Methanex Reports Higher Fourth Quarter 2023 Earnings as Methanol Prices Strengthen; Geismar 3 in Start Up Process
- Methanex reported an increase in net income and Adjusted EBITDA in the fourth quarter of 2023 compared to the third quarter of 2023.
- The average realized price for Methanex's products increased to $322 per tonne in the fourth quarter of 2023.
- The Geismar 3 plant is expected to enhance cash flow capability at a range of methanol prices.
- Methanex returned $136 million to shareholders through regular dividends and share purchases in 2023.
- Net income attributable to Methanex shareholders decreased from $354 million in 2022 to $174 million in 2023.
- Adjusted EBITDA decreased from $932 million in 2022 to $622 million in 2023.
- Methanex's production in 2023 was lower compared to 2022.
Insights
The financial results of Methanex for the fourth quarter of 2023 indicate a positive trajectory in net income and Adjusted EBITDA, reflecting a stronger market position. The increase in the average realized price per tonne from $303 to $322 suggests an improved pricing environment, likely driven by market demand dynamics, particularly in China. The uptick in net income and Adjusted EBITDA is a sign of robust operational performance and cost management, despite a slight decrease in year-over-year net income from 2022 to 2023.
Investors should note the potential cash flow enhancement from the Geismar 3 plant, which is expected to commence commercial production shortly. The plant's low emission profile could also provide a competitive edge in the current environment where sustainability is becoming increasingly important. The return of $136 million to shareholders through dividends and share repurchases demonstrates a commitment to shareholder value, while the strong cash position and undrawn credit facility provide financial flexibility.
However, the year-over-year decline in net income and Adjusted EBITDA from 2022 to 2023 should be carefully evaluated to understand the underlying causes, such as market volatility or one-off events and how they might affect future performance.
The methanol industry is characterized by cyclical demand and supply dynamics, which are reflected in Methanex's financial performance. The reported increase in demand, particularly in China, against a backdrop of supply constraints due to outages and natural gas restrictions, has likely contributed to the higher average realized price in Q4 2023. Investors should monitor global economic indicators and energy market trends as they can significantly impact methanol prices and, consequently, Methanex's revenue.
Looking at the operational data, the higher production volumes in Chile, New Zealand, Geismar and Medicine Hat are encouraging. However, the geopolitical risks and supply chain uncertainties that can affect production in regions like Egypt and Trinidad should be accounted for in risk assessments. The strategic shift in Trinidad, with the idling of the Titan plant in favor of the Atlas plant, reflects an agile response to changing natural gas supply scenarios and could influence future production levels and cost structures.
The emphasis on the Geismar 3 plant's low emission intensity profile aligns with the broader industry trend towards sustainability and environmental compliance. As regulations tighten and investors increasingly favor environmentally responsible investments, Methanex's focus on reducing CO2 emissions could enhance its market reputation and lead to potential long-term cost savings through efficiency improvements and possible incentives for low-emission technologies.
The financial implications of environmental performance are becoming more pronounced and Methanex's proactive approach could position it favorably against competitors. However, the actual environmental performance and the operational efficiency of the new plant will need to be monitored to validate these claims and assess their impact on the company's financial health.
Except where otherwise noted, all currency amounts are stated in United States dollars.
- Net income attributable to Methanex shareholders of
$33 million and Adjusted EBITDA of$148 million in the fourth quarter. The average realized price in the fourth quarter was$322 per tonne compared to$303 per tonne in the third quarter of 2023. - Full year 2023 net income attributable to Methanex shareholders of
$174 million and Adjusted EBITDA of$622 million . - Fourth quarter production was higher compared to the third quarter due to higher production in Chile, New Zealand, Geismar and Medicine Hat, which was partially offset by lower production in Egypt.
- The 1.8 million tonne methanol plant, Geismar 3 ("G3"), is in the process of starting up and we expect that commercial production is imminent. The plant is expected to ramp up to full rates over the month of February. G3 will have one of the lowest emission intensity profiles in the industry and will significantly enhance our cash flow capability at a range of methanol prices.
- Returned
$136 million to shareholders through regular dividends and share purchases in 2023 and ended the fourth quarter with$458 million in cash.
VANCOUVER, British Columbia, Jan. 31, 2024 (GLOBE NEWSWIRE) -- For the fourth quarter of 2023, Methanex (TSX:MX) (NASDAQ:MEOH) reported net income attributable to Methanex shareholders of
Our average realized price in the fourth quarter was
For the year ended December 31, 2023, Methanex reported net income attributable to Methanex shareholders of
In 2023, we returned
Rich Sumner, President & CEO of Methanex, said, “I am proud of our G3 team that delivered a high quality plant with outstanding safety performance. G3 significantly enhances our asset portfolio and we expect it to generate strong shareholder returns. We remain focused on reliably operating our assets so we can deliver shareholder value over a variety of methanol prices."
