Methanex Reports Third Quarter 2018 Earnings
October 24 2018 - 05:19PM
For the third quarter of 2018, Methanex (TSX:MX) (NASDAQ:MEOH)
reported net income attributable to Methanex shareholders of $128
million ($1.61 per common share on a diluted basis) compared to net
income of $111 million ($1.36 per common share on a diluted basis)
in the second quarter of 2018. Adjusted EBITDA for the third
quarter of 2018 was $293 million and Adjusted net income was $152
million ($1.92 per common share). This compares with Adjusted
EBITDA of $275 million and Adjusted net income of $143 million
($1.75 per common share) for the second quarter of 2018.
John Floren, President and CEO of Methanex commented, "Our
higher Adjusted EBITDA and earnings in the third quarter reflects
our strong sales volume and higher average realized price. Our
sales volume in the third quarter of 2.9 million tonnes matched
previous record levels. Our average realized price increased to
$413 per tonne in the third quarter compared to $405 per tonne in
the second quarter of 2018 as marginally higher industry supply was
matched by strong methanol demand which sustained tight market
conditions."
"We are extremely pleased to have recorded Adjusted EBITDA of
$874 million in the first nine months of 2018, surpassing the
record annual Adjusted EBITDA in 2017 of $838 million. These
results reflect the investments we have made over the past few
years to increase our production capability, which have
substantially improved our earnings power and ability to generate
significant free cash flow at a wide range of methanol prices."
"In addition, we announced earlier this month that we restarted
and produced methanol from our Chile IV plant for the first time
since 2007. We expect the plant to ramp up to full production rates
over the coming weeks and have also begun to receive natural gas
from Argentina for the first time in 11 years. These achievements
represent a significant step towards a two-plant operation in
Chile, without seasonal restrictions, in the long-term."
"We returned $139 million to shareholders through our regular
dividend and share repurchases during the third quarter. To
September 30, 2018 we have repurchased 5,400,000 common shares, of
the 6,590,095 approved, for approximately $366 million since the
start of our normal course issuer bid on March 13, 2018."
We have $261 million of cash on hand at the end of the third
quarter, a committed revolving credit facility and a robust balance
sheet. Our balanced approach to capital allocation remains
unchanged. We believe we are well positioned to meet our financial
commitments, pursue our growth opportunities and deliver on our
commitment to return excess cash to shareholders through dividends
and share repurchases," Floren said.
FURTHER INFORMATIONThe
information set forth in this news release summarizes Methanex's
key financial and operational data for the third quarter of 2018.
It is not a complete source of information for readers and is not
in any way a substitute for reading the third quarter 2018
Management’s Discussion and Analysis ("MD&A") dated
October 24, 2018 and the unaudited condensed consolidated
interim financial statements for the three and nine month periods
ended September 30, 2018, both of which are available from the
Investor Relations section of our website at www.methanex.com. The
MD&A and the unaudited condensed consolidated interim financial
statements for the three and nine month periods ended
September 30, 2018 are also available on the Canadian
Securities Administrators' SEDAR website at www.sedar.com and
on the United States Securities and Exchange Commission's EDGAR
website at www.sec.gov.
