Methanex Corp (MEOH) 2002 Q3 法說會逐字稿

Please hold for the Methanex third quarter earnings conference call. It will begin shortly. Thank you.

Ladies and gentlemen thank you for standing by. Welcome to the Methanex Corporation third quarter earnings conference call. At that this time all participants are on a listen only mode. Later we will conduct a question and answer session. As a reminder this conference call is being recorded on Tuesday October 22nd 2002. I would now like to turn the conference call over to Manager Investor Relations. Please go ahead Sir.

Thank you operator. Good morning ladies and gentlemen. Before we begin today I'd like to take this opportunity to remind our listeners that our comments and answers to your questions may contain forward-looking information.

This information by nature is subject to risks and uncertainties that may cause the to differ materially from the actual out come. So please refer to the bottom of our latest news release and to our 2001 annual report for more information. And I'd now like to turn the call over to our President and Chief Executive Officer Mr. Pierre Choquette.

Thank you Chris and good morning to all of you. We understand from the operator that we've a large number of people on line so we think that's great. I'll start with an over view as I usually do and then go into more detail about the third quarter. I'd then like to talk about some of our strategic initiatives and give you a little more detail than perhaps we have in the past on these projects and then I will conclude with some comments on outlook and I will be happy to take your questions. So firstly the over view.

As we've been saying for the past few quarters that the main drivers of our financial results continue to be favorable all of them really. But nothing impacted our business than good supply and demand from the and that is certainly the state of affairs in Methanol today and in our view for the foreseeable future. Good supply and demand for the of course lead to above averaging pricing for our commodity Methanol. As an addition those items return to our control for example on a manufacturing performance or cash management.

If those items are also favorable and that is the case for us then the end result is the type of financial results that we delivered for the quarter. And as I'm sure you know during the quarter our net income was $58.5 million of 47 cents a share. That compares to 12 cents per share last quarter and a loss of 10 cents for the third quarter of 2001. Either dial one measure of cash flow was $108 million and that contracts the 52 million for the last quarter and 20 million a year ago and cash flow from operations are at 96 million and that's before our changes in working capital that was equally strong and of course compared way variably to the previous periods.

Now there is always room for improvement but I result that there is no doubt that we are pleased with what we delivered in the third quarter. Just like to switch now to make some specific comments about the third quarter starting with the revenue side.

Over all our sales volume for the quarter were around 1.8 million tons of Methanol that's an alert for the second quarter. We did have a small reduction in the sales that come from our own production of about 70 thousand tons but there is nothing to be read in that it is just basically how our mix of sales came up for the quarter.

We do have the professional for sales volume growth but at this point again as I'm sure you can tell from our disclosure our plan for operating at capacity and going out and purchasing additional stock quantities and an environment of high stock prices and then using that for resale is not an attractive economic proposition.

There aren't many speaking about the volume of sales there are not many changes in the geographic distribution of our sales. This is the time of the year the third quarter when we normally see a small reduction in Europe this was seasonal and for the quarter that was more than obstruct with increases in Asia. We continue to see a good steady demand and also in Latin America.

On the bright side the main driver for results of course though I realized price and our realized price for the quarter was a $182 a tone that is just under 55 cents a gallon that is an increase of just over 30 percent compared to quarter two or in dollars per ton it was an increase of $44 per ton and we did see some small improvements month over month across the quarter. Each month was subsequently higher realization than in the previous one.

In terms of costs our cost management continues to be a very positive aspect of our results but if you look at longer time frame strictly on a year to date base so it is our cash balance almost $90 million lower than for the same period in 2001 and half of that all 45 million is due to gas costs and surely in North America what I'm strictly pleased about is that the balance the other 45 million is a result of reductions and cost and distribution and and and of course the savings with what we have achieved from shut down from one of our high cost plants from a year ago so half of it is really items that are under our control and we are pleased with the progress that continue to make in this area.

In terms of the quarters specifically as measured in unit trash costs the trash costs were very similar to the second quarter which request was a very low level for our company.

I would like to make a few comments about operating excellence. I want to do that because we are really proud of the track record that we have in the few areas that we have chosen to concentrate in. I am going to exercise two of those.

Again in our disclosure we mentioned that we operative our plant at 99 percent of capacity in the third quarter. That was a little bit higher I believe than the second quarter and I mentioned this because there has been so many operating turns in the industry, and at a time of high margins, it's so critical to extract the maximum amount of and continue to be able to do that primarily because we have a tremendous amount of effort in preventative maintenance and making sure that our plants are in tip top shape.

