VANCOUVER, BRITISH COLUMBIA (NASDAQ: MEOH)(SANTIAGO: Methanex)
-
For the first quarter of 2008, Methanex reported Adjusted
EBITDA(1) of $127 million, net income of $65 million and earnings
per share of $0.67 (on a diluted basis).
Bruce Aitken, President and CEO of Methanex commented, "Our
average realized price in the first quarter was $545 per tonne
which resulted in another good quarter of earnings for our
shareholders. Our earnings under this pricing environment would
normally be higher, however, we sourced less of our sales from
produced methanol during the first quarter and more from purchased
methanol and this had an impact on our profitability. In addition,
methanol pricing peaked in December and decreased through the first
quarter and, as is typical in a decreasing methanol price
environment, our sales margins on both produced and purchased
methanol are impacted by inventory timing issues."
Mr. Aitken added, "In the high methanol price environment of the
last six months, we saw China moving from being a net importer to a
net exporter, which we believe has been the most significant factor
causing the methanol market to rebalance and methanol prices to
decline. We have also seen some regional softness in demand in some
derivatives, but globally we continue to observe that demand for
methanol is healthy and the high energy price environment continues
to underpin strong demand growth for new methanol demand in energy
applications, particularly in DME and fuel blending in China."
Mr. Aitken continued, "China has recently reverted to being a
net importer and spot methanol prices are increasing. We are
continuing to make good progress on our initiatives to source more
gas in Chile and we recently agreed to terms on a gas supply
arrangement in New Zealand which will allow us to switch production
to one of our larger idle plants in the second half of the
year."
Mr. Aitken concluded, "Our strong cash generation in the first
quarter continues to leave us in a strong financial position. With
US$465 million cash on hand at the end of the quarter, a strong
balance sheet and a US$250 million undrawn credit facility, we are
well positioned to meet our financial commitments related to the
Egypt methanol project, pursue opportunities to accelerate natural
gas development in southern Chile, pursue opportunities to sponsor
methanol demand in new energy applications, pursue other strategic
growth initiatives, and continue to deliver on our commitment to
return excess cash to shareholders."
A conference call is scheduled for Thursday, April 24, 2008 at
11:00 am EST (8:00 am PST) to review these first quarter results.
To access the call, dial the Telus Conferencing operator ten
minutes prior to the start of the call at (416) 883-0139, or toll
free at (888) 458-1598. The passcode for the call is 45654. A
playback version of the conference call will be available for
fourteen days at (877) 653-0545. The reservation number for the
playback version is 518972. There will be a simultaneous audio-only
webcast of the conference call, which can be accessed from our
website at www.methanex.com. In addition, an audio recording of the
conference call can be downloaded from our website for three weeks
after the call.
Methanex is a Vancouver based, publicly traded company engaged
in the worldwide production, distribution and marketing of
methanol. Methanex shares are listed for trading on the Toronto
Stock Exchange in Canada under the trading symbol "MX", on the
NASDAQ Global Market in the United States under the trading symbol
"MEOH", and on the foreign securities market of the Santiago Stock
Exchange in Chile under the trading symbol "Methanex". Methanex can
be visited online at www.methanex.com.
FORWARD-LOOKING STATEMENTS
Information contained in this press release and the attached
First Quarter 2008 Management's Discussion and Analysis contains
forward-looking statements. Certain material factors or assumptions
were applied in drawing the conclusions or making the forecasts or
projections that are included in these forward-looking statements.
Methanex believes that it has a reasonable basis for making such
forward-looking statements. However, forward-looking statements, by
their nature, involve risks and uncertainties that could cause
actual results to differ materially from those contemplated by the
forward-looking statements. The risks and uncertainties include
those attendant with producing and marketing methanol and
successfully carrying out major capital expenditure projects in
various jurisdictions, the ability to successfully carry out
corporate initiatives and strategies, conditions in the methanol
and other industries including the supply and demand balance for
methanol, the success of natural gas exploration and development
activities in southern Chile and our ability to obtain any
additional gas in that region on commercially acceptable terms,
actions of competitors and suppliers, actions of governments and
governmental authorities, changes in laws or regulations in foreign
jurisdictions, world-wide economic conditions and other risks
described in our 2007 Management's Discussion & Analysis and
the attached First Quarter 2008 Management's Discussion and
Analysis. Undue reliance should not be placed on forward-looking
statements. They are not a substitute for the exercise of one's own
due diligence and judgment. The outcomes anticipated in
forward-looking statements may not occur and we do not undertake to
update forward-looking statements. These materials also contain
certain non-GAAP financial measures. Non-GAAP financial measures do
not have any standardized meaning and therefore are unlikely to be
comparable to similar measures used by other companies. For more
information regarding these non-GAAP measures, please see our 2007
Management's Discussion & Analysis and the attached First
Quarter 2008 Management's Discussion and Analysis.
(1) Adjusted EBITDA is a non-GAAP measure that does not have any
standardized meaning prescribed by Canadian generally accepted
accounting principles (GAAP) and therefore is unlikely to be
comparable to similar measures presented by other companies. Refer
to Supplemental Non-GAAP Measures in the attached First Quarter
2008 Management's Discussion and Analysis for a description of each
Supplemental Non-GAAP Measure and a reconciliation to the most
comparable GAAP measure.
Interim Report For the Three Months Ended March 31, 2008
At April 23, 2008 the Company had 94,781,117 common shares
issued and outstanding and stock options exercisable for 1,702,779
additional common shares.
Share Information
Methanex Corporation's common shares are listed for trading on
the Toronto Stock Exchange under the symbol MX, on the Nasdaq
Global Market under the symbol MEOH and on the foreign securities
market of the Santiago Stock Exchange in Chile under the trading
symbol Methanex.
Transfer Agents & Registrars
CIBC Mellon Trust Company
320 Bay Street
Toronto, Ontario, Canada M5H 4A6
Toll free in North America:
1-800-387-0825
Investor Information
All financial reports, news releases and corporate information
can be accessed on our website at www.methanex.com.
Contact Information
Methanex Investor Relations
1800 - 200 Burrard Street
Vancouver, BC Canada V6C 3M1
E-mail: invest@methanex.com
Methanex Toll-Free: 1-800-661-8851
FIRST QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS
Except where otherwise noted, all currency amounts are stated in
United States dollars.
This first quarter 2008 Management's Discussion and Analysis
should be read in conjunction with the 2007 Annual Consolidated
Financial Statements and the Management's Discussion and Analysis
included in the Methanex 2007 Annual Report. The Methanex 2007
Annual Report and additional information relating to Methanex is
available on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov.
Three Months Ended
---------------------
Mar 31 Dec 31 Mar 31
($ millions, except where noted) 2008 2007 2007
--------------------------------------------------------------------------
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Sales volumes (thousands of tonnes)
Produced methanol 678 997 1,139
Purchased methanol 669 421 376
Commission sales(1) 143 195 138
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Total sales volumes 1,490 1,613 1,653
Methanex average non-discounted posted price ($ per
tonne)(2) 703 637 537
Average realized price ($ per tonne)(3) 545 514 444
Adjusted EBITDA(4) 127.1 270.3 236.9
Cash flows from operating activities(4,5) 102.3 187.8 179.0
Operating income(4) 104.0 241.3 213.1
Net income 65.5 171.7 144.7
Basic net income per common share 0.67 1.74 1.38
Diluted net income per common share 0.67 1.72 1.37
Common share information (millions of shares):
Weighted average number of common shares 97.2 98.9 105.1
Diluted weighted average number of common shares 97.5 99.6 105.6
Number of common shares outstanding, end of period 95.6 98.3 104.2
--------------------------------------------------------------------------
(1) Commission sales represent volumes marketed on a commission basis.
Commission income is included in revenue when earned.
(2) Methanex average non-discounted posted price represents the average
of our non-discounted posted prices in North America, Europe and Asia
Pacific weighted by sales volume. Current and historical pricing
information is available at www.methanex.com.
(3) Average realized price is calculated as revenue, net of commissions
earned, divided by the total sales volumes of produced and purchased
methanol.
(4) These items are non-GAAP measures that do not have any standardized
meaning prescribed by Canadian generally accepted accounting
principles (GAAP) and therefore are unlikely to be comparable to
similar measures presented by other companies. Refer to Supplemental
Non-GAAP Measures for a description of each non-GAAP measure and a
reconciliation to the most comparable GAAP measure.
(5) Cash flows from operating activities in the above table represents
cash flows from operating activities before changes in non-cash
working capital.
--------------------------------------------------------------------------
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PRODUCTION SUMMARY
Q1 2008 Q4 2007 Q1 2007
(thousands of tonnes) Capacity Production Production Production
--------------------------------------------------------------------------
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Chile I, II, III and IV 960 309 288 751
Titan 213 217 220 225
Atlas (63.1% interest) 268 293 278 180
New Zealand 132 120 75 118
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1,573 939 861 1,274
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Chile
Our methanol facilities in Chile produced 309,000 tonnes during
the first quarter of 2008 compared with total capacity of 960,000
tonnes. We have natural gas supply contracts for approximately 60%
of our natural gas requirements for our production facilities in
Chile from natural gas suppliers in Argentina. Since June 2007, the
government of Argentina has curtailed all natural gas exports to
our plants and we continue to source natural gas supply to our
facilities exclusively from Chile. We source natural gas from Chile
primarily from Empresa Nacional del Petroleo (ENAP), the Chilean
state-owned energy company, and from GeoPark Chile Limited
(GeoPark).
