2023
Annual
Report
TABLE OF CONTENTS
2023 Financial Highlights
President’s Message
to Shareholders
Chair’s Message to
Shareholders
Methanex Corporation
is the world’s largest producer and supplier of
methanol to major international markets in Asia
Pacific, North America, Europe and South America.
Our methanol production sites are located in the
United States, New Zealand, Trinidad and Tobago,
Chile, Egypt and Canada. Our primary objective is to
create value through our leadership in the global
production, marketing and delivery of methanol to
Management’s Discussion
and Analysis
customers.
Consolidated
Financial Statements
Notes to Consolidated
Financial Statements
Methanol is a clear, biodegradable liquid commodity
chemical that is a key ingredient in a variety of
chemical derivatives, and serves as a building block to
produce a multitude of everyday consumer and
industrial items. Methanol is also used in a number of
energy-related applications as a cleaner-burning
alternative fuel.
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3
5
6
47
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Methanex – Global Methanol Industry Leader
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Global Production Facilities
Methanex’s global production sites are strategically positioned to supply every major global market.
United States
Our plants in Geismar, Louisiana, have the capability to serve
customers in all major methanol markets. We have two plants,
Geismar 1 and Geismar 2 in operation and a third, Geismar 3,
is expected to reach commercial production in 2024.
New Zealand
Our New Zealand production site supplies methanol primarily
to customers in Asia Pacific. We have two operating plants in
New Zealand: Motunui 1 and Motunui 2. A third plant, Waitara
Valley, is idled indefinitely.
Trinidad and Tobago
Our Trinidad production site supplies methanol to all major
methanol markets. We have two plants in Trinidad and
Tobago: Atlas (Methanex interest 63.1%) and Titan. The Titan
plant is currently idled and will resume operations in
September 2024, whereupon our Atlas plant will be idled.
Chile
Our Chile production site supplies methanol to
customers in South America and Asia Pacific. We have
two plants in Chile: Chile I and Chile IV.
Egypt
Our Egypt plant (Methanex interest 50%) is located on
the Mediterranean Sea and primarily supplies methanol
to the domestic and European market, but can also
supply markets in Asia.
Canada
Our plant in Medicine Hat, Alberta, supplies methanol
to customers in North America.
Global Supply Chain
Methanex has an extensive global supply chain and distribution network of terminals and storage facilities throughout
Asia Pacific, North America, Europe and South America. Methanex’s majority owned Waterfront Shipping subsidiary
operates the largest methanol ocean tanker fleet in the world. The fleet forms a seamless transportation network
dedicated to keeping an uninterrupted flow of methanol moving to storage terminals and customers’ plant sites around
the world.
Our Responsible Care Commitment
The Responsible Care Ethic and Principles for Sustainability are foundational to everything we do. This United Nations-
recognized chemical industry initiative informs the governance and management of our environmental and social
matters. It includes our commitment to environmental protection (including greenhouse gas emissions), health and safety
(occupational and process safety), physical security and product stewardship, business continuity and crisis
management, and our social responsibility program and strategy.
1
2023 Financial Highlights (U.S.$ millions, except where noted)
2023
2022
2021
2020
2019
Operations
Revenue
3,723
4,311
4,415
Net income (loss) (attributable to Methanex shareholders)
Adjusted net income (loss) 1
Adjusted EBITDA 1
Cash flows from operating activities
174
153
622
660
Diluted per Share Amounts (U.S.$ per common share)
Net income (loss) (attributable to Methanex shareholders)
Adjusted net income (loss) 1
2.57
2.25
354
343
932
987
4.86
4.79
482
460
1,108
994
2,650
(157)
(123)
346
461
3,284
88
71
566
515
6.13
6.03
(2.06)
(1.62)
1.01
0.93
Financial Position
Cash and cash equivalents
Total assets
Long-term debt, including current portion
Net debt to capitalization 1 2
Other Information
Average realized price (U.S.$ per tonne) 3
Total sales volume (000s tonnes)
Sales of Methanex-produced methanol (000s tonnes)
Total production (000s tonnes)
458
6,427
2,142
44 %
333
11,169
6,455
6,642
858
6,631
2,152
35 %
932
6,090
2,158
39 %
834
5,696
2,363
51 %
397
393
247
10,774
11,184
10,740
6,141
6,118
6,207
6,514
6,704
6,614
417
5,197
1,769
45 %
295
11,134
7,611
7,589
1 The Company has used the terms Adjusted EBITDA, Adjusted net income (loss), Adjusted net income (loss) per common share, and Net debt to capitalization throughout this
document. These items are non-GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to
similar measures presented by other companies. Refer to the Non-GAAP Measures section on page 37 for a description of each non-GAAP measure and reconciliations to the
most comparable GAAP measures.
2 Defined as total debt less cash and cash equivalents divided by the sum of total equity and total debt less cash and cash equivalents (including 100% of debt related to the
Egypt methanol facility).
3 The Company has used Average realized price ("ARP") throughout this document. ARP is calculated as revenue divided by the total sales volume. It is used by management to
assess the realized price per unit of methanol sold, and is relevant in a cyclical commodity environment where revenue can fluctuate widely in response to market prices..
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President’s Message to Shareholders
DEAR FELLOW SHAREHOLDERS,
This year, my first in the role of president and chief executive officer, I had the privilege of meeting with team members around the
world and witnessing their commitment to our strategy and values that have made Methanex the world’s global methanol leader.
Their dedication has led to another year of strong operational results for Methanex: excellent safety and environmental performance,
high asset and supply chain reliability, and solid financial returns. As one global team, we’re focused on making an essential product
that improves everyday life and provides solutions for a sustainable future.
LOOKING BACK AT 2023
Progressing Geismar 3 and sustainable solutions
The addition of the 1.8 million tonne Geismar 3 (G3) plant to our portfolio will substantially enhance our cash flow capability over a
range of methanol prices and will also lower our average portfolio emissions intensity. Although I am disappointed by the delayed
start-up of the plant I want to thank our G3 team who have worked over eight million hours to construct this plant safely. Despite the
complexities of executing such a large project next to two operating plants and with a peak workforce of more than 1,800 people, the
project had no Days Away from Work cases – a significant achievement. We look forward to the start-up of the plant in 2024 and the
additional reliable production capacity it will add for our customers.
The demand for low carbon methanol is growing, and this past year we built out a Low Carbon Solutions function which is mandated
with matching low carbon methanol supply with new demand as this market develops. The team has done an excellent job and is
quickly developing several potential sources of low carbon methanol supply to meet the needs of current and potential new
customers. In 2023 we saw strong momentum for methanol as a marine fuel with orders for methanol dual-fuel vessels outpacing
orders for LNG-powered ships. There are now over 250 methanol dual-fuel vessels on order or on the water. We demonstrated our
leadership in this evolving market when we successfully completed the first-ever net-zero voyage, on our dual-fuel vessel Cajun Sun,
which was fueled by bio-methanol from our ISCC (International Sustainability and Carbon Certification) certified plant in Geismar. We
believe methanol can play an essential role in a lower carbon world and Methanex is well-positioned to support the transition to a low-
carbon economy through our industry leadership.
Safety remains our top priority
An unwavering commitment to safety, environmental excellence, and the well-being of the communities in which we operate is a
fundamental pillar of both our business and our culture. In 2023, we received three Responsible Care® awards from the Chemistry
Industry Association of Canada, including the Company of the Year award, for our achievements in these areas. As one of my top
priorities for the year, I visited each of our manufacturing sites and I observed first-hand how safety culture is embedded into our
teams through their continual focus on developing “safeguards” to contain process safety risks and embracing hazard awareness and
identification across our sites. We remain committed to enhance our safety culture through focused global and regional initiatives such
as engaging hearts and minds of our team members through our in-house "Switch On" to Responsible Care program.
Sustaining and maintaining optionality in our asset portfolio
In 2023, we produced 6.6 million tonnes of methanol, an increase of approximately 0.5 million tonnes compared to 2022, thanks to
high reliability rates across our asset portfolio. We successfully completed three major turnarounds at our Geismar 1, Chile 1, and
Motunui 2 plants to maintain safe, reliable and sustainable operation. The debottlenecking of two distillation columns at our Motunui
facility in New Zealand simplifies our operations while also reducing our greenhouse gas emissions. Our global manufacturing team is
focused on planning and executing major maintenance programs so that our facilities continue to operate efficiently and reliably.
Ensuring a consistent and cost-effective supply of natural gas to each of our six manufacturing sites is a critical component of our
strategy. With G3 in operation, we’ll have 4.5 million tonnes of Methanex-owned operating capacity in North America and are
executing a layered hedging program to secure a competitive cost structure over the long term. In Chile, we secured gas from
Argentina to re-start our second plant in September, which is enabling us to run both plants at full rates through April 2024, the first
time we have achieved this in almost a decade. Natural gas development and related infrastructure investments in Argentina continue
to advance and we’re working with our natural gas suppliers to extend the period of full gas availability to our Chilean plants. In
Trinidad and Tobago, we secured a two-year natural gas agreement with the National Gas Company of Trinidad and Tobago that will
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underpin the restart of our wholly-owned Titan methanol plant in September 2024. This agreement allows us to maintain our world-
class team while we work with the government to secure a longer-term economic gas supply.
Strong financial results despite challenging market conditions
Our commitment to disciplined capital allocation and operational excellence in financial management enabled us to successfully
navigate the uncertain market conditions in 2023. The methanol market faced pressures towards the middle of the year from softer
than expected demand, higher than typical operating rates and low methanol-to-olefin (MTO) affordability that led to lower prices.
Stronger demand, primarily from China, coupled with plant outages in North America and Asia and winter gas curtailments impacting
production from Iran and China, led to rising methanol prices in the second half of the year and into 2024.
In response to macro conditions, we halted our share buyback in June and allocated excess cash flow, after the G3 spend, to building
our cash reserves so we can repay rather than refinance the $300 million bond due in December 2024. For the full year, we generated
adjusted EBITDA of $622 million and adjusted net income per share of $2.25, allowing us to return $136 million to shareholders
through our regular dividend and share repurchases. We proved the resiliency of our business model in the face of these continued
macroeconomic risks as we ended the year in a strong financial position with $458 million in cash (of which approximately $110 million
is allocated to the remaining G3 capital requirements) and $300 million of undrawn backup liquidity, leaving us well-positioned for
2024 and onwards with growing cash flow generation capability.
LOOKING AHEAD TO 2024 AND BEYOND
In 2024, we expect methanol demand growth rates to be similar to that of 2023 and the market to be relatively balanced with new
capacity partially offset by supply rationalizations. Methanol is an essential chemical for everyday life, and we anticipate continued
demand growth over the long-term due to its use in both traditional chemical applications and its growing role as a cleaner-burning
alternative fuel. Beyond 2024, we believe industry supply could be challenged to keep pace with demand growth as there are limited
new capacity additions planned outside of China.
Our achievements in 2023 strengthened our position as the global methanol leader and speak to our continued ability to successfully
navigate an uncertain global economy and future commodity cycles. We remain committed to prudently managing our business and
maintaining a strong balance sheet to allow us to strategically address these and other risks. Our capital allocation priorities are to
maintain our assets, repay the $300 million bond due at the end of 2024, identify accretive growth opportunities – both conventional
and low carbon – and continue our established record of returning excess cash to shareholders through regular dividends and flexible
share buybacks.
Along with the release of this 2023 Annual Report, we are publishing our 2023 Sustainability Report where you can learn more about
our sustainability culture, initiatives on material environmental, social and governance topics, and the work we are doing to support the
transition to a lower carbon world.
I would like to thank the dedicated Methanex teams around the world, our Board of Directors, and the Executive Leadership Team for
their ongoing commitment to our company. I am confident that our continued focus on the strategic pillars of leadership, operational
excellence, and low cost will enable us to deliver shareholder value over a range of methanol prices.
Rich Sumner
President & Chief Executive Officer
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Chair’s Message to Shareholders
DEAR FELLOW SHAREHOLDERS,
As I look back on 2023, I am pleased at the success of our CEO transition process which saw our new President and Chief Executive
Officer, Rich Sumner, and his largely new executive leadership team transitioning into their roles early in the year. Rich and the new
senior executives were all internal appointments, which is testimony to Methanex’s strong talent development and succession
planning capability. Together, the new executive team members have over 120 years of leadership experience with Methanex, which
has enabled them to efficiently step into their positions and continue creating value for shareholders.
Moreover, in a short period of time, the Board and the new executive team have developed a positive, open and collaborative
relationship. I believe that management’s candid and transparent communication style with both the Board and outside stakeholders
has been instrumental to Methanex’s success in 2023. To take just one example, starting this year, the independent directors of the
Board and the CEO now hold a “pre-meeting” before the formal start of the full Board meeting to ensure sufficient focus on priority
issues. This simple change, which originated out of our annual board effectiveness survey, is just part of a multi-pronged effort to
promote strong dialogue between the Board, CEO and the broader management team.
Strategy and Risk Management
One of the key roles of all boards is to oversee and provide input and guidance on navigating risks and company strategy.
Management has taken steps to further mature its enterprise risk management program and has consulted with the Board on the
ways it is enhancing Methanex’s enterprise risk oversight practices, processes and controls. The Board fully supports the direction of
management’s efforts. In 2023, both the Board and senior management put greater emphasis on having more explicit risk
management discussions and analyses. These discussions are being integrated into the corporate strategy process, with the targeted
result being an enhanced assessment of material risks and a more comprehensive discussion of risk appetite.
The Board’s oversight of the annual strategy process culminates with a full-day strategy session each July. This past year, much
discussion revolved around the evolution of low carbon methanol markets, particularly the marine fuel market, as well as gas risks and
opportunities at our existing plants. Board-management discussions and debates regarding risks and opportunities are embedded into
every Board meeting. This provides the Board with a deeper understanding of key issues and sets the stage for an informed and
iterative process for developing and approving the strategy.
Board Renewal
In the same way that the Board prepares for the eventual retirement of the President & CEO, it also actively undertakes succession
planning for directors. Part of this process involves an annual review of the Board’s skills matrix to determine which skills and
experiences are required to ensure directors are providing proper oversight and high-level input on strategy. Additionally, the Board
must ensure that it will continue to have these skills and experiences as individual directors retire. From time to time, Methanex will
strategically increase its board size in anticipation of upcoming retirements in order to allow for effective transition of directors in key
areas. In October 2023, we welcomed John Sampson, who is currently Senior Vice President, Operations, Manufacturing and
Engineering of Dow Inc. and has extensive expertise in chemical manufacturing excellence and driving safety performance. And in
this year’s proxy circular we are inviting shareholders to elect a new director, Roger Perreault. Roger is a former President & CEO of
UGI Corporation with strong leadership experience in the natural gas industry and manufacturing. I look forward to the insight he will
provide the Board.
Doug Arnell
Chair of the Board
5
Management’s Discussion and Analysis
Index
6
8
10
10
12
12
18
24
Overview of the Business
Our Strategy
Financial Highlights
Production Summary
How We Analyze Our Business
Financial Results
Liquidity and Capital Resources
Risk Factors and Risk Management
34
37
37
37
39
39
40
41
Critical Accounting Estimates
Adoption of New Accounting Standards
Anticipated Changes to International Financial Reporting Standards
Non-GAAP Measures
Quarterly Financial Data (Unaudited)
Selected Annual Information
Controls and Procedures
Forward-Looking Statements
This Management’s Discussion and Analysis ("MD&A") is dated March 8, 2024, and should be read in conjunction with our
consolidated financial statements and the accompanying notes for the year ended December 31, 2023. Except where otherwise
noted, the financial information presented in this MD&A is prepared in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board (the "IASB"). We use the United States dollar as our reporting
currency and, except where otherwise noted, all currency amounts are stated in United States dollars. In this MD&A, a reference to
the "Company" refers to Methanex Corporation and a reference to "Methanex," "we," "our" and "us" refers to the Company and its
subsidiaries or any one of them as the context requires, as well as their respective interests in joint ventures and partnerships.
Throughout this document we use non-GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP
and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Non-GAAP Measures
section on page 37 for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.
Some of the historical price data and supply and demand statistics for methanol and certain other industry data contained in this
MD&A are derived by the Company from industry consultants or from recognized industry reports regularly published by independent
consulting and data compilation organizations in the methanol industry, including Chemical Market Analytics by OPIS, a Dow Jones
company, Tecnon OrbiChem Ltd., Argus, ICIS, S&P Global Platts and Methanol Market Services Asia. Industry consultants and
industry publications generally state that the information provided has been obtained from sources believed to be reliable. We have
not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions
relied upon in these reports.
As at March 7, 2024 we had 67,387,492 common shares issued and outstanding and stock options exercisable for 1,478,353
additional common shares.
Additional information relating to Methanex, including our Annual Information Form, is available on our website at www.methanex.com,
the Canadian Securities Administrators’ SEDAR+ website at www.sedarplus.ca and on the United States Securities and Exchange
Commission’s EDGAR website at www.sec.gov.
OVERVIEW OF THE BUSINESS
Methanol is a clear liquid commodity chemical that is produced from natural gas and is also produced from coal, particularly in China.
Traditional chemical demand, which represents approximately 50% of global methanol demand, is used to produce traditional
chemical derivatives, including formaldehyde, acetic acid and a variety of other chemicals that form the basis of a wide variety of
industrial and consumer products. Demand for energy-related applications, which represents over 30% of global methanol demand,
includes several applications including methyl tertiary-butyl ether ("MTBE"), fuel applications (including vehicle fuel, marine fuel and
other thermal applications), di-methyl ether and biodiesel. Demand into methanol-to-olefins ("MTO") represents over 15% of global
methanol demand. MTO plants produce light olefins which have wide applications in packaging, textiles, plastic parts and automotive
components.
We are the world’s largest producer and supplier of methanol to the major international markets in Asia Pacific, North America, Europe
and South America. Our total annual operating capacity, including Methanex's interests in jointly owned plants, is currently 9.3 million
tonnes and is located in the United States, New Zealand, Trinidad and Tobago, Chile, Egypt, and Canada. In addition to the methanol
produced at our sites, we purchase methanol produced by others under methanol offtake contracts and on the spot market. This gives
us flexibility in managing our supply chain while continuing to meet customer needs and support our marketing efforts. We have
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marketing rights for 100% of the production from the jointly-owned plants in Trinidad and Tobago and in Egypt, which provides us with
an additional 1.3 million tonnes per year of methanol offtake supply when the plants are operating at full capacity.
Refer to the Production Summary section on page 10 for more information.
2023 Industry Overview & Outlook
Methanol is a global commodity and our earnings are significantly affected by fluctuations in the price of methanol, which is directly
impacted by changes in methanol supply and demand. Based on the diversity of end products in which methanol is used, demand for
methanol is driven by a number of factors, including: the strength of global and regional economies, industrial production levels,
energy prices, pricing of end products, downstream capacity additions and government regulations and policies. Methanol industry
supply is impacted by the cost of production, methanol industry operating rates and new methanol industry capacity additions.
Demand
We estimate that global methanol demand increased to approximately 91 million tonnes in 2023 driven primarily by growth in China.
Outside of China, traditional demand decreased slightly due to ongoing macro-economic headwinds and the impact of inflation and
the resulting monetary policy actions on the rate of industrial activity. This was offset by growing demand in China from traditional
chemical derivatives driven by higher GDP growth as compared to 2022, higher demand from energy-related applications with
increased global mobility, and strong operating rates in the second half of the year from the methanol-to-olefins (MTO) sector.
Over the long term, we believe that traditional chemical demand is influenced by the strength of global and regional economies and
industrial production levels. We believe that demand for energy-related applications will be influenced by energy prices, pricing of end
products, and government policies that are playing an increasing role in encouraging new applications for methanol due to its
emissions benefits as a fuel. The future operating rates and methanol consumption of MTO producers will depend on a number of
factors, including pricing for their various final products, the degree of downstream integration of these units with other products, the
impact of olefin industry feedstock costs, including naphtha, on relative competitiveness and plant maintenance schedules.
Ongoing regulatory changes as part of the global energy transition along with other factors have led to a growing interest in methanol
as a fuel due to its cleaner-burning attributes and potential to reduce greenhouse gas emissions.
There is growing interest in methanol as a marine fuel given its environmental benefits, wide availability, cost competitiveness and
ease of use. When made from renewable sources, methanol can be carbon neutral on a life-cycle basis, providing a future-proof
pathway to meet the decarbonization goals of the shipping industry. The demand outlook for methanol as marine fuel continues to
grow with orders for dual-fueled vessels and retrofits. The current vessels operating coupled with the order book for new builds and
retrofits represents over 250 dual-fueled ships. Actual methanol consumption from marine applications will depend on regulations,
relative economics versus other fuels, and other factors.
Methanol is also being used as a vehicle fuel in China. Methanol can be blended with gasoline in low quantities and used in existing
vehicles and can be used in high-proportion blends such as M85 in flex-fuel vehicles or M100 in dedicated methanol-fueled vehicles.
There is significant interest in high-level methanol fuel blends for M100 taxis and trucks (able to run on 100% methanol fuel) in China.
There are approximately 30,000 taxis and methanol hybrid passenger cars and 4,000 heavy-duty trucks in China, running on M100
fuel, representing approximately one million tonnes of annual methanol demand. Other countries are in the assessment or near-
commercial stage for using methanol as a vehicle fuel.
In China, stricter air quality emissions regulations in several provinces are leading to a phase-out of coal-fueled commercial boilers,
kilns, and cooking stoves in favour of cleaner fuels, creating a growing market for methanol as an alternative fuel. We estimate that
this demand segment represents approximately seven million tonnes of methanol demand. We continue to support various pilot
projects and the development of operational and safety standards to support the commercialization of methanol as a thermal fuel for
industrial boilers, kilns and cooking stoves.
Supply
Methanol is predominantly produced from natural gas and is also produced from coal, particularly in China. The cost of production is
influenced by the availability and cost of raw materials, including coal and natural gas, freight costs, other operating and maintenance
costs and government policies. An increase in economically competitive methanol supply, all else equal, can displace supply from
higher cost producers and have a negative impact on methanol price.
In 2023, approximately two to three million tonnes of new production capacity was added in China. In Iran, a new plant was
commissioned at the end of 2023 but plant operating rates continue to be uncertain and challenged due to the impact of sanctions,
plant technical issues and seasonal natural gas constraints. The methanol industry ran at similar rates in 2023 compared to 2022.
In North America, we expect our new 1.8 million tonne Geismar 3 facility, which will be our third plant in Louisiana, to reach
commercial production in 2024. In Malaysia, a 1.8 million tonne plant is under construction with a scheduled start up in 2024. We
expect to see increased supply from new capacities to be partially offset by rationalization of existing supply in the market in 2024.
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With the shut down of Atlas and the restart of Titan in September 2024 the overall production in Trinidad will be lower by approximately
1 million tonnes annually and we continue to monitor other factors that could further impact supply such as the announced gas
diversion from methanol to LNG in Equatorial Guinea. In China, there are planned capacity additions over the near-to-medium term
which we expect will be somewhat offset by the closure of some small-scale, inefficient and older plants. New capacity built in China is
expected to be consumed domestically as China requires methanol imports to meet growing demand.
Price
The methanol business is a highly competitive commodity industry and future methanol prices will ultimately depend on the strength of
global demand and methanol industry supply. Methanol demand and industry supply are driven by several factors as described above.
Methanol prices have historically been, and are expected to continue to be, characterized by cyclicality.
Methanex’s average realized price in 2023 was $333 per tonne compared to $397 per tonne in 2022.
OUR STRATEGY
Our primary objective is to create value through our leadership in the global production, marketing and delivery of methanol to
customers. To achieve this objective we have a simple, clearly defined strategy: leadership, low cost and operational excellence. We
pride ourselves in being a leader in Responsible Care (an operating ethic and set of principles for sustainability developed by the
Chemistry Industry Association of Canada and recognized by the United Nations) and having a strategic focus on managing risks and
proactive plans relating to personnel health and safety, environmental protection, community involvement, social responsibility,
sustainability, security and emergency preparedness. Our brand differentiator "The Power of Agility®" defines our culture of flexibility,
responsiveness and creativity that allows us to capitalize on opportunities quickly as they arise, and swiftly respond to customer
needs.
Leadership
Leadership is a key element of our strategy. We are focused on creating value through our position as the leading producer and
supplier in the global methanol industry, improving our ability to cost-effectively deliver methanol to customers and supporting both
traditional and energy-related global methanol demand growth.
We are the leading producer and supplier of methanol to the major international markets in Asia Pacific, North America, Europe and
South America. Our 2023 sales volume of 11.2 million tonnes of methanol represented approximately 12% of global methanol
demand. This scale allows us the flexibility to meet customer needs across international markets. Our leadership position has also
enabled us to play an important role in the methanol industry, which includes publishing Methanex reference prices that are used in
each major market as the basis of pricing for our customer contracts.
The geographically diverse locations of our production sites allow us to deliver methanol cost-effectively to customers in all major
global markets. We continue to invest in global distribution and supply infrastructure, which includes the world's largest methanol
ocean tanker fleet and terminal capacity in all major international markets, enabling us to enhance value to customers by providing
reliable and secure supply.
Another key component of our global leadership strategy is our ability to supplement methanol production with methanol purchased
from third parties to give us flexibility in our supply chain to meet customer commitments. We purchase methanol through a
combination of methanol offtake contracts and spot purchases. We manage the cost of purchased methanol by taking advantage of
our global supply chain infrastructure, which allows us to purchase methanol in the most cost-effective region while still maintaining
overall security of supply.
China and Asia continue to lead global methanol demand growth. We have storage capacity in China, South Korea, Japan and
Singapore that allows us to cost-effectively manage supply to customers and we have offices in Shanghai, Beijing, Hong Kong, Tokyo,
and Seoul to ensure customer service and industry positioning in the region. This enables us to participate in and improve our
knowledge of the evolving and growing methanol markets in China and other Asian countries including the use of methanol as a
cleaner burning fuel.
Low Cost
A low cost structure is an important competitive advantage in a commodity industry and is a key element of our strategy. Our approach
to major business decisions is guided by a drive to improve our cost structure and create value for shareholders. The most significant
components of total costs are natural gas for feedstock and distribution costs associated with delivering methanol to customers.
We manage our natural gas costs in two ways: through gas contracts linked to methanol price and through fixed price contracts. Our
production facilities outside North America are largely underpinned by natural gas purchase agreements where the natural gas price is
linked to methanol prices. This pricing relationship enables these facilities to be competitive throughout the methanol price cycle. In
8
North America, we have fixed price contracts and hedges in place targeting minimum operating rate requirements of approximately
70% in the near term. We purchase our remaining North American gas requirements through the spot market.
Our production facilities are well located to supply global methanol markets and we take a long-term approach to contracting shipping
capacity to meet customer needs. Nonetheless, the cost to distribute methanol from production locations to customers is a significant
component of total operating costs. These include costs for ocean shipping, in-market storage facilities and in-market distribution. We
focus on identifying initiatives to reduce these costs, including optimizing the use of our shipping fleet, third-party backhaul
arrangements and taking advantage of prevailing conditions in the shipping market by varying the type and term of ocean vessel
contracts. We also look for opportunities to leverage our global asset position by entering into geographic product exchanges with
other methanol producers to reduce distribution and transportation costs.
Operational Excellence
We maintain a focus on operational excellence in all aspects of our business. This includes excellence in manufacturing and supply
chain processes, marketing and sales, Responsible Care and financial management.
To differentiate ourselves from competitors, we strive to be the best operator and the preferred supplier to customers. We believe that
reliability of supply is critical to the success of our customers’ businesses and our goal is to deliver methanol reliably and cost-
effectively. Our commitment to Responsible Care drives our adherence to the highest principles of health, safety, environmental
stewardship, and social responsibility. We believe this commitment helps us achieve an excellent overall environmental and safety
record and aligns our community involvement and social investments with our core values.
Product stewardship is a vital component of a Responsible Care culture and guides our actions through the complete life cycle of our
product. We aim for the highest safety standards to minimize risk to employees, customers and suppliers as well as to the
environment and the communities in which we do business. We promote the proper use and safe handling of methanol at all times
through a variety of internal and external health, safety and environmental initiatives, and we work with industry colleagues to improve
safety standards. We readily share technical and safety expertise with key stakeholders (including customers, end-users, suppliers,
and logistics providers) through direct communication and active participation in local and international industry associations, seminars
and conferences and online education initiatives.
In 2023, our strategy of operational excellence in financial management supported the construction of the Geismar 3 project to be
funded from our cash balance, while continuing to allocate any excess cash to shareholders through share repurchases and a regular
dividend. At December 31, 2023, we remain in a strong liquidity position with $458 million in cash and $300 million of undrawn back-
up liquidity through our revolving credit facility, leaving us in position to fund the remaining costs for the Geismar 3 project fully with
cash on hand. Our intent remains to repay rather than re-finance the $300 million bond due at the end of 2024. We have no other
significant debt maturities in the near term. We actively manage our liquidity and capital structure in light of changes to economic
conditions, the underlying risks inherent in our operations and the capital requirements of our business.
Sustainability
We have embedded sustainability into our long-term strategy alongside our commitment to Responsible Care. We prioritize the
sustainability topics that are most relevant to our business and stakeholders. In a sustainability context, material topics are those
environmental, social or governance topics that can significantly impact our business success and are of interest to our key
stakeholders. In 2023, we conducted a materiality assessment with external stakeholder outreach to inform whether we were
prioritizing the right topics. Our top material sustainability topics were confirmed as greenhouse gas ("GHG") emissions, transition to a
low-carbon economy, employee and contractor safety and process safety.
Our executive leadership team has overall responsibility for ensuring our material sustainability topics are being effectively evaluated
and managed. These include climate-related risks and opportunities associated with our GHG emissions and the transition to a low-
carbon economy. The Executive Leadership Team incorporates these matters into our strategic and business planning activities to
support the long-term sustainability of our business.
We believe that having a diverse team, equitable people practices and an inclusive workplace leads to a better culture, better
decisions and a better company. Our Equity, Diversity and Inclusion (EDI) Vision is to have an inclusive culture where diversity is
valued, differences are embraced and everyone has the opportunity to contribute, develop and advance. The Global EDI Council,
made up of senior leaders from around the globe, supports the development and execution of our EDI strategy and its integration into
the business. In 2023, we made significant strides towards achieving our vision, including a global roll-out of our foundational EDI
learning module to all team members, the development of a Guide to Equitable Succession Planning, and the launch of an Employee
Resource Group (ERG) Toolkit to support team members in forming new ERGs.
In March 2024, we issued our 2023 Sustainability Report, aligned with the Sustainability Accounting Standards Board (SASB) and the
Task-Force on Climate-related Financial Disclosures (TCFD). Our 2023 Sustainability Report is available at https://
www.methanex.com/sustainability.
9
FINANCIAL HIGHLIGHTS
($ Millions, except as noted)
Production (thousands of tonnes) (attributable to Methanex shareholders)
Sales volume (thousands of tonnes)
Methanex-produced methanol
Purchased methanol
Commission sales
Total sales volume 1
Methanex average non-discounted posted price ($ per tonne) 2
Average realized price ($ per tonne) 3 4
Revenue
Net income (attributable to Methanex shareholders)
Adjusted net income 4
Adjusted EBITDA 4
Cash flows from operating activities
Basic net income per common share ($ per share)
Diluted net income per common share ($ per share)
Adjusted net income per common share ($ per share) 4
Common share information (millions of shares)
Weighted average number of common shares
Diluted weighted average number of common shares
Number of common shares outstanding, end of year
2023
6,642
6,455
3,527
1,187
2022
6,118
6,141
3,688
945
11,169
10,774
434
333
503
397
3,723
4,311
174
153
622
660
2.57
2.57
2.25
68
68
67
354
343
932
987
4.95
4.86
4.79
71
72
69
1 Methanex-produced methanol represents our equity share of volume produced at our facilities and excludes volume marketed on a commission basis related to 36.9% of the
Atlas facility and 50% of the Egypt facility that we do not own.
