For the second quarter of 2013, Methanex Corporation
(TSX:MX)(NASDAQ:MEOH) reported Adjusted EBITDA(1) of $157 million
and Adjusted net income(1) of $99 million ($1.02 per share on a
diluted basis(1)). This compares with Adjusted EBITDA(1) of $149
million and Adjusted net income(1) of $88 million ($0.92 per share
on a diluted basis(1)) for the first quarter of 2013.
John Floren, President and CEO of Methanex commented, "The
higher methanol pricing environment in the second quarter
contributed to stronger EBITDA and earnings. Entering the third
quarter, we continue to move forward on a number of growth
projects. These projects are expected to expand our annual
operating capacity by approximately three million tonnes over the
next three years, representing a 60% capacity increase."
Mr. Floren added, "We are making solid progress on our
initiatives in both New Zealand and Medicine Hat, which will add up
to one million tonnes of annual production capacity by the end of
2013. Our project to relocate the first one million tonne plant
from Chile to Geismar, Louisiana is on track to be completed by the
end of 2014 with the second one million tonne plant in Geismar
expected to be operational in early 2016."
Mr. Floren concluded, "This is an exciting time for our business
as these growth projects offer significant upside to our earnings
and cash flows. With over US$700 million of cash on hand, an
undrawn credit facility, a robust balance sheet and strong cash
flow generation, we are well positioned to grow our business and
deliver on our commitment to return excess cash to
shareholders."
A conference call is scheduled for July 25, 2013 at 12:00 noon
ET (9:00 am PT) to review these second quarter results. To access
the call, dial the Conferencing operator ten minutes prior to the
start of the call at (416) 695-6616, or toll free at (800)
766-6630. A playback version of the conference call will be
available until August 15, 2013 at (905) 694-9451, or toll free at
(800) 408-3053. The passcode for the playback version is 3021008.
Presentation slides summarizing Q2-13 results and a simultaneous
audio-only webcast of the conference call can be accessed from our
website at www.methanex.com. The webcast will be available on the
website for three weeks following the call.
Methanex is a Vancouver-based, publicly traded company and is
the world's largest supplier of methanol to major international
markets. Methanex shares are listed for trading on the Toronto
Stock Exchange in Canada under the trading symbol "MX" and on the
NASDAQ Global Market in the United States under the trading symbol
"MEOH". Effective July 19, 2013, Methanex shares are no longer
listed for trading on the Santiago Stock Exchange.
FORWARD-LOOKING INFORMATION WARNING
This Second Quarter 2013 press release contains forward-looking
statements with respect to us and the chemical industry. Refer to
Forward-Looking Information Warning in the attached Second Quarter
2013 Management's Discussion and Analysis for more information.
(1) Adjusted EBITDA, Adjusted net income and Adjusted net income per common
share are non-GAAP measures which do not have any standardized meaning
prescribed by GAAP. These measures represent the amounts that are
attributable to Methanex Corporation shareholders and are calculated by
excluding the mark-to-market impact of share-based compensation as a result
of changes in our share price and items considered by management to be non-
operational. Refer to Additional Information - Supplemental Non-GAAP
Measures section of the attached Interim Report for the three months ended
June 30, 2013 for reconciliations to the most comparable GAAP measures.
Interim Report for the Three Months Ended June 30, 2013
At July 24, 2013 the Company had 95,360,640 common shares issued
and outstanding and stock options exercisable for 2,996,690
additional common shares.
Share Information
Methanex Corporation's common shares are listed for trading on
the Toronto Stock Exchange under the symbol MX and on the Nasdaq
Global Market under the symbol MEOH.
Transfer Agents & Registrars
CIBC Mellon Trust Company
320 Bay Street
Toronto, Ontario Canada M5H 4A6
Toll free in North America: 1-800-387-0825
Investor Information
All financial reports, news releases and corporate information
can be accessed on our website at www.methanex.com.
Contact Information
Methanex Investor Relations
1800 - 200 Burrard Street
Vancouver, BC Canada V6C 3M1
E-mail: invest@methanex.com
Methanex Toll-Free: 1-800-661-8851
SECOND QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS
Except where otherwise noted, all currency amounts are stated in
United States dollars.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
-- A reconciliation from net income attributable to Methanex shareholders
to Adjusted net income(1) and the calculation of Adjusted net income per
common share(1) is as follows:
Three Months Ended Six Months Ended
-----------------------------------------
($ millions except number of shares Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
and per share amounts) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income attributable to Methanex
shareholders $ 54 $ 60 $ 52 $ 114 $ 74
Mark-to-market impact of share-
based compensation, net of tax 9 28 (10) 36 7
Geismar project relocation
expenses, net of tax 22 - 2 22 2
Write-off of oil and gas rights,
net of tax 14 - - 14 -
----------------------------------------------------------------------------
Adjusted net income (1) $ 99 $ 88 $ 44 $ 186 $ 83
----------------------------------------------------------------------------
Diluted weighted average shares
outstanding (millions) 96 96 95 96 95
Adjusted net income per common
share (1) $ 1.02 $ 0.92 $ 0.47 $ 1.94 $ 0.88
----------------------------------------------------------------------------
-- We recorded Adjusted EBITDA(1) of $157 million for the second quarter of
2013 compared with $149 million for the first quarter of 2013. The
increase in Adjusted EBITDA(1) was primarily due to an increase in
average realized price to $425 per tonne for the second quarter of 2013
from $412 per tonne for the first quarter of 2013.
-- Production for the second quarter of 2013 was 1,035,000 tonnes compared
with 1,057,000 tonnes for the first quarter of 2013. Refer to the
Production Summary section.
-- Sales of Methanex-produced methanol were 1,021,000 tonnes in the second
quarter of 2013 compared with 1,024,000 in the first quarter of 2013.
-- During the second quarter of 2013, we reached a final investment
decision to proceed with the relocation of a second 1.0 million tonne
Chile facility to the Geismar site. We expect the 1.0 million tonne
Geismar II facility will be operational by early 2016. During the second
quarter of 2013, we recorded a $34 million expense ($22 million after-
tax) to earnings related to Geismar II project relocation expenses that
are not eligible for capitalization. The Geismar I facility remains on
track to be operational by the end of 2014.
-- We continue to make good progress with our projects to expand operating
capacity in Medicine Hat and New Zealand. We expect our Medicine Hat
debottlenecking project will add 90,000 tonnes of annual capacity by the
end of the third quarter of 2013 and that we will be able to operate our
New Zealand operations at their full annual production capacity of 2.4
million tonnes by the end of 2013, depending on natural gas composition.
During the second quarter of 2013 we contracted additional natural gas
in New Zealand that represents approximately 600,000 tonnes of methanol
production.
-- During the second quarter of 2013, we recorded a $17 million non-cash
charge ($14 million after-tax) to earnings to write off oil and gas
rights in New Zealand.
(1) These items are non-GAAP measures that do not have any standardized
meaning prescribed by GAAP and therefore are unlikely to be comparable to
similar measures presented by other companies. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a description of
each non-GAAP measure and reconciliations to the most comparable GAAP
measures.
This Second Quarter 2013 Management's Discussion and Analysis
("MD&A") dated July 24, 2013 for Methanex Corporation ("the
Company") should be read in conjunction with the Company's
condensed consolidated interim financial statements for the period
ended June 30, 2013 as well as the 2012 Annual Consolidated
Financial Statements and MD&A included in the Methanex 2012
Annual Report. Unless otherwise indicated, the financial
information presented in this interim report is prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
The Methanex 2012 Annual Report and additional information relating
to Methanex is available on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov.
Effective January 1, 2013, we adopted new IFRS standards related
to consolidation and joint arrangement accounting. Under these new
standards, our 63.1% interest in the Atlas entity, which was
previously proportionately consolidated in our financial
statements, is accounted for using the equity method. This change
has been applied retrospectively. As a result, amounts related to
Atlas are no longer included in individual line items in our
consolidated financial statements and the net assets and net
earnings are presented separately. For purposes of analyzing our
consolidated financial results in this MD&A, the Adjusted
EBITDA from our 63.1% interest in the Atlas entity is included in
Adjusted EBITDA.
FINANCIAL AND OPERATIONAL DATA
Three Months Ended Six Months Ended
-----------------------------------------
($ millions, except per share Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
amounts and where noted) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production (thousands of tonnes)
(attributable to Methanex
shareholders) 1,035 1,057 1,034 2,092 1,979
Sales volumes (thousands of
tonnes):
Methanex-produced methanol
(attributable to Methanex
shareholders) 1,021 1,024 1,001 2,045 1,927
Purchased methanol 749 588 569 1,337 1,260
Commission sales (1) 242 219 276 461 474
----------------------------------------------------------------------------
Total sales volumes 2,012 1,831 1,846 3,843 3,661
Methanex average non-discounted
posted price ($ per tonne) (2) 494 474 452 484 444
Average realized price ($ per
tonne) (3) 425 412 384 418 383
Adjusted EBITDA (attributable to
Methanex shareholders) (4) 157 149 113 307 206
Adjusted cash flows from operating
activities (attributable to
Methanex shareholders) (4) 158 127 110 286 199
Cash flows from operating
activities 125 118 140 243 214
Adjusted net income (attributable
to Methanex shareholders) (4) 99 88 44 186 83
Net income attributable to Methanex
shareholders 54 60 52 114 74
Adjusted net income per common
share (attributable to Methanex
shareholders) (4) 1.02 0.92 0.47 1.94 0.88
Basic net income per common share
(attributable to Methanex
shareholders) 0.57 0.64 0.56 1.21 0.80
Diluted net income per common share
(attributable to Methanex
shareholders) 0.56 0.63 0.50 1.19 0.78
Common share information (millions
of shares):
Weighted average number of common
shares 95 95 94 95 93
Diluted weighted average number
of common shares 96 96 95 96 95
Number of common shares
outstanding, end of period 95 95 94 95 94
----------------------------------------------------------------------------
(1) Commission sales represent volumes marketed on a commission basis
related to the 36.9% of the Atlas methanol facility and 40% of the Egypt
methanol facility that we do not own.
(2) Methanex average non-discounted posted price represents the average of
our non-discounted posted prices in North America, Europe and Asia Pacific
weighted by sales volume. Current and historical pricing information is
available at www.methanex.com.
(3) Average realized price is calculated as revenue, excluding commissions
earned and the Egypt non-controlling interest share of revenue but including
an amount representing our share of Atlas revenue, divided by the total
sales volumes of Methanex-produced (attributable to Methanex shareholders)
and purchased methanol.
(4) These items are non-GAAP measures that do not have any standardized
meaning prescribed by GAAP and therefore are unlikely to be comparable to
similar measures presented by other companies. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a description of
each non-GAAP measure and reconciliations to the most comparable GAAP
measures.
PRODUCTION SUMMARY
Q2 2013 Q1 2013
(thousands of tonnes) Capacity(1) Production Production
----------------------------------------------------------------------------
New Zealand (2) 608 361 309
Atlas (Trinidad) (63.1% interest) 281 201 248
Titan (Trinidad) 218 169 181
Egypt (60% interest) 190 163 133
Medicine Hat (Canada) 118 129 131
Chile I and IV 450 12 55
Geismar I and II (Louisiana, USA) (3) 500 - -
----------------------------------------------------------------------------
2,365 1,035 1,057
----------------------------------------------------------------------------
Q2 2012 YTD Q2 2013 YTD Q2 2012
(thousands of tonnes) Production Production Production
----------------------------------------------------------------------------
New Zealand (2) 210 670 384
Atlas (Trinidad) (63.1% interest) 264 449 391
Titan (Trinidad) 196 350 411
Egypt (60% interest) 164 296 366
Medicine Hat (Canada) 118 260 232
Chile I and IV 82 67 195
Geismar I and II (Louisiana, USA) (3) - - -
----------------------------------------------------------------------------
1,034 2,092 1,979
----------------------------------------------------------------------------
(1) The production capacity of our facilities may be higher than original
nameplate capacity as, over time, these figures have been adjusted to
reflect ongoing operating efficiencies. Actual production for a facility in
any given year may be higher or lower than annual production capacity due to
a number of factors, including natural gas composition or the age of the
facility's catalyst.
(2) The annual production capacity of New Zealand represents the two 0.85
million tonne facilities at Motunui and the 0.53 million tonne facility at
Waitara Valley. The current operating capacity of the Motunui facilities is
1.5 million tonnes due to distillation capacity constraints (refer to New
Zealand section below).
(3) We are relocating two idle Chile facilities to Geismar, Louisiana. The
Geismar I facility is expected to be operational by the end of 2014 and the
Geismar II facility is expected to be operational in early 2016.
