CALGARY, AB --(Marketwired - March 12, 2015) - Canexus Corporation (TSX: CUS) (TSX: CUS.DB.A) (TSX: CUS.DB.B) (TSX: CUS.DB.C) (TSX: CUS.DB.D) (the "Corporation" or "Canexus") today announced its financial results for the fourth quarter and year ended December 31, 2014.

Highlights:

  • Cash Operating Profit ("COP") was $89.0 million for the year ended December 31, 2014 ($101.5 million for the year ended December 31, 2013). Our 2014 results reflect lower realized netback prices and higher costs in the North American Sodium Chlorate business; record performance in Brazil; a cash operating loss at our North American Terminal Operations ("NATO") due to the closure of the unit train operation for 3 months for construction followed by re-commissioning of the expanded facility, as well as, lower manifest transload volumes in the second half of 2014; and higher costs for severance and inventory write-downs. COP was $20.7 million for the three months ended December 31, 2014 (Q3/14 - $16.9 million; Q4/13 - $24.6 million). COP for the fourth quarter was negatively affected by $1.8 million of materials and supplies inventory write-downs and $1.6 million of severance.
  • The Board of Directors declared a quarterly dividend of $0.01 per common share payable April 15, 2015 to shareholders of record on March 31, 2015. This significant reduction in the quarterly dividend from the previous level of $0.10 per common share will result in the Corporation retaining an incremental $67 million annually to reduce debt and fund committed capital expenditures. Other initiatives to reduce debt and enhance liquidity include the Business Improvement Program and the potential sale of NATO or other assets, both of these initiatives are discussed further below.
  • Canexus is initiating a Business Improvement Program ("BIP") across the entire organization. This program is expected to deliver ongoing benefits from cost reduction and improved plant uptime of $10 million to $15 million annually. The full benefit is expected to be realized in 2016 and future years. Additionally, we expect to lower our investment in normalized working capital by not less than $10 million and to contain maintenance capital spending in future years to not more than $25 million (running average over a three year period) while improving operating reliability and manufacturing conversion efficiency. Executive compensation will be held at 2014 levels and cash retainers to Board members have been reduced by 10%.
  • Canexus continues to hold discussions with several interested North American parties regarding the potential sale of NATO. The recent turmoil in oil markets has affected both the number of interested parties and indications of value for this asset. We continue to see interest expressed in certain of our chemicals assets and in January, we engaged a financial advisor to explore the potential sale of our North American chlor-alkali business at North Vancouver. There is no assurance that a transaction for either or both of these assets, if pursued, will be concluded.
  • Canexus recorded $295 million of non-cash impairment charges in the fourth quarter. Impairment charges were recorded on the NATO manifest transloading facility of $145 million as well as the NATO unit train facility of $58 million, primarily related to lower than expected operating profit and higher construction costs (final expected cost of the unit train facility is approximately $356 million, consistent with previous estimates). The remaining net book value of our NATO facilities at year end was approximately $310 million. Impairment charges were also recorded on our North American Chlor-alkali ("NACA") facility at North Vancouver of $77 million due to prolonged lower netback pricing for chlorine and caustic soda, and expectations for reduced demand and pricing for hydrochloric acid ("HCl") due to lower oil and gas industry drilling activity. The remaining net book value of our NACA facility was approximately $292 million at year end. Finally, we impaired an energy efficiency project at our Nanaimo sodium chlorate plant ($6 million) and calcium chloride technology licenses and associated capitalized costs ($9.2 million) in the fourth quarter.
  • Canexus' North American sodium chlorate business posted solid performance in the fourth quarter. COP was $13.8 million (Q3/14 - $14.5 million; Q4/13 - $14.4 million) after absorbing $1.3 million of materials and supplies inventory write-downs. A full-year production record of approximately 308,000 Metric Tonnes ("MT") was set at our industry-leading, low-cost Brandon plant in 2014 and production is expected to increase to approximately 316,000 MT's in 2015. The Corporation continues to analyze de-bottleneck opportunities at Brandon for future expansions. North American sodium chlorate industry operating rates are expected to remain in the low 90% range in 2015, assuming no capacity rationalization. This business unit is currently benefitting from the devaluation of the Canadian dollar relative to the US dollar, with approximately two-thirds of our sales volumes exported to the US.
  • Canexus' North American chlor-alkali business generated $7.4 million in COP for the quarter (Q3/14 - $4.5 million; Q4/13 - $5.7 million) including a $2 million final contract settlement relating to an obligation to purchase HCl. Full-year results benefitted by $5 million from this settlement. Production volumes continued to be affected by the premature degradation of anode coatings in some of the electrolytic cells as well as the planned maintenance shutdown that carried into October. The plant is currently operating at approximately 82% of practical capacity and we expect to return to full operating rates by mid-2015. Caustic soda prices moderated somewhat entering 2015, however NE Asia spot prices are showing some improvement in March which should be positive for Canexus. HCl demand from the oil and gas industry continued to be relatively strong in January, however the dramatic drop in drilling activity started to affect both demand and pricing in February, making future predictions for HCl demand from this end use segment extremely challenging. Non-oil and gas end use market demand for HCl is stable. Chlorine netbacks have shown recent improvement and our railcar fleet has some additional capacity to increase chlorine shipments depending on demand.
  • Canexus' Brazil operations generated record COP of $26.1 million in 2014. Brazil's operations continue to be highly stable with our primary customer running at high rates resulting in strong demand for our products which are sold under a long-term fixed US dollar margin contract. 
  • At the NATO unit train facility, construction to further increase loading capacity and connect this facility to the Cold Lake pipeline system began in mid-June 2014 and was completed in mid-September. With the re-commissioning and start-up of the expanded facility completed, the Corporation resumed operations in September. Since then, Canexus has experienced significant improvements in unit train loading times and is now consistently loading unit trains in 17 hours or less. We recently loaded a unit train in under 16 hours (consistent performance at this level could allow Canexus to achieve planned activity levels of 10.5 unit trains per week) and believe loading times can be further reduced without additional capital spending. In conjunction with the BIP initiative, we are actively looking to reduce our cost structure and are exploring options to increase unit train activity levels. At the currently contracted level commencing Q3/15 of 5.5 unit trains per week (assuming full nominations), this facility should break even or be slightly positive from a COP perspective. Nominations for Q2/15 are lower than expected and Canexus is currently pursuing spot contract opportunities for Q2/15. We have loaded 4 unit trains on a spot basis so far in the first quarter and have contracted one additional spot unit train in March.
  • Canexus' NATO manifest (truck-to-rail) operations continue to be disappointing from a volume throughput basis. We continue to see operating rates for dilbit and crude oil ("DBCO") transloading at about one-third of our capacity of 30,000 bbls/day. Steps are underway to reduce our costs to be more aligned with activity levels. The significant railcar storage capabilities associated with the manifest facility provide a unique opportunity for Canexus' manifest customers to capture unit train shipment economics. During the fourth quarter, the manifest operation loaded and assembled 7 unit trains for customers and is scheduled to load and assemble 11 unit trains in Q1/15.

