For the second quarter of 2020, Methanex (TSX:MX) (NASDAQ:MEOH)
reported a net loss attributable to Methanex shareholders of $65
million ($0.85 net loss per common share on a diluted basis)
compared to net income of $23 million ($0.21 net income per common
share on a diluted basis) in the first quarter of 2020. Adjusted
EBITDA for the second quarter of 2020 was $32 million and Adjusted
net loss was $64 million ($0.84 Adjusted net loss per common
share). This compares with Adjusted EBITDA of $138 million and
Adjusted net income of $8 million ($0.10 Adjusted net income per
common share) for the first quarter of 2020.
Second Quarter ResultsWe
estimate that global methanol demand declined by approximately 5%
in the second quarter of 2020 compared to the first quarter.
Methanol demand declined significantly in most parts of the world,
other than China, due to impacts from the COVID-19 pandemic and
lower oil price environment.
We recorded substantially lower Adjusted EBITDA
in the second quarter of 2020, compared to the first quarter, due
to a lower average realized price and lower sales of
Methanex-produced methanol, which was partially offset by lower
production costs and selling, general and administrative costs. In
addition, in a declining methanol price environment, our margins
tend to be lower than in a stable price environment due to
inventory timing differences.
Business and Financial
UpdateJohn Floren, President and CEO of Methanex,
commented, “Our number one priority remains the safety of our
employees, contractors and communities where we do business and we
continue to take extensive preventative measures across our
operations and offices during this uncertain time. We have
demonstrated the resilience of our business model as our
manufacturing operations and global supply chain continue to run
effectively. I continue to be incredibly proud of our team who have
done an outstanding job by maintaining secure and reliable methanol
supply to our customers around the world."
As we previously announced, we have taken a
number of steps to protect our business to respond to lower
methanol demand and further strengthen our balance sheet and
preserve liquidity by idling our Titan plant in Trinidad and our
Chile IV plant, deferring approximately $500 million in capital
spending on the Geismar 3 project for up to 18 months, reducing our
dividend by approximately $100 million on an annual basis and
reducing 2020 maintenance capital spending by $30 million. We have
a flexible cost structure as approximately 60% of our natural gas
supply is linked to methanol price which reduces our operating
costs in a low methanol price environment. In addition, we continue
to actively manage our operating costs across the organization and
realized a further $8 million in savings in the second quarter
compared to the first quarter.
We ended the quarter with a strong liquidity
position of $783 million in cash on the balance sheet. We have no
near-term debt maturities. We also recently announced that we
amended our $300 million committed revolving credit facility and
$800 million non-revolving construction facility, which provides
meaningful financial covenant relief. Following this amendment, we
repaid $100 million of the amount outstanding on our revolving
credit facility in the second quarter and that amount remains
available as additional liquidity, if required.
Given the uncertainty in the broader economic
environment, we continue to plan for a wide range of scenarios,
including ones where we see a prolonged period of lower methanol
demand and continued low methanol prices. We are focused on cash
preservation and continue to evaluate all options to ensure we
maintain financial capacity and flexibility to navigate the current
environment and emerge stronger over the cycle as conditions
improve.
OutlookMr. Floren, President
and CEO of Methanex concluded, “We have begun to see some early
signs of improving methanol demand with global economic activity
beginning to recover and with oil pricing stabilizing in recent
weeks. However, the near-term outlook remains uncertain as we
believe that it is not possible to accurately predict the full
extent and duration of the COVID-19 pandemic and lower oil price
environment.”
"We remain focused on operating our plants
safely and reliably, delivering secure and reliable supply to our
customers and protecting our balance sheet during this very
uncertain time. We believe that with our resilient business model
and strong liquidity, we are well-positioned to sustain our
business in this uncertain environment and generate significant
long-term value when market conditions recover.”
FURTHER INFORMATIONThe
information set forth in this news release summarizes Methanex's
key financial and operational data for the second quarter of 2020.
