Chemtrade Logistics Income Fund · TSX:CHE.UN
Chemtrade Logistics Income Fund — Investor Presentation (May 2023)
61 slides from Chemtrade Logistics Income Fund's investor presentation, May 2023
Slide 1: Our Commitment to Sustainability
RESPONSIBLE CARE® OUR COMMITMENT TO SUSTAINABILITY 2023 Investor Presentation | May 2023 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: Business Overview
Business Overview 3 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 4: 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 5: Chemtrade Financial Overview
Chemtrade Financial Overview Unit Price (1) $7.71 CHE.UN Unit Price - Last Twelve Months $10.50 $10.00 Market Capitalization (1) $893.2 million $9.50 $9.00 $8.50 $8.00 Enterprise Value (1) $1.9 billion $7.50 $7.00 $6.50 Net debt to Adjusted EBITDA (2) 2.2x Volume 2.0M 1.5M Distribution / Yield $0.60
Slide 6: Investment Highlights
Chemtrade Investment Highlights § Diversified exposure to industrial and consumer end-markets, given extensive product portfolio § Significant regional market share across products including sulphuric acid, Ultrapure sulphuric Market Leadership acid, sodium chlorate, water chemicals, and caustic sod
Slide 7: Company History
Chemtrade Company History December 2002 August 2003 August 2005 July 2001 Acquired Peak Chemicals Acquired SHS Operations Acquired Pulp Chemicals (Expanded Sulphuric Acid business; IPO on TSX (Sodium Hydrosulphite) (Sodium Chlorate; Crude Tall Oil) diversified end markets) (Spun out of Marsulex) US$
Slide 8: Strategic Blueprint for Success
Chemtrade Strategic Blueprint for Success Business Model Size, scale, and diversity of earnings with regional market leadership Financial Prudence Growth Maintain Organic growth financial and flexibility with opportunistic sound capital tuck-in M&A management Operational Excellence Continuous improv
Slide 9: Operating Segments
Chemtrade Operating Segments Electrochemicals (EC) Sulphur and Water Chemicals (SWC) Segment Segment LTM Revenue 41% 59% SWC EC Electrochemicals Acids & Non-Acid Water Chloralkali - #1 producer in UP Acid - #1 supplier to Alum - #1 supplier to Canada Semi- conductors (1) drinking water plants (1) LT
Slide 10: Delivering Record Performance
Chemtrade Delivering Record Performance Record results generated in 2022. Adjusted EBITDA (C$ millions) Expect 2023 Adjusted EBITDA will be At or above at or above 2022. 2022 This strength reflects: § Improved and robust end-market demand across most key products $430.9 § Higher realized pricing for
Slide 11: Sulphur and Water Chemicals (SWC) Segment
Sulphur and Water Chemicals (SWC) Segment 11 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 12: SWC Segment Key Products
SWC Segment Key Products Key Products Primary End-Uses Competitive Advantages Key Competitors • Largest facilities are closely connected to Regen Ecovyst; Veolia North America; PVS Chemical Gasoline production customers (connected via pipeline at most sulphuric acid Solutions Inc. facilities) • Nort
Slide 13: SWC Segment Sulphuric Acid Outlook
SWC Segment Sulphuric Acid Outlook Sulphuric acid § Demand and pricing for Regen acid, which is used in gasoline alkylate production, remains solid. Chemtrade continues to be optimistic about the near-term outlook, particularly given refinery utilization rates generally remain high in a typical rece
Slide 14: SWC Segment Water Chemicals Outlook
SWC Segment Water Chemicals Outlook Water Chemicals § Strong demand supported by increasing regulations and population growth – alum demand relatively stable; PACl/ACH demand growing at least 5% per year. § Additional production capacity of PACl and ACH was installed in 2022 and will contribute more
Slide 15: Electrochemicals (EC) Segment
Electrochemicals (EC) Segment 15 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 16: 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 17: EC Segment Sodium Chlorate Outlook
EC Segment Sodium Chlorate Outlook Sodium Chlorate § Brandon, Manitoba plant is the largest and one of the lowest cost sodium chlorate plants globally*. § Chemtrade’s sodium chlorate plants operate in energy regulated markets supplied by renewable hydroelectric energy. § With utility costs represent
