Methanex Corporation · TSX:MX
Methanex — Investor Presentation (June 2019)
40 slides from Methanex's investor presentation, Jun 27, 2019
Slide 1: Methanex Investor Presentation June 2019
Methanex Investor Presentation June 2019
Slide 2: Forward-looking statements & non-GAAP measures
Forward-looking statements & non-GAAP measures Information contained in these materials or presented orally on the earnings conference call, either in prepared remarks or in response to questions, contains forward-looking statements. Actual results could differ materially from those contemplated by
Slide 3: Investment opportunity
Investment opportunity • Global methanol leader with plants well positioned on Global methanol leader cost curve to be competitive through all points in the methanol price cycle Positive long-term • Strong demand growth outlook with industry capacity industry outlook additions required to meet growi
Slide 4: Growing production with a clear focus on shareholders
4 Production (000 tonnes) 2012 4,071 2013 4,344 2014 4,853 2015 5,193 2016 7,017 2017 7,187 2018 7,211 Potent. 8,400 Production up by 77% Annual dividend per share ($ per share) 2012 0.73 2013 0.79 2014 0.95 2015 1.08 2016 1.10 2017 1.18 2018 1.32 Dividends up by 93% 2019 1.41 Shares outstanding (mi
Slide 5: Competitive advantage, positive long-term industry outlook
Competitive advantage, positive long-term industry outlook
Slide 6: Methanol end uses
Methanol end uses • Methanol is an essential ingredient used to produce hundreds of everyday industrial and consumer items • It is also a clean- burning, cost- competitive alternative fuel 6
Slide 7: Industry leadership is core to strategy and track record
Industry leadership is core to strategy and track record • Scale and flexibility to meet customer needs creates Methanex is the market leader shareholder value Strong customers that are leaders in their 15% industry Estimated industry market share Ability to reduce costs for customers and Methan
Slide 8: Clear competitive advantage from integrated global capabilities
Clear competitive advantage from integrated global capabilities • Investing in industry-leading, secure, reliable supply from a global network of plants is a fundamental driver of long- term results Network of production sites to supply every major global market Fleet of dedicated ocean vessels
Slide 9: Continued, strong demand growth expected
Continued, strong demand growth expected Projected 5% CAGR led by methanol-to-olefins (“MTO”) (million MT) 2019 – 2022 CAGR: 5% 100 90 2013 – 2018 CAGR: 6% 80 Methanol-to- 70 olefins 60 50 Other energy applications 40 30 Traditional 20 chemical 10 applications 0 2013 2014 2015 2016 2017 2018 2019 20
Slide 10: Methanol-to-olefins (MTO)
Methanol-to-olefins (MTO) • A number of new plants under Natural Food packaging, Polyethylene construction to be plastic bags Gas or completed over the Coal coming years (8MMT Feedstock Pipes, window EDC PVC frames methanol demand Ethylene potential) Synthesis EO MEG PET Textile, bottles • MTO produ
Slide 11: Methanol is a clean-burning alternative fuel
Methanol is a clean-burning alternative fuel Represents significant upside potential for long-term demand Methanol as a marine fuel Methanol as a vehicle fuel Methanol as a power source • Regulations (IMO 2020) lead • Methanol is an affordable • Methanol used as alternative to towards cleaner-burnin
Slide 12: Healthy supply/demand fundamentals
Healthy supply/demand fundamentals Demand: growing market that requires 4 (million MT) Outlook for 2019-2022 million MT of new capacity per year (million MT) 16 • Healthy demand growth of 5% CAGR 14 MTO and Incremental • Led by methanol-to-olefin (“MTO”) and 12 Supply Required Other Energy energy ap
Slide 13: Challenges to growth in the methanol industry
Challenges to growth in the methanol industry Significant capital costs Estimated internal rate of return • US Gulf Coast stand-alone greenfield project Natural Realized methanol price $/MT (~$1,100/MT) requires a long-term methanol Gas price of $400/MT to meet Methanex’s return $300 $350 $400 targe
