Methanex Corporation · TSX:MX
Methanex — Investor Presentation (February 2020)
41 slides from Methanex's investor presentation, February 2020
Slide 1: Methanex Investor Presentation February 2020
Methanex Investor Presentation February 2020
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 1. Global methanol leader 2. Positive long-term Global methanol leader with industry outlook leading market share, global Steady demand growth outlook production footprint and with industry capacity additions integrated global supply chain needed to meet growing demand 3. Stro
Slide 4: Growing production with a clear focus on shareholders
Growing production with a clear focus on shareholders Production Production per thousand shares (M tonnes) (tonnes) 85% 133% 7.6 93 100 7.2 7.2 86 7.0 78 4.9 5.2 53 58 4.1 4.3 43 45 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019 Annual dividend Shares outstanding ($/
Slide 5: Methanex is the world's largest producer and supplier of methanol
Methanex is the world’s largest producer and supplier of methanol Created by tulpahn Over 9 million Integrated global tonnes of 6 manufacturing supply chain and operating sites distribution capacity network Wholly-owned Committed to Approximately Waterfront Responsible 1,545 team Integrated global S
Slide 6: Methanol is an essential ingredient in modern life
Methanol is an essential ingredient in modern life Traditional Chemical Market Clean and Economic Alternative Fuel Essential ingredient used in countless industrial and consumer products Represents a growing demand segment for methanol Over 50% of global demand Close to 50% of global demand Roof pan
Slide 7: Global methanol leader, positive long-term industry outlook
Global methanol leader, positive long-term industry outlook 7
Slide 8: Industry leadership is core to our strategy and track record
Industry leadership is core to our strategy and track record Estimated industry market share Scale and flexibility to meet customer needs creates shareholder value 15% • Strong customers that are leaders in their industry Methanex is the • Ability to reduce costs for customers and Methanex market le
Slide 9: 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 • E
Slide 10: Industry capacity additions needed to keep up with demand
Industry capacity additions needed to keep up with demand Outlook for 2020-2023 Industry demand forecasted to increase by (M tonnes) ~10 million tonnes (3-4% CAGR) from 2020 and 2023 10 • Traditional demand expected to grow similarly to GDP and 9 Incremental Supply industrial production rates 8 MTO
Slide 11: Methanol-to-olefin (MTO) producers typically have an integrated value chain
Methanol-to-olefin (MTO) producers typically have an integrated value chain Natural gas or coal feedstock Synthesis gas Methanol Ethylene Propylene Polyethylene EDC EO Ethyl benzene Polypropylene ACN PO Cumene PVC MEG Styrene Synthetic rubbers Polyether polyols Phenol Polycarbonates/ PET Polystyrene
Slide 12: Methanol is a clean-burning alternative fuel
Methanol is a clean-burning alternative fuel Marine Vehicle Power Fuel Fuel Source • Regulations (IMO 2020) lead • Methanol is an affordable gasoline • Methanol is used as an towards cleaner-burning fuels substitute in China alternative to coal for industrial boilers and kilns to reduce • Methanol i
Slide 13: Challenges to growth in the methanol industry
Challenges to growth in the methanol industry Estimated internal rate of return Building a methanol plant has a significant capital cost Realized methanol price • US Gulf Coast stand-alone greenfield project $/tonne (~$1,100/tonne) requires a long-term methanol price of Natural gas $/mmbtu $300 $350
Slide 14: Methanex is well positioned on the global industry cost curve
Methanex is well positioned on the global industry cost curve Illustrative methanol industry cost curve • Methanex plants are competitive across a wide ($/tonne) range of methanol prices – we estimate that our assets are positioned on the low-to-mid portion of the industry cost curve • Flat portion
Slide 15: Methanex annual production capacity
Methanex annual production capacity Production capacity (000s tonnes) Current Future # of plants Plant potential1 potential 2 (2020) Gas supply Supply chain Multiple medium-to long-term New Zealand 1,900 2,430 3 Asia Pacific physical contracts Physical contract, financial North America and other maj
Slide 16: Strong cash flow generation at a wide range of methanol prices
Strong cash flow generation at a wide range of methanol prices 16
Slide 17: Financial results
Financial results Adjusted EPS and Modified ROCE Adjusted EPS1 $8.00 24% Modified ROCE2 $7.00 21% $6.00 18% $5.00 15% $4.00 12% $3.00 9% $2.00 6% $1.00 3% $0.00 0% -$1.00 -3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Average Modified ROCE of 12% over last 10 years. 1 Adjusted EPS = Adjusted
Slide 18: Valuation considerations
Valuation considerations • Our cost structure per tonne Annual operating capacity1 continues to benefit from significant Current potential (8.1 million tonnes)2 Future potential (11.4 million tonnes)3 leverage on our fixed costs as Average production increases Realized Adjusted Free Free Adjusted Fr
Slide 19: Valuation considerations (continued)
Valuation considerations (continued) Estimated sensitivities Sensitivities versus run-rate of: ($Millions) • Average realized price: $350/tonne EBITDA +/- $10/tonne ARP • Volume: 8.1 million tonnes • Adjusted EBITDA capability: $1.1 billion FCF +/- $10/tonne ARP • Free cash flow capability: $525 mil
Slide 20: Short-term earnings can be impacted by various factors
Short-term earnings can be impacted by various factors Illustrative impact on earnings Different factors can impact our earnings on a ($/tonne) quarter-on-quarter basis but are less impactful Margins at a given over the long-term price are generally higher in a rising price environment • Difference
Slide 21: Highly disciplined approach to capital allocation
Highly disciplined approach to capital allocation 21
Slide 22: Balanced approach to capital allocation
