For the third quarter of 2020, Methanex (TSX:MX) (NASDAQ:MEOH)
reported a net loss attributable to Methanex shareholders of $88
million ($1.15 net loss per common share on a diluted basis)
compared to a net loss of $65 million ($0.85 net loss per common
share on a diluted basis) in the second quarter of 2020. Adjusted
EBITDA for the third quarter of 2020 was $40 million and Adjusted
net loss was $79 million ($1.03 Adjusted net loss per common
share). This compares with Adjusted EBITDA of $32 million and an
Adjusted net loss of $64 million ($0.84 Adjusted net loss per
common share) for the second quarter of 2020.
Third Quarter Results
Global methanol demand improved in the third
quarter of 2020 compared to the second quarter as economic activity
rebounded around the world. At the same time, methanol industry
supply declined in the third quarter of 2020, compared to the
second quarter, due to various planned and unplanned outages and
plant shutdowns globally. Improved methanol demand and lower
industry supply tightened market conditions and methanol pricing
stabilized from the multi-year lows we saw in the second quarter.
Methanol prices are higher leading into the fourth quarter.
We recorded higher Adjusted EBITDA in the third
quarter of 2020 compared to the second quarter, reflecting a higher
average realized price, partially offset by changes in the mix of
produced and purchased methanol sold. We recorded a larger Adjusted
net loss in the third quarter primarily due to a one time finance
charge of $15.4 million related to the early redemption of the $250
million unsecured notes that were originally due March 2022.
Business and Financial
Update
John Floren, President and CEO of Methanex,
commented, “Leading into the fourth quarter, we are pleased to see
an increase in methanol prices, supported by strong recovery in
methanol demand and lower methanol industry supply which has
resulted in a reduction of global inventory levels. Our team
continues to run our manufacturing operations and global supply
chain safely and effectively to ensure that we deliver secure and
reliable methanol supply to our customers around the world. We
undertook planned turnaround activities at our Medicine Hat and
Atlas plants in the third quarter. We also completed our Geismar 1
debottlenecking project to increase our production capability by
approximately 10%, or 100,000 tonnes per year, and expect to ramp
up to full operating rates over the coming weeks. In addition, as
global methanol demand is improving, we are in the process of
restarting our Chile IV plant. We continue to take extensive
preventative measures across our operations and office locations to
ensure the safety of our team members during this uncertain
time."
In 2020, we have taken a number of measures to
preserve liquidity and improve financial flexibility. These steps
include deferring approximately $500 million in capital spending on
our Geismar 3 project, reducing our dividend by approximately $100
million on an annual basis, suspending share buybacks, reducing
maintenance capital and operating costs and obtaining covenant
relief on our credit facilities.
During the third quarter, to provide additional
financial flexibility, we issued $700 million in senior unsecured
notes due in 2027 and secured further covenant relief for our
existing credit facilities. We repaid $200 million that was drawn
on our revolving credit facility during the quarter. In addition,
we issued a redemption notice to repay the $250 million bonds that
were due in early 2022. The cash flow impact of this repayment will
be reflected in our fourth quarter results. We ended the quarter
with a strong liquidity position of $1.2 billion in cash on the
balance sheet, our undrawn $300 million revolving credit facility
and no debt maturities until 2024. As a result, we have significant
financial flexibility to manage our business through an uncertain
period.
Our Geismar 3 project remains on temporary care
and maintenance and spending on the project over the next 12 months
is expected to be approximately $100 million. This amount reflects
costs that were already committed and the completion of key
engineering activities and procurement of critical path equipment
to preserve flexibility to complete the project in the future.
There are many factors that management and our Board will need to
consider before restarting construction and no decision has been
made at this time on whether to restart.
