EARNINGS / Methanex Corp. reports Fantastic 12 month Results
VANCOUVER, Jan. 26 /CNW/ - For the fourth quarter ended December 31,
1997, Methanex Corporation recorded net earnings of US$36.5 million (US$0.20
per share) compared to a net loss of US$56.5 million (US$0.30 per share) for
the same period in the previous year. The 1996 results included a writedown
of certain methanol facilities in the amount of US$93.4 million net of tax.
Excluding the writedown, net earnings in the fourth quarter of 1996 were
US$36.9 million (US$0.20 per share). Cash generated from operations in the
fourth quarter was US$77.4 million (US$0.42 per share) compared to US$75.1
million (US$0.40 per share) for 1996. For the year ended December 31, 1997,
net earnings were US$202.0 million (US$1.10 per share) compared to 1996 net
earnings before the write-down of US$85.5 million (US$0.45 per share), or loss
of US$7.9 million (US$0.04 per share) after the writedown.
Pierre Choquette, President and CEO, commented, ''1997 was an excellent
year, the second best in our history. We exceeded our sales forecasts and
pricing remained firm, defying all industry projections. We have continued to
realize benefits from our leadership position and announced several longer
term initiatives including MOU's with Fletcher Challenge Energy (New Zealand
Gas), Ballard Power Systems (Fuel Cells) and QGPC (Qatar Project). We also
completed a buy-back of 14 million shares, which we believe represented
excellent value at prevailing equity prices. We closed 1997 in a very strong
financial position.''
The contract price for methanol in Europe for the first quarter of 1998
was settled unchanged at DM330, which was equivalent to US$186 per tonne
(US$0.56 per gallon) at the time of contract settlement. The current spot
price in the US Gulf is US$183 per tonne (US$0.55 per gallon). Spot pricing in
Asia ranges from US$165 to $175 per tonne (US$0.50 to US$0.53 per gallon).
A conference call is scheduled for Tuesday, January 27, 1998 at 1:00pm
EST (10:00am PT) to review the fourth quarter results. Access to the call may
be obtained by calling the Accutel operator at 416 - 695 - 7888 ten minutes
prior to the call. Please call 1-800-565-1307 (Ext. 2) if you need assistance
connecting to the conference call. A playback version of the conference call
will be available until January 29, 1998 at 416 - 695 - 9731. The conference
call will also be available the following week on our Shareholder Direct line
at 1 - 800 - 64 - MEOHF (63643) or on our web site at www.methanex.com.
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 in the United States under the trading
symbol ''MEOHF.''
METHANEX 1997 FOURTH QUARTER REPORT
Interim Report to Shareholders
For the twelve months ended December 31, 1997
Message to Shareholders
(Except where otherwise noted all currency amounts
are stated in United States dollars.)
Results from Operations
For the year ended December 31, 1997, Methanex recorded net earnings of
$202.0 million ($1.10 per share) compared to a net loss in 1996 of $7.9
million ($0.04 per share). The 1996 results included a writedown of property,
plant and equipment of $93.4 million net of tax. Excluding the writedown, net
earnings in 1996 were $85.5 million ($0.45 per share). Earnings from
operations increased to $251.5 million in 1997 from $97.5 million in 1996. The
increase in earnings from operations was principally due to higher methanol
prices and higher sales volumes from Methanex's own production. The average
realized price in 1997 was $187 per tonne compared with $149 per tonne in
1996. Sales of Methanex-produced product increased 10% to 5.0 million tonnes
in 1997 from 4.6 million tonnes in 1996.
Global demand for methanol in 1997 was healthy, driven by strong global
economic growth and a full year impact of clean air legislation in California
which contributed to continued strong MTBE demand for methanol.
Methanex's net earnings for the fourth quarter 1997 were $36.5 million
($0.20 per share) compared to $50.2 million ($0.27 per share) for the third
quarter 1997. Earnings were lower in the fourth quarter due primarily to
higher natural gas costs for our North American plants, the impact of the
temporary shutdown of the Chile II plant and the gain on sale of our interest
in the Caribbean Methanol Company sold in the third quarter.
Strong demand has translated into strong pricing; the fourth quarter
realized methanol price was $187 per tonne compared to $184 in the third
quarter. In Europe, the first quarter 1998 contract price has been settled
unchanged at DM 330 per tonne ($186 per tonne). Current spot pricing in the
U.S. is $183 per tonne ($0.55 per gallon). Asia spot price currently varies
depending on location between $165 and $175 per tonne ($0.50 to $0.53 per
gallon).
