Chemtrade Logistics Income Fund : First Quarter Financial Statements

CHEMTRADE LOGISTICS INCOME FUND

Condensed Consolidated Interim Financial Statements

Three Months Ended March 31, 2024 and 2023 (Unaudited)

Q1 2024

Where to find it
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME	2
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION	3
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN UNITHOLDERS' EQUITY	4
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS	5
Note 1	CORPORATE INFORMATION	6
Note 2	BASIS OF PREPARATION	6
Note 3	REPORTABLE SEGMENTS	8
Note 4	REVENUE	11
Note 5	SELLING AND ADMINISTRATIVE EXPENSES	11
Note 6	DEPRECIATION AND AMORTIZATION	11
Note 7	NET FINANCE COSTS	12
Note 8	INCOME TAXES	13
Note 9	NET EARNINGS PER UNIT	14
Note 10	CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES	15
Note 11	LONG-TERM DEBT	17
Note 12	UNITS AND OTHER COMPONENTS OF EQUITY	18
Note 13	SHARE- BASED PAYMENTS	19
Note 14	FINANCIAL INSTRUMENTS	21
Note 15	CAPITAL MANAGEMENT	25
Note 16	MATERIAL ACCOUNTING POLICIES	26

CHEMTRADE LOGISTICS INCOME FUND

Condensed Consolidated Interim Statements of Comprehensive Income (In thousands of Canadian dollars, except per unit amounts) (Unaudited)

		Three months ended March 31,
	Notes		2024		2023
Revenue	4	$	418,234	$	471,245
Cost of sales and services	6		(320,192)		(361,390)
Gross profit			98,042		109,855
Selling and administrative expenses	5		(38,191)		(28,497)
Share of loss from joint venture			(10)		(686)
Operating income			59,841		80,672
Net finance (costs) income	7		(5,642)		12,736
Income before income tax			54,199		93,408
Income tax expense	8
Current			(8,999)		(1,630)
Deferred			(3,245)		(12,245)
			(12,244)		(13,875)
Net earnings		$	41,955	$	79,533
Other comprehensive (loss) income
Items that may subsequently be reclassified to
earnings:
Net investment hedge of foreign operations, net of tax of	11,14		(5,504)		(343)
$nil (2023 - net of tax of $49)
Foreign currency translation differences for foreign			18,786		(2,057)
operations, net of tax of $nil (2023 - $nil)
Effective portion of change in the fair value of cash flow			72		(367)
hedges, net of tax of ($24) (2023 - net of tax of $124)
Cash flow hedges reclassified to earnings, net of tax of	7		(1,313)		(1,310)
$441 (2023 - net of tax of $444)
Items that will not be reclassified to earnings:
Defined benefit plan adjustments, net of tax of ($893)			2,778		1,946
(2023 - net of tax of ($331))
Change in fair value of convertible debentures due to own
credit risk, net of tax of ($42) (2023 - net of tax of	10		(4,204)		(14,541)
($1,554))
Other comprehensive income (loss)			10,615		(16,672)
Total comprehensive income		$	52,570	$	62,861
Net earnings per unit	9
Basic net earnings per unit		$	0.36	$	0.69
Diluted net earnings per unit		$	0.25	$	0.32

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CHEMTRADE LOGISTICS INCOME FUND

Condensed Consolidated Interim Statements of Financial Position (In thousands of Canadian dollars)

(Unaudited)

	Notes		March 31, 2024	December 31, 2023 (1)
ASSETS
Current assets
Cash and cash equivalents		$	27,543	$	21,524
Trade and other receivables			166,147		146,686
Inventories			123,734		124,906
Income taxes receivable			6,340		7,925
Prepaid expenses and other assets			10,957		24,981
Total current assets			334,721		326,022
Non-current assets
Property, plant and equipment			984,517		963,813
Right-of-use assets			175,724		165,043
Investment in a joint venture			4,072		4,082
Income taxes receivable	8		62,694		48,381
Other assets			21,920		13,572
Intangible assets			538,743		538,615
Deferred tax assets	8		46,889		49,704
Total non-current assets			1,834,559		1,783,210
Total assets		$	2,169,280	$	2,109,232
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Trade and other payables		$	252,901	$	299,351
Distributions payable	12		6,445		5,884
Provisions			51,194		55,285
Lease liabilities			52,274		49,304
Convertible unsecured subordinated debentures (2)	10,16		435,035		437,517
Total current liabilities			797,849		847,341
Non-current liabilities
Long-term debt	11		322,468		246,545
Other long-term liabilities			12,368		23,228
Long-term lease liabilities			140,957		130,583
Employee benefits			17,813		20,491
Provisions			120,147		118,681
Deferred tax liabilities	8		16,205		15,222
Total non-current liabilities			629,958		554,750
Total liabilities			1,427,807		1,402,091
Unitholders' equity
Units	12		1,649,506		1,648,411
Contributed surplus			9,720		9,720
Deficit			(1,122,523)		(1,147,923)
Accumulated other comprehensive income			204,770		196,933
Total unitholders' equity			741,473		707,141
Total liabilities and unitholders' equity		$	2,169,280	$	2,109,232

