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Mthanex Corporation (NASDAQ:MEOH) Fourth Quarter 2023 Earnings Call Transcript, February 1, 2024
Methanex Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Bonjour. I’m Dennis and I’ll be your convention operator today. At this time, I’d like to welcome everyone to Mthanex Corporation’s fourth quarter 2023 earnings conference call. All lines have been muted with background noise. Following the speakers’ comments, there will be a Q&A session. [Operator Instructions] Merci. Je I would now like to turn the floor over to Mthanex’s Director of Investor Relations, Ms. Sarah Herriott. Go ahead, Mrs. Herriott.
Sarah Herriott: Thank you. Welcome to our fourth quarter 2023 earnings conference call. Our fourth quarter 2023 press release, management discussion and analysis (MD
Check out our MD
These parts are non-GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures provided through other companies. We provide those non-GAAP measures in this way because they are a greater measure of underlying operating functionality and we inspire analysts covering the company to provide their estimates in this way. I would now like to give the floor to Mthanex’s Chairman and CEO, Mr. Rich Sumner, for his comments and a question and answer. period.
Rich Sumner: Thank you, Sarah, and hello everybody. We appreciate you joining us today as we discuss our fourth quarter and fiscal year 2023 results. I am pleased to announce that the G3 plant is in the process of commissioning and we anticipate that advertising production is imminent. G3 particularly increases our money-generating capacity and has one of the lowest emissions intensity profiles in the industry. We are incredibly proud of our global team who have safely delivered this high-quality addition to our portfolio of assets. Let’s move on to our fourth-quarter results. Our average learned value of $322 per ton and sales of approximately 1. 7 million tons generated adjusted EBITDA of $148 million and adjusted net earnings of $0. 52 per share.
Adjusted EBITDA was consistent with the third quarter due to an increase consistent with average learned value and product sales. Our global team reported a strong year of negative effects consistent with production of 6. 6 million tonnes of capital. For the full fiscal year 2023, we report adjusted EBITDA of $622 million and adjusted net income source of $153 million, or $2. 25 consistent with participation. We estimate that global demand for methanol will increase in 2023 to around 91 million tonnes. During the fourth quarter, market conditions strengthened with an increase in demand, mainly in China, outpacing and expanding supply, leading to a reduction in inventories and an increase in the value of methanol. Global demand for methanol for accumulation increased by more than 3% from the third quarter, with a significant improvement in steady production rates in the methanol to olefins sector and an expansion of classical demand in China.
Outside of China, demand for classical and energy shows has remained relatively strong. We estimate MTO steady exit rates will increase from 70% in the third quarter to 80% in the fourth quarter, driven by the final touch of planned downstream expansions and intensification. future accessibility of the quarter. On the source side, production increased at coal manufacturers in China, which was offset by planned and unplanned outages in the US, Southeast Asia and the Middle East, as well as a decline in production due to herbal fuel restrictions in Iran and China. Coal prices in China remained strong in the fourth quarter, ranging between around RMB 950 and RMB 1,000 per ton. We currently estimate the marginal cost of production to be between RMB 280 and 300 per ton, based on existing coal. charges in China.
Overall, continued high energy pricing, low global inventories, and tightening supply-demand balances led to higher pricing throughout the fourth quarter and into the first quarter. Our February posted prices in North America, Asia-Pacific, and China were posted at $570, $390, and $360 per metric tonne, respectively. And our first quarter European price was posted at €525 per tonne, an increase from Q4 of €150. Based on our January and February posted prices, we estimate our global average realized price to be approximately $335 to $345 per metric tonne for these 2 months. Looking forward, we expect 2024 demand growth rates to be similar to 2023 based on current global economic forecasts. Supply additions in 2024 include our G3 plant, a plant in Malaysia which is expected to startup in the second half of the year, and some limited new capacity in China.
