Chemtrade Logistics Income Fund (CHEUN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Chemtrade Logistics Income Fund Q4 2021 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I will now turn the call over to your speaker for today, Rohit Bhardwaj.

Thanks, Jenny. Good morning, everyone, and thank you for joining us today. We also have Scott Rook, our Chief Executive Officer, with us on the call this morning. Unlike the last few calls, each of us is in a different location. The fourth quarter was eventful for Chemtrade. I will begin by mentioning a few large one-off events and then review the consolidated and segmented business results. This will help guide your understanding of some of the drivers for our performance in the quarter. Then Scott will follow with some remarks on the current state of our business and future growth. He will also provide additional insights into our 2022 full year earnings guidance and assumptions and key sensitivities for the business. Following that, we will have a Q&A session. Before I go further, I would like to remind you that our presentation contains certain forward-looking statements that are based on current expectations and are subject to a number of uncertainties and risks, and actual results may differ materially. Further information identifying risks, uncertainties and assumptions and additional information on certain non-IFRS measures referred to in this call can be found in the disclosure documents filed by Chemtrade with the securities regulatory authorities available at sedar.com. One of the non-IFRS measures that we'll refer to in this call is adjusted EBITDA, which is EBITDA modified to exclude only noncash items such as unrealized foreign exchange gains and losses. For simplicity, although our accompanying presentation will refer to adjusted EBITDA, We will just refer to it as either EBITDA in our remarks as opposed to adjusted EBITDA. Both these terms are fully defined in our MD&A. Starting with the sale of the potassium chloride and vaccine adjuvants businesses that were completed on November 2. These businesses were part of the Water Solutions and Specialty Chemicals, or WSSC segment. The sale generated net proceeds of $182.7 million, with a net gain of $7.6 million. The net proceeds from the sale were used to pay down our credit facility. And a lot of the sale of these businesses penetrated in the process of reconfiguring the operating segments can be effective in the first quarter of '22. Sulfur Products and Performance Chemicals will combine with the remaining Water Solutions and Specialty Chemicals segment to form a new segment called Sulfur and Water Chemicals or SWC. This new organizational structure will be reflected starting with our next earnings release for the first quarter of '22. Also during the fourth quarter, Chemtrade settled a lawsuit at the plaintiff relating to Canexus Corporation's North American Terminal Operations or NATO assets for $21 million. A net benefit of $17.7 million was recorded in corporate costs during the fourth quarter of '21. The sodium chlorate business has since the beginning of COVID experienced lower demand, especially due to a decline in demand for office paper combined with an increase in competitive pressure that has reduced margins. As offices have remained closed and a recovery demand is uncertain, during the fourth quarter of '21, Chemtrade recorded an impairment in the value of assets associated with this business of $130 million. While we are hopeful that the business will continue to recover post-COVID, this adjustment was necessary to reflect the current market conditions. Starting with the aggregate results for the fourth quarter of '21, our revenue was $353.8 million, which is $34.4 million higher than the fourth quarter of 2020. The increase in revenue for fourth quarter is due to higher volumes and pricing for all chlor-alkali products in the Electrochemicals or EC segment and higher sales volume and selling prices for merchant and Regen sulphuric acid in the SPPC segment. This was partially offset by the lower volumes and pricing for sodium chlorate in the EC segment. Also relative to the fourth quarter of 2020, the stronger Canadian dollar had a negative impact of $8.4 million. Consolidated EBITDA for the fourth quarter was $92.5 million, an increase of $48.3 million compared to the fourth quarter of 2020. Consolidated EBITDA for the fourth quarter benefited from the same factors that affected revenue. Additionally, there was a benefit of the settlement of the NATO lawsuit of $17.7 million that was partially offset by $2.9 million due to the stronger Canadian dollar. Distributable cash of $25.7 million was $48.7 million higher than the same period in 2020. In the fourth quarter, Chemtrade recorded a net loss of $180.5 million. That is primarily due to the $130 million impairment of goodwill, intangible assets and property, plant and equipment in the SC segment and a higher income tax expense and net finance cost. This was partially offset by higher consolidated EBITDA and a $7.6 million gain from the sale of the KCl and adjuvants business. As a reminder, every $0.01 of increase in the Canadian dollar versus the U.S. dollar is expected to reduce annual EBITDA by roughly $3.1 million and distributable cash by $2.2 million and vice versa. Shifting