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:
-- Cash Operating Profit was a record $134.1 million (net of cash settled
share-based compensation of $1.5 million) for the year ended December
31, 2012, 9% higher than the prior year. Record cash operating profit
was achieved in both our North America Sodium Chlorate and Chlor-alkali
business units in 2012. Cash Operating Profit was $35.3 million for the
fourth quarter of 2012.
-- Distributable Cash 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.
-- Record sodium chlorate production at our flagship Brandon plant of over
302,200 metric tonnes ("MT") in 2012. The upgraded power line completed
in late Q3 2012 is expected to add as much as 5% to our low-cost
capacity before additional debottleneck opportunities.
-- In December, Canexus announced the expansion of its North American
Terminal Operations ("NATO") at Bruderheim, Alberta to include pipeline
connected unit train operations. The Corporation also announced that
formal agreement had been reached with MEG Energy Corp. ("MEG") to
connect the Canexus Bruderheim terminal ("Bruderheim" or "Bruderheim
terminal") with pipelines which interconnect with the MEG Energy
Stonefell Terminal, and to provide terminalling services to MEG for the
loading of bitumen blend for transport by rail and the receiving of
diluent shipments by rail. We are making solid progress on this $125
million project and expect to commission this expansion late in the
third quarter of 2013. Significant progress is also being made on both a
potential second pipeline/terminal connection to Bruderheim and on
contract negotiations with additional customers for unit train shipments
from Bruderheim under multi-year, take-or-pay terms.
-- The Corporation continues to advance its other initiatives at the
Bruderheim terminal. Hydrochloric acid blending capability and the
expansion of diluted bitumen and crude oil ("DBCO") truck-to-rail
transload capacity to 30,000 bbls/day, are expected to be completed late
Q1 2013 and Q2 2013, respectively. In the month of February, we
transloaded about 16,000 bbls/day of diluted bitumen and crude oil. We
are also on track to increase our hydrochloric acid transloading
capacity in Q2 2013, in time for the start-up of the next phase of
hydrochloric acid capacity expansion at our North Vancouver chlor-alkali
facility.
-- Canexus' hydrochloric acid capacity expansion projects at its North
Vancouver chlor-alkali facility are on track for start-up in the first
and third quarters of 2013 and will each add an additional 110,000 wet
metric tonnes ("WMT") of capacity, increasing our total hydrochloric
acid capacity to 370,000 WMT's per year. The output from the first of
the two expansions is sold out under multi-year contracts.
-- The Board of Directors declared the regular quarterly dividend of
$0.1368 per common share payable April 15, 2013 to shareholders of
record on March 31, 2013.
"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.
Three Months Ended
December 31 Year Ended December 31
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CAD thousands 2012 2011 2012 2011
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Cash Operating Profit 35,257 36,713 134,053 123,394
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Interest Expense (4,200) (5,545) (19,699) (23,365)
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Realized Currency
Translation Gains 3,351 141 2,574 4,025
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Maintenance Capital
Expenditures (5,602) (7,628) (19,437) (19,438)
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Provision for Current
Income Taxes (892) (2,390) (4,604) (5,775)
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DSU/DTU Plan Settlement (310) - (310) (1,505)
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TCP Severance Costs Paid - - (888) (2,133)
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Other (1,383) (1,328) (4,041) (1,541)
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Distributable Cash 26,221 19,963 87,648 73,662
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Distributable Cash Per Share 0.19 0.17 0.70
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Dividends Declared Per Share 0.1368 0.1368 0.5472 0.5472
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Payout Ratio 70% 81% 78% 86%
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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.
Three Months Ended
December 31 Year Ended December 31
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CAD thousands 2012 2011 2012 2011
----------------------------------------------------------------------------
Net Cash Generated from
Operating Activities 35,974 31,533 101,922 93,935
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Changes in Non-Cash
Operating Working Capital (6,255) (9,343) 7,414 (1,380)
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Non-Cash Change in Income
Tax Payable and Interest
Payable 2,522 879 764 (739)
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Interest Income 103 127 412 580
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Maintenance Capital
Expenditures (5,602) (7,628) (19,437) (19,438)
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Realized Foreign Currency
Translation Gains (Losses)
on Cash (83) 146 (600) 20
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TCP Severance Costs Paid - - (888) (2,133)
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Amortization of the
Purchase Cost of Foreign
Exchange Options - (371) (1,571) (942)
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Expenditures on
Decommissioning
Liabilities (536) (515) (1,002) (597)
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Operating Non-Cash Items 98 5,135 634 4,356
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Distributable Cash 26,221 19,963 87,648 73,662
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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.