"I am disappointed not to be in a position today to announce the sale of our NATO business unit," commented Doug Wonnacott, President and CEO. "Energy market conditions have challenged a number of parties who have expressed interest in this asset. Given the environment, the Board of Directors decided to take the prudent step to significantly reduce the dividend in order to preserve cash. A disposition of NATO, or our North American Chlor-alkali business, will stabilize the Corporation by providing funds to de-lever the balance sheet, however the success and timing is uncertain. Meanwhile, there are other self-help initiatives in addition to reducing the dividend that are being undertaken with the BIP initiative. Canexus is 100% committed to achieving the BIP targets and I am confident that our strategy to reduce debt, improve business performance and build upon our impressive portfolio of chemical assets, is the right way to move Canexus forward."

Distributable Cash
Three Months Ended
December 31 		Year Ended
December 31
CAD thousands, except as noted 2014 2013 2014 2013
Cash Operating Profit 20,681 24,597 89,033 101,537
Interest Expense (6,191 ) (3,292 ) (20,043 ) (12,250 )
Realized Foreign Currency Translation Losses (1,022 ) (136 ) (11,506 ) (2,642 )
Maintenance Capital Expenditures (9,203 ) (8,440 ) (23,130 ) (25,817 )
Provision for Current Income Taxes (42 ) (669 ) (3,143 ) (3,903 )
Cumulative Pension Funding (in Excess of) Lower than Cumulative Pension Expense 726 (438 ) (215 ) (2,342 )
Cash Settled Share-based Compensation (202 ) - (259 ) -
Severance Costs 1,237 - 2,206 (274 )
Other (915 ) 62 (1,945 ) (238 )
Distributable Cash 5,069 11,684 30,998 54,071
Distributable Cash Per Share $0.03 $0.08 $0.17 $0.38
Dividends Declared Per Share $0.1000 $0.1368 $0.4368 $0.5472
Cash Payout Ratio (Net of DRIP Participation) 280% 139% 197% 120%
Payout Ratio 364% 179% 257% 150%

Below is a reconciliation of net cash generated from operating activities to Distributable Cash of the Corporation for the three months and years ended December 31, 2014 and 2013.