Slide 18: EC Segment Chlorine and HCl Outlook
EC Segment Chlorine and HCl Outlook Chlorine and HCl § Merchant chlorine prices remain strong due to Long Term Market Demand tight industry supply and robust end-market demand in North America 2020: Oil WTI: $39/bbl US & Can Rigs: 522 § North American rig counts remain significantly higher year-over
Slide 19: EC Segment Caustic Soda Outlook
EC Segment Caustic Soda Outlook Caustic Soda § Historically high pricing in 2022, supported by strong demand, supply dislocations stemming from geopolitical conflicts, increased utility costs in Forecast Europe and Asia, and increased global freight costs. § NE Asia spot index pricing declined stead
Slide 20: Organic Growth Projects
Organic Growth Projects 20 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 21: Long-Term Growth Strategy
Chemtrade Long-Term Growth Strategy § Chemtrade’s long-term objective is to deliver sustained earnings growth and generate value for our investors § This will be accomplished by two primary factors: 1) Organic Growth 2) Operating Efficiencies – Productivity & Reliability § This should result in unit
Slide 22: Organic Growth Projects Update
Organic Growth Projects Update Chemtrade continues to target an incremental $45 million in Adjusted EBITDA growth by year-end 2025 and $75 million in Adjusted EBITDA growth by year-end 2027, as announced at its 2022 Investor Day. § Chemtrade plans to allocate $110 million - $140 million for Growth c
Slide 23: Organic Growth Projects: Ultrapure Acid
Organic Growth Projects Ultrapure Acid § CHIPS Act in the US will continue to fuel Global Semiconductor Market Semiconductor growth of 2-3x over the next 5 years § 8-10 new semiconductor fabrication plants currently under construction in the US § Chemtrade has announced two organic growth projects –
Slide 24: Ultrapure Acid: Cairo, Ohio Expansion
Organic Growth Projects Ultrapure Acid Cairo, Ohio Expansion 3D Rendering of the Cairo, Ohio Expansion § 60% increase in UPA capacity at Cairo, Ohio facility § Significant technology upgrades being made § Estimated capital cost of ~US$50-55 million § 25%+ expected IRR § Remains on schedule and on bu
Slide 25: Ultrapure Acid: Casa Grande, Arizona Greenfield Plant
Organic Growth Projects Ultrapure Acid Greenfield Plant in Casa Grande, Arizona (KPCT JV) Ultrapure Plant located ~40 Miles from Intel and TSMC~80 FabMiles from TSMC § JV 49% owned by Chemtrade TSMC § Annual capacity of 100,000 MT of UPA § Chemtrade working with Chemetics on Oleum plant design § Kan
Slide 26: Organic Growth Projects: Water Chemicals
Organic Growth Projects Water Chemicals § Increasing regulations and population growth support heightened demand for coagulants New Pilot Plant across North America. § Industry PACl/ACH demand is growing >5% per year; Chemtrade sales of PACl/ACH up >10% in 2022. § Small projects to expand capacity f
Slide 27: Organic Growth Projects: Hydrogen
Organic Growth Projects Hydrogen § Hydrogen expected to become a more significant energy source in a low carbon future. § Chemtrade uniquely positioned with “Green hydrogen” produced using hydro-electric power. § Project at Prince George, BC sodium chlorate plant delayed, as one of Chemtrade’s partn
Slide 28: Operational Excellence
Operational Excellence 28 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 29: Productivity and Reliability: Safety and Reliability
Operational Excellence Productivity and Reliability Chemtrade launched Productivity and Reliability initiatives in 2020, building out a culture of continuous improvement. Safety § 25% reduction in recordable injury rate in 2022 vs. 2021 § Focused on improvements in Engagement, Operating Discipline,
Slide 30: Productivity and Reliability: Productivity and Capital
Operational Excellence Productivity and Reliability Productivity New technology will deliver 4X § We have delivered $15+ million savings each of current capacity per ACH reactor the last two years and are targeting achieving this level of savings in future years to offset annual inflation § Chemtrad
Slide 31: Key ESG Targets
Chemtrade Key ESG Targets 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 ESG leadership by reporting emissio
