Mark Davis, President & CEO

Good morning, ladies and gentlemen.

There will be three parts to our presentation this morning. I will start with an overview of Chemtrade, including our business strategies and model.
     

I will also review some of the initiatives we've taken to strengthen the business.   Rohit will then cover the financial results, and I will go over the conclusions from the recently completed review of strategic alternatives and have some closing remarks.

   
  Chemtrade is a diversified business that provides industrial chemicals and services to customers in North America and around the world. The volume for three of our products – sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite – places us among the world's largest suppliers.  Our other businesses are more regional or niche in nature, but in all cases, we have strong market positions.
     
  This portfolio is the result of six years of growth since our IPO. During that time, we have significantly enhanced the size and scope of Chemtrade, primarily through acquisitions. These actions have led to a diversification of our portfolio of products, geographic reach, and most important, sources of earnings and distributable cash.
     
This broad product, customer and geographic reach spreads our business risk. We further mitigate risks by entering into contracts with our customers or suppliers that share the risks typically inherent in industrial chemicals.   I'll have more to say on our risk mitigating contracts shortly.
     
 

We have completed five significant acquisitions since our IPO in 2001. In each case the acquisition has built upon the assets we already owned and/or increased the quality of earnings within our portfolio. In certain cases, such as the Peak acquisition in 2005, we accomplished both of these. That acquisition expanded our sulphuric acid business, diversified our end markets and is based on risk sharing agreements with certain of our customers.

     
 

We now serve a diverse range of end markets. This has changed significantly over the past few years. Prior to adding the Peak assets in 2005, approximately 58% of our products were sold to the pulp and paper industry broadly defined.. As you can see, based on 2006 revenues, that was down to 25% as we added significant new end market industries such as oil refineries.

   
 

So, having commenced business in 2001 as primarily a removal services provider for sulphur by-products, Chemtrade is now a diversified business with a wide range of products and services.  While North America accounts for the bulk of our business we also have an important strategic international presence.

     
 

Growing and diversifying the business has been and continues to be one of our key strategies.  However, we have always understood that growth is not possible without a focus on operational excellence in the businesses we already own. We will talk about this in a minute.

     
 

At the heart of our strategies is our business model, which is designed to generate stable cash flow. There are several elements to our business model, including the diversity I just mentioned, competitive positioning, and service and product differentiation, but the key element of the model is the risk sharing contracts we have with our customers and suppliers.

   
In 2007, 80% of our revenue is being generated through risk sharing contracts, so we are successfully applying that aspect of our model.  These contractual agreements contain attributes that tend to mitigate, but do not eliminate, the effect of typical commodity price movements.
     
 

Initially this mitigation was provided by our key sulphur products contract. Since that time, we have bolstered this contractual mitigation by the contracts we obtained in our Pulp Chemicals and Peak acquisitions, and in our sales and marketing agreement with ZhongCheng.

     

While the attributes of the contracts vary from group to group, the common objective is to reduce the effect on Chemtrade that movements in commodity prices could have. For example, our agreements with Inco, our largest supplier of merchant acid, provide that the producer assumes 60% of any reduction in acid price movements but also receives 60% of any price increases.

 

In our Pulp Chemicals business, Canfor purchases about 65% of our sodium chlorate capacity at a price that adjusts for changes in virtually all raw materials, namely electricity, salt, caustic soda and steam. These raw materials constitute approximately 95% of variable costs and 70% of the total cost of producing sodium chlorate.

In our Refinery Services business, a large portion of the earnings is

generated by contracts that adjust the customer's price for changes in natural gas, a major cost input. Refinery Services' regen business is based on 2-5 year contracts, which form the foundation of its earnings. These contracts not only adjust pricing to pass through changes in natural gas, but often contain a CPI index on labour as well.  This contractual basis helps mitigate the financial impact of cyclical movements of natural gas pricing.

One more example of a key risk mitigating contract is the arrangement with ZhongCheng for the supply of powder SHS for the North American market. The seven-year agreement adjusts the price we pay ZC for their product by a percentage to share risk for changes in the U.S. dollar/ RMB exchange rate, and further, any movement in the price at which the product is sold to our customers.
So as you can see, despite differences in the terms of these keys agreements, the common objective for Chemtrade is to reduce our exposure to commodity price movements, and enhance the stability of our cash flow.