New Zealand
Our New Zealand methanol facilities produced 361,000 tonnes of
methanol in the second quarter of 2013 compared with 309,000 tonnes
in the first quarter of 2013. During the first quarter of 2013, the
Motunui facilities suffered an equipment failure which resulted in
an unplanned outage and lost production of approximately 60,000
tonnes. The facility was repaired and the Motunui facilities
returned to operation at the end of March 2013. We are in the
process of restarting the Waitara Valley facility and
debottlenecking the Motunui facilities which we expect will allow
us to produce at the site's full annual production capacity of up
to 2.4 million tonnes, depending on natural gas composition, by the
end of 2013. During the second quarter of 2013, we contracted
additional natural gas in New Zealand that represents approximately
600,000 tonnes of methanol production.
Trinidad
In Trinidad, we own 100% of the Titan facility with an annual
production capacity of 875,000 tonnes and have a 63.1% interest in
the Atlas facility with an annual production capacity of 1,125,000
tonnes (63.1% interest). The Titan facility produced 169,000 tonnes
in the second quarter of 2013 compared with 181,000 tonnes in the
first quarter of 2013 and the Atlas facility produced 201,000
tonnes in the second quarter of 2013 compared with 248,000 tonnes
in the first quarter of 2013. During the second quarter of 2013,
lost production at the Titan and Atlas facilities as a result of
unplanned outages was approximately 28,000 tonnes and 29,000
tonnes, respectively.
We continue to experience some natural gas curtailments to our
Trinidad facilities due to a mismatch between upstream commitments
to supply the Natural Gas Company of Trinidad and Tobago (NGC) and
downstream demand from NGC's customers, which becomes apparent when
an upstream supplier has a technical issue or planned maintenance
that reduces gas delivery. We are engaged with key stakeholders to
find a solution to this issue, but in the meantime expect to
continue to experience gas curtailments to the Trinidad site.
Egypt
The Egypt methanol facility produced 163,000 tonnes (60%
interest) in the second quarter of 2013 compared with 133,000
tonnes in the first quarter of 2013. Production during the second
quarter of 2013 and the first quarter of 2013 was impacted by
natural gas supply restrictions.
The Egypt facility has experienced periodic natural gas supply
restrictions since mid-2012 which have resulted in production below
full capacity. This situation may persist in the future and become
more acute during the summer months when electricity demand is at
its peak. Refer to our 2012 Annual Report for further details.
Medicine Hat, Canada
Our 470,000 tonne per year facility in Medicine Hat, Alberta
produced 129,000 tonnes in the second quarter of 2013 compared with
131,000 tonnes during the first quarter of 2013. The Medicine Hat
facility is currently able to produce above stated production
capacity due to the age of its catalyst and the composition of the
natural gas feedstock. We are currently debottlenecking the
Medicine Hat facility which we expect will add a further 90,000
tonnes of annual production capacity by the end of the third
quarter of 2013.
Chile
During the second quarter of 2013, we produced 12,000 tonnes in
Chile compared with 55,000 tonnes in the first quarter of 2013. In
addition to our own production, early in the second quarter we
continued to receive some natural gas from Argentina under an
arrangement whereby we process the natural gas received and return
the methanol produced to Argentina. Under this arrangement, our
Chile operations produced an additional 18,000 tonnes during the
second quarter of 2013 compared with 6,000 tonnes during the first
quarter of 2013.
As a result of insufficient natural gas feedstock from Chile and
Argentina during the southern hemisphere winter, we idled our Chile
operations at the end of April 2013. We are optimistic that we will
secure sufficient natural gas from Empresa Nacional del Petroleo
(ENAP) and others to restart our operations later in 2013.
The future of our Chile operations is primarily dependent on the
level of exploration and development in southern Chile and our
ability to secure a sustainable natural gas supply to our
facilities on economic terms from Chile and Argentina.
Geismar, Louisiana
We are in the process of relocating the idle Chile II and Chile
III facilities to Geismar, Louisiana (Geismar I and Geismar II).
The 1.0 million tonne Geismar I facility is expected to be
operational by the end of 2014 and the 1.0 million tonne Geismar II
facility is expected to be operational in early 2016. During the
second quarter of 2013, we incurred $54 million of capital
expenditures related to these projects. In addition, under IFRS,
certain costs associated with relocating an asset are not eligible
for capitalization and are required to be charged directly to
earnings. During the second quarter of 2013, $34 million ($22
million after-tax) of Geismar II project relocation expenses were
not eligible to be capitalized and were charged directly to
earnings.
FINANCIAL RESULTS
For the second quarter of 2013 we recorded Adjusted EBITDA of
$157 million and Adjusted net income of $99 million ($1.02 per
share on a diluted basis). This compares with Adjusted EBITDA of
$149 million and Adjusted net income of $88 million ($0.92 per
share on a diluted basis) for the first quarter of 2013.
For the second quarter of 2013, we reported net income
attributable to Methanex shareholders of $54 million ($0.56 per
share on a diluted basis) compared with net income attributable to
Methanex shareholders for the first quarter of 2013 of $60 million
($0.63 income per share on a diluted basis).
Effective January 1, 2013, we adopted new IFRS standards related
to consolidation and joint arrangement accounting. Under these new
standards, our 63.1% interest in the Atlas entity, which was
previously proportionately consolidated in our financial
statements, is accounted for using the equity method. This change
has been applied retrospectively. As a result, amounts related to
Atlas are no longer included in individual line items in our
consolidated financial statements and the net assets and net
earnings are presented separately. For purposes of analyzing our
consolidated financial results in this MD&A, the Adjusted
EBITDA from our 63.1% interest in the Atlas entity is included in
Adjusted EBITDA. Our analysis of depreciation and amortization,
finance costs, finance income and other expenses and income taxes
is consistent with the presentation of our consolidated statements
of income and excludes amounts related to Atlas.
We calculate Adjusted EBITDA and Adjusted net income by
including amounts related to our equity share of the Atlas (63.1%
interest) and Egypt (60% interest) facilities and by excluding the
mark-to-market impact of share-based compensation as a result of
changes in our share price and items which are considered by
management to be non-operational. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a further
discussion on how we calculate these measures.
A reconciliation from net income attributable to Methanex
shareholders to Adjusted net income and the calculation of Adjusted
net income per common share is as follows:
Three Months Ended Six Months Ended
-----------------------------------------
($ millions except number of shares Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
and per share amounts) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income attributable to Methanex
shareholders $ 54 $ 60 $ 52 $ 114 $ 74
Mark-to-market impact of share-
based compensation, net of tax 9 28 (10) 36 7
Geismar project relocation
expenses, net of tax 22 - 2 22 2
Write-off of oil and gas rights,
net of tax 14 - - 14 -
----------------------------------------------------------------------------
Adjusted net income (1) $ 99 $ 88 $ 44 $ 186 $ 83
----------------------------------------------------------------------------
Diluted weighted average shares
outstanding (millions) 96 96 95 96 95
Adjusted net income per common
share (1) $ 1.02 $ 0.92 $ 0.47 $ 1.94 $ 0.88
----------------------------------------------------------------------------
(1) These items are non-GAAP measures that do not have any standardized
meaning prescribed by GAAP and therefore are unlikely to be comparable to
similar measures presented by other companies. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a description of
each non-GAAP measure and reconciliations to the most comparable GAAP
measures.
We review our financial results by analyzing changes in Adjusted
EBITDA, mark-to-market impact of share-based compensation,
depreciation and amortization, Geismar project relocation expenses,
write-off of oil and gas rights, finance costs, finance income and
other expenses and income taxes. A summary of our consolidated
statements of income is as follows:
Three Months Ended Six Months Ended
---------------------------------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
($ millions) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated statements of
income:
Revenue $ 733 $ 652 $ 613 $ 1,385 $ 1,267
Cost of sales and operating
expenses, excluding mark-to-
market impact of share-based
compensation (571) (497) (487) (1,068) (1,022)
Adjusted EBITDA of associate
(Atlas) (1) 18 9 12 27 9
----------------------------------------------------------------------------
180 164 138 344 254
Comprised of:
Adjusted EBITDA (attributable
to Methanex shareholders)
(2) 157 149 113 307 206
Attributable to non-
controlling interests 23 15 25 37 48
----------------------------------------------------------------------------
180 164 138 344 254
Mark-to-market impact of
share-based compensation (9) (31) 11 (40) (7)
Depreciation and amortization (29) (30) (38) (59) (74)
Geismar project relocation
expenses (34) - (4) (34) (4)
Write-off of oil and gas
rights (17) - - (17) -
Earnings of associate,
excluding amount included in
Adjusted EBITDA (1) (12) (8) (11) (20) (15)
Finance costs (15) (15) (17) (30) (33)
Finance income and other
expenses 3 (2) - 1 2
Income tax expense (1) (12) (13) (13) (24)
----------------------------------------------------------------------------
Net income $ 66 $ 66 $ 66 $ 132 $ 99
----------------------------------------------------------------------------
Net income attributable to
Methanex shareholders $ 54 $ 60 $ 52 $ 114 $ 74
----------------------------------------------------------------------------
(1) Earnings of associate has been divided into an amount included in
Adjusted EBITDA and an amount excluded from Adjusted EBITDA. The amount
excluded from Adjusted EBITDA represents depreciation and amortization,
finance costs, finance income and other expenses and income tax expense
relating to earnings of associate.
(2) This item is a non-GAAP measure that does not have any standardized
meaning prescribed by GAAP and therefore is unlikely to be comparable to
similar measures presented by other companies. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a description of
the non-GAAP measure and reconciliation to the most comparable GAAP measure.
Adjusted EBITDA (Attributable to Methanex Shareholders)
Our operations consist of a single operating segment - the
production and sale of methanol. We review the results of
operations by analyzing changes in the components of Adjusted
EBITDA. For a discussion of the definitions used in our Adjusted
EBITDA analysis, refer to the How We Analyze Our Business
section.
The changes in Adjusted EBITDA resulted from changes in the
following:
Q2 2013 Q2 2013 YTD Q2 2013
compared with compared with compared with
($ millions) Q1 2013 Q2 2012 YTD Q2 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average realized price $ 22 $ 72 $ 121
Sales volume 19 21 20
Total cash costs (33) (49) (40)
----------------------------------------------------------------------------
Increase in Adjusted EBITDA $ 8 $ 44 $ 101
----------------------------------------------------------------------------
Average realized price
Three Months Ended Six Months Ended
-----------------------------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
($ per tonne) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Methanex average non-discounted
posted price 494 474 452 484 444
Methanex average realized price 425 412 384 418 383
----------------------------------------------------------------------------
Methanol market conditions remained healthy and pricing
increased in North America and Europe during the second quarter of
2013 (refer to Supply/Demand Fundamentals section for more
information). Our average non-discounted posted price for the
second quarter of 2013 was $494 per tonne compared with $474 per
tonne for the first quarter of 2013 and $452 per tonne for the
second quarter of 2012. Our average realized price for the second
quarter of 2013 was $425 per tonne compared with $412 per tonne for
the first quarter of 2013 and $384 per tonne for the second quarter
of 2012. The change in average realized price for the second
quarter of 2013 increased Adjusted EBITDA by $22 million compared
with the first quarter of 2013 and increased Adjusted EBITDA by $72
million compared with the second quarter of 2012. Our average
realized price for the six months ended June 30, 2013 was $418 per
tonne compared with $383 per tonne for the same period in 2012 and
this increased Adjusted EBITDA by $121 million.
Sales volume
Methanol sales volumes excluding commission sales volumes were
higher in the second quarter of 2013 compared with the first
quarter of 2013 by 158,000 tonnes and with the second quarter of
2012 by 200,000 tonnes. Higher methanol sales volumes excluding
commission sales volumes for these periods increased Adjusted
EBITDA by $19 million and $21 million, respectively. For the six
month period ended June 30, 2013 compared with the same period in
2012, methanol sales volumes excluding commission sales volumes
were higher by 195,000 tonnes and this resulted in higher Adjusted
EBITDA by $20 million.
Total cash costs
The primary drivers of changes in our total cash costs are
changes in the cost of methanol we produce at our facilities
(Methanex-produced methanol) and changes in the cost of methanol we
purchase from others (purchased methanol). All of our production
facilities except Medicine Hat are underpinned by natural gas
purchase agreements with pricing terms that include base and
variable price components. We supplement our production with
methanol produced by others through methanol offtake contracts and
purchases on the spot market to meet customer needs and support our
marketing efforts within the major global markets.
