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Methanex Corporation (MX)
Market: CDN Consolidated
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Jul 24, 2014, 6:44 PM EDT
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VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 26, 2005) - Methanex Corporation (TSX:MX)(NASDAQ:MEOH) recorded income before unusual items (after-tax) of US$24.2 million (US$0.21 diluted per share) for the third quarter of 2005. After unusual items related to costs to permanently shut down its Kitimat site and a one-time charge in connection with new retroactive tax legislation in Trinidad, the Company recorded a net loss of US$21.8 million (diluted net loss per share of US$0.19) and generated Adjusted EBITDA(1) of US$69.3 million for the third quarter ended September 30, 2005. This compares with net income of US$71.2 million (US$0.58 diluted net income per share) and Adjusted EBITDA of US$125.9 million for the same period in 2004.

Bruce Aitken, President and CEO of Methanex commented, "In the third quarter we sold approximately 180,000 tonnes less methanol from our low cost plants than we did in the second quarter of 2005. This was due in part to unplanned maintenance outages at our plants in Trinidad, curtailments of natural gas and the advancement of maintenance turnarounds at our Chilean facilities, as well as disruptions suffered by some of our customers in the United States as a result of hurricanes and other events. While we are disappointed with the reduced levels of production during the third quarter, our low cost plants are now well positioned to run at higher rates in the fourth quarter. Our new Chile IV plant has recently completed its reliability and performance tests and is now operating above rated capacity, bringing our global low cost production capability to 5.8 million tonnes per year and significantly improving our ability to generate cash throughout the methanol price cycle."

During the third quarter of 2005 we lost approximately 43,000 tonnes of production from our plants in Chile due to curtailments of natural gas resulting from redirection orders from the Argentinean government. The total production loss caused by curtailments from May to August of 2005 (the winter season in the southern hemisphere), was approximately 100,000 tonnes. This compares to a loss of approximately 50,000 tonnes of production for the same period in 2004. To mitigate the impact of natural gas curtailments in 2005, we advanced planned maintenance turnarounds for two of our facilities in Chile from the fourth quarter to the third quarter and this reduced third quarter production by approximately 140,000 tonnes. The Company has not suffered any production losses due to these curtailments of natural gas since mid-August of 2005.

Mr. Aitken continued, "Methanol pricing remained strong and relatively stable in the third quarter underpinned by continued high global energy prices and supply and demand fundamentals. Our average realized price for the third quarter of 2005 was US$240 per tonne compared with US$256 per tonne for the previous quarter and US$248 per tonne for the third quarter of 2004. During the quarter we announced plans to shut down our remaining high cost capacity. Our 530,000 tonne per annum New Zealand plant was shut down at the end of September 2005 (and remains a flexible asset) and we plan to permanently close our 500,000 tonne per annum Kitimat plant on November 1, 2005. We have observed that a number of our competitors in North America and Europe have in the last few months announced closures of their facilities due to escalating feedstock costs. As a result of these shutdowns and continued strong demand, we expect the methanol market to remain balanced in the fourth quarter of 2005. Our posted references prices have increased for October, ranging from US $280 to $319 per tonne (US$0.84 to $0.96 per gallon) before discounts."

Mr. Aitken concluded, "Our balance sheet and cash generation remained very strong this quarter. With US$152 million cash on hand at the end of the third quarter and a US$250 million undrawn credit facility, we have the financial capacity to complete our capital maintenance spending program, pursue new opportunities to enhance our leadership position in the methanol industry and continue to deliver on our commitment to maintain a prudent balance sheet and return excess cash to shareholders."

A conference call is scheduled for Thursday, October 27 at 11:00 am EDT (8:00 am PDT) to review these third 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 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 261999. 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) For a definition of Adjusted EBITDA, please refer to "Additional Information - Supplemental Non-GAAP Measures" included in the accompanying Interim Report.

Information in this news release may contain forward-looking statements. By their nature, such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections which are included in the forward-looking information. They include world-wide economic conditions, actions of competitors, the availability and cost of gas feedstock, the ability to implement business strategies and pursue business opportunities, conditions in the methanol and other industries including the supply and demand for methanol and the risks attendant with producing and marketing methanol, integrating acquisitions and realizing anticipated synergies and carrying out major capital expenditure projects. Please also refer to our publicly available documents filed from time to time with securities commissions.


