Chemtrade Logistics Income Fund Issues 2025 Guidance and Raises Monthly Distribution

TORONTO--(BUSINESS WIRE)--January 10, 2025-- 

Chemtrade Logistics Income Fund (TSX: CHE.UN) ("Chemtrade") today issued 2025 Guidance and increased the level of monthly distributions to unitholders.

2025 Guidance

 
                                                  2024 Guidance 
($ million)                     2025 Guidance      Updated in Q4   2023 Actual 
-----------------------------  ----------------  ----------------  ----------- 
Adjusted EBITDA (1)            $430.0 - $460.0   $445.0 - $460.0     $502.6 
-----------------------------  ----------------  ----------------  ----------- 
Maintenance capital 
 expenditures (1)              $100.0 - $120.0   $100.0 - $110.0     $104.2 
-----------------------------  ----------------  ----------------  ----------- 
Growth capital expenditures 
 (1)                            $40.0 - $60.0     $70.0 - $80.0       $62.1 
-----------------------------  ----------------  ----------------  ----------- 
Lease payments                  $65.0 - $75.0     $60.0 - $70.0       $58.3 
-----------------------------  ----------------  ----------------  ----------- 
Cash interest (1)               $45.0 - $55.0     $40.0 - $50.0       $42.4 
-----------------------------  ----------------  ----------------  ----------- 
Cash tax (1)                    $45.0 - $55.0     $40.0 - $50.0       $14.7 
-----------------------------  ----------------  ----------------  ----------- 
 
 
(1)    Adjusted EBITDA is a Total of segments measure. Maintenance capital 
       expenditures, Cash interest and Cash tax are Supplementary financial 
       measures. Growth capital expenditures is a non-IFRS financial measure. 
       See Non-IFRS and Other Financial Measures. 
 

Chemtrade expects its 2025 Adjusted EBITDA to range between $430.0 million and $460.0 million. Based on the mid-point of the above guidance, including the anticipated spending on Growth capital expenditures and the changes in capital allocation, Chemtrade expects to end 2025 with a Net debt to Adjusted EBITDA ratio(1) close to 2x with an implied Payout ratio(1) of 48%.

Chemtrade's latest guidance for 2024 projects Adjusted EBITDA to range between $445.0 and $460.0 million, marking the second-highest annual Adjusted EBITDA in the organization's history. The midpoint of 2025 guidance represents the third highest annual Adjusted EBITDA in the company's history. This level of Adjusted EBITDA reinforces the significant step-change in Chemtrade's Adjusted EBITDA and cashflow generation compared to pre-pandemic levels as it would be the fourth consecutive year at the higher level of earnings.

Chemtrade's guidance is based on numerous assumptions. Certain key assumptions that underpin the guidance are as follows:

   -- 
 None of the principal manufacturing facilities (as set out in 
      Chemtrade's AIF) incurs significant unplanned downtime. 
 
 
   -- 
 No labour disruptions occur at any of Chemtrade's principal 
      manufacturing facilities (as set out in Chemtrade's AIF). 
 

The incoming US administration has threatened to levy a 25% tariff on Canadian products being exported to the US. It is difficult to estimate the impact of potential tariffs as it is possible that these could be passed through to customers. This guidance does not take into account the impact of potential tariffs.

 
(1) Net debt and Payout ratio are Non-IFRS ratios. Net debt to Adjusted EBITDA 
is a Capital management measure. Please see Non-IFRS and Other Financial 
Measures for more information. 
 
 
                                                            2024 
                                            2025        Assumptions     2023 
Key Assumptions                          Assumptions    Updated in Q4   Actual 
--------------------------------------  -------------  --------------  ------- 
Approximate North American MECU sales 
 volumes                                   180,000        175,000      181,000 
--------------------------------------  -------------  --------------  ------- 
2025 realized MECU Netback being lower 
than 2024 (per MECU)                     CAD ($115)         N/A          N/A 
--------------------------------------  -------------  --------------  ------- 
Average CMA(1) NE Asia caustic spot 
price index per tonne(2)                   US$395          US$385      US$455 
--------------------------------------  -------------  --------------  ------- 
Approximate North American production 
 volumes of sodium chlorate (MTs)          250,000        265,000      283,000 
--------------------------------------  -------------  --------------  ------- 
USD to CAD average foreign exchange 
 rate                                       1.360          1.358        1.349 
--------------------------------------  -------------  --------------  ------- 
Long term incentive plan costs (in $ 
 millions)                              $15.0 - $20.0  $20.0 - $25.0    $17.3 
--------------------------------------  -------------  --------------  ------- 
 