2 Methanex average non-discounted posted price represents the average of our non-discounted posted prices in North America, Europe, China and Asia Pacific weighted by
sales volume. Current and historical pricing information is available at www.methanex.com.
3 The Company has used Average realized price ("ARP") throughout this document. ARP is calculated as revenue divided by the total sales volume. It is used by management
to assess the realized price per unit of methanol sold, and is relevant in a cyclical commodity environment where revenue can fluctuate widely in response to market prices.
4 The Company has used the terms Adjusted net income, Adjusted net income per common share, and Adjusted EBITDA throughout this document. These items are non-
GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by
other companies. Refer to the Non-GAAP Measures section on page 37 for a description of each non-GAAP measure and reconciliations to the most comparable GAAP
measures.
PRODUCTION SUMMARY
The following table details the annual operating capacity and actual production at our facilities in 2023 and 2022:
(Thousands of tonnes)
USA (Geismar) 2
New Zealand 3
Trinidad (Methanex interest) 4
Chile
Egypt (50% interest)
Canada (Medicine Hat)
Annual operating
capacity 1
2023
Production
2022
Production
2,200
2,200
1,960
1,700
630
600
9,290
2,142
1,381
1,074
993
504
548
2,041
1,230
981
888
385
593
6,642
6,118
1 The annual operating capacity of our production facilities may be higher or lower than original nameplate capacity as, over time, these figures have been adjusted to reflect
ongoing operating efficiencies. Actual production for a facility in any given year may be higher or lower than operating capacity due to a number of factors, including natural
gas availability, feedstock composition, the age of the facility's catalyst, turnarounds and access to CO2 from external suppliers for certain facilities. We review and update the
operating capacity of our production facilities on a regular basis based on historical performance.
2 The operating capacity of USA (Geismar) does not include the incremental capacity from the Geismar 3 plant (1.8 million tonnes) that is starting up in 2024.
3 The operating capacity of New Zealand is made up of the two Motunui facilities and the Waitara Valley facility. The Waitara Valley facility is idled indefinitely due to natural
gas constraints.(Refer to the New Zealand section below.)
4 The operating capacity of Trinidad is made up of the Titan (100% interest) and Atlas (63.1% interest) facilities. (Refer to the Trinidad and Tobago section below.)
10
United States
Our Geismar plants in Louisiana produced 2.1 million tonnes of methanol in 2023, compared with 2.0 million in 2022. Production at the
Geismar site was higher in 2023 due an unplanned outage in late 2022 as the utilities supplier for the Geismar site experienced a loss
of power due to a failed transformer. Refer to the Risk Factors and Risk Management – United States section on page 28 for more
information.
New Zealand
In New Zealand, we produced 1.4 million tonnes of methanol in 2023 compared with 1.2 million tonnes in 2022. Production for 2023
was higher than 2022 due to higher gas deliveries in 2023. We operate the two Motunui plants in New Zealand with our smaller
Waitara Valley plant idled indefinitely since the beginning of 2021 due to natural gas constraints.
We estimate production for 2024 to be between 1.0 - 1.1 million tonnes. 2024 natural gas supply is expected to be impacted by a
combination of our suppliers' planned natural gas infrastructure maintenance outages as well as lower than expected output from
existing wells. While upstream investment has been made by our gas suppliers in New Zealand over the past two years, recent gas
production results have been lower than originally expected which has contributed to the revised forecast for lower production in 2024
as compared to 2023. Refer to the Risk Factors and Risk Management – New Zealand section on page 28 for more information.
Trinidad and Tobago
We operate our fully-owned Titan facility, which is currently idled, and the Atlas facility, in which we have a 63.1% economic interest
and marketing rights for 100% of the production. Together, the two facilities represent 2.0 million tonnes of annual operating capacity.
The Atlas facility produced 1.1 million tonnes of methanol (Methanex share) in 2023, compared with 1.0 million tonnes in 2022.
Production in Trinidad was higher in 2023 due to unplanned outages in the fourth quarter of 2022. In October, Methanex signed a two-
year natural gas supply agreement with the National Gas Company of Trinidad and Tobago (NGC) for its currently idled, wholly
owned, Titan methanol plant (875,000 tonnes per year capacity) to restart operations in September 2024. Simultaneously, the Atlas
plant (Methanex interest 63.1% or 1,085,000 tonnes per year capacity) will be idled in September 2024, when its legacy 20-year
natural gas supply agreement expires. Refer to the Risk Factors and Risk Management – Trinidad and Tobago section on page 28 for
more information.
Chile
The Chile facilities produced 1.0 million tonnes of methanol in 2023 compared with 0.9 million tonnes in 2022. Production in Chile was
higher in 2023 due to higher gas availability from Argentina. Both plants are expected to run at full rates from the end of September
2023 through April 2024, the Southern hemisphere summer months. We estimate production for 2024 will be between 1.1 - 1.2 million
tonnes. This production is underpinned by year-round natural gas supply from Chile for about 30 – 35% of our requirements with the
remaining 65 – 70% from Argentina during the non-winter period allowing us to operate both plants at full rates. Natural gas
development and related infrastructure investments in Argentina continue to progress and we are working with our Argentine natural
gas suppliers on extending the period of full gas availability to our plants. Refer to the Risk Factors and Risk Management – Chile
section on page 28 for more information.
Egypt
We operate the 1.3 million tonne per year methanol facility in Egypt, in which we have a 50% economic interest and marketing rights
for 100% of the production. We produced 1.0 million tonnes of methanol (Methanex share of 0.5 million) in Egypt in 2023 compared to
0.8 million tonnes (Methanex share of 0.4 million) in 2022. We had lower levels of production from Egypt in 2022 as we completed an
extended planned turnaround. 2023 production in Egypt was impacted by an unplanned outage in mid-October caused by a
mechanical failure in the synthesis gas compressor. The unit was removed from service and repaired on an expedited schedule at the
manufacturer overseas. The repairs were completed and the plant restarted in February 2024. Refer to the Risk Factors and Risk
Management – Egypt section on page 29 for more information.
Canada
Medicine Hat produced 0.5 million tonnes of methanol in 2023 compared with 0.6 million tonnes in 2022. Production was lower in
2023 compared to 2022 due to unplanned outages in 2023. Refer to the Risk Factors and Risk Management – Canada section on
page 29 for more information.
11
HOW WE ANALYZE OUR BUSINESS
Our operations consist of a single operating segment: the production and sale of methanol. We review our financial results by
analyzing changes in the components of Adjusted EBITDA, mark-to-market impact of share-based compensation, depreciation and
amortization, finance costs, finance income and other, and income taxes.
The Company has used the terms Adjusted net income, Adjusted net income per common share, and Adjusted EBITDA throughout
this document. These items are non-GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and
therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Non-GAAP Measures section
on page 37 for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.
In addition to the methanol that we produce at our facilities, we also purchase and resell methanol produced by others and we sell
methanol on a commission basis. We analyze the results of all methanol sales together, excluding commission sales volume. The key
drivers of changes in Adjusted EBITDA are average realized price, cash costs and sales volume, which are defined and calculated as
follows:
PRICE
CASH
COSTS
SALES
VOLUME
The change in Adjusted EBITDA as a result of changes in average realized price is calculated as the difference
from period to period in the selling price of methanol multiplied by the current period total methanol sales volume,
excluding commission sales volume.
The change in Adjusted EBITDA as a result of changes in cash costs is calculated as the difference from period to
period in cash costs per tonne multiplied by the current period total methanol sales volume, excluding commission
sales volume in the current period. The cash costs per tonne is the weighted average of the cash cost per tonne
of Methanex-produced methanol and the cash cost per tonne of purchased methanol. The cash cost per tonne of
Methanex-produced methanol includes absorbed fixed cash costs per tonne and variable cash costs per tonne.
The cash cost per tonne of purchased methanol consists principally of the cost of methanol itself. In addition, the
change in Adjusted EBITDA as a result of changes in cash costs includes the changes from period to period in
unabsorbed fixed production costs, consolidated selling, general and administrative expenses and fixed storage
and handling costs.
The change in Adjusted EBITDA as a result of changes in sales volume is calculated as the difference from period
to period in total methanol sales volume, excluding commission sales volume, multiplied by the margin per tonne
for the prior period. The margin per tonne for the prior period is the weighted average margin per tonne of
Methanex-produced methanol and margin per tonne of purchased methanol. The margin per tonne for Methanex-
produced methanol is calculated as the selling price per tonne of methanol less absorbed fixed cash costs per
tonne and variable cash costs per tonne. The margin per tonne for purchased methanol is calculated as the
selling price per tonne of methanol less the cost of purchased methanol per tonne.
We own 63.1% of the Atlas methanol facility and market the remaining 36.9% of its production through a commission offtake
agreement, both of which we recognize as revenue on a gross basis. A contractual agreement between us and our partners
establishes joint control over Atlas. As a result, we account for this investment using the equity method of accounting, which results in
63.1% of the net assets and net earnings of Atlas being presented separately in the consolidated statements of financial position and
consolidated statements of income, respectively. For the purpose of analyzing our business, Adjusted EBITDA, Adjusted net income
and Adjusted net income per common share include an amount representing our 63.1% equity share in Atlas. Our analysis of
depreciation and amortization, finance costs, finance income and other, and income taxes is consistent with the presentation of our
consolidated statements of income and excludes amounts related to Atlas.
We own 50% of the Egypt methanol facility and market the remaining 50% of its production through a commission offtake agreement.
We own 60% of Waterfront Shipping, which provides service to Methanex for the ocean freight component of our distribution and
logistics costs. We consolidate both Egypt and Waterfront Shipping, which results in 100% of the financial results being included in our
financial statements. Non-controlling interests are included in the Company’s consolidated financial statements and represent the non-
controlling shareholders’ interests in the Egypt methanol facility and Waterfront Shipping. For the purpose of analyzing our business,
Adjusted EBITDA, Adjusted net income and Adjusted net income per common share exclude the amounts associated with non-
controlling interests.
FINANCIAL RESULTS
For the year ended December 31, 2023, we reported a net income attributable to Methanex shareholders of $174 million ($2.57 net
income per common share on a diluted basis), compared with a net income attributable to Methanex shareholders of $354 million
($4.86 net income per common share on a diluted basis) for the year ended December 31, 2022. Net income attributable to Methanex
shareholders for the year ended December 31, 2023 is lower compared to the year ended December 31, 2022, primarily due to a
lower average realized price and the non-recurring Egypt gas redirection and sale proceeds which occurred in 2022, partially offset by
higher sales of Methanex-produced methanol and proceeds from a gas contract settlement that occurred in 2023.
12
For the year ended December 31, 2023, we reported Adjusted EBITDA of $622 million and Adjusted net income of $153 million ($2.25
Adjusted net income per common share), compared with Adjusted EBITDA of $932 million and Adjusted net income of $343 million
($4.79 Adjusted net income per common share) for the year ended December 31, 2022.
We calculate Adjusted EBITDA and Adjusted net income by including amounts related to our equity share of the Atlas facility
(63.1% interest) and by excluding the non-controlling interests' share, the mark-to-market impact of share-based compensation as a
result of changes in our share price, the impact of the Egypt gas contract revaluation included in finance income and other and the
impact of certain items associated with specific identified events. For 2023, the settlement of a historical dispute under an existing gas
contract was excluded from Adjusted EBITDA and Adjusted net income due to the one-time nature of the settlement and to better
reflect the operating performance of the Company's business. For 2022, there were no specifically identified events impacting
Adjusted EBITDA or Adjusted net income.
A reconciliation from net income attributable to Methanex shareholders to Adjusted net income and the calculation of Adjusted diluted
net income per common share is as follows:
($ Millions, except number of shares and per share amounts)
Net income attributable to Methanex shareholders
Mark-to-market impact of share-based compensation, net of tax
Gas contract settlement, net of tax
Impact of Egypt gas contract revaluation, net of tax
Adjusted net income
Diluted weighted average shares outstanding (millions)
Adjusted net income per common share
A summary of our consolidated statements of income for 2023 and 2022 is as follows:
($ Millions)
Consolidated statements of income:
Revenue
Cost of sales and operating expenses
Egypt gas redirection and sale proceeds
Mark-to-market impact of share-based compensation
Adjusted EBITDA attributable to associate
Amounts excluded from Adjusted EBITDA attributable to non-controlling interests
Adjusted EBITDA
Mark-to-market impact of share-based compensation
Depreciation and amortization
Gas contract settlement, net of tax
Finance costs
Finance income and other
Income tax expense
Earnings of associate adjustment 1
Non-controlling interests adjustment 1
$
$
$
$
2023
174 $
13
(31)
(3)
153 $
68
2.25 $
2022
354
(6)
—
(5)
343
72
4.79
2023
2022
3,723 $
(3,068)
4,311
(3,446)
—
16
135
(184)
622
(16)
(392)
31
(117)
40
(1)
(67)
74
118
(7)
151
(195)
932
7
(372)
—
(131)
25
(120)
(74)
87
354
462
Net income attributable to Methanex shareholders
Net income
$
$
174 $
284 $
1 These adjustments represent depreciation and amortization, finance costs, finance income and other and income taxes associated with our 63.1% interest in the Atlas
methanol facility and the non-controlling interests.
Revenue
There are many factors that impact our global and regional revenue. The methanol business is a global commodity industry affected
by supply and demand fundamentals. Based on the diversity of end products in which methanol is used, demand for methanol is
driven by a number of factors, including: strength of global and regional economies, industrial production levels, energy prices, pricing
of end products and government regulations and policies. Revenue was $3.7 billion in 2023 compared to $4.3 billion in 2022. The
lower revenue reflects a lower average realized price, partially offset by higher sales volume in 2023 compared to 2022.
We publish regional non-discounted reference prices for each major methanol market and these posted prices are reviewed and
revised monthly or quarterly based on industry fundamentals and market conditions. Most of our customer contracts use published
Methanex reference prices as a basis for pricing, and we offer discounts to customers based on various factors. Our average non-
13
discounted published reference price in 2023 was $434 per tonne compared with $503 per tonne in 2022. Our average realized price
in 2023 was $333 per tonne compared to $397 per tonne in 2022.
Distribution of Revenue
The geographic distribution of revenue by customer location for 2023 was comparable to 2022. Details are as follows:
($ Millions, except where noted)
2023
China
Europe
United States
South America
South Korea
Other Asia
Canada
$
1,043
28 % $
1,106
722
575
429
392
387
175
19 %
15 %
12 %
11 %
10 %
5 %
830
657
459
543
519
197
2022
26 %
19 %
15 %
11 %
13 %
12 %
4 %
$
3,723
100 % $
4,311
100 %
Adjusted EBITDA (Attributable to Methanex Shareholders)
2023 Adjusted EBITDA was $622 million compared with 2022 Adjusted EBITDA of $932 million, a decrease of $310 million. The key
drivers of change in our Adjusted EBITDA are average realized price, sales volume and cash costs as described below (refer to the
How We Analyze Our Business section on page 12 for more information).
($ Millions)
Average realized price
Sales volume
Total cash costs
Decrease in Adjusted EBITDA
Average Realized Price
2023 vs. 2022
(657)
16
331
(310)
$
$
Our average realized price for the year ended December 31, 2023, was $333 per tonne compared to $397 per tonne for 2022, and
this decreased Adjusted EBITDA by $657 million (refer to the Financial Results – Revenue section on page 13 for more information).
Sales Volume
Methanol sales volume, excluding commission sales volume, for the year ended December 31, 2023, increased to 10.0 million tonnes
from 9.8 million tonnes in 2022, and this increased Adjusted EBITDA by $16 million. Including commission sales volume from the Atlas
and Egypt facilities, our total methanol sales volume was 11.2 million tonnes in 2023 compared with 10.8 million tonnes in 2022. Sales
volume may vary year to year depending on customer requirements and inventory levels as well as the available commission sales
volume.
Total Cash Costs
The primary drivers of change in our total cash costs are changes in the cost of Methanex-produced methanol and changes in the
cost of methanol we purchase from others ("purchased methanol"). We supplement our production with methanol produced by others
through methanol offtake contracts and purchases on the spot market to meet customer needs and support our marketing efforts in
major global markets.
We apply the first-in, first-out method of accounting for inventories and it generally takes between 30 and 60 days to sell the methanol
we produce or purchase. Accordingly, the changes in Adjusted EBITDA as a result of changes in Methanex-produced and purchased
methanol costs primarily depend on changes in methanol pricing and the timing of inventory flows.
In a rising price environment, our margins at a given price are higher than in a stable price environment as a result of methanol
purchases and production versus sales. Generally, the opposite applies when methanol prices are decreasing.
14
The changes in Adjusted EBITDA due to changes in total cash costs for 2023 compared with 2022 were due to the following:
($ Millions)
Methanex-produced methanol costs
Proportion of Methanex-produced methanol sales
Purchased methanol costs
Logistics costs
Egypt gas redirection and sale proceeds
Other, net
Increase in Adjusted EBITDA due to changes in total cash costs
Methanex-Produced Methanol Costs
2023 vs. 2022
199
18
207
(18)
(58)
(17)
331
$
$
Natural gas is the primary feedstock at our methanol facilities and is the most significant component of Methanex-produced methanol
costs. Through 2023, we purchased natural gas for more than half of our production under natural gas purchase agreements where
the unique terms of each contract include a base price and a variable price component linked to methanol price to reduce our
commodity price risk exposure. The variable price component of each gas contract is adjusted by a formula linked to methanol sales
prices above a certain level. We also purchase natural gas in North America and are exposed to natural gas spot price fluctuations for
the unhedged portion of our gas needs in the region. Methanex-produced methanol costs were lower in 2023 compared with 2022 by
$199 million, primarily due to the impact of changes in realized methanol prices on the variable portion of our natural gas cost,
changes in spot gas prices which impact the unhedged portion of our North American operations, timing of inventory flows and
changes in the mix of production sold from inventory. For additional information regarding our natural gas supply agreements, refer to
the Liquidity and Capital Resources – Summary of Contractual Obligations and Commercial Commitments section on page 21.
Proportion of Methanex-Produced Methanol Sales
The cost of purchased methanol is directly linked to the selling price for methanol at the time of purchase and the cost of purchased
methanol is generally higher than the cost of Methanex-produced methanol. Accordingly, an increase in the proportion of Methanex-
produced methanol sales results in a decrease in our overall cost structure for a given period, while a decrease in the proportion of
Methanex-produced methanol will increase our cost structure. The proportion of Methanex-produced methanol sales increased in
2023 due to higher production and this decreased costs and increased Adjusted EBITDA by $18 million for 2023 compared with 2022.
Purchased Methanol Costs
A key element of our corporate strategy is global leadership and, as such, we have built a leading market position in each of the major
global markets where methanol is sold. We supplement our production with purchased methanol through methanol offtake contracts
and on the spot market to meet customer needs and support our marketing efforts within the major global markets. In structuring
purchase agreements, we look for opportunities that provide synergies with our existing supply chain that allow us to purchase
methanol in the most cost-effective region. The cost of purchased methanol consists principally of the cost of the methanol itself,
which is directly related to the price of methanol at the time of purchase. Lower methanol prices in 2023 and the timing of inventory
flows and purchases decreased the cost of purchased methanol per tonne and this increased Adjusted EBITDA by $207 million
compared with 2022.
Logistics Costs
Our investment in global distribution and supply infrastructure includes a dedicated fleet of ocean-going vessels. We utilize these
vessels to enhance value to customers by providing reliable and secure methanol supply. Additionally we carry third-party backhaul
cargoes, when available, to optimize supply chain costs overall. Logistics costs can also vary from period to period primarily
depending on the levels of production from each of our production facilities, the resulting impact on our supply chain, and variability in
bunker fuel costs. Higher logistics costs in 2023 decreased Adjusted EBITDA by $18 million compared to 2022. Logistics costs
increased in 2023 compared to 2022 primarily due to the mix of production from various plants and the impact of longer supply routes,
with the outage in Egypt and preparation for Geismar 3 causing increased costs in the fourth quarter of 2023.
Egypt Gas Redirection and Sale Proceeds
In the third quarter of 2022, we entered into an agreement to redirect and sell the Egypt plant's contracted natural gas during an
extended turnaround for a three-month period. Adjusted EBITDA for the year ended December 31, 2022 includes $58 million
(attributable to Methanex) from this transaction which did not recur in 2023.
15
Other, Net
Other, net relates to unabsorbed fixed costs, selling, general and administrative expenses and other operational items. For the year
ended December 31, 2023 compared with the same period in 2022, other costs were higher by $17 million mainly due to the
organization build-up of costs relating to the start-up of Geismar 3 plant.
Mark-to-Market Impact of Share-Based Compensation
We grant share-based awards as an element of compensation. Share-based awards granted include stock options, share appreciation
rights, tandem share appreciation rights, deferred share units, restricted share units and performance share units. For all share-based
awards, share-based compensation is recognized over the related vesting period for the proportion of the service that has been
rendered at each reporting date. Share-based compensation includes an amount related to the grant date value and a mark-to-market
impact as a result of subsequent changes in the fair value of the share-based awards primarily driven by the Company’s share price.
The grant date value amount is included in Adjusted EBITDA and Adjusted net income. The mark-to-market impact of share-based
compensation as a result of changes in our share price is excluded from Adjusted EBITDA and Adjusted net income and is analyzed
separately.
($ Millions, except share price)
Methanex Corporation share price 1
Grant date fair value expense included in Adjusted EBITDA and Adjusted net income
Mark-to-market impact 2
Total share-based compensation expense, before tax
2023
47.36 $
19
16
35 $
2022
37.86
22
(7)
15
$
$
1 U.S. dollar share price of Methanex Corporation as quoted on the NASDAQ Global Select Market on the last trading day of the respective period.
2 For the periods presented, the mark-to-market impact on share-based compensation is primarily due to changes in the Methanex Corporation share price.
For stock options, the cost is measured based on an estimate of the fair value at the grant date using the Black-Scholes option pricing
model, and this grant date fair value is recognized as compensation expense over the related vesting period with no subsequent re-
measurement to fair value.
Share appreciation rights ("SARs") are non-dilutive units that grant the holder the right to receive a cash payment upon exercise for
the difference between the market price of the Company’s common shares and the exercise price that is determined at the grant date.
Tandem share appreciation rights ("TSARs") give the holder the choice between exercising a regular stock option or a SAR. The fair
value of SARs and TSARs are re-measured each quarter using the Black-Scholes option pricing model, which considers the market
value of the Company’s common shares on the last trading day of each quarter.
Deferred, restricted and performance share units are grants of notional common shares that are redeemable for cash based on the
market value of the Company’s common shares and are non-dilutive to shareholders. Performance share units granted annually
reflect a long-term incentive plan where units are redeemable for cash based on the market value of the Company's common shares
and are non-dilutive to shareholders. Units vest over three years and include two performance factors: (i) relative total shareholder
return of Methanex shares versus a specific market index, and (ii) the three-year average return on capital employed. The relative total
shareholder performance factor is measured by the Company at the grant date and each reporting date using a Monte-Carlo
simulation model to determine fair value. The three-year average return on capital employed performance factor reflects the actual
return on capital employed for historical periods and management's best estimate for forecast periods to determine the expected
number of units to vest.
For deferred, restricted and performance share units, the cost of the service received as consideration is initially measured based on
the market value of the Company’s common shares at the date of grant. The grant date fair value is recognized as compensation
expense over the vesting period with a corresponding increase in liabilities. Deferred, restricted and performance share units are re-
measured at each reporting date based on the market value of the Company’s common shares with changes in fair value recognized
as compensation expense for the proportion of the service that has been rendered at that date.
The price of the Company’s common shares as quoted on the NASDAQ Global Select Market Composite increased from $37.86 per
share at December 31, 2022, to $47.36 per share at December 31, 2023. As a result of the increase in the share price and the
resulting impact on the fair value of the outstanding units, we recorded a $16 million mark-to-market expense related to share-based
compensation during 2023.
Depreciation and Amortization
Depreciation and amortization was $392 million for the year ended December 31, 2023, and is higher than $372 million for the year
ended December, 31 2022 due to the higher cost base of depreciable property, plant and equipment driven by additional capitalized
maintenance costs and ocean going vessel additions.
16
Finance Costs
($ Millions)
Finance costs before capitalized interest
Less capitalized interest
Finance costs
$
$
2023
173 $
(55)
117 $
2022
167
(36)
131
Finance costs are primarily comprised of interest on borrowings and lease obligations and were $117 million for the year ended
December 31, 2023, compared to $131 million for the year ended December 31, 2022. Finance costs are lower primarily due to higher
capitalized interest. Capitalized interest relates to interest costs capitalized for the Geismar 3 project. Refer to the Liquidity and Capital
Resources section of page 18 for more information.
Finance Income and Other
Finance income and other were $40 million for the year ended December 31, 2023, compared to $25 million for the year ended
December 31, 2022. Finance income and other were higher during the year ended December 31, 2023 compared to the same period
in 2022 primarily due to higher interest income.
Income Taxes
A summary of our income taxes for 2023 compared with 2022 is as follows:
($ Millions, except where noted)
2023
2022
Net income before income tax
Income tax expense
Net income after income tax
Effective tax rate
Per consolidated
statement of
income
Adjusted 1 2 3 4
Per consolidated
statement of
income
Adjusted 1 2 3 4
$
$
286 $
(2)
284 $
1 %
199 $
(46)
153 $
23 %
582 $
(120)
462 $
21 %
482
(139)
343
29 %
1 Adjusted net income before income tax reflects amounts required for the inclusion of 63.1% of Atlas income, 50% of Egypt and 60% of Waterfront Shipping, as well as
amounts required to exclude the mark-to-market impact of share-based-compensation expense or recovery, the impact of the Egypt gas contract revaluation, and the impact
of the settlement of a historical dispute under an existing gas contract. The most directly comparable measure in the financial statements is net income before tax.
2 Adjusted income tax expense reflects amounts required for the inclusion of 63.1% of Atlas income, 50% of Egypt and 60% of Waterfront Shipping, as well as amounts required
to exclude the tax impact of mark-to-market impact of share-based-compensation expense or recovery, the impact of the Egypt gas contract revaluation, and the impact of the
settlement of a historical dispute under an existing gas contract calculated at the appropriate applicable tax rate for their respective jurisdictions. The most directly comparable
measure in the financial statements is income tax expense.
3 Adjusted effective tax rate is a non-GAAP ratio and is calculated as adjusted income tax expense or recovery, divided by adjusted net income before tax.
4 Adjusted net income before income tax and Adjusted income tax (expense) recovery are non-GAAP measures. Adjusted effective tax rate is a non-GAAP ratio. These do not
have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Management uses
these to assess the effective tax rate. These measures and ratios are useful as they are a better measure of our underlying tax rate across the jurisdictions in which we
operate.
We earn the majority of our income in the United States, New Zealand, Trinidad and Tobago, Chile, Egypt and Canada. Including
applicable withholding taxes, the statutory tax rate applicable to Methanex in the United States is 23%, New Zealand is 28%, Trinidad
and Tobago is 38%, Chile is 35%, Egypt is 30% and Canada is 24.5%. We accrue for taxes that will be incurred upon distributions
from our subsidiaries when it is probable that the earnings will be repatriated. As the Atlas entity is accounted for using the equity
method, any income taxes related to Atlas are included in earnings of associate and therefore excluded from total income taxes but
included in the calculation of Adjusted net income.
The effective tax rate based on Adjusted net income was an expense of 23% for the year ended December 31, 2023, compared to
29% for the year ended December 31, 2022. Adjusted net income represents the amount that is attributable to Methanex shareholders
and excludes the mark-to-market impact of share-based compensation and the impact of certain items associated with specific
identified events. The effective tax rate differs from period to period depending on the source of earnings (losses) and the impact of
foreign exchange fluctuations against the United States dollar on our tax balances. In periods with low income levels or losses, the
distribution of income and loss between jurisdictions can result in income tax rates that are not indicative of the longer-term corporate
tax rate. In addition, the effective tax rate is impacted by changes in tax legislation in the jurisdictions in which we operate.
17
The following table shows a reconciliation of Net income to Adjusted net income before tax, and of Income tax expense to Adjusted
income tax expense:
($ Millions, except where noted)
Net income
Adjusted for:
Income tax expense
Earnings from associate
Share of associate's income before tax
Net income before tax of non-controlling interests
Mark-to-market impact of share-based compensation
Gas contract settlement
Impact of Egypt gas contract revaluation
Adjusted net income before tax
Income tax expense
Adjusted for:
Inclusion of our share of associate's adjusted tax expense
Removal of non-controlling interest's share of tax (recovery) expense
Tax (recovery) expense on mark-to-market impact of share-based compensation
Tax on impact of Egypt gas contract revaluation
Adjusted income tax expense
$
$
$
2023
284 $
1
(99)
152
(103)
16
(47)
(5)
199 $
2022
462
120
(77)
120
(130)
(7)
—
(6)
482
(1) $
(120)
(37)
(7)
(3)
2
(43)
22
1
1
$
(46) $
(139)
For additional information regarding income taxes, refer to note 16 of our 2023 consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
A summary of our consolidated statements of cash flows is as follows:
($ Millions)
Cash flows from/(used in) operating activities:
Cash flows from operating activities before changes in non-cash working capital
$
Changes in non-cash working capital related to operating activities
2023
2022
719 $
(59)
660
(86)
(49)
(169)
(12)
(118)
(185)
1
(1)
—
69
(551)
(178)
(270)
(60)
(509)
(400)
933
54
987
(253)
(44)
(162)
(9)
(106)
(85)
1
(1)
149
2
(508)
(146)
(432)
24
(553)
(74)
858
$
458 $
Cash flows from/(used in) financing activities:
Payments for the repurchase of shares
Dividend payments to Methanex Corporation shareholders
Interest paid
Repayment of long-term debt and financing fees
Repayment of lease obligations
Distributions to non-controlling interests
Proceeds on issue of shares on exercise of stock options
Restricted cash for debt service accounts
Sale of partial interest in subsidiary
Changes in non-cash working capital relating to financing activities
Cash flows from/(used in) investing activities:
Property, plant and equipment
Geismar plant under construction
Changes in non-cash working capital relating to investing activities
Decrease in cash and cash equivalents
Cash and cash equivalents, end of year
18
Cash Flow Highlights
Cash Flows from Operating Activities
Cash flows from operating activities for the year ended December 31, 2023 were $660 million compared with $987 million for the year
ended December 31, 2022. The decrease in cash flows from operating activities is primarily due to lower earnings and differences in
non-cash working capital changes, offset by lower tax payments and higher dividends received from the Atlas joint venture.
The following table provides a summary of these items for 2023 and 2022:
($ Millions)
Net income
Deduct earnings of associate
Add dividends received from associate
Add (deduct) non-cash items:
Depreciation and amortization
Income tax expense
Share-based compensation expense
Finance costs
Interest received
Income taxes paid
Other
Cash flows from operating activities before changes in non-cash working capital
Changes in non-cash working capital:
Trade and other receivables
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
$
2023
284 $
(99)
112
392
1
35
117
22
(82)
(63)
719
(33)
16
(19)
(23)
(59)
Cash flows from operating activities
$
660 $
2022
462
(77)
97
372
120
15
131
10
(164)
(33)
933
38
33
(3)
(14)
54
987
For a discussion of the changes in net income, depreciation and amortization, income tax expense, share-based compensation
expense (recovery) and finance costs, refer to the Financial Results section on page 12.