CAD thousands, except as noted North America ------------------------------------------- Three Months Ended Sodium Chlor- South December 31, 2012 Chlorate alkali (2) America Other Total ---------------------------------------------------------------------------- Sales Revenue 60,519 61,358 23,840 - 145,717 ---------------------------------------------------------------------------- Cost of Sales 35,316 35,597 17,626 (136) 88,403 ---------------------------------------------------------------------------- Distribution, Selling and Marketing 7,861 17,039 375 706 25,981 ---------------------------------------------------------------------------- General and Administrative (1) 2,543 3,222 1,036 1,722 8,523 ---------------------------------------------------------------------------- Operating Profit (Loss) 14,799 5,500 4,803 (2,292) 22,810 ---------------------------------------------------------------------------- Add: ---------------------------------------------------------------------------- Depreciation and Amortization included in Cost of 3,219 6,532 1,755 (1) 11,505 Sales ---------------------------------------------------------------------------- Depreciation and Amortization included in General - - 12 345 357 and Administrative ---------------------------------------------------------------------------- Share-based Compensation Expense - - - 585 585 ---------------------------------------------------------------------------- Cash Operating Profit (Loss) 18,018 12,032 6,570 (1,363) 35,257 ---------------------------------------------------------------------------- Cash Operating Profit Percentage 30% 20% 28% - 24% ---------------------------------------------------------------------------- CAD thousands, except as noted North America ------------------------------------------- Three Months Ended Sodium Chlor- South December 31, 2011 Chlorate alkali(2) America Other Total ---------------------------------------------------------------------------- Sales Revenue 58,311 59,168 26,324 - 143,803 ---------------------------------------------------------------------------- Cost of Sales 34,762 30,952 20,883 123 86,720 ---------------------------------------------------------------------------- Distribution, Selling and Marketing 7,517 14,580 372 561 23,030 ---------------------------------------------------------------------------- General and Administrative (1) 2,460 3,117 1,019 2,785 9,381 ---------------------------------------------------------------------------- Operating Profit (Loss) 13,572 10,519 4,050 (3,469) 24,672 ---------------------------------------------------------------------------- Add: ---------------------------------------------------------------------------- Depreciation and Amortization included in Cost of Sales 3,198 5,727 1,576 - 10,501 ---------------------------------------------------------------------------- Depreciation and Amortization included in General and Administrative - 14 231 245 ---------------------------------------------------------------------------- Share-based Compensation Expense - - - 1,295 1,295 ---------------------------------------------------------------------------- Cash Operating Profit (Loss) 16,770 16,246 5,640 (1,943) 36,713 ---------------------------------------------------------------------------- Cash Operating Profit Percentage 29% 27% 21% - 26% ---------------------------------------------------------------------------- CAD thousands, except as noted North America ------------------------------------------- Year Ended December Sodium Chlor- South 31, 2012 Chlorate alkali(2) America Other Total ---------------------------------------------------------------------------- Sales Revenue 235,144 245,058 102,224 - 582,426 ---------------------------------------------------------------------------- Cost of Sales 138,636 145,468 80,471 156 364,731 ---------------------------------------------------------------------------- Distribution, Selling and Marketing 29,711 62,199 1,317 2,764 95,991 ---------------------------------------------------------------------------- General and Administrative (1) 10,579 13,407 3,774 7,862 35,622 ---------------------------------------------------------------------------- Operating Profit (Loss) 56,218 23,984 16,662 (10,782) 86,082 ---------------------------------------------------------------------------- Add: ---------------------------------------------------------------------------- Depreciation and Amortization included in Cost of Sales 12,731 24,658 7,105 - 44,494 ---------------------------------------------------------------------------- Depreciation and Amortization included in General and Administrative - - 50 913 963 ---------------------------------------------------------------------------- Share-based Compensation Expense - - - 2,514 2,514 ---------------------------------------------------------------------------- Cash Operating Profit (Loss) 68,949 48,642 23,817 (7,355) 134,053 ---------------------------------------------------------------------------- Cash Operating Profit Percentage 29% 20% 23% - 23% ----------------------------------------------------------------------------
CAD thousands, except
as noted North America
-------------------------------------------
Year Ended December Sodium Chlor- South
31, 2011 Chlorate alkali(2) America Other Total
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Sales Revenue 221,990 210,613 106,988 - 539,591
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Cost of Sales 133,835 121,164 82,879 207 338,085
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Distribution, Selling
and Marketing 28,035 57,161 1,367 2,314 88,877
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General and
Administrative (1) 9,498 12,034 4,424 9,560 35,516
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Operating Profit
(Loss) 50,622 20,254 18,318 (12,081) 77,113
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Add:
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Depreciation and
Amortization
included in Cost of
Sales 13,257 23,010 5,827 - 42,094
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Depreciation and
Amortization
included in General
and Administrative - - 47 933 980
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Share-based
Compensation Expense - - - 3,207 3,207
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Cash Operating Profit
(Loss) 63,879 43,264 24,192 (7,941) 123,394
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Cash Operating Profit
Percentage 29% 21% 23% - 23%
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Notes:
(1) North America general and administrative expenses are for functional
areas such as human resources, finance, information technology and
legal and are allocated to the North America operating segments based
on production volumes.