During the first quarter of 2008, the government of Argentina
announced an increase of natural gas export duties from 45% to 100%
of the highest contracted import price of natural gas into
Argentina and it is expected that this would currently represent an
export duty in excess of US$7 per mmbtu. Natural gas exports have
not been reinstated and if they were, our natural gas contracts
provide that the gas suppliers must pay any duties levied by the
government of Argentina. However, given the increased duties we do
not expect to receive natural gas supply from Argentina.
We believe the solution to these issues of natural gas supply
from Argentina is to source more natural gas from suppliers in
Chile. We are pursuing investment opportunities with ENAP and
GeoPark to help accelerate natural gas exploration and development
in areas of southern Chile which lie close to our production
facilities. In late 2007, we signed an agreement with GeoPark under
which we will provide US$40 million in financing to support and
accelerate GeoPark's natural gas exploration and development
activities in the Fell Block in southern Chile. Under the
arrangement, GeoPark will also provide us with natural gas supply
sourced from the Fell Block under a 10-year exclusive supply
agreement. In late 2007, the government of Chile completed its
first international bidding round to assign natural gas exploration
areas that lie close to our production facilities and announced the
participation of five international oil and gas companies.
Exploration and development activities in these areas in southern
Chile are expected to begin during the second quarter of 2008.
We cannot provide assurance that ENAP, GeoPark or others will be
successful in the exploration and development of natural gas or
that we would obtain any additional natural gas from suppliers in
Chile on commercially acceptable terms.
Trinidad
Our methanol facilities in Trinidad operated well during the
first quarter of 2008 and produced a total of 510,000 tonnes
compared with 498,000 tonnes during the fourth quarter of 2007.
New Zealand
Our Waitara Valley facility in New Zealand produced 120,000
tonnes during the first quarter of 2008 compared with 75,000 tonnes
during fourth quarter of 2007. Production was lower than capacity
during the fourth quarter of 2007 at this facility as a result of
planned maintenance activities. We have secured sufficient natural
gas supply that will allow us to produce at this facility until at
least mid-2008.
In addition to our 530,000 tonne Waitara Valley facility which
we have operated over the past few years, we have up to 1.9 million
tonnes of additional flexible annual operating capacity from our
idled Motunui facilities in New Zealand. We have agreed to terms on
a natural gas supply arrangement which will allow us to restart one
idled 900,000 tonne per year Motunui methanol plant in mid-2008 and
operate this facility until at least the end of 2009. This
agreement is subject to some final authorization procedures which
we expect to conclude in a few weeks. We plan to continue to
operate the Waitara Valley facility until the Motunui plant
restarts. The continued operations of the flexible New Zealand
facilities is dependant upon industry supply and demand and the
availability of natural gas on commercially acceptable terms.
EARNINGS ANALYSIS
The operating results for our production facilities in Chile,
Trinidad and New Zealand represent a substantial proportion of our
Adjusted EBITDA and, accordingly, we separately discuss changes in
average realized price, sales volumes and total cash costs related
to these facilities. For a further discussion of the definitions
and calculations used in our Adjusted EBITDA analysis, refer to How
We Analyze Our Business.
For the first quarter of 2008 we recorded Adjusted EBITDA of
$127.1 million and net income of $65.5 million ($0.67 per share on
a diluted basis). This compares with Adjusted EBITDA of $270.3
million and net income of $171.7 million ($1.72 per share on a
diluted basis) for the fourth quarter of 2007 and Adjusted EBITDA
of $236.9 million and net income of $144.7 million ($1.37 per share
on a diluted basis) for the first quarter of 2007.
Adjusted EBITDA
The increase (decrease) in Adjusted EBITDA resulted from changes
in the following:
Q1 2008 Q1 2008
compared with compared with
($ millions) Q4 2007 Q1 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Average realized price $ 4 $ 51
Sales volumes (95) (106)
Total cash costs(1) 2 (21)
Purchased methanol (54) (34)
--------------------------------------------------------------------------
$ (143) $ (110)
--------------------------------------------------------------------------
(1) Includes cash costs related to methanol produced at our Chile,
Trinidad and New Zealand facilities as well as consolidated selling,
general and administrative expenses and fixed storage and handling
costs.
Average realized price
Three Months Ended
-----------------------
Mar 31 Dec 31 Mar 31
($ per tonne, except where noted) 2008 2007 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Methanex average non-discounted posted price(1) 703 637 537
Methanex average realized price(2) 545 514 444
Average discount 22% 19% 17%
--------------------------------------------------------------------------
(1) Methanex average non-discounted posted price represents the average
of our non-discounted posted prices in North America, Europe and Asia
Pacific weighted by sales volume. Current and historical pricing
information is available at www.methanex.com.
(2) Methanex average realized price disclosed above is calculated as
revenue, net of commissions earned, divided by the total sales
volumes of produced and purchased methanol.
We commenced 2008 in a tight methanol market environment as a
result of planned and unplanned supplier outages, including outages
at our Chile facilities, which began in the second half of 2007.
Our average non-discounted posted price for the first quarter of
2008 was $703 per tonne compared with $637 per tonne for the fourth
quarter of 2007 and $537 per tonne for the first quarter of 2007.
Our average realized price for the first quarter of 2008 was $545
per tonne compared with $514 per tonne for the fourth quarter of
2007 and $444 per tonne for the first quarter of 2007. For the
first quarter of 2008 our average realized price was approximately
22% lower than our average non-discounted posted price. This
compares with approximately 19% lower for the fourth quarter of
2007 and 17% lower for the first quarter of 2007. We have entered
into long-term contracts for a portion of our production volume
with certain global customers where prices are either fixed or
linked to our costs plus a margin and accordingly, we expect the
discount from our average non-discounted posted prices to widen
during periods of higher methanol pricing. The discount from our
average non-discounted posted price widened during the first
quarter of 2008 compared with the fourth quarter of 2007 primarily
as a result of higher methanol pricing and lower sales volumes.
For the purposes of our Adjusted EBITDA analysis, the average
realized price for sales of produced methanol will differ from the
Methanex average realized price disclosed above as sales under
these long-term contracts are allocated to sales of produced
methanol. During the first quarter of 2008, our total sales volumes
of produced methanol decreased by 319,000 tonnes compared with the
fourth quarter of 2007. As a result, sales volumes with pricing
that is fixed or linked to our costs plus a margin represented a
significantly higher proportion of our total sales volumes of
produced methanol during the first quarter of 2008 compared with
the fourth quarter of 2007. The change in our average realized
price for produced methanol for the first quarter of 2008 increased
our Adjusted EBITDA by $4 million compared with the fourth quarter
of 2007 and increased our Adjusted EBITDA by $51 million compared
with the first quarter of 2007.
Sales volumes of produced methanol
Sales volumes of methanol produced at our production hubs in
Chile, Trinidad and New Zealand for the first quarter of 2008 were
lower by 319,000 tonnes compared with the fourth quarter of 2007
and lower by 461,000 tonnes compared with the first quarter of 2007
and this decreased Adjusted EBITDA by $95 million and $106 million,
respectively. During the first quarter of 2008, our sales volumes
of produced methanol were lower than our production volumes
resulting in a rebuilding of our produced inventories during the
first quarter of 2008. This, combined with lower overall sales
volumes, has resulted in the decrease in sales of produced methanol
compared with the fourth quarter of 2007.
Total cash costs
Our production facilities are underpinned by natural gas
purchase agreements with pricing terms that include base and
variable price components. The variable component is adjusted in
relation to increases in methanol prices above predetermined
prices.
Total cash costs for the first quarter of 2008 were lower than
in the fourth quarter of 2007 by $2 million. Natural gas costs on
produced methanol were higher during the first quarter of 2008 by
$9 million compared with the fourth quarter of 2007 primarily due
to the timing of inventory flows. Methanol pricing increased
significantly during the fourth quarter of 2007 and high pricing
has continued throughout the first quarter of 2008. Natural gas
costs on sales of produced methanol during the fourth quarter of
2007 were lower than the first quarter of 2008 primarily as a
result of the impact of selling lower cost opening inventory which
was produced at lower methanol pricing in the third quarter of
2007. During the fourth quarter of 2007, we also had a drawdown of
produced inventory volumes which resulted in a high proportion of
our production being sold in the quarter. During the first quarter
of 2008, our selling, general and administrative expenses were
lower by $5 million than the fourth quarter of 2007 primarily as a
result of the lower stock-based compensation expense due to changes
in our share price as well as lower consulting and other costs.
Fixed unabsorbed production costs for our production facilities
were lower in the first quarter of 2008 by $4 million compared with
the fourth quarter of 2007 primarily as a result of planned
maintenance activities at our Waitara Valley facility in New
Zealand in the fourth quarter of 2007. During the first quarter of
2008, our ocean freight costs were lower by $5 million compared
with the fourth quarter of 2007 as a result of higher backhaul
profits. Also, due to lower operating rates at our Chilean
operations brought on by the curtailment of natural gas exports
from Argentina, we made the decision during the first quarter of
2008 to reorganize our Chilean operations and reduce the work force
by approximately 15%, or 39 employees. As a result, we accrued
approximately $3 million in severance and termination costs during
the first quarter of 2008.
