Chemtrade Logistics Income Fund Reports 2009 Third Quarter Results

Further Improvements Over First and Second Quarters This Year

TORONTO, Nov. 11 /CNW/ - Chemtrade Logistics Income Fund (TSX: CHE.UN) today announced results for the three months and nine months ended September 30, 2009. The Fund reported further improvements in operating earnings compared to the first and second quarters of 2009. Demand for most of Chemtrade's products improved in the third quarter, including demand for sulphuric acid, Chemtrade's largest product by volume.

Comparing the third quarter 2009 results with the second quarter this year, cash flow from operating activities was $18.9 million (Q2 2009: $6.8 million) and Distributable cash after maintenance capital expenditures for the period was $11.6 million, or $0.38 per unit (Q2 2009: $11.0 million, or $0.36 per unit), generated from revenue of $127.0 million (Q2 2009: $124.6 million) and earnings before interest, income taxes, depreciation and amortization (EBITDA) of $21.5 million (Q2 2009: $17.5 million). Net earnings for the third quarter were $19.5 million (Q2 2009: $13.6 million).

For the nine months ended September 30, 2009 cash flows from operating activities were $15.8 million (2008: $53.7 million), and Distributable cash after maintenance capital expenditures was $32.2 million (2008: $72.0 million), or $1.04 per unit (2008: $2.14 per unit). EBITDA was $57.3 million (2008: $94.7 million), and revenue was $413.4 million (2008: $886.0 million). Net earnings for the first nine months of 2009 were $34.4 million (2008: $42.8 million).

Mark Davis, President and Chief Executive Officer of Chemtrade, said, "Our ongoing focus on operating efficiencies, diversified customer base and multiple supply sources continue to position us for success. The strength of our business portfolio is evident in our results. Despite lower economic activity this year and a labour disruption at a major supply source, the Fund continues to generate Distributable cash after maintenance capital expenditures comfortably in excess of our distribution rate and maintain its strong balance sheet."

Sulphur Products & Performance Chemicals (SPPC) generated revenue of $77.7 million, which was similar to the level of $77.9 million generated in the second quarter of 2009. EBITDA for the third quarter was $21.3 million, compared with $15.2 million in the second quarter of 2009. The improvement over the second quarter reflected higher volumes for most product lines as well as lower distribution and operating costs. EBITDA for the quarter also benefited from insurance recoveries of $3.8 million related to the incident at the Beaumont plant in 2008, compared with recoveries of $2.3 million in the second quarter this year.

Pulp Chemicals reported third quarter revenue of $13.8 million compared with $13.2 million in the second quarter of 2009. EBITDA achieved during the third quarter of $4.5 million was also similar to the level achieved during the second quarter of 2009.

International reported revenue of $35.5 million for the third quarter, which was slightly higher than the level of $33.5 million reported for the second quarter of 2009. EBITDA for the quarter was $3.2 million on lower volumes versus the $4.9 million earned in the second quarter of 2009.

Mr. Davis said, "We remain focused on pursuing the right initiatives to ensure long term sustainability of earnings while at the same time positioning ourselves for maximum benefit when demand for our products increases. For example, we recently added new product sources that potentially could create as much as 10% more volume of sulphuric acid than we have traditionally marketed. Despite the economic challenges that we and our customers have been facing in 2009, the nature of our business model, coupled with our strong balance sheet and ample liquidity are more than sufficient to sustain our current distribution rate."

Distributions

Distributions declared in the third 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. Forward-looking statements in this news release describe the expectations of Chemtrade 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.

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 volume of sulphuric acid that may be available from new sources;
        and
    -   The Fund's ability to sustain its current distribution rate.
    

Financial outlook information contained in this press 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 press 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 2009 results will be webcast live on www.chemtradelogistics.com and www.newswire.ca/webcast on Thursday, November 12, 2009 at 10:00 a.m.

    
    CHEMTRADE LOGISTICS INCOME FUND
    Consolidated Balance Sheets
    (in thousands of dollars)

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
                                                    (unaudited)
    ASSETS

    Current assets
      Cash and cash equivalents                    $    12,887   $    48,050
      Accounts receivable (note 3)                      60,462       138,640
      Inventories                                       20,936        38,124
      Prepaid expenses and other assets
       (notes 8(b) and 10)                               6,858         6,259

    -------------------------------------------------------------------------
                                                       101,143       231,073

    Notes receivable                                     2,677         3,045
    Property, plant and equipment (note 3)             152,267       169,174
    Other assets                                         2,414         2,583
    Future tax asset                                    10,233        13,283
    Intangibles                                        114,476       137,227
    Goodwill                                            91,598        98,840

    -------------------------------------------------------------------------
                                                   $   474,808   $   655,225
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY

    Current liabilities
      Accounts payable                             $    34,792   $   122,685
      Accrued and other liabilities (notes 5(f)
       and 8(b))                                        40,118        71,024
      Distributions payable                              3,067         3,178
      Income taxes payable                               2,216         8,157

    -------------------------------------------------------------------------
                                                        80,193       205,044

    Long-term debt (note 4)                            162,983       185,023
    Other long-term liabilities (notes 5(f)
     and 8(b))                                          12,623        12,706
    Post-employment benefits                             4,002         4,238
    Future tax liability                                17,646        30,278

    Unitholders' equity
      Units (note 5(b))                                377,144       389,932
      Contributed surplus (note 5(c))                    9,720         5,272
      Deficit                                         (146,402)     (153,141)
      Accumulated other comprehensive (loss)
       (note 6)                                        (43,101)      (24,127)

    -------------------------------------------------------------------------
                                                       197,361       217,936

    -------------------------------------------------------------------------
                                                   $   474,808   $   655,225
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CHEMTRADE LOGISTICS INCOME FUND
    Consolidated Statements of Earnings
    (in thousands of dollars, except per unit amounts)
    (unaudited)

                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
                         September     September     September     September
                          30, 2009      30, 2008      30, 2009      30, 2008
    -------------------------------------------------------------------------

    Revenue            $   126,989   $   393,971   $   413,436   $   886,037

    Cost of sales and
     services (excluding
     depreciation
     disclosed below)
     (note 3)               95,660       346,615       329,721       759,990

    -------------------------------------------------------------------------
    Gross profit            31,329        47,356        83,715       126,047

    Selling, general,
     administrative and
     other costs (note 3)    9,803         5,662        26,453        32,553
    Restructuring costs          -             -             -        (1,238)

    -------------------------------------------------------------------------
    Earnings before the
     under-noted            21,526        41,694        57,262        94,732

    Unrealized foreign
     exchange (gain)
     loss                   (6,802)        3,520       (12,046)        4,517
    Depreciation and
     amortization           11,086         9,893        33,523        29,883
    Loss (gain) on sale
     of property, plant
     and equipment              94          (250)           94          (250)
    Net interest and
     accretion expense
     (note 4)                2,122         3,639         6,567         9,465

    -------------------------------------------------------------------------
    Earnings before
     income taxes           15,026        24,892        29,124        51,117

    Income taxes
      Current                  973         2,098         2,805         5,429
      Future                (5,482)        3,304        (8,110)        2,897

    -------------------------------------------------------------------------
                            (4,509)        5,402        (5,305)        8,326

    -------------------------------------------------------------------------
    Net earnings       $    19,535   $    19,490   $    34,429   $    42,791
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per
     unit (note 5(d))
      Basic            $      0.64   $      0.58   $      1.12   $      1.27
      Diluted          $      0.64   $      0.58   $      1.12   $      1.27
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cost of sales and services for the three months and the nine months ended
    September 30, 2009 does not include $5,738 and $16,992 respectively (2008
    - $4,627 and $14,124 respectively) of depreciation relating to plant
    buildings and equipment.

    See accompanying notes to consolidated financial statements



    CHEMTRADE LOGISTICS INCOME FUND
    Consolidated Statements of Changes in Unitholders' Equity
    (in thousands of dollars)
    (unaudited)

                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
                         September     September     September     September
                          30, 2009      30, 2008      30, 2009      30, 2008
    -------------------------------------------------------------------------

    Units
    Balance, beginning
     of period         $   377,144   $   412,957   $   389,932   $   412,957
    Repurchase of units
     (note 5(c))                 -        (2,444)      (12,788)       (2,444)
    -------------------------------------------------------------------------
    Balance, end of
     period            $   377,144   $   410,513   $   377,144   $   410,513
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contributed surplus
    Balance, beginning
     of period         $     9,720   $         -   $     5,272   $         -
    Repurchase of units
     (note 5(c))                 -           275         4,448           275
    -------------------------------------------------------------------------
    Balance, end of
     period            $     9,720   $       275   $     9,720   $       275
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Deficit
    Balance, beginning
     of period         $  (156,736)  $  (150,415)  $  (153,141)  $  (154,040)
    Changes in
     accounting policies         -             -             -           474
    -------------------------------------------------------------------------
    Balance, beginning
     of period, as
     adjusted             (156,736)     (150,415)     (153,141)     (153,566)
    Net earnings            19,535        19,490        34,429        42,791
    Distributions           (9,201)      (10,065)      (27,690)      (30,215)
    -------------------------------------------------------------------------
    Balance, end of
     period            $  (146,402)  $  (140,990)  $  (146,402)  $  (140,990)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive (loss)
     (note 6)
    Balance, beginning
     of period         $   (31,853)  $   (50,532)  $   (24,127)  $   (53,305)
    Other comprehensive
     (loss) income         (11,248)        5,795       (18,974)        8,568
    -------------------------------------------------------------------------
    Balance, end of
     period            $   (43,101)  $   (44,737)  $   (43,101)  $   (44,737)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    Consolidated Statements of Comprehensive Income
    (in thousands of dollars)
    (unaudited)

                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
                         September     September     September     September
                          30, 2009      30, 2008      30, 2009      30, 2008
    -------------------------------------------------------------------------

    Net earnings       $    19,535   $    19,490   $    34,429   $    42,791

    Change in unrealized
     loss on translation
     of self-sustaining
     foreign operations    (11,186)        5,872       (18,630)        9,476
    Change in unrealized
     loss on derivatives
     designated as cash
     flow hedges               (62)         (324)         (344)       (1,155)
    Losses on derivatives
     designated as cash
     flow hedges in
     prior periods
     transferred to net
     income in the
     current period              -           247             -           247
    -------------------------------------------------------------------------
    Other comprehensive
     (loss) income         (11,248)        5,795       (18,974)        8,568

    -------------------------------------------------------------------------
    Comprehensive
     income            $     8,287   $    25,285   $    15,455   $    51,359
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CHEMTRADE LOGISTICS INCOME FUND
    Consolidated Statements of Cash Flows
    (in thousands of dollars)
    (unaudited)

                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
                         September     September     September     September
                          30, 2009      30, 2008      30, 2009      30, 2008
    -------------------------------------------------------------------------
    Cash provided by
     (used in):

    Operating
     activities:
      Net earnings     $    19,535   $    19,490   $    34,429   $    42,791
      Items not
       affecting cash:
        Depreciation and
         amortization       11,086         9,893        33,523        29,883
        Future income
         taxes              (5,482)        3,304        (8,110)        2,897
        Accretion
         expense               140           133           439           520
        Loss (gain) on
         sale of
         property, plant
         and equipment          94          (250)           94          (310)
        Gain on
         settlement of
         property damage
         claim (note 3)     (2,671)            -        (2,671)            -
        Change in fair
         value of
         derivatives and
         unrealized
         foreign exchange
         (gain) loss        (6,426)          742       (11,236)        4,535

