Investor Presentation | April 2015
DrivingAssets
Growth
Solid
Delivering
Returns
Great Potential
TSX: CUS; CUS.DB.A; CUS.DB.B; CUS.DB.C; CUS.DB.D
North America Sodium Chlorate
Unrivaled Advantage at Brandon
Relative Electricity Price Index
Low-Cost Advantage
 Brandon is the largest facility in the world
• Significant economies of scale
Winnipeg, MB
St. John’s, NL
Montréal, QC
Chicago, IL
Atlanta. GA
Vancouver, BC
Seattle, WA
Miami, FL
Portland, OR
Regina, SK
Ottawa, ON
Houston, TX
Moncton, NB
Nashville, TN
Detroit, MI
Charlottetown, PE
San Francisco, CA
Halifax, NS
Toronto, ON
Boston, MA
New York, NY
Edmonton, AB
Calgary, AB
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 Located in low-cost electricity jurisdiction
• Manitoba is the lowest cost electricity jurisdiction in North America
• Electricity ~70-80% of variable costs
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150
200
250
300
350
 Believe we can deliver at the lowest-cost to >50% of NA pulp producers
End-Use Markets
 Pulp & Paper Industry
• Bleaching of chemical pulp used in tissue, packaging and printing and writing papers
2
Source Canexus, Hydro-Quebec
North America Chlor-Alkali
Positioned for Growth
Competitive Advantages
•
Low-cost regional supplier – cash costs
& logistical advantages
•
Region is net importer of caustic soda
(about 300,000 MT/year)
•
Well positioned for growth in hydrochloric acid
Growth Opportunities
•
Significant hydrochloric acid capacity
• Recently increased capacity almost 120% to
370,000 WMT/year
• Long-term demand growth from oil and gas
industry
• Netbacks significantly higher when converting
low-value chlorine into hydrochloric acid
• Western Canada market focus with ~45% market
share
3
Brazil
Stable & Sustainable Cash Flow
Our Business Advantage
•
Stable and sustainable cash flow
•
27-year supply contract (est. 1999)
•
Option to extend 10 years
•
Fixed USD margin per tonne of product
Principal Customer
•
Fibria Celulose S.A., world’s largest
Eucalyptus pulp producer
•
Canexus’ plant is strategically located
•
Aracruz pulp mill is among the lowest
cost in the world
Products and Facilities
•
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Two facilities (same site)
• Sodium Chlorate (66,000 mt/yr)
• Chlor-Alkali (46,000 MECU/yr)
NATO
Well Positioned Operation
Business Advantages
•
First unit train operation in Alberta
•
Railroad serviced by both CN and CP
•
High demand for transport options in Western
Canada
•
Fee-for-service/take-or-pay contracts lower
risk
•
Long-term and multi-year agreements improve
stability
•
Manifest operation with ability to build unit
trains given significant rail car storage
Growth Opportunities
•
480-acre site with multiple growth opportunities
• Storage caverns
• Diluent recovery unit
• Condensate
Sales Process Update
5
•
Currently in negotiations for the sale of NATO
2015 Outlook
Strong Start to the Year
Sodium Chlorate
• Solid sodium chlorate prices
• Devaluation of the Canadian dollar relative to the US dollar
is a net benefit
• Brandon plant expected to produce a record of 316,000
MT’s in 2015
• Industry operating rates are expected to remain in the low
90% range in 2015
Chlor-alkali
• Caustic soda prices moderated entering 2015 showing
some improvement in March
• Chlorine netbacks have shown recent improvement
• We expect to see a decrease in hydrochloric acid demand
and pricing due to slow-down of activity in the oil and gas
sector in Q2
Brazil
• Remains stable cash flow producer
NATO
• 1.0-1.5 additional unit train volumes contracted
commencing in Q3 2015
• Lower unit train nominations for Q2 2015 pursuing spot
contract opportunities
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Cash Operating Profit
January/February
~$19 million
Our Approach
Stabilize
“To succeed, a company must have a clear and focused strategic
plan accompanied by flawless execution.”
