Canexus Corporation Announces First Quarter Results

Canexus Corporation Announces First Quarter Results 
Record Cash Operating Profit Expected in Second Half of 2013 Despite
Challenging Start 
CALGARY, ALBERTA -- (Marketwired) -- 05/08/13 -- Canexus Corporation
(TSX:CUS) (the "Corporation" or "Canexus") today announced its
financial results for the first quarter ended March 31, 2013.  
Highlights: 


 
--  Cash Operating Profit was $30.3 million for the three months ended March
    31, 2013 ($40.3 million in the first quarter of 2012, and $35.3 million
    for the fourth quarter of 2012). Distributable Cash was $21.9 million
    ($0.16 per common share), resulting in a payout ratio of 85%.
    
--  As expected, first quarter results reflect weakness in both caustic soda
    and chlorine prices in North America and the delay in ramp-up of truck-
    to-rail transload capacity at Bruderheim. Price increases announced for
    the second quarter for both caustic soda and chlorine were unsuccessful.
    The Corporation also experienced nine days of production loss (about
    5,700 metric electrochemical units ("MECU")), following the attempted
    start-up of the North Vancouver chlor-alkali facility from its planned
    shutdown in April, due to equipment failure (which has since been
    repaired and the plant is operating at capacity). Although it is still
    expected that caustic soda prices will increase in the third quarter
    (supported by price increases implemented in Asia in March),
    hydrochloric acid prices are currently under pressure from lower
    seasonal demand in Alberta and competition for business in the U.S. As a
    result, it is prudent to lower our full year guidance for Cash Operating
    Profit to $135 to $145 million for a payout ratio of 85 to 90%.
    
--  The first of two hydrochloric acid capacity expansion projects at the
    North Vancouver chlor-alkali facility has been successfully
    commissioned, increasing the current capacity to 260,000 wet metric
    tonnes ("WMT"). Canexus is on track to add an additional 110,000 WMT of
    capacity at the end of the third quarter. There is optimism that
    drilling activity will improve with higher oil prices and improved
    netbacks and in support of proposed west coast liquefied natural gas
    ("LNG") projects, that will lead to higher hydrochlo
ric acid demand in
    Western Canada. The output from our most recent expansion is sold out
    under multi-year contracts.
    
--  Canexus' low-cost Brandon sodium chlorate plant is on track to set
    another production record in 2013, with first quarter production of
    77,300 metric tonnes ("MT"). Full year production is expected to be
    between 305,000 and 310,000 MT's and the Corporation is currently
    analysing additional de-bottleneck opportunities.
    
--  Canexus' Brazil operations continue to be very stable with solid demand
    from its primary customer as well as from the merchant market for both
    chlorine and chlorine derivatives.
    
--  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. The Corporation is making solid progress on
    this project and expects 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 strategic customers for unit train shipments
    from Bruderheim under multi-year, take-or-pay terms. Contracts in
    negotiation for unit train shipments, if completed, will exceed the
    capacity of the initial phase of development. This project was designed
    to readily accommodate staged expansion of the rail loading
    infrastructure and the loop tracks to be able to load two unit trains
    simultaneously and more efficiently stage inbound and outbound unit
    trains, to increase capacity of the Canexus Bruderheim Terminal from 7
    to 13 unit trains per week. The capacity expansion is ready to proceed
    upon receiving sufficient customer commitment and could be operational
    by mid-2014. If this next stage of expansion is approved, it would bring
    the total estimated cost of the pipeline connected unit train facility
    to approximately $190 million through mid-2014.
    
--  The Corporation continues to advance its other initiatives at the
    Bruderheim terminal. The expansion of diluted bitumen and crude oil
    ("DBCO") truck-to-rail transload capacity to 30,000 bbls/day is expected
    to be completed by the end of the second quarter. In the months of March
    and April, we transloaded about 16,000 bbls/day of diluted bitumen and
    crude oil. Temporary outages on the various transloading tracks will be
    required in the second quarter to tie in the remaining storage tanks.
    The addition of tanks and the recently completed West rail yard (capable
    of storing approximately 360 railcars) should significantly increase
    capacity and alleviate bottlenecks. Canexus is also on track to increase
    its hydrochloric acid transloading capacity in the second quarter, to
    coincide with the recent start-up of the hydrochloric acid capacity
    expansion at our North Vancouver chlor-alkali facility.
    