Total cash costs for the first quarter of 2008 were higher than
in the first quarter of 2007 by $21 million. During the first
quarter of 2008, natural gas and other costs were higher by $6
million compared with the first quarter of 2007 due to the impact
of higher methanol pricing. During the first quarter of 2008, our
selling, general and administrative expenses were higher by $4
million than the first quarter of 2007 as a result of higher
stock-based compensation expense as a result of changes in our
share price, and higher costs from the impact of foreign exchange
rates. Fixed unabsorbed production costs for our production
facilities were higher in the first quarter of 2008 by $5 million
compared with the first quarter of 2007 primarily as a result of
lower production at our Chile facilities. The remaining increase in
cash costs of $3 million during the first quarter of 2008 compared
with the first quarter of 2007 primarily relates to higher ocean
freight costs as a result of lower backhaul profits. During the
first quarter of 2008, we also accrued approximately $3 million in
severance and termination costs related to the reorganization of
our Chilean operations described above.
Margin on sale of purchased methanol
We purchase additional methanol produced by others through
long-term and short-term offtake contracts or on the spot market to
meet customer needs and support our marketing efforts.
Consequently, we realize holding gains or losses on the resale of
this product depending on the methanol price at the time of resale.
During the first quarter of 2008, our cash margin was negative $19
million on the resale of 0.7 million tonnes of purchased methanol
compared with a positive cash margin of $35 million on the resale
of 0.4 million tonnes for the fourth quarter of 2007 and a positive
cash margin of $15 million on the resale of 0.4 million tonnes for
the first quarter of 2007. The negative cash margin earned during
the first quarter of 2008 is primarily due to sales of methanol
that was purchased at higher prices in the fourth quarter of
2007.
Depreciation and Amortization
Depreciation and amortization was $23 million for the first
quarter of 2008 compared with $29 million for the fourth quarter of
2007 and $24 million for the first quarter of 2007. The decrease in
depreciation and amortization for the first quarter of 2008
compared with the fourth quarter of 2007 is primarily as a result
of lower sales volumes of produced methanol.
Interest Expense
Three Months Ended
----------------------------
Mar 31 Dec 31 Mar 31
($ millions) 2008 2007 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Interest expense before capitalized interest $ 14 $ 13 $ 11
Less capitalized interest (3) (2) -
--------------------------------------------------------------------------
Interest expense $ 11 $ 11 $ 11
--------------------------------------------------------------------------
Interest expense before capitalized interest for the first
quarter of 2008 was $14 million compared with $13 million for the
fourth quarter of 2007 and $11 million for the first quarter of
2007. In May 2007, we reached financial close and secured limited
recourse debt of $530 million for our joint venture project to
construct a 1.3 million tonne per year methanol facility in Egypt.
Interest costs related to this project have been capitalized since
that date.
Interest and Other Income
Three Months Ended
----------------------------
Mar 31 Dec 31 Mar 31
($ millions) 2008 2007 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Interest and other income (expense) $ (1) $ 3 $ 5
--------------------------------------------------------------------------
During the first quarter of 2008, interest and other income
(expense) was an expense of $1 million compared with income of $3
million for the fourth quarter of 2007 and $5 million for the first
quarter of 2007. The decrease in income during the first quarter of
2008 was due to the impact of changes in foreign exchange rates as
well as lower interest income as a result of lower interest
rates.
Income Taxes
The effective tax rate for the first quarter of 2008 was 29%
compared with 26% for the fourth quarter of 2007 and 30% for the
first quarter of 2007. The statutory tax rate in Chile and
Trinidad, where we earn a substantial portion of our pre-tax
earnings, is 35%. Our Atlas facility in Trinidad has partial relief
from corporation income tax until 2014.
In Chile the tax rate consists of a first tier tax that is
payable when income is earned and a second tier tax that is due
when earnings are distributed from Chile. The second tier tax is
initially recorded as future income tax expense and is subsequently
reclassified to current income tax expense when earnings are
distributed. Accordingly, the ratio of current income tax expense
to total income tax expense is highly dependent on the level of
cash distributed from Chile.
SUPPLY/DEMAND FUNDAMENTALS
We commenced 2008 in a tight methanol market environment as a
result of planned and unplanned supplier outages in the second half
of 2007. This resulted in high methanol prices during the first
quarter which are unsustainable in a normal supply and demand
environment. During the first quarter, due to a rebuilding of
global inventories, methanol prices have moderated, but remain at a
high level. Methanex non-discounted posted prices for April average
approximately $490 per tonne across the major regions and we have
announced a non-discounted price of $499 per tonne for May in North
America.
To the end of 2008, we expect the next increment of world-scale
capacity to be the 1.7 million tonne per year plant under
construction in Saudi Arabia. We expect product from this plant
should be available to the market in the second half of 2008. In
addition, there are 1.7 million tonne per year plants under
construction in Malaysia and Iran, and we expect product from both
of these plants to be available to the market in the first half of
2009. We also believe that global methanol demand growth combined
with the potential shutdown of high cost capacity as a result of
high feedstock prices could offset this new industry supply.
Methanex Non-Discounted Regional Posted Prices(1)
Apr Mar Feb Jan
(US$ per tonne) 2008 2008 2008 2008
--------------------------------------------------------------------------
--------------------------------------------------------------------------
United States 532 632 698 832
Europe(2) 465 772 772 772
Asia 450 525 600 720
--------------------------------------------------------------------------
(1) Discounts from our posted prices are offered to customers based on
various factors.
(2) EUR295 at April 2007 (Feb 2007 - EUR525) converted to United States
dollars at the date of settlement.
--------------------------------------------------------------------------
Overall, while demand growth for some derivatives, such as
formaldehyde and biodiesel, has weakened in some regions, we
believe demand remains healthy in both traditional chemical
derivatives and in energy applications as high global energy prices
continue to drive strong demand for fuel blending and di-methyl
ether (DME) in China. In addition, we believe that high energy
prices are continuing to support strong demand for MTBE in a period
which usually experiences some seasonal weakness.
We believe methanol demand in China will continue to grow at
high rates as a result of very strong traditional demand driven by
high industrial production growth rates and additional demand
related to non-traditional uses for methanol such as gasoline
blending and DME. We also believe that there is increasing pressure
on the cost structure of the Chinese methanol industry and the cost
to export as a result of escalating feedstock costs for both coal
and natural gas based producers in China, the continued
appreciation of the Chinese currency and reduced fiscal incentives
offered to Chinese exporters of methanol introduced during 2007.
During the first quarter of 2008, China was a net exporter of
methanol as a result of the very high methanol price environment,
which gave producers in China the incentive to operate at higher
production rates and export methanol. We believe this was a key
factor contributing to improving the global inventory position
during the first quarter of 2008. However, we believe that China
has reverted back to a net importer of methanol in April and this
has been reflected in the recent strengthening of spot methanol
prices in China and other global markets. Due to the high cost
position of many of the Chinese producers and the fact that the
majority of methanol produced in China is coal-based and not
suitable for many international customers, we believe in a lower
price environment substantially all domestic methanol production in
China will be consumed within the local market and that imports of
methanol into China will grow over time.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities before changes in non-cash
working capital in the first quarter of 2008 were $102 million
compared with $179 million for the same period in 2007. The
decrease in cash flows from operating activities before changes in
non-cash working capital are primarily the result of lower earnings
during the first quarter of 2008.
During the first quarter of 2008, we repurchased 2.9 million
common shares at an average price of US$25.99 per share under our
current normal course issuer bid that expires May 16, 2008. At
March 31, 2008, we had repurchased a total of 7.2 million of the
maximum available repurchase of 8.6 million common shares at an
average price of US$25.95 per share under this bid.
During the first quarter of 2008, we paid a quarterly dividend
of US$0.14 per share, or $13 million.
We are constructing a 1.3 million tonne per year methanol
facility at Damietta on the Mediterranean Sea in Egypt. We expect
commercial operations of the methanol facility to begin in early
2010 and we will purchase and sell 100% of the methanol from the
facility. We own 60% of Egyptian Methanex Methanol Company S.A.E.
("EMethanex") which is the company that is developing the project.
We account for our investment in EMethanex using consolidation
accounting. This results in 100% of the assets and liabilities of
EMethanex being included in our financial statements. The other
investors' interest in the project is presented as "non-controlling
interest". During the first quarter of 2008, total plant and
equipment construction costs related to our project in Egypt were
$96 million. EMethanex has limited recourse debt of $530 million.
During the first quarter of 2008, a total of $39 million of this
limited recourse debt was drawn. The total estimated future costs
to complete the project over the next two years, excluding
financing costs and working capital, are expected to be
approximately $600 million. Our 60% share of future equity
contributions, excluding financing costs and working capital, over
the next two years is estimated to be approximately $165 million
and we expect to fund these expenditures from cash generated from
operations and cash on hand.
We have excellent financial capacity and flexibility. Our cash
balance at March 31, 2008 was $465 million and we have a strong
balance sheet with an undrawn $250 million credit facility. We
invest our cash only in highly rated instruments that have
maturities of three months or less to ensure preservation of
capital and appropriate liquidity. Our planned capital maintenance
expenditure program directed towards major maintenance, turnarounds
and catalyst changes, including costs to complete the restart of
the Motunui facility, is currently estimated to total approximately
$125 million for the period to the end of 2010.
