Methanex Reports Third Quarter 2017 Earnings
October 25 2017 - 5:24PM
For the third quarter of 2017, Methanex (TSX:MX) (NASDAQ:MEOH)
reported net income attributable to Methanex shareholders of $32
million ($0.38 per common share on a diluted basis) compared to net
income of $84 million ($0.89 per common share on a diluted basis)
in the second quarter of 2017. Adjusted EBITDA for the third
quarter of 2017 was $143 million and Adjusted net income was $52
million ($0.60 per common share). This compares with Adjusted
EBITDA of $174 million and Adjusted net income of $74 million
($0.85 per common share) for the second quarter of 2017.
John Floren, President and CEO of Methanex
commented, "The lower Adjusted EBITDA and earnings in the third
quarter primarily reflects our lower average realized price during
the quarter. Our average realized methanol price decreased $20 per
tonne in the quarter to $307 per tonne, which compares to $327 per
tonne realized in the second quarter of 2017. We achieved record
sales volume in the third quarter of 2017 with sales of 2.8 million
tonnes, reflecting a 12% increase over the second quarter of 2017.
As we enter the fourth quarter, we are encouraged to see an
improvement in methanol prices, supported by healthy methanol
demand."
"During the quarter we returned $109 million to
shareholders through dividends and share repurchases. To date we
have repurchased 5,970,000 common shares, of the 6,152,358 common
shares approved, for approximately $277 million since commencement
of our normal course issuer bid on March 13, 2017, illustrating the
Company's commitment to return excess cash to shareholders. We
expect to complete the current repurchase program by the end of
October 2017."
"We continue to progress discussions to contract
additional gas supply in Chile and Argentina and remain optimistic
that our underutilized 1.7 million tonne Chile facilities represent
a very low capital cost growth opportunity for Methanex due to the
significant progress in developing natural gas reserves in the
area. We have low capital and financing requirements in the medium
term, and we have the ability to generate significant free cash
flow at a wide range of methanol prices.
We recently extended the term of our revolving
credit facility to December 2022 to maintain our strong liquidity
position. With $307 million of cash on hand at the end of the third
quarter, a revolving credit facility, a robust balance sheet and
strong cash generation capability, we believe we are well
positioned to meet our financial commitments, pursue our near-term
growth opportunities in Chile and deliver on our commitment to
return excess cash to shareholders through dividends and share
repurchases," Floren said.
FURTHER INFORMATIONThe
information set forth in this news release summarizes Methanex's
key financial and operational data for the third quarter of 2017.
It is not a complete source of information for readers and is not
in any way a substitute for reading the third quarter 2017
Management’s Discussion and Analysis ("MD&A") dated
October 25, 2017 and the unaudited condensed consolidated
interim financial statements for the period ended
September 30, 2017, both of which are available from the
Investor Relations section of our website at www.methanex.com. The
MD&A and the unaudited condensed consolidated interim financial
statements for the period ended September 30, 2017 are also
available on the Canadian Securities Administrators' SEDAR website
at www.sedar.com and on the United States Securities and
Exchange Commission's EDGAR website at www.sec.gov.
