Mehtanex (NASDAQ:MEOH) announced on December 11, 2007 that it executed a Memorandum of Understanding for the development of a dimethyl ether (DME) plant in Egypt. Weeks before Methanex engaged in a start-up joint venture in China for the development of a similar plant. This new plant in Egypt will have 200,000 tons capacity of DME annually and consume close to 300,000 tons of methanol per year.
The joint venture in Egypt will be Mehtanex and XinAo Group (who is also Methanex's DME joint venture partner in China) as minority partners, with the government owned Egyptian Petrochemicals Holding Company (Echem) holding the majority interest. Echem is also a 12% participant in the EMethanex methanol joint venture currently under construction in Egypt. Methanex Corporation is in the business of producing, marketing, supplying, and distributing methanol. Methanol’s principal use is in the production of formaldehyde, acetic acid, and various other chemicals that form the basis of differing chemical derivatives which are used in the manufacture of building materials, foams, resins, and plastics. The Company is headquartered in Vancouver, Canada and offers its products in
North America, the Asia Pacific, Europe and in Latin America. Net income for the third quarter ended September 30, 2007 decreased to $23.6 million from $113.2 for the period ended September 30, 2006.
Net income for the nine months ended September 30, 2007 decreased to $204 million from $284.7. The large declines in net income were due to unusual circumstances. There was a reduction in the Company’s natural gas supply at their Chilean facilities which resulted in substantially lower production. Production problems were also experienced in Trinidad. Most of the decline in net income was due to these factors. Cash flow from operating activities for the third quarter ended September 30, 2007 was $132.5 million and for the nine months ended September 30, 2007 $447.4 million.
Methanex stock price trades at $24.75 or a P/E of 8x trailing earnings. Methanex is a solid company in the methanol business that is operating at a profit and running a successful business. Due to price fluctuations earnings in the methanol business are cyclical. The Company is taking steps to reduce the affect pricing fluctuations have on its earnings by entering into long-term contracts for a portion of their production volume with some customers where appropriate. Based on the Company’s strong fundamentals and being in a cyclical industry the stock price of Methanex seems reasonable.
http://www.methanex.com/
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