This company continues to operate as an income trust, building on its strong niche in the removal and conversion of industrial chemicals. Chemtrade Logistics Income Fund has made two major acquisitions in recent years, the most recent in 2017.
While acquisitions add risk, this company has a good record of integrating new additions. Its latest acquisition is already adding to revenues and helping the trust sustain its distribution, which yields 6.4%.
CHEMTRADE LOGISTICS INCOME FUND (Toronto symbol CHE.UN; www.chemtradelogistics.com) is one of the largest removal-service providers for resource firms that create acids and sulphur as byproducts. The trust converts (and sells) these substances into useful chemicals such as sulphuric acid. Many of its removal contracts are with oil refineries and base-metal processors.
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In the quarter ended June 30, 2017, Chemtrade’s revenue jumped 55.4%, to $407.4 million from $262.1 million a year earlier. The gain came mostly from its acquisition of Canexus, which was partly offset by lower sulphuric acid prices. Cash flow per share rose 14.9%, to $0.77 from $0.67.
Chemtrade completed its $900 million takeover of Canexus in March 2017. The business produces and sells sodium chlorate and chlor-alkali products to the pulp and paper, water treatment, and oil and gas industries. The acquisition is Chemtrade’s biggest since it bought General Chemical in January 2014 for $941.5 million.
Value Stocks: Monthly distribution has a high yield of 6.4%
Following the Canexus acquisition, Chemtrade reconfigured its business segments and introduced a new Electrochemicals segment to add to its Sulphur Products & Performance Chemicals and Water Solutions & Specialty Chemicals segments. .
Recently Chemtrade ended its European involvement with the sale of its wholly owned subsidiary Chemtrade Aglobis AG. Chemtrade and Mitsui & Co completed a transaction in which Mitsui acquired the entire stake in Aglobis. As a result of the transaction Chemtrade has exited the international market and will no longer distribute sulphur and sulfuric acid in Europe.
However, Chemtrade has made two major acquisitions in recent years, and growth by acquisition adds risk. But the trust has successfully integrated General Chemical, and Canexus also seems to be a good fit for Chemtrade’s current operations. The trust’s debt is high, but it generates steady cash flow that can be applied to that debt. As well, Chemtrade’s monthly distribution of $0.10 a unit looks safe. It also makes for a high 6.4% yield.
For years I have appreciated Pat McKeough’s stock picking and educational commentary. I sometimes wonder, when recommending figures to others, and I feel I should know more about TSI’s fate if an accident or disease were to deprive us (prematurely) of Pat’s help. Would appreciate comment on TSI’s contingency planning.
Thanks for your inquiry. Pat’s in great health, and very busy managing both our businesses. When the time comes he may want to step down or work less frequently than he is now, but right now, he’s focused on continuing to build the team.
That team includes a well-trained and long-time staff of researchers/portfolio managers with MBAs and CFAs etc. that are very well versed in the TSI philosophy and dedication to clients.
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For years I have appreciated Pat McKeough’s stock picking and educational commentary. I sometimes wonder, when recommending figures to others, and I feel I should know more about TSI’s fate if an accident or disease were to deprive us (prematurely) of Pat’s help. Would appreciate comment on TSI’s contingency planning.
Thanks for your inquiry. Pat’s in great health, and very busy managing both our businesses. When the time comes he may want to step down or work less frequently than he is now, but right now, he’s focused on continuing to build the team.
That team includes a well-trained and long-time staff of researchers/portfolio managers with MBAs and CFAs etc. that are very well versed in the TSI philosophy and dedication to clients.