Slide 14: Well positioned on the global methanol cost curve
Well positioned on the global methanol cost curve • Methanex plants are competitive across a wide Illustrative methanol industry cost curve range of methanol prices – 30 million MT of Global methanol demand ~82 MMT/year current operating capacity has a higher cost structure than Methanex • Industry
Slide 15: Methanex annual production capacity
Methanex annual production capacity Production capacity (000 tonnes) # of Plant Gas supply Supply chain Current Full plants potential1 potential2 New Zealand 2,200 2,430 3 Multiple medium-to long-term physical Asia Pacific contracts Geismar (G1, G2) 2,000 2,000 2 Physical contract, financial hedges
Slide 16: Strong cash flow generation at a wide range of methanol prices
Strong cash flow generation at a wide range of methanol prices
Slide 17: Financial results
Financial results Average Modified ROCE of 11% over last 10 years. Robust 2018 EPS results. (million MT) $8.00 Adjusted EPS (1) Modified ROCE (2) 24% $7.00 21% $6.00 18% Modified ROCE Adjusted EPS $5.00 15% $4.00 12% $3.00 9% $2.00 6% $1.00 3% $0.00 0% -$1.00 -3% 2009 2010 2011 2012 2013 2014 2015 2
Slide 18: Valuation considerations
Valuation considerations 1 Methanex interest (63.1% Atlas, 50% Egypt) Current Potential 2 Full Potential 3 2 Current potential = reflects Trinidad Annual operating capacity1 operating rate of 85% (1.7MMT), Chile 8.4 9.4 operating rate of 75% (1.3MMT) and New (millions of tonnes) Zealand operating ra
Slide 19: Valuation considerations - sensitivities
Valuation considerations - sensitivities Estimated sensitivities Sensitivities versus run-rate of: (USD$ millions) • Average realized price: $350/MT EBITDA +/- $10/tonne ARP • Volume: 8.4MMT FCF +/- $10/tonne ARP • EBITDA capability: $1.1 billion • FCF capability: $625 million EBITDA +/- 100k tonnes
Slide 20: Highly disciplined approach to capital allocation
Highly disciplined approach to capital allocation
Slide 21: Balanced approach to capital allocation
Balanced approach to capital allocation Debt service • $110 million annual interest expense • $25 million debt payments (MX share) Essential • Next maturity - $350 million, end of 2019 Maintenance • $120 million avg. annual maintenance capex Meaningful, • Dividend $1.44/share annually and approximat
Slide 22: Meaningful capital returned to shareholders while significantly growing production
Meaningful capital returned to shareholders while significantly growing production Metric January 1, 2013 March 31, 2019 % change Number of plants in operation 7 11 57% Production 4.1 million MT 8.4 million MT 1 105% Shares outstanding 94.3 million 77.2 million (18%) Production per thousand shares 4
Slide 23: Consistent track record of returning excess cash to shareholders
Consistent track record of returning excess cash to shareholders ~$1.7 billion of capital returned to shareholders ($ millions) • During the development of G1 and G2, we continued $550 to return significant capital G1 & G2 builds to shareholders $660 million of capital returned • Since January 1, 20
Slide 24: Unique near-term very low capital cost growth opportunities
Unique near-term very low capital cost growth opportunities Increase • Restarted idle Chile IV facility in late 2018 production by • Sufficient gas for up to 75% of two-plant operation Chile growth 420,000 MT with up to mid-2020 opportunity Refurbish Chile I facility in two stages starting 2019 addi
Slide 25: Geismar 3 – an unparalleled low cost growth opportunity
Geismar 3 – an unparalleled low cost growth opportunity • Potential Geismar 3 facility (~1.8 • No reformer required million MT) would be constructed Less equipment required Non-replicable • adjacent to existing Geismar 1 & 2 due to shared infrastructure facilities brownfield with existing G1/G2 site
Slide 26: Strong financial position and liquidity