Three Months Ended
December 31 		Year Ended
December 31
CAD thousands 2014 2013 2014 2013
Net Cash Generated from Operating Activities (11,985 ) 11,942 12,644 77,221
Change in Non-Cash Operating Working Capital 19,332 5,675 35,915 240
Non-Cash Change in Income Taxes Payable and Interest Payable 5,657 2,553 3,984 1,860
Interest Income 199 67 417 526
Maintenance Capital Expenditures (9,203 ) (8,440 ) (23,130 ) (25,817 )
Severance Costs 1,237 - 2,206 (274 )
Operating Non-Cash Items (168 ) (113 ) (1,038 ) 315
Distributable Cash 5,069 11,684 30,998 54,071

Segmented Information for the Three Months and Years Ended
December 31, 2014 and 2013

Canexus has a total of six electrochemical manufacturing plants -- four in Canada and two at one site in Brazil -- organized into three business units. Canexus also provides fee-for-service hydrocarbon transloading at its NATO terminal in Bruderheim, Alberta as a separate business unit. Below is our fourth quarter and full year performance by segment.

North America
Three Months Ended
December 31, 2014 		Sodium
Chlorate 		Chlor-
alkali 		South
America
 NATO
 Other
 Total
Sales Revenue
Total Segment 60,195 52,977 21,371 8,810 - 143,353
Inter-Segment (1)(2) 93 - - 584 - 677
Total Sales Revenue from External Customers 60,102 52,977 21,371 8,226 142,676
Cost of Sales 38,232 32,977 18,374 15,975 5 105,563
Distribution, Selling and Marketing
Total Segment 8,466 15,574 172 1,258 663 26,133
Inter-Segment (1)(2) - 677 - - - 677
Total External Distribution, Selling and Marketing 8,466 14,897 172 1,258 663 25,456
General and Administrative 3,023 3,686 1,069 144 3,593 11,515
Operating Profit (Loss) 10,381 1,417 1,756 (9,151 ) (4,261 ) 142
Add:
Depreciation and Amortization 3,371 6,009 4,224 6,053 304 19,961
Share-based Compensation Expense - - - - 578 578
Cash Operating Profit (Loss) 13,752 7,426 5,980 (3,098 ) (3,379 ) 20,681
Cash Operating Profit (Loss) Percentage 23% 14% 28% (38% ) 14%
North America
Three Months Ended
December 31, 2013 		Sodium
Chlorate 		Chlor-alkali South
America 		NATO
Other
Total
Sales Revenue
Total Segment 60,076 51,432 22,817 6,675 - 141,000
Inter-Segment (1)(2) 608 - - 581 - 1,189
Total Sales Revenue from External Customers 59,468 51,432 22,817 6,094 - 139,811
Cost of Sales 37,078 31,248 19,220 4,975 (883 ) 91,638
Distribution, Selling and Marketing
Total Segment 8,163 17,435 146 1,672 705 28,121
Inter-Segment (1)(2) - 664 - - - 664
Total External Distribution, Selling and Marketing 8,163 16,771 146 1,672 705 27,457
General and Administrative 3,052 3,723 1,033 145 2,475 10,428
Operating Profit (Loss) 11,175 (310 ) 2,418 (698 ) (2,297 ) 10,288
Add:
Depreciation and Amortization 3,272 5,962 2,647 904 287 13,072
Share-based Compensation Expense - - - - 1,237 1,237
Cash Operating Profit (Loss) 14,447 5,652 5,065 206 (773 ) 24,597
Cash Operating Profit Percentage 24% 11% 22% 3% 18%
See footnotes.
North America
Year Ended
December 31, 2014 		Sodium Chlorate Chlor-alkali South America NATO Other Total
Sales Revenue
Total Segment 233,427 212,749 93,087 34,189 - 573,452
Inter-Segment (1)(2) 349 - - 2,230 - 2,579
Total Sales Revenue from External Customers 233,078 212,749 93,087 31,959 - 570,873
Cost of Sales 144,990 132,107 73,639 47,757 137 398,630
Distribution, Selling and Marketing
Total Segment 33,688 65,923 871 5,868 2,544 108,894
Inter-Segment (1)(2) - 2,579 - - - 2,579
Total External Distribution, Selling and Marketing 33,688 63,344 871 5,868 2,544 106,315
General and Administrative 11,913 14,531 3,695 567 12,638 43,344
Operating Profit (Loss) 42,487 2,767 14,882 (22,233 ) (15,319 ) 22,584
Add:
Depreciation and Amortization 13,082 24,220 11,174 15,923 1,148 65,547
Share-based Compensation Expense - - - - 902 902
Cash Operating Profit (Loss) 55,569 26,987 26,056 (6,310 ) (13,269 ) 89,033
Cash Operating Profit (Loss) Percentage 24% 13% 28% (20% ) 16%
North America
Year Ended
December 31, 2013 		Sodium Chlorate Chlor-alkali South America NATO Other Total
Sales Revenue
Total Segment 233,155 202,766 97,034 23,664 - 556,619
Inter-Segment (1)(2) 1,318 - - 2,340 - 3,658
Total Sales Revenue from External Customers 231,837 202,766 97,034 21,324 - 552,961
Cost of Sales 140,321 122,801 79,394 19,293 (639 ) 361,170
Distribution, Selling and Marketing
Total Segment 31,363 66,014 708 5,504 2,933 106,522
Inter-Segment (1)(2) - 2,681 - - - 2,681
Total External Distribution, Selling and Marketing 31,363 63,333 708 5,504 2,933 103,841
General and Administrative 11,421 13,931 4,093 543 9,092 39,080
Operating Profit (Loss) 48,732 2,701 12,839 (4,016 ) (11,386 ) 48,870
Add:
Depreciation and Amortization 13,102 23,000 8,305 4,422 978 49,807
Share-based Compensation Expense - - - - 2,860 2,860
Cash Operating Profit (Loss) 61,834 25,701 21,144 406 (7,548 ) 101,537
Cash Operating Profit Percentage 27% 13% 22% 2% 18%
Notes:
(1) The North America Sodium Chlorate operating segment (i) sells sodium chlorate at market rates to the South America operating segment and (ii) provides transloading services at market rates to the NACA operating segment for caustic soda transloaded from barges into trucks for delivery to NACA customers that are eliminated for financial reporting purposes.
(2) NATO charges transloading fees (approximating market rates charged by third party terminals) to the NACA operating segment for hydrochloric acid and caustic soda transloaded from railcars into trucks for delivery to NACA customers that are eliminated for financial reporting purposes.