Another aspect that we are also very proud of is the area of safety and health in environment are responsible generally, we see continuous improvement there, we on a year to date basis, we have our best ever performers on all the metrics that we look at, and a substantial improvement over last year which was also the best over the year for us.

I say that sometimes when I am not talking to shareholders, I have the opportunity to expose to a number of companies and I have never seen a company that delivers out standing results, financial results that has a poor record in terms of operating excellence and operating plots and in particular in safety, so, these are important markers we believe.

Some comments about cash and cash flow, cash flow in operations that I mentioned earlier was $96 million, should mention that during the quarter we did repurchase shares at a cost of $11 million to complete our normal price issue bid. We spent $5 million on sustaining capital, we spent $35 million on our new plants, we repaid $150 million of debt, we did have an increase on working capital of 25 million and we did end the quarter with a cash balance of 288 million.

A few comments on working capital, there are no issues with the increase of working capital, this is all due to the impact of higher prices on receivables and a small increase in volume and the change on the mix of product and inventory.

Our appear to be low, they were below 800,000 tons at the end of the quarter. It is also important to note, and we have mentioned this in the disclosure but at the end of the quarter we had spent $123 million on our Atlas project in Trinidad, that is actually $23 million more than the expected ultimate equity contributions for this project and I say ultimate because if we were to close the financing in this project today, we would get a fair amount of cash back and it is important to take that into account when you look at our cash balances, and on this point we do expect to finalize the financing very soon.

I would now like to talk about the strategic initiatives, we are currently working on three major projects and these projects are aimed at further improving the quality of our earnings, while at the same time, under pinning our global position in Methanol, when I say under pinning our global leadership position, they are not aimed at introducing new capacity in the hope of getting additional market share, this was basically the capacity that we think we need to continue to maintain approximately maintain our position on the global basis.

So these three projects are the first one is in Trinidad which is the Atlas project that we are doing in partnership with and we will own 63.1 percent of this plant and the plant is 1.7 million tons.

Second project is an expansion in Chile, well that is an expansion of 850,000 tons. And the third project is in Australia, where we are looking at a new facility of two million tons which is really aimed to under pin our market position in Asia where the first two are really aimed to under pin our market position in what we could call the Atlantic basin serving North and South America.

To put these projects in prospective I'd like to give you a bit of that in terms of our cash generation capability that a constant methanol price and different periods and time.

Now I'm going to use EBITDA as a measure of cash generation and use a methanol price of $150 a turn or 45 cents a gallon to make my point.

Five years ago and that would be just before we added our first low cost plan insuring with the assets that we have in place for that time we would have generated about 150 million of EBITDA for less than a dollar a share at that methanol price.

Today with the assets that we currently have in place at the same price we can generate 260 million of EBITDA and that's over two dollars per share. Whereas we're operating at a much higher rate of EBITDA today but this is at $150.

In a five year time frame when we expect that all these projects, they'll all have a different sequence, but when all these projects have completed are EBITDA generation capability would be about 460 million. And that's where we for or around four dollars a share. Again at this fame $150 of turn methanol price.

So I think this is this is very important because yes you do need capital to get there but we think we have the capability to do that and that's our very substantial prize to go after in terms of cash generation capability.

I'd just like to carry on here and give you the status on these two projects. Trinidad we are on track to complete the construction in 2003 and an on recourse project financing which is being vent at 60 percent leverage is being finalized as we speak so that's in great shape.

The Chile project, our board approved this project, our wonder board approved this project and it was subject to another conditions and those conditions were related to the gas contracts that we have in place and also completion of all the major financing that we're undertaking this year cause we don't want to go into this project not having locked in things like the new debt issue that we had in June and I another major financing.

Now we expected these conditions are going to be met very soon. I should also say in the case of Chile that there is a side benefit or part of the negotiations for the gas contracts for this expansion.

We've also extended all other gas contracts for that site until the late 2020s. And that really means that we're insuring a very little cost structure for this site and also and I'll argue very importantly will insure that gas reserves are dedicated to this plant.

I should also mention that this plant that we're looking at in Chile is a plant that has very good efficiencies. The best that we've ever delivered and in today's environment of discussions about gas submissions. The CO to admissions from this plant will be 60 percent less 60 percent less than what we actually do in our current plants.

