•  Rohit Bhardwaj,
Vice-President, Finance and Chief Financial Officer

•  Doug Cadwell,
Vice-President, Marketing

•  Susan Paré,
General Counsel

•  Maryann Romano,
Vice-President, Human Resources

And the other members of the team, Leon Aarts, VP Sales; Tab McCullough, VP Manufacturing and Beat Heller, President International, were unable to be here today.

Despite some raw material cost pressures and even after sustaining some non-recurring corporate costs, Chemtrade generated slightly higher distributable cash after maintenance capital expenditures in 2007 than we generated in 2006.

Our three key initiatives during 2007 were to improve the quality of our physical assets, to actively pursue the opportunities presented to us in the market and to reposition our SHS products.

A core component of our corporate strategy is to continually improve the operating reliability and efficiency of our plants. For our acid plants, this process began soon after we acquired them in 2005, and was accelerated by the damage caused to our Beaumont plant by Hurricane Rita. Since then, we have deliberately spent, and will continue to spend capital, over and above normal maintenance capex, to upgrade the quality of our asset base.

Executing this strategy is critical for the long-term success of Chemtrade. In 2007 the benefits were apparent. After taking our annual maintenance shutdowns in the first quarter, our acid plants operated at improved rates that allowed us to take advantage of the strengthening market for sulphuric acid that developed over the balance of the year.

The market dynamics for Chemtrade's products, especially sulphuric acid are very positive. Our ongoing initiatives allowed us to capitalize on the upward trend in pricing for sulphuric acid. This successful execution positively impacted our results for the fourth quarter last year and continued to benefit our first quarter results, which we announced yesterday. There are a number of factors that are positively affecting the acid market and we see no sign of these factors changing. Since these factors will continue to have a significant impact on our results for the balance of this year, and next year, I will provide a more detailed overview at the end of the presentation today.

Another factor that had a significant impact on the results of our Sulphur Products & Performance Chemicals group in 2007 was the repositioning of our SHS business. As you know, we made some substantial changes to our powder SHS operations at the end of 2006 when we closed our plant in Leeds, South Carolina and entered into a long-term supply and marketing arrangement with ZhongCheng Chemicals, one of the world's largest producers of powder SHS.

We now have an expanded customer base, and the flexibility of supplying our liquid customers from our own plant in Leeds or from Olin. We have largely eliminated our exposure to manufacturing costs for powder SHS and share the risks and the benefits of movements in the end market pricing on powder SHS. These strategic moves resulted in higher volumes and sales of SHS products in 2007, although the financial benefit of these increases was more than offset by higher net zinc costs, a raw material for liquid SHS. Although the SHS business continues to operate in a very challenging environment, we're very pleased that the changes we implemented have stabilized this business and we saw the financial benefits in Q1 this year.

Our Pulp Chemicals business operated well throughout the year and enjoyed higher selling prices for sodium chlorate. Unfortunately, the benefits were more than offset by higher input costs, particularly for salt. Some of these costs are recoverable under our long-term supply contract with Canfor, which accounts for about two thirds of our volume. Sales of the balance of our production to third parties benefit from the higher selling prices, but they weren't sufficient to offset the input cost increases.

In February 2007, largely in response to the Government's proposal to tax income trusts and the possible restriction to growth that the changes in tax laws may impose on trusts, we initiated a strategic alternatives review.

To summarize, we were pleased with Chemtrade's performance in 2007. Our strategy of constantly improving the long-term operating reliability of our plants and actively pursuing our opportunities had a positive effect on our results. We continue to pursue these and other initiatives that will continue to strengthen our business.

EBITDA was $71.4 million for 2007 compared with $68.1 million for 2006, before the Leeds costs in both years.

The strengthening of our businesses, from an operating perspective, is evident in the year-over-year increase in EBITDA. Our segmented results show that the operating businesses in aggregate generated EBITDA in 2007 of $88.5 million, an improvement of $8.4 million over 2006 EBITDA of $80.1 million. (Both of these numbers exclude the Leeds shutdown costs). The difference between these results and our net EBITDA increase of $3.3 million is due to higher corporate costs.

Pulp Chemicals posted revenue of $58.1 million in 2007, up from $52.6 million in 2006. The main reason for the increase was higher selling prices and volumes for sodium chlorate. However, it also reflected lower sales in the fourth quarter of 2006 because of the production interruption in December due to our major salt supplier declaring force majeure, which resulted in our plant operating at only 70% of planned capacity for that month.

