Methanex Reports Third Quarter 2019 Results
October 30 2019 - 5:03PM
For the third quarter of 2019, Methanex (TSX:MX) (NASDAQ:MEOH)
reported a net loss attributable to Methanex shareholders of $10
million ($0.21 net loss per common share on a diluted basis)
compared to net income of $50 million ($0.51 net income per common
share on a diluted basis) in the second quarter of 2019. Adjusted
EBITDA for the third quarter of 2019 was $90 million and Adjusted
net loss was $21 million ($0.27 Adjusted net loss per common
share). This compares with Adjusted EBITDA of $146 million and
Adjusted net income of $26 million ($0.34 Adjusted net income per
common share) for the second quarter of 2019.
John Floren, President and CEO of Methanex,
commented, "The lower Adjusted EBITDA we recorded in the third
quarter of 2019 primarily reflects a decline in methanol prices
during the quarter which was partially offset by higher sales
volume of Methanex-produced methanol and improved costs compared to
the second quarter, although there were significant costs incurred
related to the Egypt outage. Our average realized price declined by
$54 dollars per tonne to $272 dollars per tonne in the third
quarter of 2019 from $326 dollars per tonne that we realized in the
second quarter. "
"In Louisiana, we have begun construction of our
Geismar 3 plant, which will be a 1.8 million tonne methanol plant
located adjacent to our existing facilities. We expect this project
will deliver outstanding returns based on its substantial capital
and operating cost advantages. We believe we are well positioned to
complete this project as we have a rigorous and well-defined
execution plan, an experienced team in place and a robust and
flexible financing plan. In addition, we continue to make progress
on the debottlenecking opportunities at our existing Geismar 1 and
Geismar 2 facilities to increase production by approximately 10%
over the next couple of years."
"We were very pleased to announce earlier this
month that we reached an agreement for natural gas supply for our
Chile facilities that will underpin approximately 25% of a
two-plant operation through to the end of 2025 and that we
completed the first phase of the major refurbishment of our Chile I
plant. These accomplishments reflect important steps in returning
our assets in Chile back to full operating rates."
"We returned $27 million to shareholders through
our regular dividend in the third quarter. We have $857 million of
cash on the balance sheet at the end of the third quarter. This
amount includes proceeds from the $700 million 10-year notes that
we issued in September 2019 of which $350 million was used,
subsequent to the quarter, to repay existing unsecured notes
originally due on December 15, 2019 and the remaining proceeds are
earmarked to fund Geismar 3 construction expenditures."
"We continue to prudently manage our business by
maintaining a strong balance sheet and sufficient liquidity to
navigate the cyclical nature of our industry. The strategic
investments we have made in our business have strengthened our
asset base, significantly increased our global production capacity,
enhanced our ability to service customers and substantially
improved our earnings capability and cash generation potential over
a wide range of prices."
"Our balanced approach to capital allocation
remains unchanged. We believe we are well positioned to meet our
financial commitments, execute our growth projects in Louisiana and
Chile, and deliver on our commitment to return excess cash to
shareholders through dividends and share repurchases," Floren
said.
FURTHER INFORMATIONThe information set forth in
this news release summarizes Methanex's key financial and
operational data for the third quarter of 2019. It is not a
complete source of information for readers and is not in any way a
substitute for reading the third quarter 2019 Management’s
Discussion and Analysis ("MD&A") dated October 30, 2019
and the unaudited condensed consolidated interim financial
statements for the period ended September 30, 2019, both of
which are available from the Investor Relations section of our
website at www.methanex.com. The MD&A and the unaudited
condensed consolidated interim financial statements for the period
ended September 30, 2019 are also available on the Canadian
Securities Administrators' SEDAR website at www.sedar.com and
on the United States Securities and Exchange Commission's EDGAR
website at www.sec.gov.
