News Releases Back to List

Methanex Continues to Deliver Strong Financial Results and Cash Generation

July 21, 2004

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - July 21, 2004) - Methanex Corporation recorded net income of US$52.4 million (US$0.43 per share) and generated EBITDA1 of US$94.4 million for the second quarter ended June 30, 2004. The second quarter 2004 results compare to net income of US$46.8 million (US$0.39 per share) and EBITDA of US$93.4 million for the first quarter 2004.

Bruce Aitken, President and CEO of Methanex commented, "Methanol industry supply/demand fundamentals are very tight, underpinned by high global energy prices. This has resulted in upward momentum in methanol pricing and a very favourable business environment for Methanex. Our average realized price for the second quarter 2004 was US$222 per tonne compared with US$220 per tonne for the previous quarter. Currently, in all global markets for methanol, Methanex reference prices are strong, ranging from US$272 - 280 per tonne (US$0.82 - 0.84 per gallon) before discounts. Looking ahead, we are optimistic that current favourable methanol market conditions will continue as we expect that the impact of planned new capacity additions during 2004 is likely to be largely offset by further shut-downs of high cost North American production and increased demand."

Mr. Aitken continued, "In Trinidad, the 1.7 million tonne per year Atlas methanol facility - a joint venture between Methanex (63%) and BP (37%) - has been in the commissioning phase over the past couple of months and we expect the first shipment from this facility during the third quarter 2004. By early 2005, we expect to complete our 840,000 tonne per year Chile IV project. Like Atlas, Chile IV will allow us to take another significant step in improving the quality of our earnings and enhancing our ability to generate cash from our business."

Mr. Aitken concluded, "In keeping with our balanced approach in using cash, we announced in a separate release today that our Board of Directors have approved a 33 percent increase in our regular quarterly dividend to shareholders, from US$0.06 per share to US$0.08 per share, beginning with the dividend payable on September 30, 2004. This increase in the dividend follows our recently announced share buyback program, which is in progress and, at the current pace, will be completed before the end of 2004. Both initiatives further emphasize our track record for, and commitment to, returning excess cash to our shareholders. We continue to enjoy excellent financial strength and flexibility, with US$202 million of cash on hand at the end of the second quarter 2004 and a US$250 million credit facility, which remains undrawn. We have the financial capacity to complete our capital maintenance spending program, the current normal course issuer bid, the construction of Chile IV and to pursue new opportunities to enhance our strategic position in methanol."

A conference call is scheduled for Thursday, July 22 at 11:00 am EDT (8:00 am PDT) to review these second quarter results. To access the call, dial the Telus Conferencing operator ten minutes prior to the start of the call at (416) 883-0139, or toll free at (888) 458-1598. The security passcode for the call is 75577. A playback version of the conference call will be available for seven days at (877) 653-0545. The reservation number for the playback version is 190524. There will be a simultaneous audio-only webcast of the conference call, which can be accessed from our website at www.methanex.com.

Methanex is a Vancouver based, publicly-traded company engaged in the worldwide production and marketing of methanol. Methanex shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol "MX" and on the Nasdaq National Market in the United States under the trading symbol "MEOH."

1 EBITDA is a non-GAAP measure. For a description and reconciliation to the most comparable GAAP measure refer to "Additional Information - Supplemental Non-GAAP Measure" included in the attached Interim Report.

Interim Report

For the six months ended June 30, 2004

At July 20, 2004, the Company had 122,269,842 common shares issued and outstanding and stock options exercisable for 2,609,475 additional common shares.

Share Information

Methanex Corporation's common shares are listed for trading on the Toronto Stock Exchange under the symbol MX and on the Nasdaq National Market under the symbol MEOH.

Transfer Agents & Registrars
CIBC Mellon Trust Company
320 Bay Street
Toronto, Ontario, Canada M5H 4A6
Toll free in North America:
1-800-387-0825

Investor Information

All financial reports, news releases and corporate information can be
accessed on our web site at www.methanex.com. 

MANAGEMENT'S DISCUSSION AND ANALYSIS

Except where otherwise noted, all currency amounts are stated in United States dollars.

This second quarter 2004 Management's Discussion and Analysis should be read in conjunction with the 2003 annual consolidated financial statements and the Management's Discussion and Analysis included in the Methanex 2003 Annual Report. The Methanex 2003 Annual Report and additional information relating to Methanex is available on SEDAR at www.sedar.com.

                                                          SIX MONTHS
                             THREE MONTHS ENDED(1)           ENDED(1)
                           ----------------------     --------------
($ millions, except        JUN 30  MAR 31  JUN 30     JUN 30  JUN 30
 where noted)                2004    2004    2003       2004    2003
--------------------------------------------------------------------
Sales volumes (thousands                                            
 of tonnes)                                                         
 Company produced           1,233   1,227   1,211      2,460   2,405
 Purchased                    600     535     332      1,135     643
 Commission sales               -       -      55          -     254
--------------------------------------------------------------------
                            1,833   1,762   1,598      3,595   3,302
Average realized methanol
 price ($ per tonne)(2)       222     220     240        221     232
Net income                   52.4    46.8    48.4       99.2   122.4
Operating income             77.8    73.3    77.8      151.1   178.5
Cash flows from operating
 activities(3)               81.8    80.6    86.7      162.5   198.1
EBITDA(4)                    94.4    93.4    99.3      187.7   223.1
Basic net income per common
 share ($ per share)         0.43    0.39    0.38       0.81    0.97
Diluted net income
 per common share
 ($ per share)               0.42    0.38    0.37       0.80    0.94
Number of common shares
 outstanding, end of period
 (millions of shares)       122.9   122.1   119.1      122.9   119.1
Weighted average number of
 common shares outstanding
 (millions of shares)       122.9   121.2   127.1      122.5   126.5
--------------------------------------------------------------------
                                                                    
1. The 2003 financial results have been restated to reflect the
retroactive adoption on January 1, 2004 of the new recommendations
of the Canadian Institute of Chartered Accountants (CICA) related to
asset retirement obligations and stock-based compensation. Refer to
note 1 of the consolidated financial statements for the six months
ended June 30, 2004.

