Chemtrade Logistics Income Fund · TSX:CHE.UN
Chemtrade Logistics Income Fund — Investor Presentation (June 2022)
40 slides from Chemtrade Logistics Income Fund's investor presentation, June 2022
Slide 1: 2022 Investor Presentation
2022 INVESTOR PRESENTATION | June 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 Stock Price - Last Twelve Months Unit Price (1) $8.23 $8.50 $8.00 Market Capitalization (1) $860.3 million $7.50 $7.00 Enterprise Value (1) $2.0 billion $6.50 $6.00 Net Debt / Adjusted EBITDA (2) 3.5x Volume 2.0M 1.5M Distribution / Yield 1.0M $0.60 per share / 7.
Slide 5: Chemtrade Investment Highlights
Chemtrade Investment Highlights ▪ Extensive product portfolio offers diversified exposure to industrial and consumer end- Size, Scale and Diversity markets of Earnings ▪ Exposure to post-COVID industrial recovery, including strong chlor-alkali backdrop Market Leadership ▪ Significant regional market
Slide 6: Chemtrade Company History
Chemtrade Company History December 2002 August 2003 August 2005 July 2001 Acquired Peak Chemicals Acquired SHS Operations Acquired Pulp Chemicals IPO on TSX (Expanded Sulphuric Acid business; (Sodium Hydrosulphite) (Sodium Chlorate; Crude Tall Oil) diversified end markets) (Spun out of Marsulex) US$
Slide 7: 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: 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 39% Regen acid from the petroleum indust
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 Outlook
SWC Segment Outlook Sulphuric acid ▪ Regen acid used in gasoline alkylate production, with demand tied to refinery utilization rates – Demand rebounding as mobility of individuals normalizes (U.S. driving miles have returned to 2019 levels). ▪ Ultrapure acid demand from semiconductor industry remain
Slide 11: 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 12: EC Segment Caustic Soda Outlook
EC Segment Caustic Soda Outlook Caustic Soda ▪ Prices remain well above levels seen a year ago, with recent support from ongoing geopolitical conflicts. ▪ Demand and pricing expected to remain elevated over the short- to medium-term (at least 12-18 months). ▪ NE Asia mid-April price US$650/DMT. ▪ Re
Slide 13: EC Segment Chlorine and HCl Outlook
EC Segment Chlorine and HCl Outlook Chlorine ▪ Demand and pricing benefitting from tight industry Long Term Market Demand supply and improving industrial and construction end-markets (PVC; bleach products). 2018: Oil WTI: $65/bbl ▪ Prices expected to remain elevated through 2022. US & Can Rigs: 1,20
Slide 14: EC Segment Sodium Chlorate Outlook
EC Segment Sodium Chlorate Outlook Sodium Chlorate ▪ Volumes under pressure from ongoing softness in demand for office paper. ▪ Focused on renewing contracts at higher prices. ▪ Optimistic that demand could improve with broader return to the office. Planned closure of Beauharnois, QC facility ▪ To b
Slide 15: 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 16: 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 17: Organic Growth Projects: Water Chemicals
Organic Growth Projects Water Chemicals ▪ Chemtrade is one of North America’s largest suppliers of inorganic coagulents for water treatment. Water Coagulant Market Demand Growth ▪ Increasing regulations and population growth Municipal Drinking Water: 1-2% pa support heightened demand for coagulents
Slide 18: 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 19: 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 20: Key ESG Targets
Operational Excellence Key ESG Targets 1. Green House Gas (GHG) Emissions ✓ We will reduce or offset 2021 Scope 1 GHG emissions from operations, private fleet and process by 50% by 2025 2. Energy Management ✓ We will ensure a minimum of 85% of our electricity is from hydro or other renewable sources
Slide 21: Capital Structure and Capital Allocation
Financial Prudence Capital Structure and Capital Allocation Equity (CHE.UN) Capital Allocation Priorities: ▪ 104.5 million units outstanding, as of March 31, 2022 1. Deleveraging 2. Investing in financially Long-Term Debt accretive organic growth ▪ US$650 million revolving credit facility opportunit
Slide 22: Balance Sheet
Financial Prudence Balance Sheet Numerous initiatives were recently undertaken to improve the balance sheet and increase financial flexibility: 1. Sale of specialty chemicals businesses (potassium chloride and vaccine adjuvants) for net proceeds of $182.7 million, completed November 2021 2. $70 mill
Slide 23: Defensive Attributes
Financial Prudence Defensive Attributes Chemtrade is well-positioned for a potential economic downturn, given numerous defensive attributes across the business. SWC Segment ▪ Water treatment chemicals are non-discretionary. ▪ Regen business resilient as refinery utilization rates generally remain hi
Slide 24: Chemtrade Investment Highlights