FINANCIAL AND OPERATIONAL DATA
|
Three Months Ended |
|
Nine Months Ended |
($
millions except per share amounts and where noted) |
Sep 30
2018 |
|
Jun 30
2018 |
|
Sep 30
2017 |
|
|
Sep 30
2018 |
|
Sep 30
2017 |
|
Production (thousands
of tonnes) (attributable to Methanex shareholders) |
1,735 |
|
1,648 |
|
1,765 |
|
|
5,326 |
|
5,245 |
|
Sales volume (thousands
of tonnes) |
|
|
|
|
|
|
Methanex-produced methanol |
1,790 |
|
1,729 |
|
1,753 |
|
|
5,403 |
|
5,299 |
|
Purchased
methanol |
802 |
|
709 |
|
757 |
|
|
2,124 |
|
1,656 |
|
Commission sales |
279 |
|
329 |
|
261 |
|
|
929 |
|
862 |
|
Total
sales volume 1 |
2,871 |
|
2,767 |
|
2,771 |
|
|
8,456 |
|
7,817 |
|
|
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
486 |
|
478 |
|
351 |
|
|
480 |
|
394 |
|
Average realized price
($ per tonne) 3 |
413 |
|
405 |
|
307 |
|
|
407 |
|
332 |
|
|
|
|
|
|
|
|
Revenue |
1,044 |
|
950 |
|
720 |
|
|
2,955 |
|
2,199 |
|
Adjusted revenue |
1,067 |
|
972 |
|
775 |
|
|
3,025 |
|
2,322 |
|
Adjusted EBITDA |
293 |
|
275 |
|
143 |
|
|
874 |
|
584 |
|
Cash flows from
operating activities |
228 |
|
290 |
|
119 |
|
|
762 |
|
574 |
|
Adjusted net
income |
152 |
|
143 |
|
52 |
|
|
466 |
|
266 |
|
Net income
(attributable to Methanex shareholders) |
128 |
|
111 |
|
32 |
|
|
408 |
|
248 |
|
|
|
|
|
|
|
|
Adjusted net income per
common share |
1.92 |
|
1.75 |
|
0.60 |
|
|
5.71 |
|
3.03 |
|
Basic net income per
common share |
1.62 |
|
1.36 |
|
0.38 |
|
|
5.01 |
|
2.83 |
|
Diluted net income per
common share |
1.61 |
|
1.36 |
|
0.38 |
|
|
5.00 |
|
2.83 |
|
|
|
|
|
|
|
|
Common share
information (millions of shares) |
|
|
|
|
|
|
Weighted
average number of common shares |
79 |
|
82 |
|
86 |
|
|
82 |
|
88 |
|
Diluted
weighted average number of common shares |
79 |
|
82 |
|
86 |
|
|
82 |
|
88 |
|
Number of common shares outstanding, end of period |
78 |
|
80 |
|
85 |
|
|
78 |
|
85 |
|
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 was 20,000 MT of Tolling
Volume produced in the third quarter of 2018 and 48,000 MT in the
second quarter of 2018. There was no Tolling Volume in the third
quarter of 2017. |
|
|
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 attributable to
Methanex shareholders to Adjusted net income and the calculation of
Adjusted net income per common share is as follows:
|
Three Months
Ended |
|
Nine Months
Ended |
($ millions except number of shares and per
share amounts) |
Sep 30
2018 |
Jun 30 2018 |
Sep 30 2017 |
|
Sep 30
2018 |
Sep 30 2017 |
Net income (attributable to Methanex shareholders) |
$ |
128 |
|
$ |
111 |
|
$ |
32 |
|
|
$ |
408 |
|
$ |
248 |
|
Mark-to-market impact of share-based compensation, net of tax |
24 |
|
32 |
|
20 |
|
|
58 |
|
18 |
|
Adjusted net income |
$ |
152 |
|
$ |
143 |
|
$ |
52 |
|
|
$ |
466 |
|
$ |
266 |
|
Diluted weighted average shares outstanding (millions) |
79 |
|
82 |
|
86 |
|
|
82 |
|
88 |
|
Adjusted net income per common share |
$ |
1.92 |
|
$ |
1.75 |
|
$ |
0.60 |
|
|
$ |
5.71 |
|
$ |
3.03 |
|
- We recorded net income attributable to Methanex shareholders of
$128 million during the third quarter of 2018 compared to net
income of $111 million in the second quarter of 2018. The increase
in earnings is primarily due to an increase in sales of
Methanex-produced methanol, an increase in our average realized
methanol price during the third quarter, and the change in the
mark-to-market impact of share-based compensation.
- We recorded Adjusted EBITDA of $293 million for the third
quarter of 2018 compared with $275 million for the second quarter
of 2018. Adjusted net income was $152 million for the third quarter
of 2018 compared to Adjusted net income of $143 million for the
second quarter of 2018. The increase in Adjusted EBITDA and
Adjusted net income is primarily due to an increase in sales of
Methanex-produced methanol and an increase in average realized
price to $413 per tonne for the third quarter of 2018 from $405 per
tonne for the second quarter of 2018.
- Production for the third quarter of 2018 was 1,735,000 tonnes
compared with 1,648,000 tonnes for the second quarter of 2018.
- Total sales volume for the third quarter of 2018 was a record
2,871,000 tonnes compared with 2,767,000 tonnes for the second
quarter of 2018. Sales of Methanex-produced methanol were 1,790,000
tonnes in the third quarter of 2018 compared with 1,729,000 tonnes
in the second quarter of 2018.