--  The Board of Directors declared the regular quarterly dividend of
    $0.1368 per common share payable July 15, 2013 to shareholders of record
    on June 30, 2013. 

 
"In the first quarter of 2013, market headwinds, plant outages and
project delays at NATO hampered our financial performance and this
will extend into the second quarter," said Gary Kubera, President and
CEO. "We continue to expect to deliver record Cash Operating Profit
in the second half of the year as major capital projects are
completed and the challenges associated with establishing and
ramping-up our NATO truck-to-rail transloading business are put
behind us. The market fundamentals for oil-by-rail movements are
solid and we are making excellent progress in establishing strategic
long-term relationships with both producers and with end-use
customers unlikely to be served by major pipelines." 
"Both our North American sodium chlorate business and Brazil
operations are performing well and market conditions are expected to
support strong business performance over the balance of the year.
Over the next few quarters, we will see the successful implementation
of major projects and delivery of the cash flow expectations that we
have set for these initiatives," he added. 
Distributable Cash  
Distributable cash of Canexus Corporation was $21.9 million ($0.16
per common share) for the quarter resulting in a payout ratio of 85%. 


 
                                                         Three Months Ended 
                                                              March 31      
                                                         -------------------
CAD thousands                                              2013        2012 
----------------------------------------------------------------------------
Cash Operating Profit      
                              30,273      40,303 
----------------------------------------------------------------------------
  Interest Expense                                       (3,485)     (5,670)
----------------------------------------------------------------------------
  Realized Foreign Currency Translation Gains               825          39 
----------------------------------------------------------------------------
  Maintenance Capital Expenditures                       (4,557)     (4,054)
----------------------------------------------------------------------------
  Provision for Current Income Taxes                     (1,236)     (1,912)
----------------------------------------------------------------------------
  Technology Conversion Project ("TCP") Severance Costs                     
   Paid                                                    (211)       (888)
----------------------------------------------------------------------------
  Other                                                     331        (506)
----------------------------------------------------------------------------
Distributable Cash                                       21,940      27,312 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Distributable Cash Per Share                               0.16        0.23 
----------------------------------------------------------------------------
Dividends Declared Per Share                             0.1368      0.1368 
----------------------------------------------------------------------------
Payout Ratio                                                 85%         60%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Below is a reconciliation of net cash generated from operating
activities to Distributable Cash of the Corporation for the three
months ended March 31, 2013 and 2012. 


 
                                                         Three Months Ended 
                                                              March 31      
                                                         -------------------
CAD thousands                                              2013        2012 
----------------------------------------------------------------------------
Net Cash Generated from Operating Activities             25,169      14,552 
----------------------------------------------------------------------------
  Changes in Non-Cash Operating Working Capital           2,311      18,969 
----------------------------------------------------------------------------
  Non-Cash Change in Income Tax Payable and Interest                        
   Payable                                               (1,696)     (1,631)
----------------------------------------------------------------------------
  Interest Income                                            90          57 
----------------------------------------------------------------------------
  Maintenance Capital Expenditures                       (4,557)     (4,054)
----------------------------------------------------------------------------
  Realized Foreign Currency Translation Gains on Cash       534          35 
----------------------------------------------------------------------------
  TCP Severance Costs Paid                                 (211)       (888)
----------------------------------------------------------------------------
  Purchase of Foreign Exchange Options                      512           - 
----------------------------------------------------------------------------
  Amortization of the Purchase Cost of Foreign Exchange                     
   Options                                                    -        (378)
----------------------------------------------------------------------------
  Expenditures on Decommissioning Liabilities              (148)       (136)
----------------------------------------------------------------------------
  Operating Non-Cash Items                                  (64)        786 
----------------------------------------------------------------------------
Distributable Cash                                       21,940      27,312 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Segmented Information for the Three Month Periods Ended March 31,
2013 and 2012 
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
NATO terminal in Bruderheim, Alberta as a separate business unit.
Below is our first quarter performance by segment. 