So I think this is this is important. Now this we intend to find out whose project from our own cash flow.

Australia we we've yet to get a hotter review of this project to our board so it's at a different state of progress. Great economics, economics for these will look very attractive certainly will meet our criteria and the cost structure measure this delivered cash costs to the customers. That will be the lowest in the Asia Pacific region.

We challenge for us in this project is to identify and deliver an appropriate financing mechanism for this capital-intensive project. Now what I mean by that is we got a finer mechanism for this capital intensive project and what I mean by that is you let a fun and mechanism that allows to achieve appropriate balance, a balance between leverage and the positioning made me want to achieve in the region.

I also balancing with our commitment to share our substantial cash generation with shareholders and we intend to live by that commitment. Now how current views that we will find this balance. We will completely project and still have excess cash to return to our shareholders. I spend more time on this then I normally do but these are so critical in terms of looking at the potential for Methanex that I wanted to do that today.

In terms of out look we continue to feel optimistic about the outlook for Methanex as mention of the out set we see a favorable supply in demand balance for equity modalities for the period ahead.

Our own operating plans which we recently updated for annual planning process. In those plans we anticipate above average industry operating rates for the next few years, as a matter of fact we see operating rates for the industry increasing this year in 2002, next year in 2003 and also in the following year 2004.

Even though we take them to account potential reductions and MTB on the net. As you know we don't like to forecast earnings and we're not about to start today but I would like to give our current view on a few key items that will impact our fourth quarter results.

On the revenue side we expect a small improvement in pricing, we also expect a small improvement in the volume of our sales coming from our own production. On the cost side of this point we think that much of the revenue increase would be offset by increases in gas cost primarily in North America although it's difficult at this point to see exactly where we would end up with North America gas costs but they are up substantially.

And with these conditions we would expect to deliver another very solid quarter in earnings. So let's close the year with outstanding liquidity particularly as we anticipate closing the project finance for the Atlas Project in Trinidad very soon.

So stop here and we'll be happy to take the questions.

Operator are we ready for questions?

Thank you, one moment please.

We have a question from Bob Hastings, Raymond James please go ahead Sir.

Thank you. Excellent results Pierre?

Thank you.

And just a couple of questions here.

The Chilean decisions that that's expected this year? The decision on the force plant?

Yes because I'll just repeat what I said in my remarks. There were two separate conditions that we had with our Board. One had to do with insuring that the gas contracts was very secured at appropriate monies and guarantees and also that we had export permits for the gas marched into the city in him. We have all of those.

And then there was a matter of making sure that, that we were comfortable with all other financial matters and we expect that to be available soon, so at the answer to your question is yes.

Right. Sorry I guess my real question on that was if the decisions coming through by the end of the year. What impact would that have on depreciation rates given that no palatalize would be extended in the first three units?

Well I'll get my colleagues to answer that if they would.

Bob I that the will be amortized over the life of the gas contract so that they'd be - the and depreciation rates would go down.

Yeah. I don't - we can talk about details off line, but I said the contracts are being extended into the 2020's, it's actually - we staggered in at 2025, 2027, 2029, so clearly that's way beyond the - yeah, some of the original of these assets.

These assets are in fantastic shape, so that's another example that you can get another basically out of the first plant.

Yeah, it seems to me that we might save $15 million next year in depreciation costs or something because of that. Anyway, we can talk about that off line.

The other question I have is just can you give me an update on what's going on with ?

Sure.

The - we had 90 days to respond to the - basically to the last response we had from the panel, which was to submit a fresh . And I know there has been some debate from observers as to whether or not we would pursue this, we intend to do that. We think we have a great case. And so I think that the dates were first week in November, is when we would have to submit fresh . And we're doing that.

You know, as we have gotten ready for this and have watched what has happened in Congress with the Energy Bill, I can't help but make a point that it's interesting that as the country is - the U.S. that is, is struggling, not struggling but looking to identify ways for energy - more energy, friendly energy supplies if you want. My way of putting it. That is being, we've been talked about eliminating from the gasoline pool.

And in a way is a way of getting very low cost natural gas into the country, and you know, given that has no problems in terms of environmental damage, or anything of the like, it just doesn't seem to be - to make much sense to us to see an ban when it could be looked like as a way of bringing very low cost natural gas supplies into the United States.