For further information, contact:
Wendy Bach
Director, Investor Relations
Tel: 604.661.2600

Interim Report

For the nine months ended September 30, 2005

At October 25, 2005 the Company had 115,830,767 common shares issued and outstanding and stock options exercisable for 746,175 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.


Contact Information

Methanex Investor Relations 1800-200 Burrard Street Vancouver, BC
Canada V6C 3M1
Email: invest@methanex.com
Methanex Toll-Free: 1-800-661-8851

THIRD QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS

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

This third quarter 2005 Management's Discussion and Analysis should be read in conjunction with the 2004 Annual Consolidated Financial Statements and the Management's Discussion and Analysis included in the Methanex 2004 Annual Report. The Methanex 2004 Annual Report and additional information relating to Methanex is available on SEDAR at www.sedar.com.


                                THREE MONTHS ENDED  NINE MONTHS ENDED
                           -----------------------  -----------------
($ millions,                SEP 30  JUN 30  SEP 30     SEP 30  SEP 30
 except where noted)          2005    2005    2004       2005    2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Sales volumes
 (thousands of tonnes)

 Company produced:
  Chile and Trinidad           947   1,129     955      3,203   2,704
  Kitimat and New Zealand      183     203     352        634   1,063
---------------------------------------------------------------------
                             1,130   1,332   1,307      3,837   3,767
 Purchased methanol            325     269     423        890   1,558
 Commission sales(1)            75     158      41        378      41
---------------------------------------------------------------------
                             1,530   1,759   1,771      5,105   5,366

Average realized methanol
 price ($ per tonne)(2)        240     256     248        253     232
Methanex average non-
 discounted posted price
 ($ per tonne)(3)              282     308     276        300     259
Operating income              16.8    98.1   105.7      229.6   256.8
Net income (loss)            (21.8)   62.9    71.2      117.2   170.4
Income before unusual
 items (after-tax)(4)         24.2    62.9    71.2      163.2   170.4
Cash flows from operating
 activities(5)                29.1    99.1   108.7      244.2   271.2
Adjusted EBITDA(4)            69.3   119.6   125.9      323.6   313.6
Basic net income (loss)
 per common share            (0.19)   0.53    0.59       0.99    1.40
Diluted net income (loss)
 per common share            (0.19)   0.53    0.58       0.98    1.38
Diluted income before
 unusual items (after-tax)
 per share(4)                 0.21    0.53    0.58       1.37    1.38
Common share information
 (millions of shares):
 Weighted average number
  of common shares
  outstanding                117.5   118.4   121.6      118.6   121.9
 Diluted weighted average
  number of common shares
  outstanding                117.5   118.9   123.2      119.3   123.4
 Number of common shares
  outstanding, end of
  period                     116.6   117.6   120.0      116.6   120.0
---------------------------------------------------------------------

1  Commission sales volumes represent volumes marketed on a
   commission basis. Commissions earned are included in revenue.
2  Average realized methanol price is calculated as revenue,
   excluding commissions earned, divided by the total sales volumes
   of produced and purchased methanol.
3  Represents the average of our non-discounted posted prices in
   North America, Europe and Asia Pacific weighted by sales volume.
4  Adjusted EBITDA, income before unusual items (after-tax) and
   diluted income before unusual items (after-tax) per share are
   non-GAAP measures. For a reconciliation of these amounts to the
   most directly comparable GAAP measures, refer to "Additional
   Information - Supplemental Non-GAAP Measures".
5  Before changes in non-cash working capital.

For the third quarter of 2005 we recorded Adjusted EBITDA of $69.3 million and a net loss of $21.8 million (diluted net loss per share of $0.19). This compares with Adjusted EBITDA of $119.6 million and net income of $62.9 million (diluted net income per share of $0.53) for the second quarter of 2005 and Adjusted EBITDA of $125.9 million and net income of $71.2 million (diluted net income per share of $0.58) for the third quarter of 2004. For the nine month period ended September 30, 2005, we recorded Adjusted EBITDA of $323.6 million and net income of $117.2 million (diluted net income per share of $0.98) compared with Adjusted EBITDA of $313.6 million and net income of $170.4 million (diluted net income per share of $1.38) for the same period in 2004.