Balanced approach to capital allocation 1 2 3 ESSENTIAL PROFITABLE GROWTH SHAREHOLDER RETURNS Share Debt service Maintenance Low-cost growth opportunities Dividends buybacks • $120 million annual interest • Disciplined capital investment • Meaningful, sustainable, expense decisions based on strict g
Slide 23: Unique near-term low capital cost growth opportunities
Unique near-term low capital cost growth opportunities CHILE GROWTH OPPORTUNITY GEISMAR 1 AND 2 OPTIMIZATION Increase production to full operating rates with Increase production capacity by 10% additional gas supply (add 420k tonnes) (add 200k tonnes) • Restarted idle Chile IV facility in late 2018;
Slide 24: Geismar 3 project has significant capital and operating cost advantages
Geismar 3 project has significant capital and operating cost advantages Project overview G3 has a much lower capital cost ($/tonne) • Size: 1.8 million tonnes per year $1,300 • Location: Geismar, Louisiana; adjacent to existing G1 and G2 facilities $1,100 • Estimated capital cost: $1.3 billion to $1
Slide 25: Flexible financing plan for Geismar 3 project
Flexible financing plan for Geismar 3 project Funding Capital spending schedule ($ millions) • $1.1 billion of undrawn credit available $500 • $800 million construction credit facility • $300 million revolving credit facility $400 remaining Partnership search underway 35 • Engaged investment banker
Slide 26: Geismar 3 progress on track
Geismar 3 progress on track Project de-risking factors • Front End Engineering Design (FEED) has provided a well-defined project scope and high confidence in capital cost estimate • A significant portion of costs for the project have been fixed and healthy contingency in place to cover remaining ris
Slide 27: Meaningful shareholder returns while significantly growing production
Meaningful shareholder returns while significantly growing production Metric January 1, 2013 December 31, 2019 % change Number of plants in operation 7 11 57% Production (M tonnes) 4.1 7.6 85% Shares outstanding (M) 94.3 76.2 (19%) Production per thousand shares 43 100 133% Annual dividend per share
Slide 28: Consistent track record of returning excess cash to shareholders
Consistent track record of returning excess cash to shareholders • During the development Dividends and share buybacks of G1 and G2, we ($ millions) continued to return ~$1.9 billion of capital returned to shareholders (Jan 1, 2013 to Dec 31, 2019) significant capital to shareholders G1 & G2 builds
Slide 29: Strong financial position and liquidity
Strong financial position and liquidity Liquidity as at Q4-19 Balanced debt maturity schedule ($millions) Cash (MX share) 1 $428 700 Revolving credit facility $300 Construction credit facility $800 300 300 250 Capital structure as at Q4-19 2022 … 2024 … … 2029 … … 2044 Total shareholders’ equity $1,
Slide 30: Summary
Summary • Global industry leader with competitive assets • Solid franchise value that is difficult to replicate • Global marketing, supply chain and shipping network • Strong financial position • Strong cash generation at a wide range of methanol prices • Low capital cost growth potential in Louisia
Slide 31: Forward-looking information
Forward-looking information This presentation, our Fourth Quarter 2019 Management’s Discussion and Analysis (“MD&”A) as well as comments made during the Fourth Quarter 2019 Investor Conference call contain forward-looking statements with respect to us and our industry. These statements relate to fut
Slide 32: Appendix
Appendix 32
Slide 33: Methanol production process
APPENDIX Methanol production process 1 2 3 4 Desulphurization of natural gas Reforming Methanol synthesis Distillation Refined Methanol Methanol Air Separator Reactors Desulphurization Unit Make-up Gas Purge Compressor Natural gas Compressor Steam Reformer Waste Heat Raw Recovery Methanol Autotherma
Slide 34: Global methanol industry demand
APPENDIX Global methanol industry demand By application By region AP (ex. China) Other Energy Formaldehyde 16% Applications 28% 29% China 58% Europe 14% Acetic Acid 9% Latin America MTO 2% 14% Other North America Traditional 10% 20% 34 Source: IHS Chemical Supply and Demand Fall 2019 Update.
Slide 35: 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, etc. • Methanex supplies primarily traditional chemical derivative customers who v
Slide 36: Methanex historical realized pricing
APPENDIX Methanex historical realized pricing Average realized price per tonne • Methanex posts ~ US$395 (real) reference prices: ~ US$350 (nominal) $550 – Monthly in North America and Asia – Quarterly in Europe $450 • Realized pricing is lower than posted reference $350 prices due to customer disco
Slide 37: Methanex cost structure
APPENDIX Methanex cost structure Representative operating cost distribution Natural gas • Flexible price structure: – North America: ~75% of natural gas requirements under long-term fixed price contract or financial hedge Logistics 2 – Rest of world: natural gas price varies based on methanol prices
Slide 38: Methanex is committed to Responsible Care
APPENDIX Methanex is committed to Responsible Care® • The Responsible Care® Ethic and Principles for Sustainability is a United Nations recognized sustainability initiative adopted by the global chemical industry • At Methanex, Responsible Care® is the foundation of everything we do and a key elemen
Slide 39: Best-in-class corporate governance
APPENDIX Best-in-class corporate governance BOARD COMPOSITION • DIRECTOR COMPENSATION • 11 of 12 Independent directors (92%) • Required director equity ownership • Separate chair and CEO of 3x total annual retainer • Prohibition on hedging • All Committee members are independent • Not eligible for s
Slide 40: Management alignment
APPENDIX Management alignment • Executive shareholding requirements: – CEO - 5 times salary in Methanex shares or share units – Senior executives (5 members) – 3x salary – Other senior management (~60 employees) – 1x salary guideline • Short-term incentive linked to ROCE (return on capital employed)
Slide 41: Thank you
Thank you Investor Relations T: 604 661 2600 [email protected] www.methanex.com linkedin.com/company/methanex-corporation @Methanex