The world’s largest supplier of methanol is well financed to grow in 2011, but all eyes are on Methanex Corp.’s (TSX:MX) ability to inject new life in its Chilean plants.
The Vancouver-based company released its fourth quarter results Thursday, posting a net income of $27.9 million for the period compared with $10.6 million in the previous quarter.
For the year, Methanex recorded a net income of $101.7 million, which was boosted by the $22.2 million sale of its terminal facilities in Kitimat, B.C.
The company has $194 million in cash on hand and has started production at its new plant in Egypt.
Despite the good news, analysts yesterday zeroed in on the company’s facilities in Chile, where production has been curtailed since 2008.
The problem began in 2007 when the Argentinean government slashed natural gas exports to Methanex’s Chilean plants.
Natural gas is the feedstock required to produce Methanol, which is used in a number of products including gasoline, flooring and even paint.
Argentina’s move forced Methanex to source gas from Chilean companies.
But the Chilean companies, including state-owned energy company Empresa Nacional del Petroleo (ENAP), haven’t produced enough gas to meet plant capacity.
In 2010, Methanex produced some 935,000 tonnes of methanol while its total Chilean capacity was 3.8 million tonnes.
Only one of Methanex’s four plants in Chile is operational.
Meanwhile, Methanex and its Chilean partners are busy exploring for and developing natural gas reserves to feed its plants.
But company president and CEO Bruce Aitken conceded Thursday that new supplies of natural gas haven’t come online as quickly as he would have liked.
“We’ve been over promising and under delivering on this for the last couple years, and I’ll take the blame,” Aitken told investors on a conference call. “I was a bit naďve about how long it takes to develop natural gas in a province where there had been no activity. I looked at it and said, ‘well, there’s natural gas pipelines and there’s gas treatment facilities, maybe this can happen quite quickly.’
“Well, I was completely wrong.”
Aitken said the company’s Chilean plants are unlikely to reach capacity in the first quarter of 2011, but Methanex will continue “working hard” to develop alternative sources of natural gas supply.
The company’s shares closed down 3.96% to $28.64 Thursday.
At press time, Methanex shares remained unchanged.