For the third quarter of 2005 and for the nine month period ended September 30, 2005, we recorded income before unusual items (after-tax) of $24.2 million (diluted income before unusual items (after-tax) per share of $0.21) and $163.2 million (diluted income before unusual items (after-tax) per share of $1.37), respectively. A reconciliation from net income (loss) to income before unusual items (after-tax) is as follows:


($ millions)                                 Q3 2005     YTD Q3 2005
--------------------------------------------------------------------
--------------------------------------------------------------------

Net income (loss)                            $ (21.8)        $ 117.2
Add unusual items:
 Kitimat closure costs
  (before and after-tax)                        29.1            29.1
 Adjustment to taxes related to retroactive
  change in legislation                         16.9            16.9
--------------------------------------------------------------------
Income before unusual items (after-tax)      $  24.2         $ 163.2
--------------------------------------------------------------------

During the third quarter of 2005 we announced the planned November 1, 2005 closure of the Kitimat methanol and ammonia facilities. The total closure costs are estimated to be approximately $41 million (before and after-tax) and include employee severance costs of approximately $13 million and contract termination costs of approximately $28 million. Contract termination costs include costs to terminate a take-or-pay natural gas transportation agreement and an ammonia supply agreement. For accounting purposes, a portion of the total costs has been recognized in the third quarter of 2005 and the remaining costs will be recognized in the fourth quarter. As a result, during the three months ended September 30, 2005, we recorded Kitimat closure costs of $29 million and the remaining Kitimat closure costs of approximately $12 million will be recorded during the fourth quarter of 2005. Approximately $7 million of the total Kitimat closure costs are expected to be paid during the fourth quarter of 2005 with the remainder paid in early 2006.

During the third quarter of 2005, we entered into an agreement to provide terminalling services to Calgary-based EnCana at the Kitimat site. We expect this agreement will enable us, over time, to offset at least some or possibly all of the Kitimat closure costs. The agreement allows us to import methanol from our other production facilities through Kitimat.

During the third quarter of 2005, the government of Trinidad introduced new tax legislation retroactive to January 1, 2004. As a result, during the three month period ended September 30, 2005 we recorded a $17 million adjustment to increase future income taxes to reflect the retroactive impact for the period January 1, 2004 to June 30, 2005. The government has announced that it is considering an amendment to change the retroactive date to January 1, 2005. We estimate that changing the retroactive date to January 1, 2005 would substantially reverse our adjustment. There can be no assurance, however, that an amendment will be introduced and passed into law.

Our third quarter results were also impacted by lower sales volumes. Our total sales volumes for the third quarter of 2005 were 229,000 tonnes lower than for the second quarter of 2005. Sales from our low cost Trinidad and Chile facilities, where we earn substantially all of our margins, were lower by 182,000 tonnes, primarily due to decreased production from these facilities during the quarter.

Our Chile and Trinidad production facilities produced 1.0 million tonnes during the third quarter of 2005 compared with an operating capacity of 1.4 million tonnes. Production from our Trinidad facilities was 140,000 tonnes lower than capacity due to unplanned maintenance turnarounds which were completed during the quarter. At our Chilean facilities, production was 276,000 tonnes lower than capacity, primarily due to the advancement of planned maintenance turnarounds to the third quarter, gas curtailments from Argentina and technical issues on the start-up of Chile IV. Chile IV has recently completed its reliability and performance tests and is operating well - refer to Production Summary.

In addition to these production factors, the hurricanes that impacted the United States Gulf Coast during the quarter disrupted our supply chain and reduced our sales volumes to customers in this region. Certain of our customers also had outages unrelated to the hurricanes and this further reduced our sales volumes. These factors, in addition to inventory movements and timing of production, caused us to temporarily adjust our sales levels and the timing of customer deliveries.

Going forward, now that Chile IV is through the start-up phase and turnarounds at our facilities in Trinidad and Chile have been completed, we expect that production from these low cost assets will increase substantially. We also expect that in the fourth quarter we will return to more historical sales levels, despite the closures of our Kitimat and Waitara Valley facilities. A higher proportion of our sales will come from our low cost Trinidad and Chile production hubs.


