Methanex Second Quarter 2021 Results Demonstrate Favourable Methanol Industry Fundamentals and Strong Cash Generation Capability
July 28 2021 - 5:00PM
For the second quarter of 2021, Methanex (TSX:MX) (NASDAQ:MEOH)
reported net income attributable to Methanex shareholders of $107
million ($1.31 net income per common share on a diluted basis)
compared to net income of $105 million ($1.19 net income per common
share on a diluted basis) in the first quarter of 2021. Adjusted
EBITDA for the second quarter of 2021 was $262 million and Adjusted
net income was $95 million ($1.24 Adjusted net income per common
share). This compares with Adjusted EBITDA of $242 million and
Adjusted net income of $82 million ($1.07 Adjusted net income per
common share) for the first quarter of 2021.
We increased our average realized price in the
second quarter of 2021 to $376 per tonne from $363 per tonne in the
first quarter of 2021. Strong methanol demand and ongoing industry
supply challenges supported higher methanol prices in the second
quarter, with tight market conditions continuing into the third
quarter of 2021. Our Adjusted EBITDA of $262 million increased by
$20 million over the first quarter of 2021, demonstrating the
significant leverage our earnings have to methanol prices.
We ended the quarter with over $750 million in
cash, a $600 million undrawn construction facility, a $300 million
undrawn revolving credit facility and no debt maturities until the
end of 2024. In addition, we recently announced an agreement on key
commercial terms for a strategic shipping partnership between
Methanex, Waterfront Shipping (a subsidiary of Methanex) and Mitsui
O.S.K. Lines, Ltd. ("MOL"). We anticipate this partnership will
realize strategic benefits for our Waterfront Shipping business and
unlock $145 million in non-dilutive capital to further strengthen
our financial position.
We also recently announced a restart of
construction on our Geismar 3 project, a 1.8 million tonne methanol
plant located adjacent to the existing Geismar 1 and 2 plants. The
project is significantly de-risked and is well-positioned to be
completed on-time and on budget. We will restart construction in
October 2021 with commercial operations targeted at the end of 2023
or early 2024.
John Floren, President and CEO of Methanex,
commented, “Current methanol industry dynamics are favourable, and
our outlook for the methanol industry is positive. We believe that
new industry supply, including our Geismar 3 project, will be
needed to meet growing methanol demand. Our Geismar 3 project has
distinct project advantages and robust project economics that will
strengthen our asset portfolio and significantly increase our
future cash generation capability. We recently increased our
quarterly dividend to $0.125 per share, and Geismar 3 will support
a substantial increase in our shareholder distribution potential in
the coming years. We believe that Geismar 3 will deliver
significant long-term value to our shareholders.”
FURTHER INFORMATION
The information set forth in this news release
summarizes Methanex's key financial and operational data for the
second quarter of 2021. It is not a complete source of information
for readers and is not in any way a substitute for reading the
second quarter 2021 Management’s Discussion and Analysis
("MD&A") dated July 28, 2021 and the unaudited condensed
consolidated interim financial statements for the period ended
June 30, 2021, both of which are available from the Investor
Relations section of our website at www.methanex.com. The MD&A
and the unaudited condensed consolidated interim financial
statements for the period ended June 30, 2021 are also
available on the Canadian Securities Administrators' SEDAR website
at www.sedar.com and on the United States Securities and Exchange
Commission's EDGAR website at www.sec.gov.
