Methanex Corporation · TSX:MX
Methanex — Investor Presentation (October 2019)
42 slides from Methanex's investor presentation, October 2019
Slide 1: Methanex Investor Presentation
Methanex Investor Presentation October 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 • Global methanol leader with leading market share, global leader production footprint and integrated global supply chain Positive long-term • Strong demand growth outlook with industry capacity additions industry outlook required to meet growing demand • Solid
Slide 4: Company overview
Company overview World’s largest producer and supplier of methanol to major international markets Integrated global 9.4 million tonnes 6 manufacturing supply chain and of production sites distribution capacity network Wholly-owned Approximately Adjusted EBITDA of Waterfront Shipping 1,425 team $1.1
Slide 5: Growing production with a clear focus on shareholders
Growing production with a clear focus on shareholders Production increased by 77% Production per share increased by 116% Production (tonnes) Production (M tonnes) per 000 shares 8.4 93 7.2 7.2 86 7.0 78 4.9 5.2 53 58 4.1 4.3 43 45 Current 2012 2013 2014 2015 2016 2017 2018 Potential 1 2012 2013 2014
Slide 6: Global methanol leader, positive long-term industry outlook
Global methanol leader, positive long-term industry outlook
Slide 7: Methanol end uses
Methanol end uses • Methanol is a clear, biodegradable commodity chemical primarily produced from natural gas • 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 7
Slide 8: 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 15% • Strong customers that are leaders in their industry Estimated industry market share • Ability to reduce costs for customers and Methanex
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: Continued, steady demand growth expected
Continued, steady demand growth expected Projected 3 - 4% CAGR with steady growth across various applications (million tonnes) 2019 – 2022 CAGR: 3 - 4% 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 201
Slide 11: Methanol-to-olefins (MTO)
Methanol-to-olefins (MTO) • Two new plants under construction to Natural Food packaging, be completed over P olyethylene plastic bags Gas or the coming years (3.6 Coal MMT methanol P ipes, window Feedstock EDC P VC demand potential) frames Ethylene • MTO production Synthesis EO MEG P ET Textile, bot
Slide 12: 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 is used as an towards cleaner-burning fuels g
Slide 13: Healthy supply/demand fundamentals
Healthy supply/demand fundamentals Demand: growing market that requires 3 - 4 (million MT) Outlook for 2019-2022 million MT of new capacity per year (million MT) • Demand expected to grow (3 - 4% CAGR) 10 Incremental Supply Required above GDP rates MTO and 8 Other Energy from China • Supported by ex
Slide 14: 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 15: 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 – we estimate that Global methanol demand our assets are positioned on the low-to-mid portion of the industry cost curve Delivered Cash
Slide 16: Methanex annual production capacity
Methanex annual production capacity Production capacity # of (thousand tonnes) Plant plants Gas supply Supply chain (2019) Current Full Future potential 1 potential 2 potential 3 Multiple medium-to long-term New Zealand 2,200 2,430 2,430 3 Asia Pacific physical contracts Physical contract, financial
Slide 17: Strong cash flow generation at a wide range of methanol prices
Strong cash flow generation at a wide range of methanol prices
Slide 18: Financial results
Financial results Average Modified ROCE of 11% over last 10 years. Robust 2018 EPS results. (million tonnes) $8.00 Adjusted EPS (1) Modified ROCE (2) 24% $7.00 21% $6.00 18% Modified ROCE 15% Adjusted EPS $5.00 $4.00 12% $3.00 9% $2.00 6% $1.00 3% $0.00 0% -$1.00 -3% 2009 2010 2011 2012 2013 2014 20
Slide 19: Valuation considerations
Valuation considerations 1. Methanex interest (63.1% Atlas, 50% Current Potential 2 Full Potential 3 Egypt) Annual operating capacity1 2. Refer to slide 16 (footnote 1) (millions of tonnes) 8.4 9.4 3. Includes full nameplate capacity for all Average realized price ($/tonnes) Adjusted EBITDA Capabili
Slide 20: Valuation considerations - sensitivities
Valuation considerations - sensitivities Estimated sensitivities (millions) Sensitivities versus run-rate of: EBITDA +/- $10/tonne ARP • Average realized price: $350/tonne • Volume: 8.4 million tonnes FCF +/- $10/tonne ARP • Adjusted EBITDA capability: $1.1 billion • Free cash flow capability: $625
Slide 21: Highly disciplined approach to capital allocation
Highly disciplined approach to capital allocation
Slide 22: Balanced approach to capital allocation