    -------------------------------------------------------------------------
                            16,276        33,312        46,468        80,316
      Decrease (increase)
       in working capital    2,600       (19,344)      (30,710)      (26,594)

    -------------------------------------------------------------------------
                            18,876        13,968        15,758        53,722

    Financing activities:
      Distributions to
       unitholders          (9,201)      (10,075)      (27,802)      (30,225)
      Repurchase of units
       (note 5(c))               -        (2,169)       (8,340)       (2,169)
      (Decrease) in
       operating line of
       credit                 (777)       (7,097)            -       (14,144)
      Financing transaction
       costs                     -             -             -          (628)
      Increase (decrease)
       in other long-term
       liabilities           1,164           965          (113)        3,577

    -------------------------------------------------------------------------
                            (8,814)      (18,376)      (36,255)      (43,589)

    Investing activities:
      Additions to
       property, plant
       and equipment        (4,900)       (4,940)      (14,980)      (11,590)
      Proceeds from
       disposal of
       property, plant
       and equipment           240         2,708           240         2,787
      Notes receivable           -             -             -        (2,523)

    -------------------------------------------------------------------------
                            (4,660)       (2,232)      (14,740)      (11,326)

    Effect of exchange
     rates on cash held in
     foreign currencies         55          (181)           74             -

    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and cash
     equivalents             5,457        (6,821)      (35,163)       (1,193)

    Cash and cash
     equivalents -
     beginning of period     7,430        17,432        48,050        11,804

    -------------------------------------------------------------------------
    Cash and cash
     equivalents - end
     of period         $    12,887   $    10,611   $    12,887   $    10,611
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental
     information:
      Cash taxes paid  $     4,535   $       (82)  $     8,272   $     1,292
      Cash interest
       paid            $     2,188   $     3,394   $     6,800   $     9,070

    See accompanying notes to consolidated financial statements



    CHEMTRADE LOGISTICS INCOME FUND
    Notes to Consolidated Financial Statements
    (in thousands of dollars)
    (unaudited)

    September 30, 2009
    -------------------------------------------------------------------------

    1.  ORGANIZATION AND DESCRIPTION OF THE BUSINESS:

        Chemtrade Logistics Income Fund (the "Fund") commenced operations on
        July 18, 2001 when it completed an Initial Public Offering and
        purchased various assets and related businesses from Marsulex Inc.
        The Fund operates in four business segments: Sulphur Products &
        Performance Chemicals (SPPC), Pulp Chemicals, International and
        Corporate. For additional information regarding the Fund's business
        segments see note 7.

        These interim consolidated financial statements of the Fund have been
        prepared by management in accordance with accounting principles
        generally accepted in Canada. These interim consolidated financial
        statements include the accounts of the Fund and its wholly-owned
        subsidiaries. Inter-company transactions and balances have been
        eliminated. These interim consolidated financial statements have been
        prepared following the same accounting policies and methods of
        computation as the annual consolidated financial statements of the
        Fund for the year ended December 31, 2008, except as disclosed in
        note 2. These interim consolidated financial statements do not
        contain all disclosures required by generally accepted accounting
        principles and accordingly should be read in conjunction with the
        annual consolidated financial statements and the notes thereto.

    2.  CHANGES IN ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS:

        (a) Changes in Accounting Policies:

        (i) Goodwill and intangible assets

        Effective January 1, 2009, the Fund adopted the recommendations of
        the Canadian Institute of Chartered Accountants (CICA) Handbook
        Section 3064, Goodwill and Intangible Assets. Section 3064 states
        that upon their initial identification, intangible assets are to be
        recognized as assets if they meet the definition of an intangible
        asset and if they satisfy the recognition criteria contained in the
        Handbook section. This section also provides further information on
        the recognition of internally generated intangible assets (including
        research and development costs).

        Section 3064 carries forward the requirements of the old Section
        3062, Goodwill and Other Intangible Assets with regards to the
        subsequent measurement of intangible assets, goodwill, and
        disclosure. The adoption of this section did not have an impact on
        the Fund's consolidated financial statements.

        (ii) Fair value of financial assets and financial liabilities

        Effective January 1, 2009, the Fund adopted the recommendations of
        EIC-173, entitled Credit Risk and the Fair Value of Financial Assets
        and Financial Liabilities, which provides further information on the
        determination of the fair value of financial assets and financial
        liabilities under Section 3855, entitled Financial Instruments -
        Recognition and Measurement. This EIC states that an entity's own
        credit and the credit risk of the counter-party should be taken into
        account in determining the fair value of financial assets and
        financial liabilities, including derivative instruments. The adoption
        of this EIC did not have an impact on the Fund's consolidated
        financial statements.

        (b) Recent Accounting Pronouncements:

        (i) Convergence to International Financial Reporting Standards (IFRS)

        In January 2006, the CICA Accounting Standards Board (AcSB) adopted a
        strategic plan for the direction of accounting standards in Canada.
        The AcSB has recently confirmed that accounting standards in Canada
        for public companies are to converge with IFRS effective for fiscal
        periods beginning on or after January 1, 2011. The Fund has assembled
        an IFRS transition team which is continuing to assess the impact of
        the convergence of Canadian GAAP and IFRS, and will implement the new
        IFRS standards.

        (ii) Business combinations

        In January 2009, the CICA issued Handbook Sections 1582, Business
        Combinations; 1601, Consolidated Financial Statements; and 1602, Non-
        Controlling Interests. These sections replace Handbook Sections 1581,
        Business Combinations; and 1600, Consolidated Financial Statements.
        Section 1582 establishes standards for the accounting for business
        combinations that is equivalent to the business combination
        accounting standard under IFRS. Section 1582 is applicable for the
        Fund's business combinations with acquisition dates on or after
        January 1, 2011. Early adoption of this section is permitted.
        Sections 1601 and 1602 establish standards for the preparation of
        consolidated financial statements and for accounting for a non-
        controlling interest in a subsidiary in the consolidated financial
        statements subsequent to a business combination. Sections 1601 and
        1602 are applicable for the Fund's interim and annual consolidated
        financial statements for its fiscal year beginning January 1, 2011.
        Early adoption of these sections is also permitted. If the Fund
        chooses to early adopt any one of these sections, the other two
        sections must also be adopted at the same time. The Fund is currently
        evaluating the effect of these new sections on the consolidated
        financial statements.

    3.  INSURANCE CLAIM:

        During the third quarter of 2008, an incident occurred at the Fund's
        Beaumont, Texas facility, which resulted in property damage and
        business interruption. The Fund has settled the property damage and
        is pursuing the business interruption insurance claim with its
        insurer.

        During the second quarter of 2009, the Fund received a prepayment of
        US$2,500 related to its business interruption claim. The Fund
        allocated US$500 of this towards a receivable that had been
        previously recorded and the balance was included in selling, general,
        administrative and other costs in the SPPC segment. During the fourth
        quarter of 2008 and the first quarter of 2009, the Fund incurred
        capital expenditures of US$9,839 relating to the repair of damaged
        property at the Beaumont facility. The Fund has concluded its
        property damage claim and has recovered most of its capital
        expenditures relating to the repair. Since the repair costs exceeded
        the net book value of the damaged assets and because the Fund was
        reimbursed the repair costs, the Fund recognized a non-cash gain of
        $2,671 at the conclusion of the claim. This gain was included in
        selling, general, administrative and other costs in the SPPC segment.
        The Fund also recovered $1,097 of costs incurred to preserve the
        assets during the repair process. This recovery was included in cost
        of sales and services in the SPPC segment where the costs were
        originally recorded.

    4.  LONG-TERM DEBT:

        The interest rate on the Fund's term debt is the aggregate of LIBOR
        and a margin which varies based on the level of a ratio, as set out
        in the Fund's credit agreement. During the first quarter of 2009, the
        Fund entered into new interest rate swap arrangements which fixed the
        LIBOR component of its interest rate on all of its outstanding term
        debt until August 2011. During the third quarter of 2009, the Fund's
        weighted average effective interest rate on its term debt was 4.83%.

        Previously the Fund had interest rate swaps related to its term debt
        and operating lines of credit, which fixed interest rates until
        August 2010. The Fund collapsed all of these interest rate swaps
        upon entering into the new interest rate swap arrangements and rolled
        the related fair value liability of $9,790 into its new interest rate
        swaps. This value will be amortized on a straight-line basis over
        the remaining term of the term debt in net interest and accretion
        expense.

    5.  UNITS:

        (a) Authorized:

            Unlimited number of units.

        (b) Outstanding:

                                                        Number
                                                      of Units        Amount
        ---------------------------------------------------------------------
        Units
          Balance - December 31, 2008               31,710,410     $ 389,932
          Units repurchased for cancellation
           (note 5(c))                              (1,039,940)      (12,788)
        ---------------------------------------------------------------------
          Balance - September 30, 2009              30,670,470     $ 377,144
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (c) Normal course issuer bid:

            From September 23, 2008 to September 22, 2009, the Fund purchased
            an aggregate of 2,912,466 of its units by way of a normal course
            issuer bid (the "Bid") through the facilities of the Toronto
            Stock Exchange (TSX). The purchases were made in accordance with
            the policies and rules of the TSX and units were purchased for
            cancellation. The prices that the Fund paid for the units
            purchased were the market price of such units at the time of
            acquisition.

            During 2009, the Fund purchased 1,039,940 units at an average per
            unit price of $8.02 for an aggregate purchase amount of $8,340.
            This resulted in $12,788 being recorded as a reduction to the
            value of units and $4,448 being recorded as contributed surplus.

            During 2008, the Fund purchased 1,872,526 units at an average per
            unit price of $9.48 for an aggregate purchase amount of $17,753.
            This resulted in $23,025 being recorded as a reduction to the
            value of units and $5,272 being recorded as contributed surplus.

        (d) Net earnings per unit:

            Net earnings per unit has been calculated on the basis of the
            weighted average number of units outstanding for the three months
            and the nine months ended September 30, 2009 which amounted to
            30,670,470 units and 30,868,188 units respectively (2008 -
            33,581,852 units and 33,582,572 units respectively).

        (e) Distributions:

            Distributions paid for the three months and the nine months ended
            September 30, 2009 were $9,201 and $27,802 respectively (2008 -
            $10,075 and $30,225 respectively). All of the Fund's
            distributions are discretionary.

        (f) Long-term incentive plan:

            The Fund operates a Total Return Long-Term Incentive Plan (TR
            LTIP) which grants cash awards based on achieving total
            Unitholder return over a performance period. Total Unitholder
            return consists of changes in unit price and distributions paid
            to Unitholders. The Fund treats these awards as liabilities with
            the value of these liabilities being re-measured at each
            reporting period, based upon changes in the intrinsic value of
            the awards. Any gains or losses on re-measurement are recorded in
            the Consolidated Statements of Earnings, provided that the
            aggregate compensation cost accrued during the performance period
            is not adjusted below zero. For the three months ended September
            30, 2009, the Fund recorded an expense of $3,800 (2008 - recovery
            of $2,242). For the nine months ended September 30, 2009, the
            Fund recorded a total expense of $2,567 (2008 - $3,765) related
            to the TR LTIP. As at September 30, 2009 there was $2,960
            included in Accrued and other liabilities and $3,040 included in
            Other long-term liabilities related to the TR LTIP. As at
            December 31, 2008, there was $1,661 included in Accrued and other
            liabilities, and $3,500 included in Other long-term liabilities.