2. Average realized price presented in the above table is calculated
net of inland shipping and handling costs billed to customers. For
financial statement presentation, these amounts are included in cost
of sales. Refer to note 1 of the consolidated financial statements
for the six months ended June 30, 2004.

3. Before changes in non-cash working capital and the utilization
of prepaid natural gas.

4. EBITDA differs from the most comparable GAAP measure, cash flows
from operating activities, primarily because it does not include
changes in non-cash working capital, the utilization of prepaid
natural gas and cash flows related to interest, income taxes and
unusual items. For a reconciliation of cash flows from operating
activities to EBITDA, refer to "Additional Information - Supplemental
Non-GAAP Measure."

STRONG FINANCIAL RESULTS

For the second quarter of 2004 we recorded EBITDA of $94.4 million and net income of $52.4 million ($0.43 per share). This compares with EBITDA of $93.4 million and net income of $46.8 million ($0.39 per share) for the first quarter of 2004 and EBITDA of $99.3 million and net income of $48.4 million ($0.38 per share) for the second quarter of 2003. For the six-month period ended June 30, 2004 we recorded EBITDA of $187.7 million and net income of $99.2 million ($0.81 per share) compared with EBITDA of $223.1 million and net income of $122.4 million ($0.97 per share) during the same period in 2003.

EBITDA

The change in EBITDA resulted from:

                             Q2-2004         Q2-2004        YTD 2004
                       COMPARED WITH   COMPARED WITH   COMPARED WITH
($ millions)                 Q1-2004         Q2-2003        YTD 2003
--------------------------------------------------------------------
Higher (lower)
 realized price of
 produced methanol                 2             (23)            (28)
Lower (higher) total
 cash cost                        (2)              9             (20)
Higher sales volume of
 produced methanol                 1               2               5
Higher margin on the sale
 of purchased methanol             -               7               8
--------------------------------------------------------------------
Increase (decrease) in
 EBITDA                            1              (5)            (35)
--------------------------------------------------------------------

Higher (lower) realized price of produced methanol - Methanol prices are characterized by volatility and are affected by the methanol supply/demand balance, which is influenced by global industry capacity, industry operating rates and the strength of demand. Methanol prices are also influenced by the cost structure of high cost methanol production that is determined primarily by energy prices.

Tight supply conditions, strong demand and high global energy prices, including North American natural gas, resulted in the continuation of the favourable methanol price environment through the second quarter of 2004. Our average realized price for the second quarter of 2004 was $222 per tonne, slightly higher than our average realized price of $220 per tonne for the first quarter of 2004. The average realized price for the first half of 2004 was $221 per tonne compared with $232 per tonne for the first half of 2003. The impact on EBITDA of changes in the average realized price for produced methanol is included in the above table.

Lower (higher) total cash cost - Natural gas is the most significant component of our production costs. We purchase natural gas for our production facilities in Chile and Trinidad through favourably priced take-or-pay supply contracts. Natural gas costs in both Chile and Trinidad are adjusted by formulas related to methanol prices and this enables these facilities to be very competitive at all points throughout the methanol price cycle. In Chile, the natural gas cost adjustment is primarily related to the trailing twelve month weighted average methanol price, and in Trinidad, natural gas costs are adjusted by a formula related to quarterly methanol prices. We purchase natural gas for our Kitimat facility on a short-term basis and the purchase price is set in a competitive market that can fluctuate widely. Natural gas in New Zealand is purchased through take-or-pay and other purchase contracts reflecting the current market price for natural gas.

Total cash costs for the second quarter of 2004 were higher than the first quarter of 2004 and this decreased EBITDA by $2 million. During the second quarter of 2004 we had unplanned maintenance shutdowns at our facilities in Chile and Trinidad and experienced temporary natural gas curtailments in Chile (refer to Operating Performance). As a result, we sold a lower proportion of production from these facilities and our total cash costs increased compared with the first quarter by approximately $6 million. This increase in costs reflects the higher proportion of New Zealand and Kitimat production in sales and was partially offset by lower maintenance costs and lower general and administrative expenditures during the second quarter of 2004 compared with the first quarter.

Our total cash costs for the second quarter of 2004 were lower than in the second quarter of 2003 and this increased EBITDA by $9 million. Lower costs during the second quarter of 2004 resulting from lower natural gas costs for our Trinidad production facility and lower supply chain costs were partially offset by higher natural gas costs in New Zealand. Natural gas costs in New Zealand were $5 million higher during the second quarter of 2004 compared with the second quarter of 2003 reflecting current natural gas prices.

For the six months ended June 30, 2004, our total cash costs were higher primarily due to higher natural gas costs in Chile and New Zealand and this decreased EBITDA by $20 million compared with the same period in 2003. Natural gas costs in Chile were $12 million higher due to the trailing twelve month average price being higher for 2004 compared with 2003. Natural gas costs in New Zealand increased by $13 million for the first half of 2004 compared with the same period in 2003.

Higher sales volume of produced methanol - Our total sales volume of produced methanol was higher for the second quarter of 2004 compared with both the first quarter of 2004 and the second quarter of 2003 and this increased EBITDA by $1 million and $2 million, respectively. For the six-month period ended June 30, 2004 compared with the same period in 2003, EBITDA increased by $5 million because of higher sales volumes of produced methanol.

Higher margin on the sale of purchased methanol - We purchase additional methanol produced by others on the spot market or through offtake agreements in order to meet customer needs and support our marketing efforts. As a consequence, we realize holding gains or losses on the resale of this product depending on the methanol price at the time of resale. The cost for purchased methanol also includes allocated storage and handling costs of approximately $6 per tonne. For the second quarter of 2004 we incurred a loss of $3 million on the sale of 0.6 million tonnes of purchased methanol compared with a loss of $3 million on the sale of 0.5 million tonnes for the first quarter of 2004 and a loss of $10 million in the second quarter of 2003 on the sale of 0.3 million tonnes. For the six-month period ended June 30, 2004, we incurred a loss of $6 million on the sale of 1.1 million tonnes of purchased methanol compared with $14 million on the sale of 0.6 million tonnes for the same period in 2003.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense for the second quarter of 2004 was $17 million compared with $22 million for the second quarter of 2003. Depreciation expense was $37 million for the six months ended June 30, 2004 compared with $45 million for the same period in 2003. The overall decrease in depreciation expense in 2004 compared with 2003 relates to the lower carrying value of property, plant and equipment due to the write-down of our Medicine Hat and New Zealand production facilities at December 31, 2003.

