Methanex Reports Third Quarter 2020 Results With Strong Liquidity Position and Enhanced Financial Flexibility

Rhea-AI Summary

Methanex reported a net loss of $88 million for Q3 2020, compared to a loss of $65 million in Q2 2020. Adjusted EBITDA rose to $40 million from $32 million, driven by improved methanol prices and demand. Total sales volume was 12,678 thousand tonnes, with an average realized price of $3217 per tonne. The company issued $700 million in senior unsecured notes and repaid $200 million on its revolving credit, while enhancing liquidity to $1.2 billion. Production decreased to 1,372 thousand tonnes due to maintenance and gas delivery issues. A planned maintenance at plants and a debottlenecking project are underway to increase capacity.

Positive

• Increased liquidity of $1.2 billion.
• Improved adjusted EBITDA from $32 million in Q2 to $40 million in Q3.
• Total sales increased to 12,678 thousand tonnes.
• Completed debottlenecking project to increase production by about 10%.

Negative

• Net loss increased to $88 million from $65 million in Q2.
• Total production decreased to 1,372 thousand tonnes due to maintenance.
• One-time finance charge of $15.4 million related to early redemption of bonds.

Except where otherwise noted, all currency amounts are stated in United States dollars.

• Global methanol demand improved in the third quarter of 2020 compared to the second quarter of 2020 and methanol prices have increased leading into the fourth quarter
• Increased liquidity and improved financial flexibility through the issuance of $700 million in bonds and secured further financial covenant relief for our existing credit facilities
• Repaid $200 million drawn on revolving credit facility and provided early notice to repay our existing $250 million bonds due in March 2022 resulting in a one-time finance charge in the third quarter
• Successfully undertook planned maintenance activities at our Medicine Hat and Atlas plants to support long-term reliability
• Completed low capital cost Geismar 1 debottlenecking project to increase production by approximately 10% or 100,000 tonnes per annum
  

VANCOUVER, British Columbia, Oct. 28, 2020 (GLOBE NEWSWIRE) -- For the third quarter of 2020, Methanex (TSX:MX) (NASDAQ:MEOH) reported a net loss attributable to Methanex shareholders of $88 million ($1.15 net loss per common share on a diluted basis) compared to a net loss of $65 million ($0.85 net loss per common share on a diluted basis) in the second quarter of 2020. Adjusted EBITDA for the third quarter of 2020 was $40 million and Adjusted net loss was $79 million ($1.03 Adjusted net loss per common share). This compares with Adjusted EBITDA of $32 million and an Adjusted net loss of $64 million ($0.84 Adjusted net loss per common share) for the second quarter of 2020.

Third Quarter Results

Global methanol demand improved in the third quarter of 2020 compared to the second quarter as economic activity rebounded around the world. At the same time, methanol industry supply declined in the third quarter of 2020, compared to the second quarter, due to various planned and unplanned outages and plant shutdowns globally. Improved methanol demand and lower industry supply tightened market conditions and methanol pricing stabilized from the multi-year lows we saw in the second quarter. Methanol prices are higher leading into the fourth quarter.

We recorded higher Adjusted EBITDA in the third quarter of 2020 compared to the second quarter, reflecting a higher average realized price, partially offset by changes in the mix of produced and purchased methanol sold. We recorded a larger Adjusted net loss in the third quarter primarily due to a one time finance charge of $15.4 million related to the early redemption of the $250 million unsecured notes that were originally due March 2022.

Business and Financial Update

John Floren, President and CEO of Methanex, commented, “Leading into the fourth quarter, we are pleased to see an increase in methanol prices, supported by strong recovery in methanol demand and lower methanol industry supply which has resulted in a reduction of global inventory levels. Our team continues to run our manufacturing operations and global supply chain safely and effectively to ensure that we deliver secure and reliable methanol supply to our customers around the world. We undertook planned turnaround activities at our Medicine Hat and Atlas plants in the third quarter. We also completed our Geismar 1 debottlenecking project to increase our production capability by approximately 10%, or 100,000 tonnes per year, and expect to ramp up to full operating rates over the coming weeks. In addition, as global methanol demand is improving, we are in the process of restarting our Chile IV plant. We continue to take extensive preventative measures across our operations and office locations to ensure the safety of our team members during this uncertain time."

