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Chemtrade Logistics Income Fund Reports 2010 Second Quarter Results

TORONTO, July 28, 2010 – Chemtrade Logistics Income Fund (TSX:  CHE.UN) today announced results for the three months and six months ended June 30, 2010.

Cash flow from operating activities for the second quarter was $5.8 million (2009:  $6.8 million) and Distributable cash after maintenance capital expenditures for the period was $8.1 million, or $0.27 per unit (2009:  $11.0 million, or $0.36 per unit), generated from revenue of $137.4 million (2009:  $124.6 million).  Distributable cash after maintenance capital expenditures for the quarter was negatively impacted by the shutdown of Chemtrade’s Beaumont, Texas plant following a fire on May 15, 2010.  The results do not include any potential insurance proceeds which will be included in Distributable cash when received.  The revenue increase reflected the improvement in demand and increased volume over last year in the Sulphur Products & Performance Chemicals (SPPC) segment, and higher sulphur prices in SPPC and International.  EBITDA for the second quarter was $15.0 million (2009:  $17.5 million) and net loss was $1.1 million compared with net earnings of $13.6 million in the same period in 2009.

For the six months ended June 30, 2010 cash flows from operating activities were $35.1 million (2009:  negative $3.1 million), and Distributable cash after maintenance capital expenditures was $23.1 million (2009:  $20.6 million), or $0.75 per unit (2009:  $0.67 per unit).  EBITDA was $39.5 million (2009:  $35.7 million), and revenue was $264.2 million (2009:  $286.4 million).  Net earnings for the first six months of 2010 were $12.7 million (2009:  $14.9 million).

Mark Davis, President and Chief Executive Officer of Chemtrade, said “Overall business conditions in the second quarter this year were better than a year ago.  Demand levels are well above 2009 levels, and prices for sulphuric acid, our major product by volume, while still lower than a year ago, continued the improvement trend seen during the first quarter of this year.  It is unfortunate that the benefit of these improved conditions was offset by the impact of the incident at Beaumont.  We estimate that this incident adversely impacted second quarter distributable cash by $2.5 million, or 8 cents per unit.  Despite this, for the first half of 2010, Distributable cash of $0.75 per unit was comfortably ahead of our distributions of $0.60 per unit.”

Sulphur Products & Performance Chemicals (SPPC) generated revenue of $82.0 million in the second quarter compared with $77.9 million in the second quarter of 2009.  The main reasons for the increase in revenue were higher volumes and higher sulphur prices.  These positive factors more than offset the negative impact of the stronger Canadian dollar on U.S. denominated revenue.  EBITDA for the second quarter was $13.2 million compared with $15.2 million in 2009.  The lower EBITDA relative to the second quarter last year was due primarily to the Beaumont plant being off-line for half of the quarter and to extra costs incurred to ensure customer operations were not disrupted.  Additionally, results for the second quarter of 2009 benefited from an insurance recovery of $2.3 million related to an incident at the Beaumont plant in 2008.

Pulp Chemicals reported second quarter revenue of $11.2 million compared with $13.2 million in 2009, reflecting lower sales volume of sodium chlorate.  EBITDA was $4.0 million compared with $4.7 million in 2009 with lower costs partially offsetting the impact of lower volumes.

International reported revenue of $44.3 million for the second quarter, compared with $33.5 million in 2009, the increase due mainly to higher prices for sulphur.  EBITDA for the quarter was $3.7 million compared with $4.9 million reported last year, which included a few high margin contracts.

Corporate costs during the second quarter of 2010 were $1.4 million lower than the second quarter of 2009.  Of this, $0.6 million was due to lower LTIP costs.  Additionally, in the second quarter of 2009 unrealized losses of $0.6 million relating to natural gas swaps were recorded, whereas there were no swaps in 2010.

During the second quarter of 2010, the Fund issued $10.0 million of 6% convertible unsecured subordinated debentures due March 31, 2017 pursuant to an over-allotment option granted to the underwriters who purchased the $80.0 million convertible debentures issuance in the first quarter.  The Fund also repaid approximately $25.0 million of outstanding term debt, bringing total repayments for the year to approximately $79.0 million.

Mr. Davis said, “Looking forward, demand for our products remains stable.  Vale has now settled its strike and is expected to return to full production soon.  Finally, we also expect our Beaumont plant will be re-started by the end of October.  The results for the first half of the year, despite these issues, again demonstrated the resilience of our business and business model.  The strong performance of our underlying businesses along with the strength of our balance sheet supports our belief that the current distribution rate is sustainable.”

Distributions

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

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”, “expected”, “intend”, “may”, “will”, “project”, “plan”, “should”, “believe” and similar expressions are intended to identify forward-looking statements.  These statements are based on a number of material factors and assumptions and involve known and unknown risks and uncertainties that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.  As a result, we cannot guarantee that any forward-looking statement will materialize.  Forward-looking statements in this news release describe the expectations of Chemtrade as of the date of this news release.  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.

This news release contains forward-looking statements about the objectives, strategies, financial condition, results of operations and businesses of the Fund, including, but not limited to:

  • the strength of demand for our products going forward;
  • the timing of a return to full production by Vale;
  • the timing of Chemtrade’s Beaumont plant re-start; and
  • the sustainability of the Fund’s distribution rate.

Financial outlook information contained in this news release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available.  Readers are cautioned that such financial outlook information contained in this news release should not be used for purposes other than those for which it is disclosed herein.

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

A conference call to review the second quarter 2010 results will be webcast live on www.chemtradelogistics.com and www.newswire.ca/webcast on Thursday, July 29, 2010 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

Website: www.chemtradelogistics.com

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