We hope that the pool of sources resulting from these new capacity additions will be partially offset by the rationalization of existing sources. Production in Trinidad will be reduced by approximately 1 million tonnes year-on-year from September 2024, when we close. Atlas and restart Titan, and we will continue to monitor the ongoing exit rates of our competition in Trinidad and other points globally that may have an additional impact at source, as announced by diverting fuel from methanol to LNG in Equatorial Guinea. Beyond 2024, we will expect a continued expansion of methanol demand and will not expect a significant increase in source outside of China for the next few years. In terms of long-term driver demand, orders for methanol-fueled dual-fuel vessels accelerated at an immediate speed in 2023.
This was the first year that orders for methanol-fueled dual-fuel vessels surpassed LNG, and the existing order book for methanol vessels would result in more than 250 vessels on the water by the end of 2028. Momentum for methanol as a marine shipment The fuel is obviously very strong, and the demand for methanol for offshore programs will depend on a number of factors, such as the availability of low-carbon methanol, marine fuel regulations, and methanol’s competitiveness compared to other fuels. . Our low-carbon response team is in discussions with several shipping corporations about how we can fuel them with methanol as those shipments begin to absorb water between 2025 and 2028. In the fourth quarter, we recorded higher production with no planned shutdowns and the two plants in Chile were operating at full capacity with fuel from Argentina.
The Egyptian plant experienced an unplanned shutdown in mid-October due to a mechanical failure of the synthetic fuel compressor. The unit was sent to its manufacturer in Germany for repair and I am pleased to report that it is now back on site and we will be ready. We hope that the plant can begin operating in the first part of February. The G3 plant is in the process of commissioning and we anticipate that ad production is imminent. We hope that the plant is fully successful. capacity the month of February. I would like to thank the allocation team who worked tirelessly to carry out this high quality assignment safely. And we expect the overall capital charge to be in the budget at $1. 25 billion to $1. 3 billion. In 2024, we have an expected recovery. Our planned production for 2024 is approximately 8. 1 million tonnes, although actual production would likely vary from quarter to quarter depending on the timing of overhauls, fuel availability, unplanned outages and unforeseen events.
In Chile, the two plants are lately operating at full capacity with fuel deliveries from Argentina. We estimate that production for 2024 will be between 1. 1 and 1. 2 million tonnes, supported by a year-round herbal fuel source from Chile for approximately 30-35% of our needs, with the remaining 60-65% coming from Argentina. winter season, which allows us to operate both plants at full capacity. Natural fuel development and similar infrastructure investments in Argentina continue to advance, and we are collaborating with our natural fuel suppliers to expand the generation of full fuel availability for our power plants. In New Zealand, we forecast a decline in fuel deliveries and a decline in production in 2024 of 1 to 1. 1 million tonnes. The natural fuel source in 2024 is expected to be impacted by a combination of planned infrastructure maintenance disruptions through our suppliers, as well as lower-than-projected production from existing wells.
Although our fuel suppliers in New Zealand have invested in upstream in recent years, recent effects on production have been smaller than initially anticipated, contributing to the revised forecast of a decline in production in 2024. We ended the fourth quarter on a high note. Monetary position with $451 million in liquidity and $300 million in unused emergency liquidity. Our capital priorities are to liquidate the remaining G3 principal of approximately $60 million to $110 million in the first two quarters of 2024 and to liquidate, rather than refinance, the $300 million in bonds maturing at the end of 2024. Looking ahead, we expect to generate a large amount of loose cash with limited maintenance capital and increased production capacity with the G3 operation. Looking ahead to the first quarter of 2024, we expect slightly higher adjusted EBITDA with higher learned value and similar product sales as we build product inventories with the start of G3 and the start in Egypt.
While G3 is expected to ramp up activity in the month of February, we expect the second quarter of 2024 to be more representative of our production and money-making capacity. Our priorities for 2024 are to generate strong operational effects from our assets and supply chain. Maintain a strong balance sheet, add debt repayment, and return excess money to shareholders. We will be happy to answer any questions you may have.
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