Chemtrade Logistics Income Fund : First Quarter MD&A

CHEMTRADE LOGISTICS INCOME FUND

Management's Discussion and Analysis

For the Three Months Ended March 31, 2024

May 15, 2024

2024

MANAGEMENT'S

DISCUSSION

AND ANALYSIS

This MD&A is intended to assist you to understand and assess the trends and significant changes in the results of operations and financial condition of Chemtrade Logistics Income Fund.

This MD&A should be read in conjunction with the unaudited Condensed Consolidated Interim Financial Statements of Chemtrade for the three months ended March 31, 2024, the audited consolidated financial statements of Chemtrade for the year ended December 31, 2023 and the annual MD&A for the year ended December 31, 2023.

Chemtrade's financial statements are prepared in accordance with IFRS. Chemtrade's reporting currency is the CAD. In this MD&A, amounts are presented in thousands of CAD unless otherwise indicated. This MD&A is current as at May 15, 2024 and was approved by the Board on that date.

This MD&A contains certain non-IFRS financial measures and ratios which do not have standard meanings under IFRS. Therefore they may not be comparable to similar measures presented by other issuers. Further information and reconciliations of these measures to the most directly comparable measures under IFRS may be found at Non- IFRS and Other Financial Measures on page 36.

This MD&A also contains statements and information about our expectations about the future. Please refer to the cautionary statement in Caution Regarding Forward - Looking Statements on page 34.

Definitions

MD&A means Management's Discussion & Analysis

Fund means Chemtrade Logistics Income Fund

Chemtrade, we, us and our mean the Fund and its consolidated subsidiaries

IFRS means IFRS Accounting Standards as issued by the IASB

SWC means our Sulphur and Water Chemicals reportable segment

EC means our Electrochemicals reportable segment

More terms and definitions are explained on page 43.

Page | 1

Where to find it

About Chemtrade	2	Contractual Obligations	26
Financial Highlights	4	Financial Outlook	27
Recent Developments	3	Standards and Interpretations	31
Consolidated Operating	6	Disclosure Controls and Procedures and Internal	33
Results	Controls over Financial Reporting
Results of Operations by Reportable	7	Caution Regarding Forward - Looking	34
Segment	Statements
Net Finance Costs and Income	13	Non-IFRS and other Financial Measures	36
Taxes
Distributions	15	Terms and Definitions	43
Cash Flows	17
Liquidity and Capital Resources	19
Financial Condition Review	23
Summary of Quarterly Results	24
Outstanding Securities of the Fund	26

About Chemtrade

We provide industrial chemicals and services to customers in North America and around the world. We report our results in two reportable segments:

Sulphur and Water Chemicals (SWC) and Electrochemicals (EC).

SWC markets, removes and/or produces merchant, Regen and ultra pure sulphuric acid, sodium hydrosulphite, elemental sulphur, hydrogen sulphide, sodium bisulphite, and sulphides, and provides other processing services. SWC also manufactures and markets a variety of inorganic coagulants used in water treatment, including aluminum sulphate, aluminum chlorohydrate, polyaluminum chloride, and ferric sulphate, and sodium nitrite. SWC products are marketed primarily to North American customers.

EC manufactures and markets sodium chlorate and chlor-alkali products including caustic soda, chlorine and HCl, largely for the pulp and paper, oil and gas and water treatment industries. These products are marketed primarily to North American and South American customers.

Page | 2

RECENT DEVELOPMENTS

Classification of the Debentures

Effective January 1, 2024, we have presented the Debentures as current liabilities in the Condensed Consolidated Interim Statements of Financial Position in accordance with amendments to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-current. Since the amendments are applicable retrospectively, we have restated the December 31, 2023 Condensed Consolidated Interim Statements of Financial Position by re-classifying the Debentures from non-current to current liabilities. While these are presented as current liabilities, Debenture holders do not have the right to demand their repayment prior to their maturity date, which for all the outstanding series of Debentures is more than one year in the future. However, the Debenture holders have the right to convert Debentures into units at predetermined prices, thus, the Debentures are classified as current liabilities.

