Chemtrade Logistics Income Fund (TSE:CHE.UN) used its fourth-quarter 2025 question-and-answer session to address investor concerns around margin pressure in its Sulphur and Water Chemicals (SWC) segment, the outlook for caustic soda pricing, and the timing of maintenance and growth initiatives expected to shape 2026 results.
SWC margin pressure tied to raw material inflation and contract mechanics
Management said margin percentage performance in SWC during 2025 was affected by sharp input-cost inflation—particularly higher sulphur—combined with the way pricing resets in the segment’s water chemicals business.
The company emphasized that the water chemicals business largely operates on fixed annual pricing set through bid processes with municipalities across North America. When raw material costs rise, Chemtrade may absorb the impact initially, with the benefit of lower costs also flowing through when inputs decline.
Management added that contracts “roll in and out every month,” and when sulphur rises sharply—as it did over the prior six months—it can take time for pricing to catch up, creating short-term margin pressure. By contrast, the Merchant Acid business was described as more responsive to sulphur-driven cost changes and capable of implementing price increases more quickly.
New segment reporting for water chemicals coming in Q1 disclosure
Analysts asked for additional detail after the company indicated it would break out water chemicals into a separate segment going forward. Management confirmed that the new segment will be carved entirely out of SWC and that no portion will be taken from the company’s Electrochemicals (EC) segment.
However, the company said it is not yet ready to provide a revenue, EBITDA, or margin breakout for the new segment. Management indicated that beginning with the first-quarter 2026 report—expected to be released in May—Chemtrade will provide the same line items investors currently receive for reporting segments.
2026 seasonality and turnaround impacts, including North Vancouver in Q2
On cadence for the year, management reiterated that the second and third quarters tend to be the strongest periods, while the first and fourth quarters are typically the weakest. That said, executives flagged 2026 as a “North Vancouver turnaround year,” with the turnaround occurring in the second quarter and expected to have a negative cost impact in that period.
Management also said quarter-to-quarter performance will depend in part on commodity pricing—particularly sulphur and caustic soda—suggesting that typical seasonal patterns can be influenced by market conditions in any given quarter.
Corporate cost framework and outlook
Management said it views corporate costs in two categories: program expenses and long-term incentives, with the latter fluctuating based on unit performance. The company noted that unit appreciation in 2025 contributed to higher costs tied to incentives. After normalizing for those effects, management expects 2026 corporate program costs to be similar to 2025.
Executives also referenced previously provided “outage” assumptions, noting a range of approximately CAD 22 million to CAD 28 million and that 2025 results came in toward the higher end of that range. Management suggested investors use that framework for modeling, while cautioning that these items can change.
Caustic soda: weaker early-year pricing, recovery expected in the second half
Management acknowledged that caustic soda pricing in the first quarter has been weaker than the company’s assumptions. Executives attributed the softness to several factors discussed on the call:
- Oversupply conditions, particularly in China
- Weaker aluminum production in Asia
- Broader weakness in pulp and paper markets
- Market distortions around shipments ahead of Chinese New Year
Even with that weakness, management said it is planning for caustic prices to be stronger in the second half of the year than in the first half. Executives added that it can be difficult to gauge direction in the first quarter due to the extended Chinese New Year holiday period, and they said industry contacts maintain a “strong belief” that caustic trends will resume and strengthen over the next few years. The company also pointed to underlying end-market fundamentals, noting construction activity as a key driver of chlorine demand and batteries and alumina as demand drivers for caustic.
Other operating updates included a heavier SWC maintenance year in 2026 tied to customer turnaround schedules. Management said Regen acid plant outages are coordinated with gasoline producers, including one significant customer that undertakes a major turnaround every five years. The company characterized 2026 turnarounds as heavier than the past two years, but not unusual when viewed over a 10-year period.
The company also discussed Tulsa facility upgrades in connection with its Cairo facility ramp. Management said major semiconductor customers (“fabs”) requested redundancy of supply and quality closer to Cairo’s output. Chemtrade said it applied learnings from Cairo to investments in Tulsa and is pleased with the quality improvements. Executives noted that Cairo remains the company’s highest-quality plant, while Tulsa product is in the sampling and approval process at fabs. On Cairo, management said the approval process is progressing positively, with “a lot of samples out,” and reiterated expectations for sales volume ramping in the second half of the year.
Finally, in response to a question about the use of unaudited financials in the release, management said annual audits involve more rigorous procedures and timing pressure. Executives cited the late-November closing of the Poly-tech acquisition as an additional factor that increased audit workload, including asset valuation requirements. Management said it felt good about the numbers and expected the audit to conclude in short order.
In closing remarks, management said 2025 was a record year for Chemtrade and thanked employees for performance during the year.
About Chemtrade Logistics Income Fund (TSE:CHE.UN)
Chemtrade Logistics Income Fund provides industrial chemicals and services to customers in North America and around the world. The company organized into four main operating segments: Sulphur Products and Performance Chemicals (SPPC), Water Solutions and Specialty Chemicals (WSSC), Electrochemicals, and Corporate. It generates maximum revenue from Electrochemicals segment. Chemtrade operates in Canada, the United States, and South America of which maximum revenue comes from the United States. SPPC markets, remove and produces merchant, regenerated and ultra-pure sulphuric acid, liquid sulphur dioxide, sodium hydrosulfite and provides other processing services.