In 2020, we have taken a number of measures to preserve liquidity and improve financial flexibility. These steps include deferring approximately $500 million in capital spending on our Geismar 3 project, reducing our dividend by approximately $100 million on an annual basis, suspending share buybacks, reducing maintenance capital and operating costs and obtaining covenant relief on our credit facilities.

During the third quarter, to provide additional financial flexibility, we issued $700 million in senior unsecured notes due in 2027 and secured further covenant relief for our existing credit facilities. We repaid $200 million that was drawn on our revolving credit facility during the quarter. In addition, we issued a redemption notice to repay the $250 million bonds that were due in early 2022. The cash flow impact of this repayment will be reflected in our fourth quarter results. We ended the quarter with a strong liquidity position of $1.2 billion in cash on the balance sheet, our undrawn $300 million revolving credit facility and no debt maturities until 2024. As a result, we have significant financial flexibility to manage our business through an uncertain period.

Our Geismar 3 project remains on temporary care and maintenance and spending on the project over the next 12 months is expected to be approximately $100 million. This amount reflects costs that were already committed and the completion of key engineering activities and procurement of critical path equipment to preserve flexibility to complete the project in the future. There are many factors that management and our Board will need to consider before restarting construction and no decision has been made at this time on whether to restart.

John Floren concluded, "We are encouraged by recent early signs of economic recovery, including improvement in methanol demand and methanol prices. However, in this unprecedented environment impacted by both COVID-19 and challenging commodity prices, the path and pace for global economic recovery and methanol demand remains uncertain. We are placing a premium on preserving liquidity and improving financial flexibility. The actions that we have taken this year to strengthen our business have positioned us well to navigate through this uncertain time and generate significant long-term value as and when market conditions further improve."

FURTHER INFORMATION
The information set forth in this news release summarizes Methanex's key financial and operational data for the third quarter of 2020. It is not a complete source of information for readers and is not in any way a substitute for reading the third quarter 2020 Management’s Discussion and Analysis ("MD&A") dated October 28, 2020 and the unaudited condensed consolidated interim financial statements for the period ended September 30, 2020, 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 September 30, 2020 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							Nine Months Ended
($ millions except per share amounts and where noted)	Sep 30 2020		Jun 30 2020		Sep 30 2019			Sep 30 2020		Sep 30 2019
Production (thousands of tonnes) (attributable to Methanex shareholders) 1	1,372		1,628		1,837			5,007		5,465
Sales volume (thousands of tonnes)
Methanex-produced methanol	1,531		1,717		1,965			5,224		5,555
Purchased methanol	836		418		680			1,802		1,869
Commission sales	311		271		179			846		724
Total sales volume 1	2,678		2,406		2,824			7,872		8,148
Methanex average non-discounted posted price ($ per tonne) 2	255		263		330			283		370
Average realized price ($ per tonne) 3	217		211		272			233		309
Revenue 4	581		512		765			1,839		2,514
Adjusted revenue	515		453		723			1,644		2,299
Adjusted EBITDA	40		32		90			210		430
Cash flows from operating activities	35		186		71			363		401
Net income (loss) (attributable to Methanex shareholders)	(88	)	(65	)	(10	)		(130	)	79
Adjusted net income (loss)	(79	)	(64	)	(21	)		(135	)	62
Basic net income (loss) per common share	(1.15	)	(0.85	)	(0.13	)		(1.70	)	1.03
Diluted net income (loss) per common share	(1.15	)	(0.85	)	(0.21	)		(1.72	)	0.88
Adjusted net income (loss) per common share	(1.03	)	(0.84	)	(0.27	)		(1.77	)	0.80
Common share information (millions of shares)
Weighted average number of common shares	76		76		76			76		77
Diluted weighted average number of common shares	76		76		76			76		77
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.

