Methanex Reports Fourth Quarter 2018 Results
January 30 2019 - 5:05PM
For the fourth quarter of 2018, Methanex (TSX:MX) (NASDAQ:MEOH)
reported net income attributable to Methanex shareholders of $161
million ($1.68 per common share on a diluted basis) compared to net
income of $128 million ($1.61 per common share on a diluted basis)
in the third quarter of 2018. Adjusted EBITDA for the fourth
quarter of 2018 was $197 million and Adjusted net income was $90
million ($1.15 per common share). This compares with Adjusted
EBITDA of $293 million and Adjusted net income of $152 million
($1.92 per common share) for the third quarter of 2018.
For the year ended December 31, 2018, Methanex
reported net income attributable to Methanex shareholders of $569
million ($6.92 net income per common shares on a diluted basis),
Adjusted EBITDA of $1,071 million and Adjusted net income of $556
million ($6.86 net income per common share). This compares with net
income attributable to Methanex shareholders of $316 million ($3.64
net income per common share on a diluted basis), Adjusted EBITDA of
$838 million and Adjusted net income of $409 million ($4.71
Adjusted net income per common share) for the year ended December
31, 2017.
John Floren, President and CEO of Methanex,
commented, "2018 was an excellent year and we are pleased to have
achieved record production and sales volume and the highest
Adjusted EBITDA in the Company's history, surpassing the records we
set in 2017. These results reflect the investments we have made
over the past few years to increase our production capability and
significantly improve our earnings profile and cash generation
capability. In 2018, we also returned $550 million to shareholders
through our regular dividend and share repurchases of 6.6 million
common shares to complete the normal course issuer bid that started
on March 13, 2018."
"The volatility that we experienced in the
fourth quarter resulted in downward pressure on our earnings on a
quarter-over-quarter basis that is less impactful over the
longer-term. Our fourth quarter Adjusted EBITDA was impacted by
lower average realized methanol prices, lower sales of Methanex-
produced methanol and higher costs compared to the third quarter of
2018. Our average realized price decreased to $401 per tonne in the
fourth quarter compared to $413 per tonne in the third quarter.
Methanol pricing declined in the fourth quarter due to concerns
around global economic growth, unresolved trade tensions and a
steep decline in oil prices which reduced affordability for
methanol in energy-related applications. Sales of Methanex-produced
methanol were lower compared to the third quarter of 2018 due to
the timing of inventory flows and because we increased our
inventory levels in line with business growth. Our costs were
higher in the fourth quarter compared to the third quarter as a
result of higher unabsorbed costs at our manufacturing sites,
higher logistics costs and higher selling and administrative
expenses. As well, in a declining methanol price environment, our
margins tend to be lower than in a stable price environment due to
inventory timing differences."
"The improvements we have made in our business
enable us to generate strong earnings and cash flow at a wide range
of methanol prices. We have $256 million of cash on hand at the end
of the fourth quarter, a committed revolving credit facility and a
robust balance sheet. Our balanced approach to capital allocation
remains unchanged. We believe we are well positioned to meet our
financial commitments, pursue our growth opportunities and deliver
on our commitment to return excess cash to shareholders through
dividends and share repurchases," Floren said.
FURTHER INFORMATIONThe
information set forth in this news release summarizes Methanex's
key financial and operational data for the fourth quarter of 2018.
It is not a complete source of information for readers and is not
in any way a substitute for reading the fourth quarter 2018
Management’s Discussion and Analysis ("MD&A") dated
January 30, 2019 and the unaudited condensed consolidated
interim financial statements for the three and twelve month periods
ended December 31, 2018, both of which are available from the
Investor Relations section of our website at www.methanex.com. The
MD&A and the unaudited condensed consolidated interim financial
statements for the three and twelve month periods ended
December 31, 2018 are also available on the Canadian
Securities Administrators' SEDAR website at www.sedar.com and
on the United States Securities and Exchange Commission's EDGAR
website at www.sec.gov.