    6.  OTHER COMPREHENSIVE INCOME (LOSS):

        The components of accumulated other comprehensive income (loss) as at
        September 30, 2009 and other comprehensive income (loss) for the nine
        months then ended were as follows:


    Accumulated            Opening                      Ending       Opening
     other                 balance                     balance       balance
     comprehensive     December 31,          Net  September 30,  December 31,
     (loss)                   2008        change          2009          2007
    -------------------------------------------------------------------------
    Unrealized (loss)
     gain on translation
     of self-sustaining
     foreign operations  $ (19,411)    $ (18,630)  $(38,041)(1)    $ (52,867)
    Loss on derivatives
     designated as cash
     flow hedges            (4,716)         (344)    (5,060)(2)         (438)
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive
     (loss)              $ (24,127)    $ (18,974)    $ (43,101)    $ (53,305)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Accumulated                                         Ending
     other                           Transferred       balance
     comprehensive             Net        to net  September 30,
     (loss)                 change        income          2008
    -----------------------------------------------------------
    Unrealized (loss)
     gain on translation
     of self-sustaining
     foreign operations  $   9,476     $       -   $(43,391)(1)
    Loss on derivatives
     designated as cash
     flow hedges            (1,155)          247     (1,346)(2)
    -----------------------------------------------------------

    Accumulated other
     comprehensive
     (loss)              $   8,321     $     247     $ (44,737)
    -----------------------------------------------------------
    -----------------------------------------------------------
    (1) Net of income tax expense of $nil (2008 - $nil).
    (2) Net of cumulative income tax recovery of $2,666 (2008 - $898).


    7.  BUSINESS SEGMENTS:

        The Fund operates in four business segments: Sulphur Products &
        Performance Chemicals (SPPC), Pulp Chemicals (Pulp), International
        (Intl.) and Corporate (Corp.).

        SPPC markets, removes and/or produces merchant and regenerated
        sulphuric acid, liquid sulphur dioxide, sodium hydrosulphite,
        elemental sulphur and phosphorous pentasulphide. These products are
        marketed primarily to North American customers.

        Pulp produces sodium chlorate and crude tall oil. These products are
        marketed primarily to Canadian customers.

        Intl. provides removal and marketing services for elemental sulphur
        and sulphuric acid. These products are marketed to customers in
        Europe, the Mediterranean, North Africa, Central and South America,
        North America, as well as in the Pacific region.

        Corp. is a non-operating segment that provides centralized services
        such as treasury, finance, information systems, human resources,
        legal and risk management.

        Three Months Ended September 30, 2009
        ---------------------------------------------------------------------
                                SPPC      Pulp      Intl.     Corp.    Total
        ---------------------------------------------------------------------

        Revenue from
         external customers $ 77,737  $ 13,760  $ 35,492  $      -  $126,989

        Earnings before the
         under-noted          21,256     4,450     3,160    (7,340)   21,526
        Unrealized foreign
         exchange gain             -         -         -    (6,802)   (6,802)
        Depreciation and
         amortization          8,167     2,358       561         -    11,086
        Loss on disposal of
         property, plant and
         equipment                 -         -        94         -        94
        Net interest and
         accretion expense     1,706       438       (22)        -     2,122
        Income tax (recovery)
         expense              (5,200)        -       691         -    (4,509)

        Net earnings          16,583     1,654     1,836      (538)   19,535

        Total assets         230,010   110,021   134,962      (185)  474,808

        Goodwill              60,898         -    30,700         -    91,598

        Intangibles           74,385    35,544     4,547         -   114,476

        Capital expenditures   4,699       143        17        41     4,900
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        Three Months Ended September 30, 2008
        ---------------------------------------------------------------------
                                SPPC      Pulp      Intl.     Corp.    Total
        ---------------------------------------------------------------------

        Revenue from
         external customers $164,617  $ 13,994  $215,360  $      -  $393,971

        Earnings before the
         under-noted          26,193     5,015     9,368     1,118    41,694
        Unrealized foreign
         exchange loss             -         -         -     3,520     3,520
        Depreciation and
         amortization          7,223     2,295       375         -     9,893
        (Gain) on disposal
         of property, plant
         and equipment          (250)        -         -         -      (250)
        Net interest and
         accretion expense     2,630     1,107       (98)        -     3,639
        Income tax expense     4,059         -     1,343         -     5,402

        Net earnings
         (loss)               12,531     1,613     7,748    (2,402)   19,490

        Capital expenditures   2,386       198     1,695       661     4,940
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        Nine Months Ended September 30, 2009
        ---------------------------------------------------------------------
                                SPPC      Pulp      Intl.     Corp.    Total
        ---------------------------------------------------------------------

        Revenue from
         external customers $255,340  $ 38,951  $119,145  $      -  $413,436

        Earnings before the
         under-noted          45,622    13,981    11,908   (14,249)   57,262
        Unrealized foreign
         exchange gain             -         -         -   (12,046)  (12,046)
        Depreciation and
         amortization         24,723     7,065     1,735         -    33,523
        Loss on disposal of
         property, plant and
         equipment                 -         -        94         -        94
        Net interest and
         accretion expense     5,261     1,396       (90)        -     6,567
        Income tax (recovery)
         expense              (7,321)        -     2,016         -    (5,305)

        Net earnings (loss)   22,959     5,520     8,153    (2,203)   34,429

        Total assets         230,010   110,021   134,962      (185)  474,808

        Goodwill              60,898         -    30,700         -    91,598

        Intangibles           74,385    35,544     4,547         -   114,476

        Capital
         expenditures         13,572       351       662       395    14,980
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        Nine Months Ended September 30, 2008
        ---------------------------------------------------------------------
                                SPPC      Pulp      Intl.     Corp.    Total
        ---------------------------------------------------------------------

        Revenue from
         external customers $390,492  $ 43,201  $452,344  $      -  $886,037

        Earnings before the
         under-noted          69,982    15,277    24,434   (14,961)   94,732
        Unrealized foreign
         exchange loss             -         -         -     4,517     4,517
        Depreciation and
         amortization         21,799     6,974     1,110         -    29,883
        (Gain) on disposal
         of property, plant
         and equipment          (250)        -         -         -      (250)
        Net interest and
         accretion expense     7,609     2,153      (297)        -     9,465
        Income tax expense     4,254         -     4,072         -     8,326

        Net earnings (loss)   36,570     6,150    19,549   (19,478)   42,791

        Capital
         expenditures          6,650       316     3,793       831    11,590
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        December 31, 2008
        ---------------------------------------------------------------------
                                SPPC      Pulp      Intl.     Corp.    Total
        ---------------------------------------------------------------------

        Total assets        $367,677  $ 91,687  $195,128  $    733  $655,225

        Goodwill              66,883         -    31,957         -    98,840

        Intangibles           91,762    39,597     5,868         -   137,227
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        Geographic segments:

        The Fund operates primarily in Canada, the United States and Europe.
        Revenue is attributed to customers based on their location.

        Revenue
        ---------------------------------------------------------------------
                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
                         September     September     September     September
                          30, 2009      30, 2008      30, 2009      30, 2008
        ---------------------------------------------------------------------

        Canada         $    30,641   $    40,511   $    90,824   $   108,635
        U.S.                60,856       138,100       203,467       325,058
        Europe              35,492       215,360       119,145       452,344

        ---------------------------------------------------------------------
                       $   126,989   $   393,971   $   413,436   $   886,037
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        Property, Plant and Equipment, Goodwill and Intangibles
        ---------------------------------------------------------------------
                                                  September 30,  December 31,
                                                          2009          2008
        ---------------------------------------------------------------------

        Canada                                     $   112,934   $   122,318
        U.S.                                           201,585       234,540
        Europe                                          43,822        48,383

        ---------------------------------------------------------------------
                                                   $   358,341   $   405,241
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        There were no producers from which the Fund obtained product that
        accounted for more than 10% of the Fund's total revenue for the nine
        months ended September 30, 2009. For the nine months ended September
        30, 2008, the Fund obtained product from a producer that accounted
        for 11.7% of the Fund's total revenue. For the nine months ended
        September 30, 2009, revenue from a customer accounted for 10.7% of
        the Fund's total revenue. There were no customers that accounted for
        more than 10% of the Fund's total revenue for the nine months ended
        September 30, 2008.

    8.  FINANCIAL INSTRUMENTS:

        (a) Fair values of financial instruments:

            Fair value is the value that would be agreed upon in an arm's
            length transaction between willing and knowledgeable counter-
            parties. The carrying amounts of cash and cash equivalents,
            accounts receivable, accounts payable, accrued and other
            liabilities and distributions payable approximate their fair
            values because of the short-term maturity of these financial
            instruments. The carrying amount of long-term debt, excluding
            transaction costs, approximates fair value as the debt accrues
            interest at prevailing market rates.

        (b) Derivatives and hedging:

            The Fund has entered into swap arrangements with its principal
            banker, which fix the LIBOR component of its interest rates on
            all of its outstanding term debt. In the first quarter of 2009,
            the Fund entered into new swap arrangements which fixed the LIBOR
            component of its interest rates on all of its term debt until
            August 2011. Previously the Fund had interest rate swaps related
            to its term debt and operating lines of credit, which fixed the
            LIBOR component of its interest rate until August 2010. The Fund
            collapsed all of these interest rate swaps upon entering into the
            new swap arrangements. Losses are included in accrued and other
            liabilities and other long-term liabilities with the offset
            included in other comprehensive income, except for the
            amortization of the fair value liability of the interest rate
            swaps entered into during the first quarter of 2009 as discussed
            in note 4 which is included in net interest and accretion
            expense. Summarized information related to the interest rate
            swaps is as follows:

                                          Weighted
                                           Average   Fair Value   Fair Value
                                          Effective     Loss         Loss
                     Notional   Maturity   Interest   September    December
    Hedged Item        Amount     Date       Rate      30, 2009    31, 2008
    -------------------------------------------------------------------------

    U.S. dollar                  August                 $7,858      $7,861
     term debt      US$153,138    2011       4.83%    (US$7,339)  (US$6,454)
    -------------------------------------------------------------------------
    U.S. dollar
     operating
     lines of                                                       $1,247
     credit             N/A        N/A        N/A        $ -      (US$1,024)
    -------------------------------------------------------------------------

            The Fund has entered into foreign exchange contracts to manage
            its exposure to foreign currencies. The Fund buys and sells
            specific amounts of currencies at pre-determined dates and
            exchange rates, which are matched with the anticipated
            operational cash flows. Contracts in place at September 30, 2009
            include future contracts to sell US$1,500, US$8,407, US$635,
            C$8,233 and (euro) 688, at weighted average exchange rates of
            C$1.18, (euro) 0.79, CHF 1.18, (euro) 0.60 and US$1.46,
            respectively, for periods through to May 2010. There are
            unrealized losses of $481 (December 31, 2008 - $215) and
            unrealized gains of $1,645 (December 31, 2008 - $1,029) from
            these contracts at September 30, 2009. Gains are included in
            prepaid expenses and other assets, and losses are included in
            accrued and other liabilities with the offset included in
            unrealized foreign exchange loss relating to the fair value of
            the derivatives.

            To manage its exposure to changes in the price of natural gas,
            the Fund has entered into natural gas forward contracts. The Fund
            sells specific quantities of natural gas at pre-determined dates
            on indices, which are matched with the anticipated operational
            cash flows. There is a net unrealized gain of $295 (December 31,
            2008 - $1,175) from these forward contracts at September 30,
            2009. Losses are included in accrued and other liabilities and
            gains are included in prepaid expenses and other assets with the
            offset included in selling, general, administrative and other
            costs.