John Floren concluded, "We are encouraged by
recent early signs of economic recovery, including improvement in
methanol demand and methanol prices. However, in this unprecedented
environment impacted by both COVID-19 and challenging commodity
prices, the path and pace for global economic recovery and methanol
demand remains uncertain. We are placing a premium on preserving
liquidity and improving financial flexibility. The actions that we
have taken this year to strengthen our business have positioned us
well to navigate through this uncertain time and generate
significant long-term value as and when market conditions further
improve."
FURTHER INFORMATIONThe
information set forth in this news release summarizes Methanex's
key financial and operational data for the third quarter of 2020.
It is not a complete source of information for readers and is not
in any way a substitute for reading the third quarter 2020
Management’s Discussion and Analysis ("MD&A") dated
October 28, 2020 and the unaudited condensed consolidated
interim financial statements for the period ended
September 30, 2020, both of which are available from the
Investor Relations section of our website at www.methanex.com. The
MD&A and the unaudited condensed consolidated interim financial
statements for the period ended September 30, 2020 are also
available on the Canadian Securities Administrators' SEDAR website
at www.sedar.com and on the United States Securities and Exchange
Commission's EDGAR website at www.sec.gov.
FINANCIAL AND OPERATIONAL DATA
|
Three Months Ended |
|
Nine Months Ended |
($
millions except per share amounts and where noted) |
Sep 30 2020 |
Jun 30 2020 |
Sep 30 2019 |
|
Sep 30 2020 |
Sep 30 2019 |
Production (thousands of
tonnes) (attributable to Methanex shareholders) 1 |
1,372 |
|
1,628 |
|
1,837 |
|
|
5,007 |
|
5,465 |
|
Sales volume (thousands of
tonnes) |
|
|
|
|
|
|
Methanex-produced methanol |
1,531 |
|
1,717 |
|
1,965 |
|
|
5,224 |
|
5,555 |
|
Purchased methanol |
836 |
|
418 |
|
680 |
|
|
1,802 |
|
1,869 |
|
Commission sales |
311 |
|
271 |
|
179 |
|
|
846 |
|
724 |
|
Total sales volume 1 |
2,678 |
|
2,406 |
|
2,824 |
|
|
7,872 |
|
8,148 |
|
|
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
255 |
|
263 |
|
330 |
|
|
283 |
|
370 |
|
Average realized price ($ per
tonne) 3 |
217 |
|
211 |
|
272 |
|
|
233 |
|
309 |
|
|
|
|
|
|
|
|
Revenue 4 |
581 |
|
512 |
|
765 |
|
|
1,839 |
|
2,514 |
|
Adjusted revenue |
515 |
|
453 |
|
723 |
|
|
1,644 |
|
2,299 |
|
Adjusted EBITDA |
40 |
|
32 |
|
90 |
|
|
210 |
|
430 |
|
Cash flows from operating
activities |
35 |
|
186 |
|
71 |
|
|
363 |
|
401 |
|
Net income (loss)
(attributable to Methanex shareholders) |
(88 |
) |
(65 |
) |
(10 |
) |
|
(130 |
) |
79 |
|
Adjusted net income
(loss) |
(79 |
) |
(64 |
) |
(21 |
) |
|
(135 |
) |
62 |
|
|
|
|
|
|
|
|
Basic net income (loss) per
common share |
(1.15 |
) |
(0.85 |
) |
(0.13 |
) |
|
(1.70 |
) |
1.03 |
|
Diluted net income (loss) per
common share |
(1.15 |
) |
(0.85 |
) |
(0.21 |
) |
|
(1.72 |
) |
0.88 |
|
Adjusted net income (loss) per
common share |
(1.03 |
) |
(0.84 |
) |
(0.27 |
) |
|
(1.77 |
) |
0.80 |
|
|
|
|
|
|
|
|
Common share information
(millions of shares) |
|
|
|
|
|
|
Weighted average number of common shares |
76 |
|
76 |
|
76 |
|
|
76 |
|
77 |
|
Diluted weighted average number of common shares |
76 |
|
76 |
|
76 |
|
|
76 |
|
77 |
|
Number of common shares outstanding, end of period |
76 |
|
76 |
|
76 |
|
|
76 |
|
76 |
|
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.
