Press release from Marketwire
Canexus Corporation Provides Update on Caustic Soda and Hydrochloric Acid Markets and NATO
Monday, July 22, 2013
Canexus Corporation Provides Update on Caustic Soda and Hydrochloric Acid Markets and NATO20:29 EDT Monday, July 22, 2013
CALGARY, ALBERTA--(Marketwired - July 22, 2013) - Canexus Corporation (TSX:CUS) (the "Corporation" or "Canexus") is continuing to experience weakness in caustic soda and hydrochloric acid markets, as initially discussed in Canexus' press release of May 8, 2013 (the "Prior Release"). In addition, Canexus has experienced a delay in ramp-up of truck-to-rail transload capacity at our North American Terminal Operations ("NATO" or "Canexus Bruderheim Terminal") at Bruderheim. The combination of these factors has affected second quarter results and is also expected to affect results for the balance of the year.
The Corporation's second quarter results will be approved by the Canexus Board of Directors and formally released on August 7, 2013. Cash operating profit is expected to be approximately $19 million; $3 million lower for the quarter than anticipated in the Prior Release. Cash operating profit for the third quarter is expected to be approximately $30 million and should increase from that level in the fourth quarter as we start to see the benefit of higher truck-to-rail diluted bitumen and crude oil ("DBCO") transload activity associated with our expanded capacity and the initiation of unit train operations at NATO.
Canexus competes with imported caustic soda from Asia in Western Canada and the Pacific Northwest region of the United States. We had expected to see prices improve, starting in the third quarter by $20 to $30 per metric tonne, supported by price increases implemented in Asia in March. However, pricing in our markets has improved only marginally in the third quarter. We expect to see continued improvement in the fourth quarter.
Also as discussed in our Prior Release, hydrochloric acid prices have been under pressure from lower seasonal demand in Western Canada and competition for business in the U.S. Demand from the oil and gas industry in Western Canada has been weak through the second quarter with spring break-up prolonged due to wet weather conditions. Although we expect to see demand from this end-use market improve for the balance of the third quarter and the two succeeding quarters, significant hydrochloric acid capacity has been announced to come on stream in North America in 2014 and into 2015 that, if installed, will likely result in excess capacity in North America for some period of time. Despite our current expectation of lower hydrochloric acid prices, the investment made at Canexus' North Vancouver plant to expand our capacity in two stages in 2013 continues to be attractive. The second acid expansion is on track for completion near the end of the third quarter.
The truck-to-rail DBCO transload capacity expansion (to 30,000 bbls/day) is expected to be complete in August. One of the two main loading tracks being expanded was turned over to operations in June. The other loading track is currently out-of-service for installation of the remaining storage tanks and modernized loading rack.
"North American chlor-alkali market conditions have been disappointing over the past two months," said Gary Kubera, President and CEO. "Despite this, we expect modest improvement in caustic soda pricing later in the year, with hydrochloric acid demand and pricing dependent upon higher activity levels in the oil and gas segment in Western Canada. The current higher oil price environment and a weaker Canadian dollar should help support activity levels."
"On a positive note, we were very pleased to announce today the long-term agreements for the delivery of bitumen blend from the Cold Lake pipeline system to the Canexus Bruderheim Terminal, expected to be in service by mid-2014. With both Access Western Blend and Cold Lake Blend oil available from a portfolio of producers, NATO becomes a strategic facility for originating large scale oil shipments by rail from Alberta," he added.
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 impact of caustic soda and hydrochloric acid pricing on Canexus' performance for the remainder of the year; cash operating profit for the third quarter, and the impact of transload activity at NATO thereon; expectations regarding the timing of transload capacity expansions at NATO and initiation of unit train operations; expectations regarding caustic soda pricing in the fourth quarter of 2013; expected activity levels in the oil and gas industry in Western Canada and demand for hydrochloric acid arising therefrom for the remainder of the year; anticipated excess hydrochloric acid capacity and its impact on hydrochloric acid prices; and anticipated timing of completion of hydrochloric acid expansion at North Vancouver. 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.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
President and CEO