MISC. EARNINGS / Methanex reports increased sales and reduced costs in
difficult market
VANCOUVER, Oct. 21 /CNW/ - Methanex Corporation recorded a net loss of
US$20.8 million ($0.12 per share) for the third quarter ended September 30,
1998. This result is better than the analyst consensus largely due to
insurance recoveries.
Pierre Choquette, President and CEO of Methanex, commented, ''In July our
outlook was for stronger sales in the second half of the year. This has been
borne out by our third quarter results, which show a sales volume increase of
25% over the second quarter.'' Mr. Choquette continued, ''We had sought to
substantially increase our plant operating rates from 70% in the second
quarter, and we have also achieved this target, averaging 85% for the third
quarter. Increased capacity utilization reduces costs, and in both August and
September we met our strategic cost target, recording the best cost
performance in the history of Methanex.'' Mr. Choquette also remarked,
''These operating improvements were, unfortunately, largely offset by lower
methanol pricing in what continues to be a challenging period for our
industry.'' Mr. Choquette concluded, ''We remain on schedule to complete our
third plant in Chile early next year, delivering further cost reduction, as
the next step in our long-term low-cost strategy.''
The 1998 third quarter result compares to a loss of US$28.1 million
(US$0.16 per share) for Q2'98 and earnings of US$50.2 million (US$0.27 per
share) for Q3'97.
The fourth quarter contract methanol price in Europe has been settled at
DM195 per tonne, which was equivalent to US$116 per tonne (US$0.35 per gallon)
at the time of contract settlement, and is a slight improvement over the third
quarter price (in US$ terms). Contract pricing in the US Gulf Coast has
remained flat in the vicinity of US$0.34/gallon (US$113/tonne), while spot
pricing in this region has remained at approximately US$0.30/gallon
(US$100/tonne). Excess methanol supply and volatile US Gulf Coast natural gas
pricing continue to put pressure on methanol pricing.
Methanex's financial position remains strong with approximately $333
million in cash and $387 million in undrawn credit facilities at the end of
Q3'98. The Company had repurchased almost 2.2 million shares by the end of
September under its normal course issuer bid, leaving approximately 173.5
million shares outstanding.
Methanex is a Vancouver based, publicly-traded company engaged in the
worldwide production and marketing of methanol. Methanex shares are listed
for trading on the Toronto and Montreal stock exchanges in Canada under the
trading symbol ''MX'' and on The NASDAQ Stock Market in the United States
under the trading symbol ''MEOHF.''
A conference call is scheduled for Thursday, October 22 at 10:30am EST
(7:30am PST) to review these second quarter results. Access to the call may be
obtained by calling the Confertech operator at 416-620-7013 ten minutes prior
to the call. A post-view version of the conference call will be available
until October 28 at 416-626-4100 (reservation No.860326), and thereafter on
our Shareholder Direct line at 1-800-64-MEOHF (-63643) or on our web site at
www.methanex.com.
Interim Report to Shareholders
For the nine months ended September 30, 1998
At September 30, 1998, the number of common shares outstanding was
173,460,048.
Contact Information
Methanex Investor Relations
1800 - 200 Burrard Street
Vancouver, BC Canada V6C 3M1
Share Information
Methanex Corporation's common shares are listed for trading on the
Toronto and Montreal exchanges under the symbol MX and on The NASDAQ
Stock Market under the symbol MEOHF.
Transfer Agents & Registrars
CIBC Mellon Trust Company
393 University Avenue, 5th Floor
Toronto, Ontario, Canada M5G 2M7
Toll free in North America:
1-800-387-0825
Investor Information
All financial reports, news releases and corporate information can be
accessed on the Internet on our website or by calling our toll free
investor line.
E-mail:
invest@methanex.com
Internet:
methanex.com
Methanex Shareholder Direct line:
1-800-64-MEOHF 1-800-646-3643
Message to Shareholders
-----------------------
Except where otherwise noted, all currency amounts are stated in United
States dollars.
Results from Operations
-----------------------
For the nine months ended September 30, 1998, Methanex recorded a net
loss of $46.7 million ($0.27 per share) compared with net earnings of $165.5
million ($1.58 per share) for the same period in 1997. The decrease in
earnings was principally due to lower methanol prices. The average realized
price for the nine months ended September 30, 1998 was $126 per tonne compared
with $188 per tonne for the corresponding period in 1997.
Methanex's net loss for the third quarter of 1998 was $20.8 million
($0.12 per share) compared to a net loss of $28.1 million ($0.16 per share)
for the second quarter of 1998. The loss from operations was $25.9 million in
the third quarter of 1998 compared to a loss from operations of $35.6 million
in the second quarter of 1998. The improvement in earnings was principally
due to lower costs as a result of higher production volumes, and an insurance
settlement. These favourable factors were partially offset by a decline in
the average realized methanol price.
In the third quarter, Methanex sales volumes were strong at 1.7 million
tonnes. This represented an increase of 330,000 tonnes over the second
quarter of 1998 and approached the record levels achieved during 1997.
In support of stronger sales, Methanex increased production during the
third quarter. Methanex increased its production to 1.3 million tonnes from
1.0 million tonnes in the second quarter. The higher utilization of our
plants in combination with lower natural gas costs resulted in the lowest unit
costs ever achieved by Methanex.
The average realized methanol price in the third quarter of 1998 was $107
per tonne compared to $114 per tonne in the second quarter of 1998. Prices
were lower in Asia and Europe but remained stable in North America.
Value Creation Initiatives
--------------------------
Construction of Methanex's low-cost third plant in Chile (Chile III) is
progressing on budget and commercial production is expected to commence as
planned by the end of the first quarter of 1999.
In New Zealand, new natural gas exploration and development is continuing
and it is expected that new reserves will be confirmed in the near future.
Methanex is in discussions with natural gas suppliers to secure additional
large volumes of low cost gas for its New Zealand plants.
Liquidity and Capital Projects
------------------------------
Cash generated from operations before changes in non-cash working capital
for the third quarter of 1998 was $11.0 million compared with cash used in
operations of $2.6 million in the second quarter of 1998. The higher cash
generation was due to lower unit costs.
During the third quarter of 1998, cash construction costs for Chile III
were $44 million and costs to complete the project are estimated to be
approximately $125 million.
As of September 30, 1998, Methanex had repurchased 2.2 million shares at
an average price of C$11.20 under a normal course issuer bid which allows
Methanex to repurchase up to 10.7 million shares.
Methanex continues to have excellent financial strength. The cash
balance at September 30, 1998 was $333 million and the Company has undrawn
credit facilities of $387 million. Methanex's financial capacity is
sufficient to complete the construction of Chile III and pursue other projects
that will enhance its global position in methanol.
Short-term Outlook
------------------
Recent capacity additions and lower demand in Asia have contributed to a
weak methanol price environment. The capacity additions, however, have fully
impacted the market and the next supply increment will be Methanex's Chile III
in 1999. In the current price environment many methanol producers are
experiencing negative cash margins and adjustments in the industry will be
required. The price of methanol will ultimately depend on the strength of
global demand, industry operating rates and the actions of high-cost producers
in regions such as the United States, Europe, Russia and China. The Company's
strong financial position, global supply network and low cost position will
ensure that Methanex continues to be the leader in the methanol industry. |
