Canexus Corporation Fourth Quarter and Year-End Financial Results
Record 2012 Cash Operating Profit and Strategic Progress on Oil-by-Rail and Hydrochloric Acid Expansion Initiatives Set to Fuel Solid Future Growth
(firmenpresse) - CALGARY, ALBERTA -- (Marketwire) -- 03/14/13 -- Canexus Corporation (TSX: CUS) (the "Corporation" or "Canexus") today announced its financial results for the fourth quarter and year ended December 31, 2012.
Highlights:
"In 2012, Canexus achieved record financial and operational performance, while making key strategic investments in projects to fuel our future growth and build long-term shareholder value," said Gary Kubera, President and CEO. "We delivered record cash operating profit at both our North America sodium chlorate and chlor-alkali business units, and, as we complete the hydrochloric acid expansions at North Vancouver and add to our capabilities at NATO, we are poised to continue to grow our business in 2013 and beyond."
"We continue to believe our cash operating profit guidance for 2013, of $155 to $165 million, is appropriate despite current weakness in both caustic soda and chlorine prices and the delay in ramp-up of our truck-to-rail transload capacity at Bruderheim. Price increase announcements for both products have been made by Canexus and/or other industry participants to commence in the second quarter of 2013 or as contracts allow. We expect cash operating profit for Q1 to be $30 to $33 million. There are a number of positive factors, in addition to price improvements, that could potentially benefit the balance of the year," added Mr. Kubera.
To facilitate a meaningful analysis and discussion of the Corporation's financial performance for the year ended December 31, 2012, the following financial information for the year ended December 31, 2011 has been prepared on a pro forma basis to include the 100% financial results of Canexus Limited Partnership ("Canexus LP") for the period January 1, 2011 to February 6, 2011. On February 7, 2011, the Corporation's predecessor, Canexus Income Fund, indirectly acquired Nexen Inc.'s interest in Canexus LP and consolidated the 100% financial results of Canexus LP from that date.
Distributable Cash
Distributable cash of Canexus Corporation was $26.2 million ($0.19 per common share) and $87.6 million ($0.70 per common share) for the three months and year ended December 31, 2012, resulting in payout ratios of 70% and 78%, respectively.
Below is a reconciliation of net cash generated from operating activities to Distributable Cash of the Corporation for the three months and years ended December 31, 2012 and 2011.
Segmented Information for the Three- and Twelve-Month Periods Ended December 31, 2012 and 2011
Canexus has a total of six manufacturing plants - four in Canada and two at one site in Brazil - organized into three business units. Canexus also provides fee-for-service hydrocarbon transloading at its terminal in Alberta. NATO results are included in the North America Chlor-alkali results. Below is our fourth quarter and full year performance by segment.
Highlights for each business unit are as follows:
Market Fundamentals
North America Sodium Chlorate: During the fourth quarter of 2012, pulp markets generally enjoyed modestly stronger demand and improved conditions over the previous quarter. Some new capacity was restarted in the fourth quarter, but its impact on the markets was mostly offset by the announced capacity closures at two Canadian mills. Combined producer inventories in December held at 32 days, which is considered to be a well-balanced level given current fundamentals. Softwood pulp levels rose by three days from November to December ending at 29 days, while hardwood inventories decreased by five days over the same period, ending at 34 days. Producers of both fibre types took advantage of the favourable dynamics to introduce price increases, attempting to regain some of the pricing erosion incurred earlier in the year. There is the potential for additional price increases in 2013 if current conditions are sustained. Global pulp shipments closed the year on a positive note, with an increase of 2.6% over 2011 volumes. Much of the growth in 2012 was due to another strong year for Chinese imports which increased by 9.7% year-over-year.
As bleached pulp production was stable throughout the quarter, demand for sodium chlorate was also stable. Exports of sodium chlorate from North America in 2012 were 9% lower than 2011 volumes. While North American domestic demand for sodium chlorate was impacted by recent mill closures in Canada, the overall net impact was positive for the year due to the new demand that came online in the third and fourth quarters. Operating rates for the North American sodium chlorate industry are expected to remain strong, at approximately 95% for 2013.
North America Chlor-alkali: The North American chlor-alkali industry operated at an estimated 82% of capacity in the fourth quarter of 2012, compared to 83% in the third quarter and 77% in the fourth quarter of 2011. Industry capacity utilization did not decline as much as expected in the fourth quarter due to stronger demand for Polyvinyl Chloride ("PVC"). Utilization rates increased to 88% in December and are expected to hold in the mid-80's% through the first quarter of 2013 due to higher demand and inventory restocking in advance of the construction season.
North American hydrochloric acid supply was reduced in the fourth quarter of 2012 due to several planned maintenance outages in the U.S. gulf coast region. In the Pacific Northwest region, new burner capacity at a competitive facility was commissioned and began production. Hydrochloric acid demand was balanced with improved oil well fracturing activity in Western Canada increasing demand but being partially offset by reduced drilling and fracturing in the U.S. Supply in the first quarter of 2013 is expected to increase due to higher operating rates from the by-product producers in the U.S. gulf coast region while demand is also expected to improve in Western Canada due to an increase in fracturing activity.
North American caustic soda production was marginally reduced in the fourth quarter of 2012, consistent with lower chlorine operating rates while demand remained strong from most consuming segments. Export supply from Asia to the west coast of Canada and the U.S. increased late in the fourth quarter due to apparent weakness in domestic demand in China and Japan, as well as in export demand from China and Japan to other regions.
MECU prices did not change in the fourth quarter of 2012 from the prior quarter. Prices for caustic soda and hydrochloric acid are expected to decline in the first quarter of 2013 due to oversupply conditions.