FINANCIAL AND OPERATIONAL
DATA
|
Three Months Ended |
|
Six Months Ended |
($ millions except per share amounts and where noted) |
Jun 302021 |
|
Mar 312021 |
|
Jun 302020 |
|
|
Jun 302021 |
|
Jun 302020 |
|
Production (thousands of tonnes) (attributable to Methanex
shareholders) 1 |
1,505 |
|
1,596 |
|
1,628 |
|
|
3,101 |
|
3,635 |
|
Sales volume (thousands of
tonnes) |
|
|
|
|
|
|
Methanex-produced methanol |
1,582 |
|
1,518 |
|
1,717 |
|
|
3,100 |
|
3,693 |
|
Purchased methanol |
903 |
|
1,014 |
|
418 |
|
|
1,917 |
|
966 |
|
Commission sales |
345 |
|
261 |
|
271 |
|
|
606 |
|
535 |
|
Total sales volume 1 |
2,830 |
|
2,793 |
|
2,406 |
|
|
5,623 |
|
5,194 |
|
|
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
466 |
|
447 |
|
263 |
|
|
456 |
|
297 |
|
Average realized price ($ per
tonne) 3 |
376 |
|
363 |
|
211 |
|
|
369 |
|
241 |
|
|
|
|
|
|
|
|
Revenue |
1,068 |
|
1,016 |
|
512 |
|
|
2,084 |
|
1,257 |
|
Adjusted revenue |
937 |
|
922 |
|
453 |
|
|
1,859 |
|
1,129 |
|
Net income (loss)
(attributable to Methanex shareholders) |
107 |
|
105 |
|
(65 |
) |
|
211 |
|
(42 |
) |
Adjusted net income
(loss) |
95 |
|
82 |
|
(64 |
) |
|
176 |
|
(56 |
) |
Adjusted EBITDA |
262 |
|
242 |
|
32 |
|
|
504 |
|
170 |
|
Cash flows from operating
activities |
243 |
|
167 |
|
186 |
|
|
410 |
|
329 |
|
|
|
|
|
|
|
|
Basic net income (loss) per
common share |
1.40 |
|
1.37 |
|
(0.85 |
) |
|
2.77 |
|
(0.55 |
) |
Diluted net income (loss) per
common share |
1.31 |
|
1.19 |
|
(0.85 |
) |
|
2.51 |
|
(0.63 |
) |
Adjusted net income (loss) per
common share |
1.24 |
|
1.07 |
|
(0.84 |
) |
|
2.31 |
|
(0.73 |
) |
|
|
|
|
|
|
|
Common share information
(millions of shares) |
|
|
|
|
|
|
Weighted average number of common shares |
76 |
|
76 |
|
76 |
|
|
76 |
|
76 |
|
Diluted weighted average number of common shares |
76 |
|
76 |
|
76 |
|
|
76 |
|
76 |
|
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. |
|
|
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 302021 |
|
Mar 312021 |
|
Jun 302020 |
|
|
Jun 302021 |
|
Jun 302020 |
|
Net income (loss) (attributable to Methanex shareholders) |
$ |
107 |
|
$ |
105 |
|
$ |
(65 |
) |
|
$ |
211 |
|
$ |
(42 |
) |
Mark-to-market impact of share-based compensation, net of tax |
(12 |
) |
(23 |
) |
1 |
|
|
(35 |
) |
(14 |
) |
Adjusted net income (loss) |
$ |
95 |
|
$ |
82 |
|
$ |
(64 |
) |
|
$ |
176 |
|
$ |
(56 |
) |
Diluted weighted average shares outstanding (millions) |
76 |
|
76 |
|
76 |
|
|
76 |
|
76 |
|
Adjusted net income (loss) per common share |
$ |
1.24 |
|
$ |
1.07 |
|
$ |
(0.84 |
) |
|
$ |
2.31 |
|
$ |
(0.73 |
) |
- We recorded net
income attributable to Methanex shareholders of $107 million during
the second quarter of 2021 compared to net income of $105 million
in the first quarter of 2021. The increase in net income is
primarily due to an increase in our average realized methanol price
during the second quarter partially offset by the change in the
mark-to-market impact of share-based compensation. We recorded
Adjusted EBITDA of $262 million for the second quarter of 2021
compared with $242 million for the first quarter of 2021.
- We recognized
Adjusted net income of $95 million for the second quarter of 2021
compared to Adjusted net income of $82 million for the first
quarter of 2021. Adjusted EBITDA and Adjusted net income for the
second quarter of 2021 are higher than the first quarter of 2021
primarily due to the increase in our average realized methanol
price to $376 per tonne from $363 per tonne and higher sales of
Methanex-produced methanol.
