Chemtrade Logistics Income Fund · TSX:CHE.UN
Chemtrade Logistics Income Fund — Investor Presentation (November 2022)
42 slides from Chemtrade Logistics Income Fund's investor presentation, November 2022
Slide 1: 2022 Investor Presentation | November 2022
2022 INVESTOR PRESENTATION | November 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) $8.38 $9.50 $9.00 Market Capitalization (1) $966.4 million $8.50 $8.00 $7.50 Enterprise Value (1) $2.0 billion $7.00 $6.50 $6.00 Net Debt / Adjusted EBITDA (2) 2.4x Volume 2.0M 1.5M Distribution / Yield 1.0M $0.60 per
Slide 5: Chemtrade Investment Highlights
Chemtrade Investment Highlights ▪ Extensive product portfolio offers diversified exposure to industrial and consumer end- Size, Scale and markets Diversity of Earnings ▪ Exposure to strong chlor-alkali backdrop and robust industrial activity ▪ Benefitting from supply dislocations and pricing impacts
Slide 6: Chemtrade Company History
Chemtrade Company History December 2002 August 2003 August 2005 July 2001 Acquired Peak Chemicals Acquired SHS Operations Acquired Pulp Chemicals IPO on TSX (Expanded Sulphuric Acid business; (Sodium Hydrosulphite) (Sodium Chlorate; Crude Tall Oil) diversified end markets) (Spun out of Marsulex) US$
Slide 7: Chemtrade 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 Sulphuric Acid Outlook
SWC Segment Sulphuric Acid Outlook Sulphuric acid ▪ Merchant acid market remains tight on stronger economic activity, given widespread industrial uses. Stronger demand and pricing have contributed to margin expansion, despite high sulphur prices. ▪ Demand for Regen acid, which is used in gasoline al
Slide 11: SWC Segment Water Chemicals Outlook
SWC Segment Water Chemicals Outlook Water chemicals ▪ Demand supported by increasing regulations and population growth – alum demand stable; PACl/ACH demand growing >5% per year. ▪ Have been successfully offsetting higher input costs with pricing. ▪ Sulphur prices have begun easing (Tampa pricing do
Slide 12: 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 13: EC Segment Caustic Soda Outlook
EC Segment Caustic Soda Outlook Caustic Soda ▪ Prices have recently strengthened, supported by continued strong demand, supply dislocations stemming from geopolitical conflicts, increased utility costs in Europe and Asia, and increased global freight costs. ▪ NE Asia October price of US$650/DMT. ▪ R
Slide 14: EC Segment Chlorine and HCl Outlook
EC Segment Chlorine and HCl Outlook Chlorine ▪ Demand and pricing remain strong, benefitting from tight industry supply and improved end-market demand (PVC; Long Term Market Demand bleach products), as well as increased utility costs in Europe and Asia and increased global freight costs. 2018: Oil W
Slide 15: EC Segment Sodium Chlorate Outlook
EC Segment Sodium Chlorate Outlook Sodium Chlorate ▪ Chemtrade expects to see significant gains in sodium chlorate in 2023, due to both increased market demand and increased pricing. This is due to two factors: 1) Sodium chlorate capacity rationalizations taking place in North America are expected t
Slide 16: 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 17: Organic Growth Projects: Ultrapure Acid
Organic Growth Projects Ultrapure Acid Joint Venture- KPCT Advanced Chemicals LLC ▪ Joint Venture 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 plant will be built in Casa Grande, Ariz
Slide 18: 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 19: Organic Growth Projects: Water Chemicals
Organic Growth Projects Water Chemicals ▪ Chemtrade is one of North America’s largest suppliers of inorganic coagulants for water treatment. Water Coagulant Market Demand Growth ▪ Increasing regulations and population growth Municipal Drinking Water: 1-2% pa support heightened demand for coagulants
Slide 20: 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 21: 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 22: Key ESG Targets for 2022 and Beyond
Chemtrade 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 ESG leadership
Slide 23: Financial Prudence: Capital Structure and Capital Allocation
Financial Prudence Capital Structure and Capital Allocation Equity (CHE.UN) ▪ 115.3 million units outstanding as of November 8, 2022. Capital Allocation Priorities: 1. Maintaining a strong balance ▪ Proceeds of recent $86.5 million equity financing to be used to partially sheet finance previously an
Slide 24: Financial Prudence: Balance Sheet
Financial Prudence Balance Sheet ▪ Net Debt / Adjusted EBITDA (1) of 2.4x at end of Q3 2022, down from 6.0x in Q3 2021. • Expect to end 2022 with slightly lower leverage than Q3 2022. ▪ Numerous initiatives were recently undertaken to improve the balance sheet and increase financial flexibility: 1.
