April 28, 2011 / 3:56 AM / in 7 years

UPDATE 3-Methanex profit lags, sees higher production to boost Q2

* Sees better Q2 results helped by production at Egypt, Alberta

* Co may move one of four Chile plants to cut costs

* Q1 EPS $0.37 vs est $0.44

* Q1 revenue up 33 pct to to $619.0 mln, tops est (Adds company comment on Chile plant in paragraph 3, analyst comments)

By Amruta Sabnis

April 28 (Reuters) - Methanex Corp reported a quarterly profit that missed market expectations as costs rose five-fold, but the world’s largest methanol supplier forecast higher second-quarter results helped by a significant increase in production.

Vancouver-based Methanex said its methanol facility in Egypt, which started shipments in April, and the Medicine Hat plant in Alberta, which produced methanol for the first time, will contribute to the second quarter.

On a conference call the company said it may relocate one of the four plants in Chile to cut costs and would narrow down a list of options over the next six months.

Methanex, which supplies methanol to markets in the Americas, Asia-Pacific and Europe, idled three plants in Chile due to the curtailment of natural gas supply from Argentina. The Chilean plants have an annual capacity of 3.8 million tonnes.

In February, the company said it expects to restart one plant in 2012 and the others by 2014.

“Looking at current drilling patterns the company could restart its third plant by the end of 2013. I think it’s the fourth plant they’re looking to move,” said Steve Hansen, analyst at Raymond James on a call.

“If Methanex can get enough gas to run all four plants in 2-3 years, they might keep them there but if they think the timeframe gets to 5-10 years, then it’s just better to move the plants,” Hansen added.

Methanex, which gets 16-17 percent of its revenue from Chile, expects to drill about 110 wells in southern Chile during 2011 and 2012.

The company, which has invested over $100 million in Chile, also increased its quarterly dividend by 10 percent to 17 cents a share -- the seventh raise since it started paying out in 2002, the company said in a statement.

Methanex, which has $240 million of cash on hand, said methanol demand continues to be strong and said it has set a budget of $50-60 million to be invested in Chile this year.

“Supply-demand fundamentals are heavily stacked in Methanex’s favour over the next five years. There’s very low cost supply coming through around the world and the demand environment looks very strong,” Hansen said.

Methanol, a liquid petrochemical produced mainly from natural gas and coal, is found in windscreen washer fluid, recyclable plastic bottles, plywood floors and synthetic fibres.

Shares of the company were nearly flat at C$31.95 on Thursday on the Toronto Stock Exchange. (Reporting by Amruta Sabnis, Aftab Ahmed and Bhaswati Mukhopadhyay in Bangalore; Editing by Maju Samuel)

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