FURTHER INFORMATION
The information set forth in this news release summarizes Methanex's key financial and operational data for the fourth quarter of 2023. It is not a complete source of information for readers and is not in any way a substitute for reading the fourth quarter 2023 Management’s Discussion and Analysis ("MD&A") dated January 31, 2024 and the unaudited condensed consolidated interim financial statements for the period ended December 31, 2023, both of which are available from the Investor Relations section of our website at www.methanex.com. The MD&A and the unaudited condensed consolidated interim financial statements for the period ended December 31, 2023 are also available on the Canadian Securities Administrators' SEDAR+ website at www.sedarplus.ca and on the United States Securities and Exchange Commission's EDGAR website at www.sec.gov.
FINANCIAL AND OPERATIONAL DATA
| Three Months Ended | Years Ended | |||||||||||||||||
| ($ millions except per share amounts and where noted) | Dec 31 2023 | Sep 30 2023 | Dec 31 2022 | Dec 31 2023 | Dec 31 2022 | |||||||||||||
| Production (thousands of tonnes) (attributable to Methanex shareholders) 1 | 1,779 | 1,545 | 1,526 | 6,642 | 6,118 | |||||||||||||
| Sales volume (thousands of tonnes) | ||||||||||||||||||
| Methanex-produced methanol | 1,712 | 1,473 | 1,360 | 6,455 | 6,141 | |||||||||||||
| Purchased methanol | 890 | 905 | 1,095 | 3,527 | 3,688 | |||||||||||||
| Commission sales | 260 | 342 | 192 | 1,187 | 945 | |||||||||||||
| Total sales volume 1 | 2,862 | 2,720 | 2,647 | 11,169 | 10,774 | |||||||||||||
| Methanex average non-discounted posted price ($ per tonne) 2 | 421 | 395 | 469 | 434 | 503 | |||||||||||||
| Average realized price ($ per tonne) 3 | 322 | 303 | 373 | 333 | 397 | |||||||||||||
| Revenue | 922 | 823 | 986 | 3,723 | 4,311 | |||||||||||||
| Net income (attributable to Methanex shareholders) | 33 | 24 | 41 | 174 | 354 | |||||||||||||
| Adjusted net income 4 | 35 | 1 | 51 | 153 | 343 | |||||||||||||
| Adjusted EBITDA 4 | 148 | 105 | 160 | 622 | 932 | |||||||||||||
| Cash flows from operating activities | 195 | 106 | 227 | 660 | 987 | |||||||||||||
| Basic net income per common share | 0.50 | 0.36 | 0.59 | 2.57 | 4.95 | |||||||||||||
| Diluted net income per common share | 0.50 | 0.36 | 0.59 | 2.57 | 4.86 | |||||||||||||
| Adjusted net income per common share 4 | 0.52 | 0.02 | 0.73 | 2.25 | 4.79 | |||||||||||||
| Common share information (millions of shares) | ||||||||||||||||||
| Weighted average number of common shares | 67 | 67 | 70 | 68 | 71 | |||||||||||||
| Diluted weighted average number of common shares | 68 | 67 | 70 | 68 | 72 | |||||||||||||
| Number of common shares outstanding, end of period | 67 | 67 | 69 | 67 | 69 | |||||||||||||
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
2 Methanex average non-discounted posted price represents the average of our non-discounted posted prices in North America, Europe, China and Asia Pacific weighted by sales volume. Current and historical pricing information is available at www.methanex.com.
3 The Company has used Average realized price ("ARP") throughout this document. ARP is calculated as revenue divided by the total sales volume. It is used by management to assess the realized price per unit of methanol sold, and is relevant in a cyclical commodity environment where revenue can fluctuate in response to market prices.
4 Note that Adjusted net income, Adjusted net income per common share, and Adjusted EBITDA are non-GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Additional Information - Non-GAAP Measures section on page 14 of our fourth quarter MD&A dated January 31, 2024 for a description of each non-GAAP measure.