1. As restated, see note 2.
2. Maturities ranging from September 2025 to June 2028.

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CHEMTRADE LOGISTICS INCOME FUND

Condensed Consolidated Interim Statements of Changes in Unitholders' Equity (In thousands of Canadian dollars, except per unit amounts)

(Unaudited)

										Unrealized		Change in
											gains on	fair value of
								Cumulative		cash flow		convertible		Total
				Contributed				and net		debentures
	Notes		Units		Deficit	translation	investment	due to credit	unitholders'
			surplus			account*		hedges*		risk*		equity
Balance at January 1, 2024		$	1,648,411	$	9,720	$	(1,147,923)	$	194,447	$	(10,805)	$	13,291	$	707,141
Issuance of units upon
conversion of unsecured
subordinated convertible	10,12		25		-		-		-		-		-		25
debentures
Issuance of units under the
Distribution Reinvestment	12		1,070		-		-		-		-		-		1,070
Plan ("DRIP")
Net earnings			-		-		41,955		-		-		-		41,955
Other comprehensive income			-		-		2,778		18,786		(6,745)		(4,204)		10,615
(loss)
Distributions	12		-		-		(19,333)		-		-		-		(19,333)
Balance at March 31, 2024		$	1,649,506	$	9,720	$	(1,122,523)	$	213,233	$	(17,550)	$	9,087	$	741,473
										Unrealized		Change in
											gains on	fair value of
								Cumulative		cash flow		convertible		Total
				Contributed				and net		debentures
	Notes		Units		Deficit	translation	investment	due to credit	unitholders'
			surplus			account*		hedges*		risk*		equity
Balance at January 1, 2023		$	1,635,683	$	9,720	$	(1,334,524)	$	217,970	$	(4,262)	$	41,620	$	566,207
Issuance of units upon
conversion of unsecured
subordinated convertible	10,12		68		-		-		-		-		-		68
debentures
Issuance of units under the	12		2,717		-		-		-		-		-		2,717
DRIP
Net earnings			-		-		79,533		-		-		-		79,533
Other comprehensive income			-		-		1,946		(2,057)		(2,020)		(14,541)		(16,672)
(loss)
Distributions	12		-		-		(17,440)		-		-		-		(17,440)
Balance at March 31, 2023		$	1,638,468	$	9,720	$	(1,270,485)	$	215,913	$	(6,282)	$	27,079	$	614,413

* Accumulated other comprehensive income.

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CHEMTRADE LOGISTICS INCOME FUND

Condensed Consolidated Interim Statements of Cash Flows (In thousands of Canadian dollars)

(Unaudited)

		Three months ended March 31,
	Notes		2024		2023
Cash flows from operating activities:
Net earnings		$	41,955	$	79,533
Adjustments for:
Depreciation and amortization	6		44,890		52,140
Net loss on disposal and write-down of property, plant and			711		1,787
equipment ("PPE")
Change in environmental and decommissioning liability			(730)		894
Income tax expense	8		12,244		13,875
Net finance costs (income)	7		5,642		(12,736)
Unrealized foreign exchange loss (gain)	5		5,222		(3,824)
			109,934		131,669
Increase in working capital			(78,612)		(45,174)
Interest paid			(10,878)		(12,166)
Interest received			747		2,308
Net income tax paid			(18,779)		(22,265)
Net cash flows from operating activities			2,412		54,372
Cash flows from investing activities:
Capital expenditures			(35,227)		(27,903)
Net cash flows used in investing activities			(35,227)		(27,903)
Cash flows from financing activities:
Distributions to unitholders, net of distributions reinvested	12		(17,703)		(14,708)
Issuance of convertible debentures	10		-		110,000
Transaction costs related to the issuance of convertible	7,10		-		(4,980)
debentures
Repayment of lease liability, net of sub-lease receipts			(14,643)		(14,083)
Net change in revolving credit facility	11		70,683		(42,482)
Net cash flows used in financing activities			38,337		33,747
Increase in cash and cash equivalents			5,522		60,216
Cash and cash equivalents, beginning of			21,524		72,569
the period
Effect of exchange rates on cash held in			497		(70)
foreign currencies
Cash and cash equivalents, end of the period		$	27,543	$	132,715