Interest rate swaps

During the first quarter of 2024, we amended the terms of our existing US$175.0 million and US$150.0 million interest rate swaps on our outstanding long-term debt. Effective January 24, 2024, the terms of this swap were extended until December 2026 to align with the maturity date of the long-term debt and the aggregate amount of the swap was reduced to US$175.0 million.

Page | 3

FINANCIAL HIGHLIGHTS

These financial highlights have been presented in accordance with IFRS, except where noted.

		Three months ended
($'000 except per unit amounts)		March 31,		March 31,
	2024		2023
Revenue	$	418,234	$	471,245
Net earnings	$	41,955	$	79,533
Net earnings per unit (1)	$	0.36	$	0.69
Diluted net earnings per unit (1)	$	0.25	$	0.32
Total assets	$	2,169,280	$	2,225,905
Long-term debt	$	322,468	$	327,784
Convertible unsecured subordinated debentures	$	435,035	$	622,926
Adjusted EBITDA (2)	$	109,934	$	131,669
Cash flows from operating activities	$	2,412	$	54,372
Distributable cash after maintenance capital expenditures (2)	$	59,894	$	87,575
Distributable cash after maintenance capital expenditures per unit (1) (2)	$	0.51	$	0.76
Distributions declared	$	19,333	$	17,440
Distributions declared per unit (3)	$	0.165	$	0.15
Distributions paid, net of distributions reinvested	$	17,703	$	14,708

1. Based on weighted average number of units outstanding for the period.
2. See Non-IFRS and Other Financial Measures on page 36.
3. Based on actual number of units outstanding on record date.

Page | 4

FIRST QUARTER 2024 HIGHLIGHTS

• Revenue of $418.2 million, a decrease of $53.0 million or 11.2% year-over-year driven by lower selling prices for caustic soda, merchant acid and Regen acid, and lower selling prices and volumes for sodium nitrite, partially offset by higher selling prices and volumes for water products and higher selling prices for sodium chlorate, HCl and chlorine.
• Adjusted EBITDA of $109.9 million, a decrease of $21.7 million or 16.5% year-over-year reflecting reduced revenues, which more than offset improved margins for several products.
• Net earnings of $42.0 million, a decrease of $37.6 million, mainly due to lower Adjusted EBITDA and higher net finance costs, partially offset by lower income taxes.
• Cash flows from operating activities of $2.4 million, a decrease of $52.0 million or 95.6% year-over-year mainly due to changes in working capital and lower Adjusted EBITDA, partially offset by lower income taxes and lower interest paid.
• Distributable cash after maintenance capital expenditures of $59.9 million, a decrease of $27.7 million or 31.6% year-over-year, reflecting lower cash flows from operating activities.
• We now expect our 2024 Adjusted EBITDA to be at the higher end of the previously announced guidance range of $395.0 - $435.0 million, see Financial Outlook on page 27.
• In January 2024, the monthly distribution rate was increased by 10% to $0.055 per unit or $0.66 per unit per year.
• We intend to implement an NCIB to buy back a portion of our units.

Page | 5

CONSOLIDATED OPERATING RESULTS

Q1 2024 vs Q1 2023

Revenue Consolidated revenue for 2024 was $418.2 million, which was $53.0 million lower than revenue for

2023 primarily due to:

	•	significantly lower selling prices for caustic soda and lower sales volumes of sodium chlorate in the
		EC segment, and
	•	lower volumes of merchant acid mainly due to reduced by-product supply and lower selling prices
		for merchant acid and lower volumes and selling prices of sodium nitrite in the SWC segment,
	partially offset by:
	•	higher selling prices for water solutions products in the SWC segment, and
	•	higher selling prices for sodium chlorate, HCl and chlorine in the EC segment.
Adjusted	Adjusted EBITDA for 2024 was $109.9 million, which was $21.7 million lower than the Adjusted
EBITDA	EBITDA for 2023 primarily due to:
	•	significantly lower selling prices for caustic soda in the EC segment, and
	•	lower gross profit for sodium nitrite and lower volumes for merchant acid in the SWC segment,
	partially offset by:
	•	an improvement in margins for water solutions products and improved margins for Regen acid in
		the SWC segment, and
	•	higher selling prices for sodium chlorate and higher selling prices for HCl and chlorine in the EC
		segment.
Net	Net earnings for 2024 were $37.6 million lower than 2023 primarily due to:
Earnings	• lower Adjusted EBITDA, and
(loss)
	•	higher net finance costs during 2024 (see Net Finance Costs on page 13),
	partially offset by:
	•	lower depreciation and amortization expense, and
	• lower income tax expenses recorded during 2024 (see Income Taxes on page 13).