PRODUCTION SUMMARY

                             Q3           Q2      Q3  YTD Q3  YTD Q3
                           2005         2005    2004    2005    2004
(thousands                      PROD-   PROD-   PROD-   PROD-   PROD-
 of tonnes)         CAPACITY  UCTION  UCTION  UCTION  UCTION  UCTION
--------------------------------------------------------------------
--------------------------------------------------------------------

Chile and Trinidad:
 Chile I, II,
  III and IV             960     684     702     640   2,113   2,002
 Titan                   213     184     135     176     521     586
 Atlas
  (63.1% interest)       268     157     252     157     644     157
--------------------------------------------------------------------
                       1,441   1,025   1,089     973   3,278   2,745
Other:
 New Zealand             133     120     103     304     343     822
 Kitimat                 125     102     120     121     341     364
--------------------------------------------------------------------
                         258     222     223     425     684   1,186
--------------------------------------------------------------------
                       1,699   1,247   1,312   1,398   3,962   3,931
--------------------------------------------------------------------

Chile

Over the period from mid-May to mid-August (the winter season in the southern hemisphere), our Chilean facilities suffered production losses totaling approximately 100,000 tonnes as a result of curtailments of natural gas resulting from redirection orders from the Argentinean government. This compares with 50,000 tonnes over the same period in 2004. During the third quarter of 2005, curtailments of natural gas from Argentina represented 43,000 tonnes of lost production and temporary technical difficulties experienced by our gas supplier in Chile represented 10,000 tonnes of lost production. We have not suffered any production losses due to natural gas redirection orders by the Argentinean government since mid-August and curtailments to all regions of Chile have declined recently as weather has warmed in Argentina. There continues to be a relationship between temperatures in Argentina and gas curtailments to Chile.

We believe that these curtailments of natural gas have also been influenced by greater domestic demand in Argentina, the timing of increases of gas production and other dynamics related to the energy crisis in Argentina. We are exploring various possible mitigating actions that we could take to address any future potential curtailments. There can be no assurance, however, that natural gas supply to our facilities will not be impacted in the future.

To mitigate the impact of natural gas curtailments in 2005, we advanced planned maintenance turnarounds for two of our facilities in Chile from the fourth quarter to the third quarter and this reduced third quarter production by approximately 140,000 tonnes. Our new 840,000 tonne per year Chile IV methanol facility commenced operations at the end of the second quarter of 2005. We experienced some technical issues during start-up that resulted in approximately 50,000 tonnes of lost production during the quarter. Chile IV recently completed its start-up phase and is operating well. Excluding the impact of natural gas curtailments, planned turnarounds and the Chile IV start-up issues, our facilities in Chile operated at 97% of capacity during the third quarter. As a result of shifting the planned turnarounds to the third quarter and Chile IV coming on stream, our Chilean facilities represent 960,000 tonnes of available operating capacity in the fourth quarter.

Trinidad

During the third quarter of 2005, our Titan facility in Trinidad experienced an unplanned outage and this resulted in approximately 29,000 tonnes of lost production. The Atlas facility in Trinidad experienced operating problems during the third quarter related to technical design issues and this resulted in a 38 day shutdown to complete repairs. The reduced operating rate and the shutdown resulted in approximately 111,000 tonnes of lost production from the Atlas facility during the third quarter.

Kitimat and New Zealand

We reduced the operating rate at our Kitimat facility during the third quarter of 2005 in order to mitigate our exposure to high cost natural gas. During the third quarter, we announced our plans to permanently close the Kitimat facility in early January 2006 upon expiration of an ammonia offtake agreement with Mitsui & Co., Ltd. Subsequently, we were successful in further mitigating our exposure to high cost natural gas through an agreement with Mitsui to terminate the offtake agreement early and to cease production of methanol and ammonia on November 1, 2005.

During the third quarter of 2005, our 530,000 tonne per annum Waitara Valley, New Zealand methanol facility produced 120,000 tonnes compared with 103,000 tonnes during the second quarter. On September 30, 2005 we ceased production at this facility due to unfavourable economics. The Waitara Valley plant remains as a flexible production asset, with future operations dependent on securing economically priced natural gas.

EARNINGS ANALYSIS

Adjusted EBITDA

Commencing in 2005, we are providing separate discussion of the changes in Adjusted EBITDA related to our Kitimat and New Zealand facilities. Accordingly, the average realized methanol price, total cash cost and sales volume variances represent the changes in Adjusted EBITDA excluding the changes related to sales of Kitimat and New Zealand produced methanol. The change in cash margin earned by our Kitimat and New Zealand facilities is presented and analyzed separately. For a further discussion of the definitions and calculations used in our Adjusted EBITDA variance analysis, refer to How We Analyze Our Business provided at the end of this Management's Discussion and Analysis.