- A reconciliation from net income attributable to Methanex shareholders to Adjusted EBITDA, Adjusted net income and the calculation of Adjusted net income per common share is as follows:
| Three Months Ended | Years Ended | ||||||||||||||||||
| ($ millions) | Dec 31 2023 | Sep 30 2023 | Dec 31 2022 | Dec 31 2023 | Dec 31 2022 | ||||||||||||||
| Net income attributable to Methanex shareholders | $ | 33 | $ | 24 | $ | 41 | $ | 174 | $ | 354 | |||||||||
| Mark-to-market impact of share-based compensation | 3 | 8 | 12 | 16 | (7 | ) | |||||||||||||
| Gas contract settlement, net of tax | — | (31 | ) | — | (31 | ) | — | ||||||||||||
| Depreciation and amortization | 100 | 98 | 86 | 392 | 372 | ||||||||||||||
| Finance costs | 30 | 26 | 32 | 117 | 131 | ||||||||||||||
| Finance income and other | (11 | ) | (2 | ) | (18 | ) | (40 | ) | (25 | ) | |||||||||
| Income tax expense (recovery) | (14 | ) | (18 | ) | 7 | 1 | 120 | ||||||||||||
| Earnings of associate adjustment | 15 | 23 | 18 | 67 | 74 | ||||||||||||||
| Non-controlling interests adjustment | (8 | ) | (23 | ) | (18 | ) | (74 | ) | (87 | ) | |||||||||
| Adjusted EBITDA | $ | 148 | $ | 105 | $ | 160 | $ | 622 | $ | 932 | |||||||||
| Three Months Ended | Years Ended | ||||||||||||||||||
| ($ millions except number of shares and per share amounts) | Dec 31 2023 | Sep 30 2023 | Dec 31 2022 | Dec 31 2023 | Dec 31 2022 | ||||||||||||||
| Net income attributable to Methanex shareholders | $ | 33 | $ | 24 | $ | 41 | $ | 174 | $ | 354 | |||||||||
| Mark-to-market impact of share-based compensation, net of tax | 3 | 6 | 11 | 13 | (6 | ) | |||||||||||||
| Gas contract settlement, net of tax | — | (31 | ) | — | (31 | ) | — | ||||||||||||
| Impact of Egypt gas contract revaluation, net of tax | (1 | ) | 2 | (1 | ) | (3 | ) | (5 | ) | ||||||||||
| Adjusted net income | $ | 35 | $ | 1 | $ | 51 | $ | 153 | $ | 343 | |||||||||
| Diluted weighted average shares outstanding (millions) | 68 | 67 | 70 | 68 | 72 | ||||||||||||||
| Adjusted net income per common share | $ | 0.52 | $ | 0.02 | $ | 0.73 | $ | 2.25 | $ | 4.79 | |||||||||
- We recorded net income attributable to Methanex shareholders of
$33 million in the fourth quarter of 2023 compared to net income of$24 million in the third quarter of 2023. Net income in the fourth quarter of 2023 was higher compared to the prior quarter primarily due to a higher average realized price, higher sales of Methanex-produced methanol and lower mark-to-market impact of share-based compensation due to changes in Methanex's share price, offset by lower income from the gas contract settlement recognized in the third quarter of 2023. Income from gas contract settlement was excluded from Adjusted EBITDA and Adjusted net income in the third quarter of 2023. - We recorded Adjusted EBITDA of
$148 million for the fourth quarter of 2023 compared to$105 million for the third quarter of 2023. We recorded Adjusted net income of$35 million for the fourth quarter of 2023 compared to Adjusted net income of$1 million for the third quarter of 2023. Adjusted EBITDA was higher in the fourth quarter of 2023 primarily due to a higher average realized price and higher sales of Methanex-produced methanol. - We sold 2,862,000 tonnes in the fourth quarter of 2023 compared to 2,720,000 tonnes for the third quarter of 2023. Sales of Methanex-produced methanol were 1,712,000 tonnes in the fourth quarter of 2023 compared to 1,473,000 tonnes in the third quarter of 2023.
- Production for the fourth quarter of 2023 was 1,779,000 tonnes compared to 1,545,000 tonnes for the third quarter of 2023. Fourth quarter production was higher compared to the third quarter due to higher production in Chile, New Zealand, Geismar and Medicine Hat which was partially offset by lower production in Egypt.
- The Geismar 3 plant is in the process of starting up, with total capital costs expected to come within budget of
$1.25 - 1.3 billion. The remaining cash expenditure of approximately$60 t o$110 million , including approximately$20 million of spending accrued in accounts payable, is fully funded with cash on hand. Geismar 3 has one of the lowest CO2 emissions intensity profiles in the industry and significantly enhances our cash generation capability. We expect the plant to ramp up to full rates over the month of February. - In the fourth quarter of 2023 we paid a quarterly dividend of
$0.18 5 per common share for a total of$12.5 million . - At December 31, 2023, we had a strong liquidity position including a cash balance of
$458 million , or approximately$451 million excluding non-controlling interests and including our share of cash in the Atlas joint venture. We also have access to an undrawn$300 million revolving credit facility providing financial flexibility.