 
                       North America                                        
                     -----------------                                      
Three Months Ended     Sodium   Chlor-    South                             
March 31, 2013       Chlorate   alkali  America     NATO     Other    Total 
----------------------------------------------------------------------------
Sales Revenue                                                               
----------------------------------------------------------------------------
  Total Segment        58,937   53,551   24,246    5,359         -  142,093 
----------------------------------------------------------------------------
  Inter-Segment            77        -        -    781(1)        -      858 
----------------------------------------------------------------------------
Total Sales Revenue                                                         
 from External                                                              
 Customers             58,860   53,551   24,246    4,578         -  141,235 
----------------------------------------------------------------------------
  Cost of Sales        35,291   30,209   18,822    4,169        75   88,566 
----------------------------------------------------------------------------
Distribution, Selling                                                       
 and Marketing                                                              
----------------------------------------------------------------------------
  Total Segment         7,840   15,752      226    1,701       650   26,169 
----------------------------------------------------------------------------
  Inter-Segment             -      858        -        -         -      858 
----------------------------------------------------------------------------
Total External                                                              
 Distribution,                                                              
 Selling and                                                                
 Marketing              7,840   14,894      226    1,701       650   25,311 
----------------------------------------------------------------------------
  General and                                                               
   Administrative       2,953    3,601    1,032      140     1,767    9,493 
----------------------------------------------------------------------------
Operating Profit                                                            
 (Loss)                12,776    4,847    4,166   (1,432)   (2,492)  17,865 
----------------------------------------------------------------------------
Add:                                                                        
----------------------------------------------------------------------------
Depreciation and                                                            
 Amortization           3,255    5,558    1,817      899       236   11,765 
----------------------------------------------------------------------------
Share-based                                                                 
 Compensation Expense       -        -        -        -       643      643 
----------------------------------------------------------------------------
Cas
h Operating Profit                                                       
 (Loss)                16,031   10,405    5,983     (533)   (1,613)  30,273 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 (Loss) Percentage         27%      19%      25%     (12%)       -       21%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Note:                                                                       
(1) NATO charges a transloading fee (an approximation of market rates       
    charged by third party terminals) to the North America Chlor-alkali     
    ("NACA") business unit for hydrochloric acid and caustic soda           
    transloaded from railcars into trucks for delivery to NACA customers    
    that is eliminated for financial reporting purposes.                    
                                                                            
                                                                            
                         North America                                      
                     -----------------                                      
Three Months Ended     Sodium   Chlor-    South                             
March 31, 2012       Chlorate   alkali  America     NATO     Other    Total 
----------------------------------------------------------------------------
Sales Revenue                                                               
----------------------------------------------------------------------------
  Total Segment        59,904   60,012   27,904    2,141         -  149,961 
----------------------------------------------------------------------------
  Inter-Segment            86        -        -    897(1)        -      983 
----------------------------------------------------------------------------
Total Sales Revenue                                                         
 from External                                                              
 Customers             59,818   60,012   27,904    1,244         -  148,978 
----------------------------------------------------------------------------
  Cost of Sales        34,047   32,545   21,511    1,868       153   90,124 
----------------------------------------------------------------------------
Distribution, Selling                                                       
 and Marketing                                                              
----------------------------------------------------------------------------
  Total Segment         6,910   13,606      354      527       692   22,089 
----------------------------------------------------------------------------
  Inter-Segment             -      983        -        -         -      983 
----------------------------------------------------------------------------
Total External                                                              
 Distribution,                                                              
 Selling and                                                                
 Marketing              6,910   12,623      354      527       692   21,106 
----------------------------------------------------------------------------
  General and                                                               
   Administrative       2,756    3,362      952      131     2,269    9,470 
----------------------------------------------------------------------------
Operating Profit                                                            
 (Loss)                16,105   11,482    5,087   (1,282)   (3,114)  28,278 
----------------------------------------------------------------------------
Add:                                                                        
----------------------------------------------------------------------------
Depreciation and                                                            
 Amortization           3,183    5,385    1,736      549       221   11,074 
----------------------------------------------------------------------------
Share-based                                                                 
 Compensation Expense       -        -        -        -       951      951 
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 (Loss)                19,288   16,867    6,823     (733)   (1,942)  40,303 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 (Loss) Percentage         32%      28%      24%     (59%)       -       27%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Note:                                                                       
(1) NATO charges a transloading fee (an approximation of market rates       
    charged by third party terminals) to the North America Chlor-alkali     
    ("NACA") business unit for hydrochloric acid and caustic soda           
    transloaded from railcars into trucks for delivery to NACA customers    
    that is eliminated for financial reporting purposes.                    