            The Fund's International business segment has commitments to buy
            and sell commodities and has entered into commodity forward
            contracts to manage its exposure to commodity price changes. The
            commitments to buy and sell commodities and the commodity forward
            contracts are treated as derivatives and are measured at fair
            value. At September 30, 2009 and December 31, 2008, the net
            unrealized value of these transactions is not significant.

    9.  COMPARATIVE FIGURES:

        Certain comparative figures have been re-classified in order to
        comply with the current period's presentation.

    10. SUBSEQUENT EVENT:

        Subsequent to September 30, 2009, the Fund entered into an agreement
        to purchase the outstanding shares of Alliance Specialty Chemicals,
        Inc. for US$5,623. Prior to September 30, 2009, the Fund paid a
        refundable deposit of US$2,000, which has been included in Prepaid
        expenses and other assets.


                       CHEMTRADE LOGISTICS INCOME FUND
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
             FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2009
    

The information in this Management's Discussion and Analysis, or MD&A, is intended to assist the reader in the understanding and assessment of the trends and significant changes in the results of operations and financial condition of Chemtrade Logistics Income Fund. Throughout this MD&A, the term the "Fund" refers to Chemtrade Logistics Income Fund and its consolidated subsidiaries. The terms "we", "us" or "our" similarly refers to the Fund. This MD&A should be read in conjunction with the unaudited consolidated statements of the Fund for the nine month period ended September 30, 2009 and the annual MD&A for the year ended December 31, 2008.

The Fund's financial statements are prepared in accordance with accounting principles generally accepted in Canada, or Canadian GAAP. The Fund's reporting currency is the Canadian dollar. In this MD&A per unit amounts are calculated using the weighted average number of units outstanding for the applicable period unless otherwise indicated.

This MD&A 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. Forward-looking statements in this MD&A describes the expectations of the Fund as of the date of this MD&A. The Fund's actual results could be materially different from its expectations if known or unknown risks affect its business, or if its estimates or assumptions turn out to be inaccurate. As a result, the Fund 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 the Fund's business. The Fund disclaims 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 MD&A contains forward-looking statements about the objectives, strategies, financial condition, results of operations and businesses of the Fund including, but not limited to (capitalized terms are as defined in the MD&A):

    
    -   all of the risks identified in "RISKS AND UNCERTAINTIES" section;

    -   all of the forward-looking statements in the "OUTLOOK" section;

    -   the amount of any TR LTIP payouts;

    -   the ability to recover amounts from the Fund's insurers in respect of
        the Beaumont Incident and the quantum of any such recovery;

    -   the ability to comply with the new emission limits imposed by the EPA
        and the expected cost of compliance;

    -   the estimated impact of the Canadian/U.S. dollar exchange rate on the
        Fund's business;

    -   the anticipated tax characterization of planned distributions;

    -   the Fund's ability to renew its term debt at maturity;

    -   the implementation of planned maintenance capital expenditures, as
        well as the cost and timing thereof;

    -   the use and sufficiency of cash flows from operating activities;

    -   the potential non-performance of suppliers or customers of the Fund's
        International Business and the resulting effect on results; and

    -   the potential impact of recent accounting pronouncements, including
        the timing of the implementation of various steps in connection with
        the transition to IFRS.
    

Financial outlook information contained in the MD&A 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 MD&A should not be used for purposes other than those for which it is disclosed herein.

    
    FINANCIAL HIGHLIGHTS

                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
    ($'000 except        September     September     September     September
     per unit amounts)    30, 2009      30, 2008      30, 2009      30, 2008
    -------------------------------------------------------------------------

    Revenue            $   126,989   $   393,971   $   413,436   $   886,037

    Net earnings       $    19,535   $    19,490   $    34,429   $    42,791

    Net earnings per
     unit - Basic      $      0.64   $      0.58   $      1.12   $      1.27
          - Diluted    $      0.64   $      0.58   $      1.12   $      1.27

    Total assets       $   474,808   $   656,079   $   474,808   $   656,079

    Long-term debt     $   162,983   $   161,489   $   162,983   $   161,489

    EBITDA(3)          $    21,526   $    41,694   $    57,262   $    94,732
    EBITDA per unit(1) $      0.70   $      1.24   $      1.86   $      2.82

    Cash flows from
     operating
     activities        $    18,876   $    13,968   $    15,758   $    53,722
    Cash flows from
     operating
     activities per
     unit(1)           $      0.62   $      0.42   $      0.51   $      1.60

    Adjusted cash flows
     from operating
     activities(3)     $    16,332   $    33,131   $    46,542   $    80,376
    Adjusted cash flows
     from operating
     activities per
     unit(1)(3)        $      0.53   $      0.99   $      1.51   $      2.39

    Distributable cash
     after maintenance
     capital
     expenditures(3)   $    11,606   $    29,995   $    32,222   $    71,998
    Distributable cash
     after maintenance
     capital
     expenditures per
     unit(1)(3)        $      0.38   $      0.89   $      1.04   $      2.14

    Distributions
     declared          $     9,201   $    10,065   $    27,690   $    30,215
    Distributions
     declared per
     unit(2)           $      0.30   $      0.30   $      0.90   $      0.90

    Distributions
     paid              $     9,201   $    10,075   $    27,802   $    30,225
    Distributions paid
     per unit(2)       $      0.30   $      0.30   $      0.90   $      0.90
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Based on
        weighted average
        number of units
        outstanding for
        the period of:  30,670,470    33,581,852    30,868,188    33,582,572

    (2) Based on actual number of units outstanding on record date.

    (3) See Non-GAAP Measures.


    NON-GAAP MEASURES

    EBITDA -
    

Throughout this MD&A, the term EBITDA is used to describe earnings before any deduction for net interest and accretion expense, taxes, depreciation and amortization and other non-cash charges such as unrealized foreign exchange (gain) loss. EBITDA is a metric used by many investors and analysts to compare organizations on the basis of ability to generate cash from operations. Management considers EBITDA (as defined) to be an indirect measure of operating cash flow, which is a significant indicator of the success of any business. EBITDA is not intended to be representative of cash flow from operations or results of operations determined in accordance with Canadian generally accepted accounting principles (GAAP) or cash available for distribution.

EBITDA is not a recognized measure under Canadian GAAP. The Fund's method of calculating EBITDA may differ from methods used by other income trusts or companies, and accordingly may not be comparable to similar measures presented by other organizations. A reconciliation of EBITDA to net earnings follows:

    
                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
                         September     September     September     September
    ($'000)               30, 2009      30, 2008      30, 2009      30, 2008
    -------------------------------------------------------------------------

    Net earnings       $    19,535   $    19,490   $    34,429   $    42,791
      Add:
        Unrealized
         foreign exchange
         (gain) loss        (6,802)        3,520       (12,046)        4,517
        Depreciation and
         amortization       11,086         9,893        33,523        29,883
        Loss (gain) on
         disposal of
         property, plant
         and equipment          94          (250)           94          (250)
        Net interest and
         accretion
         expense             2,122         3,639         6,567         9,465
        Net taxes           (4,509)        5,402        (5,305)        8,326
    -------------------------------------------------------------------------
    EBITDA(1)          $    21,526   $    41,694   $    57,262   $    94,732
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) EBITDA for the three months and the nine months ended September 30,
        2009 includes recoveries of $nil and $nil respectively (2008 -
        recoveries of $nil and $1,238 respectively) for restructuring.
    

Cash Flow -

The following table is derived from, and should be read in conjunction with, the consolidated statement of cash flows. Management believes this supplementary disclosure provides useful additional information related to the cash flows of the Fund including the amount of cash available for distribution to Unitholders, repayment of debt and other investing activities. Certain sub-totals presented within the cash flows table below, such as "Adjusted cash flows from operating activities", "Distributable cash after maintenance capital expenditure" and "Distributable cash after all capital expenditure", are not defined terms under Canadian GAAP. These sub-totals are used by management as measures of internal performance and as a supplement to the consolidated statement of cash flows. Investors are cautioned that these measures should not be construed as an alternative to using net income as a measure of profitability or as an alternative to the GAAP consolidated statement of cash flows. Further, the Fund's method of calculating each measure may not be comparable to calculations used by other income trusts bearing the same description.

    
                           Three Months Ended           Nine Months Ended
                           ------------------           -----------------
                         September     September     September     September
    ($'000)               30, 2009      30, 2008      30, 2009      30, 2008
    -------------------------------------------------------------------------

    Cash flows from
     operating
     activities        $    18,876   $    13,968   $    15,758   $    53,722

    Add (deduct):

    Changes in non-cash
     working capital and
     other items            (2,544)       19,163        30,784        26,654
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities             16,332        33,131        46,542        80,376

    Less:

    Maintenance capital
     expenditure             4,726         3,136        14,320         8,378
    -------------------------------------------------------------------------
    Distributable cash
     after maintenance
     capital expenditure    11,606        29,995        32,222        71,998

    Less:

    Non-maintenance
     capital
     expenditure(1)            174         1,804           660         3,212
    -------------------------------------------------------------------------
    Distributable cash
     after all capital
     expenditure            11,432        28,191        31,562        68,786

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Non-maintenance capital expenditures are either pre-funded, usually
        as part of a significant acquisition and related financing or are
        considered to expand the capacity of the Fund's operations.
    

CONSOLIDATED OPERATING RESULTS

Consolidated revenue for the third quarter of 2009 was $127.0 million, compared with consolidated revenue of $394.0 million recorded in the third quarter of 2008. Consolidated revenue for the first nine months of 2009 and 2008 were $413.4 million and $886.0 million respectively. The main reason for the decline was lower prices for sulphur and sulphuric acid in the International and SPPC segments. Additionally, most product lines experienced lower volumes owing to a general reduction in demand, driven by the global economic conditions prevalent through most of 2009.

The Fund's net earnings and EBITDA for the third quarter of 2009 were $19.5 million and $21.5 million respectively compared with net earnings and EBITDA for the third quarter of 2008 of $19.5 million and $41.7 million, respectively. Net earnings and EBITDA for the first nine months of 2009 were $34.4 million and $57.3 million respectively. Comparable net earnings and EBITDA for the first nine months of 2008 were $42.8 million and $94.7 million respectively. EBITDA for the quarter and nine months ended September 30, 2009 was lower than the same period of 2008 due to significantly lower results in SPPC and International. For the quarter, the reduction in EBITDA was exacerbated by higher Corporate costs, as described in the Corporate segment below. Finally, net earnings in 2009 did not show the same decline as EBITDA, because they benefited from significant unrealized foreign exchange gains.

    
    Results of Operations by Business Segment

    SPPC -
                              Three Months Ended         Nine Months Ended
                              ------------------         -----------------
                            September    September    September    September
    ($'000)                  30, 2009     30, 2008     30, 2009     30, 2008
    -------------------------------------------------------------------------

    Revenue                 $  77,737    $ 164,617    $ 255,340    $ 390,492

    Earnings before the
     under-noted (EBITDA)      21,256       26,193       45,622       69,982
    Depreciation and
     amortization               8,167        7,223       24,723       21,799
    Gain on disposal
     of property                    -         (250)           -         (250)
    Net interest and
     accretion expense          1,706        2,630        5,261        7,609
    Income tax (recovery)
     expense                   (5,200)       4,059       (7,321)       4,254

    -------------------------------------------------------------------------
    Net earnings            $  16,583    $  12,531    $  22,959    $  36,750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SPPC manufactures and distributes sulphuric acid and other sulphur-based products to an extensive customer base in Canada and the U.S., and provides acid regeneration services to the petroleum industry, primarily in the U.S. Gulf Coast area. SPPC also supplies liquid and powder sodium hydrosulphite, which is sold to the pulp and paper industry and to a lesser extent, to the textile industry.