Highlights for each business unit are as follows:

  • North America Sodium Chlorate:
    • Year Ended December 31, 2014 versus 2013: Sales revenue for the North America sodium chlorate segment increased 1% to $233.1 million for the year ended December 31, 2014 from $231.8 million for the year ended December 31, 2013 as a result of a 1% increase in sales volumes more than offsetting lower realized prices. COP percentage decreased to 24% from 27% primarily as a result of higher electricity rates and fixed costs which more than offset higher production volumes and lower salt costs at our low-cost Brandon facility, lower natural gas consumption and lower purchased product costs. Fixed costs were higher due to a $1.3 million write-down of materials and supplies inventory in Q4.
    • Q4 2014 versus Q3 2014: Sales revenue for the North America sodium chlorate segment decreased slightly to $60.1 million for Q4 2014 as compared to $60.3 million for Q3 2014 primarily as a result of lower sales volumes (2%) being largely offset by higher realized prices (2%). COP percentage decreased from 24% to 23% primarily as a result of slightly higher salt and fixed costs, partially offset by higher production volumes. Fixed costs were higher due to a $1.3 million write-down of materials and supplies inventory in Q4.
    • Q4 2014 versus Q4 2013: Sales revenue for the North America sodium chlorate segment increased 1% to $60.1 million for Q4 2014 as compared to $59.5 million for Q4 2013 as a result of higher sales volumes (1%). COP percentage decreased from 24% to 23% as a result of higher electricity rates and fixed costs more than offsetting lower salt costs and slightly higher production volumes. Fixed costs were higher due to the inventory write-down noted in the preceding paragraph.
  • North America Chlor-alkali:
    • Year Ended December 31, 2014 versus 2013: Sales revenue for the North America chlor-alkali segment increased 5% to $212.7 million for the year ended December 31, 2014 from $202.8 million for the year ended December 31, 2013. Sales revenue and COP in 2014 were positively impacted by the settlement of a contractual obligation for HCl which contributed $5 million. Sales revenue benefitted from higher HCl sales volumes (38%) partially offset by lower HCl realized prices (4%) and lower chlorine sales volumes (32%) and realized prices (8%). COP percentage remained consistent at 13% as higher electricity rates, purchased product costs, natural gas consumption, fixed costs and lower Metric Electrochemical Units ("MECU") production volumes (7%) were offset by the contract settlement previously noted. Fixed costs increased as a result of a longer planned maintenance shutdown in 2014 as compared to 2013. Lower MECU production volumes were a result of the premature degradation of anode coatings in some of the electrolytic cells.
    • Q4 2014 versus Q3 2014: Sales revenue for the North America chlor-alkali segment decreased 2% to $53 million for Q4 2014 as compared to $54 million for Q3 2014. Reducing Q4 sales revenues were lower HCl (12%), chlorine (22%) and caustic soda (8%) sales volumes, partially offset by higher HCI (22%) and chlorine (6%) realized prices and a $2 million final settlement of a contractual obligation for HCl. COP percentage increased from 8% to 14% as a result of higher MECU realized netback prices (7%), the HCl settlement noted above and lower salt and fixed costs more than offsetting lower MECU production volumes (5%) and higher purchased product costs. MECU production volumes were lower as a result of the premature degradation of anode coatings in some of the electrolytic cells.
    • Q4 2014 versus Q4 2013: Sales revenue for the North America chlor-alkali segment increased 3% to $53 million for Q4 2014 from $51.4 million for Q4 2013. This increase was due to higher HCl and caustic soda realized prices (48% and 4%, respectively) and a $2 million final settlement of a contractual obligation for HCl, partially offset by lower chlorine (43%), HCl (2%) and caustic soda (9%) sales volumes. COP percentage increased from 11% to 14% as a result of higher MECU realized netback prices (20%), the HCl contract settlement noted above and lower salt costs more than offsetting lower MECU production volumes (21%) and higher fixed and purchased product costs. While MECU production volumes were lower as a result of the premature degradation of anode coatings in some of the electrolytic cells, the negative impact on revenues and COP was minimized as a greater proportion of chlorine produced was converted into higher margin HCl.
  • South America:
    • Year Ended December 31, 2014 versus 2013: Sales revenue for the South America segment decreased 4% to $93.1 million for the year ended December 31, 2014 from $97 million for the year ended December 31, 2013. The decrease in sales revenue was primarily due to lower sodium chlorate sales volumes (4%) and lower sodium chlorate (7%) and caustic soda (4%) realized prices, partially offset by higher sodium hypochlorite (17%), caustic soda (2%) and HCl (3%) sales volumes and higher sodium hypochlorite realized prices (8%). Lower electricity costs resulted in lower sodium chlorate and caustic soda realized prices due to the pass through nature of our fixed US dollar margin contract with our major customer. COP percentage increased to 28% from 22% as a result of higher MECU and sodium chlorate production volumes, lower fixed costs and lower general and administrative expense, partially offset by higher salt costs. COP also benefitted from the weaker Canadian dollar in 2014 as most of this business unit's revenue is generated under the fixed US dollar margin contract noted above.
    • Q4 2014 versus Q3 2014: Sales revenue for the South America segment decreased 11% to $21.4 million for Q4 2014 from $24 million for Q3 2014. The decrease in sales revenue was primarily due to lower sodium chlorate sales volumes (2%) and lower sodium chlorate (12%) and caustic soda (5%) realized prices, partially offset by higher caustic soda sales volumes (2%). Cash Operating Profit Percentage increased to 28% from 20% as a result of higher MECU production volumes (9%) and lower purchased product and fixed costs more than offsetting lower sodium chlorate production volumes (3%).
    • Q4 2014 versus Q4 2013: Sales revenue for the South America segment decreased 6% to $21.4 million for Q4 2014 from $22.8 million for Q4 2013. The decrease in sales revenue was primarily due to lower sodium chlorate sales volumes (3%) and lower sodium chlorate and caustic soda realized prices (14% and 7%, respectively), partially offset by higher sodium hypochlorite (14%) and caustic soda (5%) sales volumes and higher sodium hypochlorite realized prices (15%). COP percentage increased to 28% from 22% as a result of higher MECU (5%) and sodium chlorate (24%) production volumes and a favourable foreign exchange impact resulting from the weakening of both the Brazilian Real and the Canadian dollar as compared to the US dollar, partially offset by higher fixed costs. 
  • North American Terminal Operations:
    • Year Ended December 31, 2014 versus 2013: Cash Operating Loss for the year ended December 31, 2014 was $4.1 million, as compared to COP of $2.7 million for the year ended December 31, 2013 (inclusive of transloading services for inter-segment chlor-alkali products of $2.2 million and $2.3 million, respectively). External sales revenue increased 50% for 2014, as compared to 2013, primarily as a result of the commencement of unit train operations in mid-December 2013 but was negatively impacted by the planned construction shutdown (mid-June to mid-September) to increase unit train loading capacity and connect the facility to the Cold Lake pipeline system. Cash cost of sales (cost of sales before depreciation and amortization) comprise employee costs, pipeline fixed fees and other costs of operating the Bruderheim Terminal. The increase in cash cost of sales ($17 million) for the year ended December 31, 2014, as compared to the year ended December 31, 2013, was primarily due to the commencement of unit train operations noted above and the completion of the pipeline lateral off the Cold Lake pipeline system from Beaverhill Station to Lamont Station at the beginning of July; at which time, Canexus became responsible for pipeline fixed fee and other costs associated with the connection.
    • Q4 2014 versus Q3 2014: Cash Operating Loss for Q4 2014 was $2.5 million as compared to $4.6 million for Q3 2014 (inclusive of transloading services for inter-segment chlor-alkali products of $0.6 million and $0.5 million, respectively). External sales revenue increased 41% due to the recommencement of unit train operations in mid-September following the planned construction shutdown (started in mid-June) to further increase loading capacity and connect the facility to the Cold Lake pipeline system. The increase in cash cost of sales ($0.6 million) was primarily due to increased operating costs related to unit train loading activity following the construction shutdown; 31 unit trains were loaded in Q4 as compared to 3 in Q3.
    • Q4 2014 versus Q4 2013: Cash Operating Loss for Q4 2014 was $2.5 million as compared to COP of $0.8 million for Q4 2013 (inclusive of transloading services for inter-segment chlor-alkali products of $0.6 million in each three month period). The increase in external sales revenue of 35% was primarily due to the commencement of unit train operations in mid-December 2013. The increase in cash cost of sales was primarily the result of the commencement of unit train operations and the completion of the pipeline lateral off the Cold Lake pipeline system as discussed above.