Sales volumes continued at the record levels achieved for the first three
quarters of 1997. Fourth quarter sales were 1.7 million tonnes, 1.1 coming
from our own production. Sales volumes for 1997 were 6.9 million tonnes, 12%
higher than 1996.
Methanex's Chile II plant was successfully restarted and is currently
operating at full production rates after being down for repairs for most of
October and November. Methanex successfully used its supply chain flexibility
to ensure that all customer requirements were met. The shut-down is an insured
event and Methanex is currently in discussions to settle the claim associated
with this shutdown. Final settlement is expected in 1998.
Value Creation Initiatives
Methanex has entered into a Memorandum of Understanding (MOU) with Qatar
General Petroleum Corporation (QGPC) to work towards the development of a
multiple plant production facility in the State of Qatar. The MOU includes an
intent to enter into a joint venture where QGPC would hold 51% and Methanex
49%. The facility envisaged would include up to three plants built
sequentially aggregating three million tonnes of annual capacity, and be
located at the world-class Ras Laffan industrial complex in the north of
Qatar. This location is where Qatar's plentiful North Field gas reserves are
brought on shore. The first phase would commence production in 2002. Natural
gas feedstock and the associated infrastructure would be supplied by QGPC.
Methanex would lead the development and operation of the facility and be
responsible for marketing the methanol.
During the quarter, Methanex completed a normal course issuer bid to
repurchase 14 million shares, at an average cost of $9.00 (C$12.50).
There continues to be a positive outlook for natural gas supplies in New
Zealand. In the fourth quarter Methanex secured an additional 25 petajoules of
attractively priced natural gas representing 625,000 tonnes of additional
production for the New Zealand plants. Methanex is continuing to work with
Fletcher Challenge Energy to secure new low priced gas for the New Zealand
facilities.
Income Taxes
The effective income tax rate for the year ended December 31, 1997 was
approximately 20%. The tax rate is lower than the Canadian statutory rate due
to the utilization of tax deductions in excess of accounting values, and
because a portion of Methanex's earnings are generated in foreign
jurisdictions where the tax rates are lower than in Canada.
Liquidity and Capital Projects
There continues to be significant cash generation from operations. Cash
generated from operations before changes in non-cash working capital for the
fourth quarter 1997 was $77.4 million ($0.42 per share) compared with $88.0
million ($0.47 per share) in the third quarter 1997. Cash generated from
operations was $370.5 million ($2.02 per share) in 1997 compared to $223.9
million ($1.18 per share) in 1996.
The financial position of the Company remains strong. The cash balance
at December 31, 1997 was $492 million and the Company also had undrawn credit
facilities of $387 million. Methanex's financial capacity is sufficient to
complete the construction of the low cost third plant in Chile (Chile III),
fund our share of the Qatar project and pursue other projects that will
enhance our global position in methanol.
Short-term Outlook
The relationship between demand and supply in 1997 was balanced to tight,
and methanol prices were strong. However, the methanol supply/demand balance
continues to be subject to uncertainty. There are new supply increments; Ar
Razi III, Saudi Arabia (850,000 tonnes) and PT Kaltim, Indonesia (660,000
tonnes) which are expected to impact the market in the first quarter 1998. Ar
Razi III commenced production in late 1997, and PT Kaltim is expected to
commence production in the first part of 1998. In addition, it is uncertain
what impact the current currency and economic problems facing some Asian
countries will have on methanol demand growth. The price of methanol will
ultimately depend on industry operating rates and the strength of global
demand.
Pierre Choquette
President and Chief Executive Officer
January 26, 1998
Shareholder Information
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 National
Market System under the symbol MEOHF.
At December 31, 1997, the number of common shares outstanding was
175,576,823.
