Chemtrade Logistics Income Fund · TSX:CHE.UN
Chemtrade Logistics Income Fund — Investor Presentation (February 2023)
57 slides from Chemtrade Logistics Income Fund's investor presentation, February 2023
Slide 1: Our Commitment to Sustainability: 2023 Investor Presentation
RESPONSIBLE CARE® OUR COMMITMENT TO SUSTAINABILITY 2023 INVESTOR PRESENTATION | February 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 CHE.UN Unit Price - Last Twelve Months Unit Price (1) $9.47 $10.50 $10.00 $9.50 Market Capitalization (1) $1.1 billion $9.00 $8.50 $8.00 Enterprise Value (1) $2.0 billion $7.50 $7.00 $6.50 Net Debt / Adjusted EBITDA (2) 2.2x Volume 2.0M 1.5M Distribution / Yield 1.0M $0.
Slide 6: Chemtrade Investment Highlights
Chemtrade Investment Highlights ▪ Diversified product portfolio with exposure to varied industrial and consumer end-markets ▪ Significant regional market share across products including sulphuric acid, Ultrapure sulphuric Market Leadership acid, sodium chlorate, water chemicals, and caustic soda ▪ A
Slide 7: Chemtrade Company History
Chemtrade Company History December 2002 August 2003 August 2005 July 2001 Acquired Peak Chemicals Acquired SHS Operations Acquired Pulp Chemicals IPO on TSX (Expanded Sulphuric Acid business; (Sodium Hydrosulphite) (Sodium Chlorate; Crude Tall Oil) diversified end markets) (Spun out of Marsulex) US$
Slide 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: Chemtrade Operating Segments
Chemtrade Operating Segments Electrochemicals (EC) Sulphur and Water Chemicals (SWC) Segment Segment 2022 Revenue 41% 59% Electrochemicals Acids & Non-Acid Water SWC EC Chloralkali - #1 producer in UP Acid - #1 supplier to Alum - #1 supplier to Canada Semi- conductors (1) drinking water plants (1) 2
Slide 10: Record Performance in 2022
Chemtrade Record Performance in 2022 Record results in 2022 reflected Adjusted EBITDA strong performance across the (C$ millions) organization: ▪ Improved and robust end-market $360.0 - $400.0 demand across most key products ▪ Higher realized pricing for chlor- alkali products, Regen acid, merchant
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 Ecoservices; Veolia North America; PVS Chemical Gasoline production customers (connected via pipeline at most sulphuric acid Solutions Inc. facilities) •
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, remain strong. Chemtrade is optimistic about the near-term outlook, particularly given refinery utilization rates generally remain high in a typical recession. ▪ Ultr
Slide 14: SWC Segment Water Chemicals Outlook
SWC Segment Water Chemicals Outlook Water Chemicals ▪ Demand supported by increasing regulations and population growth – alum demand relatively stable; PACl/ACH demand growing >5% per year. ▪ Additional production capacity of PACl and ACH installed in 2022 and will start contributing to the water bu
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 • North America: Access to low-cost hydroelectric battery production; power (electricity ~50% of var
Slide 17: EC Segment Caustic Soda Outlook
EC Segment Caustic Soda Outlook Caustic Soda CMA NE Asia Spot Index vs. Taiwan Contract Index/Forecast ▪ Historically high pricing in 2022, supported by $1,000 strong demand, supply dislocations stemming from Forecast $900 geopolitical conflicts, increased utility costs in Europe and Asia, and incre
Slide 18: EC Segment Chlorine and HCl Outlook
EC Segment Chlorine and HCl Outlook Chlorine and HCl ▪ Chlorine prices remain strong, owing to tight industry supply and good end-market demand (PVC; Long Term Market Demand bleach products), however we expect them to be off the 2022 highs. 2020: Oil WTI: $39/bbl US & Can Rigs: 522 ▪ North American
Slide 19: 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*. Electricity (Power), Non-Firm $0.40 $0.40 Forecast ▪ Chemtrade’s sodium chlorate plants operate in $0.35 Delivered US Gulf Coast $0.35 Western Euro
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: Chemtrade 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: Chemtrade 3-5 Year Outlook
Chemtrade 3-5 Year Outlook Outlook for Base Business: ▪ Ultrapure Acid (UPA) Significantly Higher ▪ Regen/Merchant Acid Flat ▪ Sodium Nitrite Higher ▪ Water chemicals Higher ▪ Chlor-alkali Remaining strong; May decline due to cyclical nature, but mid- cycle pricing potentially higher than historical
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 ▪ 60% increase in UPA capacity at Cairo, Ohio 3D Rendering of the Cairo, Ohio Expansion facility ▪ Significant technology upgrades being made ▪ Estimated capital cost of ~US$50-55 million ▪ 25%+ expected IRR ▪ Long-lead time equipment has
Slide 25: Ultrapure Acid: Greenfield Plant in Casa Grande, Arizona
Organic Growth Projects Ultrapure Acid Greenfield Plant in Casa Grande, Arizona (KPCT JV) Ultrapure Plant located ~40 Miles from Intel and TSMC~80 Fab Miles from TSMC ▪ JV 49% owned by Chemtrade TSMC ▪ Annual capacity of 100,000 MT of UPA ▪ Estimated capital cost of US$175-250 million ▪ 20%+ expecte
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: Operational Excellence: Productivity 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: Operational Excellence: Productivity and Reliability
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: Chemtrade 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 ▪ 115.5 million units outstanding, as of December 31, 2022. sheet 2. Investing in financially accretive organic growth opportunities Long-Term Debt 3. Return of
Slide 34: Balance Sheet