 
(1)    Chemical Market Analytics $(CMA)$ by OPIS, a Dow Jones Company, formerly 
       IHS Markit Base Chemical. 
(2)    The average CMA NE Asia caustic spot price for 2025, 2024 and 2023 is 
       the average spot price for the four quarters ending with the third 
       quarter of that year as the majority of our pricing is based on a one 
       quarter lag. 
 

Chemtrade remains focused on its long-term objective of delivering sustainable earnings growth and generating value for investors. To achieve this, Chemtrade has identified various organic growth initiatives. In 2025, Chemtrade plans to invest between $40M and $60M in growth capital expenditures, which includes expansions to its water treatment chemicals, upgrades to ultrapure sulphuric acid production and other organic growth projects.

In addition, growth investments could potentially include M&A, should Chemtrade identify an opportunity that fits strategically within its portfolio and has synergistic value. The acquisitions Chemtrade would target would primarily be those with annual Adjusted EBITDA in the $10.0 - $50.0 million range.

Capital Allocation -- Increase in monthly distribution and continuation of NCIB program

Chemtrade's management and Board of Trustees continue to assess opportunities to further adjust and optimize Chemtrade's capital structure and capital allocation.

Chemtrade's balance sheet has continued to improve over the past few quarters with a Net debt to Adjusted EBITDA ratio of 1.8x at September 30, 2024. Chemtrade's business has also strengthened as evidenced by three consecutive record years in terms of Adjusted EBITDA generated.

Chemtrade is now increasing its monthly distribution of 5.5 cents per month by approximately 5% to 5.75 cents per month effective with the distribution that will be declared during the month of January 2025. In January 2024, Chemtrade had raised its distribution by 10% to 5.5 cents per month. This distribution represents a Payout ratio of 48% based on the mid-point of Chemtrade's guidance for 2025. The increase in the level of cash distributions is expected to have a minimal impact on Chemtrade's leverage and is not expected to impede Chemtrade's ability to execute growth initiatives while maintaining a healthy balance sheet.

In addition, Chemtrade intends to continue buying units under its NCIB program. As of the end of December 2024, Chemtrade has purchased 5.1 million units, which represents roughly 4% of units outstanding at the end of December 2024.

About Chemtrade

Chemtrade operates a diversified business providing industrial chemicals and services to customers in North America and around the world. Chemtrade is one of North America's largest suppliers of sulphuric acid, spent acid processing services, inorganic coagulants for water treatment, sodium chlorate, sodium nitrite and sodium hydrosulphite. Chemtrade is also one of the largest producers of high purity sulphuric acid for the semiconductor industry in North America. Chemtrade is a leading regional supplier of sulphur, chlor-alkali products, and zinc oxide. Additionally, Chemtrade provides industrial services such as processing by-products and waste streams.

NON-IFRS AND OTHER FINANCIAL MEASURES

Non-IFRS financial measures and non-IFRS ratios

Non-IFRS financial measures are financial measures disclosed by an entity that (a) depict historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to their composition, exclude amounts that are included in, or include amounts that are excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the entity, (c) are not disclosed in the financial statements of the entity and (d) are not a ratio, fraction, percentage or similar representation. Non-IFRS ratios are financial measures disclosed by an entity that are in the form of a ratio, fraction, percentage or similar representation that has a non-IFRS financial measure as one or more of its components, and that are not disclosed in the financial statements of the entity.

These non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS and, therefore, are unlikely to be comparable to similar financial measures presented by other entities. Management believes these non-IFRS financial measures and non-IFRS ratios provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures and non-IFRS ratios should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.

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January 10, 2025 07:00 ET (12:00 GMT)