Methanex Corporation

ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the conference call over to the Director of Investor Relations at Metanex, Ms. Sarah Harriot. Please go ahead, Ms. Harriot.

Good morning, everyone. Welcome to our fourth quarter 2024 results conference call. Our 2024 fourth quarter news release, management's discussion and analysis and financial statements can be accessed from the financial reports tab of the investor relations page on our website at methanx.com. I would like to remind our listeners that our comments and answers to your questions today may contain forward-looking information. This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. Certain material, facts, or making the forecast or projections, which are included in the forward-looking information. Please refer to our fourth quarter 2024 MD&A and to our 2023 Annual Report for more information. I would also like to caution our listeners that any projections provided today regarding Methanex's future financial performance are effective as of today's date. It is our policy not to comment on or update this guidance between quarters. For clarification, any references to revenue, EBITDA, adjusted EBITDA, cash flow, adjusted income, or adjusted earnings per share made in today's remarks reflect our 63.1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility, and our 60% interest in waterfront shipping. In addition, we report our adjusted EBITDA and adjusted net income to exclude the mark-to-market impact on share-based compensation. and the impact of certain items associated with specific identified events. These items are non-GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP, and therefore unlikely to be comparable to similar measures presented by other companies. We report these non-GAAP measures in this way because we believe that they are a better measure of underlying operating performance, and we encourage analysts covering the company to report their estimates in this manner. I would now like to turn the call over to Methanexis President and CEO, Mr. Rich Sumner, for his comments and a question and answer period.

Thank you, Sarah, and good morning, everyone. We appreciate you joining us today as we discuss our fourth quarter 2024 results. I'd like to start the call by thanking our global team for their ongoing dedication to safety. We achieved the best safety performance on record for the company in 2024 in a year of meaningful changes in our operating assets, and these results are a demonstration of the team's commitment to responsible care across the globe. Now turning to the financial and operational review of the company for the fourth quarter. Our fourth quarter average realized price of $370 per ton and produced sales of approximately 1.5 million tons generated adjusted EBITDA of $224 million and adjusted net income of $1.24 per share. Adjusted EBITDA was higher compared to the third quarter of 2024, primarily due to a higher average realized price and higher produced sales. For the full year of 2024, we had an average real-age price of $355, produced sales of just over 6 million tons, and generated adjusted EBITDA of $764 million and adjusted net income of $252 million, or $3.72 per share. Now turning to short-term methanol pricing and market dynamics. we entered the fourth quarter with very tight market conditions in the Atlantic Basin, underpinned by stable demand and low operating rates from several key supply sources, with these conditions remaining through the quarter. In the Pacific Basin, we entered the fourth quarter in a more balanced market with stable production and healthy inventories from lower methanol to olefins operating rates in the third quarter. Through the fourth quarter, conditions in the operating rates from MTO producers, combined with increasing supply constraints, particularly from Iran. Consequently, MTO operating rates decreased late in the fourth quarter, with this trend continuing into the first quarter. Overall, tight market conditions globally led to an increased methanol pricing environment in the fourth quarter and into 2025. Our global average realized price of $370 per metric ton was $14 higher than the previous quarter. Methanol pricing strength continued into the first quarter of 2025 with our European quarterly price posted at 700 euros per ton, representing a 130 euro per ton increase from the fourth quarter. Our posted prices for North America and China increased in January and rolled in February. And in Asia Pacific, we increased posted prices in January and February. Comparing methanol demand in 2024 to 2023, we estimate global methanol demand increased by approximately 3 million tons, which included relatively flat year-over-year demand for methanol to olefins, given supply constraints in the industry. In 2025, we expect methanol demand to grow at a similar rate to 2024, driven by demand from traditional chemical applications as well as energy applications, with operating rates in methanol to olefins again playing a critical role in balancing the market. We expect incremental supply will come from full-year production of G3 and from the Malaysian Sarawak plant, which we understand recently started producing methanol. Looking beyond 2025, we continue to see favorable supply and demand dynamics. projected in the industry. Now turning to our operations, Methanex production in the fourth quarter was higher compared to the third quarter with higher production from Geismar, Chile, New Zealand and Egypt. Our production was higher than our produced sales in the fourth quarter of 2024 due to an inventory bill that produced methanol from these higher production levels. In Geismar, production was higher during the fourth quarter with G3 operating at ensure reliability. The plant successfully restarted and resumed full operating rates in December and has been operating at high rates since the restart. In Chile, I'm very happy to share that both plants have been operating at full rates and that after a brief maintenance outage in November, we produced 150,000 tons of methanol in December, which is the highest monthly level of production we've reached in Chile since 2007. of the site's gas requirements year-round. We continue to expect seasonality in production, but are seeing positive developments, making full gas supply for a two-plant operation available for longer periods. Based on contracted gas, 2025 production is expected to be between 1.3 and 1.4 million tons, which would result in the fourth consecutive annual increase in production from Chile. In Egypt, production increased compared to the third quarter as temperatures moderated, the gas balances in the country stabilized, and we operated at close to full rates based on improved gas availability. We're monitoring the gas market closely and would expect to experience some curtailments in 2025, particularly in the summer months, depending on gas supply and demand dynamics. In New Zealand, production in the fourth quarter was higher compared to in November. In August, operations were temporarily idle as we entered short-term commercial arrangements to provide contractual natural gas into the New Zealand electricity market until the end of October 2024. Based on the current outlook from gas suppliers, we expect 500,000 to 700,000 tons of production from New Zealand in 2025, which will be dependent on gas availability and any on-selling of gas into the electricity markets. New Zealand's energy needs. In 2025, we have three turnaround schedules that will impact our production in the first three quarters. Our expected equity production guidance for 2025 is approximately 7.5 million equity tons, which includes the impact of these turnarounds and forecasts for gas feedstock availability outside of North America, but excludes any incremental production from OCI assets post-acquisition closing date. Actual production may vary by quarter based on timing of turnarounds, gas availability, unplanned outages, and unanticipated events. Now turning to our current financial position and outlook, we ended the fourth quarter with $879 million of our share of cash and continued access to our $500 million undrawn revolving credit facility. During the fourth quarter, we repaid the $300 million bond with cash generated from operations and executed our OCI acquisition financing plan, including issuing a $600 million bond and securing a $650 million term loan aid commitment from our banking partners. The completion of these arrangements gives us the financial capacity and flexibility to complete the OCI acquisition and our targeted deleveraging plan. We're continuing to progress the regulatory process as planned. Looking forward to 2025, our priorities are focused on closing the OCI transaction, safely and efficiently integrating the assets, achieving the identified synergies, and reducing leverage by repaying $550 to $600 million in debt over the next 18 months, assuming a $350 realized methanol price. Beyond this, we do not anticipate significant growth capital over the next few years and remain focused on maintaining a strong balance sheet and financial flexibility. With strong free cash flow capability from our existing assets, which we expect to be strengthened by the OCI acquisition, we're positioned to execute a balanced approach that includes deleveraging and shareholder distributions depending on future market conditions and methanol pricing. Based on our first quarter European posted price, along with our January and February posted prices in North America, China, and Asia Pacific, our January and February average realized price range is forecasted to be between approximately $395 and $405 per metric ton. Based on this higher forecasted average realized price, of 2025 compared to the fourth quarter. We'd now be happy to answer questions.