FINANCIAL AND OPERATIONAL DATA
|
Three Months Ended |
|
Nine Months Ended |
($
millions except per share amounts and where noted) |
Sep 30 2017 |
|
Jun 30 2017 |
|
Sep 30 2016 |
|
|
Sep 30 2017 |
|
Sep 30 2016 |
|
Production (thousands
of tonnes) (attributable to Methanex shareholders) |
1,765 |
|
1,614 |
|
1,749 |
|
|
5,245 |
|
5,158 |
|
Sales volume (thousands
of tonnes) |
|
|
|
|
|
|
Methanex-produced methanol |
1,753 |
|
1,790 |
|
1,860 |
|
|
5,299 |
|
5,078 |
|
Purchased
methanol |
757 |
|
387 |
|
411 |
|
|
1,656 |
|
1,366 |
|
Commission sales |
261 |
|
297 |
|
205 |
|
|
862 |
|
513 |
|
Total
sales volume 1 |
2,771 |
|
2,474 |
|
2,476 |
|
|
7,817 |
|
6,957 |
|
|
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
351 |
|
398 |
|
272 |
|
|
394 |
|
268 |
|
Average realized price
($ per tonne) 3 |
307 |
|
327 |
|
236 |
|
|
332 |
|
230 |
|
|
|
|
|
|
|
|
Revenue |
720 |
|
669 |
|
510 |
|
|
2,199 |
|
1,413 |
|
Adjusted revenue |
775 |
|
716 |
|
537 |
|
|
2,322 |
|
1,483 |
|
Adjusted EBITDA |
143 |
|
174 |
|
74 |
|
|
584 |
|
148 |
|
Cash flows from
operating activities |
131 |
|
250 |
|
74 |
|
|
602 |
|
178 |
|
Adjusted net income
(loss) |
52 |
|
74 |
|
(1 |
) |
|
266 |
|
(56 |
) |
Net income (loss)
(attributable to Methanex shareholders) |
32 |
|
84 |
|
(11 |
) |
|
248 |
|
(37 |
) |
|
|
|
|
|
|
|
Adjusted net income
(loss) per common share |
0.60 |
|
0.85 |
|
(0.01 |
) |
|
3.03 |
|
(0.63 |
) |
Basic net income (loss)
per common share |
0.38 |
|
0.96 |
|
(0.12 |
) |
|
2.83 |
|
(0.42 |
) |
Diluted net income
(loss) per common share |
0.38 |
|
0.89 |
|
(0.12 |
) |
|
2.83 |
|
(0.42 |
) |
|
|
|
|
|
|
|
Common share
information (millions of shares) |
|
|
|
|
|
|
Weighted
average number of common shares |
86 |
|
88 |
|
90 |
|
|
88 |
|
90 |
|
Diluted
weighted average number of common shares |
86 |
|
88 |
|
90 |
|
|
88 |
|
90 |
|
Number of common shares outstanding, end of period |
85 |
|
87 |
|
90 |
|
|
85 |
|
90 |
|
|
1 Methanex-produced methanol represents our
equity share of volume produced at our facilities and excludes
volume marketed on a commission basis related to the 36.9% of the
Atlas facility and 50% of the Egypt facility that we do not own.
Methanex-produced methanol includes any volume produced by Chile
using natural gas supplied from Argentina under a tolling
arrangement ("Tolling Volume"). There has been no Tolling Volume
produced since the fourth quarter of 2015.2 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, excluding commissions
earned and the Egypt non-controlling interest share of revenue, but
including an amount representing our share of Atlas revenue,
divided by the total sales volume of Methanex-produced and
purchased methanol, but excluding Tolling Volume. |
|
A reconciliation from net income (loss)
attributable to Methanex shareholders to Adjusted net income (loss)
and the calculation of Adjusted net income (loss) per common share
is as follows:
|
Three Months Ended |
|
Nine Months Ended |
($
millions except number of shares and per share amounts) |
Sep 30 2017 |
|
Jun 30 2017 |
|
Sep 30 2016 |
|
|
Sep 30 2017 |
|
Sep 30 2016 |
|
Net income (loss)
(attributable to Methanex shareholders) |
$ |
32 |
|
$ |
84 |
|
$ |
(11 |
) |
|
$ |
248 |
|
$ |
(37 |
) |
Mark-to-market impact
of share-based compensation, net of tax |
20 |
|
(10 |
) |
10 |
|
|
18 |
|
2 |
|
Argentina gas
settlement, net of tax |
— |
|
— |
|
— |
|
|
— |
|
(21 |
) |
Adjusted net income (loss) |
$ |
52 |
|
$ |
74 |
|
$ |
(1 |
) |
|
$ |
266 |
|
$ |
(56 |
) |
Diluted weighted
average shares outstanding (millions) |
86 |
|
88 |
|
90 |
|
|
88 |
|
90 |
|
Adjusted
net income (loss) per common share |
$ |
0.60 |
|
$ |
0.85 |
|
$ |
(0.01 |
) |
|
$ |
3.03 |
|
$ |
(0.63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- We recorded net income attributable to Methanex shareholders of
$32 million during the third quarter of 2017 compared to net income
of $84 million in the second quarter of 2017. The decrease in
earnings is primarily due to a decrease in our average realized
methanol price during the third quarter and the impact on
share-based compensation expense due to changes in the Methanex
share price.