For the third quarter of 2009, SPPC generated revenue of $77.7 million, compared with revenue of $164.6 million for the third quarter of 2008. On a year-to-date basis, 2009 revenues declined by $135.2 million from the levels achieved in 2008. The main reason for the decline in revenue was lower realized pricing for sulphur and sulphuric acid. Additionally, sales volumes for most products in 2009 were lower than 2008, reflecting weaker demand. Results were also negatively impacted by lower margins realized on sulphuric acid, as market conditions in 2009 were less buoyant than in 2008. 2009 third quarter results include an insurance recovery of $3.8 million with respect to the conclusion of the Fund's property damage claim relating to the incident at the Beaumont plant in 2008 (more fully described in the BEAUMONT INCIDENT section). The Fund is also pursuing a business interruption claim with respect to this incident and during the second quarter of 2009 the Fund recorded a recovery of $2.3 million, which represented an interim payment. That claim is ongoing and it is difficult to estimate the amount of the ultimate recovery.

Depreciation and amortization for the first nine months of 2009 were higher than the same period of 2008 due to capital additions. Net interest expenses were lower in the first nine months of 2009 due mainly to lower usage of operating lines of credit. Finally, results for 2008 were positively impacted by the recording of a recovery of $1.2 million, related to the cessation of production of powder SHS (as described in the Restructuring section below).

    
    Pulp Chemicals -

                              Three Months Ended         Nine Months Ended
                              ------------------         -----------------
                            September    September    September    September
    ($'000)                  30, 2009     30, 2008     30, 2009     30, 2008
    -------------------------------------------------------------------------

    Revenue                 $  13,760    $  13,994    $  38,951    $  43,201

    Earnings before the
     under-noted (EBITDA)       4,450        5,015       13,981       15,277
    Depreciation and
     amortization               2,358        2,295        7,065        6,974
    Net interest and
     accretion expense            438        1,107        1,396        2,153

    -------------------------------------------------------------------------
    Net earnings            $   1,654    $   1,613    $   5,520    $   6,150
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Pulp Chemicals produces sodium chlorate and crude tall oil (CTO), both of which are chemicals used in the pulp and paper industry. Sodium chlorate is used to bleach pulp and CTO is used as a less expensive alternative energy source to natural gas.

Third quarter 2009 Pulp Chemicals revenue was similar to the level achieved during the same period in 2008. EBITDA for the third quarter of 2009 was lower than 2008 mainly due to an increase in the allowance for doubtful accounts. Revenue during the first nine months of 2009 was $4.2 million lower than the same period of 2008, mainly due to reduced demand for sodium chlorate. On a year-to-date basis, the negative impact of the reduced volume in 2009 was partially offset by lower costs, resulting in EBITDA and net earnings in 2009 being lower than 2008 by approximately $1.3 million and $0.6 million, respectively.

    
    International -
                              Three Months Ended         Nine Months Ended
                              ------------------         -----------------
                            September    September    September    September
    ($'000)                  30, 2009     30, 2008     30, 2009     30, 2008
    -------------------------------------------------------------------------

    Revenue                 $  35,492    $ 215,360    $ 119,145    $ 452,344

    Earnings before the
     under-noted (EBITDA)       3,160        9,368       11,908       24,434
    Depreciation and
     amortization                 561          375        1,735        1,110
    Loss on disposal of
     property, plant and
     equipment                     94            -           94            -
    Net interest income           (22)         (98)         (90)        (297)
    Income tax expense            691        1,343        2,016        4,072

    -------------------------------------------------------------------------
    Net earnings            $   1,836    $   7,748    $   8,153    $  19,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

International provides removal and marketing services for elemental sulphur and sulphuric acid. These products are marketed to customers globally.

Revenue for the third quarter and first nine months of 2009 were substantially lower than the same periods of 2008. This was mainly due to lower prices for sulphur and sulphuric acid, reflecting reduced global demand for these commodities. This decline resulted in lower net earnings and EBITDA in 2009 relative to 2008. Also, during 2008, certain product that was not committed to specific customers resulted in extremely high margins due to the high market prices then prevailing.

    
    Corporate -
                              Three Months Ended         Nine Months Ended
                              ------------------         -----------------
                            September    September    September    September
    ($'000)                  30, 2009     30, 2008     30, 2009     30, 2008
    -------------------------------------------------------------------------

    Cost of services
     (recoveries)           $   7,340    $  (1,118)   $  14,249    $  14,961

    Loss before the
     under-noted (EBITDA)      (7,340)       1,118      (14,249)     (14,961)
    Unrealized foreign
     exchange (gain) loss      (6,802)       3,520      (12,046)       4,517

    -------------------------------------------------------------------------
    Net earnings (loss)     $    (538)   $  (2,402)   $  (2,203)   $ (19,478)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Corporate segment includes the administrative costs of corporate activities which are not directly allocable to an operating segment, such as treasury, finance, information technology, human resources, legal and risk management.

For the third quarter of 2009, corporate costs, excluding unrealized foreign exchange gains were $8.5 million higher than the third quarter of 2008. The main reason for the higher expense in 2009 was an accrual of $3.8 million with respect to the Fund's Total Return Long-Term Incentive Plan (TR LTIP), compared with a net reversal of $2.2 million in the third quarter of 2008. Also, during the third quarter of 2009, there were unrealized losses on natural gas swaps of $0.4 million, whereas during the same quarter of 2008, there were unrealized gains of $3.1 million. The impact of these two items was partially offset by higher realized foreign exchange gains during the third quarter of 2009 relative to the third quarter of 2008, of $0.9 million.

For the first nine months of 2009, the main reason for the $0.7 million reduction in corporate costs relative to the first nine months of 2008 was the Fund's TR LTIP. During the first nine months of 2009, TR LTIP accruals were $1.2 million lower than the same period of 2008. During the first nine months of 2009, unrealized losses on natural gas swaps were $0.9 million higher than 2008, which was almost fully offset by higher realized foreign exchange gains of $0.8 million.

The comments on TR LTIP expenses relate to the 2007, 2008 and 2009 TR LTIP. Awards under the 2007, 2008 and 2009 TR LTIP are payable at the beginning of 2010, 2011 and 2012 respectively. At the end of the third quarter of 2009, $6.0 million has been accrued with respect to these Plans, although the actual payouts will be based upon Total Return, as described in the Fund's Management Information Circular, achieved over the three-year performance periods of each Plan. The nature of this calculation makes it difficult to forecast the amount of TR LTIP expenses that will be recordable in any period as it is based upon future distributions and changes in unit value.

The Corporate segment includes large unrealized foreign exchange gains on the translation of U.S. dollar denominated debt, which were a result of the sharp appreciation in the Canadian dollar relative to the U.S. dollar during the third quarter of 2009. This exchange rate fluctuation also resulted in large unrealized foreign exchange losses on the translation of U.S. dollar denominated assets. However, in accordance with accounting rules, those losses are required to be shown in the Consolidated Statements of Comprehensive Income rather than in the Consolidated Statements of Earnings.

RESTRUCTURING

During the fourth quarter of 2006, the Fund decided to discontinue production of powder SHS and costs of $2.7 million related to that decision were recorded in that quarter. These costs included a provision for a penalty on a long-term supply agreement. During 2008, the penalty was waived. As a result, the Fund reversed the penalty provision previously recorded of $1.2 million.

BEAUMONT INCIDENT

During the third quarter of 2008, an explosion occurred at the Fund's Beaumont, Texas facility which resulted in property damage as well as business interruption. After a lengthy period of repairs, the plant was operational during the first quarter of 2009. During the first six months of 2009, the Fund incurred operational, legal and consulting costs relating to this incident.

During the fourth quarter of 2008 and the first quarter of 2009, the Fund incurred capital expenditures relating to the repair of damaged property at the Beaumont facility. Since these costs are recoverable under the Fund's property insurance policy, the Fund had set up a receivable of US$9.8 million with respect to these costs. Subsequent to the end of the third quarter of 2009, the Fund concluded its property damage claim and recovered most of its capital expenditures relating to the repair. Since the repair costs exceeded the net book value of the damaged assets and because the Fund was reimbursed the repair costs, the Fund recognized a non-cash gain of $2.7 million at the conclusion of the claim. This gain was included in selling, general, administrative and other costs in the SPPC segment. The Fund also recovered $1.1 million of costs incurred to preserve the assets during the repair process. This recovery was included in cost of sales and services in the SPPC segment where the costs were originally recorded.

The Fund is also pursuing insurance claims for losses due to the ensuing business interruption. During the second quarter of 2009, the Fund received an interim payment from its insurer of US$2.5 million with respect to the business interruption loss. The Fund applied US$0.5 million of this receipt towards a receivable that had been previously recorded and the balance was included in selling, general, administrative and other costs in the SPPC segment. It is currently difficult to estimate the aggregate amount that will be recovered with respect to the business interruption and the Fund does not currently intend to record further recoveries until the amount of the recovery is determined and virtually certain of being recovered.

U.S. ENVIRONMENTAL PROTECTION AGENCY (EPA) SETTLEMENT

In January 2009, the Fund reached a settlement with the EPA and certain States, whereby new emission limitations will be established at each of its five sulphuric acid manufacturing facilities. The agreement with Chemtrade arose from a broader EPA initiative regarding the domestic sulphuric acid manufacturing industry. Chemtrade's plants will meet these stricter limits by various agreed dates ranging from December 2009 to December 2012. Chemtrade anticipates that these compliance actions will cost approximately US$6.0 million in respect of four facilities, most of which will be spent to bring its Riverton, Wyoming facility into compliance with the new limits by December 2012. Because of Chemtrade's existing overall levels of control, the civil penalty paid by Chemtrade was not material and it was recorded in 2008. Certain additional funds and penalties will be expended in respect of Chemtrade's Cairo facility, but those costs will be paid for by Marsulex Inc., pursuant to an indemnity agreement between the two companies.

FOREIGN EXCHANGE

The Fund has operating subsidiaries that are based in the U.S. In addition, BCT Chemtrade Corporation, the Fund's international subsidiary, uses the U.S. dollar as its measurement currency. As the Fund reports in Canadian dollars, its reported earnings are exposed to fluctuations in the Canadian/U.S. dollar exchange rate. The Fund currently estimates that on an unhedged basis, a $0.01 increase in the Canadian/U.S. dollar exchange rate reduces Distributable cash after maintenance capital expenditures by less than $0.1 million on an annual basis and vice-versa.

To manage the volatility of foreign exchange rates, the Fund has entered into a series of foreign exchange contracts with its principal bankers. All foreign exchange contracts are under International Swap and Derivatives Association (ISDA) agreements. Contracts in place at September 30, 2009 include future contracts to sell US$1.5 million, US$8.4 million, US$0.6 million, C$8.2 million and (euro)0.7 million, at weighted average exchange rates of C$1.18, (euro)0.79, CHF 1.18, (euro)0.60 and US$1.46, respectively, for periods through to May 2010. There are unrealized losses of $0.5 million and unrealized gains of $1.6 million from these contracts at September 30, 2009.