We have adopted the first-in, first-out method of accounting for
inventories and it generally takes between 30 and 60 days to sell
the methanol we produce or purchase. Accordingly, the changes in
Adjusted EBITDA as a result of changes in Methanex-produced and
purchased methanol costs primarily depend on changes in methanol
pricing and the timing of inventory flows.
The impact on Adjusted EBITDA from changes in our cash costs are
explained below:
Q2 2013 Q2 2013 YTD Q2 2013
compared with compared with compared with
($ millions) Q1 2013 Q2 2012 YTD Q2 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Methanex-produced methanol
costs $ (7) $ (25) $ (34)
Proportion of Methanex-produced
methanol sales (19) (17) -
Purchased methanol costs (8) (19) (37)
Logistics costs 3 9 20
Other, net (2) 3 11
----------------------------------------------------------------------------
$ (33) $ (49) $ (40)
----------------------------------------------------------------------------
Methanex-produced methanol costs
We purchase natural gas for the New Zealand, Trinidad, Egypt and
Chile methanol facilities under natural gas purchase agreements
where the unique terms of each contract include a base price and a
variable price component linked to the price of methanol to reduce
our commodity price risk exposure. The variable price component of
each gas contract is adjusted by a formula related to methanol
prices above a certain level. For the second quarter of 2013
compared with the first quarter of 2013, Methanex-produced methanol
costs were higher by $7 million primarily due to a change in the
mix of production sold from inventory. For the second quarter of
2013 and six-month period ended June 30, 2013 compared with the
same periods in 2012, Methanex-produced methanol costs were higher
by $25 million and $34 million, respectively, primarily due to the
impact of higher realized methanol prices on our natural gas costs
and changes in the mix of production sold from inventory.
Proportion of Methanex-produced methanol sales
The cost of purchased methanol is directly linked to the selling
price for methanol at the time of purchase and the cost of
purchased methanol is generally higher than the cost of
Methanex-produced methanol. Accordingly, an increase in the
proportion of Methanex-produced methanol sales results in a
decrease in our overall cost structure for a given period. For the
second quarter of 2013 compared with the first quarter of 2013 and
the second quarter of 2012, sales of Methanex-produced methanol
made up a lower proportion of our total sales and this decreased
Adjusted EBITDA by $19 million and $17 million, respectively.
Purchased methanol costs
Changes in purchased methanol costs for all periods presented
are primarily as a result of changes in methanol pricing.
Logistics costs
Logistics costs vary from period to period depending on the
levels of production from each of our production facilities and the
resulting impact on our supply chain. Over the past year, we have
completed several initiatives that have reduced logistics costs and
improved the efficiency of our supply chain. Logistics costs in the
second quarter of 2013 were $9 million lower than the second
quarter of 2012 and logistics costs for the six month period were
$20 million lower than in the same period in 2012.
Other, net
We have commenced the process of building a manufacturing
organization in Geismar, Louisiana. Under IFRS, costs incurred
related to organizational build-up are not eligible for
capitalization and are charged directly to earnings as incurred.
During the second quarter of 2013, we incurred approximately $2
million of Geismar organizational build-up costs and expect that a
total of approximately $35 million of these costs will be
incurred.
Mark-to-Market Impact of Share-based Compensation
We grant share-based awards as an element of compensation.
Share-based awards granted include stock options, share
appreciation rights, tandem share appreciation rights, deferred
share units, restricted share units and performance share units.
For all the share-based awards, share-based compensation is
recognized over the related vesting period for the proportion of
the service that has been rendered at each reporting date.
Share-based compensation includes an amount related to the
grant-date value and a mark-to-market impact as a result of
subsequent changes in the Company's share price. The grant-date
value amount is included in Adjusted EBITDA and Adjusted net
income. The mark-to-market impact of share-based compensation as a
result of changes in our share price is excluded from Adjusted
EBITDA and Adjusted net income and analyzed separately.
Three Months Ended Six Months Ended
---------------------------------------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Methanex Corporation
share price (1) $ 42.84 $ 40.63 $ 27.84 $ 42.84 $ 27.84
Grant-date fair value
expense included in
Adjusted EBITDA and
Adjusted net income $ 6 $ 6 $ 7 $ 12 $ 14
Mark-to-market impact due
to change in share price 9 31 (11) 40 7
----------------------------------------------------------------------------
Total share-based
compensation expense
(recovery) $ 15 $ 37 $ (4) $ 52 $ 21
----------------------------------------------------------------------------
(1) US dollar share price of Methanex Corporation as quoted on NASDAQ Global
Market on the last trading day of the respective period.
The Methanex Corporation share price increased from $40.63 per
share at March 31, 2013 to $42.84 per share at June 30, 2013. As a
result of the increase in the share price and the resulting impact
on the fair value of the outstanding units, we recorded a $9
million mark-to-market expense on share-based compensation in the
second quarter of 2013. For the six month period ended June 30,
2013, we recorded a $40 million mark-to-market share-based
compensation expense as a result of the increase in the share price
from $31.87 at December 31, 2012 to $42.84 at June 30, 2013. For
the second quarter of 2012, a decrease in the share price resulted
in an $11 million mark-to-market recovery.
Depreciation and Amortization
Depreciation and amortization was $29 million for the second
quarter of 2013 compared with $30 million for the first quarter of
2013 and $39 million for the second quarter of 2012. Depreciation
and amortization for the six-month period ended June 30, 2013 was
$59 million compared with $74 million for the same period in 2012.
Depreciation and amortization is lower in 2013 compared with 2012
primarily as a result of the lower carrying value of our Chile
assets due to the asset impairment charge recorded in the fourth
quarter of 2012.
Write-off of Oil and Gas Rights
We partially funded two exploratory hydrocarbon wells in New
Zealand in exchange for the right to purchase any natural gas
discovered. Our share of the exploration costs incurred was $17
million. We have no future commitments under this arrangement.
Based on exploration results to date and the outlook for natural
gas deliveries under this arrangement, we have recorded a non-cash
$17 million ($14 million after-tax) charge to earnings in the
second quarter of 2013 to write off the carrying value of the
asset.
Finance Costs
Three Months Ended Six Months Ended
------------------------------------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
($ millions) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Finance costs before
capitalized interest $ 17 $ 16 $ 17 $ 33 $ 33
Less capitalized interest (2) (1) - (3) -
----------------------------------------------------------------------------
Finance costs $ 15 $ 15 $ 17 $ 30 $ 33
----------------------------------------------------------------------------
Finance costs before capitalized interest primarily relate to
interest expense on the unsecured notes and limited recourse debt
facilities. Capitalized interest relates to interest costs
capitalized for the Geismar projects.
Finance Income and Other Expenses
Three Months Ended Six Months Ended
----------------------------------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
($ millions) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Finance income and other
expenses $ 3 $ (2) $ - $ 1 $ 2
----------------------------------------------------------------------------
The change in finance income and other expenses for all periods
presented was primarily due to the impact of changes in foreign
exchange rates.
Income Taxes
A summary of our income taxes for the second quarter of 2013
compared with the first quarter of 2013 is as follows:
Three Months Ended Three Months Ended
June 30, 2013 March 31, 2013
------------------------------------------
Adjusted Adjusted
Net Net Net Net
($ millions, except where noted) Income Income(1) Income Income(1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amount before income tax $ 67 $ 114 $ 78 $ 102
Income tax expense (1) (15) (12) (14)
----------------------------------------------------------------------------
Amount after income tax $ 66 $ 99 $ 66 $ 88
----------------------------------------------------------------------------
Effective tax rate 2% 14% 15% 14%
----------------------------------------------------------------------------
(1) This item is a non-GAAP measure that does not have any standardized
meaning prescribed by GAAP and therefore is unlikely to be comparable to
similar measures presented by other companies. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a description of
the non-GAAP measure and reconciliation to the most comparable GAAP measure.
For the second quarter of 2013, the effective tax rate was 2%
compared with 15% for the first quarter of 2013. Adjusted net
income represents the amount that is attributable to Methanex
shareholders and excludes the mark-to-market impact of share-based
compensation and items that are considered by management to be
non-operational. The effective tax rate related to Adjusted net
income was 14% for each of the first and second quarters of
2013.
We earn the majority of our pre-tax earnings in Trinidad, Egypt,
Chile, Canada and New Zealand. In Trinidad and Chile, the statutory
tax rate is 35% and in Egypt, the statutory tax rate is 25%. We
have significant loss carryforwards in Canada and New Zealand which
have not been recognized for accounting purposes and this had an
impact on the effective tax rate of the second quarter of 2013 of
approximately 10%. In addition, as the Atlas entity is accounted
for using the equity method, any income taxes related to Atlas are
included in earnings of associate and therefore excluded from total
income taxes.
SUPPLY/DEMAND FUNDAMENTALS
We estimate that methanol demand, excluding methanol demand from
integrated methanol to olefins facilities, is currently
approximately 54 million tonnes on an annualized basis.
The outlook for methanol demand growth continues to be strong.
Traditional chemical derivatives consume about two-thirds of global
methanol demand and growth is correlated to industrial
production.
Energy-related applications consume the remaining one third of
global methanol demand, and the wide disparity between the price of
crude oil and that of natural gas and coal has resulted in an
increased use of methanol in energy-related applications, such as
direct methanol blending into gasoline and DME and biodiesel
production. Growth of direct methanol blending into gasoline in
China has been particularly strong and we believe that future
growth in this application is supported by numerous provincial and
national fuel-blending standards, such as M15 or M85 (15% methanol
and 85% methanol, respectively).
China is also leading the commercialization of methanol's use as
a feedstock to manufacture olefins. The use of methanol to produce
olefins, at current energy prices, is proving to be cost
competitive relative to the traditional production of olefins from
naphtha. There are now five methanol-to-olefins (MTO) plants
operating in China with the capacity to consume approximately seven
million tonnes of methanol annually. While three of these plants
are integrated and purchase methanol only to supplement their
production, two of these plants are dependent on merchant methanol
supply. We believe demand potential into energy-related
applications and olefins production will continue to grow.
During the second quarter of 2013, overall market conditions
remained healthy and prices in North America and Europe increased.
Our average non-discounted price in the second quarter was $494 per
tonne. Entering the third quarter of 2013, market conditions and
methanol prices are stable. We recently announced our North
American non-discounted price for August at $532 per tonne, which
is unchanged from July.
Over the next few years, there is a modest level of new capacity
expected to come on-stream relative to demand growth expectations.
There is a 0.8 million tonne plant expected to restart in
Channelview, Texas in 2013 and a 0.7 million tonne plant expected
to start up in Azerbaijan in 2013. We are in the process of
restarting our Waitara Valley facility and debottlenecking the
Motunui facilities in New Zealand and these initiatives are
expected to add up to 0.9 million tonnes of additional operating
capacity by the end of 2013. We are relocating two idle Chile
facilities to Geismar, Louisiana with the first 1.0 million tonne
facility expected to start up by the end of 2014 and the second 1.0
million tonne facility expected to start up in early 2016. It has
also been announced that a 1.3 million tonne plant in Clear Lake,
Texas is targeted to start-up in 2015. We expect that production
from new capacity in China will be consumed in that country and
that higher cost production capacity in China will need to operate
in order to satisfy demand growth.
Methanex Non-Discounted Regional Posted Prices(1)
----------------------------------------------------------------------------
Jul Jun May Apr
(US$ per tonne) 2013 2013 2013 2013
----------------------------------------------------------------------------
United States 532 532 532 516
Europe (2) 505 505 505 505
Asia 450 450 450 450
----------------------------------------------------------------------------
(1) Discounts from our posted prices are offered to customers based on
various factors.
(2) EUR390 for Q3 2013 (Q2 2013 - EUR390) converted to United States
dollars.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities
Cash flows from operating activities in the second quarter of
2013 were $125 million compared with $118 million for the first
quarter of 2013 and $140 million for the second quarter of 2012.
Cash flows from operating activities for the six month period ended
June 30, 2013 were $243 million compared with $214 million for the
same period in 2012. The changes in cash flows from operating
activities resulted from changes in the following:
Q2 2013 Q2 2013 YTD Q2 2013
compared with compared with compared with
($ millions) Q1 2013 Q2 2012 YTD Q2 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Change in Adjusted EBITDA
(attributable to Methanex
shareholders) $ 8 $ 44 $ 101
Exclude change in Adjusted EBITDA
of associate (Atlas) (9) (6) (18)
Cash flows attributable to non-
controlling interests 8 (2) (11)
Changes in non-cash working
capital 11 (25) 1
Income taxes paid 2 (4) (5)
Geismar project relocation
expenses (34) (30) (30)
Share-based payments 18 4 (2)
Other 3 4 (7)
----------------------------------------------------------------------------
Increase (decrease) in cash flows
from operating activities $ 7 $ (15) $ 29
----------------------------------------------------------------------------
Adjusted cash flows from operating activities
Adjusted cash flows from operating activities, which includes an
amount representing the cash flows associated with our 63.1% share
of the Atlas facility and excludes the amount associated with the
40% non-controlling interest in the methanol facility in Egypt and
changes in non-cash working capital, were $158 million in the
second quarter of 2013 compared with $127 million for the first
quarter of 2013 and $110 million for the second quarter of 2012.