(2) Revenues and costs for NATO are included in North America Chlor-
alkali.
Highlights for each business unit are as follows:
-- North America Sodium Chlorate:
-- Year Ended December 31, 2012 versus 2011: Sales revenue for the
North America sodium chlorate segment increased 6% to $235.1 million
for the year ended December 31, 2012 from $222.0 million for the
year ended December 31, 2011. This increase resulted from a 6%
increase in realized netback prices on consistent sales volumes.
Realized netback prices were positively affected by a weaker
Canadian dollar relative to the US dollar (year ended December 31,
2012 - US$1.00 as compared to the year ended December 31, 2011 -
US$1.01). Cash Operating Profit Percentage remained consistent at
29% for the years ended December 31, 2012 and 2011 with higher
realized netback prices and lower salt costs offsetting higher
electricity rates and fixed costs.
-- Q4 2012 versus Q3 2012: Sales revenue for the North America sodium
chlorate segment increased 3% to $60.5 million for the three months
ended December 31, 2012 from $58.7 million for the three months
ended September 30, 2012. Sales volumes increased 5% while realized
netback prices decreased 2% for the three months ended December 31,
2012 as compared to the three months ended September 30, 2012. Cash
Operating Profit Percentage increased from 27% to 30% as a result of
18% higher production volumes (23% higher at our low-cost Brandon
plant) and lower fixed costs for the three months ended December 31,
2012 as a result of a planned shutdown in the third quarter at
Brandon to perform regularly scheduled maintenance at the same time
that the plant was down to tie-in the upgraded power line. This was
offset somewhat by higher salt costs at Brandon.
-- Q4 2012 versus Q4 2011: Sales revenue for the North America sodium
chlorate segment increased 4% to $60.5 million for the three months
ended December 31, 2012 from $58.3 million for the three months
ended December 31, 2011 as a result of a 3% increase in sales
volumes and a 2% increase in realized netback prices. Realized
netback prices were negatively impacted by the strengthening of the
Canadian dollar (three months ended December 31, 2012 - US$1.01 as
compared to US$0.98 for the three months ended December 31, 2011).
Cash Operating Profit Percentage increased from 29% for the three
months ended December 31, 2011 to 30% for the three months ended
December 31, 2012 as a result of higher production volumes (at our
low-cost Brandon plant) and higher sales volumes and realized
netback prices, partially offset by increased electricity rates and
salt costs.
-- North America Chlor-alkali:
-- Year Ended December 31, 2012 versus 2011: Sales revenue for the
North America chlor-alkali segment increased 16% to $245.1 million
for the year ended December 31, 2012 from $210.6 million for the
year ended December 31, 2011. The increase in sales revenue was
primarily due to higher caustic soda sales volumes (5%), higher
realized netback prices for caustic soda (17%) and hydrochloric acid
(78%) combined with higher transloading and third-party logistics
revenues from our NATO business. This was partially offset by lower
sales volumes for hydrochloric acid (9%) and chlorine (3%) and lower
realized chlorine netback prices (76%). Cash Operating Profit
Percentage decreased from 21% for the year ended December 31, 2011
to 20% for the year ended December 31, 2012 as a result of higher
metric electrochemical unit ("MECU") realized netback prices (13%)
and lower natural gas costs, being more than offset by higher
electricity rates, higher caustic soda purchased product costs due
to lower MECU production volumes (5%), and higher fixed costs.
-- Q4 2012 versus Q3 2012: Sales revenue for the North America chlor-
alkali segment decreased 4% to $61.4 million for the three months
ended December 31, 2012 from $63.7 million for the three months
ended September 30, 2012. The decrease in sales revenue was
primarily due to lower hydrochloric acid (12%) and chlorine (19%)
sales volumes and lower hydrochloric acid (9%) and chlorine (10%)
realized netback prices, partially offset by higher transloading
revenues from our NATO business. Cash Operating Profit Percentage
decreased from 24% for the three months ended September 30, 2012 to
20% for the three months ended December 31, 2012 as a result of
lower MECU production volumes (14%) and higher caustic soda
purchased product costs.
