Canexus Corporation Announces Second Quarter Results

Canexus Corporation Announces Second Quarter Results 
Board Approves Expansion of Unit Train Capacity at NATO 
CALGARY, ALBERTA -- (Marketwired) -- 08/07/13 -- Canexus Corporation
(TSX:CUS) (the "Corporation" or "Canexus") today announced its
financial results for the second quarter ended June 30, 2013.  
Highlights: 


 
--  Cash Operating Profit was $19.3 million for the three months ended June
    30, 2013 ($23.0 million in the second quarter of 2012, and $30.3 million
    for the first quarter of 2013). Year-to-date Distributable Cash was
    $27.9 million ($0.20 per common share), resulting in a payout ratio of
    140%. 
    
--  On July 22, 2013, Canexus announced that it had entered into long-term
    agreements with Inter Pipeline Fund ("Inter Pipeline") and Inter
    Pipeline Polaris Inc. for the delivery of bitumen blend from the Cold
    Lake pipeline system to Canexus' Bruderheim Terminal ("Bruderheim
    Terminal") for loading into unit trains. Under the terms of the
    agreements, Canexus is guaranteed a capacity allotment of up to 100,000
    barrels of Cold Lake Blend pipeline delivery per day. Canexus also
    announced that it had entered into a multi-year agreement with Cenovus
    Energy Inc. ("Cenovus") for bitumen blend pipeline receiving and unit
    train loading services at the Bruderheim Terminal. 
    
--  Significant progress is being made on the pipeline connected unit train
    expansion at the Corporation's North American Terminal Operations
    ("NATO") at Bruderheim, Alberta. The Canexus Bruderheim Terminal is
    being connected with pipelines that interconnect with the MEG Energy
    Stonefell Terminal. Commissioning of the Bruderheim Terminal is expected
    to occur in the fourth quarter. With the recent announcement for the
    guaranteed capacity allotment from the Cold Lake pipeline system, and
    the pipeline receiving and unit train loading services agreement with
    Cenovus, the Board of Directors today approved the staged expansion to
    increase capacity of the Canexus Bruderheim Terminal from seven to 13
    unit trains per week. The capacity expansion is expected to be
    operational by mid-2014. The total estimated cost of the pipeline
    connected unit train facility is $225 million (inclusive of capital
    spending
 to facilitate large scale movements of condensate from rail to
    pipeline in the future). Canexus continues to make solid progress with
    additional potential customers for unit train shipments under multi-
    year, take-or-pay terms. Operating cash flow from unit train operations,
    assuming 11 unit trains per week, could exceed $50 million annually.
    Unit train operations will have access to both Canadian Pacific and
    Canadian National Railway systems on start-up. 
    
--  The expansion of diluted bitumen and crude oil ("DBCO") truck-to-rail
    transload capacity at NATO (to 30,000 bbls/day) is expected to be
    completed in August. With two of our main loading tracks out-of-service
    for various periods of time in the quarter for expansion, Canexus
    transloaded about 14,500 bbls/day of DBCO in the second quarter. One of
    the two main loading tracks being expanded was turned over to operations
    in June. The other loading track is currently out-of-service for
    installation of the remaining storage tanks and modernized loading rack.
    
--  Canexus' chlor-alkali results were affected by the extended plant
    shutdown in April and weakness in caustic soda and hydrochloric acid
    markets discussed in the May 8, 2013 and July 22, 2013 press releases.
    Caustic soda pricing has improved marginally in the third quarter and we
    expect to see continued improvement in the fourth quarter. Hydrochloric
    acid demand and pricing for the balance of the year is dependent upon
    higher activity levels in the oil and gas segment in Western Canada. The
    current higher oil price environment and a weaker Canadian dollar should
    help support activity levels. 
    
--  The North American sodium chlorate business experienced slightly lower
    demand in the quarter due to unplanned downtime at pulp customers. North
    American pulp production is expected to continue to be strong for the
    balance of 2013 and 2014, supporting high sodium chlorate industry
    operating rates. The Corporation is currently analysing additional de-
    bottleneck opportunities at its low-cost Brandon plant. 
    
--  Canexus' Brazil operations continue to be very stable with solid demand
    from its primary customer as well as from the merchant market for sodium
    chlorate as well as chlorine and chlorine derivatives. 
    
--  The Board of Directors declared the regular quarterly dividend of
    $0.1368 per common share payable October 15, 2013 to shareholders of
    record on September 30, 2013. 