General Market Fundamentals

North America Sodium Chlorate: Market estimates suggest that 2014 global pulp demand increased by 2% from 2013 with most of the growth in demand driven by hardwood species which experienced 3.2% higher demand than 2013. China continued to fuel global pulp demand growth with a 4% increase over 2013, while North American demand experienced a modest decrease for the same period of 0.4%. Combined producer inventory levels have remained flat for the past 3 months at 34 days. Softwood inventory in December was at 31 days, whereas hardwood inventory was at 36 days. Combined inventory levels are expected to increase over the next quarter due to reduced planned downtime by producers in most northern countries, coupled with seasonally weaker demand for paper products.

For Q4 2014, North American demand for sodium chlorate was stable, and is expected to increase modestly in 2015 as an idle pulp mill is restarted. 2015 North American sodium chlorate exports are within expectations, and will most likely mirror past year's volumes. North American sodium chlorate industry operating rates during 2014 were stable in the low 90% range, and are expected to remain at these levels for Q1 2015.

North America Chlor-alkali: The North American chlor-alkali industry operated at 80% of capacity in Q4 2014 compared to 86% in Q3 2014. Consistent with historical results, chlorine demand decreased in Q4 2014 due to lower consumption from the vinyls segment and seasonal factors in the water treatment segment.

HCl supply was constrained in Q4 2014 due to production issues at several burner producers and a major by-product site. HCl demand remained strong due to drilling and hydraulic fracturing activity in the oil and gas industry and the market experienced periods of short supply during Q4 2014. See the Oil & Gas general market fundamentals section below.

Caustic soda production in North America decreased 6% in Q4 2014, mirroring the decrease in chlorine industry operating rates compared to Q3 2014. In Western Canada, a decline in regional production was offset by increases in Asian imports. Demand in the region remains strong, supported by high operating rates in the pulp and paper sector.

MECU value held flat in Q4 2014 with a modest chlorine increase offsetting erosion in caustic soda pricing. Looking ahead to Q1 2015, MECU prices are expected to remain stable with potential pressure later in the quarter due to the economic impact of significantly lower oil prices.

South America: Brazilian pulp production and exports in 2014 were 8.8% and 12.6% higher, respectively, than 2013 due to a more balanced market place which saw Brazilian pulp producers experience a price increase in the fourth quarter.

Canexus Brazil experienced slightly lower than expected sodium chlorate demand from its major customer in Q4 2014 but exceeded the anticipated demand for the year.

The Brazilian chlor-alkali industry 2014 capacity utilization rate was 83.7%, 0.8% higher than the previous year. Canexus Brazil's chlor-alkali capacity utilization rate was 95.6% for the same period.

