Within the chemical industry, the petrochemical segments include hydrocarbons like benzene and ethylene, whereas the organic chemical segment includes components like methanol and isopropyl.
Methanol production relies heavily on transportation to move methanol from the plant to its customers or the methanol users for producing other products. The entire process requires safe and reliable ocean shipping and transporting. It also requires marine storage, and the methanol industry is prone to accidents which is a worrisome factor.
As per the latest report published by Statistica on July 6, the total value of petrochemical shipments was C$ 6.6 billion in 2019.
Now, let us turn our attention to a dividend-paying Canadian chemical stock that posted a one-year stock return of 65 per cent.
Methanex Corp (TSX: MX) and the revamp of its Geismar 3 project
Headquartered in Vancouver, Canada, Methanex Corp. is a company engaged in manufacturing and selling methanol. With an extensive supply chain network and the largest fleet of methanol ocean tankers, the company runs its operations and production sites in New Zealand, Egypt, Canada, Chile, and the US.
The company is the largest producer and supplier of methanol to international markets like Asia, North America, South America, and Europe.
The methanol produced and sold by this chemical company is used to produce foams, adhesives, and other products like windshield washer fluids and solvents. Methanex also intends to sell methanol to the oil and gas industry.
In a recent report, John Floren, president and CEO of Methanex Corporation announced the restart and revamp of the construction of the Geismar 3 project that is believed to strengthen the company's asset base.
The chemical company intends to roll out a quarterly dividend of US$ 0.125 per share on September 30, to its shareholders. The dividend yield was 1.15 per cent on September 20.
On this day, the company held earnings per share (EPS) of 1.57, price-to-earnings (P/E) ratio of 34.9. Moreover, the company posted a return on equity (ROE) of 7 per cent while the return on assets (ROA) was 1.67 per cent.
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Methanex Corporation’s performance, financials and strategic tie-ups
Methanex Corp held a market cap of C$ 4.16 billion and a stock price of C$ 54.64 on September 17.
On this same day, the company's stock price traded close to 13 per cent below its 52-week high of C$ 62.49 (January 6) and nearly 88 per cent above its 52-week low of C$ 29.12 (September 24, 2020).
The stock on a quarter-to-date (QTD) basis expanded by 33 per cent, and over the past year, it climbed by close to 65 per cent.
In the second quarter of the fiscal year 2021, Methanex posted a revenue of US$ 1.07 billion, up from US$ 512 million in Q2 FY20. The increase in the average realization price favored the increase in revenue during the latest quarter. The average realization price reached US$ 376 per tonne in Q2 FY21 from US$ 363 per tonne, the prior quarter.
In Q2 FY21, its adjusted EBITDA was US$ 262 million, and the reported net income was US$ 107 million or US$ 1.31 on a per-share basis.
The management of Methanex believes that the strong demand for methanol and industry-wide challenges on supply are likely to continue in Q3 FY21. This shall also be supported by the increase in methanol prices.
During Q2 FY21, a strategic agreement was signed between Waterfront Shipping, a subsidiary of Methanex, and Mitsui O.S.K Lines Ltd (MOL). This partnership is believed to improve the global supply chain by the management of the company. The quarter ended with a cash balance of US$ 750 million and an undrawn credit facility of US$ 300 million.
The strategic tie-up on the shipping agreement with Waterfront Shipping, Methanex, and Mitsui O.S.K.Lines Ltd. will serve as a critical element of the supply chain network of Methanex. Subjected to regulatory approval, the agreement is expected to commercialize by the end of 2021.
The Geismar 3 project is a 1.8 million tonne methanol plant and is believed to be de-risked by the company's senior leadership. The project will resume construction in October 2021, and the US$ 173 million credit drawn earlier for the construction facility was repaid. The Geismar 3 project is expected to be commercialized by 2023 or the beginning of 2024.
The company stands with undrawn backup liquidity of US$ 900 million at the end of Q2 FY21.