Before handing the presentation over to Rohit, I want to comment briefly on some of the important initiatives we have undertaken this year and last.
     
 

We continue to focus on the importance of improving our existing businesses and have had many successes.  I want to mention just two: Operational reliability; and the repositioning of our SHS business.

     
In mature businesses such as ours, operational excellence and sustainable cash flow go hand in hand. Part of operation excellence is operating efficiency and reliability.
 
 

We understand that our assets need to generate income not only next quarter but for many years to come. That is why operating efficiency and reliability has, and continues to be one of our key priorities.   We have spent additional capital on this aspect of our business in 2006 and 2007 and will continue to work on improving our plants each year. We have already received some benefits from these initiatives and are confident that there is more to come.

     

The powder SHS market was a drag on Chemtrade's performance in 2005 and 2006 because of escalating raw material costs and declining demand from one of our key end use markets.  We took decisive steps to solve this problem. While the decisions were difficult, we are confident we have taken the right steps to optimize the returns from this business.  By stopping powder SHS production at our plant in Leeds , we have eliminated our manufacturing risk and escalating raw material costs. We were able to retain, and actually increase, our customer base by replacing this volume under the marketing arrangement we now have with ZhongCheng. The move was good for our customers, Chemtrade and ZC.  We have a larger customer base, our customers have security of supply from the largest producer in the world, and we continue to profit from our long-term customer base.

We also acquired the Olin liquid SHS business earlier this year. This further solidifies our position in the SHS market.  Under the agreement, Olin now produces product for Chemtrade. The benefits of the transaction for Chemtrade are that it expands our customer base, and also gives us added flexibility in supplying our customers from the Olin plants in Charleston , Tennessee and Augusta , Georgia , or from our own plant in Leeds , South Carolina .

In summary we have significantly repositioned and improved our SHS business.

I'll now hand the presentation over to Rohit.

   
Rohit Bhardwaj, VP Finance & CFO

Thank you, Mark, and good morning everyone.

As Mark mentioned, we have taken a lot of initiatives over the past year to improve the operating reliability and efficiency of our facilities, and to reposition Chemtrade in the SHS market. The benefits of these actions are becoming evident in our financial performance this year.

For the nine months ended September 30, 2007 distributable cash after maintenance capital expenditure was $31.4 million, or 94 cents per unit.

     
 

However, if you add back the $2.5 million of costs booked in the first half with respect to the cessation of production at the Leeds plant in 2006, distributable cash would have been $33.9 million, or 7 cents per unit higher at $1.01 per unit. Adding back the corporate costs in the third quarter for a senior management change and activities related to the review of strategic alternatives, would have taken distributable cash per unit another 4 cents higher to $1.05 per unit.

     
 

In the third quarter, strong performances by the operating businesses, particularly SPPC, generated distributable cash after maintenance capex of $14.3 million, or 42 cents per unit. Again, however, adding back the $1.4 million of corporate costs for the management change and strategic review costs, distributable cash would be $15.7 million, or 46 cents per unit.

 

The principal reason for the decline in aggregate third quarter revenue over last year was the adoption of the new CICA Handbook section on Financial Instruments. This required us to record certain sales transactions in the International segment on a net basis. Revenues in SPPC and Pulp were higher than last year, but these were more than offset by the effect of the accounting change.

Looking at the segments, year-to-date revenue for the operating groups is slightly behind last year, but this is entirely a reflection of the accounting change in International.
     
 

For the third quarter, the story is the same, although it is clear that SPPC was the driver of the improvement. Increased volumes, but more importantly, a significant increase in pricing for all the group's acid products – merchant, regen and ultra pure – were the main factors. We also saw the benefits of last year's additional spending on our Beaumont and Shreveport plants. Both facilities operated well and were able to respond effectively to the increased demand.

SPPC also includes revenue form the Olin acquisition, although this was somewhat mitigated due to the weaker U.S. dollar.

EBITDA for the year-to-date reflects the strong performance by SPPC, although 2007 also includes the $2.5 million of costs recorded in the first half related to the Leeds closure. Although Pulp Chemicals recorded higher revenue for the nine months, it was not enough to offset higher input costs, primarily of salt.