 
"Our financial performance in the first half of 2013 has been
disappointing," said Gary Kubera, President and CEO. "Market
conditions for our chlor-alkali business will continue to be
challenging in the second half of the year. Despite expectations for
lower hydrochloric acid prices, this business will benefit from the
capacity expansions just being completed. Both our North American
sodium chlorate business and Brazil operations are performing well
and market conditions should support strong business performance over
the balance of the year and for 2014. The market fundamentals for
oil-by-rail movements are solid and Canexus expects NATO to
contribute meaningful results for shareholders as major capital
projects are completed," he added. 
Distributable Cash  
Distributable cash of Canexus Corporation was $6.0 million ($0.04 per
common share) for the quarter resulting in a payout ratio of 342%. 


 
                                     Three Months Ended   Six Months Ended  
                                           June 30             June 30      
                                     ---------------------------------------
CAD thousands, except as noted           2013      2012      2013      2012 
----------------------------------------------------------------------------
Cash Operating Profit                  19,254    22,976    49,527    63,279 
----------------------------------------------------------------------------
  Interest Expense                     (3,159)   (4,969)   (6,644)  (10,639)
----------------------------------------------------------------------------
  Realized Foreign Currency                                                 
   Translation Gains (Losses)            (782)      (61)       43       (22)
----------------------------------------------------------------------------
  Maintenance Capital Expenditures     (5,837)   (7,446)  (10,394)  (11,500)
----------------------------------------------------------------------------
  Provision for Current Income Taxes   (1,600)     (819)   (2,836)   (2,731)
----------------------------------------------------------------------------
  Technology Conversion Project                                             
   ("TCP") Severance Costs Paid           (63)        -      (274)     (888)
----------------------------------------------------------------------------
  Cumulative Pension Funding in                                             
   Excess of Pension Expense           (1,682)     (665)     (673)     (397)
----------------------------------------------------------------------------
  Other                                  (133)     (832)     (811)   (1,606)
----------------------------------
------------------------------------------
Distributable Cash                      5,998     8,184    27,938    35,496 
----------------------------------------------------------------------------
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Distributable Cash Per Share             0.04      0.07      0.20      0.30 
----------------------------------------------------------------------------
Dividends Declared Per Share           0.1368    0.1368    0.2736    0.2736 
----------------------------------------------------------------------------
Payout Ratio                              342%      203%      140%       93%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Below is a reconciliation of net cash generated from operating
activities to Distributable Cash of the Corporation for the three and
six months ended June 30, 2013 and 2012. 


 
                                     Three Months Ended   Six Months Ended  
                                           June 30             June 30      
                                     ---------------------------------------
CAD thousands                            2013      2012      2013      2012 
----------------------------------------------------------------------------
Net Cash Generated from Operating                                           
 Activities                            12,673    18,546    37,842    33,098 
----------------------------------------------------------------------------
  Changes in Non-Cash Operating                                             
   Working Capital                        824         -     3,135    18,969 
----------------------------------------------------------------------------
  Non-Cash Change in Income Tax                                             
   Payable and Interest Payable        (1,503)   (2,131)   (3,199)   (3,762)
----------------------------------------------------------------------------
  Interest Income                          91       138       181       195 
----------------------------------------------------------------------------
  Maintenance Capital Expenditures     (5,837)   (7,446)  (10,394)  (11,500)
----------------------------------------------------------------------------
  Realized Foreign Currency                                                 
   Translation Gains (Losses) on                                            
   Cash                                   298       (10)      832        25 
----------------------------------------------------------------------------
  TCP Severance Costs Paid                (63)        -      (274)     (888)
----------------------------------------------------------------------------
  Purchase of Foreign Exchange                                              
   Options                                  -         -       512         - 
----------------------------------------------------------------------------
  Amortization of the Purchase Cost                                         
   of Foreign Exchange Options           (208)     (531)     (208)     (909)
----------------------------------------------------------------------------
  Expenditures on Decommissioning                                           
   Liabilities                            (65)     (257)     (213)     (393)
----------------------------------------------------------------------------
  Operating Non-Cash Items               (212)     (125)     (276)      661 
----------------------------------------------------------------------------
Distributable Cash                      5,998     8,184    27,938    35,496 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Segmented Information for the Three-Month Periods Ended June 30, 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 second quarter performance by segment. 