We believe we are well positioned to meet financial requirements
related to the methanol project in Egypt, complete our capital
maintenance spending program, complete the restart of the Motunui
facility, pursue new opportunities to enhance our leadership
position in the methanol industry, pursue investment opportunities
to accelerate the development of natural gas in southern Chile,
investigate opportunities related to new methanol demand for energy
applications, pursue other strategic initiatives and continue to
deliver on our commitment to return excess cash to
shareholders.
The credit ratings for our unsecured notes at March 31, 2008
were as follows:
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Standard & Poor's Rating Services BBB- (stable)
Moody's Investor Services Ba1 (stable)
Fitch Ratings BBB (stable)
Credit ratings are not recommendations to purchase, hold or sell
securities and do not comment on market price or suitability for a
particular investor. There is no assurance that any rating will remain
in effect for any given period of time or that any rating will not be
revised or withdrawn entirely by a rating agency in the future.
--------------------------------------------------------------------------
SHORT-TERM OUTLOOK
We believe that global inventories have improved and this has
resulted in a moderation of methanol pricing into the second
quarter of 2008. Over the next year, we believe that traditional
and non-traditional growth, along with closures of high cost
capacity, will substantially offset the new supply that is
scheduled to start up over the coming year and that supply/demand
fundamentals will be in reasonable balance during 2008. We also
believe that methanol prices will be underpinned by strong demand
in China and global energy prices.
The methanol price will ultimately depend on industry operating
rates, global energy prices, the rate of industry restructuring and
the strength of global demand. We believe that our excellent
financial position and financial flexibility, outstanding global
supply network and low cost position will provide a sound basis for
Methanex continuing to be the leader in the methanol industry.
CHANGES IN ACCOUNTING POLICIES OR ESTIMATES
On January 1, 2008, we adopted the Canadian Institute of
Chartered Accountants ("CICA") Handbook Section 3031 Inventories,
Section 1535 Capital Disclosures, Section 3862 Financial
Instruments - Disclosure and Section 3863 Financial Instruments -
Presentation. These standards are discussed in Notes 2, 3, 12, 13
and 14 to our interim consolidated financial statements.
CONTROLS AND PROCEDURES
For the three months ended March 31, 2008, no changes were made
in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ADDITIONAL INFORMATION - SUPPLEMENTAL NON-GAAP MEASURES
In addition to providing measures prepared in accordance with
Canadian generally accepted accounting principles (Canadian GAAP),
we present certain supplemental non-GAAP measures. These are
Adjusted EBITDA, operating income and cash flows from operating
activities before changes in non-cash working capital. These
measures do not have any standardized meaning prescribed by
Canadian GAAP and therefore are unlikely to be comparable to
similar measures presented by other companies. We believe these
measures are useful in evaluating the operating performance and
liquidity of the Company's ongoing business. These measures should
be considered in addition to, and not as a substitute for, net
income, cash flows and other measures of financial performance and
liquidity reported in accordance with Canadian GAAP.
Adjusted EBITDA
This supplemental non-GAAP measure is provided to assist readers
in determining our ability to generate cash from operations. We
believe this measure is useful in assessing performance and
highlighting trends on an overall basis. We also believe Adjusted
EBITDA is frequently used by securities analysts and investors when
comparing our results with those of other companies. Adjusted
EBITDA differs from the most comparable GAAP measure, cash flows
from operating activities, primarily because it does not include
changes in non-cash working capital, other cash payments related to
operating activities, stock-based compensation expense, other
non-cash items, interest expense, interest and other income
(expense), and current income taxes.
The following table shows a reconciliation of cash flows from
operating activities to Adjusted EBITDA:
Three Months Ended
----------------------------------
Mar 31 Dec 31 Mar 31
($ thousands) 2008 2007 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash flows from operating activities $ 110,586 $ 79,911 $ 191,102
Add (deduct):
Changes in non-cash working capital (8,267) 107,923 (12,109)
Other cash payments 320 11,938 740
Stock-based compensation expense (4,628) (6,755) (3,522)
Other non-cash items (6,427) (3,105) (2,647)
Interest expense 10,690 10,878 11,067
Interest and other income (expense) 837 (2,583) (5,072)
Current income taxes 23,960 72,139 57,326
--------------------------------------------------------------------------
Adjusted EBITDA $ 127,071 $ 270,346 $ 236,885
--------------------------------------------------------------------------
Operating Income and Cash Flows from Operating Activities before
Non-Cash Working Capital
Operating income and cash flows from operating activities before
changes in non-cash working capital are reconciled to Canadian GAAP
measures in our consolidated statements of income and consolidated
statements of cash flows, respectively.
QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected financial information for the prior eight
quarters is as follows:
Three Months Ended
---------------------------------------
($ thousands, except per share Mar 31 Dec 31 Sep 30 Jun 30
amounts) 2008 2007 2007 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revenue $ 735,934 $ 731,057 $ 395,118 $ 466,414
Net income 65,484 171,697 23,610 35,654
Basic net income per common share 0.67 1.74 0.24 0.35
Diluted net income per common share 0.67 1.72 0.24 0.35
--------------------------------------------------------------------------
Three Months Ended
---------------------------------------
($ thousands, except per share Mar 31 Dec 31 Sep 30 Jun 30
amounts) 2007 2006 2006 2006
--------------------------------------------------------------------------
Revenue $ 673,932 $ 668,159 $ 519,586 $ 460,915
Net income 144,706 172,445 113,230 82,097
Basic net income per common share 1.38 1.62 1.05 0.75
Diluted net income per common share 1.37 1.61 1.05 0.75
--------------------------------------------------------------------------
--------------------------------------------------------------------------
HOW WE ANALYZE OUR BUSINESS
We review our results of operations by analyzing changes in the
components of our Adjusted EBITDA (refer to Supplemental Non-GAAP
Measures for a reconciliation to the most comparable GAAP measure),
depreciation and amortization, interest expense, interest and other
income, unusual items and income taxes. In addition to the methanol
that we produce at our facilities, we also purchase and re-sell
methanol produced by others. We analyze the results of produced
methanol sales separately from purchased methanol sales as the
margin characteristics of each are very different.
Methanex-Produced Methanol
Our production facilities generate the substantial portion of
our Adjusted EBITDA, and accordingly, the key drivers of changes in
our Adjusted EBITDA for produced methanol are analyzed separately.
The key drivers of changes in our Adjusted EBITDA for produced
methanol are average realized price, sales volume and cash costs.
Changes in Adjusted EBITDA related to our produced methanol include
our sales of methanol from our facilities in Chile, Trinidad and
New Zealand.
The price, cash cost and volume variances included in our
Adjusted EBITDA analysis for produced methanol are defined and
calculated as follows:
PRICE
The change in Adjusted EBITDA as a result of changes in average
realized price is calculated as the difference from period to
period in the selling price of produced methanol multiplied by the
current period sales volume of produced methanol. Sales under
long-term contracts where the prices are either fixed or linked to
our costs plus a margin are included as sales of produced methanol.
Accordingly, the selling price of produced methanol will differ
from the selling price of purchased methanol.
COST
The change in our Adjusted EBITDA as a result of changes in cash
costs is calculated as the difference from period to period in cash
costs per tonne multiplied by the sales volume of produced methanol
in the current period plus the change in unabsorbed fixed cash
costs. The change in consolidated selling, general and
administrative expenses and fixed storage and handling costs are
included in the analysis of produced methanol.
VOLUME
The change in Adjusted EBITDA as a result of changes in sales
volumes is calculated as the difference from period to period in
the sales volumes of produced methanol multiplied by the margin per
tonne for the prior period. The margin per tonne is calculated as
the selling price per tonne of produced methanol less absorbed
fixed cash costs per tonne and variable cash costs per tonne
(excluding Argentina natural gas export duties per tonne).
Purchased Methanol
The cost of sales of purchased methanol consists principally of
the cost of the methanol itself, which is directly related to the
price of methanol at the time of purchase. Accordingly, the
analysis of purchased methanol and its impact on our Adjusted
EBITDA is discussed on a net margin basis.
FORWARD-LOOKING STATEMENTS
Information contained in this First Quarter 2008 Management's
Discussion and Analysis contains forward-looking statements.
Certain material factors or assumptions were applied in drawing the
conclusions or making the forecasts or projections that are
included in these forward-looking statements. Methanex believes
that it has a reasonable basis for making such forward-looking
statements. However, forward-looking statements, by their nature,
involve risks and uncertainties that could cause actual results to
differ materially from those contemplated by the forward-looking
statements. The risks and uncertainties include those attendant
with producing and marketing methanol and successfully carrying out
major capital expenditure projects in various jurisdictions, the
ability to successfully carry out corporate initiatives and
strategies, conditions in the methanol and other industries
including the supply and demand balance for methanol, the success
of natural gas exploration and development activities in southern
Chile and our ability to obtain any additional gas in that region
on commercially acceptable terms, actions of competitors and
suppliers, actions of governments and governmental authorities,
changes in laws or regulations in foreign jurisdictions, world-wide
economic conditions and other risks described in our 2007
Management's Discussion & Analysis and this First Quarter 2008
Management's Discussion and Analysis. Undue reliance should not be
placed on forward-looking statements. They are not a substitute for
the exercise of one's own due diligence and judgment. The outcomes
anticipated in forward-looking statements may not occur and we do
not undertake to update forward-looking statements.
