), the world's largest supplier of methanol, reported adjusted
earnings of 38 cents per share for the third quarter of 2012
compared with 43 cents per share registered in the same period
last year. The results surpassed the Zacks Consensus Estimate of
30 cents per share, reflecting a positive surprise of around
Revenues dipped 2.1% year over year to $655.3 million, missing
the Zacks Consensus Estimate of $659 million. Sales volumes in
the quarter totaled 1,899 million tons, up 0.5% from the year-ago
Average realized price per ton amounted to $373 in the
quarter, down from $377 a year ago. Total production in the
quarter was 1,025,000 tons compared with 1,035,000 tons in the
prior-year quarter. Sales of Methanex-produced methanol were
1,053,000 tons versus 983,000 tons a year ago.
In the reported quarter, the company produced 59,000 tons in
Chile, operating one plant at approximately 20% capacity versus
116,000 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
However, the company is focused on resolving this problem and
continues with its investment opportunities with Empresa Nacional
del Petroleo (ENAP), GeoPark Chile Limited (Geo Park) and others
for accelerating natural gas exploration and development in
southern Chile. Roughly 90% of production at the company's
Chilean facilities was produced from the supplies from Fell and
Dorado Riquelme blocks.
Methanex produced 346,000 tons in the quarter, much higher than
209,000 tons produced last year. The company restarted its second
Motunui facility in July, adding 650,000 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 530,000 ton capacity
Waitara Valley plant which is capable of adding 900,000 tons to
New Zealand's annual production capacity by the end of next
Methanex owns two facilities in Trinidad. The company's Titan
facility, in which it holds full ownership, produced 186,000 tons
in the third quarter, lower than 224,000 tons produced last year,
mainly due to unplanned maintenance disruptions and periodic
natural gas curtailments.
The Atlas facility, in which the company holds a 63.1%
interest, produced 255,000 tons in the quarter, higher than
170,000 tons produced 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 short term.
The facility produced 62,000 tons in the quarter, significantly
down from 191,000 tons that it produced a year ago. The decline
in production was a result of planned maintenance disruptions and
natural gas supply restrictions.
The company faced periodic 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 117,000 tons in the quarter, down from
125,000 tons produced last year. Methanex is currently exploring
the feasibility of de-bottlenecking the facility, a move which
can add another 90,000 tons of annual production capacity to
Consolidated cash flows from operating activities in the third
quarter rose 10.08% to $131 million from $119 million in the
prior-year quarter. The company ended the quarter with a strong
liquidity position with cash and cash equivalents of $403
million, up roughly 54.5% year over year. Long-term debt as of
September 30, 2012, was $855.5 million, up 31.2% from the last
The company paid its quarterly dividend of 18.5 cents per
share to its shareholders for a total of $17 million in the third
Outlook and Recommendation
CELANESE CP-A (CE): Free Stock Analysis
EASTMAN CHEM CO (EMN): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
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Methanex feels that the methanol industry and its pricing
environment appear attractive in the longer term as global demand
is expected to surpass new capacity additions. The company,
however, sees upward pressure on methanol prices in the fourth
quarter stemming from steady demand and industry outages. It
further noted that methanol price will depend on a number of
factors such as economic health, operating rates, global energy
prices and demand.
With the continued initiatives to increase production in the New
Zealand and Medicine Hat units and progress in the Louisiana
project, the company has the potential to increase its operating
capacity by nearly 2 million tons over the next two years, which
in turn, will contribute in cash generation.
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 continue to deliver incremental returns
Methanex, which faces stiff competition from
Eastman Chemical Co.
), retains a short-term (1 to 3 months) Zacks #3 Rank (Hold). We
currently have a long-term (more than 6 months) Underperform
recommendation on the stock.