INTEREST EXPENSE 

                              THREE MONTHS ENDED    SIX MONTHS ENDED
                              ------------------    ----------------
Interest expense              JUN 30      JUN 30    JUN 30    JUN 30
 ($ millions)                   2004        2003      2004      2003
--------------------------------------------------------------------
Interest expense before
 deduction of capitalized
 interest                       $ 12        $ 14      $ 27      $ 25
Less: capitalized interest        (7)         (4)      (14)       (8)
--------------------------------------------------------------------
Interest expense                $  5        $ 10      $ 13      $ 17
--------------------------------------------------------------------

The decrease in interest expense before deduction of capitalized interest for the second quarter of 2004 compared with the second quarter of 2003 primarily relates to lower levels of long-term debt resulting from the repayment of the limited recourse long-term debt of Titan Methanol Company on March 31, 2004. For the six-months ended June 30, 2004, the increase in interest expense before deduction of capitalized interest primarily relates to an increase in the long-term debt of the Atlas joint venture. Capitalized interest for the three months ended June 30, 2004 includes $4 million related to the construction of the Atlas methanol facility and $3 million related to the construction of Chile IV.

INTEREST AND OTHER INCOME

Interest and other income for the second quarter of 2004 was a loss of $0.4 million compared with income of $4 million for the second quarter of 2003. For the six-month period ended June 30, 2004, interest and other income was $4 million compared with $8 million for the same period in 2003. The decrease in interest and other income for both comparative figures relates primarily to foreign exchange gains recorded during 2003 reflecting the weakening of the United States dollar against most currencies.

INCOME TAXES

The effective tax rate for the second quarter of 2004 was 28% compared with 33% for the first quarter of 2004 and the second quarter of 2003. Substantially all of our consolidated income tax expense relates to our operations in Chile, where we record taxes at a rate of 35%. Our Titan facility in Trinidad currently has a tax holiday until mid-2005 and our New Zealand and Kitimat operations have previously unrecognized tax loss carry forward balances. The lower effective tax rate for the second quarter of 2004 is primarily related to the lower proportion of sales volume and consolidated income earned from our operations in Chile due to lower production.

OPERATING PERFORMANCE

During the second quarter of 2004, we produced approximately 1.2 million tonnes of methanol at our global production facilities compared with 1.3 million tonnes in the first quarter of 2004.

During the second quarter of 2004, supplies of natural gas to our Chilean facilities from natural gas suppliers in Argentina were curtailed and this resulted in approximately 40,000 tonnes of lost production. We also had an unplanned outage in Chile that resulted in a further loss of approximately 35,000 tonnes.

Approximately 57% of the natural gas requirements for our Chilean facilities is sourced from Argentina under long-term natural gas contracts. Argentina has been experiencing an energy crisis brought about primarily as a result of price regulation of domestic natural gas and a dramatic devaluation of the Argentinean peso against the United States dollar. Natural gas prices have been held at extremely low levels which has led to increased demand and lower amounts of natural gas supplying the domestic market. As a consequence, the government of Argentina reduced exports of natural gas to Chile and other surrounding countries. Our operations had been largely isolated from this issue due to the location of our plants in the southernmost region of Chile. Since late May, however, we have suffered curtailments of natural gas averaging approximately 900 tonnes per day of methanol production. We believe the situation is improving. Domestic natural gas prices are being increased and additional investment in infrastructure is being made by gas suppliers within Argentina that should increase the supply of natural gas for domestic consumption. Our expectation is that we will continue to suffer curtailments but that the curtailments will be relatively small and not long-term. We will, however, continue to closely monitor this issue over the coming months, as there can be no assurance as to its ultimate outcome.

The second quarter of 2004 production from our New Zealand facilities was 229,000 tonnes compared with 289,000 tonnes in the first quarter of 2004. During the second quarter, we reached agreements to acquire up to 40 petajoules of natural gas to supply our New Zealand facilities. With these new agreements we have sufficient natural gas to produce approximately 1 million tonnes of methanol from our New Zealand facilities in 2004. We also have the flexibility to produce up to 500,000 tonnes of methanol in 2005 if economic conditions warrant.

SUPPLY/DEMAND FUNDAMENTALS

Global economic growth and strong demand for methanol was experienced throughout the second quarter of 2004. Tight methanol market conditions remain and are continuing into the third quarter. Planned and unplanned outages reduced supply and the supply/demand combination resulted in low global inventory levels, tight market conditions and higher methanol prices in the second quarter of 2004.

The 1.7 million tonne Atlas methanol plant has been in the commissioning phase since early June. Subsequent to initial start-up, the plant has been shut down for repairs. We expect the first shipment from this facility during the third quarter. We have a 63.1% interest in the Atlas plant and will market the remaining 36.9% of its production through an offtake agreement.

Under separate production rights agreements we are able to determine the level of production from Lyondell's Channelview facility during 2004 and Terra Industries' Beaumont facility until the end of 2008. These facilities have a combined annual production of approximately 1.5 million tonnes. These arrangements provide our supply chain with valuable flexibility as we bring Atlas to market. We expect that we will curtail this higher cost production once Atlas is operating reliably and our inventories are replenished.