 
                                                                            
                           North America                                    
                         ------------------                                 
Three Months Ended         Sodium  Chlor-    South                          
June 30, 2013            Chlorate  alkali  America    NATO   Other    Total 
----------------------------------------------------------------------------
Sales Revenue                                                               
----------------------------------------------------------------------------
  Total Segment            53,882  46,547   27,646   5,774       -  133,849 
----------------------------------------------------------------------------
  Inter-Segment                92       -        -  516(1)       -      608 
----------------------------------------------------------------------------
Total Sales Revenue from                                                    
 External Customers        53,790  46,547   27,646   5,258       -  133,241 
----------------------------------------------------------------------------
  Cost of Sales            32,577  32,197   22,631   4,900      12   92,317 
----------------------------------------------------------------------------
Distribution, Selling                                                       
 and Marketing                                                              
----------------------------------------------------------------------------
  Total Segment             7,332  15,642      255   1,304     749   25,282 
----------------------------------------------------------------------------
  Inter-Segment                 -     608        -       -       -      608 
----------------------------------------------------------------------------
Total External                                                              
 Distribution, Selling                                                      
 and Marketing              7,332  15,034      255   1,304     749   24,674 
----------------------------------------------------------------------------
General and                                                                 
 Administrative             2,655   3,240    1,129     127   2,906   10,057 
----------------------------------------------------------------------------
Operating Profit (Loss)    11,226  (3,924)   3,631  (1,073) (3,667)   6,193 
----------------------------------------------------------------------------
Add:                                                                        
----------------------------------------------------------------------------
Depreciation and                                                            
 Amortization               3,331   5,745    1,912   1,182     242   12,412 
----------------------------------------------------------------------------
Share-based Compensation                                               
     
 Expense                        -       -        -       -     649      649 
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 (Loss)                    14,557   1,821    5,543     109  (2,776)  19,254 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 Percentage                    27%      4%      20%      2%      -       14%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                          North America                                     
                        ------------------                                  
Three Months Ended        Sodium  Chlor-    South                           
June 30, 2012           Chlorate  alkali  America    NATO    Other    Total 
----------------------------------------------------------------------------
Sales Revenue                                                               
----------------------------------------------------------------------------
  Total Segment           56,193  57,133   25,368   2,037        -  140,731 
----------------------------------------------------------------------------
  Inter-Segment               83       -        -  417(1)        -      500 
----------------------------------------------------------------------------
Total Sales Revenue                                                         
 from External                                                              
 Customers                56,110  57,133   25,368   1,620        -  140,231 
----------------------------------------------------------------------------
  Cost of Sales           33,282  38,317   21,498   2,228      314   95,639 
----------------------------------------------------------------------------
Distribution, Selling                                                       
 and Marketing                                                              
----------------------------------------------------------------------------
  Total Segment            7,403  15,903      301     392      580   24,579 
----------------------------------------------------------------------------
  Inter-Segment                -     500        -       -        -      500 
----------------------------------------------------------------------------
Total External                                                              
 Distribution, Selling                                                      
 and Marketing             7,403  15,403      301     392      580   24,079 
----------------------------------------------------------------------------
General and                                                                 
 Administrative            2,957   3,607      991     141    1,520    9,216 
----------------------------------------------------------------------------
Operating Profit (Loss)   12,468    (194)   2,578  (1,141)  (2,414)  11,297 
----------------------------------------------------------------------------
Add:                                                                        
----------------------------------------------------------------------------
Depreciation and                                                            
 Amortization              3,196   5,110    1,767     590      530   11,193 
----------------------------------------------------------------------------
Share-based                                                                 
 Compensation Expense          -       -        -       -      486      486 
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 (Loss)                   15,664   4,916    4,345    (551)  (1,398)  22,976 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash Operating Profit                                                       
 (Loss) Percentage            28%      9%      17%    (34%)      -       16%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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: 
    
--  Q2 2013 versus Q1 2013: Sales revenue for the North America sodium
    chlorate segment decreased 9% to $53.8 million for the three months
    ended June 30, 2013 from $58.9 million for the three months ended March
    31, 2013. The decrease in sales revenue was due to lower sales volumes
    (10%), partially offset by an increase in realized netback prices (2%).
    Cash Operating Profit Percentage remained consistent at 27% with lower
    production volumes from our Brandon plant being offset by higher
    realized netback prices, slightly lower fixed costs and a lower
    corporate allocation of general and administrative costs. 
    
