Canexus Corporation Announces Second Quarter Results
Board Approves Expansion of Unit Train Capacity at NATO
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 08/07/13 -- Canexus Corporation (TSX: CUS) (the "Corporation" or "Canexus") today announced its financial results for the second quarter ended June 30, 2013.
Highlights:
"Our financial performance in the first half of 2013 has been disappointing," said Gary Kubera, President and CEO. "Market conditions for our chlor-alkali business will continue to be challenging in the second half of the year. Despite expectations for lower hydrochloric acid prices, this business will benefit from the capacity expansions just being completed. Both our North American sodium chlorate business and Brazil operations are performing well and market conditions should support strong business performance over the balance of the year and for 2014. The market fundamentals for oil-by-rail movements are solid and Canexus expects NATO to contribute meaningful results for shareholders as major capital projects are completed," he added.
Distributable Cash
Distributable cash of Canexus Corporation was $6.0 million ($0.04 per common share) for the quarter resulting in a payout ratio of 342%.
Below is a reconciliation of net cash generated from operating activities to Distributable Cash of the Corporation for the three and six months ended June 30, 2013 and 2012.
Segmented Information for the Three-Month Periods Ended June 30, 2013 and 2012
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 NATO terminal in Bruderheim, Alberta as a separate business unit. Below is our second quarter performance by segment.
Highlights for each business unit are as follows:
General Market Fundamentals
North America Sodium Chlorate: Global market pulp dynamics remained favorable throughout the second quarter of 2013. Despite slightly lower shipments to China from World-20 suppliers, year-to-date global pulp shipments were higher by 1.8% compared to the same period in 2012. Combined producer inventories for June remained relatively constant with historical averages at 34 days. Softwood pulp inventories continue to suggest a balanced market at 28 days, while hardwood inventories are slightly higher than historical averages at 40 days. Stable demand for pulp combined with planned maintenance downtime in both North and South America, contributed to positive market conditions and also provided support for further price appreciation in most pulp grades. New capacity coming on line in Eastern Europe and South America in the second half of the year is expected to result in increases to pulp inventories, which suggests an erosion of pulp pricing gains made during the first half of the year. Outside of strong demand for pulp in the tissue market, most other segments related to North American downstream paper are showing demand declines, most notably uncoated freesheet, which is down 4.3% through May.
As expected, demand for sodium chlorate in the second quarter of 2013 was impacted by North American mills annual maintenance shutdowns and was slightly lower than the first quarter of 2013 but it is expected to remain stable for the remainder of the year. Exports of sodium chlorate from North America for the first four months of 2013 were strong and suggest annual export volumes consistent with those achieved in 2012. Operating rates for the North American sodium chlorate industry are estimated to remain between 93% and 94% for the remainder of the year.
North America Chlor-alkali: The North American chlor-alkali industry operated at an estimated 85% of capacity in the second quarter of 2013, compared to 83% in the first quarter of 2013 and 80% in the second quarter of 2012. Domestic Polyvinyl Chloride ("PVC") demand is gradually improving and export demand for PVC and isocyanates remains strong. Domestic demand is 2.1% higher (June YTD) compared to 2012 levels. Chlorine utilization rates are expected to approximate 85% through the third quarter of 2013.
North American caustic soda supply was balanced with demand in the second quarter of 2013. Export supply from Asia to the west coast remained readily available, while exports from Europe to the east coast were limited. Declining PVC prices in China have put pressure on caustic export prices, but to date this trend has resulted in only modest price improvement in the North American west coast market.
North American hydrochloric acid supply was balanced with demand in the second quarter of 2013 due to several production outages at both byproduct and burner producer sites, offsetting seasonal demand declines in the Canadian oil and gas sector and sluggish steel production.
North American MECU prices were unchanged in the second quarter of 2013. Chlorine market price increases were announced for the second quarter but not implemented due to a lack of producer support and no movement is expected in the third quarter. Downward pressure on PVC prices in Asia resulted in higher caustic soda price nominations for export cargo during the second quarter of 2013 but minimal volume was contracted at these higher prices. Most North American producers have announced a market price increase for caustic soda for implementation in the third quarter of 2013. Hydrochloric acid price erosion was halted in the second quarter of 2013 with a market price increase announcement by most suppliers consistent with an improved supply and demand balance.
