We have downgraded our long-term recommendation on
) to Neutral from Outperform following its mixed first-quarter 2012
results. The company's earnings of 23 cents per share in the
quarter missed the Zacks Consensus Estimate of 36 cents. However,
revenues of $666 million increased 7.6% year over year, beating the
Zacks Consensus Estimate of $633 million.
The company's facility in Chile operated below the site capacity
during the quarter due to curtailed natural gas supplies from
Argentina. Methanex markets methanol it produces as well as that
which is acquired from others. The company makes much more money
from the methanol it produces and therefore its earnings were
affected during the quarter as its facilities were operating below
Methanex remains exposed to tight economic conditions and
uncertainties associated with the demand and pricing of methanol.
However, the company expects strong methanol demand and an upward
pressure on prices for the second quarter of 2012. The company
believes that methanol price will depend on the global economic
conditions, industry operating rates, global energy prices, new
supply additions and the strength of global demand.
The company has started a project to relocate one of the Chilean
plants to the U.S. Gulf Coast, and secured a site in Geismar,
Louisiana, which is expected to provide good return. The project
benefits from competitive natural gas prices and an excellent
business environment in Geismar with extensive infrastructure and
significant methanol demand nearby.
Methanex also plans to restart one plant in Medicine Hat,
Alberta, which is expected to generate considerable cash flows in
the years ahead.The company also announced plans to restart a
second facility in New Zealand in mid-2012, which will provide an
additional 0.65 million tonnes of methanol capacity. The company's
New Zealand facilities are ideally located to support the growing
Asia Pacific market.
Methanex faces stiff competition from
Eastman Chemical Co.
). The company currently retains a Zacks #3 Rank, reflecting a
short-term (1 to 3 months) Hold rating.
CELANESE CP-A (CE): Free Stock Analysis Report
EASTMAN CHEM CO (EMN): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
To read this article on Zacks.com click here.