Chemtrade Logistics (CHE.UN) AI Stock Analysis

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TSE:CHE.UN Dividends

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Chemtrade Logistics

(TSX:CHE.UN)

66Neutral

Chemtrade Logistics receives a moderate score of 66, driven by strong profitability and efficiency but tempered by challenges in revenue growth and cash flow. While the valuation appears attractive with a low P/E ratio and high dividend yield, technical indicators suggest a bearish trend. The company's resilience is apparent, yet addressing growth and cash flow will be critical for future stability.

Positive Factors

Currency Impact

The stronger USD is beneficial, with each $0.01 USD appreciation adding $3-4M to earnings.

Financial Performance

CHE continues to deliver more robust earnings and appears inexpensive with ample free cash flow to pursue ongoing buybacks and other initiatives.

Pricing Strategy

CHE's earnings are more robust than some investors remember, benefiting from better pricing strategies and fewer unplanned outages.

Negative Factors

Market Weakness

Chlorine is showing weakness, and there is likely some downtick in chlorate due to more closed pulp mills.

Operational Costs

The resolution for the future of the North Vancouver chlor-alkali plant seems likely in 2025, with the base case solution estimated to cost at most $50M.

Chemtrade Logistics (CHE.UN) vs. S&P 500 (SPY)

Market Cap

C$1.09B

Dividend Yield7.15%

Average Volume (3M)277.30K

Price to Earnings (P/E)8.7

Beta (1Y)0.95

Revenue Growth-3.23%

EPS Growth-50.02%

CountryCA

Employees1,474

SectorBasic Materials

Sector Strength58

IndustryChemicals

Share Statistics

EPS (TTM)1.07

Shares Outstanding116,282,135

10 Day Avg. Volume286,959

30 Day Avg. Volume277,299

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.66

Price to Cash Flow (P/CF)2.90

P/FCF Ratio5.10

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$13.00

Price Target Upside39.19% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Chemtrade Logistics Business Overview & Revenue Model

Company DescriptionChemtrade Logistics Income Fund offers industrial chemicals and services in Canada, the United States, and South America. It operates through Sulphur Products & Performance chemicals (SPPC), Water Solutions & Specialty Chemicals (WSSC), and Electrochemicals (EC) segments. The SPPC segment removes and/or produces, and markets merchant, regenerated, and ultra-pure sulphuric acid, sodium hydrosulphite, elemental sulphur, liquid sulphur dioxide, hydrogen sulphide, sodium bisulphite, and sulphides. This segment also offers industrial services, such as processing by-products and waste streams. Its WSSC segment manufactures and markets various inorganic coagulants used in water treatment, including aluminum sulphate, aluminum chlorohydrate, polyaluminum chloride, and ferric sulphate; and a range of specialty chemicals, such as sodium nitrite and phosphorus pentasulphide. The EC segment manufactures and markets sodium chlorate and chlor-alkali products, including caustic soda, chlorine, and hydro-chloric acid for the pulp and paper, oil and gas, and water treatment industries. Chemtrade Logistics Income Fund was founded in 2001 and is headquartered in Toronto, Canada.

How the Company Makes MoneyChemtrade Logistics generates revenue through the manufacturing and distribution of industrial chemicals and services. The company operates through several segments, including Sulphur Products & Performance Chemicals (SPPC), Water Solutions & Specialty Chemicals (WSSC), and Electrochemicals (EC). Revenue streams primarily come from selling chemicals and providing related logistics and services. Chemtrade's financial performance is influenced by factors such as commodity prices, supply and demand dynamics, and long-term contracts with key customers. Significant partnerships with major industrial players ensure a stable demand for its products and services, contributing to consistent earnings.

Chemtrade Logistics Financial Statement Overview

Summary

Chemtrade Logistics has demonstrated strong profitability and operational efficiency, as reflected in its income statement metrics. However, the negative revenue growth and declining free cash flow are potential concerns that could impact future financial stability. The balance sheet remains relatively leveraged, yet manageable, with a satisfactory equity ratio.

Income Statement

Positive

Chemtrade Logistics has shown significant improvement in profitability metrics over recent years. The gross profit margin for 2024 was approximately 24.1%, while the net profit margin was around 7.1%, both indicating solid profitability. However, the revenue growth rate was negative at -3.2% compared to 2023, suggesting a contraction in sales. EBIT and EBITDA margins stood at 13.6% and 23.4%, respectively, reflecting efficient operational performance.

Balance Sheet

Positive

The company's balance sheet shows a moderate debt-to-equity ratio of 1.10, indicating reliance on debt but within an acceptable range for the industry. The return on equity (ROE) was 15.5%, suggesting good profitability relative to shareholder equity. The equity ratio was 35.8%, showing a stable capital structure, though there is room for improvement in reducing leverage.

Cash Flow

Positive

Cash flow analysis reveals a decline in free cash flow growth of -30.7% from 2023 to 2024, indicating a potential area of concern. The operating cash flow to net income ratio was strong at 2.74, implying robust cash generation relative to net income. The free cash flow to net income ratio was 1.28, reflecting efficient cash conversion.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.79B	1.85B	1.81B	1.37B	1.38B
	Gross Profit
430.55M	420.65M	353.90M	-3.85M	33.73M
	EBIT
243.39M	315.38M	219.15M	-142.69M	-131.14M
	EBITDA
417.42M	562.33M	445.83M	92.91M	119.51M
	Net Income Common Stockholders
126.91M	249.32M	109.11M	-235.21M	-167.48M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
25.50M	21.52M	72.57M	13.91M	12.51M
	Total Assets
2.28B	2.11B	2.16B	2.05B	2.50B
	Total Debt
899.26M	863.95M	1.04B	1.19B	1.38B
	Net Debt
873.76M	842.42M	970.32M	1.18B	1.37B
	Total Liabilities
1.47B	1.40B	1.59B	1.67B	1.89B
	Stockholders Equity
818.36M	707.14M	566.21M	379.85M	605.82M
Cash Flow		Free Cash Flow
162.00M	235.07M	253.75M	132.90M	184.87M
	Operating Cash Flow
347.80M	401.46M	369.19M	219.04M	261.95M
	Investing Cash Flow
-185.80M	-118.46M	-108.88M	96.53M	-74.79M
	Financing Cash Flow
-159.30M	-333.53M	-203.00M	-314.12M	-187.86M

