Methanex(US:MEOH)2022-01-27 20:15Financial Data and Key Metrics Changes - In Q4 2021, Methanex reported the highest quarterly adjusted EBITDA in the company's history at $340 million and a record adjusted net income of $185 million, or $2.43 per share, primarily due to higher realized prices and increased sales volume [11][12] - For the full year 2021, the company achieved an adjusted EBITDA of $1.1 billion and adjusted net income of $460 million, or $6.03 per share, significantly stronger compared to 2020 [12] Business Line Data and Key Metrics Changes - Production levels in Q4 2021 were significantly higher compared to Q3 2021, driven by higher gas availability in Chile and New Zealand, as well as record production at Geismar facilities [23] - In New Zealand, production was higher following the completion of a short-term commercial arrangement, with an estimated production of approximately 1.5 million tonnes in 2022 from the two Motunui plants [24] - Geismar facilities achieved record quarterly production, with an annual operating capacity increase of 10% to 2.2 million tonnes due to a debottlenecking project [25] Market Data and Key Metrics Changes - Global methanol demand in 2021 increased by approximately 5% to 86 million tonnes, driven by recovery in traditional chemical applications [13] - In Q4 2021, global methanol demand decreased by approximately 2% compared to Q3 2021, primarily due to lower demand from MTO producers and restrictions in China [14] - Methanol prices fluctuated in Q4 2021, with an average realized price increase of $55 per tonne to $445 per tonne compared to Q3 2021 [16] Company Strategy and Development Direction - The company remains focused on managing through the pandemic, progressing the G3 project on time and on budget, and enhancing financial flexibility [33] - Methanex plans to use generated cash to maintain operations, pursue growth opportunities, and return excess cash to shareholders, with a preference for share buybacks [31][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about methanol market fundamentals, expecting robust demand growth in 2022 despite supply challenges [49] - The company anticipates a strong first quarter of 2022, with EBITDA expected to be similar to Q4 2021 due to higher forecasted sales [32] Other Important Information - The company ended Q4 2021 with $932 million in cash and $900 million of undrawn liquidity, positioning it well for future capital expenditures [28] - Methanex's G3 project is expected to be completed on time and on budget by the end of 2023 or early 2024, with a capital cost estimate of $1.25 billion to $1.35 billion [29][30] Q&A Session Summary Question: What was the percentage of sales shifted to China? - Management indicated that the percentage is around 20% to 25% but did not provide an exact number during the call [38][39] Question: What is the guidance for the discount rate in 2022? - The company forecasts a discount rate of 20% on average for 2022 [40] Question: How is the natural gas pricing situation in Europe affecting capacity? - Management noted that there is capacity offline in Europe due to high energy prices and geopolitical tensions, impacting methanol production [43][44] Question: What is the outlook for supply and demand fundamentals in 2022? - Management expects supply challenges to persist in 2022, with traditional demand growing at GDP rates [46][49] Question: How is the dual control energy policy in China affecting production? - The company expects production rates in China to be higher in the summer months compared to Q4 2021, as natural gas becomes more available [57] Question: What is the impact of the discount rate on realized prices? - Management emphasized that realized prices are what drive earnings, and the discount rate varies by region [88][102] Question: What are the plans for capital allocation moving forward? - The company plans to focus on completing the G3 project and returning excess cash to shareholders through buybacks and dividends [109]