Oil & Gas: During the Q4 2014, oil prices began a downward trend, reaching a yearly low of US$53.27/bbl on December 31, 2014. The differential between Western Canadian Select ("WCS") and West Texas Intermediate ("WTI") also weakened, averaging US$14.24/bbl in Q4 2014 as compared to US$20.18/bbl in Q3 2014. The decrease in oil prices and differentials negatively impacted the demand for crude by rail volumes, however this was partially offset by delays related to pipeline capacity improvements and expansion projects.

As a result of lower oil prices, 2015 capital budgets in the oil and gas industry have been reduced significantly resulting in reduced drilling activity and growth projects in the oil sands but this is not expected to negatively impact production rates. Limited pipeline capacity and strong production rates forecasted for oil sands operations in 2015 will help mitigate the negative impact caused by low oil prices and differentials, however, we do expect some impact on our existing NATO crude by rail transload contracts which do include partial take or pay provisions. In 2015, demand for hydrochloric acid from the drilling and hydraulic fracturing segment is expected to decrease but will not have a significant impact on activity at NATO as hydrochloric acid transloading is not a significant source of revenue for NATO.

Financial Updates

  • Long-term Debt and Finance Income (Expense):
    • Canexus has US dollar borrowings and a substantial portion of our revenues are denominated in or referenced to the US dollar. During Q4/14, we recorded an unrealized currency translation loss of $8.8 million on long-term debt as a result of the weakening of the Canadian dollar at the end of the quarter compared to the end of Q3/14 (Q4/13 - $8.1 million unrealized loss). These amounts are included in finance income (expense).
    • Interest expense in the quarter was $6.2 million (Q4/13 - $3.3 million). Interest capitalized on major projects was $0.6 million in Q4/14 (Q4/13 - $2.2 million).
  • Other Income (Expense):
    • In Q4/14, mark-to-market fair value losses of $0.4 million (Q4/13 - $0.2 million) and realized losses of $0.2 million (Q4/13 - $nil) were recorded on average rate range forward contracts.
    • In Q4/14, we recorded mark-to-market fair value losses on a cross currency swap of $0.3 million as a result of the weakening of the Canadian dollar at the end of the quarter compared to the end of Q3/14 (Q4/13 - $0.4 million losses) and realized losses of $0.1 million (Q4/13 - $0.1 million). In Q3/11, we entered into a cross currency swap to effect the payment of interest in US dollars on the Series IV Convertible Debentures issued on June 30, 2011.
  • General and Administrative: General and administrative expenses were higher for Q4/14 as compared to Q4/13 primarily as a result of severance costs.
  • Capital Expenditures: Capital expenditures in Q4/14 were $17 million, of which $2.6 million was spent on expansion projects, $9.2 million on maintenance projects and $5.2 million on continuous improvement projects. Expansion capital was primarily spent on the NATO unit train project and continuous improvement capital on the caustic modernization project underway at our North Vancouver chlor-alkali facility.
  • Provision for (Recovery of) Income Taxes: A recovery of income taxes was recognized in Q4/14 as compared to an expense in Q4/13 due to the recognition of impairment charges in Q4/14. As of December 31, 2014, the Corporation had approximately $874 million of future tax deductions which can be used to shelter future taxable income in Canada.
  • Liquidity: At December 31, 2014, total borrowings under committed credit facilities were $337 million with remaining available undrawn capacity of approximately $116 million. Cash on hand at December 31, 2014 was $3.3 million. Remaining available undrawn capacity will be lower at the end of Q1/15 with the reduction in the senior debt-to-EBITDA covenant from 5.0 to 4.5.
Operating Results for the Three Months and Years Ended December 31, 2014 and 2013
Three Months Ended
December 31 		Year Ended
December 31
CAD thousands 2014 2013 2014 2013
Sales Revenue 142,676 139,811 570,873 552,961
Cost of Sales (1) 105,563 91,638 398,630 361,170
Gross Profit 37,113 48,173 172,243 191,791
Distribution, Selling and Marketing 25,456 27,457 106,315 103,841
General and Administrative (2) 11,515 10,428 43,344 39,080
Operating Profit 142 10,288 22,584 48,870
Finance Expense (11,949 ) (8,977 ) (51,153 ) (30,146 )
Other Income (Expense) (2,151 ) (91 ) (2,478 ) 1,712
Impairment (295,191 ) - (295,191 ) -
Income (Loss) Before Income Taxes (309,149 ) 1,220 (326,238 ) 20,436
Provision for (Recovery of) Income Taxes
Current 42 669 3,143 3,903
Deferred (78,774 ) 895 (79,933 ) 4,358
(78,732 ) 1,564 (76,790 ) 8,261
Net Income (Loss) (230,417 ) (344 ) (249,448 ) 12,175
Notes:
(1) Depreciation and Amortization included in the three months and year ended December 31, 2014 - $19.6 million and $64.3 million, respectively;
Depreciation and Amortization included for the three months and year ended December 31, 2013 - $12.8 million and $48.8 million, respectively.
(2) Depreciation and Amortization included for the three months and year ended December 31, 2014 - $0.3 million and $1.2 million, respectively;
Depreciation and Amortization included for the three months and year ended December 31, 2013 - $0.4 million and $1.1 million, respectively.

