Methanex Corporation (MEOH), the world’s largest supplier of methanol, reported a fourth quarter net income of $25.7 million, or 28 cents per share, in contrast to a net loss of $3.9 million or 4 cents per share in the year-ago period. Earnings were, however, slightly below the Zacks Consensus Estimate of 29 cents. For full year 2009, Methanex posted a net income of a modest $0.7 million or 1 cent per share, significantly down from $168.8 million or $1.78 in 2008.
Quarterly revenues of Methanex slipped 7% to $381.7 million while it declined 48% to $1.2 billion for the full year. Continued upward momentum of methanol demand and higher energy prices have led to higher methanol prices and improved earnings. Sales volumes improved 7% to 1.49 million tons while the average realized price of $282 per ton was an improvement of about $60 from last year’s $321 per ton.
However, for the full year, volumes were down 2% to 5.94 million tons and average realized prices were down 47% to $225 per ton. Methanex reported an EBITDA of $72.9 million compared with an EBITDA of $31.0 million for the third quarter of 2009. For full year 2009, EBITDA stood at $141.8 million. Methanex has a strong balance sheet with $170 million of cash on hand at the end of the year and no near term refinancing requirements.
About 80% of Methanex’s total methanol output is used in the production of formaldehyde, acetic acid and a variety of other chemicals. These chemical derivatives are used to manufacture a wide range of products including plywood, particle board, foams, resins and plastics. Demand for methanol largely stems from the energy sector for the production of methyl tertiary-butyl ether, a gasoline component and a direct fuel for motor vehicles.
Cost Control
Methanex has managed to curtail losses by checking costs. Total cash costs for the reported quarter were lower by $138 million compared with the fourth quarter of 2008. We expect continued improvement going forward, driven by higher methanol prices on an average than in 2009, supported by higher coal prices in China and increased production levels. Methanex expects 1.2 million tons of production in Chile in 2010 compared to 0.9 million tons in 2009. The company is also hoping for further cost reduction with the upcoming low-cost 1.3 million ton methanol plant in Damietta, Egypt, which is expected to begin production in the first half of 2010.
Methanex shares were up 1.48% in after-hours trade and closed at $23.36. We believe the company’s share price will continue to move higher as its cash flow profile improves with the start-up of its Egyptian facility and increased production from its Chilean facilities.
Read the full analyst report on “MEOH”
Zacks Investment Research
