), the world's largest supplier of methanol, saw its earnings
increase to 50 cents per share in the second quarter of 2012 from
43 cents last year. However, the jump was not good enough to meet
the Zacks Consensus Estimate of 63 cents. Profit increased almost
29% year over year to $52 million.
Revenues rose 5.3% year over year to $656 million, also missing
the Zacks Consensus Estimate of $708 million. Sales volumes in the
quarter totaled 1.85 million tons, down 1% from the year-ago
Average realized price per ton amounted to $384 in the quarter,
up from $363 last year. Total production in the quarter was 1,034
thousand tons compared with 1,050 thousand tons in the prior-year
During the reported quarter, the company produced 82 thousand tons
in Chile, operating one plant at approximately 30% capacity versus
142 thousand tons in the prior-year quarter. The company operated
its methanol facilities in Chile, significantly below the site
capacity due to curtailed natural gas supplies from Argentina.
However, the company is focused on resolving this problem and is
collaborating with Empresa Nacional del Petroleo (ENAP) and others
for accelerating natural gas exploration and development in
southern Chile. But the effects of such efforts might not be seen
anytime soon as existing gas fields are witnessing declines and
ramp up of gas production is taking longer than expected.
During the second quarter of 2012, Methanex produced 210 thousand
tons from one Motunui facility at full capacity, but slightly down
from last year. However, the company restarted its second Motunui
facility in July, adding 650 thousand tons of annual production
capacity to its operations in New Zealand.
Methanex is also focused on removing bottlenecks at the Motunui
site and is currently carrying out feasibility studies for the
same. Methanex aims to restart the 530 thousand ton capacity
Waitara Valley plant which is capable of adding 900 thousand tons
to New Zealand's annual production capacity by the end of next
Methanex owns two facilities in Trinidad. The company has full
ownership of the Titan facility with an annual capacity of 900
thousand tons. Titan produced 196 thousand tons in the second
quarter, higher than the 186 thousand tons produced last year. The
other facility, known as Atlas, is owned to the extent of 63.1% by
Methanex. Atlas produced 264 thousand tons in the quarter at 95%
capacity, almost flat from last year.
The company is facing natural gas supply restrictions in
Trinidad. Although it is trying to find a solution to this problem,
Methanex expects to experience natural gas curtailments in the
The facility produced 164 thousand tons in the quarter, down from
178 thousand tons that it produced a year ago. The decline in
production was a result of planned maintenance and inspection
activities at the facility.
The company faced natural gas shortages in this region as well
due to upstream gas platform outages and seasonal domestic demand
for natural gas electricity generation. Methanex has a 60% interest
in the Egyptian facility.
The facility produced 118 thousand tons in the quarter,
significantly up from 74 thousand tons produced last year. Methanex
is currently exploring the feasibility of de-bottlenecking the
facility, a move which can add another 90 thousand tons of annual
production capacity to Medicine Hat.
Consolidated cash flows from operating activities in the second
quarter of 2012 were $135 million compared with $78 million in the
prior-year quarter. Cash and cash equivalents were $623.2 million
as of June 30, 2012, compared with $245.6 million as of June 30,
Methanex had $873.6 million of debt on its balance sheet as of
June 30, 2012, slightly down from $876.4 million last year. The
company also raised its quarterly dividend by 9% to 18.5 cents
during the second quarter.
Outlook and Recommendation
Methanex said that overall methanol demand remained strong along
with stability in pricing, despite some softness due to the
economic environment. However, methanol price will depend on a
number of factors such as economic health, operating rates, global
energy prices and demand.
As part of its strategy to strengthen its position as the global
leader in the production and marketing of methanol, Methanex
intends to continue pursuing new opportunities to boost its
strategic position in the methanol industry.
We currently have a long-term (more than 6 months) Neutral
recommendation on the Methanex. The company, which faces stiff
Eastman Chemical Co.
), retains a Zacks #4 Rank, reflecting a short-term (1 to 3 months)
CELANESE CP-A (CE): Free Stock Analysis Report
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METHANEX CORP (MEOH): Free Stock Analysis
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