 
Highlights for each business unit are as follows: 


 
--  North America Sodium Chlorate:
    
    --  Q1 2013 versus Q4 2012: Sales revenue for the North America sodium
        chlorate segment decreased 3% to $58.9 million for the three months
        ended March 31, 2013 from $60.5 million for the three months ended
        December 31, 2012. The decrease in sales revenue was due to lower
        sales volumes (4%) on consistent realized netback prices. Cash
        Operating Profit percentage decreased from 30% for the three months
        ended December 31, 2012 to 27% for the three months ended March 31,
        2013 as a result of lower production volumes at our Brandon and
        Nanaimo facilities due to unplanned maintenance shutdowns, higher
        purchase product costs and a higher corporate allocation of general
        and administrative costs.
        
    --  Q1 2013 versus Q1 2012: Sales revenue for the North America sodium
        chlorate segment decreased 2% to $58.9 million for the three months
        ended March 31, 2013 from $59.8 million for the three months ended
        March 31, 2012 as a result of a 3% decrease in sales volumes on
        consistent realized netback prices. Cash Operating Profit percentage
        decreased from 32% for the three months ended March 31, 2012 to 27%
        for the three months ended March 31, 2013 primarily as a result of
        lower production volumes (4%), higher electricity and salt costs,
        and slightly higher fixed costs. Fixed costs were higher during the
        three months ended March 31, 2013 due to unplanned maintenance
        shutdowns at our Brandon and Nanaimo production facilities.
        
        
--  North America Chlor-alkali:
    
    --  Q1 2013 versus Q4 2012: Sales revenue for the North America chlor-
        alkali segment decreased 7% to $53.6 million for the three months
        ended March 31, 2013 from $57.5 million for the three months ended
        December 31, 2012. The decrease in sales revenue was primarily due
        to lower caustic soda sales volumes (7%) and realized netback prices
        (10%); lower chlorine sales volumes (5%) and realized netback prices
        (3%); partially offset by higher hydrochloric acid sales volumes
        (40%). Cash Operating Profit percentage decreased from 22% for the
        three months ended December 31, 2012 to 19% for the three months
        ended March 31, 2013 as a result of lower MECU realized netback
        prices (3%) and a higher corporate allocation of general and
        administrative costs to this segment, partially offset by, lower
        caustic soda purchased product costs and lower fixed costs.
        
    --  Q1 2013 versus Q1 2012: Sales revenue for the North America chlor-
        alkali segment decreased 11% to $53.6 million for the three months
        ended March 31, 2013 from $60.0 million for the three months ended
        March 31, 2012. This was due to lower caustic soda sales volumes
        (8%) and realized netback prices (7%); lower chlorine (76%) and
        hydrochloric acid (26%) realized netback prices; partially offset by
        higher hydrochloric acid (21%) and chlorine (14%) sales volumes.
        Cash Operating Profit percentage decreased from 28% for the t
hree
        months ended March 31, 2012 to 19% for the three months ended March
        31, 2013 as a result of lower MECU realized netbacks prices (15%),
        partially offset by lower caustic soda purchased product costs and
        lower fixed costs.
        
        
--  South America:
    
    --  Q1 2013 versus Q4 2012: Sales revenue for the South America segment
        increased 2% to $24.2 million for the three months ended March 31,
        2013 from $23.8 million for the three months ended December 31,
        2012. The increase in sales revenue was primarily due to higher
        caustic soda sales volumes (14%) and higher caustic soda (8%),
        sodium chlorate (2%) and sodium hypochlorite (9%) realized netbacks
        prices, partially offset by lower sodium chlorate sales volumes
        (9%). Cash Operating Profit percentage decreased from 28% for the
        three months December 31, 2012 to 25% for the three months ended
        March 31, 2013 primarily as a result of higher caustic soda
        purchased product costs (for producing sodium hypochlorite), higher
        fixed costs and slightly lower production, partially offset by
        higher realized netback prices for products sold into the merchant
        market.
        