South America: Brazilian pulp production for the first five months of 2013 was 3.9% higher than the same period in 2012 and Brazilian exports were 9.4% higher for the same period. Downward pricing pressure is expected in the fourth quarter of 2013 due to new pulp capacity but is expected to be partially offset by the weakening of the Brazilian Real compared to the US Dollar.
Canexus Brazil`s major sodium chlorate customer had higher than expected sodium chlorate demand in the second quarter of 2013 due to higher pulp production levels. Canexus Brazil`s sodium chlorate plant production was above planned levels in the second quarter of 2013 due to the postponement of a shutdown and higher sales to the merchant market.
In the first five months of 2013, the Brazilian Chlor-alkali industry capacity utilization rate was 84.5%, 1.2% lower than the same period in 2012, due to manufacturing issues at two key producers. Canexus Brazil`s Chlor-alkali capacity utilization was 95% during the first half of 2013 which was in line with expectations.
Oil & Gas: Benchmark crude oil (Brent, WTI) price differentials significantly tightened during the second quarter of 2013 due to lower Brent prices. Western Canadian prices also appreciated meaningfully during the same period. Brent prices constricted due to weak seasonal demand and elevated inventory levels. Infrastructure de-bottlenecking, pipeline expansions, and increased rail movements firmed WTI pricing over the quarter. Price differentials between Western Canadian grades and other key benchmarks appreciated significantly during the second quarter of 2013 driven by factors specific to the Alberta marketplace, contributing to lower demand for outbound pipeline capacity, that are believed to be short term in nature. Fourth quarter 2013 and beyond, future market differentials remain wide enough to support strong demand for rail-based oil transportation services as pipeline capacity will lag new oil sands production in the near to mid-term.
Natural gas prices were stable over the second quarter of 2013. Production is expected to continue to decline slightly in North America for the remainder of 2013, while prices are expected to increase modestly in the mid to long term.
Drilling activity marginally increased in the second quarter but was somewhat constrained by a wet spring. We continue to see a transition to horizontal drilling with oil favoring gas. Second quarter 2013 completions dipped due to seasonality but drilling licenses increased over first quarter levels. Marginally improved levels of drilling activity support demand for hydrochloric acid.
Financial Updates
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. Management will host a conference call at 10 a.m. ET on August 8, 2013, to discuss the results. A Q2 2013 presentation will be available on our website to facilitate the conference call. Please call 416-644-3419 or 1-877-974-0447. The conference call will also be accessible via webcast at . A replay of the conference call will be available until midnight August 15, 2013. To access the replay, call 416-640-1917 or 1-877-289-8525, followed by passcode 4633140#.
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 2012 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: timing of commissioning of the Bruderheim Terminal; timing of capacity expansion at the Bruderheim Terminal and the potential cash flow implications thereof under certain scenarios; timing of expansion of DBCO transload capacity and the capacity thereof; cost of the pipeline connected unit train facility at Bruderheim; expectations for caustic soda price improvements; the impact of new capacity on pulp inventories and pulp pricing and pulp production expectations for 2013 and 2014 and their impact on demand for and industry operating rates for the remainder of 2013 for the North American sodium chlorate business; expectations for MECU pricing through the third quarter of 2013; expectations for market conditions for the chlor-alkali business and the impact of capacity expansions thereon; the significance of expected results from NATO as capital projects are completed; North American chlor-alkali utilization rates through the third quarter of 2013; expectations for pricing pressure due to higher pulp capacity and the impact of Brazilian Real to US Dollar exchange rate thereon in South America; natural gas production for the remainder of 2013 and price expectations for the medium to long term; the impact of oil price differentials on rail-based oil transportation services in 2013 and beyond; expectations regarding oil prices and drilling activity levels, and their impact on hydrochloric acid demand in Western Canada.
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: 07.08.2013 - 17:36 Uhr
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