reflect very robust international $179.1 market for sulphuric $14.9 acid and high margin on some spot sales ’07 ’08 ’07 ’08 Revenue EBITDA 33
Slide 34: Balance Sheet / Liquidity
BALANCE SHEET / LIQUIDITY ^ Renewed Credit Agreement and now matures on August 2011 ^ As at December 31, 2008: Fully repaid (US$41M) operating line of credit Net debt to EBITDA ratio at 1.5x (less than half the covenant limit) 34
Slide 35: Recent Developments & Outlook
RECENT DEVELOPMENTS & OUTLOOK 35
Slide 36: Strong, Reliable Businesses
STRONG, RELIABLE BUSINESSES ^ Results demonstrate Chemtrade’s ability to generate strong cash flows Reliable plants Strong customer relationships Geographic diversification 36
Slide 37: Strong, Reliable Businesses: Vale Inco
STRONG, RELIABLE BUSINESSES Vale Inco ^ Renewed long-term contract with Vale Inco (Q1 2008) Strong product and commodity risk mitigation through sharing price movements Vale Inco provides Chemtrade with majority of acid sold to merchant market New agreement term: end of 2017 37
Slide 38: Summary
SUMMARY ^ Difficult to forecast in this economic climate ^ Do not foresee appreciable increase in demand levels over Q4 levels, until at least second half of 2009 ^ Continue to focus on initiatives to improve business Enhance reliability (therefore capex expected to be higher than historic levels)
Chemtrade Logistics Income Fund — Corporate Update (March 2009) on 6ix