The purpose of these contracts is to hedge the value of the funds which are used to pay dividends and interest by subsidiary companies to the Fund and to meet other commitments. The amount of the related derivative is recorded at fair market value at the period end and included with prepaid expenses and other assets or accrued and other liabilities on the balance sheet. The resultant non-cash charge or gain is reported as unrealized foreign exchange (gain) loss. The impact of this non-cash charge or gain is excluded from the computation of Distributable cash after maintenance capital expenditures. See NON-GAAP MEASURES - Cash Flow.

The Fund's International and U.S. based operations are considered to be self-sustaining, as they are financially independent. As a result, gains or losses arising from the translation of the assets and liabilities of self-sustaining operations are recorded in other comprehensive income. The changes recorded in the accumulated other comprehensive income account since December 31, 2008 were a result of changes in the Canadian/U.S. dollar exchange rate between December 31, 2008 and September 30, 2009. The Fund's Canadian based operations have all its term debt denominated in U.S. dollars. The gains or losses arising from the translation of these loans are recorded on the Consolidated Statements of Earnings as unrealized foreign exchange (gain) loss. The rate of exchange used to translate U.S. denominated balances has changed from a rate of US$1.00 = $1.22 at December 31, 2008 to US$1.00 = $1.07 at September 30, 2009. See Risks and Uncertainties for additional comments on foreign exchange.

NET INTEREST AND ACCRETION EXPENSE

Net interest and accretion expense was $2.1 million in the third quarter of 2009 compared with $3.6 million in the third quarter of 2008. Net interest and accretion expense was $6.6 million for the first nine months of 2009, compared with $9.5 million for the first nine months of 2008.

Interest expense in 2009 was lower than 2008 mainly due to lower levels of borrowing on the Fund's operating lines of credit and due to lower interest rates experienced during 2009 relative to 2008.

The weighted average effective annual interest rate at September 30, 2009 was 4.83% (December 31, 2008 - 5.19%). See LIQUIDITY AND CAPITAL RESOURCES - Financing Activities - Financial Instruments for information concerning swap arrangements.

During the third quarter and first nine months of 2009 the Fund recorded accretion expense of $0.1 and $0.4 million, respectively, which is comparable to the same periods of 2008. This accretion is due to the amortization of transaction costs related to the Fund's borrowings.

INCOME TAXES

Current income tax expense was $1.0 million for the third quarter of 2009 and $2.8 million for the first nine months of 2009, compared with $2.1 million and $5.4 million for the third quarter and first nine months of 2008 respectively. The future income tax recovery was $5.5 million for the third quarter of 2009 and $8.1 million for the first nine months of 2009, compared to the future income tax expense of $3.3 million for the third quarter of 2008 and $2.9 million for the first nine months of 2008. The effective tax rates for the third quarter and the first nine months differ from the statutory tax rate of 32.2% primarily due to the operating losses in high tax rate jurisdictions and operating profits in low tax rate jurisdictions and flow-through entities.

The decrease in future tax asset of $3.1 million at September 30, 2009 relative to December 31, 2008 is the result of decreased tax loss carry forwards, net of valuation allowances, and other deductible temporary differences available in certain Canadian and foreign corporate subsidiaries.

The decrease in future tax liability of $12.6 million at September 30, 2009 relative to December 31, 2008 is the result of the decrease in the taxable temporary differences between the accounting carrying amount and the tax basis of assets associated with certain Canadian and foreign corporate subsidiaries.

EXCESS CASH FLOWS AND NET INCOME OVER DISTRIBUTIONS PAID

The following table presents excess cash flows from operating activities and net income over distributions paid for the three months and the nine months ended September 30, 2009 and for the years ended December 31, 2008 and 2007.

    
                          Three Months  Nine Months
                              Ended        Ended     Year Ended   Year Ended
                            September    September     December     December
    ($'000)                  30, 2009     30, 2009     31, 2008   31, 2007(1)
    -------------------------------------------------------------------------

    Cash flows from
     operating activities   $  18,876    $  15,758    $ 147,905    $  47,742
    Net earnings               19,535       34,429       40,331       20,596
    Distributions paid
     during period              9,201       27,802       40,086       40,971
    Excess (shortfall) of
     cash flows from
     operating activities
     over cash distributions
     paid                       9,675      (12,044)     107,819        6,771
    Excess (shortfall) of
     net earnings over
     cash distributions paid   10,334        6,627          245      (20,375)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For the year ended December 31, 2007 net earnings has been adjusted
        as a result of adopting CICA Handbook Section 3031, Inventories on a
        retrospective basis.
    

The Fund considers the amount of cash generated by the business in determining the amount of distributions payable to its Unitholders. In general, the Fund does not take into account quarterly working capital fluctuations as these tend to be temporary in nature. The Fund does not generally consider net income in setting the level of distributions as this is a non-cash metric and is not reflective of the level of cash flow that the Fund can generate. This divergence is particularly relevant for the Fund as it has a relatively high level of depreciation and amortization expenses and foreign exchange gains and losses.

For the nine months ended September 30, 2009 distributions to Unitholders exceeded cash flows from operating activities mainly due to an increase in working capital. The additional distributions were funded by cash being held by the Fund.

Distributions -

Distributions to Unitholders for the three months ended September 30, 2009 were declared as follows:

    
                                                   Distribution       Total
    Record Date                    Payment Date        Per Unit      ($'000)
    -------------------------------------------------------------------------
    Three months ended
     September 30:
      July 31, 2009                August 31, 2009      $  0.10     $  3,067
      August 31, 2009              September 30, 2009      0.10        3,067
      September 30, 2009           October 30, 2009        0.10        3,067
    -------------------------------------------------------------------------
                         Sub-Total                      $  0.30     $  9,201

    Six months ended June 30                            $  0.60     $ 18,489

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total for nine months ended September 30            $  0.90     $ 27,690
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions declared in the three months ended September 30, 2008 were
as follows:

                                                   Distribution       Total
    Record Date                    Payment Date        Per Unit      ($'000)
    -------------------------------------------------------------------------
    Three months ended
     September 30:
      July 31, 2008                August 29, 2008       $ 0.10     $  3,358
      August 29, 2008              September 30, 2008      0.10        3,358
      September 30, 2008           October 31, 2008        0.10        3,349
    -------------------------------------------------------------------------
                         Sub-Total                       $ 0.30     $ 10,065

    Six months ended June 30                             $ 0.60     $ 20,150

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total for nine months ended September 30             $ 0.90     $ 30,215
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Treatment of the Fund's distributions for Canadian income tax purposes for
2008 and 2009 is as follows:

                                               Foreign
                                             Non-Business
                       Other Income             Income               Total
    -------------------------------------------------------------------------
    2008                   76.6%                 23.4%               100.0%
    2009(1)                74.0%                 26.0%               100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Represents anticipated tax characterization of planned distributions.
        The actual tax treatment of 2009 distributions will be determined by
        February 28, 2010.
    

LIQUIDITY AND CAPITAL RESOURCES

The Fund's distributions to Unitholders are sourced entirely from its investments in operating subsidiary companies. The Fund's investments are financed by trust units held by Unitholders, term debt and operating lines of credit. The cash flow of the Fund is required to fund distributions to Unitholders, capital expenditures and payment of interest on term debt as well as the repurchase of units under the Normal Course Issuer Bid as discussed below. The Fund intends to renew its long-term debt prior to maturity.

    
    Cash Flow from Operating Activities
    -----------------------------------
    

Cash flow from operating activities for the third quarter of 2009 was $18.9 million, an increase of $4.9 million from the level generated during the third quarter of 2008. The increase in cash flow is due to a decrease in working capital relative to 2008, partially offset by lower earnings, particularly in the SPPC and International segments. During the third quarter of 2009, working capital decreased, whereas during the same quarter of 2008, working capital increased, particularly in the International segment as a result of higher prices for sulphur and sulphuric acid.

For the first nine months of 2009, cash flow from operating activities was $15.8 million, a decrease of approximately $37.9 million from the level achieved in 2008. The decrease in cash flow is primarily due to reduced earnings, particularly in the SPPC and International segments.

    
    Financing Activities
    --------------------
    

Distributions to Unitholders during the third quarter and first nine months of 2009 were $0.9 million and $2.4 million lower than the third quarter and first nine months of 2008 respectively. These decreased distributions were due to lower units outstanding as a result of the buy back and cancellation of units by the Fund pursuant to a normal course issuer bid commenced in September 2008 (as explained in the Normal Course Issuer Bid below).

Normal Course Issuer Bid -

From September 23, 2008 to September 22, 2009, the Fund purchased an aggregate of 2,912,466 of its units by way of a normal course issuer bid (the "Bid") through the facilities of the Toronto Stock Exchange (TSX). The purchases were made in accordance with the policies and rules of the TSX and units were purchased for cancellation. The prices that the Fund paid for the units purchased were the market price of such units at the time of acquisition.

During the nine months ended September 30, 2009, the Fund purchased 1,039,940 units at an average per unit price of $8.02 for an aggregate purchase amount of $8.3 million. This resulted in $12.8 million being recorded as a reduction to the value of units and $4.4 million being recorded as contributed surplus.

During 2008, the Fund purchased 1,872,526 units at an average per unit price of $9.48 for an aggregate purchase amount of $17.8 million. This resulted in $23.0 million being recorded as a reduction to the value of units and $5.3 million being recorded as contributed surplus.

For additional information on cash distributions, see NON-GAAP MEASURES - CASH FLOW AND EXCESS CASH FLOWS AND NET INCOME OVER DISTRIBUTIONS PAID.

Financial Instruments -

The Fund has entered into swap agreements with its principal bankers in order to fix the interest rates on its term debt. In the first quarter of 2009, the Fund entered into new swap arrangements which will fix interest rates on all of its term debt until August 2011. Previously the Fund had interest rate swaps related to its term debt and operating lines of credit, which fixed interest rates until August 2010. The Fund collapsed all of these interest rate swaps upon entering into the new swap arrangements and rolled the related fair value liability of $9.8 million into its new interest rate swaps. This value will be amortized on a straight-line basis over the remaining term of the term debt in net interest and accretion expense. The weighted average effective interest rate under the new swap arrangements is 4.83%. At September 30, 2009, the fair value of the above noted agreements was a liability of $7.9 million (US$7.3 million). See comments under NET INTEREST AND ACCRETION EXPENSE for comments on these rates.

During the third quarter of 2008, under provisions allowed by its credit agreement, the Fund converted its Canadian dollar denominated term debt into U.S. dollar term debt and $25.2 million of its outstanding Canadian dollar lines of credit into U.S. dollar lines of credit.

Also in the third quarter of 2008, the Fund collapsed its swap arrangements on its Canadian dollar denominated term debt and recognized a loss of $0.9 million which was included in net interest and accretion expense.

During the second quarter of 2008, the Fund extended its senior credit facilities with its principal bankers to August 2, 2011. This was a two year extension on substantially the same terms as the then existing agreement. The Fund incurred transaction costs of $0.6 million related to this extension. As the Fund treated this extension as a modification of the debt, rather than an extinguishment, these transaction costs were added to the remaining unamortized transaction costs from the pre-existing agreements. These transaction costs will be recorded as net interest and accretion expense using the effective interest method over the life of the extended debt.

See RESULTS OF OPERATIONS BY BUSINESS SEGMENT - Foreign Exchange for additional comments on hedging.

To manage its exposure to changes in the price of natural gas, the Fund has entered into natural gas forward contracts. The Fund buys and sells specific quantities of natural gas at pre-determined dates on indices which are matched with the anticipated operational cash flows. At September 30, 2009, the fair value of these agreements was $0.3 million in favour of the Fund. These contracts are accounted for as derivatives with gains or losses recorded in selling, general, administrative and other costs.