--  Q2 2013 versus Q2 2012: Sales revenue for the North America sodium
    chlorate segment decreased 4% to $53.8 million for the three months
    ended June 30, 2013 from $56.1 million for the three months ended June
    30, 2012 as a result of a decrease in sales volumes (7%), partially
    offset by an increase in realized netback prices (2%). Cash Operating
    Profit Percentage decreased from 28% for the three months ended June 30,
    2012 to 27% for the three months ended June 30, 2013, primarily as a
    result of higher electricity and salt costs, partially offset by higher
    realized netback prices, lower fixed costs and a lower corporate
    allocation of general and administrative costs. 
    
--  North America Chlor-alkali: 
    
--  Q2 2013 versus Q1 2013: Sales revenue for the North America chlor-alkali
    segment decreased 13% to $46.5 million for the three months ended June
    30, 2013 from $53.6 million for the three months ended March 31, 2013.
    The decrease in sales revenue was primarily due to lower hydrochloric
    acid sales volumes (17%) and realized netback prices (31%), and lower
    caustic soda 
sales volumes (3%) and realized netback prices (7%),
    partially offset by higher chlorine sales volumes (10%) and realized
    netback prices (37%). Cash Operating Profit Percentage decreased from
    19% for the three months ended March 31, 2013 to 4% for the three months
    ended June 30, 2013 as a result of lower MECU realized netback prices
    (15%), higher salt, electricity and natural gas costs and higher fixed
    costs due to a planned maintenance shutdown which was extended by nine
    days as a result of equipment failure during attempted start-up of the
    plant, partially offset by lower caustic soda purchased product costs.  
    
--  Q2 2013 versus Q2 2012: Sales revenue for the North America chlor-alkali
    segment decreased 19% to $46.5 million for the three months ended June
    30, 2013 from $57.1 million for the three months ended June 30, 2012 due
    to lower caustic soda sales volumes (10%) and realized netback prices
    (15%), lower chlorine sales volumes (13%) and lower hydrochloric acid
    realized netback prices (39%), partially offset by higher hydrochloric
    acid sales volumes (50%). Cash Operating Profit Percentage decreased
    from 9% for the three months ended June 30, 2012 to 4% for the three
    months ended June 30, 2013 as a result of lower MECU realized netback
    prices (12%) and higher salt, electricity and natural gas costs,
    partially offset by lower caustic soda purchased product costs and lower
    fixed costs.  
    
--  South America: 
    
--  Q2 2013 versus Q1 2013: Sales revenue for the South America segment
    increased 14% to $27.6 million for the three months ended June 30, 2013
    from $24.2 million for the three months ended March 31, 2013. The
    increase in sales revenue was primarily due to higher sodium chlorate
    sales volumes (15%) and higher sodium chlorate (10%) and caustic soda
    (8%) realized netback prices, partially offset by lower caustic soda
    (6%) and hydrochloric acid (11%) sales volumes. Cash Operating Profit
    Percentage decreased from 25% for the three months ended March 31, 2013
    to 20% for the three months ended June 30, 2013 primarily as a result of
    lower chlor-alkali production volumes, higher electricity costs, higher
    purchased product costs and higher fixed costs, partially offset by
    higher realized netback prices for products sold into the merchant
    market.  
    
--  Q2 2013 versus Q2 2012: Sales revenue for the South America segment
    increased 9% to $27.6 million for the three months ended June 30, 2013
    from $25.4 million for the three months ended June 30, 2012. The
    increase in sales revenue was due to higher sodium chlorate (12%),
    chlorine (24%) and sodium hypochlorite (6%) sales volumes, and higher
    sodium hypochlorite (9%) and caustic soda (2%) realized netback prices,
    partially offset by lower hydrochloric acid sales volumes (9%). Cash
    Operating Profit Percentage increased to 20% for the three months ended
    June 30, 2013 from 17% for the three months ended June 30, 2012 as a
    result of higher realized netback prices for products sold into the
    merchant market, higher sodium chlorate production and lower fixed
    costs, partially offset by higher purchased product costs.  
    
--  North American Terminal Operations: 
    
--  Q2 2013 versus Q1 2013: Cash Operating Profit for the three months ended
    June 30, 2013 was $0.63 million, inclusive of transloading services for
    inter-segment chlor-alkali products, as compared to $0.25 million for
    the three months ended March 31, 2013. External sales revenue increased
    15% for the three months ended June 30, 2013 as compared to the three
    months ended March 31, 2013, primarily as a result of an increase in the
    number of railcars transloaded (12%). 
    
