Chemical maker Methanex Corporation MEOH recorded earnings of 54 cents in the third quarter of 2015, flat year over year. Earnings per share surpassed the Zacks Consensus Estimate of 28 cents by a wide margin.
Methanex recorded profits of $78 million, up 50% from $52 million in the third quarter of 2014.
Methanex’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $95 million in the quarter, a decline of roughly 30.7% from $137 million recorded a year ago. The decrease was attributable to lower average realized prices of methanol in the third quarter.
Revenues decreased roughly 27.8% year over year to $527 million in the reported quarter, missing the Zacks Consensus Estimate of $641 million.
Average realized price was $323 per ton in the quarter, down roughly 17% from $389 per ton a year ago. Total production was 1,259,000 tons, a 4.6% rise from 1,204,000 tons in the prior-year quarter, aided by the company’s successful start-up of its Geismer 1 facility in Jan 2015. Methanex-produced methanol sales volumes dipped 1.6% year over year to 1,238,000 tons.
Shares of Methanex rose roughly 1.1% to close at $38.79 on Oct 29. The stock is up around 4% since the earnings release based on last Friday’s close.
Production Summary
New Zealand: Methanex produced 476,000 tons in the third quarter of 2015, down 20% from 595,000 tons produced a year ago. Production in this region was also lower sequentially due to mechanical issues at two Motunui facilities, leading to loss of production of around 80,000 tons in the quarter.
Trinidad: Methanex's fully-owned Titan facility produced 172,000 tons in the quarter, down roughly 7% from 185,000 tons produced a year ago. The Atlas facility, in which the company holds a 63.1% interest, produced 226,000 tons, down around 3.4% from the prior-year quarter figure. In the reported quarter, Methanex encountered gas curtailment issues at both the plants that adversely affected their production.
Egypt: Operations at this facility were completely stopped since Jun 2015 owing to natural gas supply restrictions. However, the plant operated for only 12 days during the quarter, producing 32,000 tons. The company anticipates resuming operations at the facility in the fourth quarter of 2015.
Medicine Hat, Canada: The facility produced 123,000 tons in the quarter, down 5.4% from 130,000 tons produced a year ago. As expected, the facility underwent a planned renovation in the reported quarter, resuming operations in mid July.
Chile: Operations in this region were idled owing to insufficient natural gas feedstock from Chile and Argentina during winter in the southern hemisphere. Once operations resumed on Sep 27, 2015, the region generated production of 3,000 tons in the quarter.
Geismar, LA: Methanex started commercial production at the Geismar 1 facility at full operating rates in late Jan 2015, with production of 259,000 tons during the reported quarter. Further, Methanex is progressing with the construction of the Geismar 2 facility at a fast pace and now anticipates production by the end of 2015 adding 1 million extra tons to the company’s annual operating capacity.
Financials
Consolidated cash flows from operating activities plunged around 21.6% year over year to $134 million in the reported quarter. Cash and cash equivalents were $426.7 million, down 10.2% year over year.
Methanex’s board paid a quarterly dividend of 27.5 cents per share to stockholders, amounting to a total of $25 million. The company also bought back 629,100 shares for $27 million under the new share repurchase program. The company can further purchase 3.2 million shares by May 5, 2016.
Outlook
Going forward, Methanex anticipates annual methanol demand to be 61 million tons. The company expects methanol-to-olefins demand in the fourth quarter to increase owing to the commencement of production at facilities.
Methanex kept its contract prices for North America at $366 per ton, while reducing the European Union (EU) contract prices to €295 per ton for fourth-quarter 2015. While the company announced that Asia Pacific contract prices for November will be steady, it lowered its contract prices for North America to $349 per ton.
Methanex anticipates stable demand growth from chemical applications in China and the rest of the world. The company also expects growth in energy-related methanol demand. Further, Methanex stated that the price of methanol depends on a number of factors such as economic health, operating rates, global energy prices, new supply additions and demand. Other than China, additional supply capacities over the next few years are anticipated to be up in North America.
Further, the company expects first commercial production from its Geismar 2 facility toward the end of 2015.
Zacks Rank
Methanex currently carries a Zacks Rank #5 (Strong Sell).
Better-ranked companies in the diversified chemical space include Celanese Corporation CE, Stepan Company SCL and Albemarle Corporation ALB. While Celanese and Stepan sport a Zacks Rank #1 (Strong Buy), Albemarle carries a Zacks Rank #2 (Buy).
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