Methanex Corporation

Development and Investor Relations at Metanex, Miss Jessica Woodbrook. Please go ahead, Miss Woodbrook.

Thank you. Good morning, everyone. Welcome to our second quarter 2025 results conference call. Our 2025 second quarter news release, management's discussion and analysis and financial statements can be accessed from the financial reports tab, the investor relations page on our website at metanex.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 factors or assumptions were applied in drawing the conclusions or making the forecast or projections, which are included in the forward-looking information. Please refer to our second quarter 2025 MDNA and to our 2024 annual report for more information. I would also like to caution our listeners that any projections provided today regarding Metanex'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 cashflow, adjusted income or adjusted earnings per share made in today's remark reflect our .1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility, our 50% interest in the NatGap Lean facility and our 60% interest in waterfront shipping. In addition, we report our adjusted EBITDA, adjusted net income to exclude the -to-market impact on share-based compensation and the impact of certain items associated with specific identified events. These items are non-GAP measures and ratios that do not have any standardized meaning prescribed by GAP and therefore, unlikely to be comparable to similar measures presented by other companies. We report these non-GAP measures in this way because we believe they are a better measure of underlying operating performance and we encourage analysts covering the company to report their estimates the same way. I would now like to turn the call over to Methenox's president and CEO, Mr. Rich Sumner, for his comments and a question and answer period.

Thank you, Jessica, and good morning, everyone. We appreciate you joining us today to discuss our second quarter 2025 results. Our second quarter average realized price of $374 per ton and produced sales of approximately 1.5 million tons generated adjusted EBITDA of $183 million and adjusted net income of 97 cents per share. Adjusted EBITDA was lower compared to the first quarter of 2025, primarily due to a lower average realized price. On June 27th, we successfully closed the previously announced acquisition of OCI's methanol business. This is a highly strategic acquisition for Methenox, which we believe significantly strengthens and expands our production portfolio with two world-scale methanol facilities in Beaumont, Texas, which have access to stable and economic supply of natural gas feedstock. The integration is proceeding as planned and we're focused on maintaining safe and reliable operations, continuing to meet customer commitments and delivering the strategic and financial benefits of this acquisition. I would like to extend my personal thanks to the team for their hard work and dedication in planning and carrying out a safe, reliable and seamless day one continuity of operations. It's been very exciting to welcome the new talented team members into our organization. Now turning to methanol market conditions, after realizing over $400 per ton in the first quarter of 2025, we continue to achieve strong results with second quarter global average realized price of $374 per ton. We estimate global methanol demand was about 4% higher in the second quarter compared to the first quarter. The increase was primarily driven by higher demand in China across all applications. Traditional and other energy demand in China rose in line with seasonal construction and transportation activities, as well as strong export manufacturing and domestic consumption, which offset a continued stream property market. Demand was also supported by methanol to olefins operating rates, increasing gradually throughout the quarter as supply from Iran increased post winter gas curtailments. In the rest of the world, demand remained largely stable with minor regional differences. On the supply side, methanol production from Iran steadily increased throughout the quarter, second quarter, as speed stock restrictions eased. We believe the disruptions to Iranian methanol production in June as a result of the significant escalation and the ongoing conflicts in the region was short-lived and we estimate Iran's operating rates increased by over 50% from the previous quarter. Globally, we believe the methanol industry operated very high rates with limited outages. In the Atlantic basin, strong production and stable demand led to inventory rebuilding from a low point over the course of the quarter, with pricing softening from high levels in Q1 as a result. In the Pacific basin and in particular China, the inventory buildup was more moderate as increasing MTO operating rates absorbed much of the increased supply availability in the market. Looking ahead to the third quarter, we estimate the methanol affordability into MTO and the marginal cost of production in China to be in the range of approximately 270 to $290 per ton. And we continue to see realized pricing in all other major regions at premiums to these pricing levels. We posted our third quarter European quarterly price at 530 euros per ton, representing a 95 euro decrease from the second quarter. Our North America, Asia Pacific and China prices for August were posted at 778, 370 and $350 per ton respectively. We estimate that based on these posted prices, our July and August realized price range is between approximately 335 and $345 per ton. Now turning to our operations, methanol production in the second quarter was similar compared to the first quarter with higher production from Geismert and Trinidad offset by lower production from Chile, New Zealand and Egypt due to gas constraints, as well as a planned turnaround in Medicine Hat. In Geismert, production was higher in the second quarter as G1 and G2 operated at full rates for the second quarter and G3 successfully restarted in early May. As it relates to the previous challenges we've experienced on G3, we feel confident we've addressed these with new startup conditions that allow us to safely and reliably start up without risk to the autothermal reformer. Towards the end of June, we experienced utility and power outages which reduced methanol production at the Geismert site. All plants returned to production in early July and are currently operating at full rates. For both the 100% owned Beaumont facility and the 50% owned gasoline facility, as previously mentioned, integration is going well and both assets have operated safely and at full rates since acquisition. In July, we operated both Chile plants and capacity for the period September 2024 through April 2025, achieving our highest production rate since 2007. On May 1, we idled one facility as planned and are currently conducting maintenance in preparation for restart late in the third quarter. While seasonality and production is expected to continue, we continue to see positive developments in natural gas availability and are working closely with gas suppliers to improve production rates over time. In New Zealand, we had lower production due to the temporary idling of operations in mid-May through the end of June under a short-term commercial agreement to redirect contracted natural gas to the New Zealand electricity market. The plant successfully restarted in early July and we forecasted our production for 2025 for New Zealand to be approximately 400,000 tons. Gas supply availability in New Zealand continues to be challenged and we continue to work with our gas suppliers and the government to sustain our operations in the country. In Egypt, we experienced some curtailments due to significant import disruptions which ended in late June. 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. Our expected equity production guidance for 2025 is approximately eight million tons, including the fully-owned Beaumont facility, both its methanol and ammonia production, as well as our share of production from the Nat Gasoline plant. Actual production may vary by quarter based on timing and turnarounds, gas availability, unplanned outages and unanticipated events. Now turning to our current financial position at Outlook, we ended the second quarter with $485 million of our share of cash, which is inclusive of approximately 50 million that was acquired with the transaction and access to an undrawn revolving credit facility, which was upsized with the closing of the transaction to 600 million. Our priorities for the second half of 2025 are to safely and reliably operate our business and smoothly integrate the new assets. Our top capital allocation priority will be to direct all free cash flow to deleveraging in the near term through the repayment of the term loan A facility. We do not anticipate significant growth capital over the next few years and remain focused on maintaining a strong balance sheet and ensuring we have financial flexibility. Based on higher produced sales offset by a lower forecasted average realized price, we expect higher adjusted EBITDA in the third quarter of 2025 compared to the second quarter. As we move through 2025, we would expect production and sales of produced product to more fully reflect our run rate capacity. We'd now be happy to answer questions.