Toronto-based Chemtrade Logistics Income Fund reported first-quarter net earnings of $42 million, down 47.2% from the year-ago $79.5 million. Adjusted EBITDA was off 16.5%, to $109.9 million from $131.7 million, while revenue was down 11.2%, to $418.2 million from $471.2 million.
“We started the new year on great footing with respect to both our operational performance and our financial performance,” said President and CEO Scott Rook. “Although our financial results this quarter were below the record first-quarter results we delivered in 2023, we believe that Chemtrade remains very well-positioned for continued success moving forward, with our diversified portfolio offering a compelling combination of defensiveness and growth.”
He added that first-quarter adjusted EBITDA was above internal expectations, with strong execution in both operating segments helping to support profitability. Based on its first-quarter performance and improved outlook for the balance of 2024, Rook said the company now expects adjusted EBITDA for the full year to be at the higher end of the previous guidance of $395-$435 million.
“Achieving the higher end of our guidance range for adjusted EBITDA in 2024 would mean that we’ve had three consecutive years of adjusted EBITDA being significantly above historic levels, which reaffirms the step change in our business,” Rook said. “With the biennial maintenance turnaround at our North Vancouver chlor-alkali facility having been successfully executed in the second quarter of 2024 and with caustic soda index pricing now seemingly on an upward trajectory, amongst other factors, we continue to expect that Chemtrade will generate stronger adjusted EBITDA in the second half of 2024 than in the first half of the year.”
Rook said the construction on the expansion and quality upgrade project at the $60-$65 million Cairo, Ohio, ultrapure sulfuric acid facility is nearing completion and the company looks forward to commissioning the upgraded and expanded facility in the second half, with commercial ramp-up in 2025. Chemtrade said the product will meet the quality requirements for the next generation of semiconductor nodes, and the plant will further bolster the company’s position as the top North American supplier of ultrapure sulfuric acid to the semiconductor industry.
Chemtrade said the demand outlook for ultrapure acid remains strong over the medium- and long-term, supported by the semiconductor industry production capacity expansion in North America. It added that regen acid continues to experience strong demand and the company maintains an optimistic near-term outlook for the product.
Chemtrade said 2023 was a strong year in merchant acid and it expects a more normal year in 2024. It said risk-sharing agreements with suppliers and customers are anticipated to help mitigate any potential pricing and input cost movements.
A proposed joint venture ultrapure project in Casa Grande, Ariz., remains on hold until it can be assured the project will generate an acceptable level of return. Rook said the company is also undertaking a number of smaller projects in the Water Chemicals business, given the strategic, high-return growth opportunities in that area. This includes expanding manufacturing capabilities for higher growth specialized products.
In 2024, Chemtrade plans to invest $60-$90 million in growth capital expenditures. This includes approximately $40 million for the ultrapure business, principally at Cairo, with the remainder for Water Chemicals and other organic growth projects.
Rook said Chemtrade is also looking to supplement organic growth initiatives with M&A, should it identify an opportunity that fits strategically within its portfolio and has synergistic value. It is targeting acquisitions with annual adjusted EBITDA of between $10-$50 million.