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CHEMTRADE LOGISTICS INCOME FUND

Notes to Condensed Consolidated Interim Financial Statements (In thousands of Canadian dollars, except per unit amounts) (Unaudited)

Three months ended March 31, 2024 and 2023

_____________________________________________________________________________

1. CORPORATE INFORMATION:
   Chemtrade Logistics Income Fund (the "Fund") is a publicly listed Income Trust formed in Ontario, Canada and its units are listed on the Toronto Stock Exchange ("TSX"). The term "Chemtrade" refers to the Fund, its consolidated subsidiaries and equity accounted investments, including joint ventures. Chemtrade commenced operations on July 18, 2001 when it completed an initial public offering. Chemtrade operates a diversified business providing industrial chemicals and services to customers in North America and around the world. Chemtrade is one of North America's largest suppliers of sulphuric acid, spent acid processing services, inorganic coagulants for water treatment, sodium chlorate, sodium nitrite and sodium hydrosulphite. Chemtrade is a leading regional supplier of sulphur, chlor-alkali products and zinc oxide. Additionally, Chemtrade provides industrial services such as processing by-products and waste streams. Chemtrade operates in two reportable segments: Sulphur and Water Chemicals ("SWC") and Electrochemicals ("EC"). In addition to the above two reportable segments, Chemtrade discloses results of corporate activities separately. For additional information regarding Chemtrade's reportable segments, see note 3.
   Chemtrade is an entity domiciled in Canada. The head office, principal address, and registered and records office of the Fund are located at 155 Gordon Baker Road, Suite 300, Toronto, Ontario, M2H 3N5.
   Chemtrade's Condensed Consolidated Interim Financial Statements include all of its controlled subsidiaries and equity accounted investments and have been prepared on a going concern basis, which contemplates the realization of assets and settlements of liabilities in the normal course of business.
2. BASIS OF PREPARATION:
3. 1. Statement of compliance:

These Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Accounting Standards ("IAS") 34, Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB"), using the same accounting policies and standards as were used for Chemtrade's 2023 annual consolidated financial statements. Certain amendments and interpretations apply for the first time in 2024, but do not have a material impact on these Condensed Consolidated Interim Financial Statements except for amendments to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, see note 16.

These Condensed Consolidated Interim Financial Statements should be read in conjunction with Chemtrade's 2023 annual consolidated financial statements.

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CHEMTRADE LOGISTICS INCOME FUND

Notes to Condensed Consolidated Interim Financial Statements (In thousands of Canadian dollars, except per unit amounts) (Unaudited)

Three months ended March 31, 2024 and 2023

_____________________________________________________________________________

2. BASIS OF PREPARATION (continued):

The Condensed Consolidated Interim Financial Statements were authorized for issue by the Board of Trustees (the "Board") on May 15, 2024.

(b) Basis of measurement:

The Condensed Consolidated Interim Financial Statements have been prepared on the historical cost basis, except for the following material items in the Condensed Consolidated Interim Statements of Financial Position:

1. • Derivative financial instruments, convertible unsecured subordinated debentures (the "Debentures") and liabilities for cash settled share-based payment arrangements are measured at fair value;
   • The defined benefit liability is recognized as the present value of the defined benefit obligation net of the fair value of the plan assets; and
   • Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to temporary differences when they reverse.
2. Presentation currency:

These Condensed Consolidated Interim Financial Statements are presented in thousands of Canadian dollars, except for net earnings per unit information which is presented in Canadian dollars.