- We sold 2,830,000 tonnes in the
second quarter of 2021 compared to 2,793,000 tonnes for the first
quarter of 2021. Sales of Methanex-produced methanol were 1,582,000
tonnes in the second quarter of 2021 compared with 1,518,000 tonnes
in the first quarter of 2021.
-
Production for the second quarter of 2021 was 1,505,000 tonnes
compared with 1,596,000 tonnes for the first quarter of 2021.
Production is lower for the second quarter of 2021 primarily due to
lower seasonal gas availability in Chile and temporarily idling one
plant in New Zealand which was partially offset by higher
production at other sites.
- During the second
quarter of 2021 we completed certain deleveraging initiatives and
credit facility amendments to further strengthen our balance sheet
and enhance financial flexibility, including repaying $173 million
drawn on the Geismar 3 construction facility, reducing the facility
to $600 million and extending its maturity to 2025 and extending
the maturity of our undrawn $300 million revolving credit facility
to 2026.
- In the second
quarter of 2021 we paid a $0.0375 per common share quarterly
dividend to shareholders for a total of $3 million.
- At June 30, 2021,
we have a healthy cash balance of $764 million and $900 million of
undrawn backup liquidity and have taken steps to continue to
strengthen our balance sheet and enhance our financial
flexibility.
- In July 2021 we
announced:
- The agreement on
key commercial terms for a strategic shipping partnership between
Methanex, Waterfront Shipping (a Methanex subsidiary) and Mitsui
O.S.K. Lines, Ltd. ("MOL"). Through the agreement, MOL will acquire
a 40% minority interest in Waterfront Shipping for $145 million.
Methanex will retain the remaining 60% majority interest in
Waterfront Shipping and continue to operate it as a key element
within our globally integrated supply chain. The closing is subject
to regulatory approval and is expected by the end of 2021 after all
customary conditions are met.
- The restart of our
Geismar 3 project following the care and maintenance period that
commenced April 1, 2020 at the start of the COVID-19 pandemic.
Geismar 3 is a 1.8 million tonne methanol plant located adjacent to
the existing Geismar 1 and 2 plants. The project is significantly
de-risked and is well-positioned to be completed on-time and on
budget. We will restart construction in October 2021 with
commercial operations targeted at the end of 2023 or early
2024.
- Approval by the
Board of Directors to increase of our quarterly dividend to $0.125
per share from $0.0375 per share. The increased dividend will apply
to the dividend payable on September 30, 2021 to holders of common
shares of record on September 16, 2021.
PRODUCTION HIGHLIGHTS
|
Q2 2021 |
Q1 2021 |
|
Q2 2020 |
|
YTD Q2 2021 |
|
YTD Q2 2020 |
|
(thousands of tonnes) |
Operating Capacity 1 |
|
Production |
|
Production |
|
Production |
|
Production |
|
Production |
|
New Zealand 2 |
550 |
|
306 |
|
369 |
|
450 |
|
675 |
|
893 |
|
USA (Geismar) 3 |
550 |
|
484 |
|
422 |
|
441 |
|
906 |
|
971 |
|
Trinidad (Methanex interest)
4 |
490 |
|
294 |
|
275 |
|
241 |
|
569 |
|
670 |
|
Chile |
425 |
|
128 |
|
221 |
|
204 |
|
349 |
|
523 |
|
Egypt (50% interest) |
158 |
|
134 |
|
148 |
|
147 |
|
282 |
|
280 |
|
Canada
(Medicine Hat) |
160 |
|
159 |
|
161 |
|
145 |
|
320 |
|
298 |
|
|
2,333 |
|
1,505 |
|
1,596 |
|
1,628 |
|
3,101 |
|
3,635 |
|
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. We
review and update the operating capacity of our production
facilities on a regular basis based on historical performance. |
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 natural gas composition expected for the foreseeable future.
