Methanex Second Quarter 2021 Results Demonstrate Favourable Methanol Industry Fundamentals and Strong Cash Generation Capability
Except where otherwise noted, all currency amounts are stated in United States dollars.
- Robust methanol prices supported an increase in net income attributable to Methanex shareholders to $107 million and Adjusted EBITDA to $262 million
- Strong liquidity and financial strength supported by a healthy cash balance, deleveraging initiatives and meaningful cash generation
- Announced key decisions aligned with our capital allocation priorities, including a restart of construction on the Company's advantaged Geismar 3 project, agreement on key commercial terms for a strategic shipping partnership and a reset of the quarterly dividend to $0.125 per share
VANCOUVER, British Columbia, July 28, 2021 (GLOBE NEWSWIRE) -- 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 30 2021 | Mar 31 2021 | Jun 30 2020 | Jun 30 2021 | Jun 30 2020 | ||||||
| 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 30 2021 | Mar 31 2021 | Jun 30 2020 | Jun 30 2021 | Jun 30 2020 | |||||||||||
| 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 Campbell
Director, Investor Relations
Methanex Corporation
604-661-2600
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