now to the individual segment results for the quarter. SPPC generated revenue of $102.7 million (sic) [ $112.7 million ] during the fourth quarter of '21, which was $12 million higher than the fourth quarter of 2020. The increase in revenue is attributed to higher selling prices and sales volumes for Regen, merchant acid and sulphur products. This was partially offset by the stronger Canadian dollar, which had a negative $3 million impact. As a reminder, we had an extended outage at one of our Regen plants during the fourth quarter of 2020. The improvement in EBITDA of $10 million was due to higher volume and prices for merchant and Regen acid. This more than offset higher sulphur costs and the impact of the stronger Canadian dollar of $1 million. Our Water Solutions and Specialty Chemicals or WSSC segment reported fourth quarter revenue of $99.4 million, which was similar to 2020. As we previously disclosed, Chemtrade sold the KCl and adjuvants business that a part of this segment, resulting in a decrease in revenue tied to those businesses compared with the fourth quarter of 2020. The loss of revenue from the sale was more than offset by higher selling prices for Water Solutions products. EBITDA for the period was $16 million, which was $4.3 million lower than the same period in 2020, mainly due to the loss of $3.6 million EBITDA related to the businesses that were sold early in the fourth quarter. The EC segment reported fourth quarter revenue of $141.7 million, reflecting a $22.4 million increase over the fourth quarter of 2020. The higher revenue was primarily due to higher sales volumes and selling prices for chlor-alkali products, caustic soda, chlorine and hydrochloric acid or HCl. Continued strong demand for chlorine and HCl allowed our North Vancouver plant to run at high operating rates in the fourth quarter. Also as a reminder, the North Vancouver plant took its biennial maintenance turnaround during the fourth quarter of 2020 and had a negative impact on results in that quarter. The improved results in chlor-alkali was partially set by lower sales volumes and prices for sodium chlorate and the impact of the stronger Canadian dollar, which had a negative impact on revenue of $2.7 million. The improved performance of chlor-alkali resulted in EBITDA for the period of $41.8 million, which was $19.1 million higher than the fourth quarter of 2020. This is despite the approximately $4.5 million impact of the severe flooding in British Columbia in the fourth quarter of 2021 and the negative impact of approximately $2 million due to the stronger Canadian dollar. Corporate costs in the fourth quarter of '21 were $2.8 million compared to the $26.4 million in the same period in 2020. The decrease in corporate costs was primarily due to the settlement of the NATO lawsuit, which resulted in a net recovery of $17.7 million. Additionally, legal costs during the fourth quarter of '21 were $4.5 million lower in the fourth quarter of 2020. Finally realized foreign exchange gains in the fourth quarter of 2021 were $1.9 million higher than the fourth quarter 2020. I'm getting a bit of feedback here, Jenny. I don't know if you could mute people's lines, if one might be open. Turning to the balance sheet. During the fourth quarter, we took several steps to improve our balance sheet. The most significant was the closing of the sale of the KCl and adjuvants business, which reduced our leverage by approximately 0.7x. We also extended the maturity of our credit facility by 2 years to December of 2026. And we reduced the size of the facility by USD 200 million, and converted the facility to a fully revolving facility. We eliminated the additional covenant room we had negotiated at the start of pandemic as this was no longer required. And doing so resulted in pricing on our credit facility reverting to pre-pandemic levels. Finally, we issued a new series of convertible debentures that mature in August 27, and announced the redemption of the 2023 debentures. And therefore, we have no debt maturities until 2024. At the end of the fourth quarter, we maintained senior credit facilities that consists of a USD 650 million revolving credit line. We continue to maintain ample liquidity with USD 339.1 million undrawn on the facility. As of December 31, '21, Chemtrade was compliant with all debt covenants contained in our credit agreements. I'll now shift to our financial outlook. We issued guidance for '22 on January 26, and it's set out on the company's slide. Scott will provide some perspective on this guidance. The key assumptions driving that outlook are on our MD&A and are shown on this slide. I will not read this out for you, but will remind you that our caustic soda price, which is affected by but not equal to the Northeast Asia spot index, generally lags the Northeast Asia spot index by a quarter. I would also like to point out that rather than providing an assumption for MECU production volume, we have started providing our sales volume assumption. This is consistent with the volume disclosed in our MD&A, where we discuss EC's operating results. The key sensitivities that have an annual impact on EBITDA are shown on this slide. Again, I won't read this out. I'll now hand the call over to Scott for some additional insight on the outlook for Chemtrade's business. Scott?