Strong financial position and liquidity Liquidity as at Q1-19 Capital structure as at Q1-19 (US$ millions) (US$ millions) Cash (MX Share) 262 Total Shareholders’ Equity 1,487 Revolving Credit Facility 300 Total Debt 1,317 562 Total Debt/Capitalization 47% Net Debt/Capitalization 41% Net Debt/Enterpr
Slide 27: Investment grade rating metrics – a key priority
Investment grade rating metrics – a key priority Pro forma rating agency credit ratios • Leverage target = investment grade ($ billions unless indicated) Preserves financial flexibility Lowers cost of debt Total debt 1 Access to longer-term bond market, Debt (Q1-19) 1.3 shipping market, etc. C
Slide 28: Best-in-class governance
Best-in-class governance the power of agity
Slide 29: Best-in-class corporate governance
Best-in-class corporate governance Corporate Governance Director Compensation 10 of 11 Independent Directors Separate chair and CEO Required director equity ownership All Committee members are independent of 3x total annual retainer Strong risk and strategy oversight Prohibition on hedgi
Slide 30: Methanex is committed to Responsible Care®
Methanex is committed to Responsible Care® • At Methanex, Responsible Care® is the foundation of everything we do and a key element of our global culture: » community safety » employee health and safety » environmental protection » product stewardship » social responsibility • As an industry, we mus
Slide 31: Management alignment
Management alignment • Executive shareholding requirements: • CEO - 5 times salary in Methanex shares or share units • Senior executives (5 members) – 3 times salary • Other senior management (~55 employees) – 1 times salary • Short-term incentive linked to ROCE (return on capital employed) • Long-t
Slide 32: Summary
Summary • Global leader with competitive • Strong cash generation at a wide assets range of methanol prices • Solid franchise value that is difficult • Low capital cost growth potential in to replicate Chile and Louisiana • Global marketing, supply chain and • Dividends / share buybacks shipping net
Slide 33: Forward-looking information
Forward-looking information This Presentation, our First Quarter 2019 Management’s Discussion and Analysis (“MD&A”) as well as comments made during the First Quarter 2019 investor conference call contain forward-looking statements with respect to us and our industry. These statements relate to futur
Slide 34: Appendix
Appendix the power of agity
Slide 35: Methanol production process
APPENDIX Methanol production process • Primarily produced from natural gas 35
Slide 36: Global methanol industry demand
APPENDIX Global methanol industry demand By application By region Other Energy Formaldehyde AP (ex. Applications 28% China) 29% 16% China 58% Europe 13% Acetic Acid 9% Latin MTO America 14% North 2% Other Traditional America 20% 10% Source: IHS Chemical Supply and Demand Spring 2019 Update. 36
Slide 37: Methanex price history
APPENDIX Methanex price history Quarterly average realized price • Methanex posts reference prices: $600 10 year average Monthly in North America realized price and Asia ~US $350/MT $500 Quarterly in Europe $400 • Realized pricing is lower than $300 posted reference prices due to customer discou
Slide 38: Methanol consumers
APPENDIX Methanol consumers • Concentrated consumer base – 30% of global demand from top 20 consumers • Main consumers are large, global chemical and China MTO companies: – Celanese, BP, Momentive, Sanjiang, Sailboat, Sabic, BASF, etc. • Methanex supplies primarily traditional chemical derivative cu
Slide 39: Methanex cost structure
APPENDIX Methanex cost structure Natural Gas Representative operating Flexible price structure: cost distribution • North America: ~75% of natural gas requirements under long- Logistics term fixed price contract or financial hedge ** Rest of World: natural gas price varies based on methanol pric
Slide 40: Thank you
Thank you www.methanex.com linkedin.com/company/ methanex-corporation @Methanex Investor Relations T: 604 661 2600 [email protected]