Adjusted cash flows for the six month period ended June 30, 2013
were $286 million compared with $199 million for the same period in
2012. The changes in Adjusted cash flows from operating activities
resulted from changes in the following:
Q2 2013 Q2 2013 YTD Q2 2013
compared with compared with compared with
($ millions) Q1 2013 Q2 2012 YTD Q2 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Change in Adjusted EBITDA
(attributable to Methanex
shareholders) $ 8 $ 44 $ 101
Income taxes paid 2 (4) (5)
Share-based payments 18 4 (2)
Other 3 4 (7)
----------------------------------------------------------------------------
Increase in Adjusted cash flows
from operating activities $ 31 $ 48 $ 87
----------------------------------------------------------------------------
Refer to the Additional Information - Supplemental Non-GAAP
Measures section for a reconciliation of Adjusted cash flows from
operating activities to the most comparable GAAP measure.
During the second quarter of 2013, we paid a quarterly dividend
of $0.20 per share, or $19 million.
We operate in a highly competitive commodity industry and
believe it is appropriate to maintain a conservative balance sheet
and retain financial flexibility. At June 30, 2013, our cash
balance was $709 million, including $37 million related to the
non-controlling interest in Egypt. We invest our cash only in
highly rated instruments that have maturities of three months or
less to ensure preservation of capital and appropriate liquidity.
We have a strong balance sheet and an undrawn $400 million credit
facility provided by highly rated financial institutions that
expires in mid-2016.
Our planned capital maintenance expenditure program directed
towards maintenance, turnarounds and catalyst changes for existing
operations is currently estimated to total approximately $110
million to the end of 2014, excluding the New Zealand operations.
We are making good progress with our initiatives to increase
operating capacity in Medicine Hat and New Zealand. Remaining
capital expenditures for these projects to the end of 2013 are
approximately $170 million. We are relocating two methanol plants
from our Chile site to Geismar, Louisiana. During the second
quarter of 2013, capital expenditures related to the Geismar
projects were $54 million. Remaining capital expenditures related
to the Geismar projects are approximately $850 million. We believe
that we have the financial capacity to fund these growth
initiatives with cash on hand, cash generated from operations and
the undrawn bank facility.
We believe we are well positioned to meet our financial
commitments, invest to grow the Company and continue to deliver on
our commitment to return excess cash to shareholders.
SHORT-TERM OUTLOOK
Entering the third quarter, market conditions and methanol
prices are stable.
The methanol price will ultimately depend on the strength of the
global economy, industry operating rates, global energy prices, new
supply additions and the strength of global demand. We believe that
our financial position and financial flexibility, outstanding
global supply network and competitive-cost position will provide a
sound basis for Methanex to continue to be the leader in the
methanol industry and to invest to grow the Company.
CONTROLS AND PROCEDURES
For the three months ended June 30, 2013, no changes were made
in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ADDITIONAL INFORMATION - SUPPLEMENTAL NON-GAAP MEASURES
In addition to providing measures prepared in accordance with
International Financial Reporting Standards (IFRS), we present
certain supplemental non-GAAP measures. These are Adjusted EBITDA,
Adjusted net income, Adjusted net income per common share,
operating income and Adjusted cash flows from operating activities.
These measures do not have any standardized meaning prescribed by
generally accepted accounting principles (GAAP) and therefore are
unlikely to be comparable to similar measures presented by other
companies. These supplemental non-GAAP measures are provided to
assist readers in determining our ability to generate cash from
operations and improve the comparability of our results from one
period to another. We believe these measures are useful in
assessing operating performance and liquidity of the Company's
ongoing business on an overall basis. We also believe Adjusted
EBITDA is frequently used by securities analysts and investors when
comparing our results with those of other companies.
Adjusted EBITDA (attributable to Methanex shareholders)
Adjusted EBITDA differs from the most comparable GAAP measure,
net income attributable to Methanex shareholders, because it
excludes depreciation and amortization, finance costs, finance
income and other expenses, income tax expense, mark-to-market
impact of share-based compensation, Geismar project relocation
expenses and write-off of oil and gas rights. Adjusted EBITDA
includes an amount representing our 63.1% interest in the Atlas
facility and our 60% interest in the methanol facility in
Egypt.
Adjusted EBITDA and Adjusted net income exclude the
mark-to-market impact of share-based compensation related to the
impact of changes in our share price on share appreciation rights,
tandem share appreciation rights, deferred share units, restricted
share units and performance share units. The mark-to-market impact
related to performance share units that is excluded from Adjusted
EBITDA and Adjusted net income is calculated as the difference
between the grant date value determined using a Methanex total
shareholder return factor of 100% and the fair value recorded at
each period end. As share-based awards will be settled in future
periods, the ultimate value of the units is unknown at the date of
grant and therefore the grant date value recognized in Adjusted
EBITDA and Adjusted net income may differ from the total settlement
cost.
The following table shows a reconciliation from net income
attributable to Methanex shareholders to Adjusted EBITDA:
Three Months Ended Six Months Ended
---------------------------------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
($ millions) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income attributable to
Methanex shareholders $ 54 $ 60 $ 52 $ 114 $ 74
Mark-to-market impact of
share-based compensation 9 31 (11) 40 7
Depreciation and amortization 29 30 38 59 74
Geismar project relocation
expenses 34 - 4 34 4
Write-off of oil and gas
rights 17 - - 17 -
Finance Costs 15 15 17 30 33
Finance Income and other
expenses (3) 2 - (1) (2)
Income tax expense 1 12 13 13 24
Earnings of associate,
excluding amount included in
Adjusted EBITDA (1) 12 8 11 20 15
Non-controlling interests
adjustment (1) (11) (9) (11) (19) (23)
----------------------------------------------------------------------------
Adjusted EBITDA (attributable
to Methanex shareholders) $ 157 $ 149 $ 113 $ 307 $ 206
----------------------------------------------------------------------------
(1) These adjustments represent depreciation and amortization, finance
costs, finance income and other expenses and income tax expense associated
with the 40% non-controlling interest in the methanol facility in Egypt and
our 63.1% interest in the Atlas methanol facility.
Adjusted Net Income and Adjusted Net Income per Common Share
Adjusted net income and Adjusted net income per common share are
non-GAAP measures because they exclude the mark-to-market impact of
share-based compensation and items that are considered by
management to be non-operational, including Geismar project
relocation expenses and write-off of oil and gas rights. The
following table shows a reconciliation of net income attributable
to Methanex shareholders to Adjusted net income and the calculation
of Adjusted net income per common share:
Three Months Ended Six Months Ended
---------------------------------------------
($ millions except number of Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
shares and per share amounts) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income attributable to
Methanex shareholders $ 54 $ 60 $ 52 $ 114 $ 74
Mark-to-market impact of
share-based compensation 9 31 (11) 40 7
Geismar project relocation
expenses 34 - 4 34 4
Write-off of oil and gas
rights 17 - - 17 -
Income tax recovery related
to above items (15) (3) (1) (19) (2)
----------------------------------------------------------------------------
Adjusted net income $ 99 $ 88 $ 44 $ 186 $ 83
----------------------------------------------------------------------------
Diluted weighted average shares
outstanding (millions) 96 96 95 96 95
Adjusted net income per common
share $ 1.02 $ 0.92 $ 0.47 $ 1.94 $ 0.88
----------------------------------------------------------------------------
Adjusted Cash Flows from Operating Activities (attributable to
Methanex shareholders)
Adjusted cash flows from operating activities differs from the
most comparable GAAP measure, cash flows from operating activities,
because it includes cash flows associated with our 63.1% equity
share of the Atlas facility and does not include cash flows
associated with the 40% non-controlling interest in the methanol
facility in Egypt or changes in non-cash working capital.
The following table shows a reconciliation of cash flows from
operating activities to Adjusted cash flows from operating
activities:
Three Months Ended Six Months Ended
---------------------------------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
($ millions) 2013 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flows from operating
activities $ 125 $ 118 $ 140 $ 243 $ 214
Add (deduct):
Cash flows related to
associate (Atlas) (1) 18 9 12 27 9
Cash flows related to non-
controlling interests (2) (23) (15) (25) (37) (48)
Changes in non-cash working
capital 4 15 (21) 19 20
Geismar project relocation
expenses 34 - 4 34 4
----------------------------------------------------------------------------
Adjusted cash flows from
operating activities
(attributable to Methanex
shareholders) $ 158 $ 127 $ 110 $ 286 $ 199
----------------------------------------------------------------------------
(1) Cash flows related to associate represents the cash flows from operating
activities from our 63.1% equity share of the Atlas facility that is
accounted for using the equity method.
(2) Cash flows related to non-controlling interests represents the amount of
cash flows from operating activities attributable to non-controlling
interests that are consolidated in the financial statements.
Operating Income
Operating income is reconciled directly to a GAAP measure in our
consolidated statements of income.
QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected financial information for the prior eight
quarters is as follows:
Three Months Ended
----------------------------------
Jun 30 Mar 31 Dec 31 Sep 30
($ millions, except per share amounts) 2013 2013 2012 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 733 $ 652 $ 668 $ 608
Adjusted EBITDA (1,2) 157 149 119 104
Net income (loss) (1) 54 60 (140) (3)
Adjusted net income (1,2) 99 88 61 36
Basic net income (loss) per common share
(1) 0.57 0.64 (1.49) (0.03)
Diluted net income (loss) per common share
(1) 0.56 0.63 (1.49) (0.03)
Adjusted net income per share (1,2) 1.02 0.92 0.64 0.38
----------------------------------------------------------------------------
Three Months Ended
--------------------------------
Jun 30 Mar 31 Dec 31 Sep 30
($ millions, except per share amounts) 2012 2012 2011 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 613 $ 654 $ 696 $ 670
Adjusted EBITDA (1,2) 113 93 133 111
Net income (1) 52 22 64 62
Adjusted net income (1,2) 44 39 65 40
Basic net income per common share (1) 0.56 0.24 0.69 0.67
Diluted net income per common share (1) 0.50 0.23 0.68 0.59
Adjusted net income per share (1,2) 0.47 0.41 0.69 0.43
----------------------------------------------------------------------------
(1) Attributable to Methanex Corporation shareholders.
(2) These items are non-GAAP measures that do not have any standardized
meaning prescribed by GAAP and therefore are unlikely to be comparable to
similar measures presented by other companies. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a description of
each non-GAAP measure and reconciliations to the most comparable GAAP
measures.
FORWARD-LOOKING INFORMATION WARNING
This Second Quarter 2013 Management's Discussion and Analysis
("MD&A") as well as comments made during the Second Quarter
2013 investor conference call contain forward-looking statements
with respect to us and our industry. These statements relate to
future events or our future performance. All statements other than
statements of historical fact are forward-looking statements.
Statements that include the words "believes," "expects," "may,"
"will," "should," "potential," "estimates," "anticipates," "aim,"
"goal" or other comparable terminology and similar statements of a
future or forward-looking nature identify forward-looking
statements.
