However, company president Bruce Aitken is confident the troubled times are largely behind Methanex and that there is bright future for the corporation as it concentrates on operating its low-cost facilities in a tight world methanol market.
"We continue to operate in an environment of strong methanol prices (an average of US$204 per tonne for the quarter) and tight methanol market conditions are creating upward price momentum," Aitken said from Vancouver.
"Looking ahead, we are optimistic that the favourable methanol market conditions enjoyed throughout 2003 will continue in 2004. We expect that the impact of planned new capacity additions is likely to be largely offset by further shut-downs of high cost North American production."
Two low-cost expansions - the 1.7 million tonne Atlas methanol facility in Trinidad, in which Methanex holds a 63.1% interest, and the 840,000 tonne Chile IV project - are due for completion during 2004.
Methanex recorded income before unusual items (after-tax) of US$29.2 million and generated EBITDA of US$82.8 million for the fourth quarter. However, the asset restructuring related to the write-down of the New Zealand and Medicine Hat production facilities, meant a net loss of US$110.2 million.
Higher gas costs during 2003 - in Chile, New Zealand and Kitimat - decreased EBITDA by US$27 million, US$13 million and US$33 million, respectively. Higher unit costs were also because of reduced New Zealand production and increased ocean freight costs.
During the quarter Methanex also recorded a non-cash asset impairment charge of US$130 million, writing down property, plant and equipment and related assets in New Zealand and Medicine Hat, Alberta.
"We also incurred costs and made payments of US$9 million primarily for employee termination benefits to reduce the workforce at our New Zealand operations by approximately 82 employees and for costs to re-mothball the Medicine Hat facility.
"The write-downs in 2003 complete the restructuring of our assets not supported by long-term low-cost natural gas supply," said Aitken.
There was also, during the third quarter, the US$40 million write-off of plant and equipment as a result of Methanex not proceeding with the 1.3 million tonne Burrup Peninsula plant in Western Australia.
Aitken added that, due to the existence of "unrecorded tax benefits" in New Zealand, income earned in that country had not attracted accounting income taxes.
As a result of reduced Taranaki production, a higher proportion of the 2003 earnings came from Chile, where Methanex does record accounting income taxes, and this resulted in a higher effective tax rate than in 2002.
New Zealand produced only 158,000 tonnes during September-December (compared with a possible 550,000 tonnes). However, Aitken said Methanex had sufficient contracted natural gas to produce approximately a total of 500,000 tonnes at Taranaki this year.
Late last year Methanex concluded negotiations with an un-named company, believed to be Todd Energy, for the supply of gas, believed to be McKee/Mangahewa gas, for 2004.
Aitken added that Methanex continued with efforts to secure additional gas supply that could increase Kiwi production to 1 million tonnes. "There can be no assurance, however, that we will be able to secure additional natural gas on commercially acceptable terms," he cautioned.
