Methanex(MEOH) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2020, the company recorded adjusted EBITDA of $136 million and adjusted net income of $12 million, or $0.15 per share, which was higher than Q3 results primarily due to realized prices [12] - For the full year 2020, adjusted EBITDA was $346 million, with an adjusted net loss of $123 million, or $1.62 per share, reflecting lower realized methanol prices compared to 2019 [12] Business Line Data and Key Metrics Changes - Production levels in New Zealand increased in Q4 due to improved gas supply, but the outlook for 2021 is uncertain due to expected lower gas deliveries [19][20] - Geismar facilities achieved record production in Q4, benefiting from a completed debottlenecking project, with an expected annual capacity of 2.2 million tonnes [21] - Production in Trinidad remained stable in Q4, but 2021 production is estimated to decline to 900,000 tonnes due to upstream production declines [22] - Chile's production was higher in Q4, but lower gas deliveries later in the quarter led to idling of one plant, with 2021 production estimated at 900,000 to 1,000,000 tonnes [24] - Egypt's production in Q4 was similar to Q3, with 2021 production forecasted to be similar to 2020 levels of 6.6 million tonnes [25] Market Data and Key Metrics Changes - Global methanol demand increased by approximately 2% in Q4 2020 compared to Q3, but overall demand for 2020 was down 3% compared to 2019 [13][14] - Methanol prices in North America and Asia Pacific increased in early 2021, with February prices at $492 per tonne and $430 per tonne respectively [16] - The industry cost curve is estimated at approximately $260 per tonne, influenced by higher coal prices [15] Company Strategy and Development Direction - The company remains focused on maintaining liquidity and financial flexibility while prioritizing safe and reliable operations [30] - The Geismar 3 project is on hold, with a decision expected in mid-2021, contingent on market conditions and economic recovery [27][42] - The company is cautious about future investments and will assess the demand recovery before making significant capital allocation decisions [65] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about early signs of economic recovery but remains cautious due to ongoing uncertainties from the COVID-19 pandemic [28] - The company expects realized methanol prices in Q1 2021 to be higher than in Q4 2020, with production levels anticipated to be similar [29] - The management highlighted the challenges in gas supply across various regions, impacting production capabilities [55] Other Important Information - The company ended 2020 with a strong liquidity position of over $800 million in cash and no debt maturities until the end of 2024 [26] - The company is committed to returning excess cash to shareholders through dividends and share repurchases [26] Q&A Session Summary Question: How does the company see normalization of various issues affecting operations? - Management indicated that predicting normalization is difficult, particularly regarding gas supply issues in New Zealand and Trinidad, which were unexpected [34] Question: How did the company manage to increase prices despite a weaker spot market? - Management explained that pricing decisions are based on supply-demand fundamentals and customer discussions, rather than solely on spot market prices [38] Question: What is the current status of the Geismar 3 project? - The company is targeting a decision on the Geismar 3 project in mid-2021, with ongoing evaluations of market conditions [42] Question: What are the expectations for methanol demand recovery? - Management noted that traditional demand was down 5% in 2020, with North America experiencing the most significant decline [80] Question: How does the company view the impact of LNG and coal price spikes on production? - Management stated that while coal prices could influence the cost curve, producers are currently running at full capacity due to favorable pricing dynamics [84]