- To September 30, 2018 we have repurchased 5,400,000 common
shares, of the 6,590,095 approved, for approximately $366 million
since the start of our normal course issuer bid on March 13,
2018.
- During the third quarter of 2018 we paid a $0.33 per common
share quarterly dividend to shareholders for a total of $26
million.
- We recently restarted our 0.8 million tonne Chile IV plant that
has been idle since 2007 and expect the plant to ramp up to full
production rates over the coming weeks. Additionally, the Argentine
Government has granted permits to allow for the export of natural
gas from Argentina to Chile and Methanex has begun to receive
natural gas from Argentine suppliers in October 2018. 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 until
mid-2020.
- We continue to make good progress on a potential Geismar 3
production facility. We expect to spend approximately $50 to $60
million on this project prior to reaching a final investment
decision by mid-2019. We believe that the potential Geismar 3
project would be advantaged relative to other projects being
contemplated or under construction in the US Gulf.
PRODUCTION HIGHLIGHTS
|
Q3 2018 |
Q2 2018 |
Q3 2017 |
|
YTD Q3 2018 |
YTD Q3 2017 |
(thousands of tonnes) |
Operating Capacity
1 |
Production |
Production |
Production |
|
Production |
Production |
New Zealand 2 |
608 |
|
478 |
|
252 |
|
502 |
|
|
1,217 |
|
1,385 |
|
Geismar (USA) |
500 |
|
520 |
|
518 |
|
499 |
|
|
1,551 |
|
1,429 |
|
Trinidad (Methanex interest) 3 |
500 |
|
353 |
|
442 |
|
457 |
|
|
1,254 |
|
1,302 |
|
Egypt (50% interest) |
158 |
|
128 |
|
165 |
|
71 |
|
|
458 |
|
389 |
|
Medicine Hat (Canada) |
150 |
|
144 |
|
143 |
|
158 |
|
|
440 |
|
435 |
|
Chile 4 |
220 |
|
112 |
|
128 |
|
78 |
|
|
406 |
|
305 |
|
|
2,136 |
|
1,735 |
|
1,648 |
|
1,765 |
|
|
5,326 |
|
5,245 |
|
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 produced 478,000 tonnes compared with 252,000
tonnes in the second quarter of 2018. Production in the third
quarter of 2018 is higher than the second quarter of 2018 by
226,000 tonnes as major turnaround activities were completed at the
end of June. However, production in New Zealand was impacted in the
third quarter as we experienced gas constraints as a result of
natural gas suppliers completing planned and unplanned maintenance
activities. We expect the gas constraints to be resolved in the
fourth quarter.
- Geismar production rates continue to be strong, with production
of 520,000 tonnes.
- Trinidad produced 353,000 tonnes (Methanex interest) compared
with 442,000 tonnes in the second quarter of 2018. Production in
Trinidad was lower in the third quarter of 2018 compared to the
second quarter of 2018 primarily as a result of interruptions to
the electricity supply to the site and mechanical issues at both
plants during the quarter. Additionally, we continue to experience
gas curtailments in Trinidad.
- The Egypt facility produced 256,000 tonnes (Methanex interest -
128,000 tonnes) in the third quarter of 2018 compared with 330,000
tonnes (Methanex interest - 165,000 tonnes) in the second quarter
of 2018. Mechanical issues primarily related to the supply of off
spec natural gas at the Egypt facility resulted in lower production
in the third quarter of 2018 compared to the second quarter of
2018. Natural gas supplied to the facility following the
outage has since met specifications.
- Medicine Hat produced 144,000 tonnes during the third quarter
of 2018, and 143,000 tonnes in the second quarter of 2018. We
experienced CO2 supply constraint during both the second and third
quarters of 2018. CO2 supply resumed late in the third quarter of
2018 and is expected to continue for the foreseeable future.
- Chile produced 112,000 tonnes, including 20,000 tonnes produced
through a tolling arrangement with natural gas from Argentina. This
compares to 128,000 tonnes during the second quarter of 2018,
including 48,000 tonnes through the tolling arrangement.
CONFERENCE CALL
A conference call is scheduled for October 25,
2018 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 and will also be available following the call. A
playback version of the conference call will be available until
November 8, 2018 at (905) 694-9451, or toll free at (800) 408-3053.
The passcode for the playback version is 9757508#.
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 2018 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 2018
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, Adjusted net income 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 14 of the Company's MD&A for the period ended
September 30, 2018 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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