Methanex Corporation
Consolidated Statements of Income (unaudited)
(thousands of US dollars, except number of common shares and per share
amounts)
Three Months Ended
--------------------------
Mar 31 Mar 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revenue $ 735,934 $ 673,932
Cost of sales and operating expenses 608,863 437,047
Depreciation and amortization 23,113 23,739
--------------------------------------------------------------------------
Operating income before undernoted items 103,958 213,146
Interest expense (note 7) (10,690) (11,067)
Interest and other income (expense) (837) 5,072
--------------------------------------------------------------------------
Income before income taxes 92,431 207,151
Income taxes:
Current (23,960) (57,326)
Future (2,987) (5,119)
--------------------------------------------------------------------------
(26,947) (62,445)
--------------------------------------------------------------------------
Net income $ 65,484 $ 144,706
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net income per common share:
Basic $ 0.67 $ 1.38
Diluted $ 0.67 $ 1.37
Weighted average number of common shares
outstanding:
Basic 97,155,124 105,104,712
Diluted 97,534,095 105,597,445
Number of common shares outstanding at
period end 95,588,767 104,199,092
See accompanying notes to consolidated financial statements.
Methanex Corporation
Consolidated Balance Sheets (unaudited)
(thousands of US dollars)
Mar 31 Dec 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 465,164 $ 488,224
Receivables 299,512 401,843
Inventories 348,332 312,143
Prepaid expenses 37,506 20,889
--------------------------------------------------------------------------
1,150,514 1,223,099
Property, plant and equipment (note 4) 1,620,856 1,542,100
Other assets 112,033 104,700
--------------------------------------------------------------------------
$ 2,883,403 $ 2,869,899
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 438,637 $ 466,020
Current maturities on long-term debt (note 6) 15,282 15,282
Current maturities on other long-term liabilities 17,604 16,965
--------------------------------------------------------------------------
471,523 498,267
Long-term debt (note 6) 621,008 581,987
Other long-term liabilities 88,003 74,431
Future income tax liabilities 341,589 338,602
Non-controlling interest 54,858 41,258
Shareholders' equity:
Capital stock 441,727 451,640
Contributed surplus 18,138 16,021
Retained earnings 867,373 876,348
Accumulated other comprehensive loss (20,816) (8,655)
--------------------------------------------------------------------------
1,306,422 1,335,354
--------------------------------------------------------------------------
$ 2,883,403 $ 2,869,899
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Methanex Corporation
Consolidated Statements of Shareholders' Equity (unaudited)
(thousands of US dollars, except number of common shares)
Number of
Common Capital Contributed
Shares Stock Surplus
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance, December 31, 2006 105,800,942 $ 474,739 $ 10,346
Net income - - -
Compensation expense recorded
for stock options - - 9,343
Issue of shares on exercise of
stock options 552,175 9,520 -
Reclassification of grant date
fair value on exercise of
stock options - 3,668 (3,668)
Payments for shares repurchased (8,042,863) (36,287) -
Dividend payments - - -
Other comprehensive loss - - -
--------------------------------------------------------------------------
Balance, December 31, 2007 98,310,254 451,640 16,021
Net income - - -
Compensation expense recorded
for stock options - - 2,893
Issue of shares on exercise of
stock options 128,513 2,392 -
Reclassification of grant date
fair value on exercise of
stock options - 776 (776)
Payments for shares repurchased (2,850,000) (13,081) -
Dividend payments - - -
Other comprehensive loss - - -
--------------------------------------------------------------------------
Balance, March 31, 2008 95,588,767 $ 441,727 $ 18,138
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accumulated
Other Total
Retained Comprehensive Shareholders'
Earnings Loss Equity
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance, December 31, 2006 $ 724,166 $ - $ 1,209,251
Net income 375,667 - 375,667
Compensation expense recorded
for stock options - - 9,343
Issue of shares on exercise of
stock options - - 9,520
Reclassification of grant date
fair value on exercise of
stock options - - -
Payments for shares repurchased (168,440) - (204,727)
Dividend payments (55,045) - (55,045)
Other comprehensive loss - (8,655) (8,655)
--------------------------------------------------------------------------
Balance, December 31, 2007 876,348 (8,655) 1,335,354
Net income 65,484 - 65,484
Compensation expense recorded
for stock options - - 2,893
Issue of shares on exercise of
stock options - - 2,392
Reclassification of grant date
fair value on exercise of
stock options - - -
Payments for shares repurchased (60,995) - (74,076)
Dividend payments (13,464) - (13,464)
Other comprehensive loss - (12,161) (12,161)
--------------------------------------------------------------------------
Balance, March 31, 2008 $ 867,373 $ (20,816) $ 1,306,422
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income (unaudited)
(thousands of US dollars)
Three months ended
--------------------
Mar 31 Mar 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net income $ 65,484 $ 144,706
Other comprehensive loss:
Change in fair value of forward exchange
contracts, net of tax (note 13) (265) (380)
Change in fair value of interest rate swap
contracts, net of tax (note 13) (11,896) -
--------------------------------------------------------------------------
(12,161) (380)
--------------------------------------------------------------------------
Comprehensive income $ 53,323 $ 144,326
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Methanex Corporation
Consolidated Statements of Cash Flows (unaudited)
(thousands of US dollars)
Three Months Ended
--------------------
Mar 31 Mar 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 65,484 $ 144,706
Add (deduct) non-cash items:
Depreciation and amortization 23,113 23,739
Future income taxes 2,987 5,119
Stock-based compensation expense 4,628 3,522
Other 6,427 2,647
Other cash payments (320) (740)
--------------------------------------------------------------------------
Cash flows from operating activities before
undernoted 102,319 178,993
Changes in non-cash working capital (note 11) 8,267 12,109
--------------------------------------------------------------------------
110,586 191,102
--------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for shares repurchased (74,076) (45,272)
Dividend payments (13,464) (13,072)
Proceeds from limited recourse debt (note 6) 39,000 -
Equity contribution by non-controlling interest 13,600 10,850
Repayment of limited recourse debt (312) -
Proceeds on issue of shares on exercise of stock
options 2,392 2,139
Changes in debt service reserve accounts - 2,476
Repayment of other long-term liabilities (4,998) (1,010)
--------------------------------------------------------------------------
(37,858) (43,889)
--------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment (8,151) (13,676)
Plant and equipment construction costs (96,211) (8,586)
GeoPark financing included in other assets (11,390) -
Other assets 306 45
Changes in non-cash working capital (note 11) 19,658 347
--------------------------------------------------------------------------
(95,788) (21,870)
--------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (23,060) 125,343
Cash and cash equivalents, beginning of period 488,224 355,054
--------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 465,164 $ 480,397
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ 16,989 $ 13,423
Income taxes paid, net of amounts refunded $ 28,148 $ 29,120
See accompanying notes to consolidated financial statements.
Methanex Corporation
Notes to Consolidated Financial Statements (unaudited)
Except where otherwise noted, tabular dollar amounts are stated
in thousands of US dollars.
1. Basis of presentation
These interim consolidated financial statements are prepared in
accordance with generally accepted accounting principles in Canada
on a basis consistent with those followed in the most recent annual
consolidated financial statements, except as described in Note 2
below. These accounting principles are different in some respects
from those generally accepted in the United States and the
significant differences are described and reconciled in Note 15.
These interim consolidated financial statements do not include all
note disclosures required by Canadian generally accepted accounting
principles for annual financial statements, and therefore should be
read in conjunction with the annual consolidated financial
statements included in the Methanex Corporation 2007 Annual
Report.
2. Changes in accounting policies
On January 1, 2008, the Company adopted the Canadian Institute
of Chartered Accountants ("CICA") Handbook Section 3031
Inventories, Section 1535 Capital Disclosures, Section 3862
Financial Instruments - Disclosure and Section 3863 Financial
Instruments - Presentation. Section 3031 provides more extensive
guidance on the measurement and disclosure of inventory. The
adoption of this standard has had no impact on the Company's
measurement of inventory. Section 1535 establishes standards for
disclosing information about an entity's capital and how it is
managed. Sections 3862 and 3863 revise and enhance disclosure and
presentation of financial instruments and place increased emphasis
on disclosures about the nature and extent of risks arising from
financial instruments and how those risks are managed.
3. Inventories
Inventories are valued at the lower of cost, determined on a
first-in first-out basis, and estimated net realizable value. The
amount of inventories included in cost of sales and operating
expense and depreciation and amortization during the three months
ended March 31, 2008 was $573 million (2007 - $408 million).
