2001
Results Conference Call
Mark
Davis
President and Chief Executive Officer.
Good
morning, ladies and gentlemen. Thank you for joining us for our
conference call and webcast this morning.
Also
joining me today is Vic Wells, Vice President, Finance and Chief
Financial Officer. Vic and I will answer any questions you may
have following my brief remarks.
___
As
all you know, this is only our second reporting period, so the
2001 results cover the period from July 18, 2001 when we completed
our IPO, to December 31, 2001. Therefore, the three months ended
December 31 was, in fact, the first full quarter of operations
for Chemtrade Logistics.
We
were pleased with the results for the fourth quarter and for
the year. Chemtrade's performance for the fourth quarter was
ahead of the run rate in the stub third quarter, and this was
in spite of some signs of slowing in the economy.
Cash
available for distribution in the fourth quarter totaled $6.8
million which was generated from revenue of $51.0 million and
EBITDA of $8.1 million.
These
numbers reflect good performances from both our North American
business and from BCT Chemtrade, our international business.
BCT
Chemtrade improved even further on the strong results they posted
for the third quarter. Their fourth quarter results were aided
by spot sales to markets such as Tunisia. BCT Chemtrade's business,
like all of Chemtrade's, is very much supply driven. In addition
to BCT's base supply source which provides a strong, steady volume
of product, BCT generates increased earnings when additional
spot supply is available. This was a key component of the fourth
quarter results.
In
North America, we also had a good fourth quarter, exceeding the
third quarter stub period run rate and the IPO expectations.
You will recall that our third quarter results, even though they
were ahead of expectations in the IPO marketing materials, had
been affected by the unexpected interruption to production at
our Timmins liquid sulphur dioxide facility due to a problem
at the Falconbridge Kidd Creek smelter. The plant was back on
stream for the whole fourth quarter and was a strong contributor
to our performance.
A
quick comment on overall margin percentages. Last quarter we
had some questions about an apparent reduction in margin percentage
when the third quarter was compared to the IPO pro formas. As
we said, the main reason was a disproportionate share of aggregate
earnings coming from BCT versus North America due to the strong
BCT performance and the Kidd Creek outage in the North American
results.
In
the fourth quarter, our margin percentage has recovered to exceed
the prospectus levels. Essentially, with the Kidd Creek facility
back on line, the percentage contributions between North America
and BCT more closely reflect the IPO materials.
We
saw good demand for product through most of the fourth quarter,
although there was a bit of slowing towards the end of the year
as customers ran down inventories. The US reportedly went through
its largest de-stocking in history in the fourth quarter. The
fact that we made our numbers despite this softening is a good
indicator that our diverse customer base does limit our exposure.
In
the early part of this year we're seeing demand return to normal,
and I think this is partly behind the reasoning of some economists
who predict that the restocking expected to take place later
in the year will boost the economy.
___
This
performance for our first two periods has enabled us to pay out
higher distributions than we anticipated during the marketing
of the IPO. As you know, our distribution policy is to pay out
approximately 75% of the distributable cash earned each month,
about 9 cents per unit. We then pay supplemental distributions
after the end of the quarter.
In
the first stub period, distributions totaled 31 cents per unit,
which was higher than anticipated.
Last
Friday we announced the supplemental distribution for the fourth
quarter of 11 cents per unit, bringing total distributions for
the quarter to 38 cents per unit.
Annualized,
these distributions continue to exceed $1.50 per unit. We believe
this rate is sustainable and we plan we stay at that level until
we are certain that a higher rate of distribution is sustainable.
While we believe we will reach that point, until we do, we intend
to take a conservative approach and maintain our approximate
$1.50 per unit distribution rate.
We're
pleased with the level of distributions we have achieved so far.
At Friday's closing price of $13.25, a $1.50 payout would deliver
a yield of over 11%.
The
return for initial investors has also been quite good. At the
closing price on January 31 of $12.65 and taking into account
distributions paid or to be paid to unitholders of record on
January 31, the total return is over 33%.
___
To
summarize, our first two periods of operations have surpassed
our expectations and as a result we have been able to deliver
higher than anticipated distributions to unitholders.
We
believe the higher rate, approximately $1.50 per annum, is sustainable,
and are hopeful of further increases. However, we will only increase
our supplemental distributions when we are sure they can be sustained.
The
outlook for the business is positive, and we are seeing some
early signs that the economy is beginning to improve which will
add further strength to our business.
|