Thank you, Rohit. Good morning, everyone, and thank you for joining us today for the fourth quarter earnings call. I hope you are all doing well. As you heard from Rohit's update on the fourth quarter, we had quite an eventful end to the year. Several positive things happened, and we remain excited about the direction that we are headed. I will provide some perspective on the EBITDA guidance we issued for this year and on current business conditions, followed by an update on the key initiatives that are in progress to drive sustainable growth and ESG. Our business is much stronger as we head into 2022. A few key points to highlight. The midpoint of our guidance for this year implies a roughly $31 million EBITDA improvement over last year once you normalize for the sale of KCl and the adjuvants business and the lawsuit settlements. The improvement would have been more pronounced if we did not have the biannual turnaround at the North Vancouver facility, which is scheduled for the fourth -- for the second quarter and expected to have an $11 million impact on EBITDA. We used the net proceeds of the sale of approximately $182.6 million to significantly reduce our leverage by 0.7x. This results in $9 million lower annual interest payments. We will also invest $50 million in our new ultra pure acid facility in Cairo, Ohio between this year and next. As mentioned, we expect this plant to be in operation in 2024, and will return 25% on our investment. We are continuing to pursue additional organic growth opportunities across ultra pure acid and our byproduct hydrogen. Next, I'll share comments from our fourth quarter, along with specific market outlook information. Caustic soda and chlorine continue to have strong favorable market conditions that resulted in both higher selling volume and pricing. We anticipate that trend to continue in 2022. I'll get into that in more detail on the next couple of slides. We have also seen a significant rebound in the ultra-pure sulphuric acid business. We have regained most of the sales volume that we lost at the beginning of last year, and I look forward to seeing this business continue to improve this year. In the third quarter, last year, our key supplier, Vale, had a strike that shut down their smelting operations in Canada. This continued to create sulphuric acid supply disruptions into the fourth quarter. We were able to mitigate some of the impact to our customers by procuring alternate sources of acid and diligently managing our network to keep the supply chain filled. And as Rohit mentioned, we also felt the impact of the strong Canadian dollar on our financial results. Despite these challenges, excluding the $17.7 million benefit from the NATO lawsuit settlement, we increased our EBITDA and by $30.6 million year-over-year while also making significant improvements to our balance sheet. Transitioning to focus on the chlor-alkali markets. During the fourth quarter, we saw the price of caustic soda reach new historical highs. The price of caustic soda has been steadily increasing over the prior quarters. However, the spike in the fourth quarter was largely attributed to China's dual energy policy that curtailed production in their country, impacting global supply and resulting in some panic buying. We have seen pricing come back down off of those highs, although it is still well above where it was at the start of 2021. The Northeast Asia spot index, a leading indicator for the market in Western Canada, was $575 per ton in January, reflecting an increase of $80 per ton versus December. In setting our guidance, we have assumed that the index will average approximately USD 440 per ton for the 12 months ended September 30 this year, which is the period that will influence realized pricing in '22. The chlorine market also continued to benefit from favorable market conditions. Capacity rationalization last year, particularly in the U.S. Gulf Coast, has tightened supply. We expect that the tightness in supply, combined with continued strength in industrial and construction-related demand, will help keep pricing at the current levels through the next few quarters. We have also seen steady increases in the rig counts in the U.S. and Canada, which is positive for HCl. So under the current chlorine and HCL market conditions, we have the benefit of higher margins from pricing and higher operating rates at the North Vancouver facility, thereby enabling us to sell more caustic soda. As we have previously discussed, the single largest opportunity for organic growth at Chemtrade is our ultra pure sulphuric acid business that supplies the semiconductor industry. The long-term fundamentals for the semiconductor industry are strong. In fact, it is hard to point to another sector that has seen the growth that the semiconductor industry is experiencing. Just a few weeks ago, the leading semiconductor manufacturer, Intel, announced plans to invest $20 billion in the new Ohio campus, with the potential to invest $100 billion over the next decade. As I mentioned on our last earnings call, we are moving forward with an expansion of our ultra pure acid capacity at our Cairo, Ohio facility. That project is now in progress, and we are actively looking at the next opportunity to add significant capacity in the U.S. We think we are well positioned to retain our market leadership position in North America. We are also making solid progress in developing our coproduction of hydrogen that is part of the sodium chlorate process. We currently have projects being developed that will allow us to fully monetize these hydrogen streams in Prince George and Brandon. We expect construction of the Prince George hydrogen system later this year. We are announcing 12 long-term ESG targets in our 2022 AIF, which will be released in March. Today on the call, I plan to share 5 of our new targets with you. The first, greenhouse gas. We will reduce or offset 2021 Scope 1 greenhouse gas emissions from operations, private fleet and process by 50% by the year 2025. Second, energy management. We will ensure a minimum of 85% of our electricity is from hydroelectric or other renewable sources, including any future acquisitions. Three, industrial waste. We will reduce high-clay alumina landfill disposal by an additional 20% of our 2021 baseline by 2025 through reuse and process efficiencies. Number four, workforce safety. We will target a 50% reduction of workplace injuries by the year 2025. And number five, workforce diversity. We will achieve 50% of black indigenous people of color, BIPOC, and/or women in all management positions by the year 2025. Finally, these targets will be included in our management's team's short-term and long-term incentive compensation. So in summary, our business conditions continued to improve during 2021. We enter this year with strong market conditions for most of our businesses, a better balance sheet and great opportunities for organic growth. Additionally, we are pleased to share our new corporate ESG targets with you. In conclusion, we are happy with the progress we made last year and excited to continue that progress in 2022 with stronger earnings and organic growth, which will help us beyond 2022. Thank you. Rohit and I will now be happy to take any questions.

