Canexus is on it's own (at least for now)
On August 11,2016 Canexus released it's first quarterly report since the so-called merger;the merger with Superior Plus (another chemical producer) that never took place.The write-up on the merger was in Workathon.blogger.com.click here for details of merger.The merger was valued at $316 million and Superior Plus would have to issue new shares (this blog estimated 27 million shares) and this would dilute earnings.Because of the synergies created it is possible that this would only be a temporary setback.But the Federal Trade Commisssion (FTC) stopped the merger because it would have put upwards pressure on the price of chemicals used to bleach pulp and paper.Superior Plus did not try to rectify the problem nor ask for a extension.So the merger has finished.
Quarterly Data
Canexus reported cash operating profit (COP) of $22 million;this included $1 million for termination of the merger.The results reflect a strong performance from it's sodium chlorate business and it's South America business.Canexus adds that it plans to reduce it's debt by $100 million by 2018 and also to have cost reductions that will add $6 to $8 million annually and allow for compounded growth over the next 3 years of 5% per year.Also it expects maintenance capital spending of $25 million per year over the next 3 years.Canexus offered it's guidance of $100 to $110 million COP for 2016 excluding $6 million of merger termination costs.
Other Highlights
Quarterly Data
Canexus reported cash operating profit (COP) of $22 million;this included $1 million for termination of the merger.The results reflect a strong performance from it's sodium chlorate business and it's South America business.Canexus adds that it plans to reduce it's debt by $100 million by 2018 and also to have cost reductions that will add $6 to $8 million annually and allow for compounded growth over the next 3 years of 5% per year.Also it expects maintenance capital spending of $25 million per year over the next 3 years.Canexus offered it's guidance of $100 to $110 million COP for 2016 excluding $6 million of merger termination costs.
Other Highlights
Canexus has received approval for new financing which gives it more flexibility; it has commitments for $425 million including $350 million of a revolving credit facility and a $75 million bridge loan.And it is ramping up it's chlor-alkali plant in north Vancouver.Furthermore it has taken a further charge on it's discontinued oil transhipment operation.
Conclusion
Industrial chemicals is a competitive business and is a slow growth industry.Demand for sodium chlorate and hydrochloric acid and chlor alkali is slowly growing.So some kind of "combination" or merger may be inevitable in the long run.Canexus' growth may be higher than most other competitiors because of it's south American business.The problem facing both Canexus and Superior Plus is finding a new product and a new market.That aside Canexus will probably have higher growth as a independent producer.Especially with it's new financing and debt reduction plans.Nevertheless this blog expects Canexus to stay in it's present price range with a peak price of $1.50 to $1.60.
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