The change in Adjusted EBITDA resulted from the following:

                               Q3 2005        Q3 2005    YTD Q3 2005
                         COMPARED WITH  COMPARED WITH  COMPARED WITH
($ millions)                   Q2 2005        Q3 2004    YTD Q3 2004
--------------------------------------------------------------------
--------------------------------------------------------------------

Increase (decrease) to
 Adjusted EBITDA related
 to changes in:
 Average realized methanol
  price                          $ (16)         $  (8)          $ 68
 Total cash cost                    (7)           (18)           (36)
 Sales volumes                     (27)            (1)            50
 Margin earned from Kitimat
  and New Zealand facilities        (1)           (26)           (59)
 Margin on the sale of
  purchased methanol                 1             (4)           (13)
--------------------------------------------------------------------
                                 $ (50)         $ (57)          $ 10
--------------------------------------------------------------------

Average realized methanol price

We continue to operate in a favourable price environment underpinned by strong demand and high global energy prices. Our average realized price for the third quarter of 2005 was $240 per tonne compared with $256 per tonne for the second quarter of 2005 and $248 per tonne for the third quarter of 2004. Our average realized price for the nine month period ended September 30, 2005 was $253 per tonne compared with $232 per tonne for the same period in 2004. The impact on Adjusted EBITDA of changes in the average realized price for produced methanol is included in the above table.

The methanol industry is highly competitive and prices are affected by supply and demand fundamentals. We publish non-discounted prices for each major methanol market and offer discounts to customers based on various factors. For the third quarter of 2005 our average realized price was approximately 15% lower than our average non-discounted posted price. This compares with approximately 17% lower for the second quarter of 2005 and 10% lower for the third quarter of 2004. In order to reduce the impact of cyclical pricing on our earnings, for a portion of our production volume we have positioned ourselves with certain global customers under long-term contracts where prices are either fixed or linked to our costs plus a margin. The discount from our average non-discounted posted price has narrowed during the third quarter of 2005 compared with the second quarter of 2005 due primarily to the decline in our average non-discounted posted price over this period. The discount from our average non-discounted posted price for the third quarter of 2005 compared with the same period in 2004 has increased primarily as a result of higher sales volumes under these long-term contracts in 2005. We believe it is important to maintain financial flexibility throughout the methanol price cycle and these strategic contracts are a part of our balanced approach to the management of cash flow and liquidity through the methanol price cycle.

Total cash cost

Maintaining a low cost structure provides a competitive advantage in a commodity industry and is a key element of our strategy. Our low cost production facilities in Chile and Trinidad are underpinned by long-term low cost take-or-pay natural gas purchase agreements with pricing terms that are linked to methanol prices above a pre-determined floor price. We believe this enables these facilities to be competitive throughout the methanol price cycle.

Total cash costs for the third quarter of 2005 were higher than in second quarter of 2005 by $7 million due to higher ocean shipping fuel costs, maintenance at our production facilities and $2 million in costs associated with the completion of our NAFTA claim. Total cash costs for the three and nine month periods ended September 30, 2005 were higher than in the same periods in 2004 by $18 million and $36 million, respectively. Approximately $9 million and $30 million, respectively, of the increases relate to higher costs for natural gas at our Chile and Trinidad facilities primarily as a result of higher methanol prices in 2005. The remaining increase for both periods relates primarily to higher costs associated with unplanned outages at our facilities in Chile and Trinidad, higher ocean shipping fuel costs and costs associated with the completion of our NAFTA claim.

Sales volumes

Sales volumes of methanol produced at our low cost Chile and Trinidad production hubs were lower by 182,000 tonnes for the third quarter of 2005 compared with the second quarter of 2005 and this reduced Adjusted EBITDA by $27 million. Sales volumes of production from Chile and Trinidad on a year-to-date basis were 499,000 tonnes higher than for the same period in 2004 and this increased Adjusted EBITDA by $50 million. Over the past year we have introduced 1.9 million tonnes of annual low cost production capability in Chile and Trinidad. As a result of planned and unplanned outages and the gradual production increase during the start-up of Chile IV, sales volumes from our low cost production facilities for the third quarter were lower than operating capacity.