⁴ Revenue for the three and nine months ended September 30, 2019 have been restated as compared to revenue reported in our quarterly MD&A and condensed quarterly financial statements issued for 2019 based on a restatement for the recognition of revenue on Atlas-produced 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										Nine Months Ended
($ millions except number of shares and per share amounts)	Sep 30 2020			Jun 30 2020			Sep 30 2019				Sep 30 2020			Sep 30 2019
Net income (loss) (attributable to Methanex shareholders)	$	(88	)	$	(65	)	$	(10	)		$	(130	)	$	79
Mark-to-market impact of share-based compensation, net of tax	9			1			(11		)		(5		)	(17		)
Adjusted net income (loss)	$	(79	)	$	(64	)	$	(21	)		$	(135	)	$	62
Diluted weighted average shares outstanding (millions)	76			76			76				76			77
Adjusted net income (loss) per common share	$	(1.03	)	$	(0.84	)	$	(0.27	)		$	(1.77	)	$	0.80

• We recorded a net loss attributable to Methanex shareholders of $88 million during the third quarter of 2020 compared to a net loss of $65 million in the second quarter of 2020. The decrease in earnings is primarily a result of increased finance costs due to the early redemption of bonds and the mark-to-market impact of share-based compensation, partially offset by higher Adjusted EBITDA.
• Adjusted EBITDA was $40 million for the third quarter of 2020 compared with $32 million for the second quarter of 2020. Adjusted EBITDA for the third quarter of 2020 is higher than the second quarter of 2020, reflecting a higher average realized price, partially offset by changes in the mix of produced and purchased methanol sold.
• Adjusted net loss was $79 million for the third quarter of 2020 compared to Adjusted net loss of $64 million for the second quarter of 2020. The decrease in earnings is primarily due to increased finance costs including a $15.4 million make-whole charge due to the early redemption of bonds, partially offset by an increase in Adjusted EBITDA.
• Total sales volume for the third quarter of 2020 was 2,678,000 tonnes compared with 2,406,000 tonnes for the second quarter of 2020. Total sales increased for the third quarter of 2020 as we saw a recovery in demand in all regions as global economic activity rebounded. Sales of Methanex-produced methanol were 1,531,000 tonnes in the third quarter of 2020 compared with 1,717,000 tonnes in the second quarter of 2020.
• Production for the third quarter of 2020 was 1,372,000 tonnes compared with 1,628,000 tonnes for the second quarter of 2020. The decrease in production for the third quarter of 2020 was primarily the result of planned turnarounds in Atlas and Medicine Hat and lower gas deliveries in New Zealand and lower gas deliveries in Chile during the southern hemisphere winter months.
• During the quarter, the Company issued $700 million of senior unsecured notes bearing a coupon of 5.125% and due October 15, 2027. The Company then repaid $200 million that was drawn on our revolving credit facility and provided notice to repay our existing $250 million bond originally due in March 2022. The bond due March 2022 was repaid subsequent to the quarter. Additionally, the Company obtained a waiver from its lenders which provides further financial covenant relief for the committed revolving credit facility and the non-revolving construction facility for the Geismar 3 project, providing additional financial flexibility. The waiver further extends the measurement period for the lower minimum interest coverage ratio threshold from June 30, 2021 through December 31, 2021.
• During the third quarter of 2020 we paid a $0.0375 per common share quarterly dividend to shareholders for a total of $3 million.
  