[Operator Instructions] Your first question is from Steve Hansen.

Just a couple for me. First, just on the organic expansion opportunity. Scott, I think you said you're already looking at your next opportunity. Can you just give us -- frame maybe what that means a little bit? I'm just trying to understand -- I understand -- I think we all understand how typically, this industry is going to grow, but how close do you need to be the facilities? Do you need to colocate? Can you move this product very far? Is this going to be organic versus -- or sort of brownfield versus greenfield? Maybe just give us some context around what the future opportunities might look like versus just an expansion?

Well, so look, what I can say for now is that -- so from the market standpoint, the market demand is going to double or triple, I think, in the next 5 years. So the market is going to need a significant expansion larger than what we're doing in Cairo. Cairo is a nice start. Cairo is also going to be the first plant, the first line in the United States with the quality level that will meet the new smaller node chip production that's going to be in North America. So if you -- what I can share right now is that most of the -- well, the first expansions from TSMC and Intel are going to be in Arizona. And so I think it will be advantageous for a supplier to be close to that facility. And so that's what I can share for now. And I think that, that facility, the closer the better, also sized and integrated would be better as well. And so I can't share too many details other than to say we are active whole working on a program that will be that will be significantly larger than Cairo. I hope to be sharing more details with you here in the next couple of months. But I think that's really all I share for now.

Okay. That's helpful. Maybe just looking at the Waters business as it stands. Rohit, maybe I'm not sure it's a question for you, but just trying to unpack the fact that there is still a little bit of the KCl and adjuvants business in the quarter, I believe a month's worth roughly. Is the margin profile we saw in Q4 generally reflective of what we should expect going forward? I'm just trying to understand, I guess, both margin profile and revenue. Revenue was roughly flat despite the sale of the business. So just trying to understand what the cadence that business is going to look like on a stand-alone basis, I guess, before you repack it with the other consolidated segment now?