Margin earned from Kitimat and New Zealand facilities

Our cash margin on sales of Kitimat and New Zealand production was a net loss of $3 million during the third quarter of 2005 compared with a net loss of $2 million for the second quarter. For the third quarter, a $6 million loss incurred by our Kitimat facility due to the high cost of natural gas was offset by a positive contribution of $3 million from our New Zealand facility. As previously discussed, we have announced our plan to permanently close our Kitimat facility in early November. We expect to sell our remaining inventories of this high cost product, including October production, during the fourth quarter. On September 30, 2005, we ceased production at our Waitara Valley, New Zealand facility.

For the three and nine month periods ended September 30, 2005 compared with the same periods in 2004, lower cash margins from our Kitimat and New Zealand facilities decreased Adjusted EBITDA by $26 million and $59 million, respectively. The decrease in cash margins compared with 2004 relates to significantly lower sales volumes of New Zealand production, increased cash costs in New Zealand and higher natural gas costs for our Kitimat facility. Our costs in New Zealand were lower in 2004, primarily as a result of favourable New Zealand dollar foreign currency forward contracts that expired during the third quarter of 2004.

Margin on the sale of purchased methanol

We purchase additional methanol produced by others on the spot market or through long-term offtake contracts in order to meet customer needs and support our marketing efforts. Consequently, we realize holding gains or losses on the resale of this product depending on the methanol price at the time of resale. Our cash margin was nil on the sale of 0.3 million tonnes during the third quarter of 2005 compared with a gain of $4 million on the sale of 0.4 million tonnes for the third quarter of 2004. For the nine month period ended September 30, 2005, we incurred a loss of $4 million on the resale of purchased methanol compared with a gain of $9 million for the same period in 2004. Methanol prices were increasing during 2004 and as a result we realized holding gains on the resale of purchased methanol. In contrast, methanol prices have remained relatively stable during 2005.

Depreciation and Amortization

Depreciation and amortization was $23 million for the third quarter of 2005 compared with $22 million for the second quarter of 2005 and $20 million for the same period in 2004. For the nine month period ended September 30, 2005, depreciation and amortization was $65 million compared with $57 million for the same period in 2004. The increase in depreciation and amortization for the nine month period ended September 30, 2005 compared with the same period in 2004 is primarily due to the depreciation of the Atlas methanol facility, which commenced operations during the third quarter of 2004, and the Chile IV methanol facility, which entered the start-up phase and commenced operations during the second quarter of 2005.

Interest Expense & Interest and Other Income


                            THREE MONTHS ENDED     NINE MONTHS ENDED
                        ----------------------     -----------------
                        SEP 30  JUN 30  SEP 30        SEP 30  SEP 30
($ millions)              2005    2005    2004          2005    2004
--------------------------------------------------------------------
--------------------------------------------------------------------

Interest expense before
 capitalized interest     $ 11    $ 14    $ 14          $ 39    $ 41
Less capitalized interest:
 Chile IV                    -      (3)     (4)           (8)    (10)
 Atlas                       -       -      (1)            -     (10)
--------------------------------------------------------------------
Interest expense          $ 11    $ 11    $  9          $ 31    $ 21
--------------------------------------------------------------------

Interest and other income $  7    $  -    $  1          $  8    $  5
--------------------------------------------------------------------

Interest incurred during construction is capitalized to the cost of the asset until the asset is substantively complete and ready for productive use. The Atlas methanol facility commenced operations during the third quarter of 2004 and Chile IV commenced operations during the second quarter of 2005.

Included in interest and other income for the third quarter of 2005 is a gain of $3 million on the disposition of certain assets in New Zealand. The remaining change in interest and other income for the third quarter of 2005 compared with the same period in 2004 relates to the impact on earnings of higher interest income and changes in foreign exchange rates.

Income Taxes

During the third quarter of 2005, the government of Trinidad introduced new tax legislation retroactive to January 1, 2004. As a result, during the third quarter of 2005, we recorded a $17 million adjustment to increase future income taxes to reflect the retroactive impact for the period January 1, 2004 to June 30, 2005. The government has announced that it is considering an amendment to change the retroactive date to January 1, 2005. We estimate that changing the retroactive date to January 1, 2005 would substantially reverse our adjustment. There can be no assurance, however, that an amendment will be introduced and passed into law.

Excluding the unusual items relating to the Kitimat closure costs and the Trinidad tax adjustment, the tax rate for the third quarter was 42% compared with 28% for the second quarter of 2005 and 27% for the third quarter of 2004. The tax rate increased as a result of higher losses in Canada, where we do not recognize the benefit of tax losses, and the impact on ongoing operations from the recent change in tax legislation in Trinidad.