METHANEX NON DISCOUNTED REGIONAL POSTED CONTRACT PRICES(i)

                          JUL              APR
                         2004             2004
----------------------------------------------
United States            $279             $249
Europe                EUR 230          EUR 200
Asia                     $272             $250

(i) US$ per tonne except where noted.
----------------------------------------------

Tight industry supply/demand fundamentals and the favourable methanol pricing environment have continued into the third quarter of 2004. The Methanex non-discounted reference prices have increased for July 2004 and are $279 per tonne ($0.84 per gallon) in the United States and $272 per tonne in Asia. In Europe, the July 2004 contract transaction price increased by EUR 30 from April 2004 to EUR 230 per tonne before discounts (US$275 per tonne at the time of settlement). Currently, spot prices in the United States are approximately $300-315 per tonne ($0.90-0.95 per gallon) and spot prices in Europe (FOB Rotterdam) are approximately EUR 245 per tonne. Prices in Asia are currently between $260 and $265 per tonne.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas in the second quarter of 2004 were $82 million compared with $87 million for the same period in 2003. For the six-month period ended June 30, 2004, cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas were $162 million compared with $198 million for the same period in 2003.

On March 31, 2004, the Company repaid all of the limited recourse long-term debt related to the Titan methanol facility. The total payment, including transaction costs, was $183 million.

Our proportionate share of capital expenditures during the second quarter of 2004 for the Atlas methanol project was $19 million. Our share of the amount drawn on the Atlas joint venture debt facilities during the second quarter was $11 million and these facilities are now fully drawn. Our remaining cash equity contribution to complete the construction of Atlas and fund a debt reserve is approximately $20 million.

We are currently expanding our operations in Chile with the construction of Chile IV, an 840,000 tonne per year methanol facility, which is expected to be completed in early 2005. Capital expenditures for Chile IV during the second quarter were $36 million, including capitalized interest of $3 million. At June 30, 2004, our estimated remaining expenditures to complete the construction of Chile IV were $86 million, including capitalized interest of $13 million.

On May 13, 2004, we announced a normal course issuer bid under which we may repurchase up to 6.1 million of our common shares. During the second quarter, we repurchased for cancellation 1.4 million shares at an average price of US$12.56 per share, or $18 million.

During the second quarter of 2004, we paid a quarterly dividend of US$0.06 per share, or approximately $7 million. On July 21, 2004, our Board of Directors approved a 33 percent increase in our regular quarterly dividend to shareholders, from US$ 0.06 per share to US$ 0.08 per share, beginning with the dividend payable on September 30, 2004. This increase in the dividend follows our recently announced share buyback program, which is in progress and, at the current pace, will be completed before the end of 2004. Both initiatives further emphasize our track record for, and commitment to, returning excess cash to our shareholders.

We have excellent financial capacity and flexibility. Our cash balance at June 30, 2004 was $202 million and we have an undrawn $250 million credit facility. The planned capital maintenance expenditure program directed towards major maintenance, turnarounds and catalyst changes is estimated to total approximately $75 million for the period to the end of 2006. We have the financial capacity to fund the remaining expenditures for Atlas and Chile IV and complete the capital maintenance and share repurchase programs. We also have the capacity to pursue new opportunities to enhance our strategic position in methanol.

SHORT-TERM OUTLOOK

Methanol market conditions continue to be favourable. Global economic growth and tight supply have led to low global inventory levels and higher pricing. The methanol price will ultimately depend on industry operating rates, the rate of industry restructuring and the strength of global demand. We believe that our excellent financial position and financial flexibility, outstanding global supply network and low-cost position will ensure that Methanex continues to be the leader in the methanol industry.

ADDITIONAL INFORMATION

SUPPLEMENTAL NON-GAAP MEASURE

EBITDA

In addition to providing measures prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), Methanex presents a supplemental non-GAAP measure, EBITDA. This measure does not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similarly described measures presented by other companies. EBITDA should be considered in addition to, and not as a substitute for, net income, cash flows from operating activities and other measures of financial performance and liquidity reported in accordance with GAAP. This measure is provided to assist readers in determining the ability of Methanex to generate cash from operations. EBITDA differs from the most comparable GAAP measure, cash flows from operating activities, primarily because it does not include changes in non-cash working capital, the utilization of prepaid natural gas and cash flows related to interest, income taxes and unusual items.

The following table shows a reconciliation of cash flows from
operating activities to EBITDA:

                        THREE MONTHS ENDED          SIX MONTHS ENDED
                     ------------------------       ----------------
($ thousands)        JUN 30   MAR 31   JUN 30       JUN 30    JUN 30
                       2004     2004     2003         2004      2003
--------------------------------------------------------------------
Cash flows from
 operating
 activities       $ 103,546 $ 54,354 $ 87,197    $ 157,900 $ 191,996
Add (deduct):                                                       
Changes in non-cash
 working capital
 and the utilization
 of prepaid natural
 gas                (21,708)  26,292     (547)       4,584     6,145
Other non-cash
 operating expenses  (2,130)  (1,634)  (4,175)      (3,764)   (7,229)
Interest expense      4,800    7,829    9,700       12,629    17,422
Interest and other
 income (expense)       431   (3,990)  (4,384)      (3,559)   (8,276)
Income taxes
 - current            9,426   10,500   11,552       19,926    23,058
--------------------------------------------------------------------
EBITDA             $ 94,365 $ 93,351 $ 99,343    $ 187,716 $ 223,116
--------------------------------------------------------------------

QUARTERLY FINANCIAL DATA (unaudited)

                                       THREE MONTHS ENDED           
                            ----------------------------------------
($ thousands, except        JUN 30     MAR 31      DEC 31     SEP 30
 per share amounts)           2004       2004        2003       2003
--------------------------------------------------------------------
Revenue                   $412,283   $392,953    $358,421   $340,180
Net income (loss)           52,375     46,830    (111,698)    (9,253)
Basic net income (loss)
 per share                    0.43       0.39       (0.93)     (0.08)
Diluted net income
 (loss) per share             0.42       0.38       (0.93)     (0.08)
--------------------------------------------------------------------


                                       THREE MONTHS ENDED           
                            ----------------------------------------
($ thousands, except        JUN 30     MAR 31      DEC 31     SEP 30
 per share amounts)           2003       2003        2002       2002
--------------------------------------------------------------------
Revenue                   $377,603   $343,342    $314,523   $304,894
Net income (loss)           48,415     73,950     (31,417)    57,468
Basic net income (loss)
 per share                    0.38       0.59       (0.25)      0.46
Diluted net income
 (loss) per share             0.37       0.57       (0.25)      0.45
--------------------------------------------------------------------


METHANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(thousands of U.S. dollars)
                                                JUN 30        DEC 31
                                                  2004          2003
--------------------------------------------------------------------
                                            (unaudited)
ASSETS

Current assets:
 Cash and cash equivalents                 $   202,171   $   287,863
 Receivables                                   242,067       220,871
 Inventories                                   111,405       126,729
 Prepaid expenses                               17,203        14,852
--------------------------------------------------------------------
                                               572,846       650,315
Property, plant and equipment (note 2)       1,340,879     1,320,227
Other assets                                    91,754       111,258
--------------------------------------------------------------------
                                           $ 2,005,479   $ 2,081,800
--------------------------------------------------------------------
--------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Accounts payable and accrued liabilities  $   191,944   $   178,420
 Current maturities on long-term debt
  and other long-term liabilities               17,598        33,026
--------------------------------------------------------------------
                                               209,542       211,446

Long-term debt (note 4)                        600,800       756,185
Other long-term liabilities                     68,095        67,420
Future income taxes (note 5)                   241,768       261,218
Shareholders' equity:
 Capital stock (note 6)                        528,404       499,258
 Contributed surplus (notes 1 and 6)             4,921         7,234
 Retained earnings (note 1)                    351,949       279,039
--------------------------------------------------------------------
                                               885,274       785,531
--------------------------------------------------------------------
                                           $ 2,005,479   $ 2,081,800
--------------------------------------------------------------------
--------------------------------------------------------------------


METHANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(thousands of U.S. dollars, except number of shares and
 per share amounts)

                        THREE MONTHS ENDED          SIX MONTHS ENDED
                   -----------------------   -----------------------
                       JUN 30       JUN 30       JUN 30       JUN 30
                         2004         2003         2004         2003
--------------------------------------------------------------------
Revenue (note 1)   $  412,283   $  377,603   $  805,236   $  720,945
Cost of sales
 and operating
 expenses (note 1)    317,918      278,260      617,520      497,829
Depreciation
 and amortization      16,565       21,564       36,629       44,638
--------------------------------------------------------------------
Operating income
 before undernoted
 items                 77,800       77,779      151,087      178,478
Interest expense
 (note 9)              (4,800)      (9,700)     (12,629)     (17,422)
Interest and other
 income (expense)        (431)       4,384        3,559        8,276
--------------------------------------------------------------------
Income before
 income taxes          72,569       72,463      142,017      169,332
Income taxes:
 Current               (9,426)     (11,552)     (19,926)     (23,058)
 Future               (10,768)     (12,496)     (22,886)     (23,909)
--------------------------------------------------------------------
                      (20,194)     (24,048)     (42,812)     (46,967)
--------------------------------------------------------------------
Net income         $   52,375   $   48,415   $   99,205   $  122,365
--------------------------------------------------------------------
--------------------------------------------------------------------


Weighted average
 number of
 common shares
 outstanding(x)   122,915,405  127,112,201  122,503,561  126,533,071

Diluted weighted
 average number
 of common shares
 outstanding(x)   124,247,101  130,776,079  123,903,147  130,448,386

(x)number of common shares outstanding at June 30, 2004: 122,907,392
   (June 30, 2003:  119,111,817)


Basic net income per
 common share      $     0.43   $     0.38   $     0.81   $     0.97
Diluted net income
 per common share  $     0.42   $     0.37   $     0.80   $     0.94


CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (unaudited)
(thousands of U.S. dollars)

                        THREE MONTHS ENDED          SIX MONTHS ENDED
                   -----------------------   -----------------------
                       JUN 30       JUN 30       JUN 30       JUN 30
                         2004         2003         2004         2003
--------------------------------------------------------------------
Retained earnings,
 beginning of period
 as previously
 reported          $  318,546   $  424,630   $  284,316   $  386,868
Adjustment for retroactive
 adoption of new accounting
 policies (note 1):
  Stock-based
   compensation             -       (4,454)      (7,234)      (3,444)
  Asset retirement
   obligations              -        3,683        1,957        4,259
--------------------------------------------------------------------
Retained earnings,
 beginning of period
 as restated          318,546      423,859      279,039      387,683
Net income             52,375       48,415       99,205      122,365
Excess of repurchase
 price over assigned
 value of common
 shares (note 6)      (11,877)     (51,523)     (11,877)     (51,523)
Dividend payments      (7,095)      (6,397)     (14,418)     (44,171)
--------------------------------------------------------------------
Retained earnings,
 end of period     $  351,949   $  414,354   $  351,949   $  414,354
--------------------------------------------------------------------
--------------------------------------------------------------------


METHANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands of U.S. dollars)

                        THREE MONTHS ENDED          SIX MONTHS ENDED
                   -----------------------   -----------------------
                       JUN 30       JUN 30       JUN 30       JUN 30
                         2004         2003         2004         2003
--------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income         $   52,375   $   48,415   $   99,205   $  122,365
Add:
 Depreciation
  and amortization     16,565       21,564       36,629       44,638
 Future income taxes   10,768       12,496       22,886       23,909
 Other                  2,130        4,175        3,764        7,229
--------------------------------------------------------------------
Cash flows from
 operating activities
 before undernoted
 changes               81,838       86,650      162,484      198,141
Receivables            (4,073)      (9,312)     (21,196)     (11,098)
Inventories            35,316       34,900       15,967      (32,861)
Prepaid expenses       (3,531)        (152)      (2,351)      (5,196)
Accounts payable
 and accrued
 liabilities           (6,004)     (26,134)       2,996       41,535
Utilization of
 prepaid natural gas        -        1,245            -        1,475
--------------------------------------------------------------------
                      103,546       87,197      157,900      191,996
--------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of limited
 recourse long-term
 debt                       -      (29,000)    (182,758)     (29,000)
Release of
 restricted cash            -            -       14,258            -
Proceeds on issue
 of shares on
 exercise of
 stock options         15,568        9,669       31,811       13,427
Proceeds on issue
 of limited recourse
 long-term debt        10,627        6,043       14,887       18,011
Dividend payments      (7,095)      (6,397)     (14,418)     (44,171)
Payment for shares
 repurchased          (17,916)     (88,648)     (17,916)     (88,648)
Other                     (13)      (4,676)      (3,926)      (5,536)
--------------------------------------------------------------------
                        1,171     (113,009)    (158,062)    (135,917)
--------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Titan
 Methanol Company,
 net of cash acquired       -      (74,130)           -      (74,130)
Plant and equipment
 under construction   (55,284)     (53,641)     (86,615)     (93,952)
Property, plant
 and equipment         (4,105)      (9,043)      (7,337)     (14,272)
Accounts payable
 and accrued
 liabilities related
 to capital
 expenditures           9,666       (1,460)      10,528        5,832
Other assets           (2,106)     (15,940)      (2,106)     (16,060)
--------------------------------------------------------------------
                      (51,829)    (154,214)     (85,530)    (192,582)
--------------------------------------------------------------------
Increase (decrease)
 in cash and cash
 equivalents           52,888     (180,026)     (85,692)    (136,503)
Cash and cash
 equivalents,
 beginning of
 period               149,283      464,910      287,863      421,387
--------------------------------------------------------------------
Cash and cash
 equivalents,
 end of period     $  202,171   $  284,884   $  202,171   $  284,884
--------------------------------------------------------------------
--------------------------------------------------------------------

SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid, net
 of capitalized
 interest          $        -   $        -   $   18,022   $   17,102
Income taxes paid  $   22,470   $   20,268   $   27,675   $   21,460
--------------------------------------------------------------------

METHANEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Except where otherwise noted, tabular dollar amounts are stated in thousands of United States dollars.

1. BASIS OF PRESENTATION:

These interim consolidated financial statements do not include all note disclosures required by Canadian generally accepted accounting principles for annual financial statements, and therefore should be read in conjunction with the annual consolidated financial statements included in the Methanex Corporation 2003 Annual Report. These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a basis consistent with those followed in the most recent annual consolidated financial statements, except as described below:

(a) Shipping and handling costs:

Inland shipping and handling costs billed to customers were previously included in revenue. These costs have been reclassified from revenue to cost of sales and operating expenses with no impact on reported earnings. For the three and six months ended June 30, 2004, $6 million (2003 - $6 million) and $11 million (2003 - $13 million) of shipping and handling costs have been included in cost of sales and operating expenses.

(b) Stock-based compensation:

Effective January 1, 2004, the Company adopted the amended recommendations of the Canadian Institute of Chartered Accountants ("CICA") for accounting for stock-based compensation. The amended standard requires recognition of an estimate of the fair value of stock-based awards in earnings. Previously, the Company provided note disclosure of pro forma net income as if a fair value method had been used for stock based awards.

The amended recommendations have been applied retroactively, with restatement of prior periods. The restatement at December 31, 2003 resulted in an increase to contributed surplus and a decrease to retained earnings of $7 million (December 31, 2002 - $3 million). The adjustments represent the total compensation expense that would have been recorded had a fair value based method been used for stock options granted on or after January 1, 2002. The restatement of the results for the three and six month periods ended June 30, 2003 resulted in an increase to cost of sales and operating expenses of $0.9 million and $1.9 million, respectively. Compensation expense related to stock options for the three and six month periods ended June 30, 2004 is $0.3 million and $1.1 million, respectively.

(c) Asset retirement obligations:

Effective January 1, 2004, the Company adopted the new CICA recommendations for accounting for asset retirement obligations, which include site restoration costs. The new standard requires that obligations associated with the retirement of tangible long-lived assets and associated retirement costs be recognized at fair value in the period in which the obligation is incurred with a corresponding increase in the carrying amount of the related long-lived asset. The asset retirement obligation liability is increased at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the initial fair value measurement.

This standard has been applied retroactively, with restatement of prior periods. This restatement resulted in a decrease to the accrual for site restoration and an increase to retained earnings of $2 million at December 31, 2003. The restatement of the results for the three and six month periods ended June 30, 2003 resulted in a reduction to operating income and net income by $0.6 million and $1.2 million, respectively. The application of this standard resulted in charges to operating income and net income of $0.3 million and $0.6 million in the three and six month periods ended June 30, 2004, respectively.

2. PROPERTY, PLANT AND EQUIPMENT:

                                            ACCUMULATED     NET BOOK
                                     COST  DEPRECIATION        VALUE
--------------------------------------------------------------------
At June 30, 2004                                                    
Plant and equipment           $ 2,121,016   $ 1,267,992  $   853,024
Plant and equipment under
 construction                     464,455             -      464,455
Other                              50,325        26,925       23,400
--------------------------------------------------------------------
                              $ 2,635,796   $ 1,294,917  $ 1,340,879
--------------------------------------------------------------------

At December 31, 2003                                                
Plant and equipment           $ 2,157,513   $ 1,237,872  $   919,641
Plant and equipment under
 construction                     377,840             -      377,840
Other                              48,827        26,081       22,746
--------------------------------------------------------------------
                              $ 2,584,180   $ 1,263,953  $ 1,320,227
--------------------------------------------------------------------

3. INTEREST IN ATLAS JOINT VENTURE:

The Company has a 63.1% joint venture interest in Atlas Methanol Company ("Atlas"). The joint venture has constructed a 1.7 million tonne per year methanol plant in Trinidad which is currently in the commissioning phase. To June 30, 2004, the joint venture had no revenue and all expenditures were capitalized.