Yes, sure. So a couple of points. One is, yes, the specialty chemical, as you would expect, would have had a higher margin profile. So once you pull that out, yes, the margin would go down. But 2 things to consider. Q4 is seasonally a weak quarter for Water. So if you look at the margin percent in Q4 versus, let's say, Q3, you will see a decline not just because of the specialty chemical we need to move, but also because the seasonality and you've got your fixed cost et cetera that you don't cover when the volume is lower. And the second thing to consider is when we see a big spike in raw materials, and we are able to -- we are passing those more and more over to our customers. But what that does is, even though from an EBITDA dollar perspective, you're hoping to be even. When you look at the margin, your margin actually gets compressed because you've got a higher cost being added to your revenue. And so when you look at a margin percentage when the raw materials are high, your margin percentage comes down, but our hope is to be able to make the actual dollars. And so once you strip out the impact in this Q4 of the specialty chemicals going out, Water was pretty flat to Q4 last year. So we have been successful more and more to pass through the raw material costs over to customers.

Okay. That's helpful. So just to think about it going forward, though, those price increases are still rolling through, should it start to improve then because we've had a bit of a drag for about a year now?

It should start to improve, but the issue is that sulphur again spiked early in '22. So we may still -- you may still not see a big improvement in '22, it will depend on how sulphur evolves over the next few months.

Your next question is from Jacob Bout with CIBC.

I had a couple of questions on the chlor-alkali outlook. Maybe just to start with on the caustic price and what you're assuming in your 2022 guidance of $440 a ton. You mentioned the $575 a ton for contract pricing in January, I think spot's closer to $670. So the assumption here is that you're expecting meaningful deterioration in pricing for the end of the year? I'm just trying to understand how conservative your approach is to guidance here.

So the -- I would say the caustic pricing over the past 4 to 5 years has been a very difficult byproduct to forecast pricing for. And especially when you're looking at a spot price. We saw sort of a rapid run-up in the second half of last year in caustic prices. Quite a bit of that was possibly coming from restrictions that were in place in China. And again, that's even hard to say. But we know that China limited their electricity production, particularly using coal-fired plants. And as they limited production of coal-fired electricity plants, then electricity was limited and then caustic at prices spiked. Right now that the Olympics have been completed, China has already announced last week that they were going to take their -- they're going to resume to a full production with coal-fired plants. So we'll see. It's really a -- look, it is a very difficult thing to predict. I'm certainly not going to say that we know. We're being very open with our guidance. Where we sit right now today, it's possible that the guidance looks a little conservative, but where it's going to be 60 days or 90 days, that's really hard to say.

Okay. And then my next question is just on HCl. And perhaps you can provide a little color on the amount of chlorine and you're converting to HCl. What it's been historically and what you're expecting for 2022? And then just on pricing. What is your realized price for HCl has been? How does that compare to a year ago? And expectations going forward, especially as drilling activities improve.

Okay. So let me give you the answer that I think I can give you on this call. So firstly, in terms of how much chlorine do we convert into HCl. At the peak in, let's say, 2018, 2017, we were getting up to 40%. We have the capacity to go to 60%, but we got to about 40%. Then fracking went down, we were in the 20s. And then last year, we ended the whole year at about 30%, and we expect to be maybe a little bit better than that. Now let's see with the current spike in oil and what that does for fracking accuracy because fracking had lagged. When you look at -- I think we have some slides that we show that when oil was a certain level 3 years ago, fracking was double what it was now. And so while '22, there's some recovery expected, we aren't really counting on a big recovery. But having said that, what's important to know is that, as Scott mentioned, chlorine has been doing very well. So the lift we get from converting to into HCl is not as pronounced as it used to be because chlorine itself has gone much higher. In terms of your question on pricing on HCl, that's one I wouldn't want to get into, but I can tell you that we will -- we'll give you some -- in the MD&A, we'll give you some idea of percentage change in pricing, but I think I'd like to not get too specific on pricing. Hopefully, that answers the question.