Investor Information
Methanex Investor Relations
1800 Waterfront Centre
200 Burrard Street
Vancouver, BC Canada V6C 3M1
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 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)
<<
------------------------------------------------------------------------
Financial Highlights
(unaudited)
Consolidated Statements of Earnings
3 months ended 12 months ended
December 31 December 31
------------------------------------------------------------------------
(thousands of US dollars, except as noted)
1997 1996 1997 1996
Revenue $ 321,902 $ 264,288 $ 1,299,380 $ 945,707
Cost of sales and
operating expenses 249,733 195,318 930,850 734,122
Depreciation and
amortization 27,682 28,168 117,057 114,055
------------------------------------------------------------------------
277,415 223,486 1,047,907 848,177
------------------------------------------------------------------------
Earnings from operations
before undernoted items 44,487 40,802 251,473 97,530
Interest expense 7,743 3,456 32,423 20,361
Interest and other income (7,614) (5,024) (34,153) (22,993)
Write down of property,
plant and equipment - 105,000 - 105,000
------------------------------------------------------------------------
129 103,432 (1,730) 102,368
------------------------------------------------------------------------
Earnings before income and
other taxes 44,358 (62,630) 253,203 (4,838)
Income and other taxes (7,900) 6,128 (51,215) (3,014)
------------------------------------------------------------------------
Net earnings (loss) $ 36,458 $ (56,502) $ 201,988 $ (7,852)
------------------------------------------------------------------------
Supplemental Information Relating to Consolidated Statements of Earnings
Net Earnings Before Write Down of Property, Plant and Equipment
---------------------------------------------------------------
Net earnings (loss) $ 36,458 $ (56,502) $ 201,988 $ (7,852)
Write down of property,
plant and equipment - 105,000 - 105,000
Tax recovery on write down 20 (11,600) - (11,600)
------------------------------------------------------------------------
Net earnings before write down of property,
plant and equipment $ 36,458 $ 36,898 $ 201,988 $ 85,548
------------------------------------------------------------------------
Per Share Information
Weighted average number of common shares
outstanding (x) 183,790,226 188,980,543 183,790,226 188,980,543
Net earnings per common share before write down of property,
plant and equipment $ 0.20 $ 0.20 $ 1.10 $ 0.45
Net earnings (loss) per
common share $ 0.20 $ (0.30) $ 1.10 $ (0.04)
Cash generated from operations per
common share (xx) $ 0.42 $ 0.40 $ 2.02 $ 1.18
(x) number of common shares outstanding at December 31, 1997: 175,576,823
(xx) before changes in non-cash working capital
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Financial Highlights
(unaudited)
December 31 December 31
Consolidated Balance Sheets 1997 1996
------------------------------------------------------------------------
(thousands of US dollars)
Assets
Current assets:
Cash and cash equivalents $ 492,316 $ 383,892
Receivables 241,656 207,847
Inventories 89,272 68,129
Prepaid expenses 12,364 9,237
------------------------------------------------------------------------
835,608 669,105
Property, plant and equipment 1,064,634 1,020,546
Other assets 68,629 81,513
------------------------------------------------------------------------
$ 1,968,871 $ 1,771,164
------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities $ 197,987 $ 119,179
Current maturities on long-term debt and other
long-term liabilities 5,145 4,932
------------------------------------------------------------------------
203,132 124,111
Long-term debt 398,481 398,241
Other long-term liabilities 62,419 64,024
Deferred income taxes 113,366 72,548
Shareholders' equity
Capital stock 720,569 774,985
Retained earnings 470,904 337,255
------------------------------------------------------------------------
1,191,473 1,112,240
------------------------------------------------------------------------
$ 1,968,871 $ 1,771,164
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Financial Highlights
(unaudited)
Consolidated Statements of Changes in Financial Position
3 months ended 12 months ended
December 31 December 31
------------------------------------------------------------------------
(thousands of US dollars) 1997 1996 1997 1996
Cash provided by (used in):
Operations:
Net earnings $ 36,458 $ (56,502) $ 201,988 $ (7,852)
Add (deduct) :
Depreciation and
amortization 27,682 28,168 117,057 114,055
Write down of property, plant
and equipment - 105,000 - 105,000
Deferred income taxes 8,128 (1,307) 40,818 4,188
Other 5,086 (269) 10,665 8,460
------------------------------------------------------------------------
Cash generated from operations before changes in non-cash
working capital 77,354 75,090 370,528 223,851
Receivables and accounts payable and accrued
liabilities (4,378) 4,810 2,468 (25,371)
Inventories and prepaid
expenses (7,145) 592 (26,596) (2,326)
------------------------------------------------------------------------
65,831 80,492 364,400 196,154
------------------------------------------------------------------------
Financing:
Repayment of long-term debt and other long-term
liabilities (3,961) (1,206) (6,358) (26,622)
Shares repurchased (33,648) - (125,574) -
Issue of shares on exercise of incentive stock
options 83 928 2,817 928
Tax benefits realized related to capital
stock - 5,879 - 5,879
------------------------------------------------------------------------
(37,526) 5,601 (129,115) (19,815)
------------------------------------------------------------------------
Investments:
Property, plant and
equipment (84,923) (37,957) (153,825) (174,322)
Accounts payable and accrued liabilities related to capital
expenditures 43,582 (2,178) 42,533 (7,208)
Other assets (4,192) (9,434) 2,431 (10,562)
------------------------------------------------------------------------
(45,533) (49,569) (108,861) (192,092)
------------------------------------------------------------------------
Increase (decrease) in cash
position (17,228) 36,524 108,424 (15,753)
Cash and cash equivalents, beginning
of period 509,544 347,368 383,892 399,645
------------------------------------------------------------------------
Cash and cash equivalents, end
of period $ 492,316 $ 383,892 $ 492,316 $ 383,892
------------------------------------------------------------------------
------------------------------------------------------------------------
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Notes to consolidated Financial Statements (unaudited)
Years ended December 31, 1997 and 1996
The consolidated financial statements have been prepared on a historical
cost basis in accordance with accounting principles generally accepted in
Canada. The consolidated financial statements have been prepared from the
books and records without audit, however, in the opinion of management, all
adjustments which are necessary to the fair presentation of the results have
been made.