    
    Investing Activities
    --------------------
    

Investment in capital expenditures was $4.9 million in both the third quarters of 2009 and 2008. These amounts include $4.7 million in the third quarter of 2009 and $3.1 million in the third quarter of 2008 for maintenance capital requirements. Investment in capital expenditures was $15.0 million for the first nine months of 2009, compared with $11.6 million in the first nine months of 2008. These amounts include $14.3 million in the first nine months of 2009 and $8.4 million in the first nine months of 2008 for maintenance capital requirements. As previously disclosed, the Fund intends to continue upgrading its manufacturing assets and consequently maintenance capital expenditures for 2009 are expected to be similar to total capital expenditure recorded in 2008.

Investment in non-maintenance capital expenditures was $0.2 million during the third quarter of 2009 compared to approximately $1.8 million during the third quarter of 2008. Investment in non-maintenance capital expenditures was $0.7 million during the first nine months of 2009 compared to approximately $3.2 million during the first nine months of 2008. Non-maintenance capital expenditures are either pre-funded, usually as part of a significant acquisition and related financing or are considered to expand or improve the capacity of the Fund's operations.

During the third quarter of 2008, the Fund sold excess vacant land at its site in Leeds, South Carolina for US$2.9 million. As a result of the sale, the Fund has recognized a gain on disposal of $0.3 million (US$0.2 million).

During the second quarter of 2008, the Fund invested US$2.5 million in Meranol S.A.C.I. (Meranol). Meranol is based in Buenos Aires, Argentina and is a leading Argentine producer of sulphuric acid and other sulphur products. The investment was made in the form of convertible notes, convertible into 10% of the equity of Meranol. The notes bear an interest rate of 10% per annum. The Fund also has options over a specified period of time, to increase its investment to up to 45% of Meranol's common stock at a pre-determined price.

Cash Balances -

At September 30, 2009 the Fund had net cash balances of $12.9 million and working capital of $11.1 million. Comparable numbers for December 31, 2008 were $48.1 million and working capital deficit of $18.8 million, respectively. The Fund defines working capital to exclude cash, operating line of credit, distributions payable and current portion of long-term debt. Cash generated by the Fund will be used to fund cash distributions to Unitholders, capital requirements, interest, general corporate purposes and other legal obligations.

Future Liquidity -

The future liquidity of the Fund will be primarily dependant on cash flows of its operating subsidiaries. These cash flows will be used to finance ongoing expenditures, including maintenance capital, distributions to Unitholders and normal course financial commitments. Cash flows are sensitive to changes in volume, sales prices and input costs and any changes in these may impact future liquidity. Management believes that cash flows from operating activities will be sufficient for the Fund to meet future obligations and commitments that arise in the normal course of business activities.

Capital Resources -

At September 30, 2009, the Fund had senior credit facilities of $241.0 million, consisting of a term loan of $164.0 million and a revolving credit facility of $77.0 million. The term bank debt, which is fully drawn, is not due or payable until August 2011. At September 30, 2009, the Fund had nothing drawn on its operating lines of credit and had committed a total of $7.4 million of its revolving credit facility towards standby letter of credits. Subject to certain limits set out in the credit agreement, the credit facilities may be used to finance working capital, fund acquisitions, invest in capital assets, buy back units and pay distributions to Unitholders.

Debt Covenants -

As at September 30, 2009, the Fund was compliant with all debt covenants contained in its credit facility.

    
    SUMMARY OF QUARTERLY RESULTS

                                            Three Months Ended
                                            ------------------
                               September      June        March     December
    ($'000)                     30, 2009    30, 2009    31, 2009    31, 2008
    -------------------------------------------------------------------------
    Revenue                    $ 126,989   $ 124,624   $ 161,823   $ 292,789
    Cost of sales and
     services                     95,660      96,539     137,522     255,955
    -------------------------------------------------------------------------
    Gross profit                  31,329      28,085      24,301      36,834
    Selling, general,
     administrative and
     other costs                   9,803      10,625       6,025      12,630
    -------------------------------------------------------------------------
    Earnings before the
     under-noted                  21,526      17,460      18,276      24,204
    Unrealized foreign
     exchange (gain) loss         (6,802)     (9,147)      3,903      12,195
    Depreciation and
     amortization                 11,086      11,272      11,165      11,240
    Loss on disposal of
     property, plant and
     equipment                        94           -           -           -
    Net interest and
     accretion expense             2,122       2,342       2,103       4,070
    Income taxes (net)            (4,509)       (580)       (216)       (841)
    -------------------------------------------------------------------------

    Net earnings (loss)        $  19,535   $  13,573   $   1,321   $  (2,460)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                            Three Months Ended
                                            ------------------
                               September      June       March      December
    ($'000)                     30, 2008    30, 2008  31, 2008(1) 31, 2007(1)
    -------------------------------------------------------------------------

    Revenue                    $ 393,971   $ 274,276   $ 217,790   $ 144,580
    Cost of sales and
     services                    346,615     230,432     182,943     110,772
    -------------------------------------------------------------------------
    Gross profit                  47,356      43,844      34,847      33,808
    Selling, general,
     administrative and
     other costs                   5,662      13,558      13,333      10,766
    Restructuring costs                -           -      (1,238)          -
    -------------------------------------------------------------------------
    Earnings before the
     under-noted                  41,694      30,286      22,752      23,042
    Unrealized foreign
     exchange loss (gain)          3,520         446         551         296
    Depreciation and
     amortization                  9,893      10,145       9,845       9,051
    Gain on disposal
     of property                    (250)          -           -           -
    Net interest and
     accretion expense             3,639       2,795       3,031       3,050
    Income taxes (net)             5,402       3,053        (129)      1,552
    Minority interest                  -           -           -         (15)
    -------------------------------------------------------------------------

    Net earnings               $  19,490   $  13,847   $   9,454   $   9,108
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Depreciation and amortization and net earnings have been adjusted as
        a result of adopting CICA Handbook Section 3031, Inventories on a
        retrospective basis.
    

Revenues for every quarter during 2008 were high due to exceptionally strong market conditions for sulphuric acid and sulphur. These were particularly noticeable in the International segment. Revenues during the fourth quarter of 2008 started to decline as prices for sulphuric acid and sulphur started to decline in the International markets. During the first three quarters of 2009, revenue was also negatively impacted by generally weaker demand for most products and because the Beaumont plant was off-line for part of the first quarter resulting in lower sales volume.

The strong conditions during 2008 resulted in higher earnings. The effect was less pronounced in the fourth quarter of 2008 when the Fund's largest plant located in Beaumont was off-line for the entire quarter (as described in the BEAUMONT INCIDENT section).

Selling, general, administrative and other costs (S,G&A) during the first quarter of 2008 were high as they included an accrual of $4.1 million relating to the Fund's TR LTIP, caused by an appreciation in the Fund's unit value. S,G&A for the second quarter of 2008 were high as they included unrealized mark-to-market losses of $1.5 million on natural gas forward contracts. S,G&A during the third quarter of 2008 were low as they included lower TR LTIP accruals. S,G&A for the fourth quarter of 2008 were high as they include an increase of $3.4 million in the allowance for doubtful accounts. The increase was mainly due to a provision for losses expected as a result of two customers filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code in January 2009. Finally, S,G&A during the first quarter of 2009 were low as they included a reversal of $3.4 million with respect to the TR LTIP owing to a reduction in the Fund's unit value.

Unrealized foreign exchange losses were higher commencing with the third quarter of 2008 up to and including the first quarter of 2009 due to the impact of the weaker Canadian dollar relative to the U.S. dollar on the Fund's long-term debt which is U.S. dollar denominated. There was a corresponding unrealized gain on the Fund's U.S. dollar denominated assets, but accounting rules require that those be recorded in other comprehensive income. During the second and third quarters of 2009, the Canadian dollar strengthened relative to the U.S. dollar, thereby causing an unrealized foreign exchange gain on the Fund's long-term debt.

CONTRACTUAL OBLIGATIONS

    
    Information concerning contractual obligations is shown below:

    Contractual
    Obligations                Less Than      1-3         4-5        After
    ($'000)           Total      1 Year      Years       Years      5 Years
    -------------------------------------------------------------------------
    Long-Term Debt $ 163,965   $       -   $ 163,965   $       -   $       -
    Operating
     Leases           53,741       6,876      26,326      15,620       4,919
    Interest on
     Long-Term Debt   14,511       7,915       6,596           -           -
    -------------------------------------------------------------------------

    Total
     Contractual
     Obligations   $ 232,217   $  14,791   $ 196,887   $  15,620   $   4,919
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

RISKS AND UNCERTAINTIES

The Fund is one of the world's largest suppliers of sulphuric acid (acid), liquid sulphur dioxide (SO(2)) and sodium hydrosulphite (SHS) and a leading processor of spent acid, particularly in the U.S. Gulf Coast region. The Fund is also a leading regional supplier of sulphur, sodium chlorate and phosphorus pentasulphide, and also produces zinc oxide at three North American locations. The Fund faces various risks associated with its business. These risks include, amongst others, a general reduction in demand for its products, the loss of a portion of its customer base, the interruption of the supply of sulphur-based products or raw materials, price fluctuations in the products sold and/or raw materials purchased, industry over-capacity, acquisition integration and operational and product hazard risks associated with the nature of its business. The Fund imports key raw materials and products from overseas and as such has additional risks associated with the sourcing activity. The Fund makes extensive use of the railway system to transport material within North America. Certain locations are serviced by a sole carrier and thus a disruption in service could have a significant negative impact on results. In addition, the Fund sells a significant portion of its major products to large customers. While many of these customers are under contract, there can be no assurance that these contracts will be renewed. As the Fund's business is international in nature, it is exposed to foreign exchange risks related to the payment of dividends and other transactions by its foreign subsidiaries.

The Fund manages the risks associated with its customer base and sales price by seeking to obtain contractual protection to mitigate these risks. The Fund also seeks to differentiate its products and services with customers to mitigate price fluctuations and uses its scale to obtain beneficial raw material contracts.

All members of the Fund's senior management team were involved in an enterprise-wide business risk assessment, which included a review of the North American and international operations. Key risks were identified and prioritized for review and the development of action plans. This enterprise-wide risk review process is an ongoing aspect of the Fund's risk management program. In addition, the Fund maintains an extensive insurance program which includes general liability and environmental coverage.

Credit Risk -

Credit risk arises from the non-performance by counter-parties of contractual financial obligations. The Fund manages credit risk for trade and other receivables through established credit monitoring activities. The Fund does not have a significant concentration of credit risk with any single counter-party or group of counter-parties. The primary counter-parties related to the foreign exchange forward contracts, commodity price contracts and interest rate swaps carry investment grade ratings. The Fund's maximum exposure to credit risk at the reporting date is the carrying value of its receivables and derivative assets.

Dependence on Vale Inco Relationship -

Vale Inco Limited (Vale Inco) is the Fund's largest sulphur products supplier. Effective January 1, 2008, the Fund renewed its agreement with Vale Inco for the marketing of all sulphur by-products produced by the Vale Inco smelter in Sudbury, Ontario. This 10-year contract contains similar terms to the prior agreements between the parties. For the nine months ended September 30, 2009, this supply source accounted for approximately 9% of the Fund's revenues. Vale Inco had a significant collective bargaining agreement which expired on May 31, 2009. The Vale Inco union and management were unable to reach an agreement and a strike commenced on July 13, 2009. The Fund's ability to continue supplying its customers could be affected depending upon the duration of the labour disruption, the availability of other sources of product supply and demand levels. Currently the Fund does not expect any disruption to its customers.

