Canexus Corporation Fourth Quarter and Year-End Financial Results

Canexus Corporation Fourth Quarter and Year-End Financial Results 
Record 2012 Cash Operating Profit and Strategic Progress on
Oil-by-Rail and Hydrochloric Acid Expansion Initiatives Set to Fuel
Solid Future Growth 
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 
                            ------------------------------------------------
CAD thousands                      2012        2011        2012        2011 
----------------------------------------------------------------------------
Cash Operating Profit            35,257      36,713     134,053     123,394 
----------------------------------------------------------------------------
 Interest Expense                (4,200)     (5,545)    (19,699)    (23,365)
----------------------------------------------------------------------------
 Realized Currency                                                          
  Translation Gains               3,351         141       2,574       4,025 
----------------------------------------------------------------------------
 Maintenance Capital                                                        
  Expenditures                   (5,602)     (7,628)    (19,437)    (19,438)
----------------------------------------------------------------------------
 Provision for Current                                                      
  Income Taxes                     (892)     (2,390)     (4,604)     (5,775)
----------------------------------------------------------------------------
 DSU/DTU Plan Settlement           (310)          -        (310)     (1,505)
----------------------------------------------------------------------------
 TCP Severance Costs Paid             -           -        (888)     (2,133)
----------------------------------------------------------------------------
 Other                           (1,383)     (1,328)     (4,041)     (1,541)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Di
stributable Cash               26,221      19,963      87,648      73,662 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Distributable Cash Per Share       0.19        0.17        0.70             
----------------------------------------------------------------------------
Dividends Declared Per Share     0.1368      0.1368      0.5472      0.5472 
----------------------------------------------------------------------------
Payout Ratio                         70%         81%         78%         86%
----------------------------------------------------------------------------

 
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 
                            ------------------------------------------------
CAD thousands                      2012        2011        2012        2011 
----------------------------------------------------------------------------
Net Cash Generated from                                                     
 Operating Activities            35,974      31,533     101,922      93,935 
----------------------------------------------------------------------------
 Changes in Non-Cash                                                        
  Operating Working Capital      (6,255)     (9,343)      7,414      (1,380)
----------------------------------------------------------------------------
 Non-Cash Change in Income                                                  
  Tax Payable and Interest                                                  
  Payable                         2,522         879         764        (739)
----------------------------------------------------------------------------
 Interest Income                    103         127         412         580 
----------------------------------------------------------------------------
 Maintenance Capital                                                        
  Expenditures                   (5,602)     (7,628)    (19,437)    (19,438)
----------------------------------------------------------------------------
 Realized Foreign Currency                                                  
  Translation Gains (Losses)                                                
  on Cash                           (83)        146        (600)         20 
----------------------------------------------------------------------------
 TCP Severance Costs Paid             -           -        (888)     (2,133)
----------------------------------------------------------------------------
 Amortization of the                                                        
  Purchase Cost of Foreign                                                  
  Exchange Options                    -        (371)     (1,571)       (942)
----------------------------------------------------------------------------
 Expenditures on                                                            
  Decommissioning                                                           
  Liabilities                      (536)       (515)     (1,002)       (597)
----------------------------------------------------------------------------
 Operating Non-Cash Items            98       5,135         634       4,356 
----------------------------------------------------------------------------
Distributable Cash               26,221      19,963      87,648      73,662 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
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 
----------------------------------------------------------------------------
Sales Revenue           221,990    210,613    106,988          -    539,591 
----------------------------------------------------------------------------
Cost of Sales           133,835    121,164     82,879        207    338,085 
----------------------------------------------------------------------------
Distribution, Selling                                                       
 and Marketing           28,035     57,161      1,367      2,314     88,877 
----------------------------------------------------------------------------
General and                                                                 
 Administrative (1)       9,498     12,034      4,424      9,560     35,516 
----------------------------------------------------------------------------
Operating Profit                                                            
 (Loss)                  50,622     20,254     18,318    (12,081)    77,113 
----------------------------------------------------------------------------
Add:                                                                        
----------------------------------------------------------------------------
Depreciation and                                                            
 Amortization                                                               
 included in Cost of                                                        
 Sales                   13,257     23,010      5,827          -     42,094 
----------------------------------------------------------------------------
Depreciation and                                                            
 Amortization                                                               
 included in General                                                        
 and Administrative           -          -         47        933        980 
----------------------------------------------------------------------------
Share-based                                                                 
 Compensation Expense         -          -          -      3,207      3,207 
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 (Loss)                  63,879     43,264     24,192     (7,941)   123,394 
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 Percentage                  29%        21%        23%         -         23%
----------------------------------------------------------------------------
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 f
or 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 
----------------------------------------------------------------------------
Sales Revenue                145,717      143,803      582,426      539,591 
----------------------------------------------------------------------------
Cost of Sales(1)              88,403       86,720      364,731      338,085 
----------------------------------------------------------------------------
Gross Profit                  57,314       57,083      217,695      201,506 
----------------------------------------------------------------------------
Distribution, Selling                                                       
 and Marketing                25,981       23,030       95,991       88,877 
----------------------------------------------------------------------------
General and                                                                 
 Administrative(2)             8,523        9,381       35,622       35,516 
----------------------------------------------------------------------------
Operating Profit              22,810       24,672       86,082       77,113 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Finance Expense               (7,798)      (4,360)     (29,968)     (28,218)
----------------------------------------------------------------------------
Other Income (Expense)         3,709          416        3,110       (1,459)
----------------------------------------------------------------------------
Income before Income                                                        
 Taxes                        18,721       20,728       59,224       47,436 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Provision for Income                                                        
 Taxes                                                                      
------------
----------------------------------------------------------------
 Current                         892        2,390        4,604        5,775 
----------------------------------------------------------------------------
 Deferred                      3,047         (208)      14,773        8,665 
----------------------------------------------------------------------------
                               3,939        2,182       19,377       14,440 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net Income                    14,782       18,546       39,847       32,996 
----------------------------------------------------------------------------
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