Slide 32: Financial Prudence
Financial Prudence 32 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 33: Capital Structure and Capital Allocation
Financial Prudence Capital Structure and Capital Allocation Capital Allocation Priorities: Equity (CHE.UN) 1. Maintaining a strong balance sheet § 115.8 million units outstanding, as of March 31, 2023. 2. Investing in financially accretive organic growth opportunities 3. Return of capital to unithol
Slide 34: Balance Sheet
Balance Sheet As of March 31, 2023 § Net debt to Adjusted EBITDA (1) of 2.2x at the end of Q1 2023, down from 3.5x at the end of Q1 2022. Net Debt to LTM Adjusted EBITDA • Reflects a combination of cash generated from the business, Adjusted EBITDA growth, an $86.5 million equity 6.1x 6.0x offering c
Slide 35: Distribution Sustainability
Chemtrade Distribution Sustainability LTM Payout Ratio (1) Distribution of $0.05/unit per month or $0.60/unit on an annualized basis. 1) Current distribution level is sustainable, as highlighted by LTM Payout ratio of 28%. 2) Current distribution yield of approximately 8% (2) offers an attractive re
Slide 36: Defensive Attributes
Chemtrade Defensive Attributes Chemtrade has yet to see any materials signs of economic softening in 2023, but believes that it is better-positioned than many chemical manufacturers, should an economic downturn occur. This is owing to numerous defensive attributes, its diverse product portfolio that
Slide 37: Investment Highlights
Chemtrade Investment Highlights § Diversified exposure to industrial and consumer end-markets, given extensive product portfolio § Significant regional market share across products including sulphuric acid, Ultrapure sulphuric Market Leadership acid, sodium chlorate, water chemicals, and caustic sod
Slide 38: Appendix
APPENDIX 38 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 39: Management Team
Chemtrade Management Team Management Team Scott Rook Rohit Bhardwaj Tim Montgomery Alan Robinson Emily Powers Tejinder Kaushik Susan Paré President and Chief Financial Group Vice- Group Vice- Group Vice- Vice-President General Counsel Chief Executive Officer President President, President Informatio
Slide 40: Board of Trustees
Chemtrade Board of Trustees Board of Trustees Douglas Muzyka Lucio Di Daniella Dimitrov Emily Moore Luc Doyon Katherine Rethy David Mutombo Scott Rook Chair of the Clemente Chair of the Audit Chair of the Corporate Corporate Corporate CEO, Corporate Board Chair of the Committee Responsible Care Dire
Slide 41: Q1 2023 Consolidated Quarterly Results
Q1 2023 Consolidated Quarterly Results C$ Millions, except per unit metrics and ratios Record Q1 for Adjusted EBITDA and second highest quarterly Adjusted EBITDA ever Q1 2023 Q1 2022 Change ($) Change (%) Revenue 471.2 390.3 80.9 21% Net Earnings (Loss) 79.5 10.7 68.8 644% Adjusted EBITDA (1) 131.7
Slide 42: Q1 2023 SWC Results
Q1 2023 SWC Results C$ Millions Revenue Revenue § Higher selling prices of water solutions products, sodium nitrite, Regen +15% $262.5 acid and merchant acid. $229.0 § Lower Regen acid volumes due to elevated customer maintenance turnaround activity. § Lower selling prices of sulphur products. Q1 20
Slide 43: Q1 2023 EC Results
Q1 2023 EC Results C$ Millions Revenue § Higher selling prices for all three chlor-alkali products (caustic soda, Revenue chlorine, and HCl) – Realized MECU netbacks up ~$550 year-over-year, with ~60% of the increase attributable to stronger pricing for chlorine and $208.7 $161.4 % hydrochloric acid
Slide 44: Q1 2023 Corporate Costs
Q1 2023 Corporate Costs C$ Millions Corporate Costs Corporate Costs $23.7 § Realized foreign exchange loss of $0.6 million, $20.2 compared to a gain of $2.1 million in Q1 2022. § Short-term incentive compensation costs increased by $1.6 million year-over-year. Q1 2022 Q1 2023 § Partial offset from $
Slide 45: 2023 Guidance
2023 Guidance C$ Millions 2023 Guidance Adjusted EBITDA § Increased the 2023 Adjusted EBITDA (C$ millions) At or above 2022 guidance to at or above the record 2022 Adjusted EBITDA § The updated 2023 outlook reflects the strong start to the year and improved $430.9 outlook for the remainder of 2023 $
Slide 46: 2023 Guidance