More particularly and without limitation, any statements
regarding the following are forward-looking statements:
-- expected demand for methanol and its derivatives,
-- expected new methanol supply or restart of idled capacity and timing for
start-up of the same,
-- expected shutdowns (either temporary or permanent) or restarts of
existing methanol supply (including our own facilities), including,
without limitation, the timing and length of planned maintenance
outages,
-- expected methanol and energy prices,
-- expected levels of methanol purchases from traders or other third
parties,
-- expected levels, timing and availability of economically priced natural
gas supply to each of our plants,
-- capital committed by third parties towards future natural gas
exploration and development in the vicinity of our plants,
-- our expected capital expenditures, including, without limitation, those
to support natural gas exploration and development for our plants and
the restart of our idled methanol facilities,
-- anticipated production rates of our plants,
-- expected operating costs, including natural gas feedstock costs and
logistics costs,
-- expected tax rates or resolutions to tax disputes,
-- expected cash flows, earnings capability and share price,
-- availability of committed credit facilities and other financing,
-- ability to meet covenants or obtain waivers associated with our long-
term debt obligations, including, without limitation, the Egypt limited
recourse debt facilities that have conditions associated with upstream
natural gas development and the finalization of certain land title
registration and related mortgages that require action by Egyptian
governmental entities,
-- our shareholder distribution strategy and anticipated distributions to
shareholders,
-- commercial viability and timing of, or our ability to execute, future
projects, plant restarts, capacity expansions, plant relocations, or
other business initiatives or opportunities, including the planned
relocation of idle Chile methanol plants to Geismar, Louisiana
("Geismar") and certain initiatives in New Zealand and Canada,
-- our financial strength and ability to meet future financial commitments,
-- expected global or regional economic activity (including industrial
production levels),
-- expected outcomes of litigation or other disputes, claims and
assessments,
-- expected actions of governments, government agencies, gas suppliers,
courts, tribunals or other third parties, and
-- expected impact on our operations in Egypt or our financial condition as
a consequence of civil unrest or actions taken or inaction by the
Government of Egypt and its agencies.
We believe that we have a reasonable basis for making such
forward-looking statements. The forward-looking statements in this
document are based on our experience, our perception of trends,
current conditions and expected future developments as well as
other factors. Certain material factors or assumptions were applied
in drawing the conclusions or making the forecasts or projections
that are included in these forward-looking statements, including,
without limitation, future expectations and assumptions concerning
the following:
-- the supply of, demand for, and price of methanol, methanol derivatives,
natural gas, coal, oil and oil derivatives,
-- the success of our natural gas exploration and development in Chile and
our ability to procure economically priced natural gas in Chile, New
Zealand, Trinidad, Canada and the United States,
-- production rates of our facilities,
-- receipt of remaining required permits in connection with our Geismar
projects,
-- receipt or issuance of third-party consents or approvals, including,
without limitation, governmental registrations of land title and related
mortgages in Egypt, governmental approvals related to natural gas
exploration rights or rights to purchase natural gas,
-- receipt of governmental approvals related to natural gas exploration
rights,
-- the establishment of new fuel standards,
-- operating costs including natural gas feedstock and logistics costs,
capital costs, tax rates, cash flows, foreign exchange rates and
interest rates,
-- the availability of committed credit facilities and other financing,
-- timing of completion and cost of our Geismar projects and our
initiatives to increase production in New Zealand and Canada,
-- global and regional economic activity (including industrial production
levels),
-- absence of a material negative impact from major natural disasters,
-- absence of a material negative impact from changes in laws or
regulations,
-- absence of a material negative impact from political instability in the
countries in which we operate,
-- enforcement of contractual arrangements and ability to perform
contractual obligations by customers, natural gas and other suppliers
and other third parties, and
-- satisfaction of conditions precedent contained in the Geismar I natural
gas supply agreement.
However, forward-looking statements, by their nature, involve
risks and uncertainties that could cause actual results to differ
materially from those contemplated by the forward-looking
statements. The risks and uncertainties primarily include those
attendant with producing and marketing methanol and successfully
carrying out major capital expenditure projects in various
jurisdictions, including, without limitation:
-- conditions in the methanol and other industries including fluctuations
in the supply, demand for and price of methanol and its derivatives,
including demand for methanol for energy uses,
-- the price of natural gas, coal, oil and oil derivatives,
-- the success of natural gas exploration and development activities in
southern Chile and our ability to obtain any additional gas in Chile and
New Zealand on commercially acceptable terms,
-- the ability to successfully carry out corporate initiatives and
strategies,
-- actions of competitors, suppliers and financial institutions,
-- conditions within the natural gas delivery systems that may prevent
delivery of our natural gas supply requirements,
-- competing demand for natural gas, especially with respect to domestic
needs for gas and electricity in Chile and Egypt,
-- actions of governments and governmental authorities, including, without
limitation, the implementation of policies or other measures that could
impact the supply of or demand for methanol or its derivatives,
-- changes in laws or regulations,
-- import or export restrictions, anti-dumping measures, increases in
duties, taxes and government royalties, and other actions by governments
that may adversely affect our operations or existing contractual
arrangements,
-- world-wide economic conditions,
-- satisfaction of conditions precedent contained in the Geismar I natural
gas supply agreement, and
-- other risks described in our 2012 Management's Discussion and Analysis
and this Second Quarter 2013 Management's Discussion and Analysis.
Having in mind these and other factors, investors and other
readers are cautioned not to place undue reliance on
forward-looking statements. They are not a substitute for the
exercise of one's own due diligence and judgment. The outcomes
anticipated in forward-looking statements may not occur and we do
not undertake to update forward-looking statements except as
required by applicable securities laws.
HOW WE ANALYZE OUR BUSINESS
Our operations consist of a single operating segment - the
production and sale of methanol. We review our results of
operations by analyzing changes in the components of Adjusted
EBITDA (refer to the Additional Information - Supplemental Non-GAAP
Measures section for a description of each non-GAAP measure and
reconciliations to the most comparable GAAP measures).
In addition to the methanol that we produce at our facilities
("Methanex-produced methanol"), we also purchase and re-sell
methanol produced by others ("purchased methanol") and we sell
methanol on a commission basis. We analyze the results of all
methanol sales together, excluding commission sales volumes. The
key drivers of changes in Adjusted EBITDA are average realized
price, cash costs and sales volume which are defined and calculated
as follows:
PRICE The change in Adjusted EBITDA as a result of changes in average
realized price is calculated as the difference from period to
period in the selling price of methanol multiplied by the
current period total methanol sales volume excluding commission
sales volume plus the difference from period to period in
commission revenue.
CASH COST The change in Adjusted EBITDA as a result of changes in cash
costs is calculated as the difference from period to period in
cash costs per tonne multiplied by the current period total
methanol sales volume excluding commission sales volume in the
current period. The cash costs per tonne is the weighted average
of the cash cost per tonne of Methanex-produced methanol and the
cash cost per tonne of purchased methanol. The cash cost per
tonne of Methanex-produced methanol includes absorbed fixed cash
costs per tonne and variable cash costs per tonne. The cash cost
per tonne of purchased methanol consists principally of the cost
of methanol itself. In addition, the change in Adjusted EBITDA
as a result of changes in cash costs includes the changes from
period to period in unabsorbed fixed production costs,
consolidated selling, general and administrative expenses and
fixed storage and handling costs.
VOLUME The change in Adjusted EBITDA as a result of changes in sales
volume is calculated as the difference from period to period in
total methanol sales volume excluding commission sales volumes
multiplied by the margin per tonne for the prior period. The
margin per tonne for the prior period is the weighted average
margin per tonne of Methanex-produced methanol and margin per
tonne of purchased methanol. The margin per tonne for Methanex-
produced methanol is calculated as the selling price per tonne
of methanol less absorbed fixed cash costs per tonne and
variable cash costs per tonne. The margin per tonne for
purchased methanol is calculated as the selling price per tonne
of methanol less the cost of purchased methanol per tonne.
We own 63.1% of the Atlas methanol facility and market the
remaining 36.9% of its production through a commission offtake
agreement. A contractual agreement between us and our partners
establishes joint control over Atlas. As a result, we account for
this investment using the equity method of accounting, which
results in 63.1% of the net assets and net earnings of Atlas being
presented separately in the consolidated statements of financial
position and consolidated statements of income, respectively. For
purposes of analyzing our business, Adjusted EBITDA, Adjusted net
income, Adjusted net income per common share and Adjusted cash
flows from operating activities include an amount representing our
63.1% equity share in Atlas.
We own 60% of the 1.26 million tonne per year Egypt methanol
facility and market the remaining 40% of its production through a
commission offtake agreement. We account for this investment using
consolidation accounting, which results in 100% of the revenues and
expenses being included in our financial statements with the other
investors' interests in the methanol facility being presented as
"non-controlling interests". For purposes of analyzing our
business, Adjusted EBITDA, Adjusted net income, Adjusted net income
per common share and Adjusted cash flows from operating activities
exclude the amount associated with the other investors' 40%
non-controlling interests.
Methanex Corporation
Consolidated Statements of Income (unaudited)
(thousands of U.S. dollars, except number of common shares and per share
amounts)
Three Months Ended Six Months Ended
--------------------------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(As adjusted (As adjusted
- note 12) - note 12)
Revenue $ 733,099 $ 613,783 $ 1,384,998 $ 1,267,321
Cost of sales and
operating expenses (580,116) (474,892) (1,108,111) (1,027,856)
Depreciation and
amortization (28,953) (38,564) (58,770) (73,965)
Geismar project
relocation expenses
(note 3) (33,867) (3,686) (33,867) (3,686)
Write-off of oil and
gas rights (note 4) (16,859) - (16,859) -
----------------------------------------------------------------------------
Operating income 73,304 96,641 167,391 161,814
Earnings (loss) of
associate (note 5) 6,017 1,315 7,303 (6,013)
Finance costs (note
7) (14,618) (17,590) (30,069) (33,623)
Finance income and
other expenses 2,698 (281) 1,071 1,557
----------------------------------------------------------------------------
Income before income
tax expense 67,401 80,085 145,696 123,735
Income tax expense:
Current (23,276) (10,853) (27,667) (16,150)
Deferred 21,726 (3,087) 14,055 (8,629)
----------------------------------------------------------------------------
(1,550) (13,940) (13,612) (24,779)
----------------------------------------------------------------------------
Net income $ 65,851 $ 66,145 $ 132,084 $ 98,956
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
Methanex
Corporation
shareholders 53,999 52,238 114,266 74,319
Non-controlling
interests 11,852 13,907 17,818 24,637
----------------------------------------------------------------------------
$ 65,851 $ 66,145 $ 132,084 $ 98,956
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income per share for the period attributable to Methanex Corporation
shareholders
Basic net income
per common share
(note 8) $ 0.57 $ 0.56 $ 1.21 $ 0.80
Diluted net income
per common share
(note 8) $ 0.56 $ 0.50 $ 1.19 $ 0.78
Weighted average
number of common
shares outstanding
(note 8) 95,116,950 93,781,404 94,817,234 93,445,231
Diluted weighted
average number of
common shares
outstanding (note
8) 96,260,035 95,119,964 95,998,786 94,772,610
See accompanying notes to condensed consolidated interim financial
statements.
Methanex Corporation
Consolidated Statements of Comprehensive Income (unaudited)
(thousands of U.S. dollars)
Three Months Ended Six Months Ended
----------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income $ 65,851 $ 66,145 $132,084 $ 98,956
Other comprehensive income (loss),
net of taxes:
Items that may be reclassified
to income:
Change in fair value of
forward exchange contracts (4,262) (566) (4,446) (871)
Change in fair value of
interest rate swap contracts (4) (747) (300) (3,360)
Realized loss on interest rate
swap contracts reclassified
to finance costs 2,792 2,766 5,383 5,702
----------------------------------------------------------------------------
(1,474) 1,453 637 1,471
----------------------------------------------------------------------------
Comprehensive income $ 64,377 $ 67,598 $132,721 $100,427
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
Methanex Corporation shareholders 51,410 52,883 112,870 74,853
Non-controlling interests 12,967 14,715 19,851 25,574
----------------------------------------------------------------------------
$ 64,377 $ 67,598 $132,721 $100,427
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated interim financial
statements.
Methanex Corporation
Consolidated Statements of Financial Position (unaudited)
(thousands of U.S. dollars)
Jun 30 Dec 31
AS AT 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(As adjusted
- note 12)
ASSETS
Current assets:
Cash and cash equivalents $ 708,514 $ 727,385
Trade and other receivables 477,261 417,156
Inventories (note 2) 270,936 256,340
Prepaid expenses 31,228 25,588
----------------------------------------------------------------------------
1,487,939 1,426,469
Non-current assets:
Property, plant and equipment (note 3) 1,902,849 1,762,873
Investment in associate (note 5) 192,052 184,665
Other assets 57,672 68,554
----------------------------------------------------------------------------
2,152,573 2,016,092
----------------------------------------------------------------------------
$ 3,640,512 $ 3,442,561
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Trade, other payables and accrued liabilities $ 484,353 $ 377,666
Current maturities on long-term debt (note 6) 40,444 38,290
Current maturities on other long-term
liabilities 53,612 30,322
----------------------------------------------------------------------------
578,409 446,278
Non-current liabilities:
Long-term debt (note 6) 1,146,122 1,156,081
Other long-term liabilities 179,724 200,212
Deferred income tax liabilities 149,822 162,253
----------------------------------------------------------------------------
1,475,668 1,518,546
Equity:
Capital stock 513,065 481,779
Contributed surplus 8,787 15,481
Retained earnings 883,336 805,661
Accumulated other comprehensive loss (14,441) (13,045)
----------------------------------------------------------------------------
Shareholders' equity 1,390,747 1,289,876
Non-controlling interests 195,688 187,861
----------------------------------------------------------------------------
Total equity 1,586,435 1,477,737
----------------------------------------------------------------------------
$ 3,640,512 $ 3,442,561
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated interim financial
statements.