PRODUCTION HIGHLIGHTS
| (thousands of tonnes) | Annual Operating Capacity1 | 2023 Production | 2022 Production | Q4 2023 Production | Q3 2023 Production | Q4 2022 Production |
| USA (Geismar) | 2,200 | 2,142 | 2,041 | 587 | 574 | 437 |
| New Zealand 2 | 2,200 | 1,381 | 1,230 | 344 | 226 | 395 |
| Trinidad (Methanex interest) 3 | 1,960 | 1,074 | 981 | 283 | 287 | 225 |
| Chile | 1,700 | 993 | 888 | 403 | 168 | 226 |
| Egypt ( | 630 | 504 | 385 | 20 | 160 | 96 |
| Canada (Medicine Hat) | 640 | 548 | 593 | 142 | 130 | 147 |
| 9,330 | 6,642 | 6,118 | 1,779 | 1,545 | 1,526 |
1 The operating capacity of our production facilities may be higher or lower 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 availability, feedstock composition, the age of the facility's catalyst, turnarounds and access to CO2 from external suppliers for certain facilities. 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 Waitara Valley plant is idled indefinitely due to natural gas constraints.
3 The operating capacity of Trinidad is made up of the Titan (
Key production and operational highlights during the fourth quarter include:
United States
Geismar produced 587,000 tonnes in the fourth quarter compared to 574,000 tonnes in the third quarter of 2023.
New Zealand
New Zealand produced 344,000 tonnes in the fourth quarter of 2023 compared to 226,000 tonnes in the third quarter of 2023. Production in the fourth quarter was higher compared to the third quarter due to the restart of Motunui 2 after the scheduled turnaround. Waitara Valley remains idled indefinitely. We estimate production for 2024 to be between 1.0 - 1.1 million tonnes. 2024 natural gas supply is expected to be impacted by a combination of our suppliers' planned natural gas infrastructure maintenance outages as well as lower than expected output from existing wells. While upstream investment has been made by our gas suppliers in New Zealand over the past two years, recent gas production results have been lower than originally expected which has contributed to the revised forecast for lower production in 2024.
Trinidad
Atlas produced 283,000 tonnes (Methanex interest) in the fourth quarter of 2023 compared to 287,000 tonnes in the third quarter of 2023. In October, Methanex signed a two-year natural gas supply agreement with the National Gas Company of Trinidad and Tobago (NGC) for its currently idled, wholly owned, Titan methanol plant (875,000 tonnes per year capacity) to restart operations in September 2024. Simultaneously, the Atlas plant (Methanex interest
Chile
Chile produced 403,000 tonnes in the fourth quarter of 2023 compared to 168,000 tonnes in the third quarter of 2023. Production was higher in the fourth quarter compared to the third quarter as both plants ran at full rates with full gas deliveries from Argentina. Both plants are expected to run at full rates from the end of September 2023 through April 2024, the Southern hemisphere summer months. We estimate production for 2024 will be between 1.1 - 1.2 million tonnes which is underpinned by year-round natural gas supply from Chile for about 30 –
Egypt
Egypt produced 40,000 tonnes (Methanex interest - 20,000 tonnes) in the fourth quarter of 2023 compared to 320,000 tonnes (Methanex interest - 160,000 tonnes) in the third quarter of 2023. Production was lower in Egypt due an unplanned outage in mid-October caused by a mechanical failure in the synthesis gas compressor. The unit was removed from service and repaired on an expedited schedule at the manufacturer overseas. The repairs were completed and the unit has now arrived back on site and we expect to be able to start up the plant in the first half of February.
Canada
Medicine Hat produced 142,000 tonnes in the fourth quarter of 2023 compared to 130,000 tonnes in the third quarter of 2023.
2024 Production Outlook
We expect production for 2024 to be higher than 2023 with the Geismar 3 start-up and to be approximately 8.1 million tonnes (Methanex interest). 2024 production guidance is based on the mid-point of Chile and New Zealand production guidance, G3 ramp up through February, Egypt restart in the first half of February, and all other plants operating at full rates. Actual production may vary by quarter based on timing of turnarounds, gas availability, unplanned outages and unanticipated events.
CONFERENCE CALL
A conference call is scheduled for February 1, 2024 at 11:00 am ET (8:00 am PT) to review these fourth quarter results. To access the call, dial the conferencing operator fifteen minutes prior to the start of the call at (646) 960-0479, or toll free at (888) 510-2296. The conference ID for the call is #7014770. A simultaneous audio-only webcast of the conference call can be accessed from our website at www.methanex.com/investor-relations/events and will also be available following the call.
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 fourth quarter 2023 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 fourth quarter 2023 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.sedarplus.ca 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, and Adjusted net income per common share throughout this document. These items are non-GAAP measures and ratios 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, the impact of the Egypt gas contract revaluation and the impact of certain items associated with specific identified events. Refer to Additional Information - Non-GAAP Measures on page 14 of the Company's MD&A for the period ended December 31, 2023 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:
Sarah Herriott
Director, Investor Relations
Methanex Corporation
604-661-2600
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