It is not a complete source of information for readers and is not
in any way a substitute for reading the second quarter 2020
Management’s Discussion and Analysis ("MD&A") dated
July 29, 2020 and the unaudited condensed consolidated interim
financial statements for the period ended June 30, 2020, 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 June 30, 2020 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 |
|
Six Months Ended |
($ millions except per share amounts and where noted) |
Jun 30 2020 |
|
Mar 31 2020 |
Jun 30 2019 |
|
Jun 30 2020 |
|
Jun 30 2019 |
Production (thousands of tonnes) (attributable to Methanex
shareholders) |
1,628 |
|
2,007 |
1,820 |
|
3,635 |
|
3,628 |
Sales volume (thousands of
tonnes) |
|
|
|
|
|
Methanex-produced methanol |
1,717 |
|
1,976 |
1,669 |
|
3,693 |
|
3,590 |
Purchased methanol |
418 |
|
548 |
716 |
|
966 |
|
1,189 |
Commission sales |
271 |
|
264 |
216 |
|
535 |
|
545 |
Total sales volume 1 |
2,406 |
|
2,788 |
2,601 |
|
5,194 |
|
5,324 |
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
263 |
|
325 |
391 |
|
297 |
|
391 |
Average realized price ($ per
tonne) 3 |
211 |
|
267 |
326 |
|
241 |
|
329 |
|
|
|
|
|
|
Revenue 4 |
512 |
|
745 |
848 |
|
1,257 |
|
1,749 |
Adjusted revenue |
453 |
|
676 |
777 |
|
1,129 |
|
1,576 |
Adjusted EBITDA |
32 |
|
138 |
146 |
|
170 |
|
340 |
Cash flows from operating
activities |
186 |
|
142 |
117 |
|
329 |
|
330 |
Net income (loss)
(attributable to Methanex shareholders) |
(65 |
) |
23 |
50 |
|
(42 |
) |
89 |
Adjusted net income
(loss) |
(64 |
) |
8 |
26 |
|
(56 |
) |
82 |
|
|
|
|
|
|
Basic net income (loss) per
common share |
(0.85 |
) |
0.30 |
0.65 |
|
(0.55 |
) |
1.15 |
Diluted net income (loss) per
common share |
(0.85 |
) |
0.21 |
0.51 |
|
(0.63 |
) |
1.09 |
Adjusted net income (loss) per
common share |
(0.84 |
) |
0.10 |
0.34 |
|
(0.73 |
) |
1.07 |
|
|
|
|
|
|
Common share information
(millions of shares) |
|
|
|
|
|
Weighted average number of common shares |
76 |
|
76 |
77 |
|
76 |
|
77 |
Diluted weighted average number of common shares |
76 |
|
76 |
77 |
|
76 |
|
77 |
Number of common shares outstanding, end of period |
76 |
|
76 |
76 |
|
76 |
|
76 |
- 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 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.
- 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.
- Revenue for the three and six
months ended June 30, 2019 have been restated as compared to
revenue reported in our quarterly MD&A and condensed quarterly
financial statements issued for 2019 based on a restatement for the
recognition of revenue on Atlas-produced methanol.
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 |
|
Six Months Ended |
($ millions except number of
shares and per share amounts) |
Jun 30 2020 |
|
|
Mar 31 2020 |
|
|
Jun 30 2019 |
|
|
Jun 30 2020 |
|
|
Jun 30 2019 |
|
Net income (loss) (attributable to Methanex shareholders) |
$ |
(65 |
) |
|
$ |
23 |
|
|
$ |
50 |
|
|
$ |
(42 |
) |
|
$ |
89 |
|
Mark-to-market impact of
share-based compensation, net of tax |
1 |
|
|
(15 |
) |
|
(24 |
) |
|
(14 |
) |
|
(7 |
) |
Adjusted net income (loss) |
$ |
(64 |
) |
|
$ |
8 |
|
|
$ |
26 |
|
|
$ |
(56 |
) |
|
$ |
82 |
|
Diluted weighted average shares outstanding (millions) |
76 |
|
|
76 |
|
|
77 |
|
|
76 |
|
|
77 |
|
Adjusted net income (loss) per common share |
$ |
(0.84 |
) |
|
$ |
0.10 |
|
|
$ |
0.34 |
|
|
$ |
(0.73 |
) |
|
$ |
1.07 |
|
- We recorded a net loss attributable
to Methanex shareholders of $65 million during the second quarter
of 2020 compared to net income of $23 million in the first quarter
of 2020. The decrease in earnings is primarily due to lower average
realized methanol prices and lower sales of Methanex-produced
methanol.
- Adjusted EBITDA was $32 million for
the second quarter of 2020 compared with $138 million for the first
quarter of 2020. Adjusted EBITDA for the second quarter of 2020 is
lower than the first quarter of 2020 primarily due to a lower
average realized methanol price and lower sales of
Methanex-produced methanol, which is partially offset by lower
production costs and selling, general, and administrative
costs.
- Adjusted net loss was $64 million
for the second quarter of 2020 compared to Adjusted net income of
$8 million for the first quarter of 2020. The decrease in earnings
is primarily due to a lower average realized methanol price and
lower sales of Methanex-produced methanol, which is partially
offset by lower production costs and selling, general, and
administrative costs.
- Total sales volume for the second
quarter of 2020 was 2,406,000 tonnes compared with 2,788,000 tonnes
for the first quarter of 2020. Sales of Methanex-produced methanol
were 1,717,000 tonnes in the second quarter of 2020 compared with
1,976,000 tonnes in the first quarter of 2020. Total sales
decreased for the second quarter of 2020 as we adjusted our supply
chain to reduce sales aligning with the decrease in methanol
industry demand, resulting from the impact of COVID-19 and lower
oil price environment.