Methanex Corporation
Consolidated Statements of Changes in Equity (unaudited)
(thousands of U.S. dollars, except number of common shares)
Number of
Common Capital Contributed Retained
Shares Stock Surplus Earnings
----------------------------------------------------------------------------
Balance, December 31,
2011 93,247,755 $ 455,434 $ 22,281 $ 942,978
Net income - - - 74,319
Other comprehensive
income - - - -
Compensation expense
recorded for stock
options - - 403 -
Issue of shares on
exercise of stock
options 569,487 10,267 - -
Reclassification of
grant date fair
value on exercise of
stock options - 3,891 (3,891) -
Dividend payments to
Methanex Corporation
shareholders - - - (33,265)
Distributions to non-
controlling
interests - - - -
Equity contributions
by non-controlling
interests - - - -
----------------------------------------------------------------------------
Balance, June 30, 2012 93,817,242 469,592 18,793 984,032
Net income (142,424)
Other comprehensive
Income (loss) (1,135)
Compensation expense
recorded for stock
options - - 323 -
Issue of shares on
exercise of stock
options 492,728 8,552 - -
Reclassification of
grant date fair
value on exercise of
stock options - 3,635 (3,635) -
Dividend payments to
Methanex Corporation
shareholders - - - (34,812)
Distributions to non-
controlling
interests - - - -
----------------------------------------------------------------------------
Balance, December 31,
2012 94,309,970 481,779 15,481 805,661
Net income - - - 114,266
Other comprehensive
income (loss) - - - -
Compensation expense
recordedfor stock
options - - 441 -
Issue of shares on
exercise of stock
options 1,018,520 24,151 - -
Reclassification of
grant datefair value
on exercise ofstock
options - 7,135 (7,135) -
Dividend payments to
Methanex Corporation
shareholders - - - (36,591)
Distributions to non-
controlling
interests - - - -
Equity contributions
by non-controlling
interests - - - -
----------------------------------------------------------------------------
Balance, June 30, 2013 95,328,490 $ 513,065 $ 8,787 $ 883,336
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated
Other Non-
Comprehensive Shareholders' Controlling Total
Loss Equity Interests Equity
----------------------------------------------------------------------------
Balance, December 31,
2011 $ (15,968) $ 1,404,725 $ 197,238 $1,601,963
Net income - 74,319 24,637 98,956
Other comprehensive
income 534 534 937 1,471
Compensation expense
recorded for stock
options - 403 - 403
Issue of shares on
exercise of stock
options - 10,267 - 10,267
Reclassification of
grant date fair
value on exercise of
stock options - - - -
Dividend payments to
Methanex Corporation
shareholders - (33,265) - (33,265)
Distributions to non-
controlling
interests - - (12,659) (12,659)
Equity contributions
by non-controlling
interests - - 1,000 1,000
----------------------------------------------------------------------------
Balance, June 30, 2012 (15,434) 1,456,983 211,153 1,668,136
Net income - (142,424) 8,893 (133,531)
Other comprehensive
Income (loss) 2,389 1,254 1,224 2,478
Compensation expense
recorded for stock
options - 323 - 323
Issue of shares on
exercise of stock
options - 8,552 - 8,552
Reclassification of
grant date fair
value on exercise of
stock options - - - -
Dividend payments to
Methanex Corporation
shareholders - (34,812) - (34,812)
Distributions to non-
controlling
interests - - (33,409) (33,409)
----------------------------------------------------------------------------
Balance, December 31,
2012 (13,045) 1,289,876 187,861 1,477,737
Net income - 114,266 17,818 132,084
Other comprehensive
income (loss) (1,396) (1,396) 2,033 637
Compensation expense
recordedfor stock
options - 441 - 441
Issue of shares on
exercise of stock
options - 24,151 - 24,151
Reclassification of
grant datefair value
on exercise ofstock
options - - - -
Dividend payments to
Methanex Corporation
shareholders - (36,591) - (36,591)
Distributions to non-
controlling
interests - - (13,024) (13,024)
Equity contributions
by non-controlling
interests - - 1,000 1,000
----------------------------------------------------------------------------
Balance, June 30, 2013 $ (14,441) $ 1,390,747 $ 195,688 $1,586,435
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated interim financial
statements.
Methanex Corporation
Consolidated Statements of Cash Flows (unaudited)
(thousands of U.S. dollars)
Three Months Ended Six Months Ended
------------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(As (As
adjusted adjusted
- note - note
12) 12)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 65,851 $ 66,145 $ 132,084 $ 98,956
Add (deduct) loss (earnings) of
associate (6,017) (1,315) (7,303) 6,013
Add (deduct) non-cash items:
Depreciation and amortization 28,953 38,564 58,770 73,965
Write-off of oil and gas
rights 16,859 - 16,859 -
Income tax expense 1,550 13,940 13,612 24,779
Share-based compensation
expense (recovery) 15,694 (3,518) 52,007 21,540
Finance costs 14,618 17,590 30,069 33,623
Other (765) (2,828) (301) 2,958
Income taxes paid (6,568) (3,211) (15,351) (10,285)
Other cash payments, including
share-based compensation (440) (3,507) (17,995) (15,537)
----------------------------------------------------------------------------
Cash flows from operating
activities before undernoted 129,735 121,860 262,451 236,012
Changes in non-cash working
capital (note 10) (3,986) 18,173 (19,023) (22,021)
----------------------------------------------------------------------------
125,749 140,033 243,428 213,991
----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividend payments to Methanex
Corporation shareholders (19,057) (17,357) (36,591) (33,265)
Interest paid, including
interest rate swap settlements (6,546) (762) (27,757) (25,011)
Net proceeds on issue of long-
term debt - - - 246,548
Repayment of long-term debt and
limited recourse debt (1,213) (612) (19,480) (17,766)
Equity contributions by non-
controlling interests - - 1,000 1,000
Cash distributions to non-
controlling interests (7,759) (3,254) (13,024) (15,999)
Proceeds from limited recourse
debt - - 10,000 -
Proceeds on issue of shares on
exercise of stock options 11,063 2,199 24,151 10,267
Other (936) (846) (1,855) (14,296)
----------------------------------------------------------------------------
(24,448) (20,632) (63,556) 151,478
----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and equipment (62,613) (39,010) (96,232) (75,765)
Geismar plants under
construction (53,679) (8,527) (97,077) (14,323)
Oil and gas assets (6,132) (5,154) (13,788) (11,955)
GeoPark repayments 1,174 3,409 8,038 10,039
Changes in non-cash working
capital related to investing
activities (note 10) 1,612 (14,147) 316 (1,315)
----------------------------------------------------------------------------
(119,638) (63,429) (198,743) (93,319)
----------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (18,337) 55,972 (18,871) 272,150
Cash and cash equivalents,
beginning of period 726,851 557,623 727,385 341,445
----------------------------------------------------------------------------
Cash and cash equivalents, end
of period $ 708,514 $613,595 $ 708,514 $613,595
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated interim financial
statements.
Methanex Corporation
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
Except where otherwise noted, tabular dollar amounts are stated in thousands
of U.S. dollars.
1. Basis of presentation:
Methanex Corporation (the Company) is an incorporated entity
with corporate offices in Vancouver, Canada. The Company's
operations consist of the production and sale of methanol, a
commodity chemical. The Company is the world's largest supplier of
methanol to major international markets in Asia Pacific, North
America, Europe and Latin America.
These condensed consolidated interim financial statements are
prepared in accordance with International Accounting Standards
(IAS) 34, Interim Financial Reporting, as issued by the
International Accounting Standards Board (IASB) on a basis
consistent with those followed in the most recent annual
consolidated financial statements, except as described in note 12
below. As described in note 12, the Company has adopted new
International Financial Reporting Standards (IFRS) effective
January 1, 2013 with retrospective application and as a result the
comparative periods have been restated.
These condensed consolidated interim financial statements do not
include all of the information required for full annual financial
statements and were approved and authorized for issue by the Audit,
Finance & Risk Committee of the Board of Directors on July 24,
2013.
2. Inventories:
Inventories are valued at the lower of cost, determined on a
first-in first-out basis, and estimated net realizable value. The
amount of inventories included in cost of sales and operating
expenses and depreciation and amortization for the three and six
month periods ended June 30, 2013 is $544 million (2012 - $424
million) and $1,013 million (2012 - $919 million),
respectively.
3. Property, plant and equipment:
Buildings,
Plant
Installations Plants Under Oil & Gas
& Machinery Construction Properties Other Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cost at June 30,
2013 $ 2,947,580 $ 174,375 $ 85,685 $ 81,385 $ 3,289,025
Accumulated
depreciation at
June 30, 2013 1,277,773 - 76,364 32,039 1,386,176
----------------------------------------------------------------------------
Net book value
at June 30,
2013 $ 1,669,807 $ 174,375 $ 9,321 $ 49,346 $ 1,902,849
----------------------------------------------------------------------------
Cost at December
31, 2012 $ 2,866,013 $ 75,238 $ 80,368 $ 68,906 $ 3,090,525
Accumulated
depreciation at
December 31,
2012 1,225,202 - 74,151 28,299 1,327,652
----------------------------------------------------------------------------
Net book value
at December 31,
2012 $ 1,640,811 $ 75,238 $ 6,217 $ 40,607 $ 1,762,873
----------------------------------------------------------------------------
The Company is relocating two idle Chile facilities to Geismar,
Louisiana with Geismar I expected to start up by the end of 2014
and Geismar II expected to start up in early 2016. During the three
months ended June 30, 2013, the Company incurred capital
expenditures related to the Geismar projects of $54 million.
Remaining capital expenditures for these projects is estimated to
be $850 million, excluding capitalized interest.
In addition, under IFRS, certain costs associated with
relocating an asset are not eligible for capitalization and during
the three months ended June 30, 2013, the Company charged $34
million of project relocation expenses ($22 million after-tax) to
income.
4.Write-off of oil and gas rights
In New Zealand, the Company partially funded two exploratory
hydrocarbon wells in exchange for the right to purchase any natural
gas discovered. The Company's share of the exploration costs
incurred was $17 million and the Company has no future commitments
under this arrangement. Based on the exploration results to date
and the outlook for natural gas deliveries under this arrangement,
the Company has recorded a non-cash $17 million ($14 million
after-tax) charge to earnings in the second quarter of 2013 to
write off the carrying value of the asset.
5. Investment in Atlas methanol facility:
a) The Company has a 63.1% equity interest in Atlas Methanol
Company Unlimited (Atlas). Atlas owns a 1.8 million tonne per year
methanol production facility in Trinidad. Effective January 1,
2013, the Company accounts for its interest in Atlas using the
equity method (refer to note 12). Summarized financial information
of Atlas (100% basis) is as follows:
Jun 30 Dec 31
Summarized Financial Information as at 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents $ 11,731 $ 28,883
Other current assets 123,890 104,933
Non-current assets 389,400 407,362
Current liabilities (37,520) (65,005)
Long-term debt, including current maturities (68,673) (80,594)
Other long-term liabilities, including
current maturities (135,477) (123,801)
----------------------------------------------------------------------------
Net assets at 100% $ 283,351 $ 271,778
----------------------------------------------------------------------------
Net assets at 63.1% $ 178,794 $ 171,492
Long-term receivable from Atlas 13,258 13,173
----------------------------------------------------------------------------
Investment in associate $ 192,052 $ 184,665
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
--------------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
Summarized Financial Information 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 78,415 $ 88,312 $ 163,781 $ 115,196
Cost of sales and depreciation
and amortization (62,146) (81,069) (141,444) (117,191)
----------------------------------------------------------------------------
Operating income (loss) 16,269 7,243 22,337 (1,995)
Finance costs, finance income
and other expenses (3,451) (4,056) (6,872) $ (8,270)
Income tax (expense) recovery (3,283) (1,104) (3,892) 735
----------------------------------------------------------------------------
Net earnings (loss) at 100% $ 9,535 $ 2,083 $ 11,573 $ (9,530)
----------------------------------------------------------------------------
Earnings (loss) of associate at
63.1% $ 6,017 $ 1,315 $ 7,303 $ (6,013)
----------------------------------------------------------------------------
b) Contingent liability:
The Board of Inland Revenue of Trinidad and Tobago has issued
assessments against Atlas in respect of the 2005 and 2006 financial
years. All subsequent tax years remain open to assessment. The
assessments relate to the pricing arrangements of certain long-term
fixed price sales contracts that extend to 2014 and 2019 related to
methanol produced by Atlas. The impact of the amounts in dispute
for the 2005 and 2006 financial years is not significant. Atlas has
partial relief from corporation income tax until 2014.