The consolidated financial statements include the following amounts representing the Company's proportionate interest in the Atlas joint venture:

                                         JUN 30, 2004   DEC 31, 2003
--------------------------------------------------------------------
Consolidated Balance Sheets:
 Cash and cash equivalents                  $   9,828      $  18,429
 Other current assets                           3,642          2,443
 Property, plant and equipment                275,190        235,718
 Other assets                                   5,996          5,996
 Current liabilities                            2,743          4,486
 Limited recourse long-term debt              159,012        144,125
--------------------------------------------------------------------


                              THREE MONTHS ENDED    SIX MONTHS ENDED
                              ------------------    ----------------
                              JUN 30      JUN 30    JUN 30    JUN 30
                                2004        2003      2004      2003
--------------------------------------------------------------------
Consolidated Statements
 of Cash Flows:
Cash inflows from 
 financing activities       $ 10,627     $ 6,043  $ 14,887  $ 18,011
Cash outflows from
 investing activities        (20,067)    (11,431)  (42,414)  (33,423)
--------------------------------------------------------------------

The Company estimates that its remaining share of capital expenditures and cash equity contribution to complete the construction of Atlas, including capitalized interest and funding of a debt reserve fund, will be approximately $20 million. The Company expects that these expenditures will be funded from cash generated from operations and cash and cash equivalents.

4. LONG-TERM DEBT:

Long-term debt includes $450 million of unsecured notes and the Company's proportionate share of limited recourse long-term debt of the Atlas joint venture totaling $159 million. The limited recourse long-term debt of Atlas is described as limited recourse as it is secured only by the assets of the joint venture.

On March 31, 2004, the Company repaid all of the limited recourse long-term debt related to the Titan methanol facility. The total payment, including transaction costs, was $183 million. As a result of this repayment, the Company reclassified $14 million of restricted cash for a debt service reserve account from other assets to cash and cash equivalents.

5. FUTURE INCOME TAXES:

On acquisition of Titan Methanol Company in 2003, the Company recorded a future income tax liability based on uncertainty related to an interpretation of certain tax legislation. During 2004, the Company reviewed its accounting for the acquisition in light of recent events clarifying the tax legislation. As a result, at March 31, 2004, the Company recorded a balance sheet adjustment to reduce both future income taxes and property, plant and equipment by $42 million.

6. CAPITAL STOCK AND CONTRIBUTED SURPLUS:

Changes in the capital stock and contributed surplus of the Company
during the period January 1, 2004 to June 30, 2004 were as follows:

                                                         CONTRIBUTED
                                   CAPITAL STOCK             SURPLUS
                            --------------------------   -----------
                                NUMBER OF
                            COMMON SHARES    AMOUNT ($)    AMOUNT ($)
--------------------------------------------------------------------
Balance, December 31, 2003    120,007,767    $ 499,258       $ 7,234
Cash proceeds from exercise
 of stock options               2,088,475       16,243             -
Stock compensation expense              -            -           713
Reclassification of fair
 value of stock options
 previously recognized in
 income                                -         1,868        (1,868)
--------------------------------------------------------------------
Balance, March 31, 2004      122,096,242       517,369         6,079
Cash proceeds from exercise
 of stock options              2,237,450        15,568             -
Stock compensation expense             -             -           348
Reclassification of fair
 value of stock options
 previously recognized in
 income                                -         1,506        (1,506)
Shares repurchased            (1,426,300)       (6,039)            -
--------------------------------------------------------------------
Balance, June 30, 2004       122,907,392     $ 528,404       $ 4,921
--------------------------------------------------------------------

On May 13, 2004, the Company announced the approval of a normal
course issuer bid under which it may repurchase up to 6,143,543
common shares of the Company representing not more than 5% of total
shares issued and outstanding. During the three months ended
June 30, 2004, the Company repurchased for cancellation 1.4 million
common shares. The cost to acquire the shares in the amount of $17.9
million was allocated $6.0 million to capital stock and $11.9
million to retained earnings.

7. NET INCOME PER SHARE:

A reconciliation of the weighted average number of common shares is
as follows:

                       THREE MONTHS ENDED           SIX MONTHS ENDED
                       ------------------         ------------------
                      JUN 30       JUN 30        JUN 30       JUN 30
                        2004         2003          2004         2003
--------------------------------------------------------------------
Denominator for
 basic net
 income per
 share           122,915,405  127,112,201   122,503,561  126,533,071
Effect of
 dilutive stock
 options           1,331,696    3,363,878     1,399,586    3,915,315
--------------------------------------------------------------------
Denominator for
 diluted net
 income per
 share           124,247,101  130,776,079   123,903,147  130,448,346
--------------------------------------------------------------------

8. STOCK-BASED COMPENSATION:

(a) Stock options:

i) Incentive stock options:

Common shares reserved for incentive stock options at June 30, 2004
were as follows:

                                       OPTIONS               OPTIONS
                           DENOMINATED IN CAD$    DENOMINATED IN US$
                         ---------------------   -------------------
                                      WEIGHTED              WEIGHTED
                         NUMBER OF     AVERAGE   NUMBER OF   AVERAGE
                            STOCK     EXERCISE       STOCK  EXERCISE
                          OPTIONS        PRICE     OPTIONS     PRICE
--------------------------------------------------------------------
Outstanding at
 December 31, 2003      4,682,775     $ 11.27    3,105,550    $ 7.51
 Granted                        -           -       93,300     11.56
 Exercised             (1,636,625)      11.26     (306,350)     6.80
 Cancelled                      -           -      (15,000)     8.40
--------------------------------------------------------------------
Outstanding at                                                      
 March 31, 2004         3,046,150       11.28    2,877,500      7.71
 Exercised             (1,292,925)      10.25     (573,825)     7.56
 Cancelled                      -           -      (21,500)     8.58
--------------------------------------------------------------------
Outstanding at
 June 30, 2004          1,753,225     $ 12.04    2,282,175    $ 7.74
--------------------------------------------------------------------

As at June 30, 2004, 1,753,225 incentive stock options denominated
in CAD$ and 892,400 incentive stock options denominated in US$ had
vested and were exercisable at an average price of CAD$12.04 and
US$6.49, respectively.

ii) Performance stock options:

Common shares reserved for performance stock options at
June 30, 2004 are as follows:

                                        NUMBER OF   AVERAGE EXERCISE
                                    STOCK OPTIONS        PRICE (CAD$)
--------------------------------------------------------------------
Outstanding at December 31, 2003          875,200             $ 4.47
Exercised                                (145,500)              4.47
--------------------------------------------------------------------
Outstanding at March 31, 2004             729,700               4.47
Exercised                                (370,700)              4.47
--------------------------------------------------------------------
Outstanding at June 30, 2004              359,000             $ 4.47
--------------------------------------------------------------------

