Canexus Income Fund

Canexus Income Fund

December 06, 2007 17:04 ET

Canexus Announces Distribution Change and Updates Brandon and North Vancouver Projects

CALGARY, ALBERTA--(Marketwire - Dec. 6, 2007) - Canexus Income Fund (TSX:CUS.UN) (the "Fund") today announced that its Board of Directors has approved a change in the monthly distribution to unitholders. Beginning with the period December 1, 2007, to December 31, 2007, the monthly cash distribution has been set at $0.0456 per unit. The distribution will be paid on January 15, 2008, to unitholders of record as at December 31, 2007.

"Although it is disappointing to announce a reduction in distributions, this is a prudent step given the pressure the strong Canadian dollar has put on our business. We believe this revised distribution level is sustainable while we continue making investments in our business that reduce costs, improve our overall competitiveness, further capitalize on our strengths and create long-term value for unitholders," said Gary Kubera, President and CEO. "Our Brandon plant expansion project which will start commissioning on January 7, 2008, is a direct example of this. Brandon is the lowest-cost sodium chlorate plant in North America and the largest in the world. With the completed expansion, which increases capacity at the plant by 12 per cent, more than 75 per cent of our North American sodium chlorate production will benefit from this low-cost structure."

At the revised level of distributions, we anticipate a payout ratio for 2008 of 80 to 85 per cent based on a CAD/US exchange rate of US$1.00 and the board-approved annual operating plan for 2008. Any remaining excess distributable cash may be used to invest in accretive capital investment opportunities, to reduce debt levels or to increase cash distributions.

Since the Fund's initial public offering in August 2005, it has paid a regular, consistent distribution. Over this same time period the Canadian dollar has increased from US$0.81 to a high of US$1.10 and has recently been around par with the US dollar. The strengthening of the Canadian dollar from US$0.81 to US$1.00 reduces distributable cash by approximately $30 million annually before considering our ability to increase prices to US-dollar customers as a result of North American sodium chlorate supply/demand dynamics. Our payout ratio for the nine months ended September 30, 2007, was 116 per cent (120 per cent when normalized for the timing of maintenance capital expenditures) and we estimate a payout ratio of 122 per cent for the full year. Although we are continuing to see higher prices from US-dollar customers, we are unable to increase prices as rapidly as the Canadian dollar has strengthened. As a result, it is not prudent to maintain distributions at the past level, especially in light of the accretive investment projects we are currently investing in and others, such as our North Vancouver technology conversion project, which are on the horizon.

The Fund also advises that the technology conversion project for the North Vancouver chlor-alkali facility continues to progress. An announcement is expected on the project in mid-to-late January 2008, and if approved, the announcement will also discuss financing commitments.

About Canexus

Canexus produces sodium chlorate and chlor-alkali products largely for the pulp and paper and water treatment industries. Canexus' five plants in Canada and one plant in Brazil are reliable, low-cost, strategically located facilities that capitalize on competitive electricity costs and transportation infrastructure to minimize production and delivery costs. Canexus targets opportunities to maximize unitholder returns and delivers high-quality products to its customers. Canexus is listed on the Toronto Stock Exchange under the symbol CUS.UN. More information about Canexus is available at

Contact Information

  • Canexus Limited
    Gary Kubera
    President and CEO
    (403) 571-7300
    Canexus Limited
    Richard McLellan
    (403) 571-7300