The Waitara Valley plant is currently idled indefinitely due to
insufficient natural gas availability. |
3 |
For the comparative 2020 periods presented, our operating capacity
in Geismar was 2.0 million tonnes. In the fourth quarter of 2020,
we completed the debottlenecking project at our Geismar 1 facility
and in Q2 2021 we have completed the debottlenecking project at our
Geismar 2 facility. As a result, we have increased our operating
capacity for 2021 by 0.2 million tonnes to 2.2 million tonnes. |
4 |
The operating capacity of Trinidad is made up of the Titan (100%
interest) and Atlas (63.1% interest) facilities. The Titan plant is
currently idled indefinitely. |
|
|
Key production and operational highlights during
the second quarter and production outlook for 2021 include:
- New Zealand
produced 306,000 tonnes compared with 369,000 tonnes in the first
quarter of 2021. In New Zealand, our production levels were lower
in the second quarter of 2021 compared to the first quarter as
lower gas deliveries experienced in the first quarter continued
through the second quarter. In addition, we agreed to a short term
commercial arrangement with Genesis Energy to make natural gas
available to support a tight New Zealand electricity market. As a
result, we temporarily idled one of our Motunui plants for close to
three months. We expect lower production of approximately 85,000
tonnes, impacting the second and third quarters of 2021.
- As a result of
the above and the previous idling of Waitara Valley, we now
estimate production in 2021 to be 1.4 million tonnes compared to
our production of 1.7 million tonnes in 2020. The upstream gas
sector is completing several field development projects that could
improve gas availability over the coming years.
- Geismar produced
484,000 tonnes during the second quarter of 2021 compared to
422,000 tonnes during the first quarter of 2021. Production for
Geismar is higher in the second quarter of 2021 compared to the
first quarter of 2021 as we completed a planned turnaround at
Geismar 2 in the first quarter. During the second quarter we
successfully completed the Geismar 2 debottlenecking project
following the debottlenecking at our Geismar 1 plant in 2020. As a
result, our operating capacity for our Geismar facilities is now
2.2 million tonnes on an annual basis - an increase of 10%.
- Trinidad
produced 294,000 tonnes (Methanex interest) during the second
quarter of 2021 compared with 275,000 tonnes in the first quarter
of 2021. Production levels in Trinidad were higher in the second
quarter of 2021 compared to the first quarter of 2021 as higher gas
deliveries enabled us to run our Atlas plant at high operating
rates. Based on current gas deliveries, we estimate Trinidad
production in 2021 of approximately 1.1 million tonnes (Methanex
interest). Titan remains idled indefinitely.
- Chile produced
128,000 tonnes during the second quarter of 2021 compared to
221,000 tonnes during the first quarter of 2021. Production for the
second quarter of 2021 is lower compared to the first quarter of
2021 as our Chile I plant has experienced lower gas availability
during the second quarter of 2021 during the Southern hemisphere
winter months when seasonal demand for natural gas in the region is
at its peak. Our Chile IV plant remains idle due to low gas
availability resulting primarily from higher seasonal domestic
demand. We estimate production in 2021 of 0.8 to 0.9 million
tonnes.
- Egypt produced
268,000 tonnes (Methanex interest - 134,000 tonnes) in the second
quarter of 2021 compared to 296,000 tonnes (Methanex interest -
148,000 tonnes) in the first quarter of 2021. We expect to receive
100% of our contracted gas supply for the foreseeable future in
Egypt.
- Medicine Hat
produced 159,000 tonnes during the second quarter of 2021 compared
to 161,000 tonnes during the first quarter of 2021.
CONFERENCE CALL
A conference call is scheduled for July 29, 2021
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. The passcode for the call is 4826256#. 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 28, 2021 at (905) 694-9451, or
toll free at (800) 408-3053. The passcode for the playback version
is 3699057#.
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 2021 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 2021
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 13 of the Company's MD&A
for the period ended June 30, 2021 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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