1. Amendments to IAS 1, Presentation of Financial Statements

Effective January 1, 2024, Chemtrade has presented the Debentures (as defined in note 10) as current liabilities in the Condensed Consolidated Interim Statements of Financial Position in accordance with the amendments to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-current. Since the amendments are applicable retrospectively, Chemtrade has restated the comparative figures. See note 16 for details of the amendments to IAS 1. The following table outlines the impact of restatements.

As at			January 1, 2023			December 31, 2023
	As reported Restatement		As restated	As reported	Restatement		As restated
Non-current	$	533,218	$	(533,218)		-	$	437,517	$	(437,517)		-
liabilities
Current liabilities		-	$	533,218	$	533,218		-	$	437,517	$	437,517

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CHEMTRADE LOGISTICS INCOME FUND

Notes to Condensed Consolidated Interim Financial Statements (In thousands of Canadian dollars, except per unit amounts) (Unaudited)

Three months ended March 31, 2024 and 2023

_____________________________________________________________________________

3. REPORTABLE SEGMENTS:

Chemtrade operates in two reportable segments: Sulphur and Water Chemicals ("SWC") and Electrochemicals ("EC"). The reportable segments of Chemtrade are strategic business groups that offer products and services to target markets.

Chemtrade's chief operating decision maker ("CODM") is the Chief Executive Officer ("CEO"). The CODM regularly reviews the operations and performance by segment and considers Adjusted EBITDA as an indirect measure of net earnings (loss) for the purpose of assessing performance of each segment and to make decisions about the allocation of resources. Adjusted EBITDA is defined as net earnings before any deduction for net finance costs, income taxes, depreciation, amortization and other non-cash charges such as impairment, change in environmental and decommissioning liability, net gain and losses on the disposal and write-down of PPE, gain on disposal of assets and unrealized foreign exchange gains and losses. Adjusted EBITDA is not intended to be representative of cash flow from operations or financial performance determined in accordance with IFRS or cash available for distribution. The remaining net earnings (loss) items and the Statements of Financial Position are reviewed on a consolidated basis by the CODM and therefore are not included in the segmented information below.

Three months ended March 31, 2024

					Corporate
	SWC		EC		items and	Total
		eliminations
Revenue - third party	$ 230,625	$	187,609	$	- $	418,234
- inter-segment	34		1,600		(1,634)	-
Revenue - total	230,659		189,209		(1,634)	418,234
Cost of sales and services	(196,238)		(125,588)		1,634	(320,192)
Gross profit	34,421		63,621		-	98,042
Selling and administrative expenses	(7,094)		(1,933)		(29,164)	(38,191)
Share of loss from joint venture	(10)		-		-	(10)
Operating income (loss)	27,317		61,688		(29,164)	59,841
Depreciation and amortization	22,490		22,400		-	44,890
Net loss on disposal and write-down of PPE	679		32		-	711
Change in environmental and decommissioning	895		(1,625)		-	(730)
liability
Unrealized foreign exchange loss	-		-		5,222	5,222
Adjusted EBITDA	51,381		82,495		(23,942)	109,934
Capital expenditures	24,690		10,123		414	35,227

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CHEMTRADE LOGISTICS INCOME FUND

Notes to Condensed Consolidated Interim Financial Statements (In thousands of Canadian dollars, except per unit amounts) (Unaudited)

Three months ended March 31, 2024 and 2023

_____________________________________________________________________________

3.	REPORTABLE SEGMENTS (continued):
	Three months ended March 31, 2023
						Corporate
		SWC		EC		items and	Total
			eliminations
	Revenue - third party	$ 262,536	$	208,709	$	- $	471,245
	- inter-segment	56		1,745		(1,801)	-
	Revenue - total	262,592		210,454		(1,801)	471,245
	Cost of sales and services	(231,898)		(131,293)		1,801	(361,390)
	Gross profit	30,694		79,161		-	109,855
	Selling and administrative expenses	(6,354)		(2,304)		(19,839)	(28,497)
	Share of loss from joint venture	(686)		-		-	(686)
	Operating income (loss)	23,654		76,857		(19,839)	80,672
	Depreciation and amortization	29,069		23,071		-	52,140
	Net loss (gain) on disposal and write-down of PPE	1,821		(34)		-	1,787
	Change in environmental and decommissioning	894		-		-	894
	liability
	Unrealized foreign exchange gain	-		-		(3,824)	(3,824)
	Adjusted EBITDA	55,438		99,894		(23,663)	131,669
	Capital expenditures	20,262		7,277		364	27,903

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