Chemtrade Logistics Income 6 50 Convertible Unsecured Subordinated Debentures T.CHE.DB.E

CIBC comments

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CHE.UN – 2023 Guidance Raised Again; Arizona Ultrapure JV Greenfield Project Put On Hold

•Given increased visibility into H1/23, CHE.UN now expects 2023 adj. EBITDA guidance to “exceed $450MM” vs. “at or above $431MM” previously (consensus $441MM). Management noted that the revised guidance does consider recent declines in the Northeast Asia benchmark price. Barring caustic (which we expect to be 10%-15% of EBITDA), clearly the rest of the business is performing very well (chlorate, HCl, sulphur products, water chemicals, etc.).

• CHE.UN is putting the proposed KPCT JV ultrapure sulphuric acid greenfield project on hold while revised commercial agreements are negotiated, and now expects aggregate capital costs to be US$300MM-$US380MM, ~50% higher than the original estimate. Meanwhile, the Cairo Ohio ultrapure acid expansion project remains on time and on budget. While the project hold/delay will likely push out some organic growth beyond 2025 (previously anticipated start-up of the Arizona facility), we view this to be a prudent move that will help safeguard CHE.UN’s dividend / balance sheet, particularly if we see a deep recession ahead.