For the second quarter of 2018, Methanex (TSX:MX) (NASDAQ:MEOH)
reported net income attributable to Methanex shareholders of $111
million ($1.36 per common share on a diluted basis) compared to net
income of $169 million ($2.00 per common share on a diluted basis)
in the first quarter of 2018. Adjusted EBITDA for the second
quarter of 2018 was $275 million and Adjusted net income was $143
million ($1.75 per common share). This compares with Adjusted
EBITDA of $306 million and Adjusted net income of $171 million
($2.03 per common share) for the first quarter of 2018.
John Floren, President and CEO of Methanex
commented, "Methanol prices have remained strong through the second
quarter as a result of healthy methanol demand from energy-related
and traditional chemical applications combined with various
industry production outages globally resulting in tight market
conditions. Our average realized price increased slightly to $405
per tonne in the second quarter compared to $402 per tonne in the
first quarter of 2018. Our Adjusted EBITDA reflects the impact of
lower sales of produced product as a result of our reduced
production volume in New Zealand in the quarter."
"We returned $241 million to shareholders
through our regular dividend and share repurchases during the
second quarter. To June 30, 2018 we have repurchased 3,850,000
common shares, of the 6,590,095 approved, for approximately $253
million since the start of our normal course issuer bid on March
13, 2018."
"In addition, the restart of our Chile IV plant
is on track to be complete by the end of Q3 2018. The investments
we have made over the past few years to increase our production
capability have substantially improved our earnings power and
ability to generate significant free cash flow at a wide range of
methanol prices. We have low capital and financing requirements in
the near term and have $320 million of cash on hand at the end of
the second quarter, a committed revolving credit facility and a
robust balance sheet. Our balanced approach to capital allocation
remains unchanged. We believe we are well positioned to meet our
financial commitments, pursue our growth opportunities and deliver
on our commitment to return excess cash to shareholders through
dividends and share repurchases," Floren said.
FURTHER INFORMATIONThe
information set forth in this news release summarizes Methanex's
key financial and operational data for the second quarter of 2018.
It is not a complete source of information for readers and is not
in any way a substitute for reading the second quarter 2018
Management’s Discussion and Analysis ("MD&A") dated
July 25, 2018 and the unaudited condensed consolidated interim
financial statements for the period ended June 30, 2018, both
of which are available from the Investor Relations section of our
website at www.methanex.com. The MD&A and the unaudited
condensed consolidated interim financial statements for the period
ended June 30, 2018 are also available on the Canadian
Securities Administrators' SEDAR website at www.sedar.com and on
the United States Securities and Exchange Commission's EDGAR
website at www.sec.gov.
FINANCIAL AND OPERATIONAL DATA
|
Three Months Ended |
|
Six Months Ended |
($
millions except per share amounts and where noted) |
Jun 30 2018 |
|
Mar 31 2018 |
|
Jun 30 2017 |
|
|
Jun 30 2018 |
|
Jun 30 2017 |
|
Production (thousands
of tonnes) (attributable to Methanex shareholders) |
1,648 |
|
1,943 |
|
1,614 |
|
|
3,591 |
|
3,480 |
|
Sales volume (thousands
of tonnes) |
|
|
|
|
|
|
Methanex-produced methanol |
1,729 |
|
1,884 |
|
1,790 |
|
|
3,613 |
|
3,546 |
|
Purchased
methanol |
709 |
|
613 |
|
387 |
|
|
1,322 |
|
899 |
|
Commission sales |
329 |
|
321 |
|
297 |
|
|
650 |
|
601 |
|
Total
sales volume 1 |