    --  Q1 2013 versus Q1 2012: Sales revenue for the South America segment
        decreased 13% to $24.2 million for the three months ended March 31,
        2013 from $27.9 million for the three months ended March 31, 2012.
        The decrease in sales revenue was primarily due to lower sodium
        chlorate (9%), caustic soda (10%) and hydrochloric acid (13%)
        realized netback prices and lower sodium chlorate (7%), hydrochloric
        acid (8%) and caustic soda (2%) sales volumes. Cash Operating Profit
        percentage increased marginally to 25% for the three months ended
        March 31, 2013 from 24% for the three months ended March 31, 2012 as
        a result of lower electricity costs, partially offset by lower
        realized netback prices for products sold into the merchant market,
        lower sodium chlorate production and higher salt costs.
        
        
--  North American Terminal Operations:
    
    --  Q1 2013 versus Q4 2012: Cash Operating Profit for the three months
        ended March 31, 2013 was $0.25 million, inclusive of transloading
        services for inter-segment chlor-alkali products, as compared to
        $Nil for the three months ended December 31, 2012. External sales
        revenue increased 20% for the three months ended March 31, 2013 as
        compared to the three months ended December 31, 2012, primarily as a
        result of an increase in the number of railcars transloaded (18%).
        Cost of sales comprises employee costs and other costs of operating
        the Bruderheim terminal. The increase in cost of sales for the three
        months ended March 31, 2013, as compared to the three months ended
        December 31, 2012, is primarily due to an increase in the number of
        employees as a result of an increase in transload volumes in the
        quarter and in anticipation of capacity increases in our manifest
        business (truck-to-railcar or railcar-to-truck) expected in the
        second half of the year. Distribution, selling and marketing costs
        comprise selling and marketing employee costs and amounts paid to
        customers to compensate for extended truck wait times to unload
        ($0.6 million in Q1/13 and Q4/12). Process improvements were
        implemented late in the first quarter of 2013 to minimize customer
        truck wait times.
        
    --  Q1 2013 versus Q1 2012: Cash Operating Profit for the three months
        ended March 31, 2013 was $0.25 million, inclusive of transloading
        services for inter-segment chlor-alkali products, as compared to
        $0.16 million for the three months ended March 31, 2012. External
        sales revenue increased 268% for the three months ended March 31,
        2013, as compared to the three months ended March 31, 2012,
        primarily as a result of an increase in the number of railcars
        transloaded (261%). The increase in cost of sales for the three
        months ended March 31, 2013, as compared to the three months ended
        March 31, 2012, is primarily due to an increase in the number of
        employees as a result of an increase in transload volumes in the
        quarter and in anticipation of capacity increases in our manifest
        business (truck-to-railcar or railcar-to-truck) expected in the
        second half of the year. The increase in distribution, selling and
        marketing costs was due to an increase in the number of selling and
        marketing employees and to amounts paid to customers to compensate
        for extended truck wait times to unload (Q1/13 - $0.6 million vs.
        Q1/12 - $Nil). Process improvements were implemented late in the
        first quarter of 2013 to minimize customer truck wait times.  

