Canexus Provides Positive Outlook for 2013

Canexus Provides Positive Outlook for 2013 
Expecting Record Financial and Operating Performance and Attractive
Growth Projects 
CALGARY, ALBERTA -- (Marketwire) -- 12/19/12 -- Canexus Corporation
(TSX:CUS) ("Canexus" or the "Corporation") today announced its
financial, operations and market outlook for 2013. 
"Canexus is well positioned to achieve a third consecutive year of
record financial and operational performance in 2013. We expect to
begin realizing the benefits of the investments made in our
hydrochloric acid growth projects at our North Vancouver chlor-alkali
facility, which should start-up in the first and third quarters.
Also, we anticipate the expansion of our bitumen blend and crude oil
truck-to-rail transloading business at our North American Terminal
Operations ("NATO", "Bruderheim terminal" or "terminal") business in
Bruderheim, Alberta to solidly contribute to our overall business
performance once this is completed in early 2013. Lastly, all of our
business units should continue to benefit from stable market
conditions," said Gary Kubera, President and CEO. 
"In 2013, cash operating profit should increase to between $155
million and $165 million, resulting in distributable cash of $100
million to $110 million, for a payout ratio of 65% to 75%. This is a
significant increase over the record cash operating profit
anticipated for 2012 of $135 million to $140 million. Management
remains committed to delivering sustainable returns and value to our
shareholders while driving future business growth," Mr. Kubera added. 
The improved outlook for 2013 (over 2012 expected results) reflects: 


 
--  Higher sodium chlorate production volumes (6,000 metric tonnes ("MTs")
    resulting from our Brandon power line upgrade) and sales volumes and a
    modest improvement in realized netback prices (1%) in our North American
    Sodium Chlorate business unit 
--  Higher chlor-alkali plant production (7%) and sales volumes, and higher
    realized metric electrochemical unit ("MECU") netback prices (4%) as a
    result of converting more chlorine to higher value hydrochloric acid (an
    additional 90,000 wet metric tonnes) in our North American Chlor-alkali
    business unit, and 
--  Solid performance from our NATO truck-to-railcar transloading business
    at Bruderheim. In 2013, we expect to transload 30,000 barrels per day of
    oil, up from an average of 8,000 barrels per day in 2012. The
    Corporation is anticipating only a modest contribution from the pipeline
    connected unit train expansion discussed below, with start-up expected
    in the third quarter. 

 
On December 7, 2012, Canexus announced the expansion of its
Bruderheim terminal capabilities to include pipeline connected unit
train operations. In this next phase of NATO expansion, Canexus plans
to connect the Bruderheim terminal by pipeline (24 inch bitumen blend
line and 12 inch condensate line) to MEG Energy Corp. ("MEG")
pipelines, which interconnect with MEG's Stonefell Terminal, as well
as potentially to a second pipeline connected facility located
nearby. In addition, the Corporation plans to build 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,
inclusive of the $25 million to $35 million of pre-spending in 2012
for long lead items and other construction activities that are
currently underway.  
The major components of this attractive growth project are: 


 
--  Two 120,000 barrel bitumen blend storage tanks 
--  A 10 kilometre 24" bitumen blend pipeline capable of transferring more
    than 150,000 barrels per day to the Bruderheim terminal 
--  A 12" condensate line in the same right of way capable of transferring
    up to 150,000 barrels of condensate per day from the Bruderheim terminal
--  Rail loading facilities capable of loading 72,000 barrels in
    approximately 16 hours 
--  More than 5 kilometers of 'loop track' that will allow Canexus to manage
    two unit trains at the terminal at the same time 
--  An additional 6.3 kilometres of track in a rail spur to allow unit
    trains to re-enter the mainline efficiently and to facilitate the
    transloading of other tank cars that do not form a full unit train. With
    the additional track, Canexus expects to be able to store up to 600
    railcars for hydrocarbon service at its Bruderheim Terminal 
--  A potential second pipeline connection for both bitumen blend and
    condensate. 