-- Q4 2012 versus Q4 2011: Sales revenue for the North America chlor-
alkali segment increased 4% to $61.4 million for the three months
ended December 31, 2012 from $59.2 million for the three months
ended December 31, 2011 due to higher realized netback prices for
caustic soda (10%) and hydrochloric acid (30%) and higher
transloading revenues from our NATO business partially offset by
lower caustic soda (6%) and hydrochloric acid (21%) sales volumes
and lower chlorine realized netback prices (75%). Cash Operating
Profit decreased from $16.2 million for the three months ended
December 31, 2011 to $12.0 million for the three months ended
December 31, 2012 as a result of lower MECU production volumes (11%)
resulting in higher caustic soda purchased product costs, and higher
fixed costs, partially offset by higher MECU realized netback prices
(5%).
-- South America:
-- Year Ended December 31, 2012 versus 2011: Sales revenue for the
South America segment decreased 4% to $102.2 million for the year
ended December 31, 2012 from $107.0 million for the year ended
December 31, 2011. The decrease in sales revenue was due to lower
caustic soda (4%), chlorine (17%) and sodium hypochlorite (5%) sales
volumes combined with lower caustic soda (5%), sodium chlorate (2%)
and sodium hypochlorite (3%) realized netback prices, partially
offset by higher hydrochloric acid sales volumes (7%). Cash
Operating Profit Percentage remained consistent at 23% for the years
ended December 31, 2012 and 2011 as lower sales volumes and realized
netback prices were offset by lower caustic soda purchased product
costs, fixed costs and general and administrative costs.
-- Q4 2012 versus Q3 2012: Sales revenue for the South America segment
decreased 5% to $23.8 million for the three months ended December
31, 2012 from $25.1 million for the three months ended September 30,
2012. The decrease in sales revenue was primarily due to lower
caustic soda sales volumes (14%) and lower caustic soda (6%) and
sodium chlorate (5%) realized netback prices, partially offset by
higher sodium chlorate sales volumes (8%). Cash Operating Profit
increased from $6.1 million for the three months ended September 30,
2012 to $6.6 million for the three months ended December 31, 2012,
primarily as a result of lower electricity, caustic soda purchased
product and salt costs, partially offset by lower realized MECU
netback prices.
-- Q4 2012 versus Q4 2011: Sales revenue for the South America segment
decreased 9% to $23.8 million for the three months ended December
31, 2012 from $26.3 million for the three months ended December 31,
2011. The decrease in sales revenue was primarily due to lower
caustic soda sales volumes (11%) and lower caustic soda (13%) and
sodium chlorate (10%) realized netback prices, partially offset by
higher sodium chlorate sales volumes (6%). Cash Operating Profit
increased to $6.6 million for the three months ended December 31,
2012 from $5.6 million for the three months ended December 31, 2011
as a result of lower electricity costs, caustic soda purchased
product costs and fixed costs, partially offset by lower realized
MECU netback prices and higher salt costs.
-- North American Terminal Operations (NATO):
Canexus continues to expand its NATO business at Bruderheim.
Construction activities are now underway to include pipeline connected
unit train operations. We are in the process of connecting the
Bruderheim terminal by pipeline (24 inch bitumen blend line and 12 inch
condensate line) to MEG's pipelines which interconnect with MEG's
Stonefell Terminal, as well as potentially to a second pipeline
connected facility located nearby. In addition, we are building out the
rail infrastructure, loading/offloading and above ground tank storage
required to allow for unit train movement of up to 118 tank cars
(approximately 70,000 barrel movements) in single trains daily. The cost
of the project is expected to be approximately $125 million. Progress to
date includes:
-- The 24 inch bitumen blend and 12 inch condensate pipelines have been
laid (with the exception of some of the bends). Pipeline tie-in and
the Canexus meter station are expected to be complete in July.
-- Earthwork for the five kilometres of loop track is substantially
complete.
-- Additional track to allow for the storage of up to 360 railcars is
complete.
-- Tank bases for the two 120,000 barrel bitumen blend tanks are
complete. Tank fabrication is underway at the site.
-- Detailed engineering for the transloading facility is about 70%
complete.
-- All long lead items have been ordered and deliveries are expected to
meet schedule.
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
-- Long-term Debt and Finance Income (Expense):
-- We borrow in US dollars, which creates unrealized currency
translation gains as the Canadian dollar strengthens. A substantial
portion of our revenues are denominated in or referenced to the US
dollar. During the fourth quarter of 2012, we recorded an unrealized
currency translation loss of $6.6 million as a result of the
weakening of the Canadian dollar at the end of the quarter compared
to the end of Q3 2012 (Q4/11 - $5.9 million unrealized gain) and a
realized currency translation gain of $3.4 million on repayments of
US dollar debt in the quarter (Q4/11 - $Nil). These amounts are
included in finance income (expense).