PRODUCTION HIGHLIGHTS

	Q3 2020				Q2 2020		Q3 2019		YTD Q3 2020		YTD Q3 2019
(thousands of tonnes)	Operating Capacity 1		Production		Production		Production		Production		Production
New Zealand 2	550		340		450		469		1,233		1,352
USA (Geismar)	500		513		441		514		1,484		1,449
Trinidad (Methanex interest) 3	500		167		241		474		837		1,287
Chile	430		118		204		146		641		677
Egypt (50% interest)	158		153		147		85		433		241
Canada (Medicine Hat)	150		81		145		149		379		459
	2,288		1,372		1,628		1,837		5,007		5,465

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. 

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 current outlook for available high CO₂ natural gas.

³ The operating capacity of Trinidad is made up of the Titan (100% interest) and Atlas (63.1% interest) facilities.

Key production and operational highlights during the third quarter include:

• New Zealand produced 340,000 tonnes compared with 450,000 tonnes in the second quarter of 2020. Production was lower in the third quarter of 2020 compared to the second quarter as a result of lower gas deliveries. We expect to receive higher gas deliveries in the fourth quarter of 2020. The upstream gas sector is completing several field development projects that are expected to improve gas availability over the coming years.
• Geismar produced 513,000 tonnes during the third quarter of 2020 compared to 441,000 tonnes during the second quarter of 2020. Production for Geismar is higher in the third quarter of 2020 compared to the second quarter of 2020 as both plants operated without significant interruption throughout the quarter, whereas in the second quarter of 2020 both plants carried out maintenance.
• Trinidad produced 167,000 tonnes (Methanex interest) during the second quarter of 2020 compared with 241,000 tonnes in the second quarter of 2020. Production in Trinidad is lower during the third quarter of 2020 compared to the second quarter of 2020 as a result of a scheduled turnaround of the Atlas plant that commenced in September 2020 and we expect production to resume in early November. The Titan plant remains idled effective March 16, 2020.
• Chile produced 118,000 tonnes during the third quarter of 2020 compared to 204,000 tonnes during the second quarter of 2020. Production for the third quarter of 2020 is lower compared to the second quarter of 2020 primarily due to lower gas availability during the southern hemisphere winter months. We are in the process of restarting the Chile IV plant that has been idled since April 1, 2020. We anticipate the restart of Chile IV and improved gas availability will lead to substantially higher production in Chile in the fourth quarter.
• The Egypt facility produced 306,000 tonnes (Methanex interest - 153,000 tonnes) in the third quarter of 2020 compared with 294,000 tonnes (Methanex interest - 147,000 tonnes) in the second quarter of 2020. Egypt production was similar in the third quarter of 2020 and the second quarter of 2020.
• Medicine Hat produced 81,000 tonnes during the third quarter of 2020 compared to 145,000 tonnes during the second quarter of 2020. Production for the third quarter of 2020 is lower compared to the second quarter of 2020 as a result of a scheduled turnaround of the Medicine Hat plant that commenced in August 2020 and subsequently completed in October 2020.

CONFERENCE CALL

A conference call is scheduled for October 29, 2020 at 11:00 am ET (8:00 am PT) to review these third 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 1310579#. 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 November 29, 2020 at (905) 694-9451, or toll free at (800) 408-3053. The passcode for the playback version is 2841432#.

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 third quarter 2020 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 third quarter 2020 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 14 of the Company's MD&A for the period ended September 30, 2020 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

FAQ

What were Methanex's financial results for Q3 2020?

Methanex reported a net loss of $88 million and adjusted EBITDA of $40 million.

How did Methanex's sales volume change in Q3 2020?

Total sales volume increased to 12,678 thousand tonnes in Q3 2020.

What financial measures did Methanex take in Q3 2020?

Methanex issued $700 million in bonds and repaid $200 million on its revolving credit.

What was the impact of maintenance on Methanex's production?

Production decreased to 1,372 thousand tonnes due to planned turnarounds at plants.

Did Methanex experience any changes in methanol prices?

Yes, methanol prices improved leading into Q4 2020 due to stronger demand and lower industry supply.