FINANCIAL AND OPERATIONAL DATA
|
Three Months Ended |
|
Nine Months Ended |
($
millions except per share amounts and where noted) |
Sep 30 2019 |
|
Jun 30 2019 |
|
Sep 30 2018 |
|
|
Sep 30 2019 |
|
Sep 30 2018 |
|
Production (thousands of
tonnes) (attributable to Methanex shareholders) |
1,837 |
|
1,820 |
|
1,735 |
|
|
5,465 |
|
5,326 |
|
Sales volume (thousands of
tonnes) |
|
|
|
|
|
|
Methanex-produced methanol |
1,965 |
|
1,669 |
|
1,790 |
|
|
5,555 |
|
5,403 |
|
Purchased methanol |
680 |
|
716 |
|
802 |
|
|
1,869 |
|
2,124 |
|
Commission sales |
179 |
|
216 |
|
279 |
|
|
724 |
|
929 |
|
Total sales volume 1 |
2,824 |
|
2,601 |
|
2,871 |
|
|
8,148 |
|
8,456 |
|
|
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
330 |
|
391 |
|
486 |
|
|
370 |
|
480 |
|
Average realized price ($ per
tonne) 3 |
272 |
|
326 |
|
413 |
|
|
309 |
|
407 |
|
|
|
|
|
|
|
|
Revenue |
650 |
|
734 |
|
1,044 |
|
|
2,126 |
|
2,955 |
|
Adjusted revenue |
723 |
|
777 |
|
1,067 |
|
|
2,299 |
|
3,025 |
|
Adjusted EBITDA |
90 |
|
146 |
|
293 |
|
|
430 |
|
874 |
|
Cash flows from operating
activities |
71 |
|
117 |
|
228 |
|
|
401 |
|
762 |
|
Adjusted net income
(loss) |
(21 |
) |
26 |
|
152 |
|
|
62 |
|
466 |
|
Net income (loss)
(attributable to Methanex shareholders) |
(10 |
) |
50 |
|
128 |
|
|
79 |
|
408 |
|
|
|
|
|
|
|
|
Adjusted net income (loss) per
common share |
(0.27 |
) |
0.34 |
|
1.92 |
|
|
0.80 |
|
5.71 |
|
Basic net income (loss) per
common share |
(0.13 |
) |
0.65 |
|
1.62 |
|
|
1.03 |
|
5.01 |
|
Diluted net income (loss) per
common share |
(0.21 |
) |
0.51 |
|
1.61 |
|
|
0.88 |
|
5.00 |
|
|
|
|
|
|
|
|
Common share information
(millions of shares) |
|
|
|
|
|
|
Weighted average number of common shares |
76 |
|
77 |
|
79 |
|
|
77 |
|
82 |
|
Diluted weighted average number of common shares |
76 |
|
77 |
|
79 |
|
|
77 |
|
82 |
|
Number of common shares outstanding, end of period |
76 |
|
76 |
|
78 |
|
|
76 |
|
78 |
|
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"). No Tolling Volume has been produced in 2019. There were
20,000 MT of Tolling Volume in the third quarter of 2018 and
108,000 MT of Tolling Volume for the nine months ended September
30, 2018. |
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 2019 |
|
Jun 30 2019 |
|
Sep 30 2018 |
|
|
Sep 30 2019 |
|
Sep 30 2018 |
|
Net income (loss) (attributable to Methanex shareholders) |
$ |
(10 |
) |
$ |
50 |
|
$ |
128 |
|
|
$ |
79 |
|
$ |
408 |
|
Mark-to-market impact of
share-based compensation, net of tax |
(11 |
) |
(24 |
) |
24 |
|
|
(17 |
) |
58 |
|
Adjusted net income (loss) |
$ |
(21 |
) |
$ |
26 |
|
$ |
152 |
|
|
$ |
62 |
|
$ |
466 |
|
Diluted weighted average
shares outstanding (millions) |
76 |
|
77 |
|
79 |
|
|
77 |
|
82 |
|
Adjusted net income (loss) per common share |
$ |
(0.27 |
) |
$ |
0.34 |
|
$ |
1.92 |
|
|
$ |
0.80 |
|
$ |
5.71 |
|
- We recorded a net loss attributable to Methanex shareholders of
$10 million during the third quarter of 2019 compared to net income
of $50 million in the second quarter of 2019. The decrease in
earnings is primarily due to a decrease in our average realized
methanol price and the change in the mark-to-market impact of
share-based compensation, partially offset by the impact of higher
sales volume of Methanex-produced methanol and improved costs
compared to the second quarter.
