Methanex Swings to Profit in Q4, Shares Up

Zacks

Methanex Corporation (MEOH) turned to profit in the fourth quarter of 2013 and its revenues also increased riding on higher methanol pricing and healthy demand. The stock reacted positively to the news, rising as much as 11% in the trading session.

Methanex posted a profit of $128 million or $1.32 per share in the quarter versus a loss of $140 million or $1.49 per share reported a year-ago.
Adjusted earnings (excluding one-time items other than stock-based compensation expenses) of $1.37 a share for the fourth quarter, however, missed the Zacks Consensus Estimates of $1.51.

For full-year 2013, the company’s adjusted earnings (excluding one-time items other than stock-based compensation expenses) came in at $3.84 per share, also missing the Zacks Consensus Estimates of $4.68.

Methanex’s adjusted earnings before interest, tax, depreciation and amortization (:EBITDA) amounted to $245 million in the quarter, up roughly 106% year over year and 33% from the sequential quarter. The sequential increase was due to higher average realized price and increase in sales of Methanex-produced methanol.

Revenues increased roughly 32% year over year to $881 million in the quarter and exceeded the Zacks Consensus Estimate of $861 million. For full-year 2013, revenues increased about 19% year over year to $3,024 million, but missed the Zacks Consensus Estimate of $3,048 million.

Average realized price per ton amounted to $493 in the quarter compared with $389 a year ago. Total production in the quarter was 1,194,000 tons compared with 1,067,000 tons in the prior-year quarter. Methanex-produced methanol sales volume was 1,190,000 tons versus 1,059,000 tons a year ago.

Production Summary

New Zealand: Methanex produced 400,000 tons in the quarter, up 5.8% from 378,000 tons produced in the same period last year. Methanex also completed a planned major refurbishment at the Motunui 2 facility and with its three facilities operating at full capacity the company will be able to produce at the New Zealand 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 173,000 tons in the fourth quarter, lower than 189,000 tons produced in the year-ago quarter. The facility underwent an unplanned outage during the fourth quarter resulting in production loss of about 15, 000 tons.

The Atlas facility, in which the company holds a 63.1% interest, produced 268,000 tons in the quarter, about 49% higher than last year. Methanex is encountering natural gas supply restrictions in Trinidad. Although it is trying to find a solution to this problem, Methanex continues to experience natural gas curtailments.

Egypt: The facility produced 159,000 tons in the quarter, up from 129,000 tons produced a year ago. The facility experienced unplanned outage during the fourth quarter, resulting in declined production of about 35,000 tons. It has also been experiencing periodic natural gas supply restrictions since mid-2012, which is expected to persist in the future due to increased electricity demand during summer.

In Dec 2013, Methanex completed the sale of a 10% equity interest in the Egypt methanol facility to Arab Petroleum Investments Corporation (:APICORP) for $110 million.

Medicine Hat: The facility produced 86,000 tons in the quarter, down 35% from 129,000 tons produced last year. The facility experienced unplanned outage during the fourth quarter, resulting in declined production of about 50,000 tons. The facility however restarted in Jan 2014 and is currently operational.

Chile: The Chile operations produced 108,000 tons in the reported quarter and operated the facility at roughly 50% of production capacity 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, La. (Geismar I and Geismar II). The Geismar I facility now on site in Louisiana. The company expects to produce methanol from the 1 million ton Geismar 1 facility in late 2014 and from the 1 million tonne Geismar 2 facility in early 2016. During the reported quarter, Methanex incurred $45 million of capital expenditures related to these projects, excluding capitalized interest.

Financial Position

Consolidated cash flows from operating activities increased 102.5% to $162 million in the fourth quarter from $80 million in the prior-year quarter. Cash and cash equivalents stood at $732.7 million (including $59 million related to the non-controlling interest in Egypt) as of Dec 31, 2013, compared with $727.4 million as of Dec 31, 2012. Long-term debt, as of Dec 31, 2013, was $1,126.8 million compared with $1156.1 million as of Dec 31, 2012.

Outlook

Methanex expects the methanol industry and methanol pricing environment to be healthy in the first quarter of 2014.

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 its position and invest in growth.

Planned capital maintenance expenditure program directed towards maintenance, turnarounds and catalyst changes for existing operations, is expected to total about $70 million through the end of 2014.

Methanex currently carries a Zacks Rank #2 (Buy).

Other chemical stocks worth a look include L'Air Liquide SA (AIQUY), Northern Technologies International Corp. (NTIC) and PPG Industries Inc. (PPG).  While L'Air Liquide and Northern Technologies International hold a Zacks Rank #1 (Strong Buy), PPG Industries retains a Zacks Rank #2 (Buy).

Read the Full Research Report on PPG
Read the Full Research Report on AIQUY
Read the Full Research Report on MEOH
Read the Full Research Report on NTIC


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