--  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 June 30, 2013, as compared to the three months ended March 31,
    2013, was primarily due to an increase in utilities and the number of
    employees as a result of an increase in transload volumes in the
    quarter. Distribution, selling and marketing costs were favourable as
    compared to the three months ended March 31, 2013 primarily due to
    process improvements resulting in lower truck wait time charges.  
    
--  Q2 2013 versus Q2 2012: Cash Operating Profit for the three months ended
    June 30, 2013 was $0.63 million, inclusive of transloading services for
    inter-segment chlor-alkali products, as compared to a loss of ($0.13)
    million for the three months ended June 30, 2012. External sales revenue
    increased 225% for the three months ended June 30, 2013, as compared to
    the three months ended June 30, 2012, primarily as a result of an
    increase in the number of railcars transloaded (79%) combined with
    higher transload fees. 
    
--  The increase in cost of sales for the three months ended June 30, 2013,
    as compared to the three months ended June 30, 2012, was primarily due
    to an increase in the number of employees as a result of an increase in
    transload volumes in the quarter. The increase in distribution, selling
    and marketing costs was due to an increase in the number of selling and
    marketing employees and increased railcar lease costs as a result of
    higher transload volumes. 

 
General Market Fundamentals 
North America Sodium Chlorate: Global market pulp dynamics remained
favorable throughout the second quarter of 2013. Despite slightly
lower shipments to China from World-20 suppliers, year-to-date global
pulp shipments were higher by 1.8% compared to the same period in
2012. Combined producer inventories for June remained relatively
constant with historical averages at 34 days. Softwood pulp
inventories continue to suggest a balanced market at 28 days, while
hardwood inventories are slightly higher than historical averages at
40 days. Stable demand for pulp combined with planned maintenance
downtime in both North and South America, contributed to positive
market conditions and also provided support for further price
appreciation in most pulp grades. New capacity coming on line in
Eastern Europe and South America in the second half of the year is
expected to result in increases to pulp inventories, which suggests
an erosion of pulp pricing gains made during the first half of the
year. Outside of strong demand for pulp in the tissue market, most
other segments related to North American downstream paper are showing
demand declines, most notably uncoated freesheet, which is down 4.3%
through May. 
As expected, demand for sodium chlorate in the second quarter of 2013
was impacted by North American mills annual maintenance shutdowns and
was slightly lower than the first quarter of 2013 but it is expected
to remain stable for the remainder of the year. Exports of sodium
chlorate from North America for the first four months of 2013 were
strong and suggest annual export volumes consistent with those
achieved in 2012. Operating rates for the North American sodium
chlorate industry are estimated to remain between 93% and 94% for the
remainder of the year. 
North America Chlor-alkali: The North American chlor-alkali industry
operated at an estimated 85% of capacity in the second quarter of
2013, compared to 83% in the first quarter of 2013 and 80% in the
second quarter of 2012. Domestic Polyvinyl Chloride ("PVC") demand is
gradually improving and export demand for PVC and isocyanates remains
strong. Domestic demand is 2.1% higher (June YTD) compared to 2012
levels. Chlorine utilization rates are expected to approximate 85%
through the third quarter of 2013. 
North American caustic soda supply was balanced with demand in the
second quarter of 2013. Export supply from Asia to the west coast
remained readily available, while exports from Europe to the east
coast were limited. Declining PVC prices in China have put pressure
on caustic export prices, but to date this trend has resulted in only
modest price improvement in the North American west coast market. 
North American hydrochloric acid supply was balanced with demand in
the second quarter of 2013 due to several production outages at both
byproduct and burner producer sites, offsetting seasonal demand
declines in the Canadian oil and gas sector and sluggish steel
production.  
North American MECU prices were unchanged in the second quarter of
2013. Chlorine market price increases were announced for the second
quarter but not implemented due to a lack of producer support and no
movement is expected in the third quarter. Downward pressure on PVC
prices in Asia resulted in higher caustic soda price nominations for
export cargo during the second quarter of 2013 but minimal volume was
contracted at these higher prices. Most North American producers have
announced a market price increase for caustic soda for implementation
in the third quarter of 2013. Hydro
chloric acid price erosion was
halted in the second quarter of 2013 with a market price increase
announcement by most suppliers consistent with an improved supply and
demand balance.  
South America: Brazilian pulp production for the first five months of
2013 was 3.9% higher than the same period in 2012 and Brazilian
exports were 9.4% higher for the same period. Downward pricing
pressure is expected in the fourth quarter of 2013 due to new pulp
capacity but is expected to be partially offset by the weakening of
the Brazilian Real compared to the US Dollar. 
Canexus Brazil`s major sodium chlorate customer had higher than
expected sodium chlorate demand in the second quarter of 2013 due to
higher pulp production levels. Canexus Brazil`s sodium chlorate plant
production was above planned levels in the second quarter of 2013 due
to the postponement of a shutdown and higher sales to the merchant
market. 
In the first five months of 2013, the Brazilian Chlor-alkali industry
capacity utilization rate was 84.5%, 1.2% lower than the same period
in 2012, due to manufacturing issues at two key producers. Canexus
Brazil`s Chlor-alkali capacity utilization was 95% during the first
half of 2013 which was in line with expectations. 
Oil & Gas: Benchmark crude oil (Brent, WTI) price differentials
significantly tightened during the second quarter of 2013 due to
lower Brent prices. Western Canadian prices also appreciated
meaningfully during the same period. Brent prices constricted due to
weak seasonal demand and elevated inventory levels. Infrastructure
de-bottlenecking, pipeline expansions, and increased rail movements
firmed WTI pricing over the quarter. Price differentials between
Western Canadian grades and other key benchmarks appreciated
significantly during the second quarter of 2013 driven by factors
specific to the Alberta marketplace, contributing to lower demand for
outbound pipeline capacity, that are believed to be short term in
nature. Fourth quarter 2013 and beyond, future market differentials
remain wide enough to support strong demand for rail-based oil
transportation services as pipeline capacity will lag new oil sands
production in the near to mid-term.  
Natural gas prices were stable over the second quarter of 2013.
Production is expected to continue to decline slightly in North
America for the remainder of 2013, while prices are expected to
increase modestly in the mid to long term. 
Drilling activity marginally increased in the second quarter but was
somewhat constrained by a wet spring. We continue to see a transition
to horizontal drilling with oil favoring gas. Second quarter 2013
completions dipped due to seasonality but drilling licenses increased
over first quarter levels. Marginally improved levels of drilling
activity support demand for hydrochloric acid.  
Financial Updates  