Page | 6

RESULTS OF OPERATIONS BY REPORTABLE SEGMENT

SULPHUR AND WATER CHEMICALS (SWC)

($'000)		March 31, 2024		March 31, 2023
Revenue	$	230,625	$	262,536
Gross profit		34,421		30,694
Adjusted EBITDA		51,381		55,438

	SWC OPERATING RESULTS
	Q1 2024 vs Q1 2023
Revenue	Revenue for 2024 was $31.9 million lower than revenue for 2023 primarily due to:
	• lower volumes of merchant acid mainly due to reduced by-product supply,
	• lower selling prices of merchant acid, and
	• lower volumes and selling prices of sodium nitrite,
	partially offset by:
	• higher selling prices for water solutions products, and
	• higher volumes of Regen acid.
Adjusted	Adjusted EBITDA for 2024 was $51.4 million, which was $4.1 million lower than Adjusted EBITDA for
EBITDA	2023 primarily due to:
	• lower volumes and selling prices of sodium nitrite, and
	• lower volumes of merchant acid mainly due to reduced by-product supply,
	partially offset by:
	• an improvement in margins for water solutions products, and
	• higher volumes of Regen acid.
	Lower selling prices for merchant acid were offset by reduced costs mainly due to risk shared supply
	contracts, where selling price changes are shared with suppliers.
Gross	Gross profit for 2024 was $34.4 million, which was $3.7 million higher than gross profit for 2023
Profit	primarily due to:
	• lower depreciation and amortization expenses during 2024, and
	• lower loss on disposal and write-down of PPE,
	partially offset by the factors that affected Adjusted EBITDA.

Page | 7

ELECTROCHEMICALS (EC)

($'000)	March 31, 2024		March 31, 2023
North American sales volumes:
Sodium chlorate sales volumes (000's MT)		70		82
Chlor-alkali sales volumes (000's MECU)		43		43
Revenue	$	187,609	$	208,709
Gross profit		63,621		79,161
Adjusted EBITDA		82,495		99,894

EC OPERATING RESULTS

Q1 2024 vs Q1 2023

Revenue Revenue for 2024 was $187.6 million, which was $21.1 million lower than revenue for 2023 primarily due to:

• significantly lower selling prices for caustic soda, and
• lower sales volumes of sodium chlorate,

partially offset by:

• higher selling prices for sodium chlorate, and
• higher selling prices for HCl and chlorine.

MECU netbacks declined by approximately $260. Higher netbacks for HCl and chlorine offset approximately 25% of the decline in caustic soda.

Adjusted Adjusted EBITDA for 2024 was $82.5 million, which was $17.4 million lower than Adjusted EBITDA
EBITDA	for 2023. The decrease in Adjusted EBITDA was primarily due to:
	• significantly lower caustic soda prices, and
	• lower sales volumes of sodium chlorate,
	partially offset by:
	• higher selling prices for sodium chlorate, and
	• higher selling prices for HCl and chlorine.
	Realized MECU netbacks declined by approximately $260. Higher netbacks for HCl and chlorine
	offset approximately 25% of the decline in caustic soda.

Page | 8

	EC OPERATING RESULTS
	Q1 2024 vs Q1 2023
Gross	Gross profit for 2024 was $63.6 million, which was $15.5 million lower than gross profit for 2023. In
Profit	addition to the factors that affected Adjusted EBITDA, gross profit was also affected by:
	• a change in environmental and decommissioning liability, and
	• lower depreciation and amortization.

Page | 9