FINANCIAL AND OPERATIONAL DATA
|
Three Months Ended |
|
Years Ended |
($ millions except
per share amounts and where noted) |
Dec 31
2018 |
Sep 30
2018 |
Dec 31
2017 |
|
Dec 31
2018 |
Dec 31
2017 |
Production (thousands
of tonnes) (attributable to Methanex shareholders) |
1,885 |
1,735 |
1,942 |
|
7,211 |
7,187 |
Sales volume (thousands
of tonnes) |
|
|
|
|
|
|
Methanex-produced methanol |
1,599 |
1,790 |
1,930 |
|
7,002 |
7,229 |
Purchased
methanol |
908 |
802 |
633 |
|
3,032 |
2,289 |
Commission sales |
245 |
279 |
289 |
|
1,174 |
1,151 |
Total
sales volume 1 |
2,752 |
2,871 |
2,852 |
|
11,208 |
10,669 |
|
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
487 |
486 |
403 |
|
481 |
396 |
Average realized price
($ per tonne) 3 |
401 |
413 |
350 |
|
405 |
337 |
|
|
|
|
|
|
|
Revenue |
977 |
1,044 |
861 |
|
3,932 |
3,061 |
Adjusted revenue |
1,008 |
1,067 |
904 |
|
4,033 |
3,227 |
Adjusted EBITDA |
197 |
293 |
254 |
|
1,071 |
838 |
Cash flows from
operating activities |
218 |
228 |
206 |
|
980 |
780 |
Adjusted net
income |
90 |
152 |
143 |
|
556 |
409 |
Net income
(attributable to Methanex shareholders) |
161 |
128 |
68 |
|
569 |
316 |
|
|
|
|
|
|
|
Adjusted net income per
common share |
1.15 |
1.92 |
1.70 |
|
6.86 |
4.71 |
Basic net income per
common share |
2.07 |
1.62 |
0.81 |
|
7.07 |
3.64 |
Diluted net income per
common share |
1.68 |
1.61 |
0.81 |
|
6.92 |
3.64 |
|
|
|
|
|
|
|
Common share
information (millions of shares) |
|
|
|
|
|
|
Weighted
average number of common shares |
78 |
79 |
84 |
|
80 |
87 |
Diluted
weighted average number of common shares |
78 |
79 |
84 |
|
81 |
87 |
Number of common shares outstanding, end of period |
77 |
78 |
84 |
|
77 |
84 |
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 no Tolling Volume produced in the fourth
quarter of 2018 and 20,000 MT in the third quarter of 2018. There
was no Tolling Volume in the fourth quarter of 2017. A total of
108,000 MT Tolling Volume was produced in 2018, and none in
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 |
|
Years Ended |
($
millions except number of shares and per share amounts) |
Dec 31 2018 |
|
Sep 30 2018 |
|
Dec 31 2017 |
|
|
Dec 31 2018 |
|
Dec 31 2017 |
|
Net income (attributable
to Methanex shareholders) |
$ |
161 |
|
$ |
128 |
|
$ |
68 |
|
|
$ |
569 |
|
$ |
316 |
|
U.S. tax reform
charge |
— |
|
— |
|
37 |
|
|
— |
|
37 |
|
Mark-to-market impact
of share-based compensation, net of tax |
(71 |
) |
24 |
|
38 |
|
|
(13 |
) |
56 |
|
Adjusted net income |
$ |
90 |
|
$ |
152 |
|
$ |
143 |
|
|
$ |
556 |
|
$ |
409 |
|
Diluted weighted
average shares outstanding (millions) |
78 |
|
79 |
|
84 |
|
|
81 |
|
87 |
|
Adjusted
net income per common share |
$ |
1.15 |
|
$ |
1.92 |
|
$ |
1.70 |
|
|
$ |
6.86 |
|
$ |
4.71 |
|
- We recorded net income attributable
to Methanex shareholders of $161 million during the fourth quarter
of 2018 compared to net income of $128 million in the third quarter
of 2018. The increase in earnings is primarily due to the change in
the mark-to-market impact of share-based compensation, offset by a
decrease in sales of Methanex-produced methanol and a decrease in
our average realized methanol price during the fourth quarter.
- We recorded Adjusted EBITDA of $197
million for the fourth quarter of 2018 compared with $293 million
for the third quarter of 2018. Adjusted net income was $90 million
for the fourth quarter of 2018 compared to Adjusted net income of
$152 million for the third quarter of 2018. The decrease in
Adjusted EBITDA and Adjusted net income is primarily due to a
decrease in sales of Methanex-produced methanol, an increase in
costs and a decrease in average realized price to $401 per tonne
for the fourth quarter of 2018 from $413 per tonne for the third
quarter of 2018.
- Production for the fourth quarter
of 2018 was 1,885,000 tonnes compared with 1,735,000 tonnes for the
third quarter of 2018.
- Total sales volume for the fourth
quarter of 2018 was 2,752,000 tonnes compared with 2,871,000 tonnes
for the third quarter of 2018. Sales of Methanex-produced methanol
were 1,599,000 tonnes in the fourth quarter of 2018 compared with
1,790,000 tonnes in the third quarter of 2018. In the fourth
quarter of 2018, production exceeded sales of Methanex-produced
methanol, resulting in a 286,000 tonne build of produced methanol
inventory. This inventory build primarily resulted due to timing
with significantly higher production levels in the last-half of the
fourth quarter compared to the last-half of the third quarter 2018.