 
--  Long-term Debt and Finance Income (Expense): 
    
    --  Canexus borrows in US dollars, which creates unrealized currency
        translation losses as the Canadian dollar weakens. A substantial
        portion of our revenues are denominated in or referenced to the US
        dollar. During the second quarter of 2013, we recorded an unrealized
        currency translation loss of $10.0 million as a result of the
        weakening of the Canadian dollar at the end of the quarter compared
        to the end of Q1/13 (Q2/12 - $6.1 million unrealized loss). These
        amounts are included in finance income (expense). 
        
    --  Interest expense in the quarter was $3.2 million (Q2/12 - $5.0
        million). Interest capitalized on major projects was $1.4 million in
        Q2/13 (Q2/12 - $0.2 million). 
        
--  Other Income (Expense): 
    
    --  In the second quarter of 2013, mark-to-market fair value losses of
        $0.4 million (Q2/12 - $0.9 million) and realized gains of $Nil
        (Q2/12 - $0.4 million) were recorded on forward foreign exchange
        contracts, foreign exchange option contracts and average rate range
        forward contracts. In June, we entered into average rate range
        forward contracts to sell US $5 million between US $0.9615 and US
        $0.9376 for October; US $0.9615 and US $0.9372 for November; and US
        $0.9709 and $0.9346 for December. 
        
    --  In the second quarter of 2013, we recorded mark-to-market fair value
        losses on a cross currency swap of $0.5 million as a result of the
        weakening of the Canadian dollar at the end of the quarter compared
        to the end of Q1/13 (Q2/12 - $0.4 million). In Q3/11, 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. 
        
    --  In the second quarter of 2013, we recorded mark-to-market fair value
        gains of $0.4 million (Q2/12 - $0.3 million) and realized losses of
        $0.1 million (Q2/12 - $0.3 million) on interest rate swaps. The
        interest rate swaps expired on April 10, 2013. 
        
