) saw its profit zoom in the first quarter of 2014 as higher
methanol pricing and increased production resulting from its
capacity expansion measures boosted the bottom line. However, the
company's shares dropped as its earnings missed expectations.
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METHANEX CORP (MEOH): Free Stock Analysis
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Methanex posted earnings of $1.50 per share in the quarter, a
more than two-fold surge from 63 cents per share logged a
year-ago. Profit jumped 142% to $145 million from $60 million a
year ago. Earnings per share, however, fell well short of the
Zacks Consensus Estimates of $1.84.
Methanex's adjusted earnings before interest, tax, depreciation
and amortization (EBITDA) was $255 million in the quarter, a
roughly 71% jump from $149 million recorded a year ago. The
healthy improvement came on the heels of higher average realized
price and increased sales of Methanex-produced methanol.
Revenues shot up roughly 48% year over year to $968 million in
the reported quarter on better pricing and higher methanol sales
volumes, backed by healthy demand. However, it missed the Zacks
Consensus Estimate of $1,003 million.
Average realized price was $524 per ton in the quarter, up 27%
from $412 per ton a year ago. Total production was 1,226,000
tons, a 15% rise from 1,063,000 tons in the prior-year quarter,
aided by the company's capacity expansion initiatives across its
New Zealand and Medicine Hat operations. Methanex-produced
methanol sales volume rose 19% year over year to 1,228,000 tons.
Separately, the Vancouver-based company beefed up its dividend by
25% and announced a new share buyback program.
Methanex's shares sagged as much as around 5% in the trading
session following the earnings announcement, reflecting the
lower-than-expected results. The stock closed at $62.00
yesterday, losing around 3%.
Methanex produced 500,000 tons in the quarter, up 62% from
309,000 tons produced a year ago. With its three facilities
operating at full capacity, the company is able to produce up to
2.4 million tons a year at the site.
Methanex's fully-owned Titan facility produced 149,000 tons in
the quarter, down roughly 18% from 181,000 tons produced in the
year-ago quarter. An unplanned outage coupled with gas
curtailment issues impacted production in the quarter.
The Atlas facility, in which the company holds a 63.1% interest,
produced 249,000 tons, essentially flat year over year. Methanex
is encountering natural gas supply restrictions in Trinidad.
Although the company is trying to find a solution to this
problem, it continues to experience natural gas curtailments at
The facility produced 139,000 tons in the quarter, up 4.5% from
133,000 tons produced a year ago. 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 months.
The facility produced 122,000 tons in the quarter, down 7% from
131,000 tons produced last year. The facility experienced
unplanned outage during the fourth quarter of 2013 and was
restarted in Jan 2014.
Methanex's Chile operations produced 67,000 tons in the reported
quarter, up 10% from 61,000 tons a year ago. It operated one
facility at roughly 60% of production capacity.
Methanex expects to idle its Chile operations in early May due to
lack of sufficient natural gas feedstock to keep its plant
operating through the southern hemisphere winter. The
availability of sustainable 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
Methanex is progressing with the relocation of two idle Chile
facilities to Geismar, LA (Geismar I and Geismar II). 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
made capital spending of $130 million related to these projects,
barring capitalized interest.
Consolidated cash flows from operating activities climbed around
52% year over year to $179 million in the reported quarter. Cash
and cash equivalents were $709 million, down 2% year over year.
Long-term debt was $1,106.9 million, down 3% year over year.
Methanex's Board approved a 25% raise in its quarterly dividend
to 25 cents per share from 20 cents, representing 10th increase
in dividend payout since its beginning in 2002. The company also
announced a new share repurchase program that authorizes it to
buyback roughly 5% of its issued and outstanding shares as of Apr
Moving ahead, Methanex expects earnings and EBITDA for the second
quarter to be lower than the first based on moderating methanol
pricing resulting from additional supply in the market,
especially in Asia Pacific.
Methanex also 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 initiatives.
Methanex is a Zacks Rank #3 (Hold) stock.
Other chemical stocks worth considering include
Eastman Chemical Co.
The Dow Chemical Company
) with all retaining a Zacks Rank #2 (Buy).