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2
3
Stabilize
Strategize
Energize
Optimize performance at
NATO
Develop a clear focus
& direction for the
company
Execute the plan; build a
culture of performance &
success
NATO Update:
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•
During the last quarter of 2014 we made significant operational progress at
NATO
•
The site has proven it can consistently load unit trains in 17 hours or less
•
At currently contracted levels (5.5 trains/week commencing in Q3 2015) we
should break even (at full nominations)
•
Exploring options to increase unit train volumes and have reduced cost
structure
Our Approach
Develop a Plan
“To succeed, a company must have a clear and focused strategic
plan accompanied by flawless execution.”
1
2
3
Stabilize
Strategize
Energize
Optimize performance at
NATO
Develop a clear focus
& direction for the
company
Execute the plan; build a
culture of performance &
success
Develop a Plan to:
1. Create Portfolio Alignment
2. Increase Financial Flexibility
3. Optimize Performance
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1. Creating Portfolio Alignment
NATO Divestment Update
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•
NATO was identified as an asset that did not align with our portfolio or our core competencies,
as a result a sale process was initiated
•
The disposition process began in Q3 2014, with strong initial interest shown from oil and gas
producers, midstream players, refiners and financial sponsors
•
In Q4 2014, oil prices decreased dramatically causing the industry to curtail capital spending
due to uncertainty; this has affected both the number of interested parties and indications of
value for the asset
•
Discussions are ongoing, but no definitive agreement has been reached
•
Near-term objective is to optimize NATO operations and contract additional volumes
•
The plan remains to sell NATO and return to a pure-play chemical company
2. Increasing Financial Flexibility
Dividend Reduction & Potential NACA Divestment
1. Dividend Amendment
•
•
In order to maintain capital management flexibility, the
Board has reduced the dividend to $0.01/share per
quarter
Results in Canexus incrementally retaining $67M of
cash annually to reduce debt and fund committed
capital expenditures
2. Potential Divestiture
•
•
•
•
•
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Along with the NATO process, Canexus continues to
evaluate all alternatives to best position the business
for success going forward
North Vancouver sale process initiated
Engaged financial advisor
Bids have been received and are being evaluated
No assurance that a transaction, if pursued, will be
completed
Total Debt Ratio Target
3.5 x Cash Flow
2. Increasing Financial Flexibility
Covenant Relaxation
Debt Maturity Profile
$500
CAD$ millions
$400
$300
$200
$100
$0
2015
2016
2017
2018
Bank Facility (Note 1)
2019
2020
2021
Converts
Bank Facility Financial Covenants
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Q4/14
Q1/15
Q2/15
Q3/15
Q4/15
Senior Debt to EBITDA(2)
5.0
5.0
5.25
4.5
4.5
Total Debt to EBITDA(2)
5.0
5.0
5.25
4.5
4.5
Note 1: $337 million drawn December 31, 2014 of $500 million capacity
Note 2: Bank financial covenants exclude convertible debentures
3. Optimizing Performance
Business Improvement Program
•
The Business Improvement Program (“BIP”) is a plan
to reenergize our company
•
The program extends across all areas and all
operations from the head office to the plants and is led
by a group of senior executives
•
The goal of the program is to ensure the long-term
sustainability of the organization by implementing near
and long-term improvements in business process and
structure to generate sustainable returns
•
The BIP will focus on increased cash flow and improve
balance sheet values through:
•
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•
Volume & Margin Improvement
•
Operating Efficiencies
•
SG&A Reduction
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Working Capital Reduction
•
Capital Management
Over time the Business Improvement Program will
transition into a continuous improvement program
Business Improvement Program
Objective
Key optimization opportunities deliver cash operating profit, liquidity and margin
improvement
Balance Sheet Optimization
Operational Efficiencies &
Effectiveness
2015 Cash Operating Profit Improvement: $10-15M
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Revenue
Improvements
Volume & Margin Improvement
$3-5M
In Progress
Operating Efficiencies
$2-4M
In Progress
SG&A Reduction
$5-6M
In Progress
Cost Improvements
Liquidity Improvement
Working Capital
Reduction
Inventory, A/R, A/P
2015: $10M
In Progress
Capital Management
Maintenance Capital Target
$25M
3-year AVE
In Progress
Business Improvement Program
Key Initiatives
Operating Efficiencies & Effectiveness
Volume & Margin Improvements
Working Capital Reduction
• Increasing chemical spot sales
• Reorganizing plant workflow processes
• Optimizing plant operations to reduce input
usage cost
• Optimizing logistics to lower freight and
distribution costs
• Reducing inventory levels
• Accelerating collection of accounts receivables
and extending payment terms
Operating Efficiencies
• $25M ongoing maintenance capital average
over three years focussing on safety and
reliability
• Reviewing expenses, controlling and cutting
costs
• Reviewing and renegotiating support contracts
• Streamlining processes and rationalization
• Automation improvements
SG&A Reduction
• Right-sizing the organization
• Reducing and optimizing hours
• Reviewing contractor positions
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Balance Sheet Optimization
Capital Management
Moving Forward
Execute
“To succeed, a company must have a clear and focused strategic
plan accompanied by flawless execution.”
