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Chemtrade Logistics Income Fund Reports 2010 Third Quarter Results

Confirms Decision to Remain an Income Trust

TORONTO, November 10, 2010 – Chemtrade Logistics Income Fund (TSX:  CHE.UN) today announced results for the three months and nine months ended September 30, 2010.  The third quarter financial statements and MD&A will be available on Chemtrade’s website at www.chemtradelogistics.com and on SEDAR at www.sedar.com.

Cash flow from operating activities for the third quarter was $19.2 million (2009:  $18.9 million) and Distributable cash after maintenance capital expenditures for the period was $9.5 million, or $0.31 per unit (2009:  $11.6 million, or $0.38 per unit), generated from revenue of $142.6 million (2009:  $127.0 million).  The results for the third quarter reflect the fact that the Beaumont, Texas plant was off-line for the entire quarter as a result of a fire that occurred in May 2010.  The results do not include any potential recovery under Chemtrade’s business interruption insurance policy.  These proceeds will be included in Distributable cash when received.  The revenue increase in the quarter reflects the improved demand and volume over last year for sulphuric acid and higher sulphur prices.  EBITDA for the third quarter was $20.3 million (2009:  $21.5 million) and net earnings were $10.4 million compared with $19.5 million in the same period in 2009.  The decline in net earnings included unrealized foreign exchange gains that were $5.9 million lower than the same quarter in 2009.

For the nine months ended September 30, 2010 cash flows from operating activities were $54.3 million (2009:  $15.8 million), and Distributable cash after maintenance capital expenditures was $32.5 million (2009:  $32.2 million), or $1.06 per unit (2009:  $1.04 per unit).  EBITDA was $59.7 million (2009:  $57.3 million), and revenue was $406.8 million (2009:  $413.4 million).  Net earnings for the first nine months of 2010 were $23.1 million (2009:  $34.4 million).

Mark Davis, President and Chief Executive Officer of Chemtrade, said “The demand for our products continues to strengthen as the year progresses.  Demand levels for sulphuric acid, our major product by volume, have improved throughout 2010 and prices for most of our products continue to have upward momentum.  Unfortunately, the shutdown of Beaumont for the entire quarter more than offset the benefit we derived from these improved conditions.  We estimate that the lack of production from Beaumont adversely impacted third quarter Distributable cash by $5.0 million, or $0.16 per unit.  The other factor that negatively affected our results was less than normal supply of product from the Vale Sudbury smelter, which did not return to full production until part way through August.  Despite the impact of these factors on both the second and third quarters, Distributable cash for the first nine months of 2010 was $1.06 per unit, comfortably ahead of our distributions of $0.90 per unit.”

Sulphur Products & Performance Chemicals (SPPC) generated revenue of $83.8 million compared with $77.7 million in 2009.  The main reason for the increase in revenue was higher demand for sulphuric acid and higher sulphur prices.  However, this was partly offset by the negative impact of the stronger Canadian dollar on U.S. denominated revenue.  EBITDA for the third quarter was $17.1 million compared with $21.3 million in 2009.  The lower EBITDA relative to the third quarter last year was due primarily to the Beaumont plant being off-line for the quarter and to extra costs incurred to ensure customer operations were not disrupted.  EBITDA also reflected a non-cash gain of $5.1 million related to the repair of the Beaumont facility whereas last year’s third quarter results included a non-cash gain of $2.7 million and a cash recovery of $1.1 million for an earlier incident.

Pulp Chemicals reported third quarter revenue of $13.4 million compared with $13.8 million in 2009, reflecting reduced demand for sodium chlorate.  EBITDA was $4.0 million compared with $4.5 million in 2009 reflecting the impact of lower volumes.

International reported revenue of $45.4 million for the third quarter, compared with $35.5 million in the third quarter of 2009, the increase reflecting higher volumes of sulphuric acid and higher prices for sulphur.  EBITDA for the quarter was $6.9 million compared with $3.2 million reported for the same quarter of last year.

Corporate costs during the third quarter of 2010 were $0.4 million higher than the third quarter of 2009.  This reflected foreign exchange losses in 2010 of $0.1 million compared with gains of $1.4 million in 2009, offset partially by LTIP costs that were $1.2 million lower this year compared to 2009.

Mr. Davis said, “Looking forward, we expect demand for our products to remain strong.  Our Beaumont plant is now back on-line and with Vale also having returned to normal production, we are well placed to take advantage of improved business conditions in the fourth quarter and to continue our success into 2011.  The results for the first nine months of the year again demonstrated the underlying strength of our businesses and business model.  Improved economic and operating conditions together with our solid balance sheet support our belief that the current distribution rate is sustainable.”

Distributions

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

Fund to Retain Income Trust Structure

Chemtrade confirmed its earlier announcements that it does not intend to convert to a corporation as a result of the new Specified Investment Flow-Through (SIFT) rules that come into effect in 2011. The Fund now believes it will not be subject to any SIFT tax.  The Fund also expects that over 50% of the Fund’s current annual distributions of $1.20 per unit will qualify as a taxable Canadian dividend, which should be beneficial to Canadian resident tax-paying Unitholders.

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 sustainability of the Fund’s distribution rate;
  • the likelihood of a possible conversion of the Fund to a corporation;
  • the applicability of SIFT tax to the Fund; and
  • the ability of distributions to qualify as a taxable Canadian dividend, the percentage thereof to so qualify and the effect of such qualification on Canadian resident tax-paying Unitholders

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 third quarter 2010 results will be webcast live on www.chemtradelogistics.com and www.newswire.ca/webcast on Thursday, November 11, 2010 at 8:30 a.m.

* * * *

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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