Income trusts: Chemtrade reports strong quarterly results

Chemtrade Logistics Income Fund, symbol CHE.UN on Toronto, is one of North America’s largest suppliers of sulphuric acid, sulphur, liquid sulphur oxide and sodium hydrosulphite. It also supplies sodium chlorate, phosphorous pentasulphide and zinc oxide. In addition to selling chemicals, Chemtrade processes spent acid. We analyze Chemtrade in Stock Pickers Digest, our newsletter for aggressive investing. In the three months ended March 31, 2011, the income trust’s cash flow per share jumped 55.6%, to $0.84 from $0.54. Revenue rose 33.8%, to $169.6 million from $126.8 million. This was mostly due to a recovering economy and higher prices for sulphuric acid. Chemtrade recently announced that it will buy Marsulex Inc. for $419.5 million. Marsulex provides environmental services that include controlling air quality and treating and handling industrial by-products and hazardous waste. The company also makes and sells chemicals. Adding Marsulex should build on the income trust’s existing strengths. Moreover, Chemtrade is already very familiar with Marsulex. That lowers the risk of unpleasant surprises. The company expects Marsulex to immediately begin adding to its cash flow per unit, even without accounting for savings from eliminating overlapping functions. The income trust’s distribution is $0.10 a month, which yields a high 8.3% on an annualized basis. You can get our clear buy/sell/hold advice on Chemtrade and dozens of other companies that may be appropriate for the part of your portfolio you devote to aggressive investing in Stock Pickers Digest. What’s more, you can get the latest issue absolutely free. Click here to learn how.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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