The vesting of the performance stock options is tied to the market
value of the Company's common shares subsequent to the date of
grant. As at June 30, 2004, 45,000 outstanding performance stock
options have vested and are exercisable. The remaining 314,000
options will vest if the Company's shares trade at or above CAD$20
per share.

iii) Compensation expense related to stock options:

Compensation expense related to stock options included in cost of
sales and operating expenses is $0.3 million for the three-month
period ended June 30, 2004 (2003 - $0.9 million) and $1.1 million
for the six-month period ended June 30, 2004 (2003 - $1.9 million).
The fair value of each stock option grant was estimated on the date
of grant using the Black-Scholes option pricing model with the
following assumptions:

                                          2004      2003
--------------------------------------------------------
Risk-free interest rate                     3%         5%
Expected dividend yield                     2%         2%
Expected life                         5 years    5 years
Expected volatility                        35%        35%
Weighted average grant date
 fair value per option ($US/share)       $3.63     $2.59
--------------------------------------------------------

(b) Deferred and restricted share units:

Deferred and restricted share units outstanding at June 30, 2004
are as follows:

                                        NUMBER OF          NUMBER OF
                                   DEFERRED SHARE   RESTRICTED SHARE
                                            UNITS              UNITS
--------------------------------------------------------------------
Outstanding at December 31, 2003          366,389            500,640
Granted                                   173,930            579,700
Dividend equivalents                        2,860              5,610
Redeemed                                        -            (26,695)
--------------------------------------------------------------------
Outstanding at March 31, 2004             543,179          1,059,255
Granted                                     4,137                  -
Dividend equivalents                        2,458              4,766
Redeemed                                        -             (1,818)
--------------------------------------------------------------------
Outstanding at June 30, 2004              549,774          1,062,203
--------------------------------------------------------------------

The fair value of deferred and restricted share units at June 30,
2004 was $21.2 million compared with a carrying value of
$10.0 million.

9. INTEREST EXPENSE:

                              THREE MONTHS ENDED    SIX MONTHS ENDED
                              ------------------    ----------------
                              JUN 30      JUN 30    JUN 30    JUN 30
                                2004        2003      2004      2003
--------------------------------------------------------------------
Interest expense before
 capitalized interest       $ 12,338    $ 14,232  $ 27,102  $ 25,396
Less: capitalized interest    (7,538)     (4,532)  (14,473)   (7,974)
--------------------------------------------------------------------
Interest expense            $  4,800    $  9,700  $ 12,629  $ 17,422
--------------------------------------------------------------------

10. RETIREMENT PLANS:

Total net pension expense for the defined benefit and defined
contribution pension plans charged to operations during the three
and six month periods ended June 30, 2004 was $1.7 million
(2003 - $1.6 million) and $3.3 million (2003 - $3.2 million),
respectively.

METHANEX CORPORATION
QUARTERLY HISTORY (unaudited)

             YTD2004     Q2    Q1   2003     Q4     Q3     Q2     Q1
--------------------------------------------------------------------

METHANOL SALES
 VOLUME
(thousands
 of tonnes)

 Company
  produced
  product      2,460  1,233 1,227  4,933  1,328  1,200  1,211  1,194
 Purchased
  product      1,135    600   535  1,392    399    350    332    311
 Commission
  sales(1)         -      -     -    254      -      -     55    199
--------------------------------------------------------------------

               3,595  1,833 1,762  6,579  1,727  1,550  1,598  1,704
--------------------------------------------------------------------

METHANOL PRODUCTION
(thousands of
 tonnes)

 Chile         1,362    666   696  2,704    640    624    732    708
 New Zealand     518    229   289    968    158    229    225    356
 Canada          243    121   122    449    109     91    122    127
 Trinidad(1)     410    220   190    577    222    202    153      -
--------------------------------------------------------------------

               2,533  1,236 1,297  4,698  1,129  1,146  1,232  1,191
--------------------------------------------------------------------

METHANOL PRICE(2)
 ($/tonne)       221    222   220    220    204    216    240    223
 ($/gallon)     0.66   0.67  0.66   0.66   0.61   0.65   0.72   0.67

PER SHARE
 INFORMATION
 Net income
  (loss)      $ 0.81   0.43  0.39   0.01  (0.93) (0.08)  0.38   0.59


                                    2002     Q4     Q3     Q2     Q1
--------------------------------------------------------------------

METHANOL SALES
 VOLUME
(thousands of
 tonnes)

 Company
  produced
  product                          5,686  1,347  1,419  1,489  1,431
 Purchased
  product                            809   278     207    129    195
 Commission
  sales(1)                           725   197     188    183    157
--------------------------------------------------------------------

                                   7,220 1,822   1,814  1,801  1,783
--------------------------------------------------------------------

METHANOL PRODUCTION
(thousands
 of tonnes)

 Chile                             2,932    735    748    743    706
 New Zealand                       2,281    552    593    601    535
 Canada                              478    126    125    103    124
 Trinidad(1)                           -      -      -      -      -
--------------------------------------------------------------------

                                   5,691  1,413  1,466  1,447  1,365
--------------------------------------------------------------------

METHANOL PRICE(2)
 ($/tonne)                           155    188    182    138    111
 ($/gallon)                         0.47   0.57   0.55   0.42   0.33

PER SHARE
 INFORMATION
 Net income
  (loss)                          $ 0.18  (0.25)  0.46   0.12  (0.14)

1 Effective May 1, 2003 we acquired the remaining interest in the
  850,000 tonne per year Titan methanol facility ("Titan"). Prior to
  May 1, 2003 we had a 10% interest in Titan and marketed its entire
  production on a commission basis.
2 Produced and purchased product.



FOR FURTHER INFORMATION PLEASE CONTACT:

Methanex Corporation
Investor Relations
(604) 661-2600 or Toll Free: 1-800-661-8851
Email: invest@methanex.com

or

Methanex Corporation
Chris Cook
Director, Investor Relations
(604) 661.2600
Website: www.methanex.com