-- Interest expense in the quarter was $4.2 million (Q4/11 - $5.5
million). Interest capitalized on major projects was $0.9 million in
Q4 2012 (Q4/11 - $0.2 million).
-- Other Income (Expense):
-- In the fourth quarter of 2012, mark-to-market fair value gains of $
nil (Q4/11 - $0.1 million gains) were recorded on foreign exchange
option contracts. In January, we purchased foreign exchange options
protecting US$5.0 million per month for both Q2 2013 (at US$0.99)
and Q3 2013 (at US$0.97).
-- In the fourth quarter of 2012, we recorded mark-to-market fair value
gains of $0.3 million (Q4/11 - $0.4 million) on interest rate swaps
and realized losses of $0.4 million (Q4/11 - $0.4 million).
-- Other income also includes $0.1 million of foreign currency
translation gains on working capital in Q4 2012 (Q4/11 - $0.3
million losses) and a $3.0 million gain on a non-monetary asset
exchange (related to an office move).
-- In the fourth quarter of 2012, we recorded mark-to-market fair value
losses on a cross currency swap of $0.2 million as a result of the
weakening of the Canadian dollar at the end of the quarter compared
to the end of Q3 2012. In Q3 2011 we entered into a cross currency
swap to effect the payment of interest in US dollars on the Series
IV Convertible Debentures issued on June 30, 2011.
-- Capital Expenditures: Capital expenditures for the three months ended
December 31, 2012 were $67.9 million, of which $5.6 million was spent on
maintenance projects, $3.2 million on continuous improvement projects
and the balance on expansion projects ($59.1 million). Expansion capital
was spent on the continued development of our NATO site and hydrochloric
acid expansions at our North Vancouver facility.
-- Provision for Income Taxes: Provision for income taxes is higher in the
fourth quarter of 2012, as compared to the same period in 2011, due to a
tax pool adjustment recorded in the three months ended December 31,
2011. As of December 31, 2012, the Corporation had approximately $515
million of future tax deductions resulting from capital expenditures
which can be used to shelter future taxable income in Canada.
-- Liquidity: As of December 31, 2012, total borrowings under committed
credit facilities were $223 million with remaining available undrawn
capacity of approximately $200 million. Cash on hand at December 31,
2012 was $9.4 million.
Operating Results for the Three Months and Years Ended December 31, 2012 and 2011
Three Months Ended
December 31 Year Ended December 31
----------------------------------------------------
2012 2011 2012 2011
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Sales Revenue 145,717 143,803 582,426 539,591
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Cost of Sales(1) 88,403 86,720 364,731 338,085
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Gross Profit 57,314 57,083 217,695 201,506
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Distribution, Selling
and Marketing 25,981 23,030 95,991 88,877
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General and
Administrative(2) 8,523 9,381 35,622 35,516
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Operating Profit 22,810 24,672 86,082 77,113
----------------------------------------------------------------------------
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Finance Expense (7,798) (4,360) (29,968) (28,218)
----------------------------------------------------------------------------
Other Income (Expense) 3,709 416 3,110 (1,459)
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Income before Income
Taxes 18,721 20,728 59,224 47,436
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Provision for Income
Taxes
----------------------------------------------------------------------------
Current 892 2,390 4,604 5,775
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Deferred 3,047 (208) 14,773 8,665
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3,939 2,182 19,377 14,440
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Net Income 14,782 18,546 39,847 32,996
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Notes:
(1) Depreciation and amortization included for the three months and year
ended December 31, 2012 - $11.5 million and $44.5 million
respectively; depreciation and amortization included for the three
months and year ended December 31, 2011 of $10.5 million and $42.1
million respectively.
(2) Depreciation and amortization included for the three months and year
ended December 31, 2012 - $0.4 million and $1.0 million respectively;
depreciation and amortization included for the three months and year
ended December 31, 2011 of $0.2 million and $1.0 million respectively.
Financial Statements, Conference Call and Webcast
Financial Statements and Management's Discussion and Analysis will be posted on the Canexus website at www.canexus.ca 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 www.canexus.ca. 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 www.sedar.com. 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 www.canexus.ca.
Contacts:
Canexus Corporation
Gary Kubera
President and CEO
(403) 571-7300
Canexus Corporation
Richard McLellan
CFO
(403) 571-7300
www.canexus.ca