This timing of production within the quarter has an impact on the
sales of produced methanol for the quarter as it generally takes
between 30 and 60 days to sell the methanol we produce.
- Total cash costs per tonne in the fourth quarter were higher
than in the third quarter. In the fourth quarter, we incurred
higher unabsorbed costs at our manufacturing sites, higher
logistics costs primarily due to increased bunker fuel prices and
higher selling, general and administrative expenses that included
cloud-based computing system implementation costs that are required
to be expensed. As well, in a declining price environment, our
margins tend to be lower than in a stable price environment due to
inventory timing differences.
- During the fourth quarter of 2018
we completed the 10% normal course issuer bid initiated in March
2018 repurchasing the maximum 6,590,095 common shares in 2018 for
approximately $444 million.
- During the fourth quarter of 2018
we paid a $0.33 per common share quarterly dividend to shareholders
for a total of $25 million.
- Total distributions to shareholders
in 2018 were $550 million including quarterly dividends and share
repurchases.
- In the fourth quarter of 2018 we
restarted our 0.8 million tonne Chile IV plant that had been idle
since 2007. During the quarter, Chile I and IV have been operating
on a combination of Chile and Argentina sourced natural gas with
Chile IV production ramping up over the quarter.
- We continue to make good progress
on a potential Geismar 3 production facility. We continue to expect
to spend approximately $50 to $60 million on this project prior to
reaching a final investment decision with approximately $45 million
remaining to be spent in the first half of 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
(thousands of
tonnes) |
Annual
Operating Capacity1 |
|
2018
Production |
|
2017
Production |
|
Q4 2018
Production |
|
Q3 2018
Production |
|
Q4 2017
Production |
|
New Zealand 2 |
2,430 |
|
1,606 |
|
1,943 |
|
389 |
|
478 |
|
558 |
|
Geismar (USA) |
2,000 |
|
2,078 |
|
1,935 |
|
527 |
|
520 |
|
506 |
|
Trinidad (Methanex
interest) 3 |
2,000 |
|
1,702 |
|
1,768 |
|
448 |
|
353 |
|
466 |
|
Egypt (50%
interest) |
630 |
|
613 |
|
534 |
|
155 |
|
128 |
|
145 |
|
Medicine Hat
(Canada) |
600 |
|
600 |
|
593 |
|
160 |
|
144 |
|
158 |
|
Chile 4 |
880 |
|
612 |
|
414 |
|
206 |
|
112 |
|
109 |
|
|
8,540 |
|
7,211 |
|
7,187 |
|
1,885 |
|
1,735 |
|
1,942 |
|
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
production 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 is 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. Chile operating capacity will
be updated in 2019 to reflect the two plant operations. |
|
|
|
Key production and operational highlights during
the fourth quarter include:
- New Zealand produced 389,000 tonnes
compared with 478,000 tonnes in the third quarter of 2018.
Production in the fourth quarter of 2018 is lower than the third
quarter of 2018 by 89,000 tonnes primarily as a result of a
scheduled turnaround at our Waitara Valley site and continued gas
constraints as a result of natural gas suppliers completing planned
and unplanned maintenance activities.
- Geismar production rates continue
to be strong, with production of 527,000 tonnes.
- Trinidad produced 448,000 tonnes
(Methanex interest) compared with 353,000 tonnes in the third
quarter of 2018. Production in Trinidad was higher in the fourth
quarter of 2018 compared to the third quarter of 2018 primarily as
a result of production outages during the previous quarter.
Additionally, we continue to experience gas curtailments in
Trinidad.
- The Egypt facility produced 310,000
tonnes (Methanex interest - 155,000 tonnes) in the fourth quarter
of 2018 compared with 256,000 tonnes (Methanex interest - 128,000
tonnes) in the third quarter of 2018. Mechanical issues primarily
related to the supply of off spec natural gas at the Egypt facility
resulted in lower production during the previous quarter.
- Medicine Hat produced 160,000
tonnes during the fourth quarter of 2018 compared to 144,000 tonnes
in the third quarter of 2018. We experienced CO2 supply constraints
during the third quarter of 2018.
- The Chile facilities, Chile I and
IV, produced 206,000 tonnes during the fourth quarter of 2018 from
a combination of Chile and Argentina sourced natural gas with Chile
IV production ramping up over the quarter. This compares to 112,000
tonnes during the third quarter of 2018, including 20,000 tonnes
through the tolling arrangement.
CONFERENCE CALLA conference
call is scheduled for January 31, 2019 at 12:00 noon ET (9:00 am
PT) to review these fourth 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 February 14, 2019 at (905) 694-9451,
or toll free at (800) 408-3053. The passcode for the playback
version is 4200911#.
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 fourth 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 fourth 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 MEASURESThe 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 13 of the
Company's MD&A for the period ended December 31, 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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