The Company has lodged objections to the assessments. Based on
the merits of the cases and legal interpretation, management
believes its position should be sustained.
6. Long-term debt:
Jun 30 Dec 31
As at 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Unsecured notes
$350 million at 3.25% due December 15, 2019 $ 344,117 $ 343,828
$250 million at 5.25% due March 1, 2022 246,490 246,326
$150 million at 6.00% due August 15, 2015 149,460 149,344
----------------------------------------------------------------------------
740,067 739,498
Egypt limited recourse debt facilities 421,958 438,631
Other limited recourse debt facilities 24,541 16,242
----------------------------------------------------------------------------
Total long-term debt (1) 1,186,566 1,194,371
Less current maturities (40,444) (38,290)
----------------------------------------------------------------------------
$ 1,146,122 $ 1,156,081
----------------------------------------------------------------------------
(1) Long-term debt is presented net of deferred financing fees.
During the three months ended June 30, 2013, the Company made
repayments on its other limited recourse debt facilities of $1.2
million.
At June 30, 2013, management believes the Company was in
compliance with all of the covenants and default provisions related
to long-term debt obligations.
7.Finance costs:
Three Months Ended Six Months Ended
------------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Finance costs $ 16,278 $ 17,590 $ 32,796 $ 3,623
Less capitalized interest related
to Geismar plants under
construction (1,660) - (2,727) -
----------------------------------------------------------------------------
$ 14,618 $ 17,590 $ 30,069 $ 33,623
----------------------------------------------------------------------------
Finance costs are primarily comprised of interest on borrowings
and finance lease obligations, the effective portion of interest
rate swaps designated as cash flow hedges, amortization of deferred
financing fees, and accretion expense associated with site
restoration costs. Interest during construction is capitalized
until the plant is substantially completed and ready for productive
use.
The Company has interest rate swap contracts on its Egypt
limited recourse debt facilities to swap the LIBOR-based interest
payments for an average aggregated fixed rate of 4.8% plus a spread
on approximately 75% of the Egypt limited recourse debt facilities
for the period to March 31, 2015.
8.Net income per common share:
Diluted net income per common share is calculated by considering
the potential dilution that would occur if outstanding stock
options and, under certain circumstances, tandem share appreciation
rights (TSARs) were exercised or converted to common shares.
Outstanding TSARs may be settled in cash or common shares at the
holder's option and for purposes of calculating diluted net income
per common share, the more dilutive of the cash-settled and
equity-settled method is used, regardless of how the plan is
accounted for. Accordingly, TSARs that are accounted for using the
cash-settled method will require adjustments to the numerator and
denominator if the equity-settled method is determined to have a
dilutive effect on diluted net income per common share.
A reconciliation of the numerator used for the purpose of
calculating diluted net income per common share is as follows:
Three Months Ended Six Months Ended
-----------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Numerator for basic net income per
common share $ 53,999 $ 52,238 $ 114,266 $ 74,319
Adjustment for the effect of
TSARs:
Cash settled recovery included
in net income - (2,762) - -
Equity settled expense - (2,021) - -
----------------------------------------------------------------------------
Numerator for diluted net income
per common share $ 53,999 $ 47,455 $ 114,266 $ 74,319
----------------------------------------------------------------------------
Stock options and, if calculated using the equity-settled
method, TSARs are considered dilutive when the average market price
of the Company's common shares during the period disclosed exceeds
the exercise price of the stock option or TSAR. A reconciliation of
the denominator used for the purposes of calculating basic and
diluted net income per common share is as follows:
Three Months Ended Six Months Ended
------------------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Denominator for basic net
income per common share 95,116,950 93,781,404 94,817,234 93,445,231
Effect of dilutive stock
options 1,143,085 1,225,970 1,181,552 1,327,379
Effect of dilutive TSARs - 112,590 - -
----------------------------------------------------------------------------
Denominator for diluted net
income per common share 96,260,035 95,119,964 95,998,786 94,772,610
----------------------------------------------------------------------------
For the three month and six month periods ended June 30, 2013
and 2012, basic and diluted net income per common share
attributable to Methanex shareholders were as follows:
Three Months Ended Six Months Ended
----------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic net income per common share $ 0.57 $ 0.56 $ 1.21 $ 0.80
Diluted net income per common share $ 0.56 $ 0.50 $ 1.19 $ 0.78
----------------------------------------------------------------------------
9. Share-based compensation:
a)Share appreciation rights (SARs), tandem share appreciation
rights (TSARs) and stock options:
(i) Outstanding units:
Information regarding units outstanding at June 30, 2013 is as
follows:
SARs TSARs
----------------------------------------------
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Units Price Units Price
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Outstanding at December 31,
2012 897,525 $ 28.63 1,815,535 $ 28.45
Granted 360,900 38.24 544,200 38.24
Exercised (67,781) 27.43 (23,400) 27.41
Cancelled (5,500) 30.86 - -
----------------------------------------------------------------------------
Outstanding at March 31, 2013 1,185,144 $ 31.62 2,336,335 $ 30.74
----------------------------------------------------------------------------
Exercised (30,395) 26.06 (8,000) 26.88
Cancelled - - (2,700) 31.73
----------------------------------------------------------------------------
Outstanding at June 30, 2013 1,154,749 $ 31.76 2,325,635 $ 30.75
----------------------------------------------------------------------------
Stock Options
------------------------
Weighted
Average
Number of Exercise
Units Price
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Outstanding at December 31, 2012 2,982,947 $ 19.97
Granted 75,600 38.24
Exercised (587,689) 22.13
Cancelled (48,128) 16.13
----------------------------------------------------------------------------
Outstanding at March 31, 2013 2,422,730 $ 20.09
----------------------------------------------------------------------------
Exercised (430,831) 25.10
----------------------------------------------------------------------------
Outstanding at June 30, 2013 1,991,899 $ 19.01
----------------------------------------------------------------------------
Units Outstanding at Units Exercisable at
June 30, 2013 June 30, 2013
-------------------------------------------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Number of Average Number of Average
Range of Exercise Life Units Exercise Units Exercise
Prices (Years) Outstanding Price Exercisable Price
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SARs:
$23.36 to 29.18 4.2 474,049 $ 26.86 377,405 $ 26.43
$31.73 to 38.24 6.2 680,700 35.18 97,740 31.73
----------------------------------------------------------------------------
5.4 1,154,749 $ 31.76 475,145 $ 27.52
----------------------------------------------------------------------------
TSARs:
$23.36 to 29.18 4.1 1,149,145 $ 26.66 982,131 $ 26.30
$31.73 to 38.24 6.1 1,176,490 34.74 208,460 31.73
----------------------------------------------------------------------------
5.1 2,325,635 $ 30.75 1,190,591 $ 27.25
----------------------------------------------------------------------------
Stock options:
$6.33 to 11.56 2.7 830,290 $ 6.39 830,290 $ 6.39
$20.76 to 38.24 2.2 1,161,609 28.02 1,008,959 27.04
----------------------------------------------------------------------------
2.4 1,991,899 $ 19.01 1,839,249 $ 17.72
----------------------------------------------------------------------------
(ii) Compensation expense related to SARs and TSARs:
Compensation expense for SARs and TSARs is measured based on
their fair value and is recognized over the vesting period. Changes
in fair value each period are recognized in net income for the
proportion of the service that has been rendered at each reporting
date. The fair value at June 30, 2013 was $47.7 million compared
with the recorded liability of $38.4 million. The difference
between the fair value and the recorded liability of $9.3 million
will be recognized over the weighted average remaining vesting
period of approximately 1.8 years. The weighted average fair value
was estimated at June 30, 2013 using the Black-Scholes option
pricing model.
For the three and six month periods ended June 30, 2013,
compensation expense related to SARs and TSARs included an expense
in cost of sales and operating expenses of $6.9 million (2012 -
recovery of $3.6 million) and an expense of $23.9 million (2012 -
expense of $7.1 million), respectively. This included an expense of
$4.1 million (2012 - recovery of $6.4 million) and an expense of
$19.1 million (2012 - expense of $1.4 million) related to the
effect of the change in the Company's share price for the three and
six month periods ended June 30, 2013.
(iii) Compensation expense related to stock options:
For the three and six month periods ended June 30, 2013,
compensation expense related to stock options included in cost of
sales and operating expenses was $0.2 million (2012 - $0.2 million)
and $0.4 million (2012 - $0.4 million), respectively. The fair
value of each stock option grant was estimated on the date of grant
using the Black-Scholes option pricing model.
b)Deferred, restricted and performance share units:
Deferred, restricted and performance share units outstanding at
June 30, 2013 are as follows:
Number of Number of Number of
Deferred Restricted Performance
Share Units Share Units Share Units
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Outstanding at December 31, 2012 566,850 38,883 1,053,869
Granted 9,725 22,500 304,600
Granted in-lieu of dividends 2,391 280 4,305
Redeemed (49,432) - (410,177)
Cancelled - - (5,810)
----------------------------------------------------------------------------
Outstanding at March 31, 2013 529,534 61,663 946,787
----------------------------------------------------------------------------
Granted 397 - -
Granted in-lieu of dividends 2,469 293 4,483
Cancelled - - (1,880)
----------------------------------------------------------------------------
Outstanding at June 30, 2013 532,400 61,956 949,390
----------------------------------------------------------------------------
Compensation expense for deferred, restricted and performance
share units is measured at fair value based on the market value of
the Company's common shares and is recognized over the vesting
period. Changes in fair value are recognized in net income for the
proportion of the service that has been rendered at each reporting
date. The fair value of deferred, restricted and performance share
units at June 30, 2013 was $73.7 million compared with the recorded
liability of $57.0 million. The difference between the fair value
and the recorded liability of $16.7 million will be recognized over
the weighted average remaining vesting period of approximately 2.0
years.
For the three and six month periods ended June 30, 2013,
compensation expense related to deferred, restricted and
performance share units included in cost of sales and operating
expenses was an expense of $8.6 million (2012 - recovery of $0.1
million) and an expense of $27.7 million (2012 - expense of $14.0
million), respectively. This included an expense of $5.2 million
(2012 - recovery of $4.1 million) and an expense of $20.9 million
(2012 - expense of $6.2 million) related to the effect of the
change in the Company's share price for the three and six month
periods ended June 30, 2013.
10. Changes in non-cash working capital:
Changes in non-cash working capital for the three and six month
periods ended June 30, 2013 were as follows:
Three Months Ended Six Months Ended
--------------------------------------------
Jun 30 Jun 30 Jun 30 Jun 30
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decrease (increase) in non-cash
working capital:
Trade and other receivables $ (35,677) $ (15,749) $ (60,105) $ (16,690)
Inventories 18,531 11,702 (14,596) 25,065
Prepaid expenses (9,531) (9,707) (5,640) (8,786)
Trade, other payables and
accrued liabilities,
including long-term payables
included in other long-term
liabilities 49,264 35,489 86,972 (21,287)
----------------------------------------------------------------------------
22,587 21,735 6,631 (21,698)
Adjustments for items not having
a cash effect and working
capital changes relating to
taxes and interest paid (24,961) (17,709) (25,338) (1,638)
----------------------------------------------------------------------------
Changes in non-cash working
capital having a cash effect $ (2,374) $ 4,026 $ (18,707) $ (23,336)
----------------------------------------------------------------------------
These changes relate to the
following activities:
Operating $ (3,986) $ 18,173 $ (19,023) $ (22,021)
Investing 1,612 (14,147) 316 (1,315)
----------------------------------------------------------------------------
Changes in non-cash working
capital $ (2,374) $ 4,026 $ (18,707) $ (23,336)
----------------------------------------------------------------------------
11. Financial instruments:
Financial instruments are either measured at amortized cost or
fair value. Held-to-maturity investments, loans and receivables and
other financial liabilities are measured at amortized cost.
Held-for-trading financial assets and liabilities and
available-for-sale financial assets are measured on the
Consolidated Statements of Financial Position at fair value.
