TORONTO, May 13, 2014 /CNW/ - Chemtrade Logistics Income Fund (TSX: CHE.UN) today announced results for the three months ended March 31, 2014. The first quarter financial statements and MD&A will be available on Chemtrade's website at chemtradelogistics.com and on SEDAR at sedar.com.
Mark Davis, President and Chief Executive Officer of Chemtrade, said, "Chemtrade had a good start to the year. The highlight of the quarter was the completion of the acquisition of General Chemical in late January and the related $345.0 million equity issue. We are making good progress towards integrating the acquired business and are pleased with the performance of the combined businesses."
As previously disclosed, Chemtrade reconfigured its North American business segments at the beginning of 2014. A new segment, Water Solutions & Specialty Chemicals ("WSSC"), was introduced which includes the newly acquired and legacy water treatment businesses, the General Chemical specialty chemical businesses, and the legacy phosphorus pentasulphide operations, as well as the former Pulp Chemicals segment. Chemtrade's Sulphur Products & Performance Chemicals ("SPPC") segment now includes the newly acquired sulphuric acid businesses. Comparative numbers for 2013 have been restated to reflect the reorganization. The International segment is unchanged.
The results for the first quarter include costs of $17.7 million related to the acquisition of General Chemical that was completed on January 23, 2014 ("Acquisition Related Costs").
Revenue in the quarter was $273.9 million compared with $210.0 million in the first quarter of 2013. The primary reason for the revenue increase was the approximately two months of revenues from the General Chemical businesses. Cash flow from operating activities for the first quarter (including the effect of the Acquisition Related Costs) was negative $40.3 million (2013: positive $2.6 million).
Distributable cash after maintenance capital expenditures for the first quarter was $14.3 million, or $0.26 per unit (2013: $27.0 million, or $0.65 per unit) or $32.0 million, or $0.56 per unit excluding Acquisition Related Costs. During the first quarter of 2014 and the comparable period of 2013, distributable cash benefited from maintenance capital expenditures being lower than the anticipated annual run rate. Maintenance capital expenditures during 2014 are expected to range between $55.0 and $60.0 million.
Adjusted cash flows from operating activities for the period were $18.0 million (2013: $29.6 million). The decrease was primarily due to Acquisition Related Costs in the first quarter of 2014. EBITDA for the first quarter was $28.2 million (or $45.2 million excluding Acquisition Related Costs) compared with $35.2 million in the first quarter of 2013.
Net loss for the first quarter of 2014 was $21.6 million compared with net earnings of $4.3 million in the same period in 2013. The decrease is primarily due to higher net finance costs due to the fair value adjustments on the convertible unsecured subordinated debentures ("debentures") and the write-down of previously deferred financing costs related to the former credit facilities that were repaid in the first quarter of 2014. Finance costs were also higher due to the additional debt incurred to finance the General Chemical acquisition. The acquisition also resulted in higher levels of depreciation and amortization in the first quarter of 2014 relative to the same period of 2013. These additional expenses were partially offset by higher income tax recoveries in 2014 compared with 2013.
SPPC generated revenue of $145.6 million and EBITDA of $35.0 million compared with $125.8 million and $33.5 million, respectively, in 2013. The main reason for the increased revenue was the inclusion of the General Chemical businesses for about two months.
WSSC, the new segment, reported first quarter revenue of $87.8 million compared with $33.4 million in 2013. EBITDA was $24.9 million compared with $9.4 million in 2013. In addition to the water treatment and specialty chemicals businesses of General Chemical, WSSC also includes the businesses transferred from SPPC, and the former Pulp Chemicals business. The higher revenue and EBITDA generated in this segment was primarily due to the inclusion of two months of results for the newly acquired business.
International reported revenue of $40.5 million for the first quarter, compared with $50.8 million in the first quarter of 2013. This reduction in revenue reflected lower volume and prices of sulphur and lower prices of sulphuric acid, caused by the generally weak conditions in international markets for sulphur and sulphuric acid. EBITDA for the quarter was $3.4 million, compared with $2.4 million last year demonstrating once again how Chemtrade's business model helps mitigate the impact of typical chemical commodity risks on financial results.
Corporate costs during the first quarter of 2014 were $35.1 million, which was $25.0 million higher than the first quarter of 2013. The primary reason for the higher costs is Acquisition Related Costs of $17.7 million. LTIP expenses were $3.0 million higher than the first quarter of 2013. Finally, corporate costs now include corporate costs of the acquired business.
Mr. Davis said, "The General Chemical acquisition has made a significant difference to the scale and scope of Chemtrade's operations. While the first quarter only includes about two months of earnings from the acquired business, the full effect of the benefits will become apparent over the course of this year as the integration progresses. We remain confident that our businesses will generate sufficient cash flow to allow us to reduce leverage in addition to sustaining our current distribution rate."
Distributions declared in the first quarter totalled $0.30 per unit, comprised of monthly distributions of $0.10 per unit.
Caution Regarding Forward-Looking Statements
Certain statements contained in this news release constitute forward-looking statements within the meaning of certain securities laws, including the Securities Act (Ontario). Forward-looking statements can be generally identified by the use of words such as "anticipate", "continue", "estimate", "expect", "expected", "intend", "may", "will", "project", "plan", "should", "believe" and similar expressions. Specifically, forward-looking statements in this news release include statements respecting certain future expectations about: capital expenditures; financial results due to acquisition integration; and the sustainability of the Fund's distributions. Forward-looking statements in this news release describe the expectations of the Fund and its subsidiaries as of the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements for a variety of reasons, including without limitation the risks and uncertainties detailed under the "Risk Factors" section of the Fund's latest Annual Information Form and the "Risks and Uncertainties" section of the Fund's most recent Management's Discussion & Analysis.
Although the Fund believes the expectations reflected in these forward-looking statements and the assumptions upon which they are based are reasonable, no assurance can be given that actual results will be consistent with such forward-looking statements, and they should not be unduly relied upon. With respect to the forward-looking statements contained in this news release, the Fund has made assumptions regarding: there being no significant disruptions affecting the operations of the Fund and its subsidiaries, whether due to labour disruptions, supply disruptions, power disruptions, transportation disruptions, damage to equipment or otherwise; the ability of the Fund to obtain products, raw materials, equipment, transportation, services and supplies in a timely manner to carry out its activities and at prices consistent with current levels or in line with the Fund's expectations; the timely receipt of required regulatory approvals; the cost of regulatory and environmental compliance being consistent with current levels or in line with the Fund's expectations; the ability of the Fund to successfully access tax losses and tax attributes; the ability of the Fund to obtain financing on acceptable terms; currency, exchange and interest rates being consistent with current levels or in line with the Fund's expectations; and global economic performance.
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. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement.
Further information can be found in the disclosure documents filed by Chemtrade Logistics Income Fund with the securities regulatory authorities, available at sedar.com.
SOURCE: Chemtrade Logistics Income Fund
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