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.
4 Revenue for the three and nine months
ended September 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 |
|
Nine Months Ended |
($
millions except number of shares and per share amounts) |
Sep 30 2020 |
Jun 30 2020 |
Sep 30 2019 |
|
Sep 30 2020 |
Sep 30 2019 |
Net income (loss)
(attributable to Methanex shareholders) |
$ |
(88 |
) |
$ |
(65 |
) |
$ |
(10 |
) |
|
$ |
(130 |
) |
$ |
79 |
|
Mark-to-market impact of share-based compensation, net of tax |
9 |
|
1 |
|
(11 |
) |
|
(5 |
) |
(17 |
) |
Adjusted net income (loss) |
$ |
(79 |
) |
$ |
(64 |
) |
$ |
(21 |
) |
|
$ |
(135 |
) |
$ |
62 |
|
Diluted weighted average
shares outstanding (millions) |
76 |
|
76 |
|
76 |
|
|
76 |
|
77 |
|
Adjusted net income (loss) per common share |
$ |
(1.03 |
) |
$ |
(0.84 |
) |
$ |
(0.27 |
) |
|
$ |
(1.77 |
) |
$ |
0.80 |
|
- We recorded a
net loss attributable to Methanex shareholders of $88 million
during the third quarter of 2020 compared to a net loss of $65
million in the second quarter of 2020. The decrease in earnings is
primarily a result of increased finance costs due to the early
redemption of bonds and the mark-to-market impact of share-based
compensation, partially offset by higher Adjusted EBITDA.
-
Adjusted EBITDA was $40 million for the third quarter of 2020
compared with $32 million for the second quarter of 2020. Adjusted
EBITDA for the third quarter of 2020 is higher than the second
quarter of 2020, reflecting a higher average realized price,
partially offset by changes in the mix of produced and purchased
methanol sold.
-
Adjusted net loss was $79 million for the third quarter of 2020
compared to Adjusted net loss of $64 million for the second quarter
of 2020. The decrease in earnings is primarily due to increased
finance costs including a $15.4 million make-whole charge due to
the early redemption of bonds, partially offset by an increase in
Adjusted EBITDA.
- Total sales volume
for the third quarter of 2020 was 2,678,000 tonnes compared with
2,406,000 tonnes for the second quarter of 2020. Total sales
increased for the third quarter of 2020 as we saw a recovery in
demand in all regions as global economic activity rebounded. Sales
of Methanex-produced methanol were 1,531,000 tonnes in the third
quarter of 2020 compared with 1,717,000 tonnes in the second
quarter of 2020.
- Production for the
third quarter of 2020 was 1,372,000 tonnes compared with 1,628,000
tonnes for the second quarter of 2020. The decrease in production
for the third quarter of 2020 was primarily the result of planned
turnarounds in Atlas and Medicine Hat and lower gas deliveries in
New Zealand and lower gas deliveries in Chile during the southern
hemisphere winter months.
- During the quarter,
the Company issued $700 million of senior unsecured notes bearing a
coupon of 5.125% and due October 15, 2027. The Company then repaid
$200 million that was drawn on our revolving credit facility and
provided notice to repay our existing $250 million bond originally
due in March 2022. The bond due March 2022 was repaid subsequent to
the quarter. Additionally, the Company obtained a waiver from its
lenders which provides further financial covenant relief for the
committed revolving credit facility and the non-revolving
construction facility for the Geismar 3 project, providing
additional financial flexibility. The waiver further extends the
measurement period for the lower minimum interest coverage ratio
threshold from June 30, 2021 through December 31, 2021.
- During the third
quarter of 2020 we paid a $0.0375 per common share quarterly
dividend to shareholders for a total of $3 million.