Changes in non-cash working capital decreased cash flows from operating activities by $59 million for the year ended December 31,
2023, compared with an increase of $54 million for the year ended December 31, 2022. Trade and other receivables increased in
2023 and this decreased cash flows from operating activities by $33 million, primarily due to timing of invoices and payments by
customers by the end of 2023 compared to 2022. Inventories decreased primarily due to the lower cost of production in the fourth
quarter of 2023 compared to the fourth quarter of 2022 driven by the impact of lower methanol prices on our natural gas costs, which
increased cash flows from operating activities by $16 million. Accounts payable and accrued liabilities decreased in 2023 compared to
2022 due to the impact of lower gas costs and lower methanol prices on purchased methanol at the end of 2023 compared to at the
end of 2022, which decreased cash flows from operating activities by $23 million.
Cash Flows from Financing Activities
In 2023, we repurchased 1,894,711 common shares under a normal course issuer bid for approximately $86 million, compared to
5,551,751 common shares repurchased in 2022 for approximately $253 million.
Total dividend payments in 2023 were $49 million compared with $44 million in 2022 as a result of an increase in quarterly dividends
in 2023. Our quarterly dividend was increased from $0.175 per share to $0.185 per share in April of 2023.
Total interest payments increased from $162 million in 2022 to $169 million in 2023 as a result of an increase in leases held in 2023.
The Company has no debt maturities until December 2024, other than normal course obligations for principal repayments related to
our other limited recourse debt facilities.
Distributions to non-controlling interests, including the 50% ownership of the Egypt entity and the 40% ownership of Waterfront
Shipping not attributable to Methanex, were $185 million in 2023 compared to $85 million in 2022 and include amounts accrued but
unpaid during 2023. The higher distributions to non-controlling interests for 2023 compared to 2022 were primarily due to the timing of
distribution accruals and changes in earnings of Egypt and Waterfront Shipping.
In 2022, the Company completed the sale of a 40% equity interest in Waterfront Shipping Limited for cash proceeds of $145 million,
excluding final purchase price adjustments.
19
Cash Flows from Investing Activities
During 2023, we incurred cash outflows on capital expenditures relating to our consolidated operations of $178 million (2022 - $146
million) primarily related to planned turnarounds in Geismar, New Zealand and Chile. The 2022 capital expenditures were primarily
related to planned turnarounds in New Zealand and Egypt as well as refurbishment work in Chile. In addition, we incurred cash
outflows on capital expenditures of $270 million (2022 - $432 million) related to the construction of the Geismar 3 project.
Liquidity and Capitalization
Our objective in 2023 in managing liquidity and capital was to provide financial capacity and flexibility to meet our strategic objectives,
with a focus on cash preservation and liquidity. Our intent remains to repay rather than re-finance the $300 million bond due at the end
of 2024 and under current market conditions and pricing levels we will be prioritizing excess cash towards this repayment.
The following table provides information on our liquidity and capitalization position as at December 31, 2023, and December 31, 2022:
($ Millions, except where noted)
Liquidity:
Cash and cash equivalents
Undrawn credit facility
Undrawn G3 construction facility
Total liquidity 1
Capitalization:
Unsecured notes, including current portion
Other limited recourse debt facilities, including current portion
Total debt
Non-controlling interests
Shareholders’ equity
Total capitalization
Total debt to capitalization 2
Net debt to capitalization 3
2023
2022
$
$
458 $
300
—
758 $
1,986
156
2,142
242
1,931
$
4,315 $
50 %
44 %
858
300
300
1,458
1,983
168
2,151
317
2,112
4,580
47 %
35 %
1 Total liquidity consists of cash and cash equivalents, as well as any undrawn amounts from facilities. Total liquidity is a non-GAAP capital management measure, see Non-
GAAP Measures on page 37 for more information.
2 Defined as total debt (including other limited recourse debt facilities) divided by total capitalization.
3 Net debt to capitalization is defined as total debt (including other limited recourse debt facilities) less cash and cash equivalents divided by total capitalization less cash and
cash equivalents. Net debt to capitalization is a non-GAAP capital management measure. See Non-GAAP Measures on page 37 for more information.
We manage our liquidity and capital structure in light of changes to economic conditions, the underlying risks inherent in our
operations and the capital requirements for the business. Total liquidity is useful because it illustrates the extent to which management
has immediate access to cash for operational and construction purposes, and is indicative of our flexibility should uses for these
facilities immediately arise. Net debt to capitalization is useful because it illustrates the relative risk of our financing structure to
potential lenders and investors. The strategies we have employed in managing our liquidity and capital structure include the issue or
repayment of general corporate debt, the issue of project debt, the payment of dividends and the repurchase of shares.
We are not subject to any statutory capital requirements and have no commitments to sell or otherwise issue common shares except
pursuant to outstanding employee stock options and TSARs.
We operate in a highly competitive commodity industry and believe that it is appropriate to maintain a strong balance sheet and
maintain financial flexibility. As at December 31, 2023, we had a cash balance of $458 million, including $79 million of cash related to
Egypt and $46 million of cash related to Waterfront Shipping entities consolidated on a 100% basis. We invest our cash only in highly
rated instruments that have maturities of three months or less to ensure preservation of capital and appropriate liquidity.
As at December 31, 2023, we have access to a $300 million committed revolving credit facility expiring in July 2026. The facility is with
a syndicate of highly rated financial institutions. During the year ended December 31, 2023, we cancelled the non-revolving
construction facility for the Geismar 3 project. At the time of cancellation, the construction facility was undrawn.
20
We have covenant and default provisions under our long-term debt obligations and we also have certain covenants that could restrict
access to our credit facilities. The covenants governing the unsecured notes, which are specified in an indenture, apply to the
Company and its subsidiaries, excluding the Egypt entity and the Atlas joint venture entity, and include restrictions on liens, sale and
lease-back transactions, a merger or consolidation with another corporation or sale of all or substantially all of our assets. The
indenture also contains customary default provisions. The significant covenants and default provisions under the credit facility include:
a)
the obligation to maintain an EBITDA to interest coverage ratio of greater than or equal to 2:1 calculated on a four-quarter
trailing basis and a debt to capitalization ratio of less than or equal to 60%, both calculated in accordance with definitions in
the credit agreement that include adjustments related to the limited recourse subsidiaries;
b) a default if payment is accelerated by a creditor on any indebtedness of $50 million or more of the Company and its
subsidiaries, except for the limited recourse subsidiaries; and
c) a default if a default occurs that permits a creditor to demand repayment on any other indebtedness of $50 million or more
of the Company and its subsidiaries, except for the limited recourse subsidiaries.
The credit facility is secured by certain assets of the Company, and also includes other customary covenants including restrictions on
the incurrence of additional indebtedness.
Other limited recourse debt facilities relate to financing for certain of our ocean going vessels which we own through less than wholly-
owned entities under the Company's control. The limited recourse debt facilities are described as limited recourse as they are secured
only by the assets of the entity that carries the debt. Accordingly, the lenders to the limited recourse debt facilities have no recourse to
the Company or its other subsidiaries.
Failure to comply with any of the covenants or default provisions of the long-term debt facilities described above could result in a
default under the applicable credit agreement that would allow the lenders to not fund future loan requests, accelerate the due date of
the principal and accrued interest on any outstanding loans or restrict the payment of cash or other distributions.
As at December 31, 2023, management believes the Company was in compliance with all covenants related to its long-term debt
obligations.
Capital Projects
The Geismar 3 project is a 1.8 million tonne methanol plant, in Geismar, Louisiana adjacent to our Geismar 1 and Geismar 2 plants
with significant capital and operating cost advantages. We expect the plant to start up in 2024 with total capital costs expected to not
significantly exceed the upper end of the capital cost guidance of $1.3 billion.
We have capitalized $1,205 million on the project, before capitalized interest and finance charges. Assuming a total capital cost of
$1.3 billion, we estimate that as of December 31, 2023, there is approximately $110 million of remaining capital expenditure, including
approximately $20 million of spending accrued in accounts payable, which is fully funded with cash on hand.
Geismar 3 is expected to significantly enhance our cash generation capability and help us meet our commitment to reduce our
greenhouse gas emissions intensity.
Summary of Contractual Obligations and Commercial Commitments
A summary of the amount and estimated timing of cash flows related to our contractual obligations and minimum commercial
commitments as at December 31, 2023, is as follows:
($ Millions)
Long-term debt repayments
Long-term debt interest obligations
Lease obligations
Repayments of other long-term liabilities
Natural gas and other
Other commitments
2024
2025-2026
2027-2028
After 2028
Total
$
315 $
27 $
731 $
1,085
$
2,158
111
172
96
438
95
194
266
56
842
6
148
221
14
470
1
322
515
83
923
1
775
1,174
249
2,673
103
$ 1,227 $
1,391 $
1,585 $
2,929
$
7,132
Long-Term Debt Repayments and Long-Term Debt Interest Obligations
We have $300 million of unsecured notes that mature in December 2024, $700 million of unsecured notes that mature in 2027, $700
million of unsecured notes that mature in 2029, and $300 million of unsecured notes that mature in 2044. The remaining debt
repayments represent the normal course obligations for principal repayments related to our limited recourse debt facilities. For
additional information, refer to note 8 of our 2023 consolidated financial statements.
21
Lease obligations
Lease obligations represent contractual payment dates and amounts for right-of-use assets recognized on balance sheet. The
majority of lease obligations are for ocean-going vessels.
Repayments of Other Long-Term Liabilities
Repayments of other long-term liabilities represent contractual payment dates or, if the timing is not known, we have estimated the
timing of repayment based on management’s expectations.
Natural Gas and Other
We have commitments under take-or-pay contracts to purchase natural gas, to pay for transportation capacity related to the delivery
of natural gas and to purchase oxygen and other feedstock requirements for our operating plants and Geismar 3 project. Take-or-pay
means that we are obliged to pay for the supplies regardless of whether we take delivery. Such commitments are common in the
methanol industry. These contracts generally provide a quantity that is subject to take-or-pay terms that is lower than the maximum
quantity that we are entitled to purchase. The amounts disclosed in the table above represent only the minimum take-or-pay quantity.
The natural gas supply contracts for our facilities in New Zealand, Trinidad and Tobago, Egypt and certain contracts in Chile are take-
or-pay contracts denominated in United States dollars and include base and variable price components to manage our commodity
price risk exposure. The variable price component of each natural gas contract is adjusted by a formula linked to methanol prices. We
believe this pricing relationship enables these facilities to be competitive throughout the methanol price cycle. The amounts disclosed
in the table for these contracts represent only the base price component representative of the minimum take-or-pay commitment.
We also have multi-year fixed price natural gas contracts and hedges to manage exposure to natural gas price risk and supply our
production facilities in Geismar and Medicine Hat. We believe that the fixed price contracts, hedges and long-term natural gas
dynamics in North America support the long-term operation of these facilities. In the above table, we have included natural gas
commitments, not accounted for as financial instruments, in North America for Geismar and Medicine Hat at the contractual volume
and fixed prices.
We have marketing rights for 100% of the production from our jointly owned Atlas and Egypt plants that results in purchase
commitments of up to an additional 0.6 million tonnes per year of methanol offtake supply when Egypt operates at capacity and
0.6 million tonnes per year of methanol offtake supply for Atlas. The offtake commitment for Atlas for 2024 will be reduced to
0.4 million tonnes of supply due to the facility running only until September 2024, when the legacy gas supply agreement expires. As
at December 31, 2023, the Company also had commitments to purchase methanol from other suppliers for approximately 0.8 million
tonnes for 2024. The pricing under these purchase commitments is referenced to pricing at the time of purchase or sale, and
accordingly, no amounts have been included in the table above.
The above table does not include costs for planned capital maintenance or expansion expenditures, as these expenditures may
change, or any obligations with original maturities of less than one year.
Other Commitments
We have future minimum lease payments under leases relating primarily to vessel charter, terminal facilities, office space and
equipment that are outside the scope of IFRS 16. For additional information, refer to note 22 of our 2023 consolidated financial
statements.
Off-Balance Sheet Arrangements
As at December 31, 2023, we did not have any off-balance sheet arrangements, as defined by applicable securities regulators in
Canada and the United States, that have, or are reasonably likely to have, a current or future material effect on our results of
operations or financial condition.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of
another party. Financial instruments are either measured at amortized cost or fair value.
In the normal course of business, the Company's assets, liabilities and forecasted transactions, as reported in U.S. dollars, are
impacted by various market risks including, but not limited to, natural gas prices and currency exchange rates. The time frame and
manner in which the Company manages those risks varies for each item based on the Company's assessment of the risk and the
available alternatives for mitigating risks.
The Company uses derivatives as part of its risk management program to mitigate variability associated with changing market values.
Changes in the fair value of derivative financial instruments are recorded in earnings unless the instruments are designated as cash
flow hedges, in which case the changes in fair value are recorded in other comprehensive income and are reclassified to profit or loss
22
or accumulated other comprehensive income when the underlying hedged transaction is recognized in earnings or inventory. The
Company designates as cash flow hedges certain derivative financial instruments to hedge its risk exposure to fluctuations in natural
gas prices and to hedge its risk exposure to fluctuations on certain foreign-currency-denominated transactions.
Until settled, the fair value of Level 2 derivative financial instruments will fluctuate based on changes in commodity prices or foreign
currency exchange rates and the fair value of Level 3 derivative financial instruments will fluctuate based on changes in the
observable and unobservable valuation model inputs.
The following table shows the carrying value of each of our categories of financial assets and liabilities and the related balance sheet
items as at December 31, 2023 and December 31, 2022:
($ Millions)
Financial assets:
Financial assets measured at fair value:
Derivative instruments designated as cash flow hedges 1
Fair value of Egypt gas supply contract derivative 2
Financial assets not measured at fair value:
Cash and cash equivalents
Trade and other receivables, excluding tax receivable
Restricted cash included in other assets
Total financial assets 3
Financial liabilities:
Financial liabilities measured at fair value:
Derivative instruments designated as cash flow hedges 1
Financial liabilities not measured at fair value:
Trade, other payables and accrued liabilities, excluding tax payable
Lease obligations, including current portion
Long-term debt, including current portion
Land mortgage
Total financial liabilities
2023
2022
121 $
20
458
515
16
323
11
858
488
14
1,130 $
1,694
92 $
8
$
$
$
672
872
2,142
28
$
3,806 $
656
870
2,152
29
3,715
1 Geismar natural gas hedges and euro foreign currency hedges designated as cash flow hedges are measured at fair value based on industry-accepted valuation models and
inputs obtained from active markets.
2 The Egypt natural gas supply contract is measured at fair value using a Monte-Carlo model classified within Level 3 of the fair value hierarchy.
3 The carrying amount of the financial assets represents the maximum exposure to credit risk at the respective reporting periods.
As at December 31, 2023, all of the financial instruments were recorded on the consolidated statements of financial position at
amortized cost with the exception of derivative financial instruments, which were recorded at fair value unless exempted.
The fair value of derivative instruments is determined based on industry-accepted valuation models using market observable inputs
and are classified within Level 2 of the fair value hierarchy and those using significant unobservable inputs classified as Level 3. The
fair value of all of the Company's derivative contracts as presented in the consolidated statements of financial position are determined
based on present values and the discount rates used are adjusted for credit risk. The effective portion of the changes in fair value of
derivative financial instruments designated as cash flow hedges is recorded in other comprehensive income. The spot element of
forward contracts in the hedging relationships is recorded in other comprehensive income as the change in fair value of cash flow
hedges. The change in the fair value of the forward element of forward contracts is recorded in other comprehensive income as the
forward element excluded from the hedging relationships. Once a commodity hedge settles, the amount realized during the period and
not recognized immediately in the statement of income is reclassified from accumulated other comprehensive income (equity) to
inventory and ultimately through cost of goods sold. Foreign currency hedges settled, are realized during the period directly to the
statement of income reclassified from the statement of other comprehensive income.
The Company has entered into forward contracts designated as cash flow hedges to manage its exposure to changes in natural gas
prices for Geismar. Natural gas is fungible across the Geismar plants.
The Company manages its foreign currency exposure to euro denominated sales by executing a number of forward contracts which it
has designated as cash flow hedges for its highly probable forecast euro collections.
Related Party Transactions
We own 63.1% of the Atlas methanol facility and a contractual agreement with our partners establishes joint control which results in
our accounting for Atlas as an equity investment. As our equity investee, Atlas is our most significant related party. Refer to note 23 to
the 2023 consolidated financial statements for information on our related party transactions.
23
RISK FACTORS AND RISK MANAGEMENT
We are subject to risks that require prudent risk management. We believe the following risks, in addition to those described in the
Critical Accounting Estimates section on page 34, to be among the most important for understanding the issues that face our business
and our approach to risk management. Our strategic risk management process drives the identification, measurement, prioritization
and management of our principal strategic risks. The Audit, Finance and Risk Committee of the Board provides oversight to the
Company's risk management process.
Methanol Market Fundamentals
Methanol Price
The methanol business is a highly competitive commodity industry and future methanol prices will ultimately depend on the strength of
global demand and methanol industry supply but can also be impacted by other factors such as global trade disputes and government
sanctions. Methanol demand and industry supply are driven by several factors as described below. Methanol prices have historically
been, and are expected to continue to be, characterized by cyclicality. We are not able to predict future methanol prices, which are
driven by several factors that are beyond our control. Since methanol is the only product we produce and market, a decline in the
price of methanol has a significant negative effect on our results of operations and financial condition.
Methanol Demand
Based on the diversity of end products in which methanol is used, demand for methanol is driven by a number of factors, including:
the strength of global and regional economies, industrial production levels, energy prices, pricing of end products, downstream
capacity additions and government regulations and policies. In addition, increasing focus on climate change and the timing and
pace of the transition to a lower-carbon economy could impact the demand for methanol that is manufactured in a manner that
produces GHG emissions. Changes in methanol demand based on availability of substitute products, consumer preference
(including preference for low-or-zero-carbon emission products), government regulation, or other factors may have a significant
negative effect on our results of operations and financial condition irrespective of energy prices or economic growth rates. We
cannot provide assurance that methanol demand will not be negatively impacted and this could have an adverse effect on our
results of operations and financial condition.
Energy Prices
Demand for energy-related applications, which represents over 30% of global methanol demand, includes several applications
including methyl tertiary-butyl ether ("MTBE"), fuel applications (including vehicle fuel, marine fuel and other thermal
applications), di-methyl ether and biodiesel. Demand into methanol-to-olefins ("MTO") represents over 15% of global methanol
demand. MTO plants produce light olefins which have wide applications in packaging, textiles, plastic parts and automotive
components.
Methanol is an alternative feedstock for the production of light olefins in the methanol-to-olefins application. MTO competes with
olefins made from ethane, propane and naptha, which are typically derived from natural gas and oil-based feedstocks. The price
of methanol relative to the price of ethane, propane and naptha can impact the competitiveness of methanol in this application.
The price of olefins and downstream derivative products are also affected by their industry supply and demand fundamentals. In
a low olefin product price environment, methanol could be a less competitive feedstock in the production of olefins, which could
reduce demand for methanol or contribute to negative pressure on methanol prices.
Methanol can also be used to produce MTBE (an oxygenate blended into gasoline to improve air quality), blended directly with
gasoline and used to produce di-methyl ether which can be blended with liquefied petroleum gas (propane). Because of this
relationship, methanol demand is sensitive to the pricing of these energy products, which in turn are generally linked to global
energy prices.
We cannot provide assurance that energy prices will not negatively impact methanol demand, which could have an adverse effect
on our results of operations and financial condition.
Global Economic Growth Rates
Traditional chemical demand, which represents approximately 50% of global methanol demand, is used to produce traditional
chemical derivatives, including formaldehyde, acetic acid and a variety of other chemicals that form the basis of a wide variety of
industrial and consumer products. Over the long term, we believe that traditional chemical demand is influenced by the strength
of global and regional economies and industrial production levels. Any slowdown in the global or regional economies, specifically
manufacturing and industrial economies, can negatively impact demand for methanol and have a detrimental impact on methanol
prices.
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Methanol Supply
Methanol industry supply is impacted by the cost of production, methanol industry operating rates and new methanol industry
capacity additions. Methanol is predominantly produced from natural gas and is also produced from coal, particularly in China. The
cost of production is influenced by the availability and cost of raw materials, including coal and natural gas, freight costs, other
operating and maintenance costs and government policies. An increase in economically competitive methanol supply, all else equal,
can displace supply from higher cost producers and have a negative impact on methanol price. The industry has historically
operated below stated capacity on a consistent basis, even in periods of high methanol prices, primarily due to shutdowns for
planned or unplanned maintenance and feedstock shortages and/or uneconomical feedstock costs. Methanol industry supply can
increase through improving operating rates of existing methanol plants. Methanol industry capacity can increase through the
construction of new methanol plants, by restarting idle methanol plants, or by expanding or debottlenecking existing plants to
increase their operating capacity. There is typically a span of four to six years to plan and construct a new world-scale methanol
plant. Typical of most commodity chemicals, periods of high methanol prices encourage high-cost producers to operate at maximum
rates and encourage the construction of new plants and expansion projects, leading to the possibility of oversupply in the market.
However, historically, many of the announced capacity additions have not been constructed for a variety of reasons. There are
significant barriers to entry in this industry. The construction of world-scale methanol facilities requires significant capital over a long
lead time, a location with access to significant natural gas or coal feedstock with appropriate pricing, and an ability to market and
deliver methanol cost-effectively and reliably to customers.
In 2023, approximately two to three million tonnes of new production capacity was added in China. In Iran, a new plant was
commissioned at the end of 2023 but plant operating rates continue to be uncertain and challenged due to the impact of sanctions,
plant technical issues and seasonal natural gas constraints. The methanol industry ran at similar rates in 2023 compared to 2022.
In North America, we expect our new 1.8 million tonne Geismar 3 facility, which will be our third plant in Louisiana, to reach
commercial production in 2024. In Malaysia, a 1.8 million tonne plant is under construction with a scheduled start up in 2024. We
expect to see increased supply from new capacities to be partially offset by rationalization of existing supply in the market in 2024.
With the shut down of Atlas and the restart of Titan in September 2024 the overall production in Trinidad will be lower by
approximately 1 million tonnes annually and we continue to monitor other factors that could further impact supply such as the
announced gas diversion from methanol to LNG in Equatorial Guinea. In China, there are planned capacity additions over the near-
to-medium term which we expect will be somewhat offset by the closure of some small-scale, inefficient and older plants. New
capacity built in China is expected to be consumed domestically as China requires methanol imports to meet growing demand.
We cannot provide assurance that increases in methanol supply will not outpace the level of future demand growth thereby
contributing to negative pressure on methanol price.
Macroeconomic Risks
Pandemic Risk
Should a pandemic arise, measures introduced in response by governments and health authorities could lead to greater uncertainty in
our business, commodity industries, energy markets and the broader global economy. Pandemic responses could lead to substantial
reduction in global manufacturing and general economic activity, which in turn leads to supply constraints and supply chain
disruptions, impacting the supply-demand balance and inventory levels across many industries.
A pandemic may increase our exposure to, and the magnitude of, each of the risks identified, whether they be methanol specific,
macroeconomic, financial, or operational. The magnitude of the impact will depend on future developments that cannot be predicted
and therefore we cannot provide assurance that a deterioration in economic conditions related to a pandemic will not have an adverse
impact on our results of operations and financial condition.
Global Economic Conditions
In addition to the potential influence of global economic activity levels on methanol demand and price, changing global economic
conditions can also result in changes in capital markets. A deterioration in economic conditions could have a negative impact on
supply or demand for methanol, our investments, diminish our ability to access existing or future credit, and it could increase the risk
of defaults by customers, suppliers, insurers and other counterparties. Also, inflationary pressures associated with buoyant economic
activity, supply chain challenges or geopolitical events such as war or international trade relations, could have a negative impact on
our cost structure or access to feedstock or logistics services. Considering these potential impacts, we cannot provide assurance that
a deterioration in economic conditions or inflationary pressures associated with buoyant economic activity will not have an adverse
impact on our results of operations and financial condition.
Global Operations
Our operations and investments are primarily located in North America, New Zealand, Trinidad and Tobago, Egypt, Chile, Europe and
Asia. We are subject to risks inherent in global operations which are more significant in certain jurisdictions, such as loss of revenue,
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property and equipment as a result of expropriation; import or export restrictions; anti-dumping measures; nationalization, war,
insurrection, civil unrest, social activism, sabotage, terrorism and other political risks; increases in duties, taxes and governmental
royalties; renegotiation of contracts with governmental entities; as well as changes in laws or policies or other actions by governments
that may adversely affect our operations, including lack of certainty with respect to foreign legal systems, corruption and other factors
inconsistent with the rule of law. Many of the foregoing risks related to foreign operations may also exist for our domestic operations in
North America. We are also subject to potential risks associated with geopolitical disputes including: (i) those between countries in
which we operate, buy, sell or transport methanol, (ii) those that border such countries such as over rights to water flowing across
political boundaries including the Nile river which supplies water to our Egypt plant, and (iii) significant geopolitical disputes including
wars, such as the invasion of Ukraine by Russia or the Israel-Palestinian conflict where the globalized nature of our operations and the
commodity we sell could be negatively impacted by the actions of multiple countries and stakeholders.
The Company is committed to doing business in accordance with all applicable laws and its code of business conduct, but there is a
risk that it, its subsidiaries or affiliated entities or their respective officers, directors, employees or agents could act in violation of its
codes and applicable laws. Any such violation could severely damage our reputation and could result in substantial civil and criminal
fines or penalties. Such damage to our reputation and fines and penalties could materially affect the Company's business and have an
adverse impact on our results of operations and financial condition.
Because we derive a significant portion of our revenues from production and sales by subsidiaries outside of Canada, the payment of
dividends or the making of other cash payments or advances by these subsidiaries may be subject to restrictions or exchange
controls on the transfer of funds in or out of the respective countries or result in the imposition of taxes on such payments or
advances.
Global Trade
Methanol is a globally traded commodity produced at facilities located around the world. Trade in methanol is subject to duty in a
number of jurisdictions. Methanol sold in certain markets from the countries in which we produce methanol is currently subject to
import duties ranging from 0% to 6%. As well, there is currently an additional 25% duty on methanol imported from the US to China.
Over the past number of years, methanol demand has grown faster in China compared to other markets. This growth has resulted in
China currently representing approximately 60% of total methanol demand, which is supplied by both local and imported methanol.
This concentration of industry demand creates a risk of market access from any production source as China may increase duties,
restrict imports or take other measures to prevent or limit the import of methanol from a particular producing country. There can be no
assurance that the countries where we produce methanol will continue to have access to all markets, including China, that duties will
not increase, that duties will not be levied in other jurisdictions in the future or that we will be able to mitigate the impact of future
duties, if levied, or that future duties will not have a significant negative effect.
Some producers and marketers of methanol may have direct or indirect contacts with countries that may, from time to time, be subject
to international trade sanctions or other similar prohibitions ("sanctioned countries"). Methanol produced in sanctioned countries may
sell at a lower price to methanol produced in non-sanctioned countries creating competitive price pressure for the methanol we
produce. In addition to the methanol we produce, we purchase methanol from third parties under purchase contracts or on the spot
market in order to meet our commitments to customers, and we also engage in product exchanges with other producers and
marketers. We believe that we are in compliance with all applicable laws with respect to sales and purchases of methanol and product
exchanges. However, as a result of the participation of sanctioned countries in our industry, we cannot provide assurance that we will
not be exposed to reputational or other risks that could have an adverse impact on our results of operations and financial condition.
Financial Risks
Taxation Risk
The Company is subject to taxes, duties, levies, governmental royalties and other government-imposed compliance costs in
numerous jurisdictions. New taxes and/or increases to the rates at which these amounts are determined could have an adverse
impact on our results of operations and financial condition.
We have organized our foreign operations in part based on certain assumptions about various tax laws (including capital gains,
withholding taxes and transfer pricing), foreign currency exchange and capital repatriation laws and other relevant laws of a variety of
foreign jurisdictions. While we believe that such assumptions are reasonable, we cannot provide assurance that foreign taxation or
other authorities will reach the same conclusion. The results of audit of prior tax filings and the final determination of these events may
have a material impact on the Company. Refer to Litigation Risk and Legal Proceedings on page 33 for more information related to
current legal matters. Further, if such foreign jurisdictions were to change or modify such laws, we could suffer adverse tax and
financial consequences.
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Liquidity Risk
As at December 31, 2023, we had a cash balance of $458 million, as well as an undrawn $300 million revolving credit facility with a
syndicate of highly rated financial institutions expiring in July 2026. Our ability to maintain access to the facility is subject to meeting
certain financial covenants, including an EBITDA to interest coverage ratio and a debt to capitalization ratio. Both ratios are calculated
in accordance with definitions in the credit agreement that include adjustments related to the Company's limited recourse subsidiaries.
As at December 31, 2023, our long-term debt obligations include $1,986 million in unsecured notes and $156 million related to other
limited recourse debt for ocean-going vessels (100% basis).
The covenants governing the unsecured notes, which are specified in an indenture, apply to the Company and its subsidiaries,
excluding the Egypt entity and the Atlas joint venture entity, and include restrictions on liens, sale and lease-back transactions, a
merger or consolidation with another corporation or a sale of all or substantially all of the Company’s assets. The indenture also
contains customary default provisions.
For additional information regarding long-term debt, refer to note 8 of our 2023 consolidated financial statements.
We cannot provide assurance that we will have sufficient liquidity to fund future capital projects without incurring additional debt.
Additionally, we cannot provide assurance that we will be able to access capital in the future on commercially acceptable terms or at
all, or that the financial institutions providing the credit facilities will have the ability to honour future draws. Additionally, failure to
comply with any of the covenants or default provisions of the long-term debt facilities described above could result in a default under
the applicable credit agreement that would allow the lenders to not fund future loan requests, accelerate the due date of the principal
and accrued interest on any outstanding loans or restrict the payment of cash or other distributions. Any of these factors could have a
significant negative effect on our results of operations, our ability to pursue and complete strategic initiatives or on our financial
condition.
Foreign Currency Risk
The dominant currency in which we conduct business is the United States dollar, which is also our reporting currency. The most
significant components of our costs are natural gas feedstock and ocean-shipping costs and substantially all of these costs are
incurred in United States dollars. Some of our underlying operating costs, capital expenditures and purchases of methanol, however,
are incurred in currencies other than the United States dollar, principally the Canadian dollar, the Chilean peso, the Trinidad and
Tobago dollar, the New Zealand dollar, the euro, the Egyptian pound, the Chinese yuan and Korean won. We are exposed to
increases in the value of these currencies that could have the effect of increasing the United States dollar equivalent of cost of sales,
operating expenses and capital expenditures. A portion of our revenue is earned in Chinese yuan, euros, Canadian dollars and, to a
lesser extent, other currencies. We are exposed to declines in the value of these currencies compared to the United States dollar,
which could have the effect of decreasing the United States dollar equivalent of our revenue.
Customer Credit Risk
Our customers are large global or regional petrochemical manufacturers or distributors and a number are highly leveraged, though we
have not experienced significant credit losses in the past. We monitor our customers’ financial status closely; however, some
customers may not have the financial ability to pay for methanol in the future and this could have an adverse effect on our results from
operations and financial condition.
Insurance Risks
Although we maintain operational and construction insurance, including business interruption insurance, we cannot provide assurance
that we will not incur losses beyond the limits of, or outside the coverage of, such insurance or that insurers will be financially capable
of honouring future claims. From time to time, various types of insurance for companies in the chemical and petrochemical industries
have not been available on commercially acceptable terms or, in some cases, have been unavailable. We cannot provide assurance
that in the future we will be able to maintain existing coverage or that premiums will not increase substantially.