- We recorded Adjusted EBITDA of $90 million for the third
quarter of 2019 compared with $146 million for the second quarter
of 2019. The decrease in Adjusted EBITDA for the third quarter of
2019 compared to the second quarter of 2019 is primarily due to the
decrease in our average realized methanol price, partially offset
by the impact of higher sales volume of Methanex-produced methanol
and improved costs compared to the second quarter. Adjusted EBITDA
for 2019 includes the adoption of IFRS 16 which increased Adjusted
EBITDA for the third quarter of 2019 by $26 million, the second
quarter of 2019 by $27 million and the nine month period ended
September 30, 2019 by $81 million. The 2018 comparative periods
have not been adjusted for IFRS 16.
- Adjusted net loss was $21 million for the third quarter of 2019
compared to Adjusted net income of $26 million for the second
quarter of 2019. The decrease in Adjusted net income is primarily
due to a decrease in average realized price to $272 per tonne for
the third quarter of 2019 from $326 per tonne for the second
quarter of 2019. This was partially offset by the impact of higher
sales of Methanex-produced methanol and improved costs compared to
the second quarter.
- We produced 1,837,000 tonnes in the third quarter of 2019
compared to 1,820,000 tonnes for the second quarter of 2019.
- Total sales volume for the third quarter of 2019 was 2,824,000
tonnes compared with 2,601,000 tonnes for the second quarter of
2019. Sales of Methanex-produced methanol were 1,965,000 tonnes in
the third quarter of 2019 compared with 1,669,000 tonnes in the
second quarter of 2019. In the third quarter of 2019, sales of
Methanex-produced methanol exceeded production, resulting in a
128,000 tonne draw of produced methanol inventory. This compares to
the second quarter of 2019, where production exceeded sales of
Methanex-produced methanol by 151,000 tonnes. An inventory build or
draw is a result of the timing of produced and purchased methanol
volume in and out of inventory.
- On July 19, 2019, we reached a final investment decision to
construct a 1.8 million tonne facility in Geismar, Louisiana
adjacent to our Geismar 1 and Geismar 2 facilities. The cost of the
Geismar 3 project is expected to be between $1.3 to $1.4 billion,
excluding capitalized interest, with operations targeted for the
second half of 2022. Capitalized costs of approximately $85 million
have been incurred for the project, life to date.
- We recently announced an agreement for natural gas supply to
our Chile facilities that will underpin approximately 25% of a
two-plant operation through to the end of 2025. We expect that our
current gas agreements will allow for a two-plant operation in
Chile during the southern hemisphere summer months and up to a
maximum of 75% of a two-plant operation annually.
- During the third quarter of 2019, we finalized committed
financing for the Geismar 3 project with a new $800 million
construction credit facility and a $300 million revolving credit
facility, both with a syndicate of highly rated financial
institutions and expiry in July 2024. Both facilities remain
undrawn.
- During the third quarter of 2019, we issued $700 million of
unsecured notes with a 5.25% coupon due December 2029, of which
$350 million was used, subsequent to the quarter, to repay the $350
million unsecured notes originally due December 2019. The remaining
proceeds are earmarked to fund Geismar 3 construction
expenditures.
- During the third quarter of 2019 we paid a $0.36 per common
share quarterly dividend to shareholders for a total of $27
million.
- On March 18, 2019 we commenced a normal course issuer bid to
purchase up to 3,863,298 common shares. To date, we have
repurchased 1,069,893 common shares under the bid for $52.8
million. No shares were repurchased in the third quarter of
2019.
