Chemtrade Logistics Income Fund · TSX:CHE.UN
Chemtrade Logistics Income Fund — Corporate Update (April 2010)
38 slides from Chemtrade Logistics Income Fund's corporate update, Apr 16, 2010
Slide 1: Business Update
LOGISTICS INCOME FUND BUSINESS UPDATE /
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 2009 Results Recent Developments and Outlook 3
Slide 4: Business Overview
oO CHEMTRADE LOGISTIGS INIGOME FUND ‘viet 4 } 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 Years of Growth
CHEMTRADE PLATFORM Result of 9 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 supplier (December 2002) 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: Acquisitions
ACQUISITIONS Building on Assets, Increasing Quality of Earnings Expanded sulphuric acid business, Peak Chemicals (August 2005) diversified end markets Improved quality of earnings with risk sharing agreements Olin Strengthened market presence in (May 2007) U.S. South East Alliance (October 200
Slide 9: Geographic Breadth
GEOGRAPHIC BREADTH North America Europe Facilities include 10 owned manufactured sites 1 tolling facility 3 customer service storage centres 8 intermodal transfer stations 6 warehouses South America 1 ocean terminal Sites are strategically located in close proximity to customers Offi
Slide 10: 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 11: 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 12: Key Markets / Products
oO CHEMTRADE LOGISTIGS INIGOME FUND tue ‘ } KEY MARKETS / PRODUCTS
Slide 13: Key Markets / Products
KEY MARKETS / PRODUCTS Sulphur Products & Performance Chemicals Segment North American Merchant Acid Refinery Services Performance Chemicals International Acid Pulp Chemicals 13
Slide 14: 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 15: 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 16: 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 17: 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 17
Slide 18: Refinery Services Industry
REFINERY SERVICES Industry Removes spent acid from oil Approximate 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 refin
Slide 19: Refinery Services Business Overview
REFINERY SERVICES Business Overview Comprised of Chemtrade’s spent acid regeneration activities at 3 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 19
Slide 20: 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 20
Slide 21: Performance Chemicals - Industry
PERFORMANCE CHEMICALS - INDUSTRY Sodium Hydrosulphite SHS is used as a reducing agent in a Approximate Demand by Industry number of different applications - (300 million lbs.) the largest uses are newsprint, kaolin clay and recycled fibre 1% 8% Business comprised of Chemtrade’s 13% SHS productio
Slide 22: International Acid
INTERNATIONAL Acid Approximate 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 lo
Slide 23: 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 23
Slide 24: Pulp Chemicals Industry
PULP CHEMICALS Industry Worldwide chemical pulp production exceeds 87 million annual tonnes, of N.A. Approximate 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%
Slide 25: 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 tolling agreement 25
Slide 26: Historical Financial Performance Overview
HISTORICAL FINANCIAL PERFORMANCE OVERVIEW 26
Slide 27: Track Record: Revenue
TRACK RECORD Revenue (C$M) $1,178.8 $552.1 $546.6 $546.2 $425.4 $346.4 $290.6 $207.0 2002 2003 2004 2005 2006 2007 2008 2009 27
Slide 28: Track Record: Business EBITDA
TRACK RECORD Business EBITDA * (C$M) $140.0 $113.6 $86.5 $77.5 $64.4 $67.9 $54.5 $26.3 2002 2003 2004 2005 2006 2007 2008 2009 * Pre-corporate expenses 28
Slide 29: 2009 Results
CHEM TRADE LOGISTICS INCOME FUND Ww | _ > Ww wu ce (=>) oOo i) N
Slide 30: Financial Performance
FINANCIAL PERFORMANCE Revenue / EBITDA (C$M) 140 1400 120 1200 2008 was a record year, with 100 1000 unprecedented market conditions for key products 80 800 2009 revenue reverted to $M - Revenue $M - EBITDA 60 600 2007 levels, but EBITDA was higher, mainly due to 40 400 stronger results in the I
Slide 31: Sulphur Products & Performance Chemicals
SULPHUR PRODUCTS & PERFORMANCE CHEMICALS 2007 – 2009 (C$M) 100.0 600 2009 revenue declined to more 90.0 500 historic levels after the record 80.0 levels achieved in 2008 70.0 400 2009 sales volume was lower 60.0 than the previous 2 years, $M - Revenue $M - EBITDA 50.0 300 reflecting reduced dema
Slide 32: Pulp Chemicals
PULP CHEMICALS 2007 - 2009 (C$M) 25 70 20 60 Despite revenue in 2009 being similar to 2008, EBITDA 50 15 is slightly higher than 2008 due to lower costs $M - EBITDA $M - Revenue 40 10 30 In general, business remained quite stable, in keeping with 20 contractual nature of the 5 majority of the bu
Slide 33: International
INTERNATIONAL 2007 - 2009 (C$M) 50 800 45 700 2009 revenues reverted to 40 historic levels, after the 600 35 record levels achieved in 30 500 2008 when the global conditions for acid and $M - Revenue $M - EBITDA 25 400 sulphur were exceptionally 20 300 favourable 15 200 EBITDA in 2009 was still
Slide 34: Balance Sheet / Liquidity
BALANCE SHEET / LIQUIDITY Credit Agreement matures in August 2011 As at December 31, 2009: Operating line of credit fully undrawn (≈US$65M available) Cash balances ≈$20M Net debt to EBITDA ratio well below 2x 34
Slide 35: Recent Developments & Outlook
RECENT DEVELOPMENTS & OUTLOOK 35
Slide 36: Convertible Debentures and Canfor
CONVERTIBLE DEBENTURES AND CANFOR Issued $90M, 6% unsecured, convertible debentures in March 2010 and a significant part of the proceeds were used to pay down term debt Extended the long-term agreement for sodium chlorate supply to Canfor until 2018 36
Slide 37: Strong, Reliable Businesses
STRONG, RELIABLE BUSINESSES Results demonstrate Chemtrade’s ability to generate strong cash flows Reliable plants Strong customer relationships Geographic diversification 37
Slide 38: Summary
SUMMARY Supply / demand characteristics for many of our products are stronger than they were at the start of 2009 Well positioned to take advantage of improvements in demand levels Nature of our business model, coupled with our strong balance sheet are more than sufficient to sustain our current
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