Methanex Corporation (MEOH) posted earnings 90 cents a share in the third quarter of 2013 versus a loss of 3 cents a share registered a year ago. That missed the Zacks Consensus Estimates of 99 cents.
Methanex’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) amounted to $184 million in the quarter, a roughly 77% year-over-year jump. Strong methanol market conditions and higher pricing across all regions contributed to the rise.
Revenues increased roughly 25% year over year to $758 million and exceeded the Zacks Consensus Estimate of $694 million. Methanol sales volumes in the quarter totaled 1,992,000 tons, up 4.9% from the year-ago quarter.
Average realized price per ton amounted to $438 in the quarter compared with $373 a year ago. Total production in the quarter was 1,035,000 tons compared with 1,025,000 tons in the prior-year quarter. Methanex-produced methanol sales volume was 1,040,000 tons versus 1,053,000 tons a year ago.
Production Summary
New Zealand: Methanex produced 349,000 tons in the quarter, up 0.9% from 346,000 tons produced in the same period last year. Methanex restarted its 530,000 ton Waitara Valley facility and completed a debottlenecking project at the Motunui facilities.
The company also completed a planned major refurbishment at the Motunui 2 facility and expects its New Zealand operations to keep up with the site's full annual production capacity of up to 2.4 million tons.
Trinidad: Methanex owns two facilities in Trinidad. The company’s fully-owned Titan facility produced 128,000 tons in the third quarter, higher than 186,000 tons produced in the year-ago quarter.
The Atlas facility, in which the company holds a 63.1% interest, produced 254,000 tons in the quarter, about 0.4% lower than last year. Methanex is encountering natural gas supply restrictions in Trinidad. Although it is trying to find a solution to this problem, Methanex expects to experience natural gas curtailments in the near term.
Egypt: The facility produced 168,000 tons in the quarter, up from 62,000 tons produced a year ago. The facility experienced unplanned outage during the third quarter, resulting in declined production of about 15,000 tons. It has also been experiencing periodic natural gas supply restrictions since mid-2012 which s expected to persist in the future due to increased electricity demand during summer.
In October, Methanex announced the sale of a 10% equity interest in the Egypt methanol facility to Arab Petroleum Investments Corporation (APICORP) for $110 million. The sale is expected to complete in the fourth quarter of 2013.
Medicine Hat: The facility produced 130,000 tons in the quarter, up from 117,000 tons produced last year. During the quarter, Methanex completed the debottlenecking project at the Medicine Hat facility which increased the site's annual production capacity by 90,000 tons.
Chile: Due to insufficient natural gas feedstock during the southern hemisphere winter, Methanex idled its Chile operations in second-quarter 2013 and restarted its Chile I facility in late Sep 2013. The Chile operations produced 6,000 tons in the reported quarter compared with 59,000 tons a year ago.
The availability of natural gas supplies from Chile and Argentina and the level of exploration and development in southern Chile are instrumental in determining the future of the Chile operations.
Geismar, Louisiana: The company is in the process of relocating two idle Chile facilities to Geismar, Louisiana (Geismar I and Geismar II). The Geismar I facility is forecast to be operational by the end of 2014 and the Geismar II facility in early 2016. During the reported quarter, Methanex incurred $67 million of capital expenditures related to these projects, excluding capitalized interest. Remaining capital expenditure for these projects is expected to be $780 million.
Financial Position
Consolidated cash flows from operating activities increased 48% to $181 million in the third quarter from $122 million in the prior-year quarter. Methanex ended the quarter with cash and cash equivalents of $686.2 million including $35 million related to the non-controlling interest in Egypt, up 70.3% year over year. Long-term debt, as of Sep 30, 2013, was $1,126.8 million compared with $855.5 million, as of Sep 30, 2012.
Outlook
Methanex expects the methanol industry and methanol pricing environment to be healthy in the fourth quarter of 2013.
Methanex stated that methanol price will depend on a number of factors such as economic health, operating rates, global energy prices, new supply additions and demand. The company believes that its healthy financial position, strong global supply network and competitive-cost position will strengthen its position as the global leader in the methanol industry and enable it to maintain this position and invest in its growth.
Planned capital maintenance expenditure program directed towards maintenance, turnarounds and catalyst changes for existing operations, is expected to total about $70 million to the end of 2014.
Methanex currently carries a Zacks Rank #3 (Hold).
Other companies in the chemical industry worth considering are Praxair (PX), DuPont (DD) and BASF (BASFY). All of them hold a Zacks Rank #2 (Buy).
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