Operational Risks
Security of Natural Gas Supply and Price
Natural gas is the principal feedstock for producing methanol and it accounts for a significant portion of our operating costs.
Accordingly, our results from operations depend in large part on the availability and security of supply and the price of natural gas. If,
for any reason, we are unable to obtain sufficient natural gas for any of our plants on commercially acceptable terms or we experience
interruptions in the supply of contracted natural gas, we could be forced to curtail production or close such plants, which could have
an adverse effect on our results of operations and financial condition.
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United States
We expect our new 1.8 million tonne Geismar 3 facility to reach commercial production in 2024. Subsequent to the start-up, we will
have three plants in Geismar, Louisiana with an annual operating capacity of 4.0 million tonnes.
We utilize a combination of fixed price financial hedges and fixed price physical gas supply agreements to manage natural gas price
risk for our Geismar facilities. In North America, we have fixed price gas supply contracts and hedges in place targeting minimum
operating rate requirements of approximately 70% in the near-term, declining over time. The balance of our gas requirements are
purchased at spot prices.
We believe that the long-term natural gas dynamics in North America will support the long-term operations of these facilities; however,
we cannot provide assurance that our contracted suppliers will be able to meet their commitments or that we will be able to secure
additional natural gas on commercially acceptable terms and this could have an adverse impact on our results of operations and
financial condition.
New Zealand
We have three plants in New Zealand with a total operating capacity of 2.2 million tonnes of methanol per year. Two plants are located
at Motunui and can produce 1.7 million tonnes per year and the third is located at nearby Waitara Valley and can produce 0.5 million
tonnes. The Waitara Valley Plant was idled indefinitely in the first quarter of 2021 due to a lack of available gas supply. We have
entered into several agreements with various natural gas suppliers with terms that range in length up to 2029. All gas supply
agreements in New Zealand are take-or-pay agreements and include U.S. dollar base and variable price components where the
variable price component is adjusted by a formula linked to methanol prices above a certain level. We believe this pricing relationship
enables these facilities to be competitive at all points in the methanol price cycle. Certain contracts require the supplier to deliver a
minimum amount of natural gas with additional volume dependent on the success of exploring and developing the related natural gas
field.
The future operation of our New Zealand facilities depends on the ability of our contracted suppliers to meet their commitments and
the success of ongoing exploration and development activities in the region. We cannot provide assurance that our contracted
suppliers will be able to meet their commitments or that exploration and development activities in New Zealand will be successful to
enable us to operate at capacity or at all. We cannot provide assurance that we will be able to secure additional natural gas on
commercially acceptable terms. These factors could have an adverse impact on our results of operations and financial condition.
Trinidad and Tobago
We have two plants in Trinidad and Tobago, Atlas (Methanex interest 63.1%) and Titan, with Methanex's interest in Trinidad and
Tobago representing an operating capacity of 2.0 million tonnes per year. Natural gas for our Atlas methanol production facility in
Trinidad and Tobago, with our share of total production capacity being 1.1 million tonnes per year, is supplied under a take-or-pay
contract with the National Gas Company of Trinidad and Tobago Limited ("NGC"), which purchases the natural gas from upstream gas
producers. The contract for Atlas has a U.S. dollar base and variable price components, where the variable portion is adjusted by a
formula linked to methanol prices above a certain level and expires in September 2024.
In October 2023, Methanex signed a two-year natural gas agreement with NGC for its Titan plant, which has been idled since the first
quarter of 2020, to restart operations in September 2024. The natural gas agreement for Titan is a take-or-pay contract with a U.S.
dollar base and variable price components, where the variable portion is adjusted by a formula linked to methanol prices.
Simultaneously, the Company plans to idle Atlas in September 2024, when its legacy 20-year natural gas agreement expires.
We cannot provide assurance that our contracted supplier will be able to meet their commitments, that we will be able to secure
additional natural gas on commercially acceptable terms or that exploration and development activities in Trinidad and Tobago will be
successful to enable us to operate at capacity or at all. These factors could have an adverse impact on our results of operations and
financial condition.
Chile
Natural gas for our two plants in Chile is supplied by various producers in Chile and Argentina. A portion of the contracted gas is
subject to deliver-or-pay and take-or-pay provisions. Our current gas agreements and gas export permits from Argentina provide for
sufficient gas to allow for a two-plant operation in Chile during the Southern hemisphere summer months. In 2023, one plant operated
throughout the year and a second plant operated for seven months.
Our primary Chilean natural gas supplier is Empresa Nacional del Petróleo ("ENAP"). ENAP has made significant investments over
the past several years in the development of natural gas from unconventional reservoirs, which has resulted in stable gas deliveries
from ENAP to our facilities. The agreements for natural gas supply with ENAP underpin approximately 25% of the 1.7 million tonnes of
annual operating capacity for 2023 through 2025.
In 2023, we received natural gas from Argentina from four different natural gas suppliers pursuant to firm supply agreements from
September through December 2023. We also received Argentine natural gas in 2023 from a fifth supplier, YPF S.A., from January until
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April 2023 and from October through December 2023. We have a gas supply agreement with YPF S.A. that expires at the end of
2025. The price paid for natural gas for our Chilean facilities from our Chilean and Argentine suppliers is a U.S. dollar base price plus
a variable price component that is adjusted by a formula linked to methanol prices above a certain level.
While we continue to work with gas suppliers in Chile and Argentina to secure sufficient natural gas to sustain our Chile operations, we
cannot provide assurance that our contracted suppliers will be able to meet their commitments, that we will be able to secure
additional natural gas on commercially acceptable terms, that Argentina will grant future export permits for natural gas to be delivered
to Chile or that exploration and development activities in Chile and Argentina will be successful to enable us to operate at capacity or
at all. These factors could have an adverse impact on our results of operations or financial condition.
Egypt
We have a 25-year, take-or-pay natural gas supply agreement expiring in 2035 for the 1.3 million tonne per year methanol plant in
Egypt in which we have a 50% equity interest. The price paid for gas is based on a U.S. dollar base price plus a variable price
component that is adjusted by a formula linked to methanol prices above a certain level. Under the contract, the gas supplier is
obligated to supply, and we are obliged to take or pay for, a specified annual quantity of natural gas. In addition, the natural gas supply
agreement has a mechanism whereby we are partially compensated when gas delivery shortfalls in excess of a certain threshold
occur. Natural gas is supplied to this facility from the same gas delivery grid infrastructure that supplies other industrial users in Egypt,
as well as the general Egyptian population.
Our Egypt facility has experienced gas restrictions in the past during periods of significant social unrest and government transition and
we believe this contributed to past constraints in the development of natural gas reserves. More recently, domestic gas needs in
periods of extreme weather have also contributed to potential gas shortage. The restrictions experienced in past years may occur in
the future. We cannot provide assurance that our contracted supplier will be able to meet its commitments or that exploration and
development activities in Egypt will be successful to enable us to operate at capacity or at all. These factors could have an adverse
impact on our results of operations and financial condition.
Canada
We have entered into fixed price contracts to supply 80-90% of our natural gas requirements for our Medicine Hat facility through
2031. The balance of our gas requirements is purchased under contracts at spot prices.
We cannot provide assurance that our contracted suppliers will be able to meet their commitments or that we will be able to secure
additional natural gas for our Medicine Hat facility on commercially acceptable terms and this could have an adverse impact on our
results of operations and financial condition.
Production Risks
Most of our earnings are derived from the sale of methanol produced at our plants. Many of our methanol plants have been in
operation for multiple decades and with appropriate maintenance they are still capable of operating efficiently and cost-effectively
today. Our business is subject to the risks of operating methanol production facilities, such as a process safety event, equipment
breakdowns, interruptions in the supply of natural gas and other feedstocks, including oxygen and utilities such as water and steam,
power failures, longer-than-anticipated planned maintenance activities, loss of port facilities, natural disasters or any other event,
including unanticipated events beyond our control, that could result in a prolonged shutdown of any of our plants or impede our ability
to produce and deliver methanol to customers. A prolonged plant shutdown at any of our major facilities could have an adverse effect
on our results of operations and financial condition.
Capital Projects
Our ability to effectively allocate capital, including successfully identifying, developing, and completing capital projects is subject to a
number of risks, including finding and selecting favourable locations for new facilities where sufficient natural gas and other feedstock
is available with acceptable commercial terms, obtaining project or other financing on satisfactory terms, constructing and completing
the projects within the contemplated budgets and schedules, and other risks commonly associated with the design, construction and
startup of large complex industrial projects. Further risks include the impact of evolving government regulation relating to carbon
intensive industries and evaluating the technological feasibility and anticipated operation of new plant designs such as those with
lower carbon intensity.
We cannot provide assurance that we will be able to effectively allocate capital to identify or develop methanol projects or that any
changes to the targeted timing of completion or estimated cost or ability to complete capital projects or future ability to operate at
production capacity, due to a number of factors, which could have an adverse impact on our results of operations and financial
condition.
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Technological Risks
New technologies for natural-gas-based methanol production have been primarily incremental rather than transformational. Alternative
feedstocks and methods for methanol production, including producing methanol from renewable resources exist today, but are not
currently economically competitive at scale. The adoption of new technologies for methanol production or methanol derivatives,
including those that reduce the GHG emissions intensity, may make our plants less competitive or obsolete over time. In addition,
implementing technologies to reduce GHG emissions, including carbon capture and storage, could result in significant capital
expenditures.
As a result, we cannot provide assurance that new technologies in methanol production will not have an adverse effect on our results
of operations and financial condition.
Joint Arrangement Risk
Certain Methanex assets are jointly held and are governed by partnership and shareholder agreements. As a result, certain decisions
regarding these assets require a simple majority, while others require 100 percent approval of the owners. In addition, certain of these
assets (ocean-going vessels) are operated by unrelated third-party entities. The operating results of these assets is to some extent
dependent on the effectiveness of the business relationship and decision making among Methanex and the other joint owner(s) and
the expertise and ability of these third-party operators to successfully operate and maintain the assets. While Methanex believes that
there are prudent governance and contractual rights in place, there can be no assurance that Methanex will not encounter disputes
with partners. Such events could impact operations or cash flows of these assets which, in turn, could have an adverse effect on our
results of operations and financial condition.
Purchased Product Price Risk
In addition to the sale of methanol produced at our plants, we also purchase methanol produced by others on the spot market and
through purchase contracts to meet our customer commitments and support our marketing efforts. We have adopted the first-in, first-
out method of accounting for inventories and it generally takes between 30 and 60 days to sell the methanol we purchase.
Consequently, we have the risk of holding losses on the resale of this product to the extent that methanol prices decrease from the
date of purchase to the date of sale. Holding losses, if any, on the resale of purchased methanol could have an adverse effect on our
results of operations and financial condition.
Supply Chain Risks
Our production is transported through various pipelines, terminals, marine, rail and road networks making up our integrated supply
chain. These networks, and ultimately our supply chain, may be interrupted by means outside of our control or have operational
constraints or restrictions that could prohibit the safe and timely transportation and distribution of methanol to our customers and
prolonged disruptions could have an adverse effect on our results of operations, financial condition and leadership position.
Shipping Capacity Risks
Excess capacity within our fleet of ocean vessels resulting from a prolonged plant shutdown or other event could have an adverse
effect on our results of operations and financial condition as our vessel fleet is subject to fixed time charter costs. In the event we have
excess shipping capacity, we may be able to mitigate some of the excess costs by entering into sub-charters or third-party backhaul
arrangements, although the success of this mitigation is dependent on conditions within the broader global shipping industry. If we
suffer any disruptions in our distribution system and are unable to mitigate these costs, this could have an adverse effect on our
results from operations and financial condition.
Talent Attraction and Retention Risks
The safe and reliable operation of our methanol plants, logistics and supporting functions rely on a skilled and experienced workforce.
We compete for skilled employees in various locations globally where labour market conditions can be highly competitive. If we are
unable to attract, develop, and retain a skilled and experienced workforce or effectively manage succession in key roles, this may be
an impediment to the operations of our methanol plants, the optimization of logistics and impact our daily operations which could have
an adverse impact on our results of operations and financial condition.
Cybersecurity Risks
Our business processes rely on Information Technology ("IT") systems that are interconnected with external networks and increasingly
hosted by third parties in the cloud. The interconnection of external networks increases the threat of cyberattack and the importance of
cybersecurity. In particular, if a cyberattack was targeted at our production facilities, our supply chain or other key infrastructure
networks, the result could harm our plants, customers, environment, people and our ability to meet customer commitments for a
period of time. In addition, targeted attacks on our systems (or third parties that we rely on), failure of a key IT system or a breach in
security measures designed to protect our IT systems, including attempts to divert financial assets or introduce ransomware to extract
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payment could have an adverse impact on our results of operations, financial condition and reputation. We have previously been the
subject of cyber attacks on our internal systems, but these incidents have not had a significant negative impact on our results of
operations.
We have a comprehensive program in place to protect our assets, detect malicious activity and respond in the event of a cybersecurity
incident. This includes: cyber education for our staff; risk-prioritized controls to protect against known and emerging threats;
segregating core operating systems from our corporate systems; tools to provide automated monitoring and alerting; incident
response planning and testing to ensure an agile response and backup and recovery procedures to restore systems and return to
normal operations. We may be required to commit additional resources to continue to modify or enhance our protective measures or
to investigate and remediate any vulnerabilities to cyberattacks. The Audit, Finance and Risk Committee is responsible for overseeing
our cybersecurity mitigation efforts and the program is reviewed periodically by an independent third party.
As the cyberthreat landscape continues to evolve, we pivot to adjust or add to our existing controls to protect the organization. We
collect, use and store sensitive data in the normal course of business, including intellectual property, proprietary business information
and personal information of our employees and third parties. Despite our security measures in place, our IT systems may be
vulnerable to cyberattacks or breaches. Any such breach could compromise information used or stored on our IT systems and/or
networks and, as a result, the information could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other
loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information,
regulatory penalties or other negative consequences, including disruption to our operations and damage to our reputation, which could
have an adverse impact on our results of operations and financial condition.
Reputational Risk
Damage to our reputation could result from the actual or perceived occurrence of any number of events, and could include any
negative publicity (for example, with respect to our handling of environmental, GHG emissions, employment, health or safety, or
process safety matters), whether true or not. There is a risk of increasing stakeholder expectations around climate change and
transition to a lower-carbon economy. Further risks arise from these changing stakeholder perceptions related to the way in which we
are viewed as contributing to (or hindering) a transition to a low-carbon economy and responding to climate change. In March 2024,
we issued our 2023 Sustainability Report, aligned with the Sustainability Accounting Standards Board (SASB) and the Task-Force on
Climate-related Financial Disclosures (TCFD). Our 2023 Sustainability Report is available at https://www.methanex.com/sustainability.
Our reputation could be impacted by evolving perceptions of carbon-intensive industries, petrochemical industries and, most
specifically, the methanol industry and its associated downstream derivatives. Although we believe that we conduct our operations in a
prudent manner and that we take care in protecting our reputation, we do not ultimately have direct control over how we are perceived
by others. Reputation loss may result in decreased access to capital and insurance coverage, decreased investor confidence,
challenges with employee retention and talent attraction, an impediment to our overall ability to advance our projects, difficulty in
obtaining permits, or increased challenges in maintaining our social license to operate, which could have an adverse impact on our
results of operations and financial condition.
Climate Related Risks
Transition Risks - Regulatory
GHG Legislation
We generate GHG emissions, primarily as carbon dioxide ("CO2"), directly and indirectly through the production, distribution and use
of its products. GHG emissions are a byproduct of the development and extraction of hydrocarbons, including natural gas used as a
feedstock in methanol production, as well as the methanol production process. GHG emissions are also generated when fuel is
consumed during the global transport of methanol. The GHG Protocol Corporate Standard classifies a company’s GHG emissions into
three ‘scopes’. Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions
from the generation of purchased energy. Scope 3 emissions are all indirect emissions (not included in Scope 2) that occur in the
value chain, including both upstream and downstream emissions.
We monitor and manage our GHG emissions intensity for Scope 1 and Scope 2 emissions, defined as the equivalent quantity of CO2
released per unit of production or transported tonne, relating to both methanol equity production and our owned marine operations.
The amount of GHG emissions generated by the methanol production process is highly dependent on a number of factors including
the design of the methanol plant, plant reliability and availability of natural gas. Similarly, the distance of trade routes for transported
cargo, as well as ship technology and operating efficiency, influence the emissions intensity of our marine operations. Accordingly,
GHG emissions may vary from year to year depending on the mix of production assets and vessels in operation.
Public attitudes around climate change and the transition to a lower-carbon economy continue to evolve. Under the Paris Agreement
within the United Nations Framework Convention on Climate Change, many of the countries we operate in have agreed to put forth
substantial efforts and commitments to reduce GHG emissions that they are implementing through GHG regulations that include
31
carbon prices. We are currently subject to GHG regulations in New Zealand, Canada and Chile, while our production in the United
States, Trinidad and Tobago, and Egypt is currently not subject to such regulations. These regulations result in additional costs to
produce methanol. Many of our competitors produce methanol in countries with no imposed GHG regulations or carbon taxes and as
such, further increases in regulations or carbon taxes in the countries in which we operate may negatively impact our competitive
position within the methanol industry. In addition, as of January 2024, Waterfront Shipping is subject to the EU’s Emissions Trading
System (ETS) for fifty percent of emissions from voyages where the point of origin or the point of destination is within the EU and 100
percent of emissions that occur for voyages between two EU ports and when ships are within EU ports. EU ETS emissions
allowances will need to be purchased and surrendered for 40 percent of reported CO2 emissions in 2024, 70 percent in 2025 and 100
percent in 2027. There are ongoing reviews and potential changes to government GHG regulations in countries where we have
operations or conduct business, including potential carbon border adjustment mechanisms that could impact the efficient management
of our global supply chain.
We cannot provide assurance that changes in existing or the introduction of new GHG regulations, carbon taxes, or other initiatives
related to climate change in jurisdictions where we have operations or conduct business will not have an adverse impact on our
results of operations and financial condition.
Marine Demand
Europe and the International Maritime Organization (IMO) have moved to measuring GHG emissions impact of marine fuels to on a
lifecycle basis, which includes upstream feedstock production. They have also set decarbonization targets that require decreasing
emissions intensity over time, which come into effect in 2025 and 2027, respectively. Low-carbon methanol is one of several potential
fuels that could be used to comply with these regulations. We cannot provide assurance that low-carbon methanol will be the
preferred fuel for demand under shipping or clean fuel regulations.
Physical Impacts
Climate change poses a number of potential risks and impacts to Methanex that may increase over time. The prospective impact of
climate change may have an adverse impact on our operations, our suppliers or customers. The physical impacts of climate change
may include water scarcity, changing sea or river levels, changing storm patterns and intensities, and changing temperature levels,
and the impact of any of these changes could be severe.
The New Zealand, Geismar, Medicine Hat and Egypt facilities rely on access to fresh water in the methanol production process.
Potential shortages or constraints in fresh water supply could impact methanol production at these sites and may impact
considerations of future growth locations. Our other two sites, Trinidad and Chile, rely on ocean water and have equipment to
desalinate water for the methanol production process.
Our transport of methanol relies primarily on vessels to ship methanol from our production sites to customers around the world. We
have, at times, experienced logistics delays in our supply chain due to high and low river or canal levels in exporting methanol from a
production site or delivering methanol by vessel or barge to customers. High or low river levels impacting our production assets and
supply chain, more severe and frequent storms and weather events could have a material adverse impact on our operating capacity
and supply chain. We cannot predict, at this time, the prospective impact of climate change on our operations, suppliers or customers,
which could have an adverse impact on our results of operations and financial condition.
Regulatory and Compliance Risks
Environmental Regulation
The countries in which we operate and international and jurisdictional waters in which our vessels operate have laws, regulations,
treaties and conventions in force to which we are subject, governing the environment and the management of natural resources as
well as the handling, storage, transportation and disposal of hazardous or waste materials. We are also subject to laws and
regulations governing emissions and the import, export, use, discharge, storage, disposal and transportation of toxic substances. The
products we use and produce are subject to regulation under various health, safety and environmental laws. Non-compliance with
these laws and regulations may give rise to compliance orders, fines, injunctions, civil liability and criminal sanctions.
Laws and regulations with respect to protecting the environment have become more stringent over time and may, in certain
circumstances, impose absolute liability rendering a person liable for environmental damage without regard to negligence or fault on
the part of such person. Such laws and regulations may also expose us to liability for the conduct of, or conditions caused by others or
for our own acts even if we complied with applicable laws at the time such acts were performed. To date, environmental laws and
regulations have not had a significant adverse effect on our capital expenditures, earnings or competitive position. However, operating
petrochemical manufacturing plants and distributing methanol exposes us to risks in connection with compliance with such laws and
we cannot provide assurance that we will not incur significant costs or liabilities in the future.
Although we have formal and proactive compliance management systems in place, we cannot provide assurance over ongoing
compliance with existing legislation or that future laws and regulations to which we are subject governing the environment and the
32
management of natural resources as well as the handling, storage, transportation and disposal of hazardous or waste materials will
not have an adverse effect on our results of operations and financial condition.
Government Regulations and Policies – Methanol
Changes in environmental, health and safety laws, regulations or requirements in any country where methanol is produced or
consumed could impact methanol demand. Methanol is subject to the chemical control laws of the countries in which they are located.
These laws include the regulation of chemical substances and inventories under the Toxic Substances Control Act (“TSCA”) in the
U.S. and the Registration, Evaluation and Authorization of Chemicals (“REACH”) and the Classification, Labeling and Packaging of
substances and mixtures (“CLP”) regulations in Europe.
Above certain inhalation and ingestion levels, methanol is toxic to humans. In past years, the United States Environmental Protection
Agency ("EPA") had assessed methanol for carcinogenicity and issued levels of maximum ingestion and inhalation that it claims will
not result in adverse health impacts. While methanol is not currently on the priority list of chemicals to be evaluated under the Toxic
Substances Control Act, we are unable to determine whether the current classifications relating to the carcinogenicity of methanol will
be maintained or if other government agencies will take actions related to methanol. Any further action or reclassification of methanol
could reduce future methanol demand, which could have an adverse effect on our results of operations and financial condition.
Government Regulations and Policies – Methanol-Derived Products
Similar to methanol, methanol-derived chemical products are subject to the chemical control laws of the countries in which they are
located. These laws include the regulation of chemical substances and inventories under the Toxic Substances Control Act (“TSCA”)
in the U.S. and the Registration, Evaluation and Authorization of Chemicals (“REACH”) and the Classification, Labeling and Packaging
of substances and mixtures (“CLP”) regulations in Europe. Analogous regimes exist in other parts of the world, including China, South
Korea, and Taiwan. In addition, a number of countries where our customers operate, including the U.K., have adopted rules to
conform chemical labeling in accordance with the globally harmonized system. Many of these foreign regulatory regimes are in the
process of a multi-year implementation period for these rules.
In the US, changes to the US Environmental Protection Agency's risk evaluation process under the TSCA could also result in
additional restrictions or bans of methanol-derived products, such as formaldehyde which is currently being reassessed by the EPA.
In 2023, global methanol demand for the production of formaldehyde represented approximately 25% of global methanol demand and
is the largest demand segment. The largest use for formaldehyde is as a component of urea-formaldehyde and phenol-formaldehyde
resins, which are used in adhesives for plywood, particleboard, oriented strand board, medium-density fibreboard and other
reconstituted or engineered wood products. There is also demand for formaldehyde as a raw material for engineering plastics and in
the manufacture of a variety of other products, including elastomers, paints, building products, foams, polyurethane and automotive
products.
Assessments under TSCA may result in heightened concerns about methanol-derived products and may result in additional
requirements or bans being placed on the production, handling, labeling or use of those chemicals. Any such actions could reduce
future methanol demand for use in producing methanol-derived products and could have an adverse effect on our results of
operations and financial condition
Litigation and Legal Proceedings
The Company is subject, from time to time, to litigation and may be involved in disputes with other parties in the future, which may
result in litigation and claims under such litigation may be material. Various types of claims may be raised in these proceedings,
including, but not limited to breach of contract, product liability, tax, employment matters and in relation to an attack, breach or
unauthorized access to Methanex's information technology and infrastructure, environmental damage, climate change and the impact
thereof, antitrust, bribery, and other forms of corruption. The Company cannot predict the outcome of any litigation. Defense and
settlement costs may be substantial, even with respect to claims that have no merit. If the Company cannot resolve these disputes
favourably, its business, financial condition, results of operations and future prospects may be materially adversely affected.
Trinidad and Tobago
The Board of Inland Revenue of Trinidad and Tobago has audited and issued assessments against our 63.1% owned joint venture,
Atlas, in respect of the 2005 to 2017 financial years. All subsequent tax years remain open to assessment. The assessments relate
to the pricing arrangements of certain long-term fixed-price sales contracts with affiliates that commenced in 2005 and continued
with affiliates through 2014 and with an unrelated third party through 2019. The long-term fixed-price sales contracts with affiliates
were established as part of the formation of Atlas and management believes these were reflective of market considerations at that
time.
During the periods under assessment and continuing through 2014, approximately 50% of Atlas-produced methanol was sold under
these fixed-price contracts. From late 2014 through 2019 fixed-prices sales to an unrelated third party represented approximately
10% of Atlas-produced methanol. Atlas had partial relief from corporation income tax until late July 2014.
33
The Company believes it is impractical to disclose a reasonable estimate of the potential contingent liability due to the wide range of
assumptions and interpretations implicit in the assessments.
The Company has lodged objections to the assessments. No deposits have been required to lodge objections. Although there can
be no assurance that these tax assessments will not have a material adverse impact, based on the merits of the case and advice
from legal counsel, we believe our position should be sustained, that Atlas has filed its tax returns and paid applicable taxes in
compliance with Trinidadian tax law, and as such has not accrued for any amounts relating to these assessments. Contingencies
inherently involve the exercise of significant judgment, and as such the outcomes of these assessments and the financial impact to
the Company could be material.
We anticipate the resolution of this matter through the court systems to be lengthy and, at this time, cannot predict a date as to
when we expect this matter to be ultimately resolved.
CRITICAL ACCOUNTING ESTIMATES
We believe the following selected accounting policies and issues are critical to understanding the estimates, assumptions and
uncertainties that affect the amounts reported and disclosed in our consolidated financial statements and related notes. Certain of our
accounting policies, including depreciation and amortization, recoverability of asset carrying values, leases, income taxes and fair
value measurement of financial instruments require us to make assumptions relating to operations and about the price and availability
of natural gas feedstock. See additional discussion of the risk factors and risk management by region in the Security of Natural Gas
Supply and Price section on page 27. See note 2 to our 2023 consolidated financial statements for our material accounting policies.
Property, Plant and Equipment
Our business is capital intensive and has required, and will continue to require, significant investments in property, plant and
equipment. As at December 31, 2023, the net book value of our property, plant and equipment was $4.4 billion.
Capitalization
Property, plant and equipment are initially recorded at cost. The cost of purchased equipment includes expenditures that are directly
attributable to the purchase price, delivery and installation. The cost of self-constructed assets includes the cost of materials and direct
labour, any other costs directly attributable to bringing the assets to the location and condition for their intended use, the costs of
dismantling and removing the items and restoring the site on which they are located, and borrowing costs on self-constructed assets
that meet certain criteria. Routine repairs and maintenance costs are expensed as incurred.
As at December 31, 2023, we had accrued $33 million for site restoration costs relating to the decommissioning and reclamation of
our methanol production sites. Inherent uncertainties exist in this estimate because the restoration activities will take place in the
future and there may be changes in governmental and environmental regulations and changes in removal technology and costs. It is
difficult to estimate the future costs of these activities as our estimate of fair value is based on current regulations and technology.
Because of uncertainties related to estimating the cost and timing of future site restoration activities, future costs could differ materially
from the amounts estimated.
Depreciation and Amortization
Depreciation and amortization is generally provided on a straight-line basis at rates calculated to amortize the cost of property, plant
and equipment from the commencement of commercial operations over their estimated useful lives to estimated residual value.
The estimated useful lives of the Company’s buildings, plant installations and machinery at installation, excluding costs related to
turnarounds, initially range up to 25 years depending on the specific asset component and the production facility to which it is related.
The Company determines the estimated useful lives of individual asset components based on the shorter of its physical life or
economic life. The physical life of these assets is generally longer than the economic life. The economic life is primarily determined by
the nature of the natural gas feedstock available to our various production facilities. The estimated useful life of production facilities
may be adjusted from time-to-time based on turnarounds, plant refurbishments and gas availability. Factors that influence the nature
of natural gas feedstock availability include the terms of individual natural gas supply contracts, access to natural gas supply through
open markets, regional factors influencing the exploration and development of natural gas and the expected price of securing natural
gas supply. We review the factors related to each production facility on an annual basis to determine if changes are required to the
estimated useful lives.
Recoverability of Asset Carrying Values
Long-lived assets are tested for recoverability whenever events or changes in circumstances, either internal or external, indicate that
the carrying amount may not be recoverable ("triggering events"). Examples of such triggering events related to our long-lived assets
include, but are not restricted to: a significant adverse change in the extent or manner in which the asset is being used or in its
physical condition; a change in management's intention or strategy for the asset, which includes a plan to dispose of the asset or idle
34
the asset for a significant period of time; a significant adverse change in our long-term methanol price assumption or in the price or
availability of natural gas feedstock required to manufacture methanol; a significant adverse change in legal factors or in the business
climate that could affect the asset’s value, including an adverse action or assessment by a foreign government that impacts the use of
the asset; or a current period operating or cash flow loss combined with a history of operating or cash flow losses, or a projection or
forecast that demonstrates continuing losses associated with the asset’s use.
When a triggering event is identified, recoverability of long-lived assets is measured by comparing the carrying value of an asset or
cash-generating unit to the estimated recoverable amount, which is the higher of its estimated fair value less costs to sell or its value
in use. Fair value less costs of disposal is determined by ascertaining the price that would be received to sell an asset in an orderly
transaction between market participants under current market conditions, less incremental costs directly attributable to the disposal,
excluding finance costs and income tax expense. Value in use is determined by measuring the pre-tax cash flows expected to be
generated from the cash-generating unit over its estimated useful life discounted by a pre-tax discount rate. An impairment writedown
is recorded if the carrying value exceeds the estimated recoverable amount. An impairment writedown recognized in prior periods for
an asset or cash-generating unit is reversed if there has been a subsequent recovery in the value of the asset or cash-generating unit
due to changes in events and circumstances. For the purposes of recognition and measurement of an impairment writedown or
reversal, we group our long-lived assets with other assets and liabilities to form a cash-generating unit at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. To the extent that our methanol facilities
in a particular location are interdependent as a result of common infrastructure and/or feedstock from shared sources that can be
shared within a facility location, we group our assets based on site locations for the purpose of determining impairment.
When impairment indicators exist, there are two key variables that impact our estimate of future cash flows from producing assets:
(1) the methanol price and (2) the price and availability of natural gas feedstock. Short-term methanol price estimates are based on
current supply and demand fundamentals and current methanol prices. Long-term methanol price estimates are based on our view of
long-term supply and demand, incorporating third-party assumptions, forecasts and market-observable prices when appropriate.