Okay. If you can't answer the question on the HCl pricing, maybe you can answer it this way. If we think about -- because these are obviously very local markets, but from an HCl pricing perspective versus chlorine historically, has it lagged? And when you've seen chlorine and oil prices move, does HCl fall further quickly after?

So a lot of the HCl is -- there's a lot of byproduct HCl out there. So it's not always kind of following the chlorine molecule, because chlorine gets into different applications, again, it depends on [ lines ], et cetera. So I wouldn't say that HCl and chlorine have always been that. Correlated and particularly where we benefit in HCl is Western Canada, which is quite diverse from the more Gulf Coast big chlorine market. So -- and that's a resource for us. If the Canadian fracking picks up, that's where we get the biggest benefit, and that's got nothing to do with what's happening with chlorine in the Gulf Coast.

Your next question is from David Newman with Dejardins.

Just first question is on aluminum. Aluminum skyrocketing on the back of the Ukrainian conflict and inventory tightness. Should -- could caustic remain elevated for some period of time on the back of the aluminum prices rising? And conversely, as you look at that as an input into the -- as the raw material into the water alum production, is that -- could that extend the time to recovery?

So the answer is yes, I would say. So it's certainly possible that with the high aluminum prices -- the high aluminum prices and high demand for aluminum that, that will keep a strong pull on caustic. So that's certainly possible. As I mentioned earlier, with caustic, I think the other thing that you have to watch is production of electricity in China. So there's demand piece for aluminum, but also the production and the electricity supply coming out of China. I think that's there. And your point about with aluminum going up, the impact on water, yes, but the impact in the Water business is really on our more specialty products, the ACH material, so that's where -- that's the impact there. But yes, our -- as we shared numerous times, our pricing to city municipalities is done in annual contracts, sir. But any -- yes.

And -- Scott, sorry, go ahead. Is that Rohit? You're going to weigh in there?

No, no, I'm not, please go ahead.

I was just going to ask you, at the end of the day, aluminum rising, is it a net benefit or a net cost to you?

I think if the aluminum is -- pricing is going up on the back of increased demand for aluminum in Asia because that's really where we are most focused. And that will be probably a net benefit from us because that will dwarf the impact of the Water business. But if it has to really be -- and then to counteract that -- because what really affects us is the imbalance between chlorine and caustic in Asia. So if aluminum is going up, demand is going up but so is demand for chlorine derivatives due to maybe more energy-intensive users, then that doesn't really help us that much.

Got it. And do you have any other chemicals that could be affected in terms of pricing, et cetera, coming out of a potential conflict in Ukraine?

No, we don't. I'm just going to reiterate what Rohit said is that I would say that the impact of rising caustic prices dwarfs any impact on the Water business. Much, much -- yes, so a much stronger benefit.

That's what I would have thought it.

Much, much, yes. Magnitude is different.

Okay. And then the last one for me, guys, is just the sodium chlorate write-down, which is understandable, obviously, in the environment that we are in right now. But I would have thought with the sale of ERCO to Birch Hill that there would have been a little bit more rationality in the market and you flagged some of the competitive dynamics in there. So what's going on in the chlorate market on the competitive side? I understand the demand side, but just on the competitive on the pricing side.

Well, what I will say, what we have seen is -- I think what we've seen in the marketplace is demand destruction, primarily coming from office paper, which is what we've talked about. We've seen office paper demand drop 40% or so. We have all been watching that and asking ourselves, is this temporary? At what point is demand going to come back? And I still see that -- maybe I'm an optimist, but I still keep thinking at some point when offices reopen and schools are fully back that office paper is going to come back. However, many of our customers, I say many, we have seen some of our customers go ahead and close their pulp mills. And so we've seen more than a half dozen of pulp mills closed over the past 18 months. Now -- and we've asked the question, could those mills reopen. And I suppose it's possible, but it seems it's beginning to look like those mills are more permanent closures. We're also seeing mills that have converted -- that they stayed open, but they converted from bleached pulp into unbleached pulp, which goes into packaging. So as the market has declined -- look, I won't comment -- I don't want to get into too many specifics about what we've seen in the marketplace. We'll just say that the market has been declining The market has, I'd say, plenty of capacity. And I think that's something that does -- will need to be looked at.