--  Capital Expenditures: Capital expenditures for the three months ended
    June 30, 2013 were $50.2 million, of which $5.8 million was spent on
    maintenance projects, $1.5 million on continuous improvement projects
    and the balance on expansion projects ($42.9 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
    second quarter of 2013, as compared to the same period in 2012, due to
    lower income in the taxable legal entities included in the companies
    comprising the Corporation in Q2/13 as compared to Q2/12. As of June 30,
    2013, the Corporation had approximately $596 million of future tax
    deductions resulting from capital expenditures which can be used to
    shelter future taxable income in Canada. 
    
--  Liquidity: As of June 30, 2013, total borrowings under committed credit
    facilities were $274 million with remaining available undrawn capacity
    of approximately $150 million. Cash on hand at June 30, 2013 was $2.3
    million. 
    
 
                                                                            
Operating Results for the Three and Six Months Ended June 30, 2013 and 2012 
                                                                            
                                     Three Months Ended   Six Months Ended  
                                           June 30             June 30      
                                     ---------------------------------------
CAD thousands                            2013      2012      2013      2012 
----------------------------------------------------------------------------
Sales Revenue                         133,241   140,231   274,476   289,209 
----------------------------------------------------------------------------
Cost of Sales(1)                       92,317    95,639   180,883   185,763 
----------------------------------------------------------------------------
Gross Profit                           40,924    44,592    93,593   103,446 
----------------------------------------------------------------------------
                                                                            
Distribution, Selling and Marketing    24,674    24,079    49,985    45,185 
----------------------------------------------------------------------------
General and Administrative(2)          10,057     9,216    19,550    18,686 
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Operating Profit                        6,193    11,297    24,058    39,575 
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Finance Expense                       (19,955)  (12,166)  (33,911)  (24,095)
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-------------------
Other Income (Expense)                    (57)   (1,345)      556      (984)
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Income (Loss) Before Income Taxes     (13,819)   (2,214)   (9,297)   14,496 
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Provision for (Recovery of) Income                                          
 Taxes                                                                      
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  Current                               1,600       819     2,836     2,731 
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  Deferred                               (652)    1,005      (763)    5,751 
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                                          948     1,824     2,073     8,482 
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Net Income (Loss)                     (14,767)   (4,038)  (11,370)    6,014 
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Notes:                                                                      
(1)    Depreciation and Amortization included in the three and six months   
       ended June 30, 2013 - $12.2 million and $23.7 million, respectively; 
       Depreciation and Amortization included for the three and six months  
       ended June 30, 2012 - $11.0 million and $21.8 million, respectively. 
                                                                            
(2)    Depreciation and Amortization included for the three and six months  
       ended June 30, 2013 - $0.2 million and $0.5 million, respectively;   
       Depreciation and Amortization included for the three and six months  
       ended June 30, 2012 - $0.2 million and $0.4 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.
Management will host a conference call at 10 a.m. ET on August 8,
2013, to discuss the results. A Q2 2013 presentation will be
available on our website to facilitate the conference call. Please
call 416-644-3419 or 1-877-974-0447. The conference call will also be
accessible via webcast at www.canexus.ca. A replay of the conference
call will be available until midnight August 15, 2013. To access the
replay, call 416-640-1917 or 1-877-289-8525, followed by passcode
4633140#. 
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: timing of commissioning of
the Bruderheim Terminal; timing of capacity expansion at the
Bruderheim Terminal and the potential cash flow implications thereof
under certain scenarios; timing of expansion of DBCO transload
capacity and the capacity thereof; cost of the pipeline connected
unit train facility at Bruderheim; expectations for caustic soda
price improvements; the impact of new capacity on pulp inventories
and pulp pricing and pulp production expectations for 2013 and 2014
and their impact on demand for and industry operating rates for the
remainder of 2013 for the North American sodium chlorate business;
expectations for MECU pricing through the third quarter of 2013;
expectations for market conditions for the chlor-alkali business and
the impact of capacity expansions thereon; the significance of
expected results from NATO as capital projects are completed; North
American chlor-alkali utilization rates through the third quarter of
2013; expectations for pricing pressure due to higher pulp capacity
and the impact of Brazilian Real to US Dollar exchange rate thereon
in South America; natural gas production for the remainder of 2013
and price expectations for the medium to long term; the impact of oil
price differentials on rail-based oil transportation services in 2013
and beyond; expectations regarding oil prices and drilling activity
levels, 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