2023 Guidance C$ Millions Updated Prior Actual 2023 Guidance ($ million) 2023 Guidance 2023 Guidance 2022 Results Adjusted EBITDA (1) At or above 2022 $360 - $400 $430.9 Maintenance Capital Expenditures (1) $80 - $105 $80 - $105 $99.8 Growth capital expenditures (2) $110 - $140 $110 - $140 $21.6 Lea
Slide 47: 2023 Guidance Key Assumptions
2023 Guidance C$ Millions Updated 2023 Prior 2023 2022 Key Assumptions Assumption Assumption Actual Approximate North American MECU sales volumes 185,000 170,000 184,000 2023 average MECU Netback being lower than 2022 average per CAD $60 CAD $340 N/A MECU* 2023 average CMA (1) NE Asia caustic spot p
Slide 48: Key Sensitivities
Key Sensitivities Annual Impact on Adjusted EBITDA Caustic Soda Price § Change of US$50/DMT = CA$13 million Sodium Chlorate Price § Change of CA$50/metric tonne = CA$14.3 million CA$/US$ exchange rate § Change of 1 cent = CA$4.0 million (favourable if C$ weakens and vice versa) 48 Organic Operationa
Slide 49: Non-IFRS Financial Measures and Ratios
Non-IFRS Financial 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
Slide 50: Non-IFRS Financial Measures and Ratios
Non-IFRS financial 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 act
Slide 51: Non-IFRS Financial Measures and Ratios
Non-IFRS financial 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
Slide 52: Non-IFRS Financial Measures and Ratios
Non-IFRS financial measures and ratios C$ Millions, except per unit metrics and ratios For the quarter ended Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 LTM Cash flow from operating activities $ 386.4 $ 369.2 $ 357.8 $ 295.7 $ 262.6 Add (Less): LTM lease payments net of sub-lease receipts (53.6) (52.4)
Slide 53: Non-IFRS Financial Measures and Ratios
Non-IFRS financial measures and ratios C$ Thousands, except per unit metrics and ratios Net debt – Most directly comparable IFRS financial measure: Total long-term debt, Debentures, lease liabilities, and long-term lease liabilities, less cash and cash equivalents Definition: Net debt is calculated
Slide 54: Non-IFRS Financial Measures and Ratios
Non-IFRS financial measures and ratios C$ Thousands, except per unit metrics and ratios Growth capital expenditures – Most directly comparable IFRS financial measure: Capital expenditures Definition: Growth capital expenditures is calculated as Capital expenditures less Maintenance Capital expenditu
Slide 55: Capital Management Measures
Capital Management Measures Capital management measures are financial measures disclosed by an entity that (a) are intended to enable an individual to evaluate an entity’s objectives, policies and processes for managing the entity’s capital, (b) are not a component of a line item disclosed in the pr
Slide 56: 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 57: Total of Segments Measures
Total of Segments Measures C$ Millions Adjusted EBITDA – Most directly comparable IFRS financial measure: Net earnings (loss) Three months ended March 31 2023 2022 Net earnings (loss) $ 79,533 $ 10,686 Add (Less): Depreciation and amortization 52,140 52,201 Net finance costs (income) (12,736) 28,845
Slide 58: Total of Segments Measures
Total of Segments Measures C$ Millions Adjusted EBITDA – Most directly comparable IFRS financial measure: Net earnings (loss) LTM Adjusted EBITDA for the quarter ended Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 LTM Net earnings (loss) $ 178.0 $ 109.1 $ (59.7) $(155.2) $(
Slide 59: Total of Segments Measures
Total of Segments Measures C$ Millions Adjusted EBITDA – Most directly comparable IFRS financial measure: Net earnings (loss) Adjusted EBITDA for the year ended December 31 2022 2021 2020 2019 2018 Net earnings (loss) $ 109.1 $ (235.2) $ (167.5) $ (99.7) $ (131.5) Add (Less): Depreciation and amorti
Slide 60: 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
Slide 61: Supplementary Financial Measures
Supplementary Financial Measures Cash interest Represents interest expense related to long-term debt, interest on Debentures, and pension plan interest expense, net of interest income. Cash tax Represents current income tax expense. 61 Organic Operational Financial Investment Business Overview SWC S
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