- We recorded Adjusted EBITDA of $143 million for the third
quarter of 2017 compared with $174 million for the second quarter
of 2017. Adjusted net income was $52 million for the third quarter
of 2017 compared to Adjusted net income of $74 million for the
second quarter of 2017. The decrease in Adjusted EBITDA and
Adjusted net income is primarily due to a decrease in our average
realized methanol price to $307 per tonne for the third quarter of
2017 from $327 per tonne for the second quarter of 2017.
- Production for the third quarter of 2017 was 1,765,000 tonnes
compared with 1,614,000 tonnes for the second quarter of 2017.
- Total sales volume for the third quarter of 2017 was a record
2,771,000 tonnes compared with 2,474,000 tonnes for the second
quarter of 2017. Sales of Methanex-produced methanol were 1,753,000
tonnes in the third quarter of 2017 compared with 1,790,000 tonnes
in the second quarter of 2017.
- Cash flows from operating activities in the third quarter of
2017 were $131 million compared with $250 million for the second
quarter of 2017, a decrease of $119 million. We generated cash
flows from operating activities before changes in non-cash working
capital of $151 million during the third quarter of 2017 compared
with $178 million in the second quarter of 2017. The decrease of
$27 million is primarily the result of the impact of lower realized
methanol prices.
- Our planned capital expenditures directed towards maintenance,
turnarounds and catalyst changes for operations, including our
63.1% share of Atlas and 50% of Egypt, is currently estimated to be
approximately $20 million to the end of 2017.
- During the third quarter of 2017 we repurchased 1,774,800
common shares for $83 million. To date we have repurchased
5,970,000 common shares under the current normal course issuer bid
for approximately $277 million. We expect to complete the current
repurchase program by the end of October 2017.
- During the third quarter of 2017 we paid a $0.30 per common
share dividend to shareholders for a total of $26
million.
- In October 2017, we renewed and extended our $300 million
revolving credit facility for a five year term to December
2022.
PRODUCTION HIGHLIGHTS
|
Q3 2017 |
|
|
|
Q2
2017 |
|
Q3
2016 |
|
|
YTD Q3 2017 |
|
YTD Q3
2016 |
|
(thousands of tonnes) |
Operating Capacity 1 |
|
Production |
|
Production |
|
Production |
|
|
Production |
|
Production |
|
New Zealand 2 |
608 |
|
502 |
|
350 |
|
559 |
|
|
1,385 |
|
1,645 |
|
Geismar (USA) |
500 |
|
499 |
|
437 |
|
519 |
|
|
1,429 |
|
1,529 |
|
Trinidad (Methanex interest) 3 |
500 |
|
457 |
|
449 |
|
420 |
|
|
1,302 |
|
1,150 |
|
Egypt (50% interest) |
158 |
|
71 |
|
159 |
|
69 |
|
|
389 |
|
197 |
|
Medicine Hat (Canada) |
150 |
|
158 |
|
159 |
|
114 |
|
|
435 |
|
396 |
|
Chile 4 |
220 |
|
78 |
|
60 |
|
68 |
|
|
305 |
|
241 |
|
|
2,136 |
|
1,765 |
|
1,614 |
|
1,749 |
|
|
5,245 |
|
5,158 |
|
|
1 Operating capacity includes only those
facilities which are currently capable of operating, but excludes
any portion of an asset that is underutilized due to a lack of
natural gas feedstock over a prolonged period of time. Our current
annual operating capacity is 8.5 million tonnes, including 0.9
million tonnes related to our Chile operations. The operating
capacity of our production facilities may be higher than original
nameplate capacity as, over time, these figures have been adjusted
to reflect ongoing operating efficiencies at these facilities.