Natural Gas
Production from the Company's New Zealand assets is dependent on the
supply of gas from the Maui and Kapuni fields. A reduction in the recovery of
natural gas from the fields underlying the contracted gas could potentially
reduce the Company's gas entitlements. The Company has signed a Memorandum of
Understanding with Fletcher Challenge Energy to work with them to develop a
longer term gas supply for the New Zealand assets. However there can be no
assurance that the Company will be able to secure additional gas on
economically attractive terms.
Income Taxes
Income taxes differ from the amounts which would be obtained by applying
the Canadian statutory income tax rate due to utilizing tax deductions in
excess of accounting values and because a portion of the Company's earnings
are generated in foreign jurisdictions where the tax rates are lower than
Canada.
The Company has received a proposal from Revenue Canada to assess the
Company's 1991 Canadian income tax return. The potential reassessment may
reduce the amount of tax depreciation available at December 31, 1991 and
thereby increase cumulative income taxes and interest to December 31, 1997 in
an amount aggregating $93 million.
The Company has responded to Revenue Canada's proposal. It is not
determinable whether Revenue Canada's proposal will lead to a reassessment. If
a reassessment is issued, the Company will file a notice of objection to
appeal the reassessment. Based on advice received from legal counsel,
management believes its position should be sustained.
In relation to this tax matter, a writ of summons was filled in the
Supreme Court of British Columbia in December 1997 naming Methanex as a
co-defendant in a civil case claiming damages equivalent to the income tax
alleged owing plus interest. As of January 26, 1998, the writ had not been
served on any of the defendants. Legal counsel has provided the opinion, with
which management concurs, that there is a high probability that Revenue Canada
will not succeed in this action.
<<
------------------------------------------------------------------------
Financial Highlights
(unaudited)
Quarterly History
1997 Q4 Q3 Q2 Q1 1996 Q4 Q3 Q2 Q1
------------------------------------------------------------------------
Methanol sales volume
(thousands of tonnes)
Company produced
product 5,049 1,137 1,159 1,328 1,425 4,580 1,194 1,158 1,181 1,047
Purchased
product 1,854 587 513 400 354 1,557 430 364 357 406
------------------------------------------------------------------------
6,903 1,724 1,672 1,728 1,779 6,137 1,624 1,522 1,538 1,453
------------------------------------------------------------------------
Methanol production
(thousands of tonnes)
North
America 1,551 378 322 394 457 1,741 441 470 392 438
New
Zealand 1,905 446 350 560 549 1,847 508 497 484 358
Chile 1,635 314 466 422 433 867 238 220 185 224
------------------------------------------------------------------------
5,091 1,138 1,138 1,376 1,439 4,455 1,187 1,187 1,061 1,020
------------------------------------------------------------------------
Methanol price
($/Tonne) 187 187 184 195 184 149 160 151 141 141
($/Gallon) 0.56 0.56 0.55 0.59 0.55 0.45 0.48 0.45 0.42 0.42
Per share information
Earnings(x) $ 1.10 0.20 0.27 0.34 0.27 0.45 0.20 0.13 0.06 0.08
Cash
Flow (xx) $ 2.02 0.42 0.47 0.58 0.51 1.18 0.40 0.33 0.23 0.23
(x) Earnings per share for 1996 before write-down of property
plant and equipment
(xx) Before changes in non-cash working capital
------------------------------------------------------------------------
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