2,767 |
|
2,818 |
|
2,474 |
|
|
5,585 |
|
5,046 |
|
|
|
|
|
|
|
|
Methanex average
non-discounted posted price ($ per tonne) 2 |
478 |
|
475 |
|
398 |
|
|
476 |
|
418 |
|
Average realized price
($ per tonne) 3 |
405 |
|
402 |
|
327 |
|
|
403 |
|
347 |
|
|
|
|
|
|
|
|
Revenue |
950 |
|
962 |
|
669 |
|
|
1,912 |
|
1,480 |
|
Adjusted revenue |
972 |
|
987 |
|
716 |
|
|
1,959 |
|
1,548 |
|
Adjusted EBITDA |
275 |
|
306 |
|
174 |
|
|
581 |
|
441 |
|
Cash flows from
operating activities |
290 |
|
244 |
|
243 |
|
|
534 |
|
458 |
|
Adjusted net
income |
143 |
|
171 |
|
74 |
|
|
314 |
|
214 |
|
Net income
(attributable to Methanex shareholders) |
111 |
|
169 |
|
84 |
|
|
280 |
|
216 |
|
|
|
|
|
|
|
|
Adjusted net income per
common share |
1.75 |
|
2.03 |
|
0.85 |
|
|
3.79 |
|
2.40 |
|
Basic net income per
common share |
1.36 |
|
2.02 |
|
0.96 |
|
|
3.39 |
|
2.43 |
|
Diluted net income per
common share |
1.36 |
|
2.00 |
|
0.89 |
|
|
3.38 |
|
2.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common share
information (millions of shares) |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares |
82 |
|
84 |
|
88 |
|
|
83 |
|
89 |
|
Diluted
weighted average number of common shares |
82 |
|
84 |
|
88 |
|
|
83 |
|
89 |
|
Number of common shares outstanding, end of period |
80 |
|
83 |
|
87 |
|
|
80 |
|
87 |
|
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 48,000 MT of Tolling
Volume produced in the second quarter of 2018 and 40,000MT in the
first quarter of 2018. There was no Tolling Volume in the second
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 |
|
Six Months Ended |
|
|
Jun 30 |
|
|
Mar
31 |
|
|
Jun
30 |
|
|
|
Jun 30 |
|
|
Jun
30 |
|
|
($
millions except number of shares and per share amounts) |
|
2018 |
|
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
|
Net income
(attributable to Methanex shareholders) |
$ |
111 |
|
$ |
169 |
|
$ |
84 |
|
|
$ |
280 |
|
$ |
216 |
|
|
Mark-to-market impact of share-based compensation, net of tax |
|
32 |
|
|
2 |
|
|
(10 |
) |
|
|
34 |
|
|
(2 |
) |
|
Adjusted
net income |
$ |
143 |
|
$ |
171 |
|
$ |
74 |
|
|
$ |
314 |
|
$ |
214 |
|
|
Diluted weighted
average shares outstanding (millions) |
|
82 |
|
|
84 |
|
|
88 |
|
|
|
83 |
|
|
89 |
|
|
Adjusted
net income per common share |
$ |
1.75 |
|
$ |
2.03 |
|
$ |
0.85 |
|
|
$ |
3.79 |
|
$ |
2.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- We recorded net income attributable
to Methanex shareholders of $111 million during the second quarter
of 2018 compared to net income of $169 million in the first quarter
of 2018. The decrease in earnings is primarily due to a decrease in
sales of Methanex-produced methanol and the mark-to-market impact
of share-based compensation due to the increase in the Methanex
share price.
- We recorded Adjusted EBITDA of $275
million for the second quarter of 2018 compared with $306 million
for the first quarter of 2018. Adjusted net income was $143 million
for the second quarter of 2018 compared to Adjusted net income of
$171 million for the first quarter of 2018. The decrease in
Adjusted EBITDA and Adjusted net income is primarily due to a
decrease in sales of Methanex-produced methanol.
- Production for the second quarter
of 2018 was 1,648,000 tonnes compared with 1,943,000 tonnes for the
first quarter of 2018. The decrease of 295,000 tonnes in production
is primarily due to natural gas supply constraints and a scheduled
turnaround and maintenance activities at our New Zealand
facilities.
- Total sales volume for the second
quarter of 2018 was 2,767,000 tonnes compared with 2,818,000 tonnes
for the first quarter of 2018. Sales of Methanex-produced methanol
were 1,729,000 tonnes in the second quarter of 2018 compared with
1,884,000 tonnes in the first quarter of 2018.