Consideration is given to many factors, including, but not limited to, estimates of global industrial production rates, energy prices,
changes in general economic conditions, the ability for the industry to add further global methanol production capacity and earn an
appropriate return on capital, industry operating rates and the global industry cost structure. Our estimate of the price and availability
of natural gas takes into consideration the current contracted terms, as well as factors that we believe are relevant to supply under
these contracts and supplemental natural gas sources. Other assumptions included in our estimate of future cash flows include the
estimated cost incurred to maintain the facilities, estimates of transportation costs and other variable costs incurred in producing
methanol in each period. Changes in these assumptions will impact our estimates of future cash flows when testing for impairment
and could impact our estimates of the useful lives of property, plant and equipment. Consequently, it is possible that our future
operating results could be adversely affected by further asset impairment charges or by changes in depreciation and amortization
rates related to property, plant and equipment. In relation to previous impairment charges, we do not believe that there are significant
changes in events or circumstances that would support their reversal.
In Trinidad we announced our intention to idle the Atlas plant when its 20-year legacy natural gas supply arrangement expires in
September 2024. The expected idling of the Atlas plant has been identified as an impairment indicator for the Atlas cash generating
unit ("Atlas CGU"). The impairment test performed on the Atlas CGU resulted in no impairment provision recognized as the estimated
recoverable value, determined on a fair value less costs of disposal methodology, exceeded the carrying value. The estimated
recoverable value was based on an assumed restart date and an operating period for Atlas aligned to natural gas reserves estimates
in Trinidad and Tobago with no terminal value, discounted at an after-tax rate of 16%.
The following table indicates the percentages by which key assumptions would need to change individually for the estimated Atlas
CGU recoverable value to be equal to the carrying value:
Key Assumptions
Long-term average realized methanol price
Production volumes
Gas price
Discount rate (after-tax)
Change Required for Carrying Value to Equal
Recoverable Value
10 percent decrease
15 percent decrease
10 percent increase
800 basis points increase
The sensitivity above has been prepared considering each variable independently. Historically, our natural gas contracts in Trinidad
and Tobago have included terms whereby a change in methanol price results in a change in natural gas price, protecting margins
should revenue decrease.
Leases
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
35
In determining the lease term, the Company considers all facts and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. The assessment is reviewed upon a trigger by an event or a significant change
in circumstances.
Certain leases contain non-lease components, excluded from the right-of-use asset and lease liability, related to operating charges for
ocean vessels and terminal facilities. Judgment is applied in the determination of the stand-alone price of the lease and non-lease
components. All related operating charges are classified as variable payments and all such costs are accounted for as a non-lease
component charged to the consolidated statement of operations as incurred.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to
be payable under a residual value guarantee or if the Company changes its assessment of whether it will exercise a purchase,
extension or termination option. In measuring lease liabilities, the Company discounts lease payments using the incremental
borrowing rate applicable at lease inception. The incremental borrowing rate is determined using a credit rating specific to the entity,
location, asset security and term of the lease.
Income Taxes
We calculate current and deferred tax provisions for each of the jurisdictions in which we operate. Actual amounts of income tax
expense or recoveries are not final until tax returns are filed and accepted by the relevant tax authorities and as a result, the ultimate
amount of taxes the Company may owe could differ from the amounts recognized in the consolidated financial statements. The filing
of annual tax returns primarily occurs subsequent to the issuance of the financial statements and the final determination of actual
amounts may not be completed for a number of years. Transactions may be challenged by tax authorities and the Company's
operations may be assessed in subsequent periods, which could result in significant additional taxes, penalties and interest. Uncertain
tax positions derive from the complexity of tax law and its interpretation by tax authorities and ultimately the judicial system in place in
each jurisdiction. Uncertain tax positions, including interest and penalties, are recognized and measured applying management
estimates. Given the complexity, management engages third-party experts as required, for the interpretation of tax law, transfer pricing
regulations and determination of the ultimate resolution of its tax positions. The Company is subject to various taxation authorities who
may interpret tax legislation differently, and resolve matters over longer periods of time. The differences in judgement in assessing
uncertain tax positions may result in material differences in the final amount or timing of the payment of taxes or settlement of tax
assessments.
Deferred income tax assets and liabilities are determined using enacted or substantially enacted tax rates for the effects of net
operating losses and temporary differences between the book and tax bases of assets and liabilities. We recognize deferred tax
assets to the extent it is probable that taxable profit will be available against which the asset can be utilized. In making this
determination, certain judgments are made relating to the level of expected future taxable income and to available tax-planning
strategies and their impact on the use of existing loss carryforwards and other income tax deductions. We also consider historical
profitability and volatility to assess whether we believe it is probable that the existing loss carryforwards and other income tax
deductions will be used to offset future taxable income otherwise calculated. Management routinely reviews these judgments. As at
December 31, 2023, we had recognized deferred tax assets of $152 million primarily relating to non-capital loss carryforwards and
other temporary differences in the United States and Trinidad and Tobago. As at December 31, 2023, the Company had $201 million
of unrecognized deductible temporary differences in the United States. If judgments or estimates in the determination of our current
and deferred tax provision prove to be inaccurate, or if certain tax rates or laws change, or new interpretations or guidance emerge on
the application of tax legislation, our results from operations and financial position could be materially impacted.
Financial Instruments Measured at Fair Value
The Company uses derivatives as part of its risk management program to mitigate variability associated with changing market values.
Changes in the fair value of derivative financial instruments are recorded in earnings unless the instruments are designated as cash
flow hedges, in which case the changes in fair value are recorded in other comprehensive income and are reclassified to profit or loss
or accumulated other comprehensive income when the underlying hedged transaction is recognized in earnings or inventory. The
Company designates as cash flow hedges certain derivative financial instruments to hedge its risk exposure to fluctuations in natural
gas prices and to hedge its risk exposure to fluctuations on certain foreign-currency-denominated transactions. Assessment of
contracts as derivative instruments, applicability of the own use exemption, determination of whether contracts contain embedded
derivatives to be separated, the valuation of financial instruments and derivatives and hedge effectiveness assessments require a high
degree of judgment and are considered critical accounting estimates due to their complex nature and the potential impact on our
financial statements.
The Company holds a long-term natural gas supply contract expiring in 2035 with the Egyptian Natural Gas Holding Company, a
State-Owned enterprise in Egypt. The natural gas supply contract includes a base fixed price plus a premium based on the realized
price of methanol for the full volume of natural gas to supply the plant for the remainder of its useful life. As a result of the amendment
in 2022, the contract is being treated as a derivative measured at fair value.
36
There is no observable, liquid spot market or forward curve for natural gas in Egypt. In addition, there are limited observable prices for
natural gas in Egypt as all natural gas purchases and sales are controlled by the government and the observed prices differ based on
the produced output or usage.
Due to the absence of an observable market price for an equivalent or similar contract to measure fair value, the contract's fair value
is estimated using a Monte-Carlo model. We consider market participant assumptions in establishing the model inputs and
determining fair value, including adjusting the base fixed price and methanol based premium at the valuation date to consider
estimates of inflation since contract inception.
Refer to note 19 to our 2023 consolidated financial statements for more information.
ADOPTION OF NEW ACCOUNTING STANDARDS
The Company has adopted the amendments to IAS 1 Presentation of Financial Statements as well as IAS 8 Changes in Accounting
Estimates and Errors regarding the disclosure of accounting policies and accounting estimates, and IAS 12, Income Taxes ("IAS 12")
regarding deferred tax related to assets and liabilities arising from a single transaction, which were effective for annual periods
beginning on January 1, 2023. The amendments did not have a material impact on the Company's consolidated financial statements.
In May 2023, the IASB issued a further amendment to IAS 12, establishing a mandatory exception for recognition and disclosure of
deferred taxes related to the Pillar Two model rules published by the Organization for Economic Co-operation and Development
(“Pillar Two rules”). The Pillar Two rules establish a global minimum fifteen percent top-up tax regime and are expected to apply to
Methanex beginning in 2024. The Company has applied this mandatory exception in the current period. Refer to note 16 to our 2023
consolidated financial statements for further disclosure on the expected impact of Pillar Two rules.
ANTICIPATED CHANGES TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
The following new or amended standards or interpretations that are effective for annual periods beginning on or after January 1, 2024
are being reviewed to determine the potential impact: amendments to IAS 1, Presentation of Financial Statements regarding the
classification of liabilities as current or non-current, IFRS 16, Leases regarding sale-and-leaseback transactions and IAS 7, Statement
of Cash Flows regarding supplier finance arrangements.
NON-GAAP MEASURES
In addition to providing measures prepared in accordance with IFRS, we present certain supplemental measures that are not defined
terms under IFRS (non-GAAP measures or ratios). These are Adjusted EBITDA, Adjusted net income (loss), Adjusted net income
(loss) per common share, Adjusted net income (loss) before income tax, Adjusted income tax expense, and Adjusted effective tax rate.
These non-GAAP financial measures and ratios reflect our 63.1% economic interest in the Atlas facility, 50% economic interest in the
Egypt facility and our 60% economic interest in Waterfront Shipping, and are useful as they are a better measure of our underlying
performance and assist in assessing the operating performance of the Company’s business. These measures, at our economic share,
are a better measure of our underlying performance, as we fully run the operations on our partners' behalf, despite having less than
full share of the economic interest. Adjusted EBITDA is also frequently used by securities analysts and investors when comparing our
results with those of other companies.
In addition, the Company also presents non-GAAP capital management measures, specifically, Net debt to capitalization and Total
liquidity, which are useful in assessing the liquidity of the Company’s ongoing business. Total liquidity is useful because it illustrates
the extent to which management has immediate access to cash for operational and construction purposes, and is indicative of our
flexibility should uses for these facilities immediately arise. Net debt to capitalization is useful because it illustrates the relative risk of
our financing structure to potential lenders and investors.These measures and ratios do not have any standardized meaning
prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other companies.
These measures should be considered in addition to, and not as a substitute for, net income, cash flows and other measures of
financial performance and liquidity reported in accordance with IFRS.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and differs from the most comparable GAAP measure, net income attributable to
Methanex shareholders, because it excludes finance costs, finance income and other, income tax expense, depreciation and
amortization and mark-to-market impact of share-based compensation. Adjusted EBITDA includes an amount representing our 63.1%
share of the Atlas facility and excludes the non-controlling shareholders' interests in entities which we control but do not fully own.
37
Adjusted EBITDA and Adjusted net income exclude the mark-to-market impact of share-based compensation related to the impact of
changes in our share price on SARs, TSARs, deferred share units, restricted share units and performance share units. The mark-to-
market impact related to share-based compensation that is excluded from Adjusted EBITDA and Adjusted net income is calculated as
the difference between the grant date value and the fair value recorded at each period-end. As share-based awards will be settled in
future periods, the ultimate value of the units is unknown at the date of grant and therefore the grant date value recognized in Adjusted
EBITDA and Adjusted net income may differ from the total settlement cost.
The following table shows a reconciliation from net income attributable to Methanex shareholders to Adjusted EBITDA:
($ Millions)
Net income attributable to Methanex shareholders
Mark-to-market impact of share-based compensation
Gas contract settlement, net of tax
Depreciation and amortization
Finance costs
Finance income and other
Income tax expense
Earnings of associate adjustment 1
Non-controlling interests adjustment 1
$
2023
174 $
16
(31)
392
117
(40)
1
67
(74)
Adjusted EBITDA (attributable to Methanex shareholders)
$
622 $
1 These adjustments represent depreciation and amortization, finance costs, finance income and other and income taxes associated with our 63.1% interest in the Atlas
methanol facility and the non-controlling interests.
2022
354
(7)
—
372
131
(25)
120
74
(87)
932
Adjusted Net Income and Adjusted Net Income per Common Share
Adjusted net income and Adjusted net income per common share are a non-GAAP measure and ratio, respectively, because they
exclude the mark-to-market impact of share-based compensation, the impact of the Egypt gas contract revaluation included in finance
income and other and the impact of certain items associated with specific identified events. The following table shows a reconciliation
from net income attributable to Methanex shareholders to Adjusted net income and the calculation of Adjusted diluted net income per
common share:
($ Millions, except number of shares and per share amounts)
Net income attributable to Methanex shareholders
Mark-to-market impact of share-based compensation, net of tax
Gas contract settlement, net of tax
Impact of Egypt gas contract revaluation, net of tax
Adjusted net income
Diluted weighted average shares outstanding (millions)
Adjusted net income per common share
$
$
$
2023
174 $
13
(31)
(3)
153 $
68
2.25 $
2022
354
(6)
—
(5)
343
72
4.79
Management uses these measures to analyze net income and net income per common share after adjusting for our economic interest
in the Atlas and Egypt facilities and Waterfront Shipping, for reasons as described above. The exclusion of the mark-to-market portion
of the impact of shared-based compensation is due to these amounts not being seen as indicative of the operational performance and
can fluctuate in the intervening periods until settlement. The exclusion of the impact of the Egypt gas contract revaluation is due to the
change in the derivative being unrealized with the fair value of the derivative expected to fluctuate in the intervening periods until
settlement.
38
QUARTERLY FINANCIAL DATA (UNAUDITED)
Our operations consist of a single operating segment – the production and sale of methanol. Quarterly results vary due to the average
realized price of methanol, sales volume and total cash costs.
A summary of selected financial information is as follows:
($ Millions, except per share amounts)
Dec 31
Sep 30
Jun 30
Mar 31
Three months ended
2023
Revenue
Cost of sales and operating expenses
Net income (attributable to Methanex shareholders)
Basic net income per common share
Diluted net income per common share
Adjusted EBITDA 1
Adjusted net income 1
Adjusted net income per common share 1
2022
Revenue
Cost of sales and operating expenses
Net income (attributable to Methanex shareholders)
Basic net income per common share
Diluted net income per common share
Adjusted EBITDA 1
Adjusted net income 1
Adjusted net income per common share 1
$
922 $
(772)
823 $
(730)
939 $
1,038
(724)
(841)
33
0.50
0.50
148
35
0.52
24
0.36
0.36
105
1
0.02
57
0.84
0.73
160
41
0.60
60
0.87
0.87
209
76
1.11
$
986 $
1,012 $
1,137 $
1,176
(841)
(861)
(852)
(892)
41
0.59
0.59
160
51
0.73
69
0.99
0.87
192
49
0.69
125
1.74
1.41
243
84
1.16
119
1.60
1.60
337
159
2.16
1 The Company has used the terms Adjusted EBITDA, Adjusted net income, and Adjusted net income per common share, throughout this document. These items are non-
GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by
other companies. Refer to the Non-GAAP Measures section on page 37 for a description of each non-GAAP measure and reconciliations to the most comparable GAAP
measures.
A discussion and analysis of our results for the fourth quarter of 2023 is set out in our fourth quarter of 2023 Management’s Discussion
and Analysis filed with the Canadian Securities Administrators on SEDAR+ at www.sedarplus.ca and the U.S. Securities and
Exchange Commission on EDGAR at www.sec.gov and is incorporated herein by reference.
SELECTED ANNUAL INFORMATION
($ Millions, except per share amounts)
Total assets
Total long-term liabilities (excluding deferred income tax)
Revenue
Net income (attributable to Methanex shareholders)
Adjusted net income 1
Adjusted EBITDA 1
Basic net income per common share
Diluted net income per common share
Adjusted net income per common share 1
Cash dividends declared per common share
$
2023
6,427 $
2,733
3,723
174
153
622
2.57
2.57
2.25
2022
6,631 $
3,032
4,311
354
343
932
4.95
4.86
4.79
0.730
0.620
2021
6,090
2,959
4,415
482
460
1,108
6.34
6.13
6.03
0.325
1 The Company has used the terms Adjusted EBITDA, Adjusted net income, and Adjusted net income per common share,throughout this document. These items are non-
GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by
other companies. Refer to the Non-GAAP Measures section on page 37 for a description of each non-GAAP measure and reconciliations to the most comparable GAAP
measures.
39
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), and NI 52-109, are those controls and procedures that are designed to ensure that the information
required to be disclosed in the filings under applicable securities regulations is recorded, processed, summarized and reported within
the time periods specified. As of December 31, 2023, under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures are effective as of that date.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control
over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the financial statements.
Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves
human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control
over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is
a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting.
However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management conducted
an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2023, based on the framework
set forth in Internal Control – Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway
Commission (the "COSO framework"). Based on its evaluation under this framework, management concluded that our internal control
over financial reporting was effective as of that date.
KPMG LLP, an independent registered public accounting firm that audited and reported on our consolidated financial statements, has
issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2023. The
attestation report is included in our consolidated financial statements on page 46.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the most recent interim
period and year ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
40
FORWARD-LOOKING STATEMENTS
This 2023 Management’s Discussion and Analysis ("MD&A") contains forward-looking statements with respect to us and our industry.
These statements relate to future events or our future performance. All statements other than statements of historical fact are forward-
looking statements. Statements that include the words "believes," "expects," "may," "will," "should," "potential," "estimates,"
"anticipates," "aim", "goal," "targets," "plan," "predict" or other comparable terminology and similar statements of a future or forward-
looking nature identify forward-looking statements.
More particularly, and without limitation, any statements regarding the following are forward-looking statements:
▪ expected demand for methanol, including demand for
▪ expected tax rates or resolutions to tax disputes,
methanol for energy uses, and its derivatives,
▪ expected cash flows, cash balances, earnings capability,
▪ expected new methanol supply or restart of idled capacity
debt levels and share price,
and timing for startup of the same,
▪ expected shutdowns (either temporary or permanent) or
restarts of existing methanol supply (including our own
facilities), including, without limitation, the timing and length
of planned maintenance outages,
▪ expected methanol and energy prices,
▪ expected levels of methanol purchases from traders or
other third parties,
▪ expected levels, timing and availability of economically
priced natural gas supply to each of our plants,
▪ capital committed by third parties towards future natural gas
exploration and development in the vicinity of our plants,
▪ availability of committed credit facilities and other financing,
▪ our ability to meet covenants associated with our long-term
debt obligations,
▪ our shareholder distribution strategy and anticipated
distributions to shareholders,
▪ commercial viability and timing of, or our ability to execute
future projects, plant restarts, capacity expansions, plant
relocations or other business initiatives or opportunities,
including our Geismar 3 project,
▪ our financial strength and ability to meet future financial
commitments,
▪ expected global or regional economic activity (including
▪ our expected capital expenditures and anticipated timing
industrial production levels) and GDP growth,
and rate of return of such capital expenditures,
▪ expected outcomes of litigation or other disputes, claims
▪ anticipated operating rates of our plants,
and assessments, and
▪ expected operating costs, including natural gas feedstock
▪ expected actions of governments, governmental agencies,
costs and logistics costs,
gas suppliers, courts, tribunals or other third parties.
We believe that we have a reasonable basis for making such forward-looking statements. The forward-looking statements in this
document are based on our experience, our perception of trends, current conditions and expected future developments as well as
other factors. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections
that are included in these forward-looking statements, including, without limitation, future expectations and assumptions concerning
the following:
▪ the supply of, demand for and price of methanol, methanol
▪ the expected timing and capital cost of our Geismar 3
derivatives, natural gas, coal, oil and oil derivatives,
project,
▪ our ability to procure natural gas feedstock on commercially
▪ global and regional economic activity (including industrial
acceptable terms,
production levels) and GDP growth,
▪ operating rates of our facilities,
▪ absence of a material negative impact from major natural
▪ receipt or issuance of third-party consents or approvals or
governmental approvals related to rights to purchase
natural gas,
▪ the establishment of new fuel standards,
▪ operating costs, including natural gas feedstock and
logistics costs, capital costs, tax rates, cash flows, foreign
exchange rates and interest rates,
▪ the availability of committed credit facilities and other
financing,
disasters,
▪ absence of a material negative impact from changes in
laws or regulations,
▪ absence of a material negative impact from political
instability in the countries in which we operate, and
▪ enforcement of contractual arrangements and ability to
perform contractual obligations by customers, natural gas
and other suppliers and other third parties.
41
However, forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially
from those contemplated by the forward-looking statements. The risks and uncertainties primarily include those attendant with
producing and marketing methanol and successfully carrying out major capital expenditure projects in various jurisdictions, including,
without limitation:
▪ conditions in the methanol and other industries, including
fluctuations in the supply, demand and price for methanol
and its derivatives, including demand for methanol for
energy uses,
▪ the price of natural gas, coal, oil and oil derivatives,
▪ our ability to obtain natural gas feedstock on commercially
acceptable terms to underpin current operations and future
production growth opportunities,
▪ the ability to carry out corporate initiatives and strategies,
▪ actions of competitors, suppliers and financial institutions,
▪ conditions within the natural gas delivery systems that may
prevent delivery of our natural gas supply requirements,
▪ our ability to meet timeline and budget targets for the
Geismar 3 project, including the impact of any cost
pressures arising from tightening construction labour
market conditions,
▪ competing demand for natural gas, especially with respect
to any domestic needs for gas and electricity,
▪ actions of governments and governmental authorities,
including, without limitation, implementation of policies or
other measures that could impact the supply of or demand
for methanol or its derivatives,
▪ changes in laws or regulations,
▪ import or export restrictions, anti-dumping measures,
increases in duties, taxes and government royalties and
other actions by governments that may adversely affect our
operations or existing contractual arrangements,
▪ worldwide economic conditions, and
▪ other risks described in this 2023 MD&A.
Having in mind these and other factors, investors and other readers are cautioned not to place undue reliance on forward-looking
statements. They are not a substitute for the exercise of one’s own due diligence and judgment. The outcomes implied in forward-
looking statements may not occur and we do not undertake to update forward-looking statements except as required by applicable
securities laws.
42
Responsibility for Financial Reporting
The consolidated financial statements and all financial information contained in the annual report are the responsibility of
management.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued
by the International Accounting Standards Board and, where appropriate, have incorporated estimates based on the best judgment of
management.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the internal control framework set out in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
The Board of Directors ("the Board") is responsible for ensuring that management fulfills its responsibilities for financial reporting and
internal control, and is responsible for reviewing and approving the consolidated financial statements. The Board carries out this
responsibility principally through the Audit, Finance and Risk Committee ("the Committee").
The Committee consists of five non-management directors, all of whom are independent as defined by the applicable rules in Canada
and the United States. The Committee is appointed by the Board to assist the Board in fulfilling its oversight responsibility relating to:
the integrity of the Company’s financial statements; the financial reporting process; the systems of accounting and financial controls;
the professional qualifications and independence of the external auditor; the performance of the external and internal auditors; risk
management processes; financing plans; and the Company’s compliance with ethics policies and legal and regulatory requirements.
The Committee meets regularly with management and the Company’s auditors, KPMG LLP, Chartered Professional Accountants, to
discuss internal controls and significant accounting and financial reporting issues. KPMG LLP has full and unrestricted access to the
Committee. KPMG LLP audited the consolidated financial statements and the effectiveness of internal controls over financial
reporting. Their opinions are included in the annual report.
Benita Warmbold
Chair of the Audit,
Finance and Risk Committee
March 8, 2024
Rich Sumner
President and
Chief Executive Officer
Dean Richardson
Senior Vice President, Finance and
Chief Financial Officer
43
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Methanex Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Methanex Corporation (the Company) as of
December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash
flows for each of the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2023 and 2022, and its financial performance and its cash flows for each of the years then ended, in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our
report dated March 8, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on
the accounts or disclosures to which it relates.
Recognition and Measurement of Uncertain Tax Positions
As discussed in Notes 6(c) and 16 to the consolidated financial statements, the Company has identified and, in certain cases,
recognized uncertain tax positions (tax positions) including associated interest and penalties. As discussed in Note 2(q) to the
consolidated financial statements, uncertain tax positions derive from the complexity of tax law and its interpretation by tax authorities
and ultimately the judicial system in place in each jurisdiction. Given the complexity, the Company engages third-party experts as
required, for the interpretation of tax law, transfer pricing regulations and determination of the ultimate resolution of its tax positions.
The Company is subject to various taxation authorities who may interpret tax legislation differently, and resolve matters over longer-
periods of time.
We identified the assessment of the recognition and measurement of uncertain tax positions as a critical audit matter. Complex auditor
judgment was required to evaluate the Company’s interpretation of tax law and its identification and determination of the ultimate
resolution of its tax positions. Additionally, the evaluation of the recognition and measurement of the Company's uncertain tax
positions required specialized skills and knowledge.
44
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of certain internal controls related to the Company's process for recognizing uncertain tax positions. This
included controls related to the interpretation of tax law and identification of tax positions, the determination of the probability that the
tax authorities would accept the Company's tax positions, and the estimation of reserves recorded for tax positions. We involved
domestic and international tax professionals with specialized skills and knowledge, who assisted in assessing the Company's tax
positions by:
–
–
–
inspecting tax rulings and correspondence between the Company and the applicable taxation authorities;
inspecting transfer pricing studies and information obtained from external tax specialists and legal counsel; and
comparing our understanding and interpretation of tax laws to the Company's evaluation.
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company's auditor since 1992.
Vancouver, Canada
March 8, 2024
45
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Methanex Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Methanex Corporation's internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. In our opinion, Methanex Corporation (the Company) maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated statements of financial position of the Company as of December 31, 2023 and 2022, the related
consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years then ended, and
the related notes (collectively, the consolidated financial statements), and our report dated March 8, 2024 expressed an unqualified
opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included under the heading ”Management’s Annual Report on Internal
Control Over Financial Reporting” in Management's Discussion and Analysis for the year ended December 31, 2023. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Chartered Professional Accountants
Vancouver, Canada
March 8, 2024
46
Dec 31
2023
Dec 31
2022
$
458,015 $
533,615
426,774
58,024
3,893
857,747
500,925
439,771
38,585
39,346
1,480,321
1,876,374
4,411,768
4,155,283
184,249
152,250
197,967
197,083
46,353
356,387
4,946,234
4,755,106
$
6,426,555 $
6,631,480
$
771,867 $
789,200
314,716
120,731
94,992
1,302,306
15,133
108,736
29,548
942,617
1,827,085
2,136,380
751,389
154,918
217,840
761,427
134,603
226,996
2,951,232
3,259,406
391,924
1,838
401,295
1,904
1,514,264
1,466,872
22,901
241,942
1,930,927
2,112,013
242,090
317,444
2,173,017
2,429,457
$
6,426,555 $
6,631,480
Consolidated Statements of Financial Position
(thousands of U.S. dollars, except number of common shares)
As at
ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables (note 3)
Inventories (note 4)
Prepaid expenses
Other assets (note 7)
Non-current assets:
Property, plant and equipment (note 5)
Investment in associate (note 6)
Deferred income tax assets (note 16)
Other assets (note 7)
LIABILITIES AND EQUITY
Current liabilities:
Trade, other payables and accrued liabilities
Current maturities on long-term debt (note 8)
Current maturities on lease obligations (note 9)
Current maturities on other long-term liabilities (note 10)
Non-current liabilities:
Long-term debt (note 8)
Lease obligations (note 9)
Other long-term liabilities (note 10)
Deferred income tax liabilities (note 16)
Equity:
Capital stock
25,000,000 authorized preferred shares without nominal or par value
Unlimited authorization of common shares without nominal or par value
Issued and outstanding common shares at December 31, 2023 were 67,387,492 (2022 - 69,239,136)
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Shareholders’ equity
Non-controlling interests
Total equity
Commitments and contingencies (note 22)
See accompanying notes to consolidated financial statements.
Approved by the Board:
Benita Warmbold (Director)
Rich Sumner (Director)
47
Consolidated Statements of Income
(thousands of U.S. dollars, except number of common shares and per share amounts)
For the years ended December 31
Revenue
Cost of sales and operating expenses (note 11)
Depreciation and amortization (note 11)
Egypt gas redirection and sale proceeds (note 26)
Operating income
Earnings of associate (note 6)
Finance costs (note 12)
Finance income and other
Income before income taxes
Income tax (expense) recovery (note 16):
Current
Deferred
Net income
Attributable to:
Methanex Corporation shareholders
Non-controlling interests (note 24)
Income per common share for the year attributable to Methanex Corporation shareholders:
Basic net income per common share (note 13)
Diluted net income per common share (note 13)
Weighted average number of common shares outstanding (note 13)
Diluted weighted average number of common shares outstanding (note 13)
See accompanying notes to consolidated financial statements.
2023
2022
$
3,723,475 $
4,311,188
(3,068,072)
(3,446,101)
(391,830)
(372,420)
—
263,573
99,466
117,946
610,613
76,938
(117,366)
(130,752)
39,938
285,611
25,348
582,147
(49,924)
(127,578)
48,435
(1,489)
7,719
(119,859)
284,122 $
462,288
174,140 $
109,982
284,122 $
353,830
108,458
462,288
2.57 $
2.57 $
4.95
4.86
67,805,220
71,422,360
67,811,615
71,677,484
$
$
$
$
$
48
Consolidated Statements of Comprehensive Income
(thousands of U.S. dollars)
For the years ended December 31
Net income
Other comprehensive income:
Items that may be reclassified to income:
Change in cash flow hedges and excluded forward element (note 19)
Realized losses (gains) on foreign exchange hedges reclassified to revenue
Items that will not be reclassified to income:
Actuarial loss on defined benefit pension plans (note 21(a))
Taxes on above items
Comprehensive income
Attributable to:
Methanex Corporation shareholders
Non-controlling interests (note 24)
See accompanying notes to consolidated financial statements.
2023
2022
$
284,122 $
462,288
(310,456)
378,287
3,105
(5,674)
(2,827)
66,636
(243,542)
40,580 $
(69,402) $
109,982
40,580 $
$
$
$
(726)
(72,440)
299,447
761,735
653,277
108,458
761,735
49
Consolidated Statements of Changes in Equity
(thousands of U.S. dollars, except number of common shares)
—
—
—
—
—
—
Number of
common
shares
Capital
stock
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Shareholders’
equity
Non-
controlling
interests
Total
equity
74,774,087
$432,728
$1,928 $1,251,640
($2,720)
$1,683,576
$271,155
$1,954,731
—
—
—
353,830
—
353,830
108,458
462,288
—
(252)
299,699
299,447
—
299,447
—
110
—
16,800
582
—
—
—
—
134
(134)
—
—
—
126,445
(5,551,751)
(32,149)
—
(220,836)
—
—
—
—
—
—
—
(43,955)
—
—
—
—
—
—
—
—
—
110
582
—
—
—
—
110
582
—
126,445
22,545
148,990
(252,985)
—
(252,985)
(43,955)
—
(43,955)
—
(84,714)
(84,714)
—
—
(55,037)
(55,037)
—
(55,037)
69,239,136
$401,295
$1,904 $1,466,872
$241,942
$2,112,013
$317,444
$2,429,457
—
—
—
174,140
—
174,140
109,982
284,122
—
(1,976)
(241,566)
(243,542)
—
(243,542)
—
124
—
43,067
1,437
—
—
—
190
(190)
—
(1,894,711)
(10,998)
—
(75,394)
—
—
—
—
—
—
—
(49,378)
—
—
—
—
—
—
—
—
124
1,437
—
(86,392)
—
—
—
—
124
1,437
—
(86,392)
(49,378)
—
(49,378)
—
(185,336)
(185,336)
67,387,492
$391,924
$1,838 $1,514,264
$22,901
$1,930,927
$242,090
$2,173,017
—
—
22,525
22,525
—
22,525
Balance, December 31,
2021
Net income
Other comprehensive
income (loss)
Compensation expense
recorded for stock
options
Issue of shares on
exercise of stock
options
Reclassification of grant
date fair value on
exercise of stock
options
Sale of partial interest in
subsidiary (note 25)
Payments for repurchase
of shares
Dividend payments to
Methanex Corporation
shareholders ($0.620
per common share)
Distributions made and
accrued to non-
controlling interests
Realized hedge gains
recognized in cash
flow hedges
Balance, December 31,
2022
Net income
Other comprehensive
loss
Compensation expense
recorded for stock
options
Issue of shares on
exercise of stock
options
Reclassification of grant
date fair value on
exercise of stock
options
Payments for repurchase
of shares
Dividend payments to
Methanex Corporation
shareholders ($0.730
per common share)
Distributions made and
accrued to non-
controlling interests
Realized hedge losses
recognized in cash
flow hedges
Balance, December 31,
2023
See accompanying notes to consolidated financial statements.