South America: Brazilian pulp exports in 2012 were an estimated 8.5 million MT according to Bracelpa (Brazilian Pulp Producers Association), consistent with 2011 levels. Estimated industry revenue for 2012 was US$6.7 billion which was 7.4% lower than in 2011. Europe was the main destination for exports representing 37%, followed by China at 20% and Latin America at 18%.
The Brazilian chlor-alkali industry capacity utilization rate was 83% for 2012 (1% higher than 2011). Canexus Brazil`s chlor-alkali capacity utilization was 100%, driven by higher hydrochloric acid sales as a result of lower spent acid availability in North East Brazil and market share gains.
Looking forward into 2013, we expect to maintain continued high operating rates at our chlor-alkali facility supported by long-term contract positions with key customers. We expect a modest decrease in our sodium chlorate operating rate due to lower consumption levels at our major customer resulting from process optimization efforts. The resulting available capacity is expected to be realigned with other merchant market customers over the next year.
Oil & Gas: International crude oil prices (Brent) were generally stable in the fourth quarter of 2012, while North American prices (West Texas Intermediate, Western Canadian Select) declined gradually during the fourth quarter of 2012. Brent pricing has been supported by a modestly improved global economic outlook and geopolitical concerns in the Middle East, whereas growing production and ongoing infrastructure bottlenecks are holding back regional prices in North America. Accordingly, price differentials between Western Canadian grades and other key benchmarks widened during the fourth quarter of 2012, supporting strong demand for rail based oil transportation services.
While natural gas prices rose during the fourth quarter of 2012 as demand was driven by cold weather and several nuclear power plants being offline in the U.S.; natural gas inventories remain solid and prices are expected to remain stable in the short term. Gas production is expected to continue to gradually fall in North America in 2013 and prices are expected to begin increasing modestly in the long term. These factors negatively impacted hydraulic fracturing service levels in the quarter which reduced demand for hydrochloric acid in the same period.
Drilling activity picked up in Western Canada in the fourth quarter of 2012 and is predominantly focused on oil production due to lower prices for natural gas.
Financial Updates
Operating Results for the Three Months and Years Ended December 31, 2012 and 2011
Financial Statements, Conference Call and Webcast
Financial Statements and Management's Discussion and Analysis will be posted on the Canexus website at and filed on SEDAR when available. Management will host a conference call at 10 a.m. ET on March 15, 2013, to discuss the results. A Q4 2012 presentation will be available on our website to facilitate the conference call. Please call 416-644-3414 or 1-800-814-4859. The conference call will also be accessible via webcast at . A replay of the conference call will be available until midnight March 22, 2013. To access the replay, call 416-640-1917 or 1-877-289-8525, followed by passcode 4594593#.
Non-GAAP Measures
Cash operating profit, cash operating profit percentage, payout ratio, distributable cash and gross profit are non-GAAP financial measures, but management believes they are useful in measuring the Corporation's performance. Readers are cautioned that these measures should not be construed as alternatives to net income or loss or other comparable measures determined in accordance with GAAP as an indicator of the Corporation's performance or as a measure of the Corporation's liquidity and cash flow. The Corporation's method of calculating non-GAAP measures may differ from the methods used by other issuers and accordingly, the Corporation's non-GAAP measures are unlikely to be comparable to similarly titled measures used by other issuers. Readers should consult the Corporation's 2011 MD&A filed on SEDAR for a complete explanation of how the Corporation calculates each such non-GAAP measure.
Forward-Looking Statements
This news release contains forward-looking statements and information relating to expected future events relating to Canexus and its subsidiaries, including with respect to: the effect of the upgraded power line at Canexus' Brandon plant; the progress of the NATO expansion and other initiatives at Bruderheim, including hydrochloric acid blending and expanded DBCO and hydrochloric acid transload capacity; the timing of completion of the current hydrochloric acid expansions at Canexus' North Vancouver chlor-alkali facility, including the potential volumes associated therewith; Canexus' corporate performance and resultant cash operating profit; pulp market stabilization and recovery; sodium chlorate demand and industry operating rates; caustic soda and hydrochloric acid supply and pricing; chlor-alkali industry capacity utilization; North American hydrochloric acid supply and the production of chlorine derivatives; operating rates of Canexus' South American chlor-alkali facility; and natural gas production and pricing. The use of the words "expects", "anticipates", "continue", "estimates", "projects", "should", "believe", "plans", "intends", "may", "will" or similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements for a variety of reasons, including market and general economic conditions, future costs, treatment under governmental regulatory, tax and environmental regimes and the other risks and uncertainties detailed under "Risk Factors" in the Corporation's Annual Information Form filed on the Corporation's SEDAR profile at . Management believes the expectations reflected in these forward-looking statements are currently reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Due to the potential impact of these factors, Canexus disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law. 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. Such financial outlook information should not be used for purposes other than those for which it is disclosed herein.
About Canexus
Canexus produces sodium chlorate and chlor-alkali products largely for the pulp and paper and water treatment industries. Our four plants in Canada and two at one site in Brazil are reliable, low-cost, strategically-located facilities that capitalize on competitive electricity costs and transportation infrastructure to minimize production and delivery costs. Canexus also provides fee-for-service hydrocarbon transloading services to the oil and gas industry from its terminal at Bruderheim, Alberta. Canexus targets opportunities to maximize shareholder returns and delivers high-quality products to its customers. Canexus' common shares (CUS) and debentures (Series I - CUS.DB; Series III - CUS.DB.A; Series IV - CUS.DB.B) trade on the Toronto Stock Exchange. More information about Canexus is available at .
Contacts:
Canexus Corporation
Gary Kubera
President and CEO
(403) 571-7300
Canexus Corporation
Richard McLellan
CFO
(403) 571-7300
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Datum: 14.03.2013 - 17:47 Uhr
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