Financial Statements, Conference Call and Webcast

Financial Statements and Management's Discussion and Analysis ("MD&A") will be posted on the Canexus website at www.canexus.ca and filed on SEDAR. Management will host a conference call and webcast at 7 am MT (9 am ET) on March 13, 2015, to discuss the financial and operating results of the Corporation. A presentation will be available on our website to facilitate the conference call.

Please call 1-888-818-4097 or 1-800-2787-2090 outside of Canada and the USA. The conference call will also be accessible via webcast at www.canexus.ca.

A replay of the conference call will be available until end of day ET on March 20, 2015. To access the replay call 1-800-408-3053 or 1-800-3366-3052, outside of Canada and the USA, followed by passcode 2221841#.

Non-GAAP Measures

Cash operating profit, cash operating profit percentage, payout ratio, cash payout ratio and distributable cash are financial measures not determined in accordance with generally accepted accounting principles for publicly accountable enterprises in Canada ("GAAP"), but management believes they are useful in measuring the Corporation's performance. Readers are cautioned that these measures should not be construed as alternatives to net income or loss or other comparable measures determined in accordance with GAAP as an indicator of the Corporation's performance or as a measure of the Corporation's liquidity and cash flow. The Corporation's method of calculating non-GAAP measures may differ from the methods used by other issuers and accordingly, the Corporation's non-GAAP measures are unlikely to be comparable to similarly titled measures used by other issuers. Readers should consult the Corporation's MD&A for the year ended December 31, 2014 filed on SEDAR for a complete explanation of how the Corporation calculates each such non-GAAP measure.

Forward-Looking Statements

This news release contains forward-looking statements and information relating to expected future events relating to Canexus and its subsidiaries, including with respect to: the magnitude of retained funds and the purposes to which they will be applied as a result of the decrease in dividends; the potential sale of NATO and other assets; the success of initiatives to reduce debt and enhance liquidity; the success of BIP in reducing costs and improving plant uptime and the magnitude and timing thereof, including at the NATO unit train facility; expectations for reduced investment in normalized working capital and containing maintenance capital spending and the magnitude thereof; improvements to operating reliability and manufacturing conversion efficiency; reduced demand and pricing for HCl and impact thereof; production increases at Brandon; North American sodium chlorate industry operating rates and demand; North American Chlor-alkali and MECU prices in Q1 2015 and thereafter; caustic soda prices in 2015; loading time improvements at NATO unit train facility; nominations by NATO customers for unit trains and the use of spot contracts to offset lower nominations; COP from NATO unit train activities and the timing thereof; cost reduction at NATO manifest operations; inventory levels of pulp; and the impact of low oil prices and WTI/WCS differentials on the NATO transloading business. The use of the words "expects", "anticipates", "continue", "estimates", "projects", "should", "believe", "plans", "intends", "may", "will" or similar expressions are intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements for a variety of reasons, including market and general economic conditions, future costs, treatment under governmental regulatory, tax and environmental regimes and the other risks and uncertainties detailed under "Risk Factors" in the Corporation's Annual Information Form filed on the Corporation's SEDAR profile at www.sedar.com. Management believes the expectations reflected in these forward-looking statements are currently reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Due to the potential impact of these factors, the Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law. Any financial outlook information contained in this news release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on Management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this news release should not be used for purposes other than those for which it is disclosed herein.

About Canexus

Canexus produces sodium chlorate and chlor-alkali products largely for the pulp and paper and water treatment industries. Our four plants in Canada and two at one site 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 also provides fee-for-service hydrocarbon transloading services to the oil and gas industry from its terminal at Bruderheim, Alberta. Canexus targets opportunities to maximize shareholder returns and delivers high-quality products to its customers and is committed to Responsible Care® through safe operating practices. Canexus' common shares (CUS) and debentures (Series III - CUS.DB.A; Series IV - CUS.DB.B; Series V - CUS.DB.C; Series VI - CUS.DB.D) trade on the Toronto Stock Exchange.www.canexus.ca.

distributed by