Actual production for a facility in any given year may be higher or
lower than operating capacity due to a number of factors, including
natural gas composition or the age of the facility's
catalyst. 2 The operating capacity of New Zealand is made
up of the two Motunui facilities and the Waitara Valley
facility.3 The operating capacity of Trinidad is made up of
the Titan (100% interest) and Atlas (63.1% interest)
facilities.4 The production capacity of our Chile I and IV
facilities is 1.7 million tonnes annually assuming access to
natural gas feedstock. |
|
Key production and operational highlights during
the third quarter include:
- New Zealand production was 502,000 tonnes compared with 350,000
tonnes in the second quarter of 2017. During the second quarter of
2017 production was impacted mainly as a result of a planned
turnaround at the Motunui 1 facility.
- Geismar production rates were strong following planned
maintenance activities completed at Geismar 1 in May and at Geismar
2 in mid-July 2017, with production of 499,000 tonnes.
- Trinidad production was 457,000 tonnes (Methanex interest). We
continue to experience gas curtailments in Trinidad with production
in the third quarter of 2017 at similar levels compared to the
second quarter of 2017.
- Egypt production was 71,000 tonnes (Methanex share). During the
third quarter of 2017 production was lower as a result of a planned
turnaround. Following the turnaround, the plant restarted and
continued to run at high rates for the remainder of the
quarter.
- Medicine Hat has continued to run at high rates with production
of 158,000 tonnes.
- Chile production was 78,000 tonnes, produced using only natural
gas supply from Chile. For the second consecutive year we
produced methanol throughout the southern hemisphere winter months,
a period of typically lower gas deliveries.
CONFERENCE CALL
A conference call is scheduled for October 26,
2017 at 12:00 noon ET (9:00 am PT) to review these third quarter
results. To access the call, dial the conferencing operator ten
minutes prior to the start of the call at (416) 340-2216, or toll
free at (800) 273-9672. A simultaneous audio-only webcast of the
conference call can be accessed from our website at
www.methanex.com. A playback version of the conference call will be
available until November 9, 2017 at (905) 694-9451, or toll free at
(800) 408-3053. The passcode for the playback version is 3369750#.
The webcast will be available on our website for two weeks
following the call.
ABOUT METHANEX
Methanex is a Vancouver-based, publicly traded
company and is the world’s largest producer and supplier of
methanol to major international markets. Methanex shares are listed
for trading on the Toronto Stock Exchange in Canada under the
trading symbol "MX" and on the NASDAQ Global Market in the United
States under the trading symbol "MEOH".
FORWARD-LOOKING INFORMATION WARNING
This third quarter 2017 press release contains
forward-looking statements with respect to us and the chemical
industry. By its nature, forward-looking information is subject to
numerous risks and uncertainties, some of which are beyond the
Company's control. Readers are cautioned that undue reliance should
not be placed on forward-looking information as actual results may
vary materially from the forward-looking information. Methanex does
not undertake to update, correct or revise any forward-looking
information as a result of any new information, future events or
otherwise, except as may be required by applicable law. Refer to
Forward-Looking Information Warning in the third quarter 2017
Management's Discussion and Analysis for more information which is
available from the Investor Relations section of our website at
www.methanex.com, the Canadian Securities Administrators' SEDAR
website at www.sedar.com and on the United States Securities
and Exchange Commission's EDGAR website at www.sec.gov.
NON-GAAP MEASURES
The Company has used the terms Adjusted EBITDA,
Adjusted net income (loss), Adjusted net income (loss) per common
share, Adjusted revenue and operating income throughout this
document. These items are non-GAAP measures that do not have any
standardized meaning prescribed by GAAP. These measures represent
the amounts that are attributable to Methanex Corporation
shareholders and are calculated by excluding the mark-to-market
impact of share-based compensation as a result of changes in our
share price and the impact of certain items associated with
specific identified events. Refer to Additional Information -
Supplemental Non-GAAP measures on page 13 of the Company's MD&A
for the period ended September 30, 2017 for reconciliations to
the most comparable GAAP measures. Unless otherwise indicated, the
financial information presented in this release is prepared in
accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB").
For further information, contact:
Sandra DaycockDirector, Investor RelationsMethanex
Corporation604-661-2600
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