TSX:CHE.DB.E - Post by User
Comment by
incomedreamer11on Jun 21, 2021 9:37am
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Post# 33419464
RE:Scotia comments
RE:Scotia comments2021 EC – North Van will operate at a higher level than 2020 due to turnaround completion and improved HCl demand. Sodium chlorate demand should be higher y/y but below pre-pandemic levels due to WFH that has reduced paper demand and, by extension, bleached pulp production. 190K MECU; 365K mt of chlorate.
2021 SPPC – Ultra-pure volume will be lower than 2020 due to the loss of a major end-use customer; merchant acid should be similar to 2020.
2021 WSSC – 2021 demand should be similar to 2020 and largely unaffected by COVID-19, but higher raws will pressure margins.
Maintenance capex is ~$80M to $90M on a run-rate basis.
Growth capex is minimal given the company’s high leverage during a downturn in the cycle. At $0.60 per unit, annual distributions are $56M. Any/all remaining capital will almost certainly be allocated to deleveraging. Capital Allocation
In 2021, we expect CHE.un to generate $117M ($1.27/sh) of distributable cash, falling to $73M ($0.79/sh) in 2022. Changes to working capital is largely why we see a major swing.
DCPU of $1.27 and $0.79 in 2021 and 2022, respectively, should be sufficient to fund a $0.60 distribution annually
Leverage stands at 5.2x. We do not believe this will decline below 4.0x without a radical improvement to the caustic soda market. CHE.un has had to refinance debt to avoid default, with growing concern that continued refinancing will lead to a perpetually increasing interest expense. Further refinancing would likely need to be at higher rates than the existing 4% to 6%.