- Cash flows from operating
activities in the second quarter of 2018 increased to $290 million
compared with $244 million for the first quarter of 2018, an
increase of $46 million. Cash flows from operating activities
increased despite a decrease in Adjusted EBITDA primarily as a
result of a reduction in non-cash working capital.
- To June 30, 2018 we have
repurchased 3,850,000 common shares, of the 6,590,095 approved, for
approximately $253 million since the start of our normal course
issuer bid on March 13, 2018.
- During the second quarter of 2018
we paid a $0.33 per common share quarterly dividend to shareholders
for a total of $27 million.
- We recently signed agreements to
supply gas to underpin over half of Methanex's 2.4 million tonnes
of annual production capacity in New Zealand for a period of 11
years through 2029. These new agreements will combine with
contracts from other natural gas producers to supply our New
Zealand facilities.
- We continue to make good progress
on a potential Geismar 3 production facility. Our Board of
Directors has recently approved moving to the next phase of the
project to commence site-specific engineering work known as
front-end engineering and design or "FEED". 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
|
Q2 2018 |
Q1
2018 |
|
Q2
2017 |
|
|
YTD Q2 2018 |
|
YTD Q2
2017 |
|
(thousands of tonnes) |
Operating Capacity 1 |
|
Production |
|
Production |
|
Production |
|
|
Production |
|
Production |
|
New Zealand 2 |
608 |
|
252 |
|
487 |
|
350 |
|
|
739 |
|
883 |
|
Geismar (USA) |
500 |
|
518 |
|
513 |
|
437 |
|
|
1,031 |
|
930 |
|
Trinidad (Methanex
interest) 3 |
500 |
|
442 |
|
459 |
|
449 |
|
|
901 |
|
845 |
|
Egypt (50%
interest) |
158 |
|
165 |
|
165 |
|
159 |
|
|
330 |
|
318 |
|
Medicine Hat
(Canada) |
150 |
|
143 |
|
153 |
|
159 |
|
|
296 |
|
277 |
|
Chile 4 |
220 |
|
128 |
|
166 |
|
60 |
|
|
294 |
|
227 |
|
|
2,136 |
|
1,648 |
|
1,943 |
|
1,614 |
|
|
3,591 |
|
3,480 |
|
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 second quarter include:
- New Zealand produced 252,000 tonnes
compared with 487,000 tonnes in the first quarter of 2018.
Production in the second quarter of 2018 is lower than the first
quarter of 2018 by 235,000 tonnes primarily as a result of a
scheduled turnaround and maintenance activities at our Motunui site
and gas supply constraints due to a damaged natural gas pipeline
impacting gas deliveries from offshore sources. Turnaround
activities were completed at the end of June. The pipeline is now
operational and we have begun receiving gas supply from this source
to our site again.
- Geismar production rates continue
to be strong, with production of 518,000 tonnes.
- Trinidad produced 442,000 tonnes
(Methanex interest) compared with 459,000 tonnes in the first
quarter of 2018. We continue to experience gas curtailments in
Trinidad.
- Egypt produced 165,000 tonnes
(Methanex interest) in both the first and second quarters of 2018.
We expect to receive 100% of contracted gas supply for the
foreseeable future.
- Medicine Hat produced 143,000
tonnes during the second quarter of 2018, and 153,000 tonnes in the
first quarter of 2018. Production in the second quarter of 2018 is
lower than the first quarter of 2018 by 10,000 tonnes primarily as
a result of CO2 supply constraint. We expect CO2 supply to resume
late in the third quarter of 2018.
- Chile produced 128,000 tonnes,
including 48,000 tonnes produced through a tolling arrangement with
natural gas from Argentina. This compares to 166,000 tonnes during
the first quarter of 2018, including 40,000 tonnes through the
tolling arrangement. Production in the second quarter of 2018 is
lower than the first quarter of 2018 as a result of lower natural
gas deliveries during the southern hemisphere winter.
CONFERENCE CALLA conference call is scheduled
for July 26, 2018 at 12:00 noon ET (9:00 am PT) to review these
second 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
August 9, 2018 at (905) 694-9451, or toll free at (800) 408-3053.
The passcode for the playback version is 9087593#.
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 second
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 second 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 June 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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