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Chemtrade Logistics Income Fund Announces 2007 Third Quarter Results

Releases Conclusions of Review of Strategic Alternatives

TORONTO, October 25, 2007 — Chemtrade Logistics Income Fund (TSX:  CHE.UN) today announced results for the three months ended September 30, 2007.  The strong demand for Chemtrade’s products in the first half of the year continued in the third quarter, producing another period of solid operating results.  During the third quarter, the operating businesses generated earnings before interest, income taxes, depreciation and amortization (“EBITDA”) of $24.1 million compared with $20.0 million in the third quarter of 2006.  The benefit of strong operating results in the third quarter was partially offset by higher corporate costs, particularly those related to the senior management change at the end of the period, and to the review of strategic alternatives.

Distributable cash after maintenance capital expenditures for the period was $14.3 million, or $0.42 per unit (2006:  $13.3 million, or $0.40 per unit), generated from revenue of $143.2 million (2006:  $148.7 million) and EBITDA of $19.4 million (2006:  $16.7 million).  Net earnings for the third quarter were $7.1 million compared with a net loss of $10.2 million in the same period in 2006.  The results for the third quarter of 2007 include costs totalling approximately $1.4 million related to a senior management change and the review of strategic alternatives.  The net loss in 2006 included a non-cash charge of $15.6 million with respect to impairment in the net book value of property, plant and equipment used to manufacture powder SHS.

For the nine months ended September 30, 2007 distributable cash after maintenance capital expenditures was $31.4 million (2006:  $37.5 million), or $0.94 per unit (2006:  $1.12).  EBITDA was $46.7 million (2006:  $51.4 million), and revenue was $402.1 million (2006:  $405.2 million).  Net earnings for the first nine months of 2007 were $11.6 million (2006:  net loss $1.6 million).  In addition to the higher corporate costs noted as impacting the third quarter, the numbers for the year-to-date also include $2.5 million relating to the cessation of powder SHS production at the Leeds plant.

Mark Davis, President and Chief Executive Officer of Chemtrade, said, “The significant improvement from our Sulphur Products & Performance Chemicals group was the key driver of our strong third quarter results.  Additionally, the benefits of some of the initiatives we recently took, such as the reorganization of our powder SHS business, the addition of the Olin business and our focus on enhancing the reliability of our regen and merchant acid plants, were apparent in the third quarter.  We have also been able to capitalize on higher demand and prices for acid – merchant, ultra pure and regen.  We expect these market dynamics to continue.”

Sulphur Products & Performance Chemicals (“SPPC”) generated revenue of $84.6 million (2006:  $73.3 million) in the third quarter, reflecting higher volumes and prices for merchant and ultra pure acid, and higher volumes of SHS.  The higher volumes of SHS included sales to customers added as a result of the Olin asset acquisition during the second quarter.  EBITDA was $16.8 million compared with $12.3 million in 2006.  The improvements were partially offset by higher zinc costs.

Pulp Chemicals reported third quarter revenue of $14.8 million compared with $13.4 million in 2006, and EBITDA was $5.0 million, compared with $5.7 million in 2006.  Higher selling prices for sodium chlorate were offset by higher input costs, particularly salt, a key raw material used in the production of sodium chlorate.

International reported revenue of $43.8 million for the third quarter compared with $62.1 million reported in 2006.  The decrease is due primarily to the Fund’s adopting recommendations of the Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3855, which required certain sales transactions to be recorded on a net margin basis.  EBITDA for the third quarter was $2.3 million compared with $2.0 million in 2006.


Distributions declared in the third quarter totalled $0.30 per unit, comprised of monthly distributions of $0.10 per unit.

Review of Strategic Alternatives

On February 28, 2007, the Fund announced that the Board of Trustees had initiated a process to identify and evaluate strategic alternatives available to maximize Unitholder value.  The review was undertaken largely as a response to the Government’s initiative to tax income trust distributions and the possible restriction to growth that these initiatives may pose.  A summary of the conclusions reached during the review include:

Chemtrade will continue to focus on improving and growing its portfolio of chemical businesses and related assets;

Chemtrade will adopt the business and legal structure that maximizes Unitholder value.  Based on current legislation and access to capital, the Fund believes the current income trust structure maximizes Unitholder value;

Based on existing tax laws and an analysis of restructuring options, Chemtrade expects that commencing in 2011 the Fund’s earnings will be subject to a Canadian effective tax rate of no more than 10%, since a large portion of the Fund’s earnings are non-Canadian source or are received in the form of dividends;

Growth of size and scale will continue to be a key element of Chemtrade’s strategy.  To the extent possible, the Fund will continue financing these initiatives with a combination of debt and equity which the Fund does not believe will materially restrict its ability to pay distributions and maximize Unitholder value.  However, if necessary, the Fund would consider increasing its debt leverage to facilitate strategic growth even if the increased leverage temporarily restricted or reduced the ability to pay distributions;

Distributable cash generated in excess of the Fund’s current distribution rate will be used primarily to reduce debt, improve operations or fund incremental growth projects; and

Finally, consideration of the sale of the Fund as one strategic alternative has been terminated.  Although the Fund received numerous indications of interest, given the current state of the credit markets the Board concluded that a transaction would not be in the best interest of Chemtrade Unitholders at this time.

Chemtrade operates a diversified business providing industrial chemicals and services to customers in North America and around the world.  Chemtrade is one of the world’s largest suppliers of sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite, and a leading processor of spent acid.  Chemtrade is also a leading regional supplier of sulphur, sodium chlorate, phosphorous pentasulphide, and zinc oxide.

This news release 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 “anticipate”, “continue”, estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking statements.

This news release contains forward-looking statements about the objectives, strategies, financial condition, results of operations and businesses of the Fund.  These statements are “forward-looking” as they are based on current expectations about our business and the markets we operate in, and on various estimates and assumptions.

  • Forward-looking statements in this news release describe our expectations as of the date of this news release.
  • Our actual results could be materially different from our expectations if known or unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate.  As a result, we cannot guarantee that any forward-looking statement will materialize.
  • Forward-looking statements do not take into account the effect that transactions or non-recurring items announced or occurring after the statements are made may have on our business.
  • We disclaim any intention or obligation to update any forward-looking statement even if new information becomes available, as a result of future events or for any other reason.
  • Risks that could cause our actual results to differ materially from our current expectations are discussed in the RISKS AND UNCERTAINTIES section of our MD&A.

Further information can be found in the disclosure documents filed by Chemtrade Logistics Income Fund with the securities regulatory authorities, available at

A conference call to review the third quarter 2007 results will be webcast live on and on Friday, October 26, 2007 at 10:00 a.m.

To view this entire news release including financial statements, download the PDF.

* * * *

For further information:

Mark Davis
President & CEO 

Tel: (416) 496-4176

Rohit Bhardwaj
Vice President, Finance & CFO 

Tel: (416) 496-4177


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