Your next question is from Nelson Ng with RBC Capital Markets.

I just had a quick follow-up on David's question in terms of the chlorate side. So you mentioned that there is plenty of capacity on the chlorate side. Given that your Brandon facility is one of the largest and lowest cost facility, are you seeing some other facilities or chlorate facilities potentially shut down?

Well, the industry has done a good job in the past of rationalizing capacity. I think -- I don't think we want to speculate on which plant -- but if you look at the cost, because you're right, Brandon is very far on one side of the cost curve. So that's clearly, the last person there. But in terms of which plants should -- on the higher cost curve, I think we'd rather not get into that.

Okay. And then just staying on the chlorate side. So your volumes in 2021, I think it was about 8% lower than 2019. Has industry demand declined by more or less than 8%? I'm just wondering whether you are taking market share or maintaining market share?

No.

And then I -- sorry, why don't you go ahead?

Yes. I was just going to say, our view is that the industry has declined roughly 8% to 10%. That's our view. So I would say that -- yes.

Got it. Okay. And then I think in the past, the chlorate side contributed about 2/3 of the EBITDA in the electrochemical division. Do you know roughly what the mix is in 2021 between sodium chlorate and chlor-alkali?

So we -- I don't want to get too precise, but '21 chlorate, I mean, caustic was -- or chlorate levels was low because we know what -- how low the Northeast Asia was, but I think I'd like to leave it at that and not focus on that.

Okay. Got it. And then just one last question. Obviously, I think you touched on Ukraine earlier. I guess one other, I guess, indirect impact from Ukraine is higher oil and gas prices. Obviously, higher oil and gas drilling activity is a positive, but do you see any negatives from having high oil and gas prices? I think one potential I can think of is if driving -- if miles driven reduces, then that obviously hurts refinery utilization. But what's -- is there anything else to flag in terms of potentially high oil and gas prices for a longer period?

No, you were just saying it. That's exactly what I say that if high oil prices -- if that starts to, let's say, to encourage people to drive less, then that is an impact. Right now, that's not what we see. But this can play out, I think, over the next several months or so. We'll see.

The next question is from Joel Jackson with BMO Capital Markets.

There's a bit of feedback in the line. Talk about SPPC, things going on in that business. So can you talked about Copper Cliff. Can you talk about -- so first, can you talk about -- is that any impact on Q1? And you had the highest margin in that business in Q4 than you've had maybe in a long, long, long time. And we know that sulphur and sulphuric acid price have been extremely strong. And I imagine some of the stuff you reprice on annual contracts in 2022 have some upward momentum. So when you look at that business this year, should we see a significant earnings boost? And can you talk about that and maybe what margins will look like versus '21 and just historical?

Yes. So I think -- so we also have had the benefit of Regen being strong in -- relative to 2020. So that's part of the story there. It's not just the acid. And further story on the Vale, again, we have to be sensitive to not getting too deep into Vale's business because they're a very key supplier for us. But yes, the issues that they had were lingering. And so we have to see how they play out in Q1. But generally, we are able to offset that. And then so again, it will hopefully not be a big factor for us in terms of year-over-year. I don't think we -- I don't expect us to see a higher margin. I think we've got a lot of that benefit. Because again, the same thing happens in SPPC that I've tried to mention in Water is that when sulphur was very high, we're able to pass through the sulphur, absolute sulphur increase in our selling price, but the margins get decline, right? So the margins actually -- the margin percentage declines even though we -- because it's a higher price with a higher cost. So that's where margin percentage declines. But I think we expect year-over-year we should -- if we look at the -- we have there, Scott. Scott tried to bridge the midpoint of our outlook with where '21 ended. And I think a lot of it is going to be the chlor-alkali story and not so much the SPPC story.

Okay. If I can talk a little bit more on the SPPC side. So if Copper Cliff issues end up being more than you would like, you're going to have to meet contracts, meet commitments by moving around, buying acid, moving around to logical places, and that's going to really impact your margins because pricing has moved up a lot. But if Vale is fine and your supply is fine, you should actually see a lot better margins. Does that make any sense?