PRODUCTION HIGHLIGHTS
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
YTD Q3 2020 |
YTD Q3 2019 |
(thousands of tonnes) |
Operating Capacity 1 |
Production |
Production |
Production |
Production |
Production |
New Zealand 2 |
550 |
|
340 |
|
450 |
|
469 |
|
1,233 |
|
1,352 |
|
USA (Geismar) |
500 |
|
513 |
|
441 |
|
514 |
|
1,484 |
|
1,449 |
|
Trinidad (Methanex interest)
3 |
500 |
|
167 |
|
241 |
|
474 |
|
837 |
|
1,287 |
|
Chile |
430 |
|
118 |
|
204 |
|
146 |
|
641 |
|
677 |
|
Egypt (50% interest) |
158 |
|
153 |
|
147 |
|
85 |
|
433 |
|
241 |
|
Canada
(Medicine Hat) |
150 |
|
81 |
|
145 |
|
149 |
|
379 |
|
459 |
|
|
2,288 |
|
1,372 |
|
1,628 |
|
1,837 |
|
5,007 |
|
5,465 |
|
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. The New
Zealand facilities are capable of producing up to 2.4 million
tonnes annually, depending on natural gas composition and
availability. Annual Operating Capacity is currently 2.2 million
tonnes based on the current outlook for available high CO2 natural
gas.
3 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 third quarter include:
- New Zealand
produced 340,000 tonnes compared with 450,000 tonnes in the second
quarter of 2020. Production was lower in the third quarter of 2020
compared to the second quarter as a result of lower gas deliveries.
We expect to receive higher gas deliveries in the fourth quarter of
2020. The upstream gas sector is completing several field
development projects that are expected to improve gas availability
over the coming years.
- Geismar produced
513,000 tonnes during the third quarter of 2020 compared to 441,000
tonnes during the second quarter of 2020. Production for Geismar is
higher in the third quarter of 2020 compared to the second quarter
of 2020 as both plants operated without significant interruption
throughout the quarter, whereas in the second quarter of 2020 both
plants carried out maintenance.
- Trinidad
produced 167,000 tonnes (Methanex interest) during the second
quarter of 2020 compared with 241,000 tonnes in the second quarter
of 2020. Production in Trinidad is lower during the third quarter
of 2020 compared to the second quarter of 2020 as a result of a
scheduled turnaround of the Atlas plant that commenced in September
2020 and we expect production to resume in early November. The
Titan plant remains idled effective March 16, 2020.
- Chile produced
118,000 tonnes during the third quarter of 2020 compared to 204,000
tonnes during the second quarter of 2020. Production for the third
quarter of 2020 is lower compared to the second quarter of 2020
primarily due to lower gas availability during the southern
hemisphere winter months. We are in the process of restarting the
Chile IV plant that has been idled since April 1, 2020. We
anticipate the restart of Chile IV and improved gas availability
will lead to substantially higher production in Chile in the fourth
quarter.
- The Egypt
facility produced 306,000 tonnes (Methanex interest - 153,000
tonnes) in the third quarter of 2020 compared with 294,000 tonnes
(Methanex interest - 147,000 tonnes) in the second quarter of 2020.
Egypt production was similar in the third quarter of 2020 and the
second quarter of 2020.
- Medicine Hat
produced 81,000 tonnes during the third quarter of 2020 compared to
145,000 tonnes during the second quarter of 2020. Production for
the third quarter of 2020 is lower compared to the second quarter
of 2020 as a result of a scheduled turnaround of the Medicine Hat
plant that commenced in August 2020 and subsequently completed in
October 2020.
CONFERENCE CALL
A conference call is scheduled for October 29,
2020 at 11:00 am ET (8:00 am PT) to review these third 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. The passcode for the call is 1310579#. 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 29, 2020 at (905) 694-9451,
or toll free at (800) 408-3053. The passcode for the playback
version is 2841432#.
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 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 third 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 September 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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