4. Property, plant and equipment
Accumulated Net Book
Cost Depreciation Value
--------------------------------------------------------------------------
--------------------------------------------------------------------------
March 31, 2008
Plant and equipment $ 2,457,040 $ 1,229,619 $ 1,227,421
Egypt plant under construction 323,994 - 323,994
Other 126,033 56,592 69,441
--------------------------------------------------------------------------
$ 2,907,067 $ 1,286,211 $ 1,620,856
--------------------------------------------------------------------------
December 31, 2007
Plant and equipment $ 2,450,175 $ 1,206,730 $ 1,243,445
Egypt plant under construction 227,783 - 227,783
Other 124,779 53,907 70,872
--------------------------------------------------------------------------
$ 2,802,737 $ 1,260,637 $ 1,542,100
--------------------------------------------------------------------------
5. Interest in Atlas joint venture
The Company has a 63.1% joint venture interest in Atlas Methanol
Company (Atlas). Atlas owns a 1.7 million tonne per year methanol
production facility in Trinidad. Included in the consolidated
financial statements are the following amounts representing the
Company's proportionate interest in Atlas:
Mar 31 Dec 31
Consolidated Balance Sheets 2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash and cash equivalents $ 44,516 $ 20,128
Other current assets 105,451 107,993
Property, plant and equipment 259,998 263,942
Other assets 16,329 16,329
Accounts payable and accrued liabilities 67,740 56,495
Long-term debt, including current maturities (note 6) 120,082 119,891
Future income tax liabilities 17,021 16,099
--------------------------------------------------------------------------
Three Months Ended
------------------------
Mar 31 Mar 31
Consolidated Statements of Income 2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revenue $ 82,077 $ 66,334
Expenses 74,634 58,289
--------------------------------------------------------------------------
Income before income taxes 7,443 8,045
Income tax expense (1,902) (1,673)
--------------------------------------------------------------------------
Net income $ 5,541 $ 6,372
--------------------------------------------------------------------------
Three Months Ended
------------------------
Mar 31 Mar 31
Consolidated Statements of Cash Flows 2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash inflows from operating activities $ 24,554 $ 27,038
Cash inflows from financing activities - 2,476
Cash outflows from investing activities (166) (9,958)
--------------------------------------------------------------------------
6. Long-term debt
Mar 31 Dec 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Unsecured notes
8.75% due August 15, 2012 $ 197,874 $ 197,776
6.00% due August 15, 2015 148,384 148,340
--------------------------------------------------------------------------
346,258 346,116
Atlas limited recourse debt facilities 120,082 119,891
Egypt limited recourse debt facilities 155,574 116,574
Other limited recourse debt facilities 14,376 14,688
--------------------------------------------------------------------------
636,290 597,269
Less current maturities (15,282) (15,282)
--------------------------------------------------------------------------
$ 621,008 $ 581,987
--------------------------------------------------------------------------
7. Interest expense:
Three Months Ended
------------------------
Mar 31 Mar 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Interest expense before capitalized interest $ 13,855 $ 11,067
Less: capitalized interest related to Egypt project (3,165) -
--------------------------------------------------------------------------
Interest expense $ 10,690 $ 11,067
--------------------------------------------------------------------------
In 2007, the Company reached financial close and secured limited
recourse debt of $530 million for its joint venture project to
construct a 1.3 million tonne per year methanol facility in Egypt.
For the three months ended March 31, 2008, interest costs related
to this project of $3.2 million were capitalized.
8. Net income per common share:
A reconciliation of the weighted average number of common shares
outstanding is as follows:
Three Months Ended
------------------------
Mar 31 Mar 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Denominator for basic net income per common share 97,155,124 105,104,712
Effect of dilutive stock options 378,971 492,733
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Denominator for diluted net income per common
share 97,534,095 105,597,445
--------------------------------------------------------------------------
--------------------------------------------------------------------------
9. Stock-based compensation:
a) Stock options:
(i) Incentive stock options:
Common shares reserved for outstanding incentive stock options
at March 31, 2008:
Options Options
Denominated in CAD $ Denominated in US $
-------------------------- -------------------------
Number of Weighted Number of Weighted
Stock Average Stock Average
Options Exercise Price Options Exercise Price
---------------------------------------------- -------------------------
---------------------------------------------- -------------------------
Outstanding at
December 31, 2007 104,450 $ 7.79 2,920,981 $ 21.17
Granted - - 1,078,068 28.43
Exercised (19,750) 9.99 (103,763) 19.95
Cancelled (7,000) 11.60 (3,666) 23.36
--------------------------------------------------------------------------
Outstanding at
March 31, 2008 77,700 $ 6.89 3,891,620 $ 23.21
--------------------------------------------------------------------------
Information regarding the incentive stock options outstanding at March 31,
2008 is as follows:
Options Outstanding at Options Exercisable at
March 31, 2008 March 31, 2008
---------------------------------- ---------------------
Weighted
Average Number Number
Remaining of Weighted of Weighted
Contractual Stock Average Stock Average
Range of Life Options Exercise Options Exercise
Exercise Prices (Years) Outstanding Price Exercisable Price
---------------------------------------------------- ---------------------
---------------------------------------------------- ---------------------
Options
denominated in
CAD
$ 3.29 to 9.56 2.3 77,700 $ 6.89 77,700 $ 6.89
---------------------------------------------------------------------------
Options
denominated in
USD
$ 6.45 to 11.56 4.7 196,500 $ 8.61 196,500 $ 8.61
$ 17.85 to 22.52 4.7 1,548,100 20.23 1,045,866 19.96
$ 23.92 to 28.43 6.4 2,147,020 26.70 346,263 24.95
---------------------------------------------------------------------------
5.7 3,891,620 $ 23.21 1,588,629 $ 19.64
---------------------------------------------------------------------------
(ii) Performance stock options:
As at March 31, 2008, there were 45,000 shares (December 31,
2007 - 50,000 shares) reserved for performance stock options with
an exercise price of CAD $4.47. All outstanding performance stock
options have vested and are exercisable.
(iii) Compensation expense related to stock options:
For the three months ended March 31, 2008, compensation expense
related to stock options included in cost of sales and operating
expenses was $2.9 million (2007 - $2.6 million). The fair value of
each stock option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following
assumptions:
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Risk-free interest rate 2.5% 4.5%
Expected dividend yield 2% 2%
Expected life 5 years 5 years
Expected volatility 32% 31%
Expected forfeitures 5% 5%
Weighted average fair value of options granted
(US$ per share) $ 7.52 $ 7.06
--------------------------------------------------------------------------
b) Deferred, restricted and performance share units:
Deferred, restricted and performance share units outstanding at
March 31, 2008 are as follows:
Number of Number of Number of
Deferred Restricted Performance
Share Units Share Units Share Units
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Outstanding at December 31, 2007 359,684 14,482 725,262
Granted 28,942 6,000 330,993
Granted in-lieu of dividends 2,462 106 5,481
Redeemed - - -
Cancelled - - (8,908)
--------------------------------------------------------------------------
Outstanding at March 31, 2008 391,088 20,588 1,052,828
--------------------------------------------------------------------------
Compensation expense for deferred, restricted and performance
share units is initially measured at fair value based on the market
value of the Company's common shares and is recognized over the
related service period. Changes in fair value are recognized in
earnings for the proportion of the service that has been rendered
at each reporting date. The fair value of deferred, restricted and
performance share units at March 31, 2008 was $33.1 million
compared with the recorded liability of $23.5 million. The
difference between the fair value and the recorded liability of
$9.6 million will be recognized over the weighted average remaining
service period of approximately 1.7 years.
For the three months ended March 31, 2008, compensation expense
related to deferred, restricted and performance share units
included in cost of sales and operating expenses was $1.7 million
(2007 - $0.9 million). For the three months ended March 31, 2008,
the compensation expense included a recovery of $1.7 million (2007
- recovery of $1.8 million) related to the effect of the change in
the Company's share price. As at March 31, 2008, the Company's
share price was US$26.17 per share.
10. Retirement plans:
Total net pension expense for the Company's defined benefit and
defined contribution pension plans during the three months ended
March 31, 2008 was $1.9 million (2007 - $1.9 million).
11. Changes in non-cash working capital:
The change in cash flows related to changes in non-cash working
capital for the three months ended March 31, 2008 were as
follows:
Three Months Ended
-------------------------
Mar 31 Mar 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Decrease (increase) in non-cash working capital:
Receivables $ 102,331 $ 43,278
Inventories (36,189) (30,655)
Prepaid expenses (16,617) 2,932
Accounts payable and accrued liabilities (27,383) (5,634)
--------------------------------------------------------------------------
22,142 9,921
Adjustments for items not having a cash effect 5,783 2,535
--------------------------------------------------------------------------
Changes in non-cash working capital having a cash
effect $ 27,925 $ 12,456
--------------------------------------------------------------------------
These changes relate to the following activities:
Operating $ 8,267 $ 12,109
Investing 19,658 347
--------------------------------------------------------------------------
Changes in non-cash working capital $ 27,925 $ 12,456
--------------------------------------------------------------------------
12. Capital Disclosures:
The Company's objectives in managing its liquidity and capital
are to safeguard the Company's ability to continue as a going
concern, to provide financial capacity and flexibility to meet its
strategic objectives, to provide an adequate return to shareholders
commensurate with the level of risk, and to return excess cash
through a combination of dividends and share repurchases.
Mar 31 Dec 31
2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Liquidity:
Cash and cash equivalents $ 465,164 $ 488,224
Undrawn Egypt limited recourse debt facilities 374,426 413,426
Undrawn credit facilities 250,000 250,000
--------------------------------------------------------------------------
Total Liquidity $ 1,089,590 $ 1,151,650
Capitalization:
Unsecured notes $ 346,258 $ 346,116
Limited recourse debt facilities, including
current portion 290,032 251,153
--------------------------------------------------------------------------
Total debt 636,290 597,269
Non-controlling interest 54,858 41,258
Shareholders' equity 1,306,422 1,335,354
--------------------------------------------------------------------------
Total capitalization $ 1,997,570 $ 1,973,881
Total debt to capitalization(1) 32% 30%
Net debt to capitalization(2) 11% 7%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Total debt divided by total capitalization.
(2) Total debt less cash and cash equivalents divided by total
capitalization less cash and cash equivalents.