SUPPLY/DEMAND FUNDAMENTALS

We continue to operate in a favourable price environment and a balanced market. Towards the end of the third quarter, MHTL announced that its 1.8 million tonne plant in Trinidad had commenced operations. Also during the third quarter, we announced the permanent closure of our 0.5 million tonne Kitimat facility and the idling of 0.5 million tonnes of capacity in New Zealand. Since the beginning of September, approximately 3 million tonnes of annual capacity in North America, Europe and New Zealand has either been shut down or had its operating rate reduced. We believe that there is still approximately 1.3 million tonnes of annual capacity operating in North America that is exposed to high feedstock costs. The plants that have recently been idled or are expected to be idled substantially offset the supply from the new MHTL plant in Trinidad.

In addition, there are a number of smaller-scale plants in China expected to be completed during 2005. We continue to believe that substantially all Chinese methanol production will be consumed within the Chinese market.

Methanex non-discounted posted prices for October 2005 are $319 per tonne ($0.96 per gallon) in the United States and $280 per tonne in Asia. The European quarterly contract price for the third quarter of 2005 was held at EUR 220, however, the Methanex non-discounted posted contract price in Europe was increased by EUR 15 to EUR 235 (US$285 per tonne at the time of settlement compared with US$267 at July 2005). Currently, spot prices in the United States are approximately $266 to $273 per tonne ($0.80 to $0.82 per gallon) and spot prices in Europe (FOB Rotterdam) are approximately EUR 215 per tonne. Prices in Asia are currently between $225 and $250 per tonne.


METHANEX NON DISCOUNTED REGIONAL POSTED CONTRACT PRICES
                                         OCT        JUL
US$ per tonne                           2005       2005
-------------------------------------------------------
-------------------------------------------------------

United States                           $319       $299
Europe(i)                               $285       $267
Asia                                    $280       $280

(i) EUR 235 at October 2005 (July 2005 - EUR 220)
    converted to United States dollars at the date of
    settlement.
-------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities before changes in non-cash working capital in the third quarter of 2005 were $29 million compared with $109 million for the same period in 2004. For the nine month period ended September 30, 2005, cash flows from operating activities before changes in non-cash working capital were $244 million compared with $271 million for the same period in 2004. The changes in cash flows from operating activities before changes in non-cash working capital are primarily the result of changes in the level of earnings.

During the third quarter of 2005, we issued $150 million of 6.00% notes due August 15, 2015. The net proceeds, together with cash on hand, were used to repay $250 million of 7.75% notes at maturity on August 15, 2005. As a result of these transactions, our total long-term debt was reduced by $100 million.

During the third quarter of 2005, we repurchased for cancellation 1.0 million shares at an average price of US$14.92 per share, totaling $15 million, under a normal course issuer bid that expires May 16, 2006. At September 30, 2005, we have repurchased a total of 1.6 million common shares under this bid with a maximum allowable repurchase of 5.9 million common shares. For the nine months ended September 30, 2005, we repurchased 4.7 million common shares at an average price of US$17.55, or $82 million.

During the third quarter of 2005, we paid a quarterly dividend of US$0.11 per share, or $13 million, compared with $0.08 per share, or $9 million, for the third quarter of 2004. For the nine month period ended September 30, 2005 we paid total dividends of US$0.30 per share, or $35 million, compared with US$0.20 per share, or $24 million, for the same period in 2004.

Capital expenditures for Chile IV during the third quarter of 2005 were $7 million and the remaining costs to complete the facility at September 30, 2005 are estimated to be $16 million. During the third quarter of 2005, we incurred capital expenditures related to turnarounds of approximately $26 million for our facilities in Chile and Trinidad.

We have strong financial capacity and flexibility. Our cash balance at September 30, 2005 was $152 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 currently estimated to total approximately $90 million from the fourth quarter of 2005 to the end of 2008.

We have the financial capacity to complete our capital maintenance spending program, pursue new opportunities to enhance our leadership position in the methanol industry and continue to deliver on our commitment to maintain a prudent balance sheet and return excess cash to shareholders.