     
  The third quarter shows clearly the improved contribution from SPPC. The high demand and high price environment has been excellent, and we expect those conditions to remain for the balance of this year, and throughout 2008. The repositioned SHS business is also performing well, and if not for a significant increase in net zinc costs in the third quarter versus last year, the results would have been even better.
   
  As I noted earlier, corporate SG&A costs were higher in the third quarter as a result of a senior management change costing $900,000, and costs of $500,000 related to the review of strategic alternatives. For the year-to-date, SG&A also includes costs of approximately $3.1 million in the second quarter related to higher LTIP accruals.
   
Maintenance capital expenditure for the first nine months of 2007 was $4.1 million. We had estimated our annual maintenance capital spend at $7.5 million and that remains the case for this year. We expect, therefore, to spend the balance in the fourth quarter. Just as a reminder, our capex spend in the fourth quarter of 2006 was $3.3 million, so our expected spend this year is similar to the amount we spent in this time frame last year.
     
 

Looking ahead, we expect that our annual maintenance capex spending will be higher than the rate of $7.5 million we had previously indicated. The costs for all projects appear to be 25-30% higher than even last year as the high demand for skilled labour and materials has led to increased costs for most capital projects. Once the construction and materials markets cool somewhat we expect that our maintenance capital plan will return to about $8 million per year.

     

The extra costs in the first half due to the extended Shreveport and Beaumont plant shutdowns were about $1.7 million of foregone distributable cash. We will continue our efforts to improve the reliability of these plants over the years, but have taken a very good first step.

With respect to the impact on Chemtrade of Canadian / U.S. dollar exchange rate, we are in reasonable shape. Our sensitivity to changes in the exchange rate has reduced as we made changes in our business. We are significantly less sensitive now to changes in the U.S./Canadian exchange rate than we used to be. We now estimate that a one-cent change in the Canadian/U.S. dollar exchange rate impacts distributable cash after maintenance capital expenditures by less than $200,000 annually.

     
 

To manage the predictability of our cash flows, we entered into a series of foreign exchange contracts that hedge that portion of Chemtrade's U.S. dollar based cash flow that is expected to be converted into Canadian dollars. As of September 30, 2007 , substantially all planned transfers for the remainder of 2007 and all 2008 have been effectively hedged at approximately 83 cents.

   
We are also in good shape with respect to our debt.
     
  We are fortunate that during the current period of tightness in the credit market we have no immediate need to access further credit.. We have no debt due to mature until August 2009 and sufficient liquidity and credit lines to manage our business appropriately. We also have interest rate swap agreements that result in our having an effective interest rate on our U.S. term debt at 5.85% and on our Canadian term debt at 5.22%.
     
I'll now hand the presentation back to Mark.
   

Mark Davis, President & CEO

Thanks Rohit.

In the third quarter we started to see the real potential for Chemtrade's businesses to generate cash. Our portfolio of businesses is now well positioned and can be further improved from this position of strength.

     
 

Our business model is proven and effective, and we look forward to taking advantage of the favorable market conditions we se for the near future.

     
Finally, a few comments on the review of strategic alternatives that we completed recently.   

Of key importance to us in trying to understand the possible impact of the Government's proposal to tax income trusts was ensuring that Chemtrade retained the ability to continue adding scope and scale to its businesses. As I said earlier, this is central to maximizing returns for our unitholders.
     
  In summary, the review concluded that maintaining our current income trust structure best maximizes value for our unitholders.  Further we believe that our structure currently minimizes taxes while not unduly impeding our ability to access the capital necessary to grow and improve our business.
     

Our portfolio of businesses is now well positioned and can be further improved.  Growth of size and scale continues to be a key element of our strategy and our businesses form an excellent foundation from which to build.  The new tax on income trusts that becomes effective in 2011 will not have a significant negative impact on Chemtrade.  Since a large portion of the Fund's earnings are non-Canadian source or are received as dividends, the majority of our earnings will not be subject to the new 2011 tax.  Despite the introduction of an approximately 30% tax rate on the Fund's earnings, we believe that the Fund's effective tax rate in 2011 should be no more than 10%.  We believe that this tax burden can be borne by our business without affecting our initiatives.

     
 

 

Thank you.