I mean, your question on , but I couldn't resist making the point.

Thank you. And are you actually seeing some of the states that were originally proposing to ban sort of backing off on that political will?

No. I think that would be going too far. But I have to tell you I continue to be amazed at the statistics though. The latest data that I saw I was reading last night on consumption in the United States shows that, I think it's measured in terms of thousands of barrels per day as going from an aggregate of 293 last year to 302 this year.

So in the midst of all this controversy usage continues to go up to .

OK. Thanks very much.

Thank you Bob.

We have a question from . Please go ahead.

All right. Thanks.

Just your tax rate was pretty low in the quarter, especially your cash tax rate. I was just wondering if you could - how else were you to see that going over the next few quarters? And maybe just -

: Hi Don, its .

The tax rate for the fourth quarter should be similar - around the 20 percent mark for the fourth quarter. And the of cash and future income taxes would be the same as well.

: And then looking on into next year, what ...

: And then looking on into next year, assuming pricing stays at this sort of level we would expect our tax rate to go up to the 25 to 30 percent range. And taxes would go up a bit because of in New Zealand.

OK. Thanks very much.

: Thank you.

go ahead please.

Great. Good morning gentlemen. Congratulations on a great quarter.

Good morning Anne.

: If you could just sort of review again the additional plants that are being brought on stream by others over the next several years?

Sure. I always hesitate to go too far out in to the future but let's take it just one year at a time. Currently of course there are no additions of new capacity except that one of the plants that was that came on stream in Argentina earlier this year was out of commission and has just recently started and I know that we are certainly planning to market some of this material. The material is now basically form the plant to the coast and we expect more shipments in October and November.

That is the only edition of capacity that we see between now and the end of 2003. And then when we look at 2004 we certainly expect our plant in Trinidad to come on stream at that time. and then after that it's more of a matter of speculation because when we look at our market intelligence and we look at how difficult it has become to finance some of these projects and we look at the progress in some of the engineering that's done in these plants. We actually would not include in our own planning additional facilities in early 2004.

So we wouldn't see any new capacity other than ours until late 2004 early 2005 and then the candidates for that would be an additional plan in Trinidad. Another project in Saudi Arabia and a plant in Iran, which I know the plant in Iran, has been announced earlier but we look at the track record there and the progress that's normally being made and I would be our judgement. And I know our judgement is different from others but they're asking for our imput so that's our imput.

Mam I think the important thing is to translate that in to a capacity utilization and I've mentioned in my remarks that we've just updated our plant and we - when we take in to account these additions of new capacity and take in to account reductions in MTBE in to the United States we still see in 2003 an increase of a couple of percentage points in capacity utilization and then we see in 2004 another couple of points increase in capacity utilization. And really the resulting in rates operating rates that this industry has not yet been able to deliver and when I say not I mean going back 15 years.

So even if we're off a little bit in terms of our economic assumptions our judgement is that you know going a couple of years out actually even into 2005 we continue to see a favorable supply and demand scenario. And know I hope that answers your question.

: Yes it does thank you very much.

Thanks Anne.

Mark Bridges CIDC World Market please go ahead.

Thanks. Good morning guys. In Q3 you guys your production volumes actually exceeded your sale company produced product. That was the first time probably in about four quarters. I'm just wondering are you guys now re-plemishing the previous inventories or going forward you guys seeing you know the potentially continued capitalize on strong pricing with inventory product as well as produced product.

Well I'll ask Brad to answer on the product to inventory but I'll answer I will try to answer your question out of principal. We today have three plants, three major manufacturing sites Chile which we estimate at three million capability per year New Zealand 2.4 million ton capability per year and is 500,000 tons and in today's environment we want these plants to operate at capacity and so that's the plan.

And then we just try to opt the logistics' around that which is why our logistics' are gone so low. Now in terms of you know quarter over quarter there's always some disruptions in gas supply and so you don't necessarily quite get the full amount although we have 99 percent that quarter.

Right.

There's a lot of product in inventory Brad do you want to answer that or?

Well just in general Mark the volumes in inventory has gone up since the end of the last quarter by about 100,000 tons. But as Pierre mentioned it's still below what we would consider to be our sort of target inventory level and we've been purchasing a little bit more product so the mix is impacted the sales volume coming through in the third quarter as well.