PRODUCTION HIGHLIGHTS
|
Q3 2019 |
Q2 2019 |
Q3 2018 |
YTD Q3 2019 |
YTD Q3 2018 |
(thousands of tonnes) |
Operating Capacity 1 |
Production |
Production |
Production |
Production |
Production |
New Zealand 2 |
608 |
469 |
446 |
478 |
1,352 |
1,217 |
USA (Geismar) |
500 |
514 |
530 |
520 |
1,449 |
1,551 |
Trinidad (Methanex interest)
3 |
500 |
474 |
384 |
353 |
1,287 |
1,254 |
Chile 4 |
430 |
146 |
290 |
112 |
677 |
406 |
Egypt (50% interest) |
158 |
85 |
15 |
128 |
241 |
458 |
Canada (Medicine Hat) |
150 |
149 |
155 |
144 |
459 |
440 |
|
2,346 |
1,837 |
1,820 |
1,735 |
5,465 |
5,326 |
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. 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 operating capacity of our Chile I and IV facilities is 1.7
million tonnes annually assuming access to natural gas feedstock.
For 2018, our operating capacity in Chile was 0.9 million tonnes.
In the fourth quarter of 2018 we restarted our 0.8 million tonne
Chile IV plant that had been idle since 2007. |
|
|
Key production and operational highlights during
the third quarter include:
- New Zealand produced 469,000 tonnes compared with 446,000
tonnes in the second quarter of 2019. We expect to receive higher
gas deliveries in the fourth quarter compared to the third quarter
of 2019. While there is significant field development work underway
in the upstream sector, we do not expect to see the benefit of this
next year. Based on our current contracted gas position, we are
revising our guidance to approximately 80% operating rates in 2020,
or approximately 1.9 million tonnes.
- Geismar produced 514,000 tonnes during the third quarter of
2019 compared to 530,000 tonnes during the second quarter of 2019.
Production in Geismar continues to be strong.
- Trinidad produced 474,000 tonnes (Methanex interest) compared
with 384,000 tonnes in the second quarter of 2019. Production in
Trinidad is higher in the third quarter of 2019 compared to the
second quarter of 2019 as production in the second quarter was
impacted by the turnaround completed for the Titan plant in April,
and an unplanned production outage in May at the Atlas plant. For
Trinidad, we continue to guide to approximately 85% operating
rates.
- The Chile facilities produced 146,000 tonnes during the third
quarter of 2019 compared to 290,000 tonnes during the second
quarter of 2019. Production for the third quarter of 2019 is lower
compared to the second quarter of 2019 as only the Chile IV plant
operated during the quarter. Late in the second quarter of 2019, we
commenced the first phase of our refurbishment of our Chile I
plant, scheduled to match expected lower natural gas deliveries
during the southern hemisphere winter months. The Chile I plant
restarted in early October. We plan to complete the remaining
refurbishment activities for Chile I over the coming years.
- The Egypt facility produced 170,000 tonnes (Methanex interest -
85,000 tonnes) in the third quarter of 2019 compared with 30,000
tonnes (Methanex interest - 15,000 tonnes) in the second quarter of
2019. The Egypt facility restarted in August, following the outage
that commenced in the second quarter of 2019. The losses related to
the outage in the second and third quarters are expected to be
partially covered by insurance. No insurance recoveries have been
recorded to date.
- Medicine Hat produced 149,000 tonnes during the third quarter
of 2019 compared to 155,000 tonnes during the second quarter of
2019.
CONFERENCE CALLA conference call is scheduled
for October 31, 2019 at 11:00 am ET (8:00 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 and will also be available following the call. A
playback version of the conference call will be available until
November 15, 2019 at (905) 694-9451, or toll free at (800)
408-3053. The passcode for the playback version is 2192370#.
ABOUT METHANEXMethanex 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 WARNINGThis third
quarter 2019 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 2019 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 MEASURESThe Company has used the terms
Adjusted EBITDA, Adjusted net income (loss), Adjusted net income
(loss) per common share, Adjusted revenue and operating income
(loss) 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 15 of the
Company's MD&A for the period ended September 30, 2019 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:
Kim CampbellManager, Investor RelationsMethanex
Corporation604-661-2600
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