Exchange Rates -

The Fund is exposed to fluctuations in the exchange rate of the U.S. dollar relative to the Canadian dollar, as a portion of the Fund's Distributable cash after maintenance capital expenditures is earned in U.S. dollars. On an unhedged basis, the Fund currently estimates that a one-cent change in the exchange rate will have an impact on Distributable cash after maintenance capital expenditures of less than $0.1 million per annum.

Since certain Canadian entities within the group have U.S. dollar denominated debt, unrealized gains and losses on the periodic translation of this debt are recorded in the Consolidated Statements of Earnings. However, because these are unrealized they will not affect Distributable cash after maintenance capital expenditures.

Interest Rates -

The Fund has a credit facility with term debt and operating lines of credit which bear variable rates of interest. As at September 30, 2009, on an unhedged basis, a change in interest rates of 1% per annum would have an impact of approximately $1.6 million per annum. As at September 30, 2009, the Fund had fixed interest rates on its term debt until August 2011.

Sulphuric Acid Pricing -

A change in sulphuric acid pricing, net of freight, of $1 per tonne, would have an impact on annual revenues in North America of approximately $1.0 million. However, given the risk-sharing aspect of a key supply contract, the impact on EBITDA would range from $0.5 million to $0.6 million. In any specific period, the exact impact would also depend upon the volume that is subject to sales contracts where pricing has been fixed for a period of time. The magnitude of realized price changes also depends upon regional market dynamics.

Sulphur Costs -

The Fund uses sulphur in the manufacturing of several of its products, including sulphuric acid. At current operating levels, an increase of $1.00 per tonne would have an impact of approximately $0.1 million per annum. It is important to note that a change in the cost of sulphur may lead to a change in the price for sulphuric acid as this is a key input cost in the manufacturing of sulphuric acid. Thus, the net impact of changes in sulphur costs would depend upon changes in sulphuric acid pricing.

Sodium Chlorate Pricing -

Approximately 65% of the Fund's sodium chlorate sales are to Canfor Pulp Limited Partnership on a long-term contract, whereby selling price is adjusted based on changes in virtually all variable costs. Thus, the Fund's exposure to changes in market prices of sodium chlorate is limited to the remainder of its output.

Other Input Costs -

There are several other large input costs, such as natural gas, zinc, salt and electricity, but in most cases there are contractual arrangements with customers, or other offsets within the business, which mitigate the exposure to changes in these costs.

Labour Relations -

The Fund has several collective bargaining agreements and expiry dates range from 2010 to 2014. The Fund's operations could be disrupted if new collective bargaining agreements are not concluded prior to their expiry dates.

Critical Accounting Policies

The Fund's accounting policies are described in Note 3 to the consolidated financial statements for the year ended December 31, 2008.

Use of Estimates -

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.

The pricing volatility that has been experienced in the Fund's International business could result in future results being affected by the non-performance of suppliers or customers. To the extent that such non-performance is likely, the Fund has made adequate provisions.

Goodwill and Intangible Assets -

Effective January 1, 2009, the Fund adopted the recommendations of the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3064, Goodwill and Intangible Assets. Section 3064 states that upon their initial identification, intangible assets are to be recognized as assets if they meet the definition of an intangible asset and if they satisfy the recognition criteria contained in the Handbook section. This section also provides further information on the recognition of internally generated intangible assets (including research and development costs).

Section 3064 carries forward the requirements of the old Section 3062, Goodwill and Other Intangible Assets with regards to the subsequent measurement of intangible assets, goodwill, and disclosure. The adoption of this section did not have an impact on the Fund's consolidated financial statements.

Fair Value of Financial Assets and Financial Liabilities -

Effective January 1, 2009, the Fund adopted the recommendations of EIC-173, entitled Credit Risk and the Fair Value of Financial Assets and Financial Liabilities, which provides further information on the determination of the fair value of financial assets and financial liabilities under Section 3855, entitled Financial Instruments - Recognition and Measurement. This EIC states that an entity's own credit and the credit risk of the counter-party should be taken into account in determining the fair value of financial assets and financial liabilities, including derivative instruments. The adoption of this EIC did not have an impact on the Fund's consolidated financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

Convergence to International Financial Reporting Standards (IFRS) -

In 2006, the Canadian Accounting Standards Board (AcSB) published a new strategic plan that will significantly affect financial reporting requirements for Canadian publicly accountable entities. The AcSB strategic plan outlines the convergence of Canadian GAAP with International Financial Reporting Standards (IFRS) over an expected five year transitional period. In February 2008 the AcSB announced that 2011 is the changeover date for publicly accountable companies to use IFRS, replacing Canada's own GAAP. The changeover date applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. For the Fund, the transition date of January 1, 2011 will require the restatement for comparative purposes of amounts reported by the Fund for the year ended December 31, 2010. The following outlines the Fund's IFRS conversion plan.

The Fund's IFRS Changeover Plan: Assessment as of September 2009:

    
    -------------------------------------------------------------------------
       Key Activity             Milestones               Status/Deadlines
    -------------------------------------------------------------------------
    IFRS Conversion Scoping  Review of current         The review is complete
    Phase                    standards vs. IFRS.       and the determination
                             Identification of         of financial impact
                             significant differences.  is in progress.

                             Assessment of available   Changes to Canadian
                             resources.                GAAP and IFRS are
                                                       monitored and assessed
                             Assignment and training   on an ongoing basis.
                             of cross-functional and
                             core team.

                             Monitoring of changes
                             to Canadian GAAP and
                             IFRS and their impact
                             to the Fund.
    -------------------------------------------------------------------------
    Decisions on Accounting  Formal review of          Most review sessions
    Policies and IFRS1       differences in each       have been completed.
                             area with the core
                             team and members of       Some IFRS1 and
                             cross-functional team     accounting policy
                             as required.              choice decisions made.

                             Assessment of             The Fund will continue
                             differences between       review sessions
                             IFRS and the Fund's       through 2009.
                             current practices.

                             Decision on accounting
                             policy choices and
                             IFRS1 for each
                             assessed area.
    -------------------------------------------------------------------------
    Information Technology   Identification of IT      The Fund has upgraded
    Evaluation               requirements, both        its ERP software in
                             hardware and software,    readiness for IFRS and
                             for IFRS conversion.      believes that minimal
                                                       further IT changes
                             Development of            will be required.
                             implementation plan
                             for new or upgraded
                             software and any
                             additional hardware
                             required.
    -------------------------------------------------------------------------
    Control Environment:     Review and assessment     As the Fund completes
    Internal Control Over    of impact of accounting   reviews and
    Financial Reporting      policy choices and        assessments of
    and Disclosure           changes relating to       accounting sections
    Controls and Procedures  IFRS conversion.          and makes decisions
                                                       on accounting policies
                             Update of internal        and IFRS1 choices,
                             control testing           appropriate changes to
                             procedures and            ensure the integrity
                             documentation for all     of internal control
                             accounting policy         over financial
                             choices and changes.      reporting and
                                                       disclosure controls
                             Implementation of         and procedures are
                             appropriate changes:      being made.

                             - MD&A Disclosure
                               Requirements

                             - Key Performance
                               Indicators

                             - Investor Relations
                               Communication
                               Process
    -------------------------------------------------------------------------
    Financial Statement      Identification of         Skeleton financial
    Preparation              transactions impacted     statements will be
                             by IFRS conversion.       developed in 2010.

                             An assessment of these
                             transactions,
                             appropriate changes
                             and re-mapping will
                             be completed.

                             The assessment and
                             re-mapping will form
                             the skeleton of the
                             IFRS compliant
                             financial statements.
    -------------------------------------------------------------------------
    Financial Impact         Analysis of               Quantification of
    Analysis for             differences between       differences between
    Transactional Areas      Canadian GAAP and IFRS    Canadian GAAP and IFRS
                             that was completed        will be completed
                             will be quantified.       during 2010.
                             Senior Management and
                             external auditors to
                             review and sign-off.
    -------------------------------------------------------------------------
    Business Activities      Identification of         Assessments and
    Impact                   impacts on business       identifications of
                             activities to be          impacts of the
                             completed.                conversion to IFRS
                                                       are underway.
                             Completion of any
                             re-negotiations.          Identification of
                                                       impacts is to be
                                                       completed during 2010
                                                       and any necessary
                                                       re-negotiations are
                                                       to be completed during
                                                       that period.
    -------------------------------------------------------------------------
    

Business Combinations -

In January 2009, the CICA issued Handbook Sections 1582, Business Combinations; 1601, Consolidated Financial Statements; and 1602, Non-Controlling Interests. These sections replace Handbook Sections 1581, Business Combinations; and 1600, Consolidated Financial Statements. Section 1582 establishes standards for the accounting for business combinations that is equivalent to the business combination accounting standard under IFRS. Section 1582 is applicable for the Fund's business combinations with acquisition dates on or after January 1, 2011. Early adoption of this section is permitted. Sections 1601 and 1602 establish standards for the preparation of consolidated financial statements and for accounting for a non-controlling interest in a subsidiary in the consolidated financial statements subsequent to a business combination. Sections 1601 and 1602 are applicable for the Fund's interim and annual consolidated financial statements for its fiscal year beginning January 1, 2011. Early adoption of these sections is also permitted. If the Fund chooses to early adopt any one of these sections, the other two sections must also be adopted at the same time. The Fund is currently evaluating the effect of these new sections on the consolidated financial statements.

    
    DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL
    REPORTING
    

The Fund maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that the Fund publicly files is recorded, processed, summarized and reported within a timely manner and that such information is accumulated and communicated to the Fund's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer have evaluated the Fund's disclosure controls procedures as of September 30, 2009 through inquiry, review and testing. The Chief Executive Officer and the Chief Financial Officer have concluded that, as at September 30, 2009, the Fund's disclosure control procedures were effective.

The Fund also maintains a system of internal controls over financial reporting designed under the supervision of the Fund's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. There have been no changes in the Fund's systems of internal controls over financial reporting that would materially affect, or are reasonably likely to materially affect, the Fund's internal controls over financial reporting.

OUTLOOK

Demand for our products appears to have stabilized, albeit at lower levels than 2008. We are well positioned to benefit from an increase in demand, although in the current economic environment it remains difficult to accurately forecast demand levels. We continue to obtain sulphuric acid from alternate sources, as Vale Inco, our largest supplier of sulphuric acid is undergoing a labour disruption. Currently we do not expect this event to cause any disruption in our ability to supply our customers.

Our business model and some of our contracts mitigate the effects of certain commodity movements. However, a sustained decrease in demand similar to that seen in the first nine months of the year has adversely affected Chemtrade and will continue to do so to the extent it persists. We continue to maintain a healthy balance sheet and ample liquidity. The nature of our business model as demonstrated by the strength of our businesses even in times of low demand and price volatility, coupled with our strong balance sheet, are more than sufficient to sustain our current distribution rate.

OTHER

Additional information concerning the Fund, including the Annual Information Form, is filed on SEDAR and can be accessed at www.sedar.com.

November 11, 2009

For further information: For further information: Mark Davis, President and CEO, Tel: (416) 496-4176; Rohit Bhardwaj, Vice-President, Finance and CFO, Tel: (416) 496-4177


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