Chemtrade Logistics Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price9.34

Price Trends

50DMA

9.60

Negative

100DMA

10.10

Negative

200DMA

10.05

Negative

Market Momentum

MACD

-0.10

Negative

RSI

50.61

Neutral

STOCH

75.49

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CHE.UN, the sentiment is Neutral. The current price of 9.34 is below the 20-day moving average (MA) of 9.36, below the 50-day MA of 9.60, and below the 200-day MA of 10.05, indicating a neutral trend. The MACD of -0.10 indicates Negative momentum. The RSI at 50.61 is Neutral, neither overbought nor oversold. The STOCH value of 75.49 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:CHE.UN.

Chemtrade Logistics Peers Comparison

Overall Rating

UnderperformOutperform

Sector (49)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ALA	76 Outperform	$11.82B	20.37	7.32%	3.03%	-4.65%	-14.19%
NPI	75 Outperform	$4.84B	17.98	6.48%	6.36%	5.08%	―
FTS	73 Outperform	$33.93B	20.86	7.47%	3.54%	-0.08%	4.76%
ENB	73 Outperform	C$137.53B	26.95	8.63%	5.81%	24.95%	-17.19%
CHE.UN	66 Neutral	C$1.09B	8.72	16.64%	7.15%	-3.23%	-50.02%
SPB	64 Neutral	C$1.57B	73.50	-3.83%	6.67%	-2.75%	-165.76%
Sector *	49 Neutral	$1.92B	-1.52	-22.04%	3.84%	0.67%	-27.41%

* Basic Materials Sector Average

Performance Comparison

TSE:CHE.UN

Chemtrade Logistics

9.44

1.43

17.85%

TSE:FTS

Fortis

67.06

15.45

29.94%

TSE:NPI

Northland Power

18.68

-0.82

-4.19%

TSE:ALA

AltaGas

39.75

10.59

36.30%

TSE:ENB

Enbridge

63.30

16.89

36.38%

TSE:SPB

Superior Plus

6.75

-2.02

-23.03%

Chemtrade Logistics Earnings Call Summary

Earnings Call Date: Feb 28, 2025 | % Change Since: -3.91% | Next Earnings Date: May 12, 2025

Earnings Call Sentiment Positive

Chemtrade demonstrated resilience in Q3 2024 with strong financial performance and strategic growth initiatives, despite facing challenges such as rail work stoppage impacts and segment-specific declines. The outlook remains positive with continued investments in high-growth areas.

Highlights

Solid Financial Performance

Chemtrade delivered a strong third quarter with EBITDA increased by 1.9% year-over-year, despite challenging comparisons due to record results in Q3 2023.

SWC Segment Growth

The water solutions business within the SWC segment showed year-over-year improvement driven by higher selling prices, contributing to increased margins.

Successful Mitigation of Rail Work Stoppage Impact

Chemtrade successfully minimized the financial impact of a significant rail work stoppage, limiting the effect on EBITDA to $5.8 million.

Strong Cash Flow and Balance Sheet

Chemtrade's cash flow generation remains robust, supporting a healthy balance sheet with a net debt to LTM EBITDA ratio of 1.8x and over USD 600 million of available liquidity.

Capital Allocation and Growth Investments

Continued investment in growth with about $19 million of growth CapEx in Q3, focusing on long-term unitholder value through growth initiatives and unit buybacks.

Positive Outlook for 2025

Anticipated continued strong performance in key segments, notably in Water Chemicals, and ongoing strategic investments in growth areas like ultrapure acid and water chemicals.

Lowlights

Decline in SWC Segment EBITDA

EBITDA for the SWC segment declined by $3.5 million or 4.3% year-over-year, impacted by lower revenue and margins in the regen business.

Challenges in Sodium Chlorate Business

The sodium chlorate business faced reduced volumes due to production curtailments by a major customer, leading to manufacturing consolidation.

Impact of Rail Work Stoppage

The quarter was affected by a work stoppage at Canada's two largest railways, impacting EBITDA by $5.8 million.

Weakness in Brazil

Revenue in Brazil declined year-over-year, attributed to customer production changes.

Company Guidance

During Chemtrade Logistics Income Fund's Q3 2024 earnings call, key guidance metrics were discussed. The company adjusted its 2024 EBITDA guidance to be between $445 million and $460 million, despite challenges like a work stoppage at Canada's two largest railways. This adjustment marks 2024 as potentially the second-highest EBITDA year in the company's history, following 2023. The company maintained a strong balance sheet with a net debt to LTM EBITDA ratio of 1.8x and over USD 600 million in available liquidity. In their Sulphur and Water Chemicals segment, revenue increased by $1.4 million or 0.5% year-over-year, while EBITDA declined by $3.5 million or 4.3%. Their Electrochemicals segment saw a 5.4% increase in EBITDA, excluding the rail work stoppage impact. Additionally, corporate costs lowered by $1.7 million or 6.6% year-over-year. The updated guidance implies a payout ratio of 40%, underscoring the sustainability of their attractive monthly distribution.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.