Balance Sheet As of December 31, 2022 ▪ Net Debt / Adjusted EBITDA (1) of 2.2x at end of 2022, down Net Debt / LTM Adjusted EBITDA from 4.2x at year-end 2021. • Reflects a combination of cash generated from the 6.1x 6.0x business, Adjusted EBITDA growth, an $86.5 million equity 5.9x 5.5x offering co
Slide 35: Chemtrade Distribution Sustainability
Chemtrade Distribution Sustainability LTM Payout Ratio (1) Distribution of $0.05/unit per month or $0.60/unit on an annualized basis. 72% 1) Current distribution level is sustainable, as highlighted by LTM payout ratio of 30%. 2) Current distribution yield of 48% 47% approximately 6% (2) offers an a
Slide 36: Chemtrade Defensive Attributes
Chemtrade Defensive Attributes Chemtrade has yet to see any materials signs of economic softening in 2023, but believes that it is better-positioned than many chemical manufacturers, should an economic downturn occur. This is owing to numerous defensive attributes, its diverse product portfolio that
Slide 37: Chemtrade Investment Highlights
Chemtrade Investment Highlights ▪ Diversified product portfolio with exposure to varied industrial and consumer end-markets ▪ Significant regional market share across products including sulphuric acid, Ultrapure sulphuric Market Leadership acid, sodium chlorate, water chemicals, and caustic soda ▪ A
Slide 38: Appendix
APPENDIX 38 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 39: Chemtrade Management Team
Chemtrade Management Team Management Team Scott Rook Rohit Bhardwaj Tim Montgomery Alan Robinson Emily Powers Susan Paré President and Chief Chief Financial Officer Group Vice-President Group Vice-President, Group Vice-President General Counsel and Executive Officer Manufacturing and Commercial Huma
Slide 40: Chemtrade Board of Trustees
Chemtrade Board of Trustees Board of Trustees Douglas Muzyka Lucio Di Daniella Dimitrov Emily Moore Luc Doyon Katherine Rethy David Mutombo Scott Rook Chair of the Clemente Chair of the Audit Chair of the Corporate Corporate Corporate CEO, Corporate Board Chair of the Committee Responsible Care Dire
Slide 41: 2022 Consolidated Results
2022 Consolidated Results C$ Millions, except per unit metrics and ratios 2022 2021 Change ($) Change (%) Revenue 1,813.4 1,368.5 444.9 33% Net Earnings (Loss) (1) (2) 109.1 (235.2) 344.3 n/a Adjusted EBITDA (2) (3) 430.9 280.4 150.5 54% Cash Flows from Operating Activities 369.2 219.0 150.2 69% Dis
Slide 42: 2023 Guidance
2023 Guidance C$ Millions 2023 Guidance Adjusted EBITDA ▪ Strong start to 2023 - Now expect to be (C$ millions) above the midpoint of 2023 Adjusted $360.0 - $400.0 EBITDA guidance representing the second highest level ever generated by Chemtrade, trailing only 2022 $430.9 ▪ Implied payout ratio (1)
Slide 43: 2023 Guidance
2023 Guidance C$ Millions 2023 2022 2023 Guidance ($ million) Guidance Actual Adjusted EBITDA (1) $360 - $400 $430.9 Maintenance Capital Expenditures (1) $80 - $105 $99.8 Growth Capital Expenditures (1) $110 - $140 $21.6 Lease Payments $50 - $60 $52.4 Cash Interest (1) $50 - $55 $51.7 Cash Tax (1) $
Slide 44: 2023 Guidance: Key Assumptions
2023 Guidance C$ Millions 2023 2022 Key Assumptions Assumption Actual Approximate North American MECU sales volumes 170,000 184,000 2023 average MECU Netback being lower than 2022 average per MECU* CAD $340 N/A 2023 average CMA (1) NE Asia caustic spot price index being lower per tonne US$185 N/A th
Slide 45: Key Sensitivities
Key Sensitivities Annual Impact on Adjusted EBITDA Caustic Soda Price ▪ Change of US$50/DMT = CA$12 million Sodium Chlorate Price ▪ Change of CA$50/metric tonne = CA$15.5 million CA$/US$ exchange rate ▪ Change of 1 cent = CA$4.2 million (favourable if C$ weakens and vice versa) 45 Organic Operationa
Slide 46: 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 47: 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 48: 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 49: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios C$ Millions, except per unit metrics and ratios For the quarter ended Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 LTM cash flow from operating activities $ 369.2 $ 357.8 $ 295.7 $ 262.6 $ 219.0 Add (Less): LTM lease payments net of sub-lease receipts (52.4) (51.6) (51.3) (51
Slide 50: Non-IFRS Measures and Ratios: Net Debt
Non-IFRS Measures and Ratios C$ Thousands, except per unit metrics and ratios Net Debt – Most directly comparable IFRS financial measure: Total long-term debt, convertible unsecured subordinated debentures, lease liabilities, and long-term lease liabilities, less cash and cash equivalents Definition
Slide 51: Growth Capital Expenditures
Non-IFRS Measures and Ratios C$ Thousands, except per unit metrics and ratios Growth Capital Expenditures – Most directly comparable IFRS financial measure: Additions to PPE Definition: Growth capital expenditures is calculated as Capital expenditures less Maintenance Capital expenditures, plus Inve
Slide 52: 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 53: 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 54: 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 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Q4 2020 LTM Net earnings (loss) $ 109.1 $ (59.7) $(155.2) $(204.1) $
Slide 55: 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 56: 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 57: Supplementary Financial Measures
Supplementary Financial Measures Cash Interest Represents interest expense related to long-term debt, convertible unsecured subordinated debentures and pension plans. It excludes non-cash finance costs such as changes in fair value of the convertible unsecured subordinated debentures, ineffective po
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