OK great and just a quick follow up. You guys have a schedule turn around at Chile in Q4 last year. What is the next schedule turn around between the three plants? You guys see any in the few quarters.

. In the fourth quarter our plant plant ... in New Zealand is ... turn around. And our turn around planned for next year but I don't have that.

We don't have the schedule right in front of us for next year Mark but I don't know if you heard that but in the fourth quarter there is a turn around plant planned for the small, the small plant in New Zealand.

OK great.

Peter Butler Glynn Hill Investment Research please go ahead.

Yeah good morning.

Good morning Peter.

The, wondering, you talked about possible additions to capacity. How about on the subtractions side you know the gas prices obviously about four bucks which means none of your competitors are break even or worse? During this period of time what are you seeing on the consolidation, any additional steps? Anything you might participate in?

Thanks for your question Peter. With an over sight on my view just to focus on the additions because as you know we are, we are great fans of industry, re-structuring including our own asset and clearly as I think I might have mentioned in the past in, in the case of the plant in Trinidad.

I think it's already been mentioned that there products is somewhat involved in this plant because you never know for sure what somebody will do with there facility but we certainly would expect that, that is one plant that may shut down when we re-start.

We continue to have a dark successful dialogue I would say with other participants who would also like to capitalize on us bringing this plant on stream. We would expect over the next three to six months to be public about that.

So that the net impact of our, certainly if our come onstream it's not at all what people expect, certainly what I what I read. So yes we think that will continue to happen and when we go further out like our plant in Australia well we would expect that we would have reduced capability in New Zealand by that time and so that the full impact of our additions in Australia is not at all the two million tones that people see.

So that's why when we talk about the which at the end of the day is one of the key key measures to look at in terms of our ability to generate cash we are bullish and we continue to be.

Yeah I would say two small things that competing plant in Trinidad, that's a phantom isn't it, they don't have the financing they don't have the guest contract and it's just impossible for them to put this thing up in the timeframe that the industry thinks.

I'm not sure about you the words of the ... but it certainly is not as advanced as our project and as I mentioned it when we look at what we've had to go through for the financing of our facilities you know and here we are with the leaders in the business with partners like BP, and when I look at what's happening in Australia through this project where they haven't been able to obtain financing, I just have to assume that some of these projects will be later than sooner.

So that's what I would say and then of course we are building next to or close to where these people are and we can observe the progress on the plant and it's certainly no where near where we are.

No OK on your comments that the outlook for the fourth quarter that you thought that prices could be up a little small amount, volume up a small amount and then you cautioned that the gas price might be up in North America to offset that. If you're competitors with gas over four bucks, if your competitors were at a break even or worse if gas stays where it is doesn't that mean that prices are going to go up more than a small amount, and you know in which case your outlook could be conservative.

Well I'll answer the question this way because I don't like to forecast prices I've always been wrong except in the third quarter where I think we were bang on I mean when I look at our estimate of the third quarter when we had the July conference call and what we delivered in results I mean it was almost bang on it doesn't happen very often but to be specific about your point. My comments were based on assuming that the current prices prevailed through the quarter. If what you've just said happens and there's even more pressure on natural gas for whatever reasons, or more disruptions in terms of the supply find in particular, then that obviously would change the outlook, so what I based it on is saying I know what the prices were in September I know what they are going into October, and that's a little bit higher than we had in the third quarter.

Yeah because about the first or second thing you talked about today were the I think you made the comment that you were you had above average pricing for the third quarter for Methanol, and I'm thinking that doesn't sound right, that if the industry has gas over four bucks and the operating rates are high and you're going full out then in fact as you look back in prior periods the price - you probably had below average in the third quarter relative to the ...

Well I like your sense of humor are you in Connecticut or in Maine right now?

Actually I'm in San Francisco but seriously...

I think it's an important point to be made around pricing right now is that clearly the price is a disconnect with natural gas the price on methanol right now is truly influenced primarily by supply and demand cause if you did the for gas today you would end up with - I think a full for a North American producer of about $170 and we're trading way above that.

So I think it's more important to say that it's driven by supply and demand and as you can see particularly in North America the prices are continuing to be well above transactions and I think it's observing what's happening to reposes which would be a better you know of what to anticipate in price cause the price is say 62 - 63 cents a gallon and I think somebody like selling that contract with a mixture of arrangements and then you ask you know currently we they are on 55 cents.