1
2
3
Stabilize
Strategize
Energize
Optimize performance at
NATO
Develop a clear focus
& direction for the
company
Execute the plan; build a
culture of performance &
success
2015
• Primary focus will be resetting our foundation for growth through operational
optimization and debt reduction from lower dividend and asset sales
2016
• Return to being a pure-play chemicals company with a focus on operational excellence
• Pursue organic and acquisition opportunities
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2016 and Beyond
Core Competencies
In 2016, we expect to realize the full impact of the Business Improvement Program and will have
the financial flexibility to “return to our roots” and leverage our core competencies to grow
Electrochemical
Chemical
Production
Experience with
Pulp & Paper,
Oil & Gas, Water
Treatment
Chemical
Pure Play
Large-Scale
Plant Operations
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Responsible
Care® and the
Handling of
Dangerous Goods
Capital Allocation
A Disciplined Approach
Allocation of funds will balance ongoing business operations, future growth and shareholder
returns
2015 – 2016
Sustainment Capital
• Maintain safe, reliable, efficient
operations
• Targeting $25M as a go forward
run-rate average over the next 3
years
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2017 and Beyond
Growth Investment
• Organic Growth
• Brandon expansion
• Brazil greenfield
• Chemical acquisitions
• Strategic fit
• Leverage core competencies
• Flawless integration and
maximum synergy attraction
• Accretive
Creating Shareholder Value
Value Proposition
As Canexus initiates a period of resetting and
transition, value creation is being restored
Increase Financial Flexibility
• Asset Divestitures
• Dividend Reduction
• Business Improvement Program
2015
2017
Long-term Chemical Growth
• Organic Growth
• Acquisitions
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Forward-looking Statements
This presentation contains forward-looking statements and information relating to expected future events relating to
Canexus and its subsidiaries, including with respect to: timing of commencement and completion of tie-in activities
and the commissioning and start-up of pipeline system and expected ramp up of contracted capacity; expectations
regarding the ability to unlock shareholder value, strengthen Canexus’ balance sheet and develop a clear strategy
and vision; expectations for the impact of regulatory changes on railroad service levels; the ability to assess
expected operation performance of the unit train terminal; new and anticipated changes to the regulatory
environment for crude-by-rail and the impact thereof on operations of the unit train terminal; North American sodium
chlorate and Brazil business unit performance; operating rates for the North American sodium chlorate business;
expectations for sodium chlorate, caustic soda, hydrochloric acid and chlorine pricing; and expectations for market
conditions for the chlor-alkali business. The use of the words "expects", “anticipates", "continue", "estimates",
"projects", "should", "believe", "plans", "intends", "may", "will" or similar expressions are intended to identify forwardlooking 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 presentation 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.
All dollar amounts are in Canadian dollars, except as otherwise noted
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Trading Symbol
Share Price (April 10, 2015)
Shares Outstanding (Q4 2014 Basic)
20
CUS: TSX
$1.56
184 million
Market Capitalization
$287 million
Annual Dividend
$0.04/share
Current Yield
2.5%
TSX: CUS; CUS.DB.A; CUS.DB.B; CUS.DB.C; CUS.DB.D