Balanced approach to capital allocation • $110 million annual interest expense Debt service • $25 million debt payments (MX share) Essential • Next maturity - $250 million, March 2022 Maintenance • $120 million annual maintenance capex (average) Meaningful, • Dividend $0.36/share per quarter Priorit
Slide 23: Meaningful capital returned to shareholders while significantly growing production
Meaningful capital returned to shareholders while significantly growing production Metric January 1, 2013 June 30, 2019 % change Number of plants in operation 7 11 57% Production 4.1 million tonnes 8.4 million tonnes 1 105% Shares outstanding 94.3 million 76.2 million (19%) Production per thousand s
Slide 24: 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 (up to 12/31 2018) (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 • Si
Slide 25: Unique near-term low capital cost growth opportunities
Unique near-term low capital cost growth opportunities Increase • Restarted idle Chile IV facility in late 2018; completed first phase of Chile I refurbishment in 2019 production to full Working with gas suppliers to secure sufficient gas to support operating rates • Chile growth full two-plant oper
Slide 26: Advantaged Geismar methanol project
Advantaged Geismar 3 methanol project Project overview Distinct project advantages • Size: 1.8 million tonnes per year Process technology • Location: Geismar, Louisiana adjacent to existing • Uses excess purge gas from G1/G2 Geismar 1 and 2 facilities • Eliminates primary reformer (significant capit
Slide 27: Strong financial position and liquidity
Strong financial position and liquidity Liquidity as at Q2-19 Capital structure as at Q2-19 (millions) (millions) Cash (MX Share) 1 $204 Total Shareholders’ Equity $1,449 Revolving Credit Facility $300 Total Debt $1,317 $504 Total Debt/Capitalization 48% Net Debt/Capitalization 43% Net Debt/Enterpri
Slide 28: Investment grade rating metrics are a key priority
Investment grade rating metrics are a key priority Pro forma rating agency credit ratios • Leverage target = investment grade ($ billions unless indicated) Preserves financial flexibility Lowers cost of debt Total debt 1 Access to longer-term bond market, Debt (Q2-19) 1.3 shipping market, etc.
Slide 29: Robust and flexible financing plan for Geismar 3 project
Robust and flexible financing plan for Geismar 3 project Financing framework Financing plan 1. Ensure sufficient financial flexibility across Funding a range of methanol prices to manage • Approximately $350 million earmarked from the proceeds of the recent $700 million bond issuance to fund Geismar
Slide 30: Best-in-class governance
Best-in-class governance the power of agilty
Slide 31: Best-in-class corporate governance
Best-in-class corporate governance Corporate Governance Director Compensation 11 of 12 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 32: 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 33: 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 34: Summary
Summary • Global industry leader with • Strong cash generation at a wide competitive 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 shi
Slide 35: Forward-looking information
Forward-looking information This p resentation, ou r S econd Qu art er 2019 Man agement ’s Di scu ssion and Anal ysi s (“M D&”A) as well as comment s mad e during th e Second Quarter 2019 Inv esto r Conferenc e c all cont ain forward-lookin g stat ement s with resp ect to us and our indu stry . Thes
Slide 36: Appendix
Appendix the power of agilty
Slide 37: Methanol production process
APPENDIX Methanol production process • Primarily produced from natural gas 37
Slide 38: Global methanol industry demand
APPENDIX Global methanol industry demand By application By region Other Energy Formaldehyde AP (ex. Applications 28% China) 29% 16% China Europe 58% 13% Acetic Acid 9% Latin MTO America 14% North 2% Other Traditional America 20% 10% Source: IHS Chemical Supply and Demand Fall 2019 Update. 38
Slide 39: Methanex historical realized pricing
APPENDIX Methanex historical realized pricing • Methanex posts $550 Average realized price reference prices: Average realized price per tonne ~ US$395 (real) ~ US$350 (nominal) Monthly in North $450 America and Asia Quarterly in Europe $350 • Realized pricing is lower $250 than posted reference
Slide 40: 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 41: 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-term fixed price contract or financial hedge 2 Logistics • Rest of world: natural gas price varies based on methanol prices
Slide 42: Thank you
Thank you www.methanex.com linkedin.com/company/ methanex-corporation @Methanex Investor Relations T: 604 661 2600 invest@methanex.com