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Methanex's (MEOH) Q3 Earnings Trail Estimates, Net Skids - Analyst Blog

Methanex ( MEOH ) reported profit of $52 million in third-quarter 2014, a 40% fall from $87 million posted a year ago, hurt by lower methanol pricing.

The Canada-based methanol producer's earnings of 54 cents per share (treating stock-based compensation as a normal expense) for the quarter fell well short of the Zacks Consensus Estimates of 65 cents and were below 90 cents per share logged a year ago.

Methanex's adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $137 million in the quarter, down roughly 26% year over year, hit by a decline in average realized methanol price.

Revenues slipped roughly 4% year over year to $730 million in the reported quarter. However, it beat the Zacks Consensus Estimate of $679 million. Average realized price was $389 per ton in the quarter, down 11% from $438 per ton a year ago.

Total production was 1,204,000 tons, a 16% rise from 1,035,000 tons in the prior-year quarter. Total sales volume rose roughly 7% year over year to 2,143,000 tons. Methanex-produced methanol volumes climbed around 20% year over year to 1,258,000 tons.

Methanex's shares fell roughly 3.7% to close at $56.85 last Thursday, reflecting the bottom line miss.

Production Summary

New Zealand: Methanex produced 595,000 tons in the quarter, up 70% year over year. With its three facilities operating at full capacity, the company is capable of producing up to 2.4 million tons a year at the site.

Trinidad: Methanex's fully-owned Titan facility produced 185,000 tons in the quarter, up roughly 45% from the year-ago quarter. The Atlas facility, in which the company holds a 63.1% interest, produced 234,000 tons, down roughly 8% year over year.

Methanex is still encountering natural gas supply restrictions in Trinidad and saw higher curtailments across both facilities on a sequential basis in the reported quarter. Although the company is trying to find a solution to this problem, it continues to experience natural gas curtailments at the site.

Egypt: The facility produced 50,000 tons in the quarter, a 70% fall from the prior-year quarter. Production during the reported quarter was impacted by natural gas supply restrictions that required the company to idle the plant. Methanex has been experiencing periodic natural gas supply restrictions since mid-2012, which may persist in the future.

Medicine Hat: The facility produced 130,000 tons in the quarter, flat year over year.

Chile: Methanex's Chile operations produced 10,000 tons in the reported quarter, up around 67% year over year, aided by natural gas supplies from Chile and Argentina under a tolling arrangement. Methanex idled its Chile operations in second-quarter 2014 due to lack of sufficient natural gas feedstock to keep its plant operating through the southern hemisphere winter. The company restarted its Chile I plant in Sep 2014.

Geismar, Louisiana: Methanex is making a good progress 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 Jan 2015 and from the 1 million ton Geismar 2 facility in late first-quarter 2016. Roughly $500 million remains to be spent (based on a revised budget) on the project over the next 18 months.

Financials

Consolidated cash flows from operating activities fell around 6% year over year to $171 million in the reported quarter. Cash and cash equivalents were $475 million at the end of the quarter, down around 31% year over year. Long-term debt fell roughly 17% year over year to around $937 million. The company repurchased 1.3 million shares during the quarter and returned more than $100 million to its shareholders in the form of dividends and share buybacks.

Outlook

Methanex estimates total methanol demand of roughly 59 million tons on an annualized basis. The outlook for methanol demand growth in the medium term is strong and will be driven by increased use of methanol in energy applications, which accounts for roughly 40% of global methanol demand

Methanex stated that methanol prices remained stable or higher across key markets entering the fourth quarter. It also noted 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, financial flexibility, strong global supply network and competitive-cost position will strengthen its position as the global leader in the methanol industry and enable it to invest in growth initiatives.

Methanex is a Zacks Rank #3 (Hold) stock.

Other chemical stocks worth considering include Celanese Corporation ( CE ), Huntsman Corporation ( HUN ) and Trecora Resources ( TREC ) with all holding a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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