Slide 25: Financial Prudence: Defensive Attributes
Financial Prudence Defensive Attributes Chemtrade continues to see ongoing strength across its business and product portfolio and the company maintains a positive outlook for Q4 2022 and into 2023. Given numerous defensive attributes, its diverse product portfolio that is benefitting from a number o
Slide 26: 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 supply dislocations and pricing impacts
Slide 27: Appendix
APPENDIX 27 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 28: 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 29: 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 30: Q3 2022 Consolidated Quarterly Results
Q3 2022 Consolidated Quarterly Results C$ Millions, except per unit metrics and ratios Q3 2022 Q3 2021 Change ($) Change (%) Revenue 519.9 365.0 154.9 42% Net Earnings (Loss) 75.3 (20.2) 95.5 n/a Adjusted EBITDA (1) 137.1 67.3 69.8 104% Cash Flows from Operating Activities 143.5 81.4 62.1 76% Distri
Slide 31: Updated 2022 Guidance
Updated 2022 Guidance C$ Millions ▪ 2022 Adjusted EBITDA guidance increased for third consecutive quarter, primarily reflecting strong year- to-date results and ongoing strength in market fundamentals across Chemtrade’s product portfolio. ▪ Midpoint of 2022 Adjusted EBITDA guidance is $425.0 million
Slide 32: 2022 Guidance Key Assumptions
2022 Guidance Key Assumptions Updated 2022 Prior 2022 2021 Key Assumptions Assumption Assumption Actuals Approximate North American MECU sales volume ~178K ~180K ~181K 2022 average CMA (1) NE Asia Caustic price index being higher US$360 US$350 N/A per tonne than the 2021 average North American produ
Slide 33: Key Sensitivities: Annual Impact on Adjusted EBITDA
Key Sensitivities Annual Impact on Adjusted EBITDA Caustic Soda Price ▪ Change of US$50/DMT = CAD$10 million Sodium Chlorate Price ▪ Change of $50/metric tonne = $17.25 million CA$/US$ exchange rate ▪ Change of 1 cent = $3.9 million 33 Organic Operational Financial Investment Business Overview SWC S
Slide 34: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Non-IFRS financial measures are financial measures disclosed by an entity that (a) depict historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to their composition, exclude amounts that are included in, or in
Slide 35: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Distributable cash after maintenance capital expenditures – Most directly comparable IFRS financial measure: Cash flows from operating activities Definition: Distributable cash after maintenance capital expenditures is calculated as cash flow from operating activities le
Slide 36: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Distributable cash after maintenance capital expenditures per unit – Definition: Distributable cash after maintenance capital expenditures per unit is calculated as distributable cash after maintenance capital expenditures divided by the weighted average number of units
Slide 37: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios C$ Thousands, except per unit metrics and ratios Three months ended Twelve months ended September 30, September 30, 2022 2021 2022 Cash flow from operating activities $ 143,472 $ 81,360 $ 357,810 Add (Less): Lease payments net of sub-lease receipts (13,358) (13,100) (51,
Slide 38: 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, and long-term lease liabilities, less cash and cash equivalents Definition: Net Debt is calculated as the total of Long-ter
Slide 39: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios C$ Thousands, except ratios Three months ended September 30 2022 2021 Long-term debt (1) $ 377,532 $ 714,195 Add (Less): Convertible unsecured convertible debentures (1) 517,365 531,115 Lease liabilities 45,435 48,727 Long-term lease liabilities 90,787 107,858 Cash and c
Slide 40: 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 41: Total of Segments Measures
Total of Segments Measures C$ Thousands Adjusted EBITDA – Most directly comparable IFRS financial measure: Net earnings (loss) Three months ended September 30 2022 2021 Net earnings (loss) $ 75,341 $ (20,159) Add (Less): Depreciation and amortization 56,598 56,590 Net finance (income) costs (25,864)
Slide 42: 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
Chemtrade Logistics Income Fund — Investor Presentation (November 2022) on 6ix