50
2023
2022
$
284,122 $
462,288
(99,466)
112,318
(76,938)
97,174
391,830
1,489
34,502
117,366
(24,651)
21,633
372,420
119,859
15,398
130,752
(12,985)
9,590
(81,922)
(163,828)
(37,894)
719,327
(59,058)
660,269
(20,503)
933,227
54,122
987,349
(86,392)
(252,985)
(49,378)
(43,955)
(168,636)
(161,816)
(12,280)
(9,151)
(118,159)
(105,863)
(185,336)
(84,713)
1,437
(1,424)
582
(1,394)
—
148,990
68,750
1,771
(551,418)
(508,534)
(178,464)
(145,701)
(269,989)
(431,680)
(60,130)
24,244
(508,583)
(553,137)
(399,732)
(74,322)
857,747
$
458,015 $
932,069
857,747
Consolidated Statements of Cash Flows
(thousands of U.S. dollars)
For the years ended December 31
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income
Deduct earnings of associate
Dividends received from associate
Add (deduct) non-cash items:
Depreciation and amortization
Income tax expense
Share-based compensation expense
Finance costs
Other
Interest received
Income taxes paid
Other cash payments, including share-based compensation
Cash flows from operating activities before undernoted
Changes in non-cash working capital (note 17(a))
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Payments for repurchase of shares
Dividend payments to Methanex Corporation shareholders
Interest paid
Repayment of long-term debt and financing fees (note 8)
Repayment of lease obligations
Distributions to non-controlling interests
Proceeds on issue of shares on exercise of stock options
Restricted cash for debt service accounts
Sale of partial interest in subsidiary (note 25)
Changes in non-cash working capital related to financing activities (note 17(a))
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Property, plant and equipment
Geismar plant under construction
Changes in non-cash working capital related to investing activities (note 17(a))
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to consolidated financial statements.
51
Notes to Consolidated Financial Statements
(Tabular dollar amounts are shown in thousands of U.S. dollars, except where noted)
Year ended December 31, 2023
1. Nature of operations:
Methanex Corporation ("the Company") is an incorporated entity with corporate offices in Vancouver, Canada. The Company’s
operations consist of the production and sale of methanol, a commodity chemical. The Company is the world’s largest producer and
supplier of methanol to the major international markets of Asia Pacific, North America, Europe and South America.
2. Material accounting policies:
a) Statement of compliance:
These consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"), as
issued by the International Accounting Standards Board ("IASB"). These consolidated financial statements were approved and
authorized for issue by the Board of Directors on March 7, 2024.
b) Basis of presentation and consolidation:
These consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, less than wholly-owned
entities for which it has a controlling interest and its equity-accounted joint venture. Wholly-owned subsidiaries are entities controlled
by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity. For less than wholly-owned entities for which the
Company has a controlling interest, a non-controlling interest is included in the Company’s consolidated financial statements and
represents the non-controlling shareholders’ interest in the net assets of the entity. All significant intercompany transactions and
balances have been eliminated. Preparation of these consolidated financial statements requires estimates, judgments and
assumptions that affect the amounts reported and disclosed in the financial statements and related notes. The areas of estimation and
judgment that management considers most significant are property, plant and equipment (note 2(g)), financial instruments (note 2(o)),
fair value measurements (note 2(p)), leases (note 2(i)), and income taxes (note 2(q)). Actual results could differ from those estimates.
c) Reporting currency and foreign currency translation:
Functional currency is the currency of the primary economic environment in which an entity operates. The majority of the Company’s
business in all jurisdictions is transacted in United States dollars and, accordingly, these consolidated financial statements have been
measured and expressed in that currency. The Company translates foreign currency denominated monetary items at the period-end
exchange rates, foreign currency denominated non-monetary items at historic rates and revenues and expenditures at the exchange
rates at the dates of the transactions. Foreign exchange gains and losses are included in earnings.
d) Cash and cash equivalents:
Cash and cash equivalents include securities with maturities of three months or less when purchased.
e) Receivables:
The Company provides credit to its customers in the normal course of business. The Company performs ongoing credit evaluations of
its customers and records provisions for expected credit losses for receivables measured at amortized cost. The Company records an
allowance for doubtful accounts or writes down the receivable to estimated net realizable value, if not collectible in full, based on
expected credit losses. Expected credit losses are based on historic and forward looking customer specific factors including historic
credit losses incurred.
f) Inventories:
Inventories are valued at the lower of cost and estimated net realizable value. Cost is determined on a first-in, first-out basis and
includes direct purchase costs, cost of production, allocation of production overhead and depreciation based on normal operating
capacity and ocean freight costs for the shipment of product.
52
g) Property, plant and equipment:
Initial recognition
Property, plant and equipment are initially recorded at cost. The cost of purchased equipment includes expenditures that are directly
attributable to the purchase price, delivery and installation. The cost of self-constructed assets includes the cost of materials and direct
labour, any other costs directly attributable to bringing the assets to the location and condition for their intended use, the costs of
dismantling and removing the items and restoring the site on which they are located, and borrowing costs on self-constructed assets
that meet certain criteria. Borrowing costs incurred during construction and commissioning are capitalized until the plant is operating in
the manner intended by management.
Subsequent costs
Routine repairs and maintenance costs are expensed as incurred. At regular intervals, the Company conducts a planned shutdown
and inspection (turnaround) at its plants to perform major maintenance and replacement of catalysts. Costs associated with these
shutdowns are capitalized and amortized over the period until the next planned turnaround and the carrying amounts of replaced
components are derecognized and included in earnings.
Depreciation
Depreciation and amortization is generally provided on a straight-line basis at rates calculated to amortize the cost of property, plant
and equipment from the commencement of commercial operations over their estimated useful lives to estimated residual value.
The estimated useful lives of the Company’s buildings, plant installations and machinery at installation, excluding costs related to
turnarounds, initially range up to 25 years depending on the specific asset component and the production facility to which it is related.
Right-of-use (leased) assets are depreciated from the lease commencement date to the earlier of the end of the useful life of the right-
of-use asset or the end of the lease term. The Company determines the estimated useful lives of individual asset components based
on the shorter of its physical life or economic life. The physical life of these assets is generally longer than the economic life. The
economic life is primarily determined by the nature of the natural gas feedstock available to the various production facilities. The
estimated useful life of production facilities may be adjusted from time-to-time based on turnarounds, plant refurbishments and gas
availability. Factors that influence the nature of natural gas feedstock availability include the terms of individual natural gas supply
contracts, access to natural gas supply through open markets, regional factors influencing the exploration and development of natural
gas and the expected price of securing natural gas supply. The Company reviews the factors related to each production facility on an
annual basis to determine if changes are required to the estimated useful lives.
Recoverability of asset carrying values
Long-lived assets are tested for recoverability whenever events or changes in circumstances, either internal or external, indicate that
the carrying amount may not be recoverable (“triggering events”). Examples of such triggering events related to our long-lived assets
may include, but are not restricted to: a significant adverse change in the extent or manner in which the asset is being used or in its
physical condition; a change in management’s intention or strategy for the asset, which includes a plan to dispose of the asset or idle
the asset for a significant period of time; a significant adverse change in our long-term methanol price assumption or in the price or
availability of natural gas feedstock required to manufacture methanol; a significant adverse change in legal factors or in the business
climate that could affect the asset’s value, including an adverse action or assessment by a foreign government that impacts the use of
the asset; or a current period operating or cash flow loss combined with a history of operating or cash flow losses, or a projection or
forecast that demonstrates continuing losses associated with the asset’s use.
When a triggering event is identified, recoverability of long-lived assets is measured by comparing the carrying value of an asset or
cash-generating unit to the estimated recoverable amount, which is the higher of its estimated fair value less costs to sell or its value
in use. Fair value less costs of disposal is determined by estimating the price that would be received to sell an asset in an orderly
transaction between market participants under current market conditions, less incremental costs directly attributable to the disposal,
excluding finance costs and income tax expense. Value in use is determined by measuring the pre-tax cash flows expected to be
generated from the cash-generating unit over its estimated useful life discounted by a pre-tax discount rate. An impairment writedown
is recorded if the carrying value exceeds the estimated recoverable amount. An impairment writedown recognized in prior periods for
an asset or cash-generating unit is reversed if there has been a subsequent recovery in the value of the asset or cash-generating unit
due to changes in events and circumstances. For the purposes of recognition and measurement of an impairment writedown or
reversal, we group our long-lived assets with other assets and liabilities to form a “cash-generating unit” at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. To the extent that our methanol facilities
in a particular location are interdependent as a result of common infrastructure and/or feedstock from shared sources that can be
shared within a facility location, we group our assets based on site locations for the purpose of determining impairment.
When impairment indicators exist, there are two key variables that impact our estimate of future cash flows from producing assets: (1)
the methanol price and (2) the price and availability of natural gas feedstock. Short-term methanol price estimates are based on
current supply and demand fundamentals and current methanol prices. Long-term methanol price estimates are based on our view of
53
long-term supply and demand, incorporating third-party assumptions, forecasts and market observable prices when appropriate.
Consideration is given to many factors, including, but not limited to, estimates of global industrial production rates, energy prices,
changes in general economic conditions, the ability for the industry to add further global methanol production capacity and earn an
appropriate return on capital, industry operating rates and the global industry cost structure. Our estimate of the price and availability
of natural gas takes into consideration the current contracted terms, as well as factors that we believe are relevant to supply under
these contracts and supplemental natural gas sources. Other assumptions included in our estimate of future cash flows include the
estimated cost incurred to maintain the facilities, estimates of transportation costs and other variable costs incurred in producing
methanol in each period. Changes in these assumptions will impact our estimates of future cash flows when testing for impairment
and could impact our estimates of the useful lives of property, plant and equipment. Consequently, it is possible that our future
operating results could be adversely affected by further asset impairment charges or by changes in depreciation and amortization
rates related to property, plant and equipment. In relation to previous impairment charges, we do not believe that there are significant
changes in events or circumstances that would support their reversal.
h) Other assets:
Intangible assets are capitalized to other assets and amortized to depreciation and amortization expense on an appropriate basis to
charge the cost of the assets against earnings.
Financing fees related to undrawn credit facilities are capitalized to other assets and amortized to finance costs over the term of the
credit facility.
i) Leases:
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
•
•
•
the contract involves the use of an identified asset - this may be specified explicitly or implicitly and should be physically distinct
or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then
the asset is not identified;
the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use;
and
the Company has the right to direct the use of the asset. The Company has the right when it has the decision-making rights that
are most relevant to changing how and for what purpose the asset is used.
For contracts that contain a lease, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are
determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is assessed for impairment
losses, should a trigger be identified and adjusted for impairment if required. Lease terms range up to 20 years for vessels, terminals,
equipment, and other items.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to
be payable under a residual value guarantee or if the Company changes its assessment of whether it will exercise a purchase,
extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to
zero.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. The assessment is reviewed upon a trigger by an event or a significant change
in circumstances.
Certain leases contain non-lease components, excluded from the right-of-use asset and lease liability, related to operating charges for
ocean vessels, terminal facilities and rail transport contracts. Judgment is applied in the determination of the stand-alone price of the
lease and non-lease components.
54
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12
months or less and leases of low-value assets, except for terminal and vessel leases. The Company recognizes the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.
j) Site restoration costs:
The Company recognizes a liability to dismantle and remove assets or to restore a site upon which the assets are located. The
Company estimates the present value of the expenditures required to settle the liability by determining the current market cost
required to settle the site restoration costs, adjusts for inflation through to the expected date of the expenditures and then discounts
this amount back to the date when the obligation was originally incurred. As the liability is initially recorded on a discounted basis, it is
increased each period until the estimated date of settlement. The resulting expense is referred to as accretion expense and is
included in finance costs. The Company reviews asset retirement obligations and adjusts the liability and corresponding asset as
necessary to reflect changes in the estimated future cash flows, timing, inflation and discount rates underlying the measurement of the
obligation.
k) Employee future benefits:
The Company has non-contributory defined benefit pension plans covering certain employees and defined contribution pension plans.
The Company does not provide any significant post-retirement benefits other than pension plan benefits. For defined benefit pension
plans, the net of the present value of the defined benefit obligation and the fair value of plan assets is recorded to the consolidated
statements of financial position. The determination of the defined benefit obligation and associated pension cost is based on certain
actuarial assumptions including inflation rates, mortality, plan expenses, salary growth and discount rates. The present value of the net
defined benefit obligation (asset) is determined by discounting the net estimated future cash flows using current market bond yields
that have terms to maturity approximating the terms of the net obligation. Actuarial gains and losses arising from differences between
these assumptions and actual results are recognized in other comprehensive income and transferred to retained earnings. The
Company recognizes gains and losses on the settlement of a defined benefit plan in income when the settlement occurs. The cost for
defined contribution benefit plans is recognized in net income (loss) as earned by the employees.
l) Share-based compensation:
The Company grants share-based awards as an element of compensation. Share-based awards granted by the Company can include
stock options, tandem share appreciation rights, share appreciation rights, deferred share units, restricted share units or performance
share units.
For stock options granted by the Company, the cost of the service received is measured based on an estimate of the fair value at the
date of grant. The grant date fair value is recognized as compensation expense over the vesting period with a corresponding increase
in contributed surplus. On the exercise of stock options, consideration received, together with the compensation expense previously
recorded to contributed surplus, is credited to share capital. The Company uses the Black-Scholes option pricing model to estimate
the fair value of each stock option tranche at the date of grant.
Share appreciation rights ("SARs") are units that grant the holder the right to receive a cash payment upon exercise for the difference
between the market price of the Company’s common shares and the exercise price that is determined at the date of grant. Tandem
share appreciation rights ("TSARs") give the holder the choice between exercising a regular stock option or a SAR. For SARs and
TSARs, the cost of the service received is initially measured based on an estimate of the fair value at the date of grant. The grant date
fair value is recognized as compensation expense over the vesting period with a corresponding increase in liabilities. For SARs and
TSARs, the liability is re-measured at each reporting date based on an estimate of the fair value with changes in fair value recognized
as compensation expense for the proportion of the service that has been rendered at that date. The Company uses the Black-Scholes
option pricing model to estimate the fair value for SARs and TSARs.
Deferred, restricted and performance share units are grants of notional common shares that are redeemable for cash based on the
market value of the Company’s common shares and are non-dilutive to shareholders.
Performance share units ("PSUs") granted from 2019 onwards are redeemable for cash based on the market value of the Company's
common shares and are non-dilutive to shareholders. PSUs vest over three years and include two performance factors: (i) relative
total shareholder return of Methanex shares versus a specific market index (the market performance factor) and (ii) three year
average Return on Capital Employed ("ROCE") (the non-market performance factor). The market performance factor is measured by
the Company at the grant date and reporting date using a Monte-Carlo simulation model to determine fair value. The non-market
performance factor reflects management's best estimate of ROCE over the performance period (using actual ROCE as applicable) to
determine the expected number of units to vest. Based on these performance factors the performance share unit payout will range
between 0% to 200%.
For deferred, restricted and performance share units, the cost of the service received as consideration is initially measured based on
the market value of the Company’s common shares at the date of grant. The grant date fair value is recognized as compensation
expense over the vesting period with a corresponding increase in liabilities. Deferred, restricted and performance share units are re-
55
measured at each reporting date based on the market value of the Company’s common shares with changes in fair value recognized
as compensation expense for the proportion of the service that has been rendered at that date.
Additional information related to the stock option plan, TSARs, SARs and the deferred, restricted and performance share units is
described in note 14.
m) Net income (loss) per common share:
The Company calculates basic net income (loss) per common share by dividing net income (loss) attributable to Methanex
shareholders by the weighted average number of common shares outstanding and calculates diluted net income (loss) per common
share under the treasury stock method. Under the treasury stock method, diluted net income (loss) per common share is calculated by
considering the potential dilution that would occur if outstanding stock options and, under certain circumstances, TSARs were
exercised or converted to common shares. Stock options and TSARs are considered dilutive when the average market price of the
Company’s common shares during the period disclosed exceeds the exercise price of the stock option or TSAR.
Outstanding TSARs may be settled in cash or common shares at the holder’s option. For the purposes of calculating diluted net
income (loss) per common share, the more dilutive of the cash-settled or equity-settled method is used, regardless of how the plan is
accounted for. Accordingly, TSARs that are accounted for using the cash-settled method will require adjustments to the numerator and
denominator if the equity-settled method is determined to have a dilutive effect on diluted net income (loss) per common share.
The calculation of basic net income (loss) per common share and a reconciliation to diluted net income (loss) per common share is
presented in note 13.
n) Revenue recognition:
Revenue is recognized based on individual contract terms at the point in time when control of the product transfers to the customer,
which usually occurs at the time shipment is made. Revenue is recognized at the time of delivery to the customer’s location if the
contractual performance obligation has not been met during shipment. For methanol sold on a consignment basis, revenue is
recognized at the point in time the customer draws down the consigned methanol. Revenue is measured and recorded at the most
likely amount of consideration the Company expects to receive.
By contract, the Company sells all the methanol produced by the Atlas Joint Venture and earns a commission on the sale of the
methanol. As the Company obtains title and control of the methanol from the Atlas facility and directs the sale of the methanol to the
Company's customers, the Company recognizes the revenue on these sales to customers at the gross amount receivable from the
customers based on the Company's revenue recognition policy noted above. Cost of sales is recognized for these sales as the
amount due to the Atlas Joint Venture which is the gross amount receivable less the commission earned by the Company.
o) Financial instruments:
All financial instruments are measured at fair value on initial recognition. Measurement in subsequent periods is dependent on the
classification of the respective financial instrument. Financial instruments are classified into one of three categories and, depending on
the category, will either be measured at amortized cost or fair value with fair value changes either recorded through profit or loss or
other comprehensive income. All non-derivative financial instruments held by the Company are classified and measured at amortized
cost.
The Company enters into derivative financial instruments to manage certain exposures to commodity price and foreign exchange
volatility. Under these standards, derivative financial instruments, including embedded derivatives, are classified as fair value through
profit or loss and are recorded in the consolidated statements of financial position at fair value unless they are in accordance with the
Company’s normal purchase, sale or usage requirements. The valuation of derivative financial instruments is a critical accounting
estimate due to the complex nature of these instruments, the degree of judgment required to appropriately value these instruments
and the potential impact of such valuation on the Company’s financial statements. The Company records all changes in fair value of
derivative financial instruments in profit or loss unless the instruments are designated as cash flow hedges. The Company enters into
and designates as cash flow hedges certain forward contracts to hedge its highly probable forecast natural gas purchases and certain
forward exchange purchase and sales contracts to hedge foreign exchange exposure on anticipated purchases or sales. The
Company assesses at inception and on an ongoing basis whether the hedges are and continue to be effective in offsetting changes in
the cash flows of the hedged transactions. The effective portion of changes in the fair value of these hedging instruments is
recognized in other comprehensive income. Any gain or loss in fair value relating to the ineffective portion is recognized immediately in
profit or loss. Until settled, the fair value of the derivative financial instruments will fluctuate based on changes in commodity prices,
foreign currency exchange rates or variable interest rates.
Assessment of contracts as derivative instruments, applicability of the own use exemption, determination of whether hybrid
instruments contain embedded derivatives to be separated, the valuation of financial instruments and derivatives and hedge
effectiveness assessments require a high degree of judgment and are considered critical accounting judgements and estimates due to
the complex nature of these products and the potential impact on our financial statements.
56
p) Fair value measurements:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Fair value measurements within the scope of IFRS 13 are categorized into Level 1, 2 or 3
based on the degree to which the inputs are observable and the significance of the inputs to the fair value measurement in its entirety.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Financial instruments measured at
fair value and categorized within the fair value hierarchy are disclosed in note 19.
q) Income taxes:
Income tax expense represents current tax and deferred tax. The Company records current tax based on the taxable profits for the
period calculated using tax rates that have been enacted or substantively enacted by the reporting date. Income taxes relating to
uncertain tax positions are provided for based on the Company’s best estimate. Deferred income taxes are accounted for using the
liability method. The liability method requires that income taxes reflect the expected future tax consequences of temporary differences
between the carrying amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are determined
for each temporary difference based on currently enacted or substantially enacted tax rates that are expected to be in effect when the
underlying items are expected to be realized. The effect of a change in tax rates or tax legislation is recognized in the period of
substantive enactment. Deferred tax assets, such as non-capital loss carryforwards, are recognized to the extent it is probable that
taxable profit will be available against which the asset can be utilized.
The Company accrues for taxes that will be incurred upon distributions from its subsidiaries when it is probable that the earnings will
be repatriated.
Uncertain tax positions derive from the complexity of tax law and its interpretation by tax authorities and ultimately the judicial system
in place in each jurisdiction. Uncertain tax positions, including interest and penalties, are recognized and measured applying
management estimates. Given the complexity, management engages third-party experts as required, for the interpretation of tax law,
transfer pricing regulations and determination of the ultimate resolution of its tax positions. The Company is subject to various taxation
authorities who may interpret tax legislation differently, and resolve matters over longer-periods of time. The differences in judgement
in assessing uncertain tax positions may result in material differences in the final amount or timing of the payment of taxes or
settlement of tax assessments.
r) Segmented information:
The Company’s operations consist of the production and sale of methanol, which constitutes a single operating segment.
s) Application of new and revised accounting standards:
The Company has adopted the amendments to IAS 1 Presentation of Financial Statements as well as IAS 8 Changes in Accounting
Estimates and Errors regarding the disclosure of accounting policies and accounting estimates, and IAS 12, Income Taxes ("IAS 12")
regarding deferred tax related to assets and liabilities arising from a single transaction, which were effective for annual periods
beginning on January 1, 2023. The amendments did not have a material impact on the Company's consolidated financial statements.
In May 2023, the IASB issued a further amendment to IAS 12, establishing a mandatory exception for recognition and disclosure of
deferred taxes related to the Pillar Two model rules published by the Organization for Economic Co-operation and Development
(“Pillar Two rules”). The Pillar Two rules establish a global minimum fifteen percent top-up tax regime and are expected to apply to
Methanex beginning in 2024. The Company has applied this mandatory exception in the current period. Refer to note 16 for further
disclosure on the expected impact of Pillar Two rules.
t) Anticipated changes to International Financial Reporting Standards:
The following new or amended standards or interpretations that are effective for annual periods beginning on or after January 1, 2024
are being reviewed to determine the potential impact: amendments to IAS 1, Presentation of Financial Statements regarding the
classification of liabilities as current or non-current, IFRS 16, Leases regarding sale-and-leaseback transactions and IAS 7, Statement
of Cash Flows regarding supplier finance arrangements.
57
3. Trade and other receivables:
As at
Trade
Value-added and other tax receivables
Other
Dec 31
2023
Dec 31
2022
$
431,602 $
407,733
22,292
79,721
14,986
78,206
$
533,615 $
500,925
4. Inventories:
Inventories are valued at the lower of cost, determined on a first-in first-out basis, and estimated net realizable value. The amount of
inventories recognized as an expense in cost of sales and operating expenses and depreciation and amortization for the year ended
December 31, 2023 is $2,860 million (2022 - $3,157 million).
5. Property, plant and equipment:
Net book value at December 31, 2023
Net book value at December 31, 2022
$
$
3,654,475 $
3,398,805 $
757,293 $
756,478 $
Owned Assets
(a)
Right-of-use assets
(b)
Total
4,411,768
4,155,283
a) Owned assets:
Cost at January 1, 2023
Additions
Disposals and other
Cost at December 31, 2023
Buildings, plant
installations and
machinery
Plants Under
Construction1
Ocean vessels
Other
TOTAL
$
5,000,999 $
1,001,888 $
240,867 $
140,081
$
6,383,835
174,058
(294,850)
353,609
—
4,880,207
1,355,497
Accumulated depreciation at January 1, 2023
Depreciation
Disposals and other
2,827,870
248,783
(281,951)
Accumulated depreciation at December 31, 2023
2,794,702
—
—
—
—
253
(397)
240,723
49,310
12,080
4,153
(15,571)
128,663
107,850
2,153
—
(15,480)
532,073
(310,818)
6,605,090
2,985,030
263,016
(297,431)
61,390
94,523
2,950,615
Net book value at December 31, 2023
$
2,085,505 $
1,355,497 $
179,333 $
34,140
$
3,654,475
1 The Company is constructing a 1.8 million tonne methanol plant in Geismar, Louisiana adjacent to its Geismar 1 and Geismar 2 facilities. Included in cost of Plants Under Construction are
$150 million (2022: $94 million) of capitalized interest and finance charges.
Cost at January 1, 2022
Additions
Disposals and other
Cost at December 31, 2022
Accumulated depreciation at January 1, 2022
Depreciation
Disposals and other
Accumulated depreciation at December 31, 2022
Buildings, plant
installations and
machinery
Plants under
construction
Ocean vessels
Other
TOTAL
$
4,908,492 $
561,860 $
240,525 $
138,378 $
5,849,255
140,326
(47,819)
440,028
—
5,000,999
1,001,888
2,631,268
248,032
(51,430)
2,827,870
—
—
—
—
342
—
240,867
37,271
12,039
—
1,703
—
140,081
105,518
2,332
—
582,399
(47,819)
6,383,835
2,774,057
262,403
(51,430)
49,310
107,850
2,985,030
Net book value at December 31, 2022
$
2,173,129 $
1,001,888 $
191,557 $
32,231 $
3,398,805
58
b) Right-of-use (leased) assets:
Cost at January 1, 2023
Additions
Disposals and other
Cost at December 31, 2023
Accumulated depreciation at January 1, 2023
Depreciation
Disposals and other
Accumulated depreciation at December 31, 2023
$
$
Net book value at December 31, 2023
Cost at January 1, 2022
Additions
Disposals and other
Cost at December 31, 2022
Accumulated depreciation at January 1, 2022
Depreciation
Disposals and other
Accumulated depreciation at December 31, 2022
Ocean vessels
Terminals and
tanks
$
846,977 $
286,036 $
83,333
(19,589)
910,721
245,873
88,040
(19,589)
314,324
596,397 $
52,909
(6,504)
332,441
160,163
36,140
—
196,303
136,138 $
Ocean vessels
Terminals and tanks
657,774 $
232,536
(43,333)
846,977
214,004
75,586
(43,717)
245,873
258,743 $
27,293
—
286,036
125,494
34,669
—
160,163
125,873 $
Net book value at December 31, 2022
$
601,104 $
6. Investment in associate:
Other
68,701 $
5,951
(16,031)
58,621
39,200
6,583
(11,920)
33,863
24,758 $
Other
64,700 $
4,001
—
68,701
30,768
8,432
—
39,200
29,501 $
TOTAL
1,201,714
142,193
(42,124)
1,301,783
445,236
130,763
(31,509)
544,490
757,293
TOTAL
981,217
263,830
(43,333)
1,201,714
370,266
118,687
(43,717)
445,236
756,478
a) The Company has a 63.1% equity interest in Atlas Methanol Company Unlimited ("Atlas"). Atlas owns a 1.8 million tonne per year
methanol production facility in Trinidad and Tobago. The Company accounts for its interest in Atlas using the equity method.
Summarized financial information of Atlas (100% basis) is as follows:
Consolidated statements of financial position as at
Cash and cash equivalents
Other current assets1
Non-current assets
Current liabilities1
Other long-term liabilities, including current maturities
Net assets at 100%
Net assets at 63.1%
Long-term receivable from Atlas1
Investment in associate
Consolidated statements of income for the years ended December 31
Revenue1
Cost of sales and depreciation and amortization
Gas contract settlement (b)
Operating income
Finance costs, finance income and other
Income tax expense
Net earnings at 100%
Earnings of associate at 63.1%
Dividends received from associate
1 Includes related party transactions between Atlas and the Company (see note 23).
59
Dec 31
2023
$
126,392 $
189,062
149,354
Dec 31
2022
24,420
182,103
184,373
(157,835)
(92,108)
(135,940)
(107,416)
171,033 $
107,921 $
76,328
191,372
120,755
76,328
184,249 $
197,083
$
$
$
2023
2022
$
466,312 $
532,456
(289,705)
(332,999)
75,000
—
251,607
199,457
(10,316)
(83,659)
(9,433)
(68,093)
157,632 $
121,931
99,466 $
112,318 $
76,938
97,174
$
$
$
b) Gas contract settlement:
Atlas stand-alone financial results for the year ended December 31, 2023 include a $75 million settlement (Methanex share,
$47 million, net of tax, $31 million) related to a historical dispute under an existing gas contract. The amount was received in cash in
the fourth quarter of 2023.
c) Atlas tax assessments:
The Board of Inland Revenue of Trinidad and Tobago ("the BIR") has audited and issued assessments against Atlas in respect of the
2005 to 2017 financial years. All subsequent tax years remain open to assessment. The assessments relate to the pricing
arrangements of certain long-term fixed-price sales contracts that commenced in 2005 and continued with affiliates through 2014 and
with an unrelated third party through 2019.
The long-term fixed-price sales contracts with affiliates were established as part of the formation of Atlas and management believes
these were reflective of market considerations at that time.
During the periods under assessment and continuing through 2014, approximately 50% of Atlas-produced methanol was sold under
these fixed-price contracts. From late 2014 through 2019 fixed-price sales to an unrelated third party represented approximately 10%
of Atlas produced methanol. Atlas had partial relief from corporation income tax until late July 2014.
The Company believes it is impractical to disclose a reasonable estimate of the potential contingent liability due to the wide range of
assumptions and interpretations implicit in the assessments.
The Company has lodged objections to the assessments. No deposits have been required to lodge objections. Based on the merits of
the cases and advice from legal counsel, the Company believes its position should be sustained, that Atlas has filed its tax returns and
paid applicable taxes in compliance with Trinidadian tax law, and as such has not accrued for any amounts relating to these
assessments. Contingencies inherently involve the exercise of significant judgment, and as such the outcomes of these assessments
and the financial impact to the Company could be material.
The Company anticipates the resolution of this matter through the court systems to be lengthy and, at this time, cannot predict a date
as to when this matter is expected to be ultimately resolved.
d) Impairment testing:
In Trinidad we announced our intention to idle the Atlas plant when its 20-year legacy natural gas supply arrangement expires in
September 2024. The expected idling of the Atlas plant has been identified as an impairment indicator for the Atlas cash generating
unit ("Atlas CGU"). The impairment test performed on the Atlas CGU resulted in no impairment provision recognized as the estimated
recoverable value, determined on a fair value less costs of disposal methodology, exceeded the carrying value. The estimated
recoverable value was based on an assumed restart date and an operating period for Atlas aligned to natural gas reserves estimates
in Trinidad and Tobago with no terminal value, discounted at an after-tax rate of 16%.
The following table indicates the percentages by which key assumptions would need to change individually for the estimated Atlas
CGU recoverable value to be equal to the carrying value:
Key Assumptions
Long-term average realized methanol price
Production volumes
Gas price
Discount rate (after-tax)
Change Required for Carrying Value to Equal
Recoverable Value
10 percent decrease
15 percent decrease
10 percent increase
800 basis points increase
The sensitivity above has been prepared considering each variable independently. Historically, our natural gas contracts in Trinidad
and Tobago have included terms whereby a change in methanol price results in a change in natural gas price, protecting margins
should revenue decrease.