Chemtrade Investment Highlights ▪ Extensive product portfolio offers diversified exposure to industrial and consumer end- Size, Scale and Diversity markets of Earnings ▪ Exposure to post-COVID industrial recovery, including strong chlor-alkali backdrop Market Leadership ▪ Significant regional market
Slide 25: Appendix
APPENDIX 25 Organic Operational Financial Investment Business Overview SWC Segment EC Segment Appendix Growth Excellence Prudence Highlights
Slide 26: Management Team
Chemtrade Management Team Management Team Scott Rook Rohit Bhardwaj Tim Montgomery Alan Robinson Emily Powers Susan Paré President and Chief Chief Financial Officer Group Vice-President Group Vice-President, Group Vice-President General Counsel and Executive Officer Manufacturing and Commercial Huma
Slide 27: Board of Trustees
Chemtrade Board of Trustees Board of Trustees Douglas Muzyka Lucio Di Clemente Daniella Dimitrov Emily Moore Luc Doyon Katherine Rethy Scott Rook Chair of the Board Chair of the Chair of the Audit Chair of the Corporate Corporate CEO, Corporate Compensation and Committee Responsible Care Director Di
Slide 28: Q1 2022 Consolidated Results
Q1 2022 Consolidated Results C$ Millions, except per unit metrics and ratios Q1 2022 Q1 2021 Change ($) Change (%) Revenue 390.3 312.4 77.9 25% Net Earnings (Loss) 10.7 (20.4) 31.1 152% Adjusted EBITDA (1) 107.8 55.4 52.4 95% Cash Flows from (used in) Operating Activities 37.8 (6.4) 44.2 691% Distri
Slide 29: Updated 2022 Guidance
Updated 2022 Guidance C$ Millions ▪ 2022 Adjusted EBITDA guidance increased in May, primarily reflecting strong Q1/22 results and ongoing strength across chlor-alkali chemicals. ▪ Midpoint of 2022 Adjusted EBITDA guidance is $315 million, a $66.5 million improvement over 2021 after normalizing for s
Slide 30: 2022 Guidance Key Assumptions
2022 Guidance Key Assumptions Updated 2022 Prior 2022 2021 Key Assumptions Assumption Assumption Actuals Approximate North American MECU sales volume ~175K ~175K ~181K 2022 average IHS NE Asia Caustic price index being higher US$285 US$150 N/A per tonne than the 2021 average North American productio
Slide 31: Key Sensitivities Annual Impact on EBITDA
Key Sensitivities Annual Impact on EBITDA Caustic Soda Price ▪ Change of US$50/DMT = CAD$10 million Sodium Chlorate Price ▪ Change of $50/metric tonne = $18.1 million CA$/US$ exchange rate ▪ Change of 1 cent = $3.6 million 31 Organic Operational Financial Investment Business Overview SWC Segment EC
Slide 32: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Non-IFRS financial measures are financial measures disclosed by an entity that (a) depict historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to their composition, exclude amounts that are included in, or in
Slide 33: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Distributable cash after maintenance capital expenditures – Most directly comparable IFRS financial measure: Cash flows from operating activities Definition: Distributable cash after maintenance capital expenditures is calculated as cash flow from operating activities le
Slide 34: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios Distributable cash after maintenance capital expenditures per unit – Definition: Distributable cash after maintenance capital expenditures per unit is calculated as distributable cash after maintenance capital expenditures divided by the weighted average number of units
Slide 35: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios C$ Thousands, except per unit metrics and ratios Three months ended March 31 2022 2021 Cash flow from (used in) operating activities $ 37,849 $ (6,396) Add (Less): Lease payments net of sub-lease receipts (12,856) (13,028) Increase in working capital 57,035 45,942 Change
Slide 36: 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, long-term lease liabilities, less cash and cash equivalents Definition: Net Debt is calculated as the total of Long-term de
Slide 37: Non-IFRS Measures and Ratios
Non-IFRS Measures and Ratios C$ Thousands, except ratios Three months ended March 31 2022 2021 Long-term debt (1) $ 524,065 $ 745,264 Add (Less): Convertible unsecured convertible debentures (1) 517,365 531,115 Lease liabilities 44,414 46,589 Long-term lease liabilities 93,813 107,177 Cash and cash
Slide 38: 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 39: Total of Segments Measures
Total of Segments Measures C$ Thousands Adjusted EBITDA – Most directly comparable IFRS financial measure: Net earnings (loss) Three months ended March 31 2022 2021 Net earnings (loss) $ 10,686 $ (20,448) Add (Less): Depreciation and amortization 52,201 62,393 Net finance costs 28,845 21,498 Income
Slide 40: 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
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