The Company manages its liquidity and capital structure and
makes adjustments to it in light of changes to economic conditions,
the underlying risks inherent in its operations and capital
requirements to maintain and grow its operations. The strategies
employed by the Company include the issue or repayment of general
corporate debt, the issue of project debt, the payment of dividends
and the repurchase of shares.
The Company is not subject to any statutory capital requirements
and has no commitments to sell or otherwise issue common
shares.
The undrawn credit facility in the amount of $250 million is
subject to certain financial covenants including a debt to
capitalization ratio as defined.
The credit ratings for our unsecured notes at March 31, 2008
were as follows:
Standard & Poor's Rating Services BBB- (stable)
Moody's Investor Services Ba1 (stable)
Fitch Ratings BBB (stable)
13. Financial Instruments:
Under CICA Section 3862 Financial Instruments - Disclosures, the
Company is required to provide disclosures regarding its financial
instruments. Financial instruments are either measured at amortized
cost or fair value. Held-to-maturity investments, loans and
receivables and other financial liabilities are measured at
amortized cost. Held for trading financial assets and liabilities
and available-for-sale financial assets are measured on the balance
sheet at fair value. Derivative financial instruments are
classified as held for trading and are recorded on the balance
sheet at fair value unless exempted as a normal purchase and sale
arrangement. Changes in fair value of derivative financial
instruments are recorded in earnings unless the instruments are
designated as cash flow hedges.
The following table provides the carrying value of each category
of financial assets and liabilities and the related balance sheet
item:
Mar 31 Dec 31
2008 2007
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--------------------------------------------------------------------------
Financial assets:
Held for trading financial assets:
Cash and cash equivalents $ 465,164 $ 488,224
Derivative instruments 589 -
Debt service reserve accounts included in
other assets 16,329 16,329
Loans and receivables:
Receivables 299,512 401,843
GeoPark financing included in other assets 23,861 13,738
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$ 805,455 $ 920,134
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Financial liabilities:
Other financial liabilities:
Accounts payable and accrued liabilities $ 438,637 $ 466,020
Long-term debt, including current portion 636,290 597,269
Capital lease obligation included in other
long-term liabilities 23,579 24,676
Held for trading financial liabilities:
Derivative instruments designated as cash flow
hedges 21,197 8,749
Derivative instruments 1,268 955
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$ 1,120,971 $ 1,097,669
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At March 31, 2008, all of the Company's financial instruments
are recorded on the balance sheet at amortized cost with the
exception of cash and cash equivalents, derivative financial
instruments and debt service reserve accounts included in other
assets which are recorded at fair value.
The Egypt limited recourse debt facilities bear interest at
LIBOR plus a spread. At March 31, 2008, the Company's derivative
financial instruments designated as cash flow hedges included
interest rate swap contracts which swap the LIBOR-based interest
payments on these debt facilities to a fixed LIBOR rate of 5.1% on
approximately half of the projected outstanding debt for the period
September 28, 2007 to March 31, 2015. As at March 31, 2008, these
interest rate swap contracts had outstanding notional amounts of
$150 million. The maximum notional amount under the term of the
interest rate swap contracts is $266 million. The notional amount
increases over the period of expected draw-downs on the Egypt
limited recourse debt and decreases over the expected repayment
period. At March 31, 2008, these interest rate swap contracts had a
negative fair value of $20.5 million (December 31, 2007 - $8.6
million) which is recorded in other long-term liabilities. The mark
to market value of these interest rate swap contracts will
fluctuate until maturity. The Company also designates as cash flow
hedges forward exchange contracts to sell euro at a fixed USD
exchange rate. At March 31, 2008, the Company had outstanding
forward exchange contracts designated as cash flow hedges to sell
euro at a fixed USD exchange rate with a negative fair value of
$0.7 million (December 31, 2007 -$0.1 million) recorded in accounts
payable and accrued liabilities. For the three months ended March
31, 2008, the total unrealized amount of the change in fair value
of these derivative financial instruments with a hedging
relationship was $12.6 million. The effective portion of this
change in fair value of $12.3 million, net of tax recovery of $0.2
million, was recorded to other comprehensive loss. Additionally,
the Company reclassified $0.1 million from other comprehensive loss
to net income related to the fair value of forward exchange
contracts designated as cash flow hedges at December 31, 2007 which
settled during the three months ended March 31, 2008.
At March 31, 2008, the Company's derivative financial
instruments that have not been designated as cash flow hedges
included forward exchange contracts to purchase $28.5 million New
Zealand dollars at an exchange rate of $0.7477 with a positive fair
value of $0.6 million (December 31, 2007 - nil) which is recorded
in receivables and a floating-for-fixed interest rate swap contract
with a negative fair value of $1.3 million (December 31, 2007 -
$1.0 million) recorded in other long-term liabilities. For the
three months ended March 31, 2008, the total change in fair value
of these derivative financial instruments was negative $0.3 million
and this amount was recorded to other expense.
14. Financial Risk Management:
a) Market risks
The Company's operations consist of the production and sale of
methanol. Market fluctuations may result in significant cash flow
and profit volatility risk for the Company. Its worldwide operating
business as well as its investment and financing activities are
affected by changes in methanol and natural gas prices and interest
and foreign exchange rates. The Company seeks to manage and control
these risks primarily through its regular operating and financing
activities and uses derivative instruments to hedge these risks
when deemed appropriate. This is not an exhaustive list of all
risks, nor will the risk management strategies eliminate these
risks.
Methanol price risk
The methanol industry is a highly competitive commodity industry
and methanol prices fluctuate based on supply and demand
fundamentals and other factors. Accordingly it is important to
maintain financial flexibility and we have adopted a prudent
approach to financial management by maintaining a strong balance
sheet including back-up liquidity. We have also entered into
long-term contracts with certain customers where prices are either
fixed or linked to our costs plus a margin.
Natural gas price risk
Natural gas is the primary feedstock for the production of
methanol and the Company has entered into long-term natural gas
supply contracts for its production facilities in Chile, Trinidad
and Egypt and shorter term natural gas supply contracts for its New
Zealand operations. These natural gas supply contracts include base
and variable price components to reduce the commodity price risk
exposure. The variable price component is adjusted by formulas
related to methanol prices above a certain level.
Interest rate risk
Interest rate risk is the risk that the Company suffers
financial loss due to changes in the value of an asset or liability
or in the value of future cash flows due to movements in interest
rates.
The Company's interest rate risk exposure is mainly related to
long term debt obligations. Approximately two thirds of its debt
obligations are subject to interest at fixed rates. We also seek to
limit this risk through the use of interest rate swaps which allows
us to hedge cash flow changes by swapping variable rates of
interest into fixed rates of interest.
Mar 31
Long-Term Debt 2008
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Fixed interest rate debt:
Unsecured notes $ 346,258
Atlas limited recourse debt facilities
(63.1% proportionate share) 76,283
--------------------------------------------------------------------------
$ 422,541
Variable interest rate debt:
Atlas limited recourse debt facilities
(63.1% proportionate share) $ 43,799
Egypt limited recourse debt facilities 155,574
Other limited recourse debt facilities 14,376
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$ 213,749
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The Company has entered into interest rate swap contracts to
hedge the variability in LIBOR-based interest payments on its Egypt
limited recourse debt facilities described in note 13. The notional
amount increases over the period of expected drawdowns on the Egypt
limited recourse debt and decreases over the expected repayment
period. These contracts swap the LIBOR-based interest payments to a
fixed rate of 5.1% on approximately half of the projected
outstanding debt for the period September 28, 2007 to March 31,
2015. The net fair value of cash flow interest rate swaps was a
$21.8 million liability as at March 31, 2008. The change in fair
value of the interest rate swaps assuming a 1% decrease in the
interest rates along the yield curve was an increase in the
liability of $14.5 million as of March 31, 2008.
For fixed interest rate debt, a 100 basis point increase in
interest rates would result in a decrease in fair value of the debt
of $20.0 million. For the variable interest rate debt that is
unhedged, a 100 basis point increase in interest rates would result
in an increase in annual interest payments of $0.6 million.
Foreign currency exchange rate risk
The Company's international operations expose the Company to
foreign currency exchange risks in the ordinary course of business.
Accordingly, the Company has established a policy which provides a
framework for foreign currency management, hedging strategies and
defines the approved hedging instruments. The Company reviews all
significant exposures to foreign currencies arising from operating
and investing activities and hedges exposures if deemed
appropriate.
The dominant currency in which we conduct business is the United
States dollar, which is also our reporting currency.
Methanol is a global commodity chemical which is priced in US
dollars. In certain jurisdictions, however, the transaction price
is set either quarterly or monthly in local currency. Accordingly,
a portion of our revenue is transacted in Canadian dollars, euros
and to a lesser extent other currencies. For the period from when
the price is set in local currency to when the amount due is
collected, we are exposed to declines in the value of these
currencies compared to the United States dollar, which could have
the effect of decreasing the United States dollar equivalent of our
revenue. We also purchase varying quantities of methanol for which
the transaction currency is the euro and to a lesser extent other
currencies. In addition, some of our underlying operating costs and
capital expenditures are incurred in other currencies. We are
exposed to increases in the value of these currencies that could
have the effect of increasing the United States dollar equivalent
of cost of sales and operating expenses and capital
expenditures.
We have elected not to actively manage these exposures at this
time except for our net exposure to euro revenues which we hedge
through forward exchange contracts each quarter when the euro price
for methanol is established.