So there is still that disconnecting and potential. But - so my comments again going back to your questions on my comments about the outlook are based on the assumption that the prices stay where they are now.

I'm wondering we haven't go the first call from some of your noted Canadian brokers that well OK you bet our estimates again but watch out next quarter.

Well we stand by our results and I think we just the key drivers for our business continue to look good all aspects look good and the face of our broad control we're managing our costs well we've got inventories under control.

So thanks for your questions.

OK well thanks you guys.

please go ahead.

Morning .

Good morning.

: I have a question on your five-year from now EBITDA projection - projection of 460 million. I assume that all three of the projects that you discussed are in there but in terms of New Zealand - how much of New Zealand is left at that point operating? Is it completely shut down or where you sort of expecting to be looking through your crystal ball?

OK first of all you said my projection of 460 so projections so I want to make sure that it's clearly understood what I was doing. I said looking at three peers at the same Methanol price.

: OK I apologize.

No it's OK I used $150 because that is a little bit below mid cycle - a price over the past few years. OK so on your question I think you said specifically about New Zealand and which projects. That would assume that the - of course the project in Trinidad comes on stream next year.

But the plant would be onstream mid 2005 and that the Australian project would be onstream in 2006 and also assumes that at that point in time we only have about one third of our current production in New Zealand generating cash. So that you can see that what we then would have done to the company we would have finally transformed the company into three production companies all with with very low costs, contracts and well positioned.

So Chili, Trinidad and Australia.

: OK thank you.

Greg Goodnight, UBS Warburg, please go ahead.

Hello gentlemen.

Good morning.

A couple of questions, first focusing on last quarter in near term Methanex demand from the important numbers, it looks like imports were constrained in the third quarter, possibly and I am speculating due to operational problems with the Atlantic Methanol and in other companies, the question is where the global plants sit right now in terms of their operational problems or shut downs out there and do you see imports picking up in the next quarter?

When you say imports, do you mean imports to where?

Into the US, I'm sorry.

OK first of all in terms of, it's the first time I have ever been asked a question about imports, that's why I am feeling a little bit like it's a global business, but I'll just break down my answer in two parts, we continue to see reasonable growth in demand globally so that's the first point, even in an environment where anti B is in California and then ultimately from the United States and so we build our models starting with GBE demand, global GBE growth and then we go to investor production growth which is a better measure of demand for our products and we see that as been positive in 2002, slightly more positive in 2003 and '04.

On a supply side, it is a year when there has been a significant number of operating problems with two particular periods of great difficulty, the first one in the first quarter another one very recently, as a matter of fact CNAI one of the absorbers of the industry just published their monthly reports which gives a very good overview of capacity and utilization and then I can't remember the exact numbers but there is two high dips in terms of supply capability there, early in the year and more recently and so now the industry just overall just doesn't seem to be able to deliver even in an environment of reasonably big demand.

Now the specific ones you mentioned is yes, the planned Methanol was bound for a significantly at the time and when they start to supply again and the statistics that you are referring to probably show that material mouse start to come into the US.

OK I appreciate that, the second question, have you seen any impact so far in terms of this voluntary California NPBE reduction and Ethonal substitution?

Well I haven't looked at the specific statistics for California for recent months but as I mentioned in remarks, I have looked at NPB consumption, I think it is into August, and that shows an increase in NPE use in the United States, so as an overall answer to your question, no we haven't seen the impact, we still assume from a planning prospective that we will see an impact next year.

OK a final question if I could please, Methanol Australia is a project that I have been reading about, apparently they have some critical approval dates from the government late this year could you up date me on this project of they received there approvals and the question I had is that project which I'm assuming is a completely separate project from years go forward those that preclude your project or is there room for both.

Well I assume that Methanol Australia it's results are known as or if you are referring to another project there. There are three Methanol projects in Australia one is an off shore program but the one I think your referring to is Methanol Australia and I have very little knowledge of this project because it is very difficult project so we would not include that in our implanting at this point.

The other project is none as and that's basically is a project that suppose is going to be on the same adjacent to where were looking to build a plant and there working on there financing and engineering and making some progress but it has no impact what so ever on what we are trying to do you know the difference with us is that this is not for us I used the word project but it's of project I mean we have the market position we have the customers. We have a gas contract from you know very a gas suppliers and we need the capacity to continue to least maintain our positioning in Asia from a very different approach. So that was not from going ahead with our own project.