60
7. Other assets:
As at
Cash flow hedges (note 19)
Chile VAT receivable
Restricted cash for debt service and major maintenance of vessels (a)
Fair value of Egypt gas supply contract derivative (note 19)
Investment in Carbon Recycling International
Defined benefit pension plans (note 21)
Other
Total other assets
Less current portion (b)
a) Restricted cash
Dec 31
Dec 31
2023
2022
$
121,108 $
322,748
17,824
15,772
20,402
5,620
5,718
15,416
201,860
18,343
14,349
11,220
5,620
3,977
19,476
395,733
(3,893)
(39,346)
197,967 $
356,387
The Company holds $15.8 million (2022 - $14.3 million) of restricted cash for the funding of debt service and major maintenance
accounts.
b) Current portion of other assets
Other assets presented as current assets as at December 31, 2023 includes $0.5 million for the current portion of the cash flow hedge
(see note 19), and $3.4 million of restricted cash for major maintenance, in particular the anticipated major maintenance costs of four
vessels.
8. Long-term debt:
As at
Unsecured notes
(i) $300 million at 4.25% due December 1, 2024
(ii) $700 million at 5.125% due October 15, 2027
(iii) $700 million at 5.25% due December 15, 2029
(iv) $300 million at 5.65% due December 1, 2044
Other limited recourse debt facilities
(i) 5.58% due through June 30, 2031
(ii) 5.35% due through September 30, 2033
(iii) 5.21% due through September 15, 2036
Total long-term debt1
Less current maturities1
Dec 31
2023
Dec 31
2022
$
299,283 $
694,844
695,824
295,709
298,836
693,649
695,283
295,606
1,985,660
1,983,374
56,637
65,300
34,204
61,978
70,312
35,849
156,141
168,139
2,141,801
2,151,513
(314,716)
(15,133)
$
1,827,085 $
2,136,380
1 Long-term debt and current maturities are presented net of discounts and deferred financing fees of $16.8 million as at December 31, 2023 (2022 - $19.4 million).
For the year ended December 31, 2023, non-cash accretion, on an effective interest basis, of deferred financing costs included in
finance costs was $2.6 million (2022 - $2.2 million).
61
The gross minimum principal payments for long-term debt in aggregate and for each of the five succeeding years are as follows:
2024
2025
2026
2027
2028
Thereafter
Other limited recourse
debt facilities
Unsecured
notes
15,367
$
300,000
$
13,660
13,796
15,173
16,026
84,574
—
—
700,000
—
1,000,000
158,596
$
2,000,000
$
$
$
Total
315,367
13,660
13,796
715,173
16,026
1,084,574
2,158,596
The Company has access to a $300 million committed revolving credit facility from a syndicate of highly rated financial institutions
expiring in July 2026.
The revolving credit facility is subject to the following significant covenants and default provisions:
i)
the obligation to maintain a minimum EBITDA to interest coverage ratio of greater than or equal to 2:1 calculated on a four-
quarter trailing basis and a debt to capitalization ratio of less than or equal to 60%, both calculated in accordance with
definitions in the credit agreement that include adjustments to limited recourse subsidiaries,
ii) a default if payment is accelerated by a creditor on any indebtedness of $50 million or more of the Company and its
subsidiaries, except for the limited recourse subsidiaries, and
iii) a default if a default occurs that permits a creditor to demand repayment on any other indebtedness of $50 million or more
of the Company and its subsidiaries, except for the limited recourse subsidiaries.
The revolving credit facility is secured by certain assets of the Company, and also includes other customary covenants including
restrictions on the incurrence of additional indebtedness.
During the year, the Company cancelled the $300 million non-revolving construction facility for the Geismar 3 project. At the time of
cancellation, the construction facility was undrawn.
Other limited recourse debt facilities relate to financing for certain of our ocean vessels which we own through less than wholly-owned
entities under the Company's control. The limited recourse debt facilities are described as limited recourse as they are secured only
by the assets of the entity that carries the debt. Accordingly, the lenders to the limited recourse debt facilities have no recourse to the
Company or its other subsidiaries.
The covenants governing the Company’s unsecured notes, which are specified in an indenture, apply to the Company and its
subsidiaries, excluding the Egypt entity and the Atlas joint venture entity, and include restrictions on liens, sale and lease-back
transactions, a merger or consolidation with another corporation or sale of all or substantially all of the Company’s assets. The
indenture also contains customary default provisions.
Failure to comply with any of the covenants or default provisions of the long-term debt facilities described above could result in a
default under the applicable credit agreement that would allow the lenders to not fund future loan requests, accelerate the due date of
the principal and accrued interest on any outstanding loans or restrict the payment of cash or other distributions.
As at December 31, 2023, management believes the Company was in compliance with all covenants related to its long-term debt
obligations.
9. Lease obligations:
Opening lease obligations
Additions, net of disposals
Interest expense
Lease payments
Effect of movements in exchange rates and other
Lease obligations at December 31
Less: current portion
Lease obligations - non current portion
2023
$
870,163 $
123,187
53,418
2022
717,101
262,470
48,039
(171,577)
(153,901)
(3,071)
(3,546)
872,120
870,163
(120,731)
(108,736)
$
751,389 $
761,427
62
The Company incurs lease payments related to ocean vessels, terminal facilities, rail cars, vehicles and equipment, and office
facilities. Leases are entered into and exited in coordination with specific business requirements which includes the assessment of the
appropriate durations for the related leased assets.
The following table presents the contractual undiscounted cash flows for lease obligations as at December 31, 2023:
2024
2025
2026
2027
2028
Thereafter
$
$
Lease
payments
172,197
142,761
123,738
112,397
108,284
514,969
Interest
component
51,466
45,617
39,998
34,419
28,547
102,179
$
1,174,346
$
302,226
$
Lease obligations
$
120,731
97,144
83,740
77,978
79,737
412,790
872,120
Variable lease payments and short-term and low value leases
Certain leases contain non-lease components, excluded from the right-of-use asset and lease liability, related to operating charges for
ocean vessels and terminal facilities. The total expense recognized in cost of sales relating to operating charges for 2023 was $83.8
million (2022 - $81.9 million). Short-term leases are leases with a lease term of twelve months or less while low-value leases are
comprised of information technology and miscellaneous equipment. Such items recognized within cost of sales in 2023 were $0.2
million (2022 - $0.2 million).
Extension options
Some leases contain extension options exercisable by the Company. Where practicable, the Company seeks to include extension
options in new leases to provide operational flexibility. The extension options held are exercisable only by the Company and not by the
lessors. The Company assesses, at lease commencement, whether it is reasonably certain to exercise the extension options. The
Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in
circumstances within its control. Total potential future lease payments not included in the lease liabilities should the Company exercise
these extension options totals $51.8 million (2022 - $53.5 million).
Ocean-going vessels
Terminals and tanks
Other
Total
Leases not yet commenced
Lease liabilities recognized
(discounted)
Potential future lease payments not
included in lease liabilities (undiscounted)
$
$
$
662,903
174,019
35,198
872,120
$
1,512
38,987
11,279
51,778
As at December 31, 2023, the Company has entered into lease agreements for which the leases have not yet commenced. Total
exposure to undiscounted future cash outflows not reflected in lease liabilities is $68.7 million (2022 - $132.6 million). The leases not
yet commenced as at December 31, 2023 related to terminal agreements, railcar agreements, storage tank agreements and the
addition of 1 new ocean vessel in 2024 with a 5-year term, replacing an existing ocean vessel lease. The leases not yet commenced
as at December 31, 2022 related to terminal agreements, storage tank agreements and 1 ocean vessel lease that commenced in
2023.
63
10. Other long-term liabilities:
As at
Share-based compensation liability (note 14)
Site restoration costs
Land mortgage
Defined benefit pension plans (note 21)
Cash flow hedges (note 19)
Other
Less current maturities
Site restoration costs:
Dec 31
2023
$
74,107 $
32,596
28,014
22,691
91,183
1,319
249,910
(94,992)
Dec 31
2022
70,569
36,581
28,514
19,216
6,739
2,532
164,151
(29,548)
$
154,918 $
134,603
The Company has accrued liabilities related to the decommissioning and reclamation of its methanol production sites and oil and gas
properties. Because of uncertainties in estimating the amount and timing of the expenditures related to the sites, actual results could
differ from the amounts estimated. As at December 31, 2023, the total undiscounted amount of estimated cash flows required to settle
the liabilities was $50.6 million (2022 - $52.1 million). The movement in the provision during the year is explained as follows:
Balance at January 1
New or revised provisions
Accretion expense
Balance at December 31
11. Expenses:
For the years ended December 31
Cost of sales
Selling and distribution
Administrative expenses
Total expenses by function
Cost of raw materials and purchased methanol
Ocean freight and other logistics
Employee expenses, including share-based compensation
Other expenses
Cost of sales and operating expenses
Depreciation and amortization
Total expenses by nature
2023
36,581 $
(5,573)
1,588
2022
29,355
6,915
311
32,596 $
36,581
$
$
2023
2022
$
2,797,794 $
3,238,312
552,693
109,415
498,552
81,657
$
3,459,902 $
3,818,521
2,329,856
2,789,921
357,495
243,542
137,179
325,893
219,012
111,275
3,068,072
3,446,101
391,830
372,420
$
3,459,902 $
3,818,521
For the year ended December 31, 2023 we recorded a share-based compensation expense of $34.5 million (2022 - expense of $15.4
million), the majority of which is included in administrative expenses for the total expenses by function presentation above.
Included in cost of sales is $466.3 million (2022 - $532.5 million) of cost of sales which are recognized as sales to Methanex in our
Atlas equity investee’s statements of income.
64
12. Finance costs:
For the years ended December 31
Finance costs before capitalized interest
Less capitalized interest related to Geismar plant under construction
Finance costs
2023
2022
172,814
$
167,066
(55,448)
(36,314)
117,366
$
130,752
$
$
Finance costs are primarily comprised of interest on the unsecured notes, limited recourse debt facilities, finance lease obligations,
amortization of deferred financing fees, and accretion expense associated with site restoration costs. Interest during construction
projects is capitalized until the plant is substantially completed and ready for productive use.
13. Net income per common share:
Diluted net income per common share is calculated by considering the potential dilution that would occur if outstanding stock options
and, under certain circumstances, TSARs were exercised or converted to common shares.
Outstanding TSARs may be settled in cash or common shares at the holder’s option and for purposes of calculating diluted net
income per common share, the more dilutive of the cash-settled and equity-settled method is used, regardless of how the plan is
accounted for. Accordingly, TSARs that are accounted for using the cash-settled method will require adjustments to the numerator and
denominator if the equity-settled method is determined to have a dilutive effect on diluted net income per common share as compared
to the cash-settled method. The cash-settled method was more dilutive for the year ended December 31, 2023, and no adjustment
was required for the numerator or the denominator. The equity-settled method was more dilutive for the year ended December 31,
2022, and an adjustment was required for both the numerator and denominator.
Stock options and, if calculated using the equity-settled method, TSARs are considered dilutive when the average market price of the
Company’s common shares during the period disclosed exceeds the exercise price of the stock option or TSARs. For the year ended
December 31, 2023 and 2022, stock options were dilutive, resulting in an adjustment to the denominator. For the year ended
December 31, 2023, TSARs were not dilutive, resulting in no adjustment to the denominator. For the year ended December 31, 2022,
TSARs were dilutive, resulting in an adjustment to the denominator.
A reconciliation of the numerator used for the purposes of calculating diluted net income per common share is as follows:
For the years ended December 31
Numerator for basic net income per common share
Adjustment for the effect of TSARs:
Cash-settled recovery included in net income
Equity-settled expense
Numerator for diluted net income per common share
2023
2022
$
174,140 $
353,830
—
—
(316)
(5,503)
$
174,140 $
348,011
A reconciliation of the denominator used for the purposes of calculating diluted net income per common share is as follows:
For the years ended December 31
Denominator for basic net income per common share
Effect of dilutive stock options
Effect of dilutive TSARS
Denominator for diluted net income per common share
2023
2022
67,805,220
71,422,360
6,395
—
10,108
245,016
67,811,615
71,677,484
For the years ended December 31, 2023 and 2022, basic and diluted net income per common share attributable to Methanex
shareholders were as follows:
For the years ended December 31
Basic net income per common share
Diluted net income per common share
$
$
2023
2.57 $
2.57 $
2022
4.95
4.86
65
14. Share-based compensation:
The Company provides share-based compensation to its directors and certain employees through grants of stock options, TSARs,
SARs and deferred, restricted or performance share units.
As at December 31, 2023, the Company had 4,010,076 common shares reserved for future grants of stock options and tandem share
appreciation rights under the Company’s stock option plan.
a) Share appreciation rights and tandem share appreciation rights:
All SARs and TSARs granted have a maximum term of seven years with one-third vesting each year from the date of grant. SARs and
TSARs units outstanding at December 31, 2023 and 2022 are as follows:
Number of
units
SARs
Exercise
price USD
Number of
units
TSARs
Exercise
price USD
Outstanding at December 31, 2021
666,256 $
45.70
2,380,237 $
Granted
Exercised
Cancelled
Expired
32,730
(129,162)
(12,900)
(149,237)
48.49
37.17
55.70
55.66
266,090
(290,577)
(21,922)
(145,469)
Outstanding at December 31, 2022
407,687 $
44.67
2,188,359 $
Granted
Exercised
Cancelled
Outstanding at December 31, 2023
51,160
(50,715)
(5,600)
402,532 $
50.49
33.85
53.69
46.65
169,190
(336,535)
(13,544)
2,007,470 $
42.05
48.49
35.94
46.45
55.82
42.68
50.49
31.88
51.36
45.10
Information regarding the SARs and TSARs outstanding as at December 31, 2023 is as follows:
Range of exercise prices
SARs
$29.27 to $38.79
$45.40 to $50.49
$54.65 to $78.59
TSARs
$29.27 to $38.79
$45.40 to $50.49
$54.65 to $78.59
Units outstanding at December 31, 2023
Units exercisable at December 31, 2023
Weighted
average
remaining
contractual
life (years)
3.52
2.93
1.39
2.64
3.57
3.65
1.66
3.07
Number
of units
outstanding
112,962 $
171,010
118,560
402,532 $
776,194 $
673,316
557,960
2,007,470 $
Weighted
average
exercise
price
32.60
49.93
55.30
46.65
33.05
49.55
56.48
45.10
Number
of units
exercisable
99,800 $
98,029
118,560
316,389 $
666,922 $
330,265
557,960
1,555,147 $
Weighted
average
exercise
price
31.78
49.96
55.30
46.23
32.11
49.62
56.48
44.57
The fair value of each outstanding SARs and TSARs grant was estimated on December 31, 2023 and 2022 using the Black-Scholes
option pricing model with the following weighted average assumptions:
Risk-free interest rate
Expected dividend yield
Expected life of SARs and TSARs (years)
Expected volatility
Expected forfeitures
2023
4.5 %
1.6 %
1.4
38 %
0 %
2022
4.4 %
1.9 %
1.8
51 %
0 %
Weighted average fair value (USD per unit)
$
10.75 $
8.72
Compensation expense for SARs and TSARs is measured based on their fair value and is recognized over the vesting period.
Changes in fair value each period are recognized in net income for the proportion of the service that has been rendered at each
reporting date. The fair value as at December 31, 2023 was $26.7 million compared with the recorded liability of $25 million. The
66
difference between the fair value and the recorded liability of $1.7 million will be recognized over the weighted average remaining
vesting period of approximately 1.4 years.
For the year ended December 31, 2023, compensation expense related to SARs and TSARs included an expense in cost of sales and
operating expenses of $10.5 million (2022 - expense of $1.8 million). This included an expense of $6.6 million (2022 - recovery of $3.7
million) related to the effect of the change in the Company’s share price.
b) Deferred, restricted and performance share units (old plan and new plan):
Deferred, restricted and performance share units (old plan and new plan) outstanding as at December 31, 2023 and 2022 are as
follows:
Outstanding at December 31, 2021
Granted
Performance factor impact on redemption1
Granted in lieu of dividends
Redeemed
Cancelled
Outstanding at December 31, 2022
Granted
Performance factor impact on redemption1
Granted in lieu of dividends
Redeemed
Cancelled
Outstanding at December 31, 2023
Number of
deferred share
units
Number of
restricted share
units
Number of
performance share
units (new plan)
133,418
19,909
—
2,434
—
—
155,761
18,417
—
2,484
(18,962)
—
157,700
332,385
104,810
—
5,561
(82,039)
(19,788)
340,929
104,980
—
5,267
(131,398)
(8,924)
310,854
689,688
199,430
(14,796)
11,764
(119,714)
(21,485)
744,887
179,340
143,065
10,411
(435,035)
(11,546)
631,122
1 Performance share units have a feature where the ultimate number of units that vest are adjusted by a performance factor of the original grant as determined by the
Company's total shareholder return in relation to a predetermined target over the period to vesting. These units relate to performance share units redeemed in the quarter
ended March 31, 2023 and the quarter ended March 31, 2022.
Performance share units are redeemable for cash based on the market value of the Company's common shares and are non-dilutive
to shareholders. Units vest over three years and include two equally weighted performance factors: (i) relative total shareholder return
of Methanex shares versus a specific market index (the market performance factor) and (ii) three year average Return on Capital
Employed (the non-market performance factor). The market performance factor is measured by the Company at the grant date and
reporting date using a Monte-Carlo simulation model to determine fair value. The non-market performance factor reflects
management's best estimate to determine the expected number of units to vest. Based on these performance factors the performance
share unit payout will range between 0% to 200%.
Compensation expense for deferred, restricted and performance share units is measured at fair value based on the market value of
the Company’s common shares and is recognized over the vesting period. Changes in fair value are recognized in net income for the
proportion of the service that has been rendered at each reporting date. The fair value of deferred, restricted and performance share
units at December 31, 2023 was $58.6 million compared with the recorded liability of $48.9 million. The difference between the fair
value and the recorded liability of $9.7 million will be recognized over the weighted average remaining vesting period of approximately
1.7 years.
For the year ended December 31, 2023, compensation expense related to deferred, restricted and performance share units included
in cost of sales and operating expenses was an expense of $23.9 million (2022 - expense of $13.5 million). This included an expense
of $8.8 million (2022 - recovery of $3.4 million) related to the effect of the change in the Company’s share price.
67
15. Segmented information:
The Company’s operations consist of the production and sale of methanol, which constitutes a single operating segment.
During the years ended December 31, 2023 and 2022, revenues attributed to geographic regions, based on the location of customers,
were as follows:
Revenue
2023
China
Europe
United
States
South
America
South
Korea
Other Asia
Canada
TOTAL
$ 1,042,723 $
722,578 $
574,951 $
428,617 $
391,821 $
387,373 $
175,412
$ 3,723,475
28 %
19 %
15 %
12 %
11 %
10 %
5 %
100 %
2022
$ 1,105,610 $
830,507 $
657,495 $
458,989 $
542,646 $
518,901 $
197,040
$ 4,311,188
26 %
19 %
15 %
11 %
13 %
12 %
4 %
100 %
As at December 31, 2023 and 2022, the net book value of property, plant and equipment by geographic region, and the Company's
shipping business, was as follows:
Property, plant and
equipment 1
United
States
Egypt
New
Zealand
Canada
Chile
Trinidad
Waterfront
Shipping
Other
TOTAL
December 31, 2023
$ 2,537,515 $ 520,497 $ 232,831 $ 157,483 $ 113,789 $
43,835 $
775,729 $
30,089 $ 4,411,768
December 31, 2022
$ 2,211,333 $ 564,454 $ 211,544 $ 165,783 $ 102,467 $
70,432 $
792,016 $
37,254 $ 4,155,283
1 Includes right-of-use (leased) assets.
16. Income and other taxes:
a) Income tax (expense) recovery:
For the years ended December 31
Current tax (expense) recovery:
Current period before undernoted items
Adjustments to prior years including resolution for certain outstanding audits
Deferred tax recovery (expense):
Origination and reversal of temporary differences
Adjustments to prior years including resolution for certain outstanding audits
Changes in tax rates
Impact of foreign exchange and other
Total income tax expense
2023
2022
$
(64,679) $
(127,254)
14,755
(324)
(49,924)
(127,578)
46,982
6,904
(5,828)
377
48,435
9,589
(400)
(23)
(1,447)
7,719
$
(1,489) $
(119,859)
68
b) Reconciliation of the effective tax rate:
The Company operates in several tax jurisdictions and therefore its income is subject to various rates of taxation. Income tax expense
differs from the amounts that would be obtained by applying the Canadian statutory income tax rate to net income before income
taxes as follows:
For the years ended December 31
Income before income taxes
Deduct earnings of associate
Canadian statutory tax rate
Income tax expense calculated at Canadian statutory tax rate
Decrease (increase) in income tax expense resulting from:
Impact of income and losses taxed in foreign jurisdictions
Utilization of unrecognized loss carryforwards and temporary differences
Impact of tax rate changes
Impact of foreign exchange
Other business taxes
Impact of items not taxable for tax purposes
Adjustments to prior years including resolution for certain outstanding audits
Other
Total income tax expense
2023
2022
$
285,611
$
582,147
(99,466)
186,145
(76,938)
505,209
24.5%
24.5%
(45,606)
(123,776)
27,260
7,381
(5,828)
5,287
1,346
7,077
(23)
3,783
(13,943)
(11,065)
2,373
21,658
(71)
3,624
(724)
(101)
$
(1,489) $
(119,859)
c) Net deferred income tax assets and liabilities:
(i) The tax effect of temporary differences that give rise to deferred income tax liabilities and deferred income tax assets is as follows:
As at
Dec 31, 2023
Dec 31, 2022
Property, plant and equipment (owned)
$
(363,644) $
(189,646) $
(173,998) $
(403,505) $
(230,756) $
(172,749)
Net
Deferred tax
assets
Deferred tax
liabilities
Net
Deferred tax
assets
Deferred tax
liabilities
Right-of-use assets
Repatriation taxes
Other
(35,883)
(28,299)
(7,584)
(33,477)
(26,486)
(6,991)
(109,186)
(31,630)
(7)
(109,179)
(106,989)
—
(106,989)
(9,259)
(22,371)
(78,305)
(60,850)
(17,455)
(540,343)
(227,212)
(313,131)
(622,276)
(318,092)
(304,184)
Non-capital loss carryforwards
358,774
321,602
Lease obligations
Share-based compensation
Other
48,633
16,391
50,955
37,854
651
19,355
474,753
379,462
37,172
10,779
15,740
31,600
95,291
353,986
322,608
46,438
17,068
24,141
35,957
2,096
3,784
441,633
364,445
31,378
10,481
14,972
20,357
77,188
Net deferred income tax assets (liabilities)
$
(65,590) $
152,250 $
(217,840) $
(180,643) $
46,353 $
(226,996)
69
As at December 31, 2023, deferred income tax assets have been recognized in respect of non-capital loss carryforwards generated in
the United States. These loss carryforwards expire as follows:
Expire
Losses generated in 2015 (expires 2035)
Losses generated in 2016 (expires 2036)
Losses generated in 2017 (expires 2037)
No expiry
Losses generated in 2019
Losses generated in 2020
Losses generated in 2023
Total non-capital loss carryforwards
Dec 31 2023
Gross amount
Tax effect
$
282,437 $
432,581
234,941
949,959
255,244
121,321
29,235
62,136
95,168
51,687
208,991
56,154
26,691
6,432
$
1,355,760 $
298,267
Losses generated in the United States on or after January 1, 2018 may be carried forward indefinitely against future taxable income.
Tax losses generated before December 31, 2017 may be carried forward for a 20 year period.
As at December 31, 2023 the Company had $201 million (2022 - $231 million) of deductible temporary differences in the United
States that have not been recognized.
As at December 31, 2023, deferred income tax assets have been recognized in respect of non-capital loss carryforwards generated in
Trinidad. The loss carryforwards total $82 million (2022 - $70 million), which result in a deferred income tax asset of $29 million (2022
- $24 million). The losses generated in Trinidad may be carried forward indefinitely against future taxable income.
As at December 31, 2023, deferred income tax assets have been recognized in respect of non-capital loss carryforwards generated in
New Zealand. The loss carryforwards total $25 million (2022 - $7 million), which result in a deferred income tax asset of $7 million
(2022 - $2 million). The losses generated in New Zealand may be carried forward indefinitely against future taxable income.
As at December 31, 2023, deferred income tax assets have been recognized in respect of non-capital loss carryforwards generated in
Canada. The loss carryforwards total $123 million (2022 - $121 million), which result in a deferred income tax asset of $30 million
(2022 - $30 million). The losses were generated in 2020 and can be carried forward 20 years against future taxable income.
(ii) Analysis of the change in deferred income tax assets and liabilities:
2023
2022
Net
Deferred tax
assets
Deferred tax
liabilities
Net
Deferred tax
assets
Deferred tax
liabilities
Balance, January 1
$
(180,643) $
46,353 $
(226,996) $
(114,536) $
98,169 $
(212,705)
Deferred income tax recovery (expense)
included in net income
Deferred income tax recovery (expense)
included in other comprehensive income
Other
48,435
40,159
8,276
7,719
22,578
(14,859)
66,636
65,738
(17)
—
898
(17)
(72,440)
(74,394)
(1,386)
—
1,954
(1,386)
Balance, December 31
$
(65,590) $
152,250 $
(217,840) $
(180,643) $
46,353 $
(226,996)
International Tax Reform — Pillar Two Rules
Pillar Two rules were published by the Organization for Economic Co-operation and Development and establish a global minimum
fifteen percent top-up tax regime. Under currently proposed legislation, Pillar Two rules are expected to be implemented in Canada
and be effective for tax years beginning January 1, 2024. The Company is in scope of the proposed legislation and has performed a
preliminary assessment of the potential exposure to to-up taxes that would apply based on our historical financial results in the
jurisdictions in which we operate. Based on the assessment, we do not expect to have a material exposure to Pillar Two top-up taxes.
70
17. Supplemental cash flow information:
a) Changes in non-cash working capital:
Changes in non-cash working capital for the years ended December 31, 2023 and 2022 were as follows:
For the years ended December 31
Changes in non-cash working capital:
Trade and other receivables
Inventories
Prepaid expenses
Trade, other payables and accrued liabilities
Adjustments for items not having a cash effect and working capital changes relating to taxes and interest paid
and interest received
Changes in non-cash working capital having a cash effect
These changes relate to the following activities:
Operating
Financing
Investing
2023
2022
$
(32,690) $
12,997
(19,439)
(17,333)
(56,465)
6,027
(50,438) $
(59,058) $
68,750
(60,130)
$
$
50,442
19,785
(2,622)
(46,751)
20,854
59,283
80,137
54,122
1,771
24,244
80,137
Changes in non-cash working capital
$
(50,438) $
b) Reconciliation of movements in liabilities to cash flows arising from financing activities:
Balance at December 31, 2022
Changes from financing cash flows
Repayment of long-term debt and financing fees
Payment of lease obligations
Total changes from financing cash flows
Liability-related other changes
Finance costs
New lease obligations
Other
Total liability-related other changes
Balance at December 31, 2023
Long term debt
(note 8)
Lease
obligations
(note 9)
$
2,151,513 $
870,163
(12,280)
—
(12,280)
—
(118,159)
(118,159)
2,568
—
—
2,568
$
2,141,801 $
—
123,187
(3,071)
120,116
872,120
71
18. Capital disclosures:
The Company’s objective in managing liquidity and capital is to safeguard the Company’s ability to continue as a going concern and to
provide financial capacity and flexibility to meet its strategic objectives, with a focus on cash preservation and liquidity.
As at
Liquidity:
Cash and cash equivalents
Undrawn credit facility
Undrawn G3 construction facility
Total liquidity
Capitalization:
Unsecured notes, including current portion
Other limited recourse debt facilities, including current portion
Total debt
Non-controlling interests
Shareholders’ equity
Total capitalization
Total debt to capitalization 1
Net debt to capitalization 2
Dec 31
2023
Dec 31
2022
$
458,015 $
300,000
—
857,747
300,000
300,000
$
758,015 $
1,457,747
1,985,660
1,983,374
156,141
168,139
2,141,801
2,151,513
242,090
317,444
1,930,927
2,112,013
$
4,314,818 $
4,580,970
50 %
44 %
47 %
35 %
1 Total debt (including Other limited recourse debt facilities) divided by total capitalization.
2 Total debt (including Other limited recourse debt facilities) less cash and cash equivalents divided by total capitalization less cash and cash equivalents.
The Company manages its liquidity and capital structure and makes adjustments to it in light of changes to economic conditions, the
underlying risks inherent in its operations and capital requirements to maintain and grow its operations. The strategies employed by
the Company may include the issue or repayment of general corporate debt, the issue of project debt, private placements by limited
recourse subsidiaries, the issue of equity, the payment of dividends and the repurchase of shares.
The Company is not subject to any statutory capital requirements and has no commitments to sell or otherwise issue common shares
except pursuant to outstanding employee stock options.
The Company has access to a $300 million committed revolving credit facility with a syndicate of highly rated financial institutions
expiring in July 2026. The credit facility is subject to certain financial covenants (note 8). During the year ended December 31, 2023,
the Company cancelled the $300 million non-revolving construction facility for the Geismar 3 plant.
19. Financial instruments:
Financial instruments are either measured at amortized cost or fair value.
In the normal course of business, the Company's assets, liabilities and forecasted transactions, as reported in U.S. dollars, are
impacted by various market risks including, but not limited to, natural gas prices and currency exchange rates. The time frame and
manner in which the Company manages those risks varies for each item based on the Company's assessment of the risk and the
available alternatives for mitigating risks.
The Company uses derivatives as part of its risk management program to mitigate variability associated with changing market values.
Changes in the fair value of derivative financial instruments are recorded in earnings unless the instruments are designated as cash
flow hedges, in which case the changes in fair value are recorded in other comprehensive income and are reclassified to profit or loss
or accumulated other comprehensive income when the underlying hedged transaction is recognized in earnings or inventory. The
Company designates as cash flow hedges certain derivative financial instruments to hedge its risk exposure to fluctuations in natural
gas prices and to hedge its risk exposure to fluctuations on certain foreign-currency-denominated transactions.
72
The following table provides the carrying value of each category of financial assets and liabilities and the related balance sheet item:
As at
Financial assets:
Financial assets measured at fair value:
Derivative instruments designated as cash flow hedges 1
Fair value of Egypt gas supply contract derivative 2
Financial assets not measured at fair value:
Cash and cash equivalents
Trade and other receivables, excluding tax receivable
Restricted cash included in other assets
Total financial assets 3
Financial liabilities:
Financial liabilities measured at fair value:
Derivative instruments designated as cash flow hedges 1
Financial liabilities not measured at fair value:
Trade, other payables and accrued liabilities, excluding tax payable
Lease obligations, including current portion
Long-term debt, including current portion
Land mortgage
Total financial liabilities
Dec 31
2023
Dec 31
2022
$
121,108 $
322,748
20,402
11,220
458,015
514,739
15,772
857,747
488,184
14,349
$
1,130,036 $
1,694,248
$
91,653 $
8,466
672,237
872,120
656,010
870,163
2,141,801
2,151,513
28,014
28,514
$
3,805,825 $
3,714,666
1 The Geismar natural gas hedges and euro foreign currency hedges designated as cash flow hedges are measured at fair value based on industry accepted valuation models
and inputs obtained from active markets.
2 The Egypt natural gas supply contract is measured at fair value using a Monte-Carlo model classified within Level 3 of the fair value hierarchy.
3 The carrying amount of the financial assets represents the maximum exposure to credit risk at the respective reporting periods.
As at December 31, 2023, all of the financial instruments were recorded on the consolidated statements of financial position at
amortized cost with the exception of derivative financial instruments, which were recorded at fair value unless exempted.