 
Market Fundamentals 
North America Sodium Chlorate: Market pulp fundamentals remained
relatively stable for the three months ended March 31, 2013,
improving modestly in the period. Combined producer inventories were
higher than historical averages for January and February, due mainly
to reduced purchases from China during the Lunar New Year. As of
February, producer inventories were at 35 days, slightly above a
balanced level of 33 days. Softwood pulp inventories were stable from
the previous month at 32 days, similar to hardwood inventories that
were flat for the past two months at 39 days. Recent advances in
pricing for most grades suggest that pulp shipments to China
accelerated in March. Demand for pulp is expected to remain strong in
most regions of the globe, as new demand coming from the start-up of
several tissue machines will require market pulp. Inventories are
expected to decline over the next few months due to the spring
maintenance season now commencing in both North and South America. As
a result of strong demand and reduced inventories, pulp prices should
hold their current levels, and potentially continue their modest
upward trend throughout the first half of the year. 
Demand for sodium chlorate in North America was stable for the first
quarter of 2013, and is expected to remain strong for the remainder
of the year. Sodium chlorate exports from North America for the first
two months of 2013, suggest another strong year with volumes that
should mirror those of 2012. Operating rates for the North American
sodium chlorate industry are expected to remain at strong levels,
between 93 and 95%, for 2013. 
North America Chlor-alkali: The North American chlor-alkali industry
operated at an estimated 82% of capacity in the first quarter of
2013, compared with 82% in the previous quarter and 85% in the same
quarter of 2012. Domestic Polyvinyl Chloride ("PVC") demand is
gradually improving and export demand for PVC and isocyanates remains
strong. Utilization rates are expected to be approximately 85% for
the second quarter of 2013 due to increased demand from seasonal
water treatment consumers. 
North American caustic soda supply was balanced with demand for the
first quarter of 2013, while export supply from Asia to the west
coast remained strong due to weakness in domestic demand in China and
Japan. 
North American hydrochloric acid supply outpaced demand for the first
quarter of 2013 due to strong byproduct and burner production.
Hydrochloric acid demand from oil well fracturing in Western Canada
was strong and balanced with supply but is expected to decline for
the second quarter of 2013, consistent with reduced activity due to
seasonal spring thaw conditions.  
North American MECU prices held stable for the first quarter of 2013
with the exception of the west coast, where caustic soda prices
declined due to the impact of lower cost imports from Asia. Downward
pressure on PVC prices in Asia is resulting in higher caustic soda 
price nominations for export cargo booked for the second quarter of
2013. Several North American producers have announced price increases
for both chlorine and caustic soda for implementation in the second
quarter of 2013. Hydrochloric acid prices experienced some erosion in
the first quarter of 2013 and are expected to stabilize in the second
quarter of 2013.  
South America: Brazilian pulp production in the first quarter was
1.8% higher than the same period in the prior year. Exports were 0.4%
higher than the same period in the prior year. The Eldorado mill is
now exporting and 100% capacity utilization was expected by April.
Significant producers have announced price increases to be
implemented May 1, 2013.  
Canexus Brazil's major sodium chlorate customer demonstrated lower
than expected sodium chlorate demand due to process issues but is
expected to recover these production losses by the end of the year.
Canexus Brazil's sodium chlorate plant operated close to planned
volumes for the first quarter of 2013 due to higher sales to the
merchant market. 
In the first quarter of 2013, the Brazilian chlor alkali capacity
utilization rate was 84%, approximately 3.0% lower than the same
period in 2012. The reduction was due to manufacturing issues
associated with two key producers. Canexus Brazil's chlor-alkali
capacity utilization was 99% during the first quarter and was in line
with expectations. 
Oil & Gas: Benchmark crude oil prices (Brent, WTI) eased slightly,
while Western Canadian prices ("WCS") improved gradually during the
first quarter of 2013. Ongoing infrastructure bottlenecks continued
to hold back regional prices in North America. Price differentials
between Western Canadian grades and other key benchmarks narrowed
modestly during the first quarter of 2013 but remain wide enough to
support strong demand for rail-based oil transportation services.  
Natural gas prices rose modestly during the first quarter of 2013 but
high inventory levels continued to constrain prices. Natural gas
inventories remain solid and prices are expected to remain stable in
the short term. Production is expected to continue to gradually fall
in North America in 2013 and prices are expected to begin increasing
modestly in the longer term.  
Drilling activity picked up significantly in Western Canada in the
first quarter of 2013 as well-service companies took advantage of
frozen ground conditions to access well sites. Drilling remains
predominantly focused on oil production, however gas related drilling
also increased during the first quarter of 2013. Increased levels of
drilling activity support continued demand for hydrochloric acid.  
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 first quarter of 2013, we recorded an unrealized
        currency translation loss of $6.2 million as a result of the
        weakening of the Canadian dollar at the end of the quarter compared
        to year-end 2012 (Q1/12 - $4.8 million unrealized gain). These
        amounts are included in finance income (expense).
        
    --  Interest expense in the quarter was $3.5 million (Q1/12 - $5.7
        million). Interest capitalized on major projects was $1.4 million in
        Q1 2013 (Q1/12 - $0.2 million).
        
        
--  Other Income (Expense):
    
    --  In the first quarter of 2013, mark-to-market fair value losses of
        $0.2 million (Q1/12 - $0.3 million) and realized losses of $0.2
        million (Q1/12 - $0.4 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 first quarter of 2013, we recorded mark-to-market fair value
        gains of $0.4 million (Q1/12 - $0.3 million) and realized losses of
        $0.4 million (Q1/12 - $0.3 million) on interest rate swaps.
        
    --  Other income also includes $0.9 million of foreign currency
        translation gains on working capital in Q1 2013 (Q1/12 - $0.2
        million losses).
        