 
"We are very excited about this next phase of expansion at
Bruderheim. Not only is this project expected to be accretive to all
common shareholders, it also sets the stage for future incremental
unit train capability, utilization of the existing 1.6 million
barrels of salt cavern storage, development of additional salt cavern
storage and pursuit of other attractive investment opportunities at
this 480 acre site," said Mr. Kubera. 
Market Outlook 
North America Sodium Chlorate  
As expected, major pulp producers have made successive, albeit modest
price increases in the first two months of Q4 taking advantage of
favorable inventory levels. Combined pulp inventories are in line
with historical norms at 33 days (October) despite significant
differences between softwood and hardwood. Softwood pulp inventory
levels are at their lowest levels (25 days) in more than 18 months.
However, hardwood pulp inventories remain relatively high at 41 days,
and suggest little room for price increases by hardwood producers.
Global pulp shipments continued their positive trend for the year,
increasing by 2.9% year-to-date. Most of this growth is fueled by
strong Chinese imports which are higher by 14.0% year-to-date. Demand
for most pulp segments is expected to remain strong for the rest of
the year.  
Production of North American bleached pulp has remained steady
throughout the year, and, consequently, the demand for sodium
chlorate has been equally stable. With new demand recently started in
Q3 coupled with further new demand scheduled for Q4, the North
American chlorate industry is poised to maintain its high operating
rates (+/-95%) for the foreseeable future. 
North America Chlor-alkali 
The North American chlor-alkali industry is operating at 78% of
capacity in the fourth quarter of 2012, compared with 85% in the
prior quarter and 78% in the fourth quarter of 2011. The decrease in
industry capacity utilization is due to reduced seasonal demand for
water treatment and production of PVC for export. Industry operating
rates are expected to remain at this level through the first quarter
of 2013 and then increase modestly with expected economic
improvement. 
North American hydrochloric acid production has been reduced in the
fourth quarter of 2012 due to annual maintenance outages at byproduct
producers in the gulf coast region. Acid demand is improving due to
increased oil well fracturing activity in Western Canada. Demand from
well fracturing is expected to strengthen modestly in Q1 2013. 
North American caustic soda production has been constrained in the
fourth quarter of 2012 consistent with lower chlorine operating
rates. Domestic demand remains strong as well as export demand taking
advantage of the low cost position of U.S. gulf coast production
compared with Asia. Export supply from China to the west coast has
improved due to slower domestic demand in China resulting in
increased inventories for some e
xport producers. Export supply from
China is expected to decline in the first quarter of 2013 due to
lower chlorine operating rates in China.  
MECU prices did not change during the fourth quarter of 2012. Caustic
price improvement has been offset by reductions in chlorine and acid
values. Prices are not expected to change in the first quarter of
2013.  
South America 
Canexus Brazil`s major sodium chlorate customer's pulp production
continues to be aligned with our estimate and our overall sodium
chlorate sales are close to the 2012 budget. Our chlor-alkali
facility in Brazil maintained a 96% operating rate through Q3 and is
projected to continue operating at full rates in Q4.  
Looking forward into 2013, Management expects 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 (about 3,000 MTs) due
to lower consumption levels by our major customer resulting from
optimization efforts, and to re-align any resulting available
capacity with other merchant customers over the next year.  
Oil & Gas 
Crude oil prices have remained stable during Q4. Prices remain
elevated due to global geopolitical concerns but supply-demand
fundamentals appear good. Oil inventory levels in the United States
and the OECD region remain generally healthy and above five-year
norms. Price differentials between Western Canadian grades and other
key benchmarks remain wide, supporting demand for oil transportation
services based on rail.  
Natural gas prices are up slightly in Q4 as colder than normal
weather in November accelerated inventory drawdown. However,
inventories remain healthy at the upper end of the five year average
range. Production is expected to continue to gradually fall in North
America into 2013 as drilling rigs are directed to oil wells and
until gas prices begin to recover. 
Drilling activity in Western Canada has increased slightly in Q4
compared to Q3, with the majority of the activity directed at oil
production.  
Additional 2013 Annual Operating Plan Assumptions  
The following additional points summarize the underlying assumptions
for the Canexus 2013 annual operating plan: 


 
--  Canadian dollar expected to average US$1.01 
 
--  Estimated incremental funding costs of our defined benefit pension plan
    will be $4 million 
 
--  At September 30, 2012, Canexus had $478 million of major tax pools to
    shelter taxable income in Canada 
 
--  Our capital expenditure program in 2013 is expected to include: 
    --  $24 million to be spent on maintenance capital (including $4 million
        on our electrolytic cell recoating program in Brazil)  
    --  $116 million on expansion/growth projects (Brandon debottleneck to
        add an additional 6,000 MTs in 2014 - $5 million; North Vancouver
        acid growth - $11 million, and NATO $100 million) 
    --  $7 million on high-return continuous improvement projects 
 
--  The 2013 capital expenditure program will be financed from the common
    share offering that closed earlier today, excess distributable cash,
    committed credit facilities and DRIP proceeds. We expect our leverage
    (Debt-to-EBITDA ratio) to be approximately 2.3 at the end of 2013 (3.1
    for Debt plus convertible debentures-to-EBITDA ratio). 

 
Non-GAAP Measures  
This news release refers to EBITDA, cash operating profit, payout
ratio and distributable cash to assist in measuring the Corporation's
financial performance. Readers are cautioned that these measures are
non-GAAP measures and 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. 
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 timing and expected
benefits of the hydrochloric acid growth projects at Canexus' North
Vancouver chlor-alkali plant and the bitumen blend and crude oil
transloading business at NATO, expectations regarding cash operating
profit, distributable cash and payout ratio for 2013, expectations
with respect to North American sodium chlorate industry demand,
operating rates, production and sales volumes and realized netback
prices, expectations with respect to North American chlor-alkali
operating rates, production and sales volumes and realized MECU
netback prices, including as a result of expected demand from well
fracturing activities, expectations with respect to South American
chlor-alkali demand and operating rates of Canexus' facility in
Brazil, expectations with respect to the NATO expansion, including
the interconnection with MEG's Stonefell Terminal, potentially a
second pipeline connected facility, the build out of rail
infrastructure, loading/offloading and above ground tank storage and
the costs associated therewith, demand from the oil a
nd gas industry
for hydrochloric acid and terminal capacity at Bruderheim,
fundamentals and demand in the global pulp market, expectations with
respect to the relative value of the Canadian dollar, expectations
regarding Canexus' 2013 capital expenditures and leverage.  
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 Fund's
Annual Information Form filed on the Fund'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
 
 
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