As of March 31, 2008, we had a net working capital liability of
$28.1 million in non-US dollar currencies. Each 1% strengthening
(weakening) of the US dollar against these currencies would
increase (decrease) the value of net working capital and pre-tax
cash flow by $0.3 million.
b) Liquidity risk
Liquidity risk is the risk that the Company will not have
sufficient funds to meet its liabilities such as the settlement of
financial debt and lease obligations and payment to its suppliers.
The Company maintains liquidity and makes adjustments to it in
light of changes to economic conditions, underlying risks inherent
in its operations and capital requirements to maintain and grow its
operations. At March 31, 2008 the Company holds $465.2 million of
cash and cash equivalents. In addition, the Company has an undrawn
$250 million credit facility that expires in 2010 provided by
highly rated financial institutions.
In addition to the above mentioned sources of liquidity, the
Company constantly monitors funding options available in the
capital markets, as well as trends in the availability and costs of
such funding, with a view to maintaining financial flexibility and
limiting refinancing risks.
c) Credit risk
Counterparty credit risk is the risk that the financial benefits
of contracts with a specific counterparty will be lost if a
counterparty defaults on its obligations under the contract. This
includes any cash amounts owed to the Company by those
counterparties, less any amounts owed to the counterparty by the
Company where a legal right of set-off exists and also includes the
fair values of contracts with individual counterparties which are
recorded in the financial statements.
Trade credit risk
Trade credit risk is defined as an unexpected loss in cash and
earnings if the customer is unable to pay its obligations in due
time or if the value of security provided declines. The Company has
implemented a credit policy which includes approvals for new
customers, annual credit evaluations of all customers and specific
approval for any exposures beyond approved limits. We employ a
variety of risk mitigation alternatives including certain
contractual rights in the event of deterioration in customer credit
quality and various forms of bank and parent company guarantees and
letters of credit to upgrade the credit risk to a credit rating
equivalent better than the stand-alone rating of the counterparty.
Historically trade credit losses have been minimal.
Cash and cash equivalents
In order to manage credit and liquidity risk we invest only in
highly rated investment grade instruments that have maturities of
three months or less. Limits are also established based on the type
of investment, the counterparty and the credit rating.
Derivative financial instruments
In order to manage credit risk, we only enter into derivative
financial instruments with highly rated investment grade
counterparties.
15. United States Generally Accepted Accounting Principles:
The Company follows generally accepted accounting principles in
Canada ("Canadian GAAP") which are different in some respects from
those applicable in the United States and from practices prescribed
by the United States Securities and Exchange Commission ("US
GAAP").
The significant differences between Canadian GAAP and US GAAP
with respect to the Company's consolidated statements of income for
the three months ended March 31, 2008 and 2007 are as follows:
Three Months Ended
----------------------
Mar 31 Mar 31
2008 2007
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--------------------------------------------------------------------------
Net income in accordance with Canadian GAAP $ 65,484 $ 144,706
Add (deduct) adjustments for:
Depreciation and amortization(a) (478) (478)
Stock-based compensation(b) - 165
Uncertainty in income taxes(c) (415) (1,789)
Income tax effect of above adjustments(d) 168 168
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Net income in accordance with US GAAP $ 64,759 $ 142,772
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Per share information in accordance with US GAAP:
Basic net income per share $ 0.67 $ 1.36
Diluted net income per share $ 0.66 $ 1.35
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The significant differences between Canadian GAAP and US GAAP
with respect to the Company's consolidated statements of
comprehensive income for the three months ended March 31, 2008 and
2007 are as follows:
Three Months Ended
March 31, 2008 March 31, 2007
---------------------------------------------------
Canadian GAAP Adjustments US GAAP US GAAP
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Net income $ 65,484 $ (725) $ 64,759 $ 142,772
Change in fair value
of forward exchange
contracts, net of tax (265) - (265) (380)
Change in fair value
of interest rate swap,
net of tax (11,896) - (11,896) -
Change related to
pension, net of tax(e) - 241 241 225
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Comprehensive income $ 53,323 $ (484) $ 52,839 $ 142,617
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a) Business combination:
Effective January 1, 1993, the Company combined its business
with a methanol business located in New Zealand and Chile. Under
Canadian GAAP, the business combination was accounted for using the
pooling-of-interest method. Under US GAAP, the business combination
would have been accounted for as a purchase with the Company
identified as the acquirer. For the three months ended March 31,
2008, an adjustment to increase depreciation expense by $0.5
million (2007 - $0.5 million) was recorded in accordance with US
GAAP.
b) Stock-based compensation:
The Company has 22,350 stock options that are accounted for as
variable plan options under US GAAP because the exercise price of
the stock options is denominated in a currency other than the
Company's functional currency or the currency in which the optionee
is normally compensated. For Canadian GAAP purposes, no
compensation expense has been recorded as these options were
granted in 2001 which is prior to the effective implementation date
for fair value accounting under Canadian GAAP. During the three
months ended March 31, 2008, no adjustment to operating expense
(2007 - decrease of $0.2 million) was recorded in accordance with
US GAAP.
c) Accounting for uncertainty in income taxes:
Effective January 1, 2007, the Company adopted Financial
Accounting Standards Board (FASB) Interpretation No. 48, Accounting
for Uncertainty in Income Taxes -- An Interpretation of FASB
Statement No. 109 (FIN48). FIN 48 clarifies the accounting for
income taxes recognized in a Company's financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes
(SFAS 109). FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return. During the three months ending March 31, 2008, an
adjustment to increase income tax expense by $0.4 million (2007 -
$1.8 million) was recorded in accordance with US GAAP.
d) Income tax accounting:
The income tax differences include the income tax effect of the
adjustments related to accounting differences between Canadian and
US GAAP. During the three months ended March 31, 2008, this
resulted in an adjustment to increase net income by $0.2 million
(2007 - $0.2 million).
e) Defined benefit pension plans:
Effective January 1, 2006, US GAAP requires the Company to
measure the funded status of a defined benefit pension plan at its
balance sheet reporting date and recognize the unrecorded
overfunded or underfunded status as an asset or liability with the
change in that unrecorded funded status recorded to other
comprehensive income. Under US GAAP, all deferred pension amounts
from Canadian GAAP are reclassified to accumulated other
comprehensive income. During the three months ended March 31, 2008,
this resulted in an increase to other comprehensive income of $0.2
million (2007 - $0.2 million) in accordance with US GAAP.
f) Interest in Atlas joint venture:
US GAAP requires interests in joint ventures to be accounted for
using the equity method. Canadian GAAP requires proportionate
consolidation of interests in joint ventures. The Company has not
made an adjustment in this reconciliation for this difference in
accounting principles because the impact of applying the equity
method of accounting does not result in any change to net income or
shareholders' equity. This departure from US GAAP is acceptable for
foreign private issuers under the practices prescribed by the
United States Securities and Exchange Commission.
Methanex Corporation
Quarterly History (unaudited)
Q1 2008 2007 Q4 Q3 Q2 Q1
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METHANOL SALES VOLUMES
(thousands of tonnes)
Company produced 678 4,569 997 1,073 1,360 1,139
Purchased methanol 669 1,453 421 387 269 376
Commission sales (1) 143 590 195 168 89 138
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1,490 6,612 1,613 1,628 1,718 1,653
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METHANOL PRODUCTION
(thousands of tonnes)
Chile 309 1,841 288 233 569 751
Titan, Trinidad 217 861 220 191 225 225
Atlas, Trinidad (63.1%) 293 982 278 290 234 180
New Zealand 120 435 75 122 120 118
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939 4,119 861 836 1,148 1,274
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AVERAGE REALIZED METHANOL PRICE (2)
($/tonne) 545 375 514 270 286 444
($/gallon) 1.64 1.13 1.55 0.81 0.86 1.34
PER SHARE INFORMATION
($ per share)
Basic net income $ 0.67 3.69 1.74 0.24 0.35 1.38
Diluted net income $ 0.67 3.68 1.72 0.24 0.35 1.37
-------------------------------------------------------------------------
2006 Q4 Q3 Q2 Q1
-----------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Company produced 5,310 1,160 1,478 1,351 1,321
Purchased methanol 1,101 288 222 294 297
Commission sales (1) 584 134 176 133 141
-----------------------------------------------------
6,995 1,582 1,876 1,778 1,759
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METHANOL PRODUCTION
(thousands of tonnes)
Chile 3,186 766 666 872 882
Titan, Trinidad 864 229 206 214 215
Atlas, Trinidad (63.1%) 1,057 267 264 273 253
New Zealand 404 111 71 118 104
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5,511 1,373 1,207 1,477 1,454
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AVERAGE REALIZED
METHANOL PRICE (2)
($/tonne) 328 460 305 279 283
($/gallon) 0.99 1.38 0.92 0.84 0.85
PER SHARE INFORMATION
($ per share)
Basic net income 4.43 1.62 1.05 0.75 1.02
Diluted net income 4.41 1.61 1.05 0.75 1.02
------------------------------------------------------
(1) Commission sales represent volumes marketed on a commission basis.
Commission income is included in revenue when earned.
(2) Average realized price is calculated as revenue, net of commissions
earned, divided by the total sales volumes of produced and purchased
methanol.
Contacts: Jason Chesko Director, Investor Relations Methanex
Corporation 604 661 2600 Website: www.methanex.com
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