    --  In the first quarter of 2013, we recorded mark-to-market fair value
        losses on a cross currency swap of $0.3 million as a result of the
        weakening of the Canadian dollar at the end of the quarter compared
        to year-end 2012 (Q1/12 - $0.2 million gains). 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
    March 31, 2013 were $53.5 million, of which $4.6 million was spent on
    maintenance projects, $1.4 million on continuous improvement projects
    and the balance on expansion projects ($47.5 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 lower in the
    first quarter of 2013, as compared to the same period in 2012, due to
    lower net income. As of March 31, 2013, the Corporation had
    approximately $552 million of future tax deductions resulting from
    capital expenditures which can be used to shelter future taxable income
    in Canada.
    
--  Liquidity: As of March 31, 2013, total borrowings under committed credit
    facilities were $264 million with remaining available undrawn capacity
    of approximately $120 million. Cash on hand at March 31, 2013 was $4.3
    million. On May 1, 2013, the US$50 million Senior Secured Notes were
    repaid from committed credit facilities which had no impact on
    liquidity. 

 
Operating Results for the Three Months Ended March 31, 2013 and 2012 


 
                                                                            
CAD thousands                                              2013        2012 
----------------------------------------------------------------------------
Sales Revenue                                           141,235     148,978 
----------------------------------------------------------------------------
Cost of Sales (1)                                        88,566      90,124 
----------------------------------------------------------------------------
Gross Profit                                             52,669      58,854 
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Distribution, Selling and Marketing                      25,311      21,106 
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General and Administrative (2)                            9,493       9,470 
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Operating Profit                                         17,865      28,278 
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Finance Expense                                         (13,956)    (11,929)
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Other Income                                                613         361 
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Income Before Income Taxes                                4,522      16,710 
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Provision for (Recovery of) Income Taxes                                    
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  Current                                                 1,236       1,912 
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  Deferred                                                 (111)      4,746 
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                                                          1,125       6,658 
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Net Income                                                3,397      10,052 
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Notes:                                                                      
(1) Depreciation and amortization included in the three months ended March  
    31, 2013 - $11.5 million; Depreciation and amortization included for the
    three months ended March 31, 2012 - $10.8 million.                      
(2) Depreciation and amortization included for the three months ended March 
    31, 2013 - $0.3 million; Depreciation and amortization included for the 
    three months ended March 31, 2012 - $0.2 million.                       

 
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.
Management will host a conference call at 9 a.m. ET on May 9, 2013,
to discuss the results. A Q1 2013 presentation will be available on
our website to facilitate the conference call. Please call
416-644-3416 or 1-800-814-4861. The conference call will also be
accessible via webcast at www.canexus.ca. A replay of the conference
call will be available until midnight May 16, 2013. To access the
replay, call 416-640-1917 or 1-877-289-8525, followed by passcode
4613570#. 
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 2012 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: anticipated cash operating
profit for the second half of 2013 and full year; caustic soda and
hydrochloric acid prices in the third quarter of 2013; full year
production of sodium chlorate from Canexus' Brandon plant; timing of
the commissioning of the Bruderheim Terminal interconnection with the
MEG Energy Stonefell Terminal; potential capacity constraints for
unit train shipments based on anticipated incremental customer
contracts and the feasibility and timing of staged unit train
expansion opportunities as necessary; anticipated timing of
completion of DBCO; the implementation of major capital projects and
the delivery of cash flow; anticipated increases in the manifest
business in the second half of 2013; hydrochloric acid expansions at
Canexus' North Vancouver chlor-alkali facility; sodium chlorate
demand and industry operating rates; hydrochloric acid demand and
pricing in North America; cost of the pipeline connected unit train
facility at Bruderheim; the impact of additional storage tanks and
West rail yard capacity and bottlenecks on DBCO transload capacity
and anticipated outages on transloading tracks required to implement;
demand for pulp and its impact on inventories and prices; demand for
and industry operating rates; chlor-alkali industry capacity
utilization; North American hydrochloric acid supply; Canexus' North
American chlor-alkali utilization rates; natural gas production,
pricing and inventory expectations and expectations regarding
drilling activity, oil prices and LNG projects and their impact on
hydrochloric acid demand in Western Canada. 
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
 
 
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