The fair value of derivative instruments is determined based on industry-accepted valuation models using market observable inputs
and are classified within Level 2 of the fair value hierarchy and those using significant unobservable inputs classified as Level 3. The
fair value of all of the Company's derivative contracts as presented in the consolidated statements of financial position are determined
based on present values and the discount rates used are adjusted for credit risk. The effective portion of the changes in fair value of
derivative financial instruments designated as cash flow hedges is recorded in other comprehensive income. The spot element of
forward contracts in the hedging relationships is recorded in other comprehensive income as the change in fair value of cash flow
hedges. The change in the fair value of the forward element of forward contracts is recorded in other comprehensive income as the
forward element excluded from the hedging relationships. Once a commodity hedge settles, the amount realized during the period and
not recognized immediately in the statement of income is reclassified from accumulated other comprehensive income (equity) to
inventory and ultimately through cost of goods sold. Foreign currency hedges settled, are realized during the period directly to the
statement of income reclassified from the statement of other comprehensive income.
Until settled, the fair value of Level 2 derivative financial instruments will fluctuate based on changes in commodity prices or foreign
currency exchange rates and the fair value of Level 3 derivative financial instruments will fluctuate based on changes in the
observable and unobservable valuation model inputs.
North American natural gas forward contracts
The Company manages its exposure to changes in natural gas prices for a portion of its North American natural gas requirements by
executing a number of fixed price forward contracts: both financial and physical.
The Company has entered into forward contracts designated as cash flow hedges to manage its exposure to changes in natural gas
prices for Geismar. Natural gas is fungible across the Geismar plants. Other costs incurred to transport natural gas from the
contracted delivery point, Henry Hub, to the relevant production facility represent an insignificant portion of the overall underlying risk
and are recognized as incurred outside of the hedging relationship. No hedge ineffectiveness has been recognized in 2023 or 2022.
73
As at
Maturities
Notional quantity 1
Notional quantity per day, annualized 1
Notional amount
Net fair value
1 In thousands of Million British Thermal Units (MMBtu)
Dec 31
2023
Dec 31
2022
2024-2032
2023-2032
347,190
50 - 170
307,900
50 - 150
$
$
1,183,319 $
1,014,264
29,925 $
316,008
Information regarding the gross amounts of the Company's natural gas forward contracts designated as cash flow hedges in the
audited consolidated statements of financial position is as follows:
As at
Other current assets
Other non-current assets
Other current liabilities
Other long-term liabilities
Net fair value
Dec 31
2023
$
470 $
Dec 31
2022
32,768
120,638
289,979
(60,532)
(30,651)
(317)
(6,422)
$
29,925 $
316,008
For the year ended December 31, 2023, the Company reclassified a loss of $22.5 million (2022 - gain of $55.0 million) for natural gas
hedge settlements from accumulated other comprehensive income. Realized gains and losses related to settlements of natural gas
hedges are presented separately within the Consolidated Statement of Changes in Equity.
Euro forward exchange contracts
The Company manages its foreign currency exposure to euro denominated sales by executing a number of forward contracts which it
has designated as cash flow hedges for its highly probable forecast euro collections. The Company has elected to designate the spot
element of the forward contracts as cash flow hedges. The forward element of the forward contracts are excluded from the
designation and only the spot element is considered for the purpose of assessing effectiveness and measuring ineffectiveness. The
excluded forward element of the swap contracts will be accounted for as a cost of hedging (transaction cost) to be recognized in profit
or loss over the term of the hedging relationships. Ineffectiveness may arise in the hedging relationship due to changes in the timing of
the anticipated transactions and/or due to changes in credit risk of the hedging instrument not replicated in the hedged item. No hedge
ineffectiveness has been recognized in 2023 or 2022.
As at December 31, 2023, the Company had outstanding forward exchange contracts designated as cash flow hedges to sell a
notional amount of 12.2 million euros (2022 - 21.1 million euros). The euro contracts had a negative fair value of $0.5 million included
in current liabilities (2022 - negative fair value of $1.7 million included in current liabilities).
For the year ended December 31, 2023, the Company reclassified a loss of $3.1 million (2022 - gain of $5.7 million) for foreign
currency hedge settlements from other comprehensive income.
Changes in cash flow hedges and excluded forward element
Information regarding the impact of changes in cash flow hedges and cost of hedging reserve in the consolidated statement of
comprehensive income is as follows:
For the years ended December 31
Change in fair value of cash flow hedges
Forward element excluded from hedging relationships
Fair value - Level 2 instruments
2023
2022
(276,619) $
(27,742)
(33,837)
(310,456) $
406,029
378,287
$
$
The table below shows the nominal cash outflows for derivative hedging instruments including natural gas forward contracts and
forward exchange contracts, excluding credit risk adjustments, based upon contracted settlement dates. The amounts reflect the
maturity profile of the hedging instruments and are subject to change based on the prevailing market rate at each of the future
settlement dates. Financial asset derivative positions, if any, are held with investment-grade counterparties and therefore the
settlement day risk exposure is considered to be negligible.
74
As at
Within one year
1-3 years
3-5 years
More than 5 years
Dec 31
2023
$
65,034 $
17,771
5,537
11,378
Dec 31
2022
2,050
7,132
—
—
$
99,720 $
9,182
The fair value of the Company’s derivative financial instruments as disclosed above are determined based on Bloomberg quoted
market prices, which are adjusted for credit risk.
The Company is exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments
but does not expect any counterparties to fail to meet their obligations. The Company deals with only highly rated investment-grade
counterparties. The Company is exposed to credit risk when there is a positive fair value of derivative financial instruments at a
reporting date. The maximum amount that would be at risk if the counterparties to derivative financial instruments with positive fair
values failed completely to perform under the contracts was $121.1 million as at December 31, 2023 (2022 - $322.7 million).
The carrying values of the Company’s financial instruments approximate their fair values, except as follows:
As at
December 31, 2023
December 31, 2022
Carrying
value
Fair
value
Carrying
value
Fair
value
Long-term debt excluding deferred financing fees
$
2,156,534 $
2,063,661 $
2,168,585 $
1,953,932
Long-term debt consists of limited recourse debt facilities and unsecured notes. There is no publicly traded market for the limited
recourse debt facilities. The fair value of the limited recourse debt facilities as disclosed on a recurring basis and categorized as
Level 2 within the fair value hierarchy is estimated by reference to current market rates as at the reporting date. The fair value of the
unsecured notes disclosed on a recurring basis and also categorized as Level 2 within the fair value hierarchy is estimated using
quoted prices and yields as at the reporting date. The fair value of the Company’s long term debt will fluctuate until maturity.
Fair value - Level 3 instrument
The Company holds a long-term natural gas supply contract expiring in 2035 with the Egyptian Natural Gas Holding Company
("EGAS"), a State-Owned enterprise in Egypt. The natural gas supply contract includes a base fixed price plus a premium based on
the realized price of methanol for the full volume of natural gas to supply the plant through 2035. As a result of the amendment in
2022, the contract is being treated as a derivative measured at fair value.
There is no observable, liquid spot market or forward curve for natural gas in Egypt. In addition, there are limited observable prices for
natural gas in Egypt as all natural gas purchases and sales are controlled by the government and the observed prices differ based on
the produced output or usage.
Due to the absence of an observable market price for an equivalent or similar contract to measure fair value, the contract's fair value
is estimated using a Monte-Carlo model. The Monte-Carlo model includes significant unobservable inputs and as a result is classified
within Level 3 of the fair value hierarchy. We consider market participant assumptions in establishing the model inputs and
determining fair value, including adjusting the base fixed price and methanol based premium at the valuation date to consider
estimates of inflation since contract inception.
At December 31, 2023 the fair value of the derivative associated with the remaining term of the natural gas supply contract is
$20.4 million (2022 - $11.2 million) recorded in Other assets. Changes in fair value of the contract are recognized in Finance income
and other.
The table presents the Level 3 inputs and the sensitivities of the Monte-Carlo model valuation to changes in these inputs:
Valuation input
Input value or range
Change in input
Methanol price volatility (before impact of mean reversion)
35%
+/- 5%
Methanol price forecast
Discount rate
$300 - $415 per MT
+/- $25 per MT
7.6%
+/- 1%
Resulting change in
valuation
$+/-7 million
$-5/+7 million
$-/+1 million
Sensitivities
It is possible that the assumptions used in establishing fair value amounts will differ from future outcomes and the impact of such
variations could be material.
75
20. Financial risk management:
a) Market risks:
The Company’s operations consist of the production and sale of methanol. Market fluctuations may result in significant cash flow and
profit volatility risk for the Company. Its worldwide operating business as well as its investment and financing activities are affected by
changes in methanol and natural gas prices and interest and foreign exchange rates. The Company seeks to manage and control
these risks primarily through its regular operating and financing activities and uses derivative instruments to hedge these risks when
deemed appropriate. This is not an exhaustive list of all risks, nor will the risk management strategies eliminate these risks.
Methanol price risk
The methanol industry is a highly competitive commodity industry and methanol prices fluctuate based on supply and demand
fundamentals and other factors. The profitability of the Company is directly related to the market price of methanol. A decline in the
market price of methanol could negatively impact the Company's future operations. The Company does not hedge its methanol
sales through derivative contracts. The Company manages its methanol price risk, to a certain degree, through natural gas supply
contracts that include a variable price component linked to methanol prices, as described below.
Natural gas price risk
Natural gas is the primary feedstock for the production of methanol. The Company has entered into multi-year natural gas supply
contracts for its production facilities in New Zealand, Trinidad and Tobago, Egypt and certain contracts in Chile that include base and
variable price components to reduce the commodity price risk exposure. The variable price component is adjusted by formulas
related to methanol prices above a certain level. The Company also has multi-year fixed price natural gas contracts to supply its
production facilities in Geismar, Medicine Hat and Chile and natural gas financial hedges in Geismar to manage its exposure to
natural gas price risk.
Interest rate risk
Interest rate risk is the risk that the Company suffers financial loss due to changes in the value of an asset or liability or in the value
of future cash flows due to movements in interest rates. The Company’s interest rate risk exposure is mainly related to the undrawn
credit facility.
As at
Fixed interest rate debt:
Unsecured notes
Other limited recourse debt facilities
Dec 31
2023
Dec 31
2022
$
$
1,985,660 $
1,983,374
156,141
168,139
2,141,801 $
2,151,513
For fixed interest rate debt, a 1% change in interest rates would result in a change in the fair value of the debt (disclosed in note 19)
of approximately $100.5 million as of December 31, 2023 (2022 - $104.8 million).
Foreign currency risk
The Company’s international operations expose the Company to foreign currency exchange risks in the ordinary course of business.
Accordingly, the Company has established a policy that provides a framework for foreign currency management and hedging
strategies and defines the approved hedging instruments. The Company reviews all significant exposures to foreign currencies
arising from operating and investing activities and hedges exposures if deemed appropriate.
The dominant currency in which the Company conducts business is the United States dollar, which is also the reporting currency.
Methanol is a global commodity chemical that is priced in United States dollars. In certain jurisdictions, however, the transaction
price is set either quarterly or monthly in the local currency. Accordingly, a portion of the Company’s revenue is transacted in
Chinese yuan, euros, and, to a lesser extent, other currencies. For the period from when the price is set in local currency to when
the amount due is collected, the Company is exposed to declines in the value of these currencies compared to the United States
dollar. The Company also purchases varying quantities of methanol for which the transaction currency is the euro, Chinese yuan
and, to a lesser extent, other currencies. In addition, some of the Company’s underlying operating costs and capital expenditures
are incurred in other currencies. The Company is exposed to increases in the value of these currencies that could have the effect of
increasing the United States dollar equivalent of cost of sales and operating expenses and capital expenditures. The Company has
elected not to actively manage these exposures at this time except for a portion of the net exposure to euro revenues, which is
hedged through forward exchange contracts each quarter when the euro price for methanol is established.
76
As at December 31, 2023, the Company had a net working capital asset of $74.4 million in non U.S. dollar currencies (2022 - $69.9
million). Each 10% strengthening (weakening) of the U.S. dollar against these currencies would decrease (increase) the value of net
working capital and pre-tax cash flows and earnings by approximately $7.4 million (2022 - $7.0 million).
b) Liquidity risks:
Liquidity risk is the risk that the Company will not have sufficient funds to meet its liabilities, such as the settlement of financial debt
and lease obligations and payment to its suppliers. The Company maintains liquidity and makes adjustments to it in light of changes to
economic conditions, underlying risks inherent in its operations and capital requirements to maintain and grow its operations. As at
December 31, 2023, the Company had a strong liquidity position including a cash and cash equivalents balance of $458 million. In
addition, the Company has access to a $300 million committed undrawn revolving credit facility.
In addition to the above-mentioned sources of liquidity, the Company monitors funding options available in the capital markets, as well
as trends in the availability and costs of such funding, with a view to maintaining financial flexibility and limiting refinancing risks.
The expected cash flows of financial liabilities from the date of the balance sheet to the contractual maturity date are as follows:
As at December 31, 2023
Trade and other payables 1
Lease obligations 2
Other long-term liabilities2
Long-term debt 2
Cash flow hedges 3
Carrying
amount
Contractual
cash flows
1 year
or less
1-3 years
3-5 years
More than
5 years
$
659,723 $
659,723
$
659,723 $
— $
— $
—
872,120
28,014
1,174,346
53,348
2,141,801
2,932,911
91,653
99,720
172,197
2,200
425,953
65,034
266,499
4,400
220,901
17,771
220,681
4,400
514,969
42,348
879,530
1,406,527
5,537
11,378
$
3,793,311
$
4,920,048
$
1,325,107
$
509,571
$
1,110,148
$
1,975,222
1 Excludes tax, accrued interest and euro foreign currency hedges.
2 Contractual cash flows include contractual interest payments related to debt obligations and lease obligations.
3 The expected cash flows of hedges are based on current valuations of the expected settlement amounts, which will fluctuate at settlement dependent on the market prices at
the future settlement dates
c) Credit risks:
Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty
defaults on its obligations under the contract. This includes any cash amounts owed to the Company by those counterparties, less any
amounts owed to the counterparty by the Company where a legal right of offset exists and also includes the fair values of contracts
with individual counterparties that are recorded in the financial statements.
Trade credit risk
Trade credit risk is defined as an unexpected loss in cash and earnings if the customer is unable to pay its obligations in due time or
if the value of the security provided declines. The Company has implemented a credit policy that includes approvals for new
customers, annual credit evaluations of all customers and specific approval for any exposures beyond approved limits. The
Company employs a variety of risk-mitigation alternatives, including credit insurance, certain contractual rights in the event of
deterioration in customer credit quality and various forms of bank and parent company guarantees and letters of credit to upgrade
the credit risk to a credit rating equivalent or better than the stand-alone rating of the counterparty. Trade credit losses have
historically been minimal and as at December 31, 2023 substantially all of the trade receivables were classified as current.
Cash and cash equivalents
To manage credit and liquidity risk, the Company’s investment policy specifies eligible types of investments, maximum counterparty
exposure and minimum credit ratings. Therefore, the Company invests only in highly rated investment-grade instruments that have
maturities of three months or less.
Derivative financial instruments
The Company’s hedging policies specify risk management objectives and strategies for undertaking hedge transactions. The
policies also include eligible types of derivatives and required transaction approvals, as well as maximum counterparty exposures
and minimum credit ratings. The Company does not use derivative financial instruments for trading or speculative purposes.
To manage credit risk, the Company only enters into derivative financial instruments with highly rated investment-grade
counterparties. Hedge transactions are reviewed, approved and appropriately documented in accordance with Company policies.
77
21. Retirement plans:
a) Defined benefit pension plans:
The Company has non-contributory defined benefit pension plans covering certain employees. The Company does not provide any
significant post-retirement benefits other than pension plan benefits. Information concerning the Company’s defined benefit pension
plans, in aggregate, is as follows:
As at
Accrued benefit obligations:
Balance, beginning of year
Current service cost
Past service cost
Interest cost on accrued benefit obligations
Benefit payments
Settlements
Actuarial (gain) loss
Foreign exchange (gain) loss
Balance, end of year
Fair values of plan assets:
Balance, beginning of year
Interest income on assets
Contributions
Benefit payments
Settlements
Return on plan assets
Foreign exchange gain (loss)
Balance, end of year
Unfunded status
Minimum funding requirement
Defined benefit obligation, net
Dec 31
2023
Dec 31
2022
$
53,586 $
2,246
2,479
2,549
(4,280)
(3,738)
2,074
265
55,181
38,347
1,901
5,687
(4,280)
(3,680)
(705)
938
38,208
16,973
—
62,208
2,329
—
2,007
(5,760)
—
(4,047)
(3,151)
53,586
46,608
1,221
4,457
(5,760)
—
(5,173)
(3,006)
38,347
15,239
—
$
16,973 $
15,239
The net defined benefit obligation above is comprised of unfunded retirement obligations and funded retirement net assets from
defined benefit pension plans, as follows:
The Company has an unfunded retirement obligation of $20.2 million as at December 31, 2023 (2022 - obligation of $19.2 million) for
its employees in Chile that will be funded in accordance with Chilean law. The Company also has an unfunded retirement obligation of
$2.5 million as at December 31, 2023 (2022 - nil) for its employees in Egypt. The accrued benefits for the unfunded retirement
arrangement in Chile and Egypt are paid when an employee leaves the Company in accordance with the plan terms and country
regulations.The Company estimates that it may make benefit payments based on actuarial assumptions related to the unfunded
retirement obligation of $11.3 million in Chile and $0.1 million in Egypt for 2024. Actual benefit payments in future periods will fluctuate
based on employee retirements.
The Company has a net funded retirement asset of $5.3 million as at December 31, 2023 (2022 - $3.6 million) for certain employees
and retirees in Canada and a net funded retirement asset of $0.4 million as at December 31, 2023 (2022 - asset of $0.4 million) in
Europe. The Company estimates that it will make no additional contributions relating to its defined benefit pension plan in Canada and
that it will make additional contributions relating to its defined benefit pension plan in Europe of $0.5 million in 2024.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market
risk on the funded plans. Additionally, as the plans provide benefits to plan members predominantly in Canada and Chile, the plans
expose the Company to foreign currency risk for funding requirements. The primary long-term risk is that the Company will not have
sufficient plan assets and liquidity to meet obligations when they fall due. The weighted average duration of the net defined benefit
obligation is 7 years.
78
The Company’s net defined benefit pension plan expense charged to the consolidated statements of income for the years ended
December 31, 2023 and 2022 is as follows:
For the years ended December 31
Net defined benefit pension plan expense:
Current service cost
Past service cost
Net interest cost
Cost of settlement
Total net defined benefit pension plan expense
2023
2022
$
2,246 $
2,329
2,479
648
(58)
—
786
—
$
5,315 $
3,115
The Company’s current year actuarial losses, recognized in the consolidated statements of comprehensive income for the years
ended December 31, 2023 and 2022, are as follows:
For the years ended December 31
Actuarial loss
2023
$
(2,827) $
2022
(726)
The Company had no minimum funding requirement for the years ended December 31, 2023 and 2022.
The Company uses a December 31 measurement date for its defined benefit pension plans. Actuarial reports for the Company’s
defined benefit pension plans were prepared by independent actuaries for funding purposes as of December 31, 2022 in Canada. The
next actuarial reports for funding purposes for the Company’s Canadian defined benefit pension plans are scheduled to be completed
as of December 31, 2025.
The discount rate is the most significant actuarial assumption used in accounting for the defined benefit pension plans. As at
December 31, 2023, the weighted average discount rate for the defined benefit obligation was 5.3% (2022 - 5.1%). A change of 1% in
the weighted average discount rate at the end of the reporting period, while holding all other assumptions constant, would result in a
change to the defined benefit obligation of approximately $3.6 million.
The asset allocation for the defined benefit pension plan assets as at December 31, 2023 and 2022 is as follows:
As at
Equity securities
Debt securities
Cash and other short-term securities
Total
Dec 31
2023
15 %
52 %
33 %
100 %
Dec 31
2022
20 %
49 %
31 %
100 %
The fair value of the above equity and debt instruments are determined based on quoted market prices in active markets whereas the
fair value of cash and other short-term securities are not based on quoted market prices in active markets. The plan assets are held
separately from those of the Company in funds under the control of trustees.
b) Defined contribution pension plans:
The Company has defined contribution pension plans. The Company’s funding obligations under the defined contribution pension
plans are limited to making regular payments to the plans, based on a percentage of employee earnings. Total net pension expense
for the defined contribution pension plans charged to operations during the year ended December 31, 2023 was $11.0 million (2022 -
$9.7 million).
79
22. Commitments and contingencies:
a) Take-or-pay purchase contracts and related commitments:
The Company has commitments under take-or-pay contracts to purchase natural gas, to pay for transportation capacity related to the
delivery of natural gas and to purchase oxygen and other feedstock requirements for our operating plants and Geismar 3 project up to
2044. The minimum estimated commitment under these contracts, except as noted below, is as follows:
As at December 31, 2023
2024
2025
2026
2027
2028
$
438,284 $
517,793 $
324,251 $
254,155 $
215,417 $
Thereafter
923,105
Take-or-pay means that we are obliged to pay for the supplies regardless of whether we take delivery. Such commitments are
common in the methanol industry. These contracts generally provide a quantity that is subject to take-or-pay terms that is lower than
the maximum quantity that we are entitled to purchase. The amounts disclosed in the table above represent only the minimum take-or-
pay quantity.
The natural gas supply contracts for our facilities in New Zealand, Trinidad and Tobago, Egypt and certain contracts in Chile are take-
or-pay contracts denominated in United States dollars and include base and variable price components to manage our commodity
price risk exposure. The variable price component of each natural gas contract is adjusted by a formula linked to methanol prices. We
believe this pricing relationship enables these facilities to be competitive throughout the methanol price cycle. The amounts disclosed
in the table for these contracts represent only the base price component representative of the minimum take-or-pay commitment.
b) Other commitments:
The Company has future minimum payments relating primarily to short-term vessel charters, terminal facilities, and other
commitments that are not leases, as follows:
As at December 31, 2023
$
2024
94,534 $
2025
4,665 $
2026
1,314 $
2027
560 $
2028
358 $
Thereafter
1,183
Refer to note 9 for a summary of lease commitments.
c) Purchased methanol:
The Company has marketing rights for 100% of the production from its jointly owned plants (the Atlas plant in Trinidad in which it has a
63.1% interest and the plant in Egypt in which it has a 50% interest), which results in purchase commitments of an additional 0.6
million tonnes per year of methanol offtake supply when Egypt operates at capacity and 0.6 million tonnes per year of methanol
offtake supply for Atlas. The offtake commitment for Atlas for 2024 will be reduced to 0.4 million tonnes of supply due to the facility
running only until September 2024, when the legacy gas supply agreement expires. As at December 31, 2023, the Company also had
commitments to purchase methanol from other suppliers for approximately 0.8 million tonnes for 2024. The pricing under these
purchase commitments is referenced to pricing at the time of purchase or sale, and accordingly, no amounts have been included in
the table above.
80
23. Related parties:
The Company has interests in significant subsidiaries and joint ventures as follows:
Name
Significant subsidiaries:
Methanex Asia Pacific Limited
Methanex Services (Shanghai) Co., Ltd.
Methanex Europe NV
Methanex Methanol Company, LLC
Egyptian Methanex Methanol Company S.A.E.
("Methanex Egypt")
Methanex Chile SpA
Country of
incorporation
Hong Kong
China
Belgium
Principal activities
Marketing & distribution
Marketing & distribution
Marketing & distribution
United States
Marketing & distribution
Egypt
Chile
Production
Production
Production
Methanex New Zealand Limited
New Zealand
Methanex Trinidad (Titan) Unlimited
Trinidad and Tobago
Production
Methanex USA LLC
Methanex Louisiana LLC
Methanex Geismar III LLC
Waterfront Shipping Limited 1
Significant joint ventures:
United States
United States
United States
Canada
Production
Production
Geismar 3 project development
Shipping
Interest %
Dec 31
2023
Dec 31
2022
100 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
60 %
100 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
60 %
Atlas Methanol Company Unlimited 2
Trinidad and Tobago
Production
63.1 %
63.1 %
1 On February 1, 2022, we closed the shipping partnership with Mitsui O.S.K. Lines, Ltd. ("MOL") whereby MOL acquired a 40% minority interest in Waterfront Shipping
Limited.
2 Summarized financial information for the investment in Atlas is disclosed in note 6.
Transactions between the Company and Atlas are considered related party transactions and are included within the summarized
financial information in note 6. Atlas revenue for the year ended December 31, 2023 of $466 million (2022 - $532 million) is a related
party transaction included in cost of sales of the Company as Methanex has marketing rights for 100% of the methanol produced by
Atlas. Balances outstanding with Atlas as at December 31, 2023 and provided in the summarized financial information in note 6
include receivables owing from Atlas to the Company of $74 million (2022 - $73 million), and payables to Atlas of $172 million (2022 -
$198 million). The Company has total loans outstanding to Atlas as at December 31, 2023 of $76 million (2022 - $76 million) which are
unsecured and due at maturity.
Remuneration to non-management directors and senior management, which includes the members of the executive leadership team,
is as follows:
For the years ended December 31
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Share-based compensation expense 1
Total
2023
$
9,034 $
681
59
10,046
$
19,820 $
2022
11,760
656
52
6,142
18,610
1 Balance includes realized and unrealized expenses and recoveries from share-based compensation awards granted.
81
24. Non-controlling interests:
Set out below is summarized financial information for each of our subsidiaries that have non-controlling interests. The amounts
disclosed are before inter-company eliminations.
As at
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Dec 31, 2023
Waterfront
Shipping
Limited
Methanex
Egypt
Total
Methanex
Egypt
Dec 31, 2022
Waterfront
Shipping
Limited 1
Total
$
129,320 $
154,308 $
283,628
$
133,499 $
180,227 $
313,726
521,708
791,512 1,313,220
557,484
806,079
1,363,563
(123,969)
(185,459)
(309,428)
(56,689)
(112,085)
(168,774)
(101,810)
(718,915)
(820,725)
(104,101)
(744,936)
(849,037)
425,249
41,446
466,695
530,193
129,285
659,478
Carrying amount of Methanex non-controlling interests
$
214,568 $
27,522 $
242,090
$
251,949 $
65,495 $
317,444
For the years ended December 31
2023
Waterfront
Shipping
Limited
Methanex
Egypt
Total
Methanex
Egypt
2022
Waterfront
Shipping
Limited 1
Total
Revenue
$
258,782 $
670,834 $
929,616
$
212,339 $
576,810 $
789,149
Net and total comprehensive income
55,428
129,411
184,839
107,375
67,670
175,045
Net and total comprehensive income attributable to
Methanex non-controlling interests
Sale of partial interest in non-controlling interests and
equity contributions by non-controlling interest
56,310
53,672
109,982
77,133
31,325
108,458
$
— $
— $
—
$
— $
22,545 $
22,545
Distributions made and accrued to non-controlling interests $
(93,696) $
(91,640) $
(185,336) $
(75,996) $
(8,718) $
(84,714)
For the years ended December 31
2023
Waterfront
Shipping
Limited
Methanex
Egypt
Total
Methanex
Egypt
2022
Waterfront
Shipping
Limited 1
Total
Cash flows from operating activities
$
131,667 $
251,290 $
382,957
$
226,647 $
94,355 $
321,002
Cash flows from (used in) financing activities
(99,490)
(300,824)
(400,314)
(152,806)
(52,796)
(205,602)
Cash flows from (used in) investing activities
$
(5,560) $
2,686 $
(2,874) $
(35,110) $
215 $
(34,895)
1 On February 1, 2022, we closed the shipping partnership with Mitsui O.S.K. Lines, Ltd. ("MOL") whereby MOL acquired a minority interest in Waterfront Shipping Limited.
25. Sale of interest in subsidiary:
In 2022, the Company completed the sale of a 40% equity interest in Waterfront Shipping Limited ("WFS") for cash proceeds of
approximately $149 million. The sale reduces the Company's interest in WFS to 60% while retaining control of the consolidated WFS
group of companies. The sale has been accounted for as a transaction between equity holders as Methanex controls WFS before and
after the transaction and the $126 million gain on sale has been reflected as an increase in shareholders' equity.
26. Egypt gas redirection and sale proceeds:
In 2022, the Company entered into an agreement to redirect and sell the Egypt plant's contracted natural gas during an extended
turnaround for a three-month period.
The Company has recognized $118 million ($59 million - attributable to Methanex) for the year ended December 31, 2022 to redirect
and sell the contracted natural gas during the diversion period.
82
Executive
Leadership Team
Rich Sumner
President and
Chief Executive Officer
Mark Allard
Senior Vice President,
Low Carbon Solutions
Brad Boyd
Senior Vice President,
Corporate Resources
Karine Delbarre
Senior Vice President,
Global Marketing and Logistics
Kevin Maloney
Senior Vice President,
Corporate Development
Gustavo Parra
Senior Vice President,
Manufacturing
Kevin Price
Senior Vice President,
General Counsel and Corporate Secretary
Dean Richardson
Senior Vice President, Finance
and Chief Financial Officer
Board of Directors
Doug Arnell
Chair of the Board
Board member since October 2016
Rich Sumner
President and CEO of Methanex Corporation
Board member since January 2023
Jim Bertram
Chair of the Human Resources Committee and
Member of the Audit, Finance & Risk
Committee
Board member since October 2018
Leslie O'Donoghue
Member of the Audit, Finance & Risk and
Responsible Care Committees
Board member since April 2020
Kevin Rodgers
Member of the Corporate Governance and
Human Resources Committees
Board member since July 2019
John Sampson
Member of the Responsible Care Committee
Board member since October 2023
Paul Dobson
Member of the Audit, Finance & Risk and
Responsible Care Committees
Board member since April 2019
Margaret Walker
Member of the Human Resources and
Responsible Care Committees
Board member since April 2015
Maureen Howe
Chair of the Corporate Governance Committee
Member of the Audit, Finance & Risk and
Committee
Board member since June 2018
Benita Warmbold
Chair of the Audit, Finance & Risk Committee
Member of the Corporate Governance
Committee
Board member since February 2016
Robert Kostelnik
Chair of the Responsible Care Committee
Member of the Human Resources Committee
Board member since September 2008
Xiaoping Yang
Member of the Corporate Governance and
Responsible Care Committees
Board member since January 2022
Corporate Information
Head Office
Methanex Corporation
1800 Waterfront Centre
200 Burrard Street
Vancouver, BC V6C 3M1
Tel 604 661 2600
Fax 604 661 2676
Toll Free
1 800 661 8851
Within North America
Web Site
www.methanex.com
Sales Inquiries:
sales@methanex.com
Transfer Agent
TSX Trust Company acts as transfer agent and
registrar for Methanex stock and maintains all
primary shareholder records. All inquiries
regarding share transfer requirements, lost
certificates, changes of address, or the
elimination of duplicate mailings should be
directed to TSX Trust Company at: 1 800 387
0825 toll free within North America.
Annual General Meeting
The Annual General Meeting will be held at the
head office in Vancouver, British Columbia on
Thursday, April 25, 2024 at 10:00 a.m. (Pacific
Time) with the option to attend virtually. For more
information on how to attend and vote online,
please refer to the Information Circular dated
March 7, 2024.
Investor Relations Inquiries
Tel 604 661 2600
invest@methanex.com
Shares Listed
Toronto Stock Exchange - MX
NASDAQ Global Select Market -
MEOH
Annual Information Form (AIF)
The corporation’s AIF can be found
online at www.sedarplus.ca.
A copy of the AIF can also be
obtained by contacting our head
office.
2023
Annual
Report