- Production for the second quarter
of 2020 was 1,628,000 tonnes compared with 2,007,000 tonnes for the
first quarter of 2020. The decrease in production for the second
quarter of 2020 was primarily the result of the idling of the Titan
plant and Chile IV plant, along with two outages at our two Geismar
plants.
- In June 2020, we renegotiated our
$300 million revolving credit facility and $800 million
non-revolving construction facility, to amend and waive terms and
conditions and provide meaningful financial covenant relief. At the
end of June, we repaid $100 million of the revolving credit
facility, and drew a further $37 million from our $800 million
construction credit facility for the Geismar 3 project. We ended
the quarter with a strong liquidity position of $783 million in
cash on the balance sheet.
- On April 29, 2020, we announced the
reduction of our quarterly dividend by 90%, representing
approximately $100 million in annualized cash savings. During the
second quarter of 2020 we paid a $0.0375 per common share quarterly
dividend to shareholders for a total of $3 million.
PRODUCTION HIGHLIGHTS
|
Q2 2020 |
Q1 2020 |
Q2 2019 |
YTD Q2 2020 |
YTD Q2 2019 |
(thousands of tonnes) |
Operating Capacity 1 |
Production |
Production |
Production |
Production |
Production |
New Zealand 2 |
550 |
450 |
443 |
446 |
893 |
883 |
USA (Geismar) |
500 |
441 |
530 |
530 |
971 |
935 |
Trinidad (Methanex interest)
3 |
500 |
241 |
429 |
384 |
670 |
813 |
Chile |
430 |
204 |
319 |
290 |
523 |
531 |
Egypt (50% interest) |
158 |
147 |
133 |
15 |
280 |
156 |
Canada (Medicine Hat) |
150 |
145 |
153 |
155 |
298 |
310 |
|
2,288 |
1,628 |
2,007 |
1,820 |
3,635 |
3,628 |
- 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.
- The operating capacity of New
Zealand is made up of the two Motunui facilities and the Waitara
Valley facility. The New Zealand facilities are capable of
producing up to 2.4 million tonnes annually, depending on natural
gas composition and availability. In Q4 2019 we revised the Annual
Operating Capacity from 2.4 million tonnes to 2.2 million tonnes
based on the current outlook for available high CO2 natural
gas.
- The operating capacity of Trinidad
is made up of the Titan (100% interest) and Atlas (63.1% interest)
facilities.
Key production and operational highlights during
the second quarter include:
- New Zealand produced 450,000 tonnes
compared with 443,000 tonnes in the first quarter of 2020.
Production was similar in the second quarter of 2020 compared to
the first quarter due to continued lower gas deliveries. Our
production guidance for New Zealand is approximately 80% for 2020,
or approximately 1.8 million tonnes.
- Geismar produced 441,000 tonnes
during the second quarter of 2020 compared to 530,000 tonnes during
the first quarter of 2020. Production for Geismar is lower in the
second quarter of 2020 compared to the first quarter of 2020 as
both plants carried out maintenance outages during the second
quarter.
- Trinidad produced 241,000 tonnes
(Methanex interest) during the second quarter of 2020 compared with
429,000 tonnes in the first quarter of 2020. Production in Trinidad
is lower during the second quarter of 2020 compared to the first
quarter of 2020 due to the Titan plant being idled effective March
16, 2020. Atlas continued to operate at similar rates to the first
quarter of 2020 throughout the second quarter.
- Chile produced 204,000 tonnes
during the second quarter of 2020 compared to 319,000 tonnes during
the first quarter of 2020. Production for the second quarter of
2020 is lower compared to the first quarter of 2020 primarily due
to the Chile IV plant being idled effective April 1, 2020.
- The Egypt facility produced 294,000
tonnes (Methanex interest - 147,000 tonnes) in the second quarter
of 2020 compared with 266,000 tonnes (Methanex interest - 133,000
tonnes) in the first quarter of 2020. Egypt production was higher
in the second quarter of 2020 compared to the first quarter of
2020, as a planned maintenance outage was undertaken in February
2020 impacting first quarter production.
- Medicine Hat produced 145,000
tonnes during the second quarter of 2020 compared to 153,000 tonnes
during the first quarter of 2020 as a result of reduced supply of
CO2.
CONFERENCE CALL
A conference call is scheduled for July 30, 2020
at 11:00 am ET (8:00 am PT) to review these second quarter results.
To access the call, dial the conferencing operator fifteen minutes
prior to the start of the call at (416) 340-2217, or toll free at
(800) 806-5484. 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 August 13, 2020 at (905)
694-9451, or toll free at (800) 408-3053. The passcode for the
playback version is 8140443#.
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 second quarter 2020 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 second quarter 2020
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 (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 14 of the Company's MD&A
for the period ended June 30, 2020 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 CampbellDirector, Investor RelationsMethanex
Corporation604-661-2600
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