Derivative financial instruments are classified as held-for-trading
and are recorded on the Consolidated Statements of Financial
Position at fair value unless exempted. Changes in fair value of
held-for-trading derivative financial instruments are recorded in
earnings unless the instruments are designated as cash flow
hedges.
The euro hedges, Egypt interest rate swaps, and New Zealand
dollar hedges designated as cash flow hedges are measured at fair
value based on industry-accepted valuation models and inputs
obtained from active markets.
The Egypt limited recourse debt facilities bear interest at
LIBOR plus a spread. The Company has interest rate swap contracts
to swap the LIBOR-based interest payments for an average aggregated
fixed rate of 4.8% plus a spread on approximately 75% of the Egypt
limited recourse debt facilities for the period to March 31, 2015.
The Company has designated these interest rate swaps as cash flow
hedges. These interest rate swaps had an outstanding notional
amount of $329 million as at June 30, 2013. The notional amount
decreases over the expected repayment period. At June 30, 2013,
these interest rate swap contracts had a negative fair value of
$26.0 million (2012 - $36.8 million) recorded in other long-term
liabilities. The fair value of these interest rate swap contracts
will fluctuate until maturity.
The Company also designates as cash flow hedges forward exchange
contracts to sell euro and buy New Zealand dollar at a fixed USD
exchange rate. At June 30, 2013, the Company had outstanding
forward exchange contracts designated as cash flow hedges to sell a
notional amount of EUR5.7 million and buy a notional amount of NZD
$119.1 million in exchange for US dollars. The euro contracts had a
positive fair value of $0.1 million (December 31, 2012 - negative
fair value of $0.2 million) recorded in other assets and the New
Zealand dollar contracts had a negative fair value of $4.3 million
(December 31, 2012 - nil) recorded in current liabilities. Changes
in fair value of derivative financial instruments designated as
cash flow hedges have been recorded in other comprehensive
income.
The carrying values of the Company's financial instruments
approximate their fair values, except as follows:
June 30, 2013
--------------------------
Carrying
As at Value Fair Value
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt $ 1,203,300 $ 1,210,149
----------------------------------------------------------------------------
There is no publicly traded market for the limited recourse debt
facilities, the fair value of which is estimated by reference to
current market prices for debt securities with similar terms and
characteristics. The fair value of the unsecured notes was
calculated by reference to a limited number of small transactions
in June 2013. The fair value of the Company's unsecured notes will
fluctuate until maturity.
12. Adoption of New Accounting Standards:
a) Effective January 1, 2013, the Company has adopted the
following new IASB accounting standards related to consolidation
and joint arrangements: IFRS 10, Consolidated Financial Statements;
IFRS 11, Joint Arrangements; and IFRS 12, Disclosure of Interests
in Other Entities.
As a result of the adoption of these new standards, the
Company's 63.1% interest in the Atlas entity is accounted for using
the equity method. The Company has restated its Consolidated
Statement of Financial Position as at January 1, 2012 and December
31, 2012 and its Consolidated Statement of Income and Comprehensive
Income for the three and six months ended June 30, 2012.
Reconciliations of the restatements of the Consolidated Statement
of Financial Position as at December 31, 2012 and Consolidated
Statement of Income and Comprehensive Income for the three and six
months ended June 30, 2012 are as follows:
Consolidated Statement of Financial Position
As at December 31, 2012
Restatement
As Previously of Atlas to
Stated Equity Method As Adjusted
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 745,610 $ (18,225) $ 727,385
Trade and other receivables 429,203 (12,047) 417,156
Inventories 253,023 3,317 256,340
Prepaid expenses 28,314 (2,726) 25,588
----------------------------------------------------------------------------
1,456,150 (29,681) 1,426,469
Non-current assets:
Property, plant and equipment 2,014,748 (251,875) 1,762,873
Investment in associate - 184,665 184,665
Other assets 73,724 (5,170) 68,554
----------------------------------------------------------------------------
2,088,472 (72,380) 2,016,092
----------------------------------------------------------------------------
$ 3,544,622 $ (102,061) $ 3,442,561
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Trade, other payables and
accrued liabilities $ 353,744 $ 23,922 $ 377,666
Current maturities on long-term
debt 53,334 (15,044) 38,290
Current maturities on other
long-term liabilities 33,903 (3,581) 30,322
----------------------------------------------------------------------------
440,981 5,297 446,278
Non-current liabilities:
Long-term debt 1,191,891 (35,810) 1,156,081
Other long-term liabilities 242,435 (42,223) 200,212
Deferred income tax liabilities 191,578 (29,325) 162,253
----------------------------------------------------------------------------
1,625,904 (107,358) 1,518,546
Equity:
Capital stock 481,779 - 481,779
Contributed surplus 15,481 - 15,481
Retained earnings 805,661 - 805,661
Accumulated other comprehensive
loss (13,045) - (13,045)
----------------------------------------------------------------------------
Shareholders' equity 1,289,876 - 1,289,876
Non-controlling interests 187,861 - 187,861
----------------------------------------------------------------------------
Total equity 1,477,737 - 1,477,737
----------------------------------------------------------------------------
$ 3,544,622 $ (102,061) $ 3,442,561
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated Statement of Income and Comprehensive Income
Three months ended June 30, 2012
Restatement of
As Previously Atlas to Equity
Stated Method As Adjusted
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 656,103 $ (42,320) $ 613,783
Cost of sales and operating
expenses (506,769) 31,877 (474,892)
Depreciation and amortization (44,436) 5,872 (38,564)
Geismar project relocation
expenses (3,686) - (3,686)
----------------------------------------------------------------------------
Operating income 101,212 (4,571) 96,641
Earnings of associate - 1,315 1,315
Finance costs (20,137) 2,547 (17,590)
Finance income and other expenses (293) 12 (281)
----------------------------------------------------------------------------
Income before income tax expense 80,782 (697) 80,085
Income tax expense: -
Current (10,589) (264) (10,853)
Deferred (4,048) 961 (3,087)
----------------------------------------------------------------------------
(14,637) 697 (13,940)
----------------------------------------------------------------------------
Net income $ 66,145 $ - $ 66,145
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Change in fair value of forward
exchange contracts, net of tax (566) - (566)
Change in fair value of interest
rate swap contracts, net of tax (747) - (747)
Realized loss on interest rate
swap reclassified to interest
expense, net of tax 2,766 - 2,766
----------------------------------------------------------------------------
Comprehensive income $ 67,598 $ - $ 67,598
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to: -
Methanex Corporation
shareholders 52,883 - 52,883
Non-controlling interests 14,715 - 14,715
----------------------------------------------------------------------------
$ 67,598 $ - $ 67,598
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated Statement of Income and Comprehensive Income
Six months ended June 30, 2012
Restatement of
As Previously Atlas to Equity
Stated Method As Adjusted
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 1,321,970 $ (54,649) $ 1,267,321
Cost of sales and operating
expenses (1,075,326) 47,470 (1,027,856)
Depreciation and amortization (82,403) 8,438 (73,965)
Geismar project relocation
expenses (3,686) - (3,686)
----------------------------------------------------------------------------
Operating income 160,555 1,259 161,814
Earnings of associate - (6,013) (6,013)
Finance costs (38,670) 5,047 (33,623)
Finance income and other
expenses 1,386 171 1,557
----------------------------------------------------------------------------
Income before income tax expense 123,271 464 123,735
Income tax expense:
Current (15,157) (993) (16,150)
Deferred (9,158) 529 (8,629)
----------------------------------------------------------------------------
(24,315) (464) (24,779)
----------------------------------------------------------------------------
Net income $ 98,956 $ - $ 98,956
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Change in fair value of forward
exchange contracts, net of tax (871) - (871)
Change in fair value of interest
rate swap contracts, net of tax (3,360) - (3,360)
Realized loss on interest rate
swap reclassified to interest
expense, net of tax 5,702 - 5,702
----------------------------------------------------------------------------
Comprehensive income $ 100,427 $ - $ 100,427
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
Methanex Corporation
shareholders 74,853 - 74,853
Non-controlling interests 25,574 - 25,574
----------------------------------------------------------------------------
$ 100,427 $ - $ 100,427
----------------------------------------------------------------------------
----------------------------------------------------------------------------
b) Effective January 1, 2013, the Company adopted IFRS 13, Fair
Value Measurements. As a result of this new standard, incremental
disclosures have been provided in note 11 to these condensed
consolidated interim financial statements.
c) Effective January 1, 2013, the Company adopted the revised
IFRS 19, Employee Benefits. The adoption of this standard has not
had a significant impact on the Company.
d) Effective January 1, 2013, the Company adopted the revised
IAS, Presentation of Financial Statements. The adoption of this
standard has resulted in a change to the presentation of the
Company's Consolidated Statements of Comprehensive Income.
Methanex Corporation
Quarterly History (unaudited)
YTD 2013 Q2 2013 Q1 2013 2012 Q4 Q3
----------------------------------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Methanex-produced 2,045 1,021 1,024 4,039 1,059 1,053
Purchased methanol 1,337 749 588 2,552 651 641
Commission sales (1) 461 242 219 855 176 205
----------------------------------------------------------------------------
3,843 2,012 1,831 7,446 1,886 1,899
----------------------------------------------------------------------------
METHANOL PRODUCTION
(thousands of tonnes)
New Zealand 670 361 309 1,108 378 346
Atlas, Trinidad (63.1%) 449 201 248 826 180 255
Titan, Trinidad 350 169 181 786 189 186
Egypt (60%) 296 163 133 557 129 62
Medicine Hat 260 129 131 481 132 117
Chile 67 12 55 313 59 59
----------------------------------------------------------------------------
2,092 1,035 1,057 4,071 1,067 1,025
----------------------------------------------------------------------------
AVERAGE REALIZED METHANOL
PRICE (2)
($/tonne) 418 425 412 382 389 373
($/gallon) 1.26 1.28 1.24 1.15 1.17 1.12
PER SHARE INFORMATION ($ per share)
(3)
Basic net income (loss) 1.21 0.57 0.64 (0.73) (1.49) (0.03)
Diluted net income (loss) 1.19 0.56 0.63 (0.73) (1.49) (0.03)
Adjusted net income (4) 1.94 1.02 0.92 1.90 0.64 0.38
----------------------------------------------------------------------------
Q2 Q1 2011 Q4 Q3 Q2 Q1
----------------------------------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Methanex-produced 1,001 926 3,853 1,052 983 970 848
Purchased methanol 569 691 2,815 644 672 664 835
Commission sales (1) 276 198 846 208 235 231 172
----------------------------------------------------------------------------
1,846 1,815 7,514 1,904 1,890 1,865 1,855
----------------------------------------------------------------------------
METHANOL PRODUCTION
(thousands of tonnes)
New Zealand 210 174 830 211 209 207 203
Atlas, Trinidad (63.1%) 264 127 891 195 170 263 263
Titan, Trinidad 196 215 711 180 224 186 121
Egypt (60%) 164 202 532 132 191 178 31
Medicine Hat 118 114 329 130 125 74 -
Chile 82 113 554 113 116 142 183
----------------------------------------------------------------------------
1,034 945 3,847 961 1,035 1,050 801
----------------------------------------------------------------------------
AVERAGE REALIZED METHANOL
PRICE (2)
($/tonne) 384 382 374 388 377 363 367
($/gallon) 1.15 1.15 1.12 1.17 1.13 1.09 1.10
PER SHARE INFORMATION ($
per share) (3)
Basic net income (loss) 0.56 0.24 2.16 0.69 0.67 0.44 0.37
Diluted net income (loss) 0.50 0.23 2.06 0.68 0.59 0.43 0.37
Adjusted net income (4) 0.47 0.41 1.93 0.69 0.43 0.41 0.39
----------------------------------------------------------------------------
(1) Commission sales represent volumes marketed on a commission basis
related to the 36.9% of the Atlas methanol facility and 40% of the Egypt
methanol facility that we do not own.
(2) Average realized price is calculated as revenue, excluding commissions
earned and the Egypt non-controlling interest share of revenue but including
an amount representing our share of Atlas revenue, divided by the total
sales volumes of Methanex-produced (attributable to Methanex shareholders)
and purchased methanol.
(3) Per share information calculated using amounts attributable to Methanex
shareholders.
(4) This item is a non-GAAP measure that does not have any standardized
meaning prescribed by GAAP and therefore is unlikely to be comparable to
similar measures presented by other companies. Refer to the Additional
Information - Supplemental Non-GAAP Measures section for a description of
the non-GAAP measure and reconciliation to the most comparable GAAP measure.
Contacts: Methanex Corporation Sandra Daycock Director, Investor
Relations 604.661.2600invest@methanex.com www.methanex.com
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