We will -- yes, keeping in mind that we share price movements with Vale. So yes, you will see improved margins, but they do get a big -- a large share of the benefit for the herd gets passed on to Vale. But you're right, when acid is very tight, trying to replace acid with different sources can be an expensive proposition. And then we have to look at whatever our legal -- whatever that contractually we're allowed to do to kind of offset things and what contractual outs we have with customers. Obviously, we're trying to do our best to supply all our customers, but we have to look at all those things.

Okay. If I could Maybe I'm going to try to ask Steve's question a little bit differently from earlier. If in a world that never exists, but let's say it's a flattish world where commodity prices like acid and water prices are all kind of stable. What is the margin impact of the businesses you sold in WSSC? Like in a normal flattish world, would that mean your margin profile in WSSC drops 100 basis points or 50 basis points? Can you try to just give me an idea a in a normal nonexisting normal world, what the margin impact is on those businesses out of the mix?

What I can tell you is, again, we've never broken out -- broken it out that precisely. But let me tell you what we've -- I'll try and triangulate some stuff for you as we publicly said. So when we said that, that business is roughly $20 million, roughly a $20 million annual EBITDA business. And it's a specialty chem business. So you can make your assumption as to what the margin on that should be. You would say, 50% plus should be the margin on products like that. And so I think with that piece of -- with those -- armed with that information, you can probably figure out what the impact would be on the segment.

That is helpful. And then finally for me, what's your corporate cost be this year? Should they be a lot lower than last year or similar?

So they should be -- again, we'll strip out the -- obviously, the benefit of that -- the legal settlement, right? So once you strip that out, they should be back to a normal range of $65 million to $70 million. That's what we expect.

I'm going to ask one more question, I lied. Sorry. If I look at your Q1 earnings, should they be like EBITDA similar to Q4?

So everything we talk about, we will exclude the $70 million, firstly, right? And having said that, what I would like to say, we don't want to start getting into quarterly guidance, Joel. But what we can tell you is -- and you made this observation at the last conference call is where you said it's possible that, again, depending on where caustic unfolds, but your comments were most likely your Q1 is going to be the strongest, could be the strongest quarter this year given where caustic is. That's assuming that our caustic assumption holds. And so I think I'd like to leave it at that and not get more precise into where Q1 will be. But I think I would like to use this opportunity though, just since we've got everyone on the phone is to remind people that Q2, we have the big North Vancouver turnaround scheduled for Q2. So when you're doing your models, I would encourage everyone to kind of keep that into account.

Your next question is from Endri Leno with National Bank.

A couple for me. I will start with the chlorate. We're seeing there's some movements of return to office, at least in Toronto, perhaps in March and then into April. Assuming that happens and there is a relatively meaningful return, like how quickly could you see a recovery in the chlorate business?

So I think we could begin to see a pickup in demand probably within -- from our standpoint, probably within, let's say, 60 to 90 days from people returning to the office. That's what I would think. So they'll get back in the office, start using printers, the inventory, they'll start placing in orders to fill up inventory, and that's what I would expect.

Okay. Great. And one more for me. It's on the Water products. I think the volumes were a bit lower. I think there was a comment in the MD&A that prices were higher, but volumes were lower. I was just wondering what drove those lower volumes? And how should they be trending into Q1?

So the volumes are generally affected by not reduced demand -- affected by reduce consumption, it depends on kind of water conditions, et cetera. So it's hard for us to get very granular on volumes, but the volumes are not due to any loss of customers or -- anything of that would be more -- it is somewhat weather dependent, too. So we'll have to wait to see how Q1 and Q2 roll out with some of the weather conditions. And -- yes, but nothing meaningful. There's nothing meaningful in terms of loss of customers or anything like that.

[Operator Instructions] The next question -- I'm sorry, there are no further questions. Do you have any closing remarks?

I'd like to thank everyone's attention. and I don't know if Scott wants to add something to that.

No, I'll just say, yes, thanks for the attention and the questions today, and have a good rest of the day.

Thank you.

That concludes today's call. You may now disconnect.