In what I read there timing would be 2006 issues is that the approximate timing of your project also.

Yes and in our case we have the subtracting place the engineering is done were talking financing so were quiet advanced.

OK thank you very much.

Thanks.

Is there a further question for Methanex please queue up now. We have a question from J P Morgan please go ahead.

Yes good morning.

Good morning Dave.

Hi most of the questions I had have been answered but I did notice in your release that the normal course issue were bid and did on in August incomplete or not completed which I think is the first time that that has happened you know in your history. Could you maybe comment on your thinking there and maybe not completed it during August and those that signal you know any kind of building of a war chest or any kind of future cash needs that maybe we are not aware of.

David thanks for the question actually it is not the first time that we have not fully completed an issue with. The last time I think was in the very difficult period of '98 '99. In this case actually from the day that we started the normal course issue would have been which I would remember as been October 29th of 2001 until the day it was August 9th I believe on every trading day we purchase 50,000 shares per day. We never try to time the market or anything we just have an order every day for 50,000 shares and we new that method that we would end up with about 10 million shares we purchased instead of the full 11.5 and we never that never phased us frankly. We thought that that was a good purchase so there's really nothing to read into that and there were also a number of periods where we felt uncomfortable you know changing the 50,000 shares you know increasing it and lowering it, because we thought it might give the signal that was inappropriate, I mean people might have drawn conclusions from it that would have been wrong. So there is nothing to read into it, in terms of why not renewing it or does this mean that we're building up a , no it doesn't mean that we're building up a but as you can tell from the numbers we have very substantial cash reserves, we're in fantastic shape to execute the project that I talked about, appropriately leveraged and that still leaves us with will leave us with if we continue with this cash generation, with substantial excess cash, and then we'll have to make a decision on what is the best way in getting that excess cash back to our shareholders.

Yeah and ...

And I should also say that in that period of time we did introduce the dividend as well David.

No that's all true and I appreciate that and I guess if I could just follow up on that in one area I guess your major shareholders during their last conference call did outline maybe a differing view or different priority you know for your cash flow so you're probably limited in what you can say but is there any comment you could make about maybe difference in perspective on the priorities for cash flow between yourselves and your major shareholder.

Well I am limited in what I can say but I don't really think there is fundamentally a difference between our major shareholders Nova and ourselves except that they may have different needs than we do. I mean when Nova talks about the alternatives try to focus on dividends that is one of the alternatives that is not surprising since dividends between corporations can flow I understand it tax free. So that's a very efficient method of them receiving the cash but I also listened to their last conference call and after comment about dividends I think Jeff Lipton went on to say and if Methanex chooses to buy back stock we'd all like you to participate and that just means that our ownership would go up and the next time round we'll just have a proportionally bigger share of the pie.

So the area where we're totally in zinc is that we continue to be very focused, we're focused on Methanol we think we just have a great period in front of us, we think that we have an opportunity to improve the quality of the business with these projects and still have excess cash for shareholders and we're completely in zinc with that and then we're completely in zinc in terms that we will find the best methods of returning that cash to share holders.

So I think when Jeff speaks Jeff Lipton has Nova, he speculates on the different approaches and what is preferable for them. But that I don't think that means that we're out of zinc or have a disagreement.

OK thanks a lot. I appreciate you're touching on that subject carefully.

Thank you.

Thank you.

We have a question from , Gates Capital Management. Please go ahead.

My questions been answered thanks.

If there are further questions from ah Methanex please queue up now. One moment please.

We have a question from a please go ahead.

Good morning. First of all could you comment on demand first for what you saw in the third quarter and secondly you know built into your expectations for utilization rates income on a decline in U.S. demand what are your long term assumptions for .

Thank you the - I think demand generally on global basis when I get back from all of our marketing directors in the four regions is steady demand. We've seen a small increase year over year and certainly when we talk directly with our major consumers - major customers in they say they're operating their plants at slightly higher rates than they were a year ago.

So these would be the leaders in the business who also happen to be our major customers in terms of going forward and I think you asked specifically about in our current plan our growth rates for would be very much closely related to our assumptions on industrial production growth on a global basis and so that would be the owner of magnitude at five percent globally.

Does that answer your question?

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Is there another question operator?

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Ok well thank you very much to all of you for sitting in to our conference call and for your questions. This is an exciting time for our company and we look forward to interacting with you again next quarter. Thank you.

Thank you.