International had an excellent year. As Mark noted, almost all of the improvement was achieved during the fourth quarter, a reflection of the very robust international market for sulphuric acid. Our ability to use our network of infrastructure and relationships enabled us to place a relatively low quantity of sulphuric acid at very high margins due to the tightness in the international sulphuric acid market.

Reported revenue of $179.1 million for 2007 was $35.5 million lower than 2006 due to the adoption of a new accounting policy. But for this, 2007 revenue would have shown an increase over 2006. EBITDA reflected the true performance of the business, and for the year was $14.9 million compared with $9.1 million in 2006.

Corporate costs for 2007 were $17.1 million compared with $12.1 million in 2006. Most of this increase was due to accruals for the LTIP and annual incentive compensation, which totaled $3.8 million, costs of $1.6 million related to a senior management change, and $0.7 million related to the review of strategic alternatives. These costs were partially offset by recognition of US$0.8 million related to the Hurricane Rita insurance claim, and higher net foreign exchange gains of $1.4 million.

Total capital expenditures for 2007 were $9.1 million compared with $7.5 million in 2006. Of this, $6.9 million was for maintenance capex, compared with $6.6 million in 2006. Most of the non-maintenance capital expenditures in 2007 were in respect of the expansion of the Rotterdam terminal which we previously announced. The expansion is proceeding substantially as planned.

Turning now to the first quarter of this year, briefly, Chemtrade had a very strong first quarter, reporting significant increases in revenue and earnings. As Mark mentioned, primarily as a result of historically high prices for sulphuric acid, our Sulphur Products and International segments earned substantially higher margins. In fact, all of our businesses performed well, not just those that benefit from the higher sulphuric acid prices.

There are more details on the quarter in our news release and in our conference call this morning, both of which you can access via our website.

First, in early March we announced the renewal of the long-term contract between Chemtrade and Vale Inco. This relationship provides a strong foundation of both product and commodity risk mitigation. Vale Inco provides Chemtrade with the majority of the acid we sell to the merchant market. The new agreement term lasts until the end of 2017 and is evergreen thereafter. The agreement continues the philosophy of mitigating commodity risks by sharing price movements between Vale Inco and Chemtrade.

Later in March we announced our investment in Buenos Aires-based Meranol, a leading Argentine producer of sulphuric acid and other sulphur products. This is a small initial investment – US$2.5 million in notes, which are convertible into 10% equity, and an option to increase our equity investment to up to 45%. The most important aspect of the investment is that it extends the international scope of our business and enhances our ability to participate in markets with expanding demand for our products.

As I said earlier, and as you have seen from our latest results, we have and continue to position ourselves to capitalize on a strengthening acid market. The duration of this market and how we continue to capitalize on it will have a significant effect on Chemtrade.

Our focus on operational reliability and customer relationships are bringing positive financial results. We've talked previously about operational excellence and customer relationships but I thought a better understanding of how Chemtrade's business model interacts with these factors and the dynamic of the current acid markets, would provide you with some perspective on our business and its outlook .

The supply/demand characteristics for both sulphuric acid and sulphur have led to significant price increases for both of these products.

As most of you know, Chemtrade's business model and structure affect the extent to which changes in acid pricing flow through to our bottom line. As I've said, we expect both acid pricing and margins to increase over the year. However, we expect that pricing will increase more drastically than our margins for a few reasons.

First, the acid that we produce at our own facilities, which represents about 30% of what we sell, is produced from sulphur. Therefore, the acid price increases achieved are first needed to cover the price increase of our sulphur raw material before we expand our margins.  

Secondly, due to our risk sharing contracts, a great deal of the market improvement is shared with our suppliers. This has always been a key component of our value proposition and consequently the manner in which we have structured our business.

Most of the merchant acid marketed by Chemtrade is obtained under what we call risk-mitigating contracts. These contracts, and particularly the Vale Inco contract, attempt to mitigate but not eliminate typical commodity risks. Of course, this works both ways. On the one hand, we are protected from the full impact of low prices, but on the other hand, when prices are good, as is the case now, we share a portion of this upside with our suppliers.

Finally, while the spot price increases we are seeing in the regions where we participate reflect the industry's reported information, Chemtrade only sells a minimal volume on the spot market, thus while our pricing will adjust with the market, it will not exactly track spot market selling prices. Accordingly, our average contract prices have not reached the level of some of the spot prices seen in the market. We have been able to increase our pricing to recover our increased sulphur costs and increase margins. Over the next few quarters we expect that our average prices will continue to climb and margins continue to expand.