The credit ratings for our unsecured notes at September 30, 2005
were as follows:

----------------------------------------------------------------
----------------------------------------------------------------
Standard & Poor's Rating Services             BBB- (stable)
Moody's Investor Services                     Ba1 (stable)
Fitch Ratings                                 BBB (stable)

Credit ratings are not recommendations to purchase, hold or sell
securities and do not comment on market price or suitability for
a particular investor. There is no assurance that any rating will
remain in effect for any given period of time or that any rating
will not be revised or withdrawn entirely by a rating agency in
the future.
----------------------------------------------------------------

STRONG-TERM OUTLOOK

Industry fundamentals and methanol pricing remain favourable. In addition to the announced shutdowns of our Kitimat and New Zealand facilities, the high global energy price environment has led to other announcements regarding the shutdowns of higher cost production in North America and Europe. The plants that have recently been idled or are expected to be idled substantially offset the supply from the new MHTL plant in Trinidad. The methanol price will ultimately depend on industry operating rates, the rate of industry restructuring and the strength of global demand.

We enter the fourth quarter in an excellent position to enjoy much higher production and sales from our low cost Chile and Trinidad operations. 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.

October 26, 2005

ADDITIONAL INFORMATION - SUPPLEMENTAL NON-GAAP MEASURES

In addition to providing measures prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), Methanex presents supplemental non-GAAP measures. These are Adjusted EBITDA, income before unusual items (after-tax) and diluted income before unusual items (after-tax) per share. These supplemental non-GAAP measures do not have standardized meanings prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Management believes these measures are useful in assessing performance and highlighting trends on an overall basis. Management also believes Adjusted EBITDA is frequently used by securities analysts and investors when comparing our results with those of other companies.

Adjusted EBITDA

Adjusted 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 and cash flows related to interest expense, interest and other income, income taxes and unusual items, including the Kitimat closure costs recorded during the third quarter of 2005. This measure 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.

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


                              THREE MONTHS ENDED   NINE MONTHS ENDED
                   ----------------------------- -------------------
                     SEP 30     JUN 30    SEP 30    SEP 30    SEP 30
 ($ thousands)         2005       2005      2004      2005      2004
--------------------------------------------------------------------
--------------------------------------------------------------------
Cash flows
 from operating
 activities       $  45,778  $ 115,488 $  63,256 $ 255,087 $ 221,156
Add (deduct):
 Changes in
  non-cash
  working capital   (16,718)   (16,344)   45,421   (10,847)   50,005
 Other non-cash
  items              (4,347)    (4,791)   (4,493)  (13,638)   (8,257)
 Kitimat closure
  costs              29,125          -         -    29,125         -
 Interest expense    11,424     10,514     8,715    30,999    21,344
 Interest and
  other income       (7,001)      (108)     (941)   (8,371)   (4,500)
 Income taxes -
  current            11,011     14,831    13,944    41,207    33,870
--------------------------------------------------------------------
Adjusted EBITDA   $  69,272  $ 119,590 $ 125,902 $ 323,562 $ 313,618
--------------------------------------------------------------------

Income before Unusual Items (after-tax) and Diluted Income before Unusual Items (after-tax) Per Share

These supplemental non-GAAP measures are provided to assist readers in comparing earnings from one period to another without the impact of unusual items that management considers to be non-operational and/or non-recurring. Diluted income before unusual items (after-tax) per share has been calculated by dividing income before unusual items (after-tax) by the diluted weighted average number of common shares outstanding. For the three month period ended September 30, 2005, the diluted weighted average number of common shares outstanding for the calculation of diluted income before unusual items (after-tax) per share differs from the diluted weighted average number of common shares outstanding for the calculation of net loss per share. For the calculation of diluted weighted average number of common shares outstanding for the calculation of net loss per share, the effect of dilutive stock options of 342,076 has not been included as the impact would be anti-dilutive.

The following table shows a reconciliation of net income (loss) to income before unusual items (after-tax) and the calculation of diluted income before unusual items (after-tax) per share:


                          THREE MONTHS ENDED       NINE MONTHS ENDED
           --------------------------------- -----------------------
              SEP 30      JUN 30      SEP 30      SEP 30      SEP 30
($ thousands)   2005        2005        2004        2005        2004
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income
 (loss):   $ (21,789) $   62,935 $    71,178 $   117,178 $   170,383
Add unusual
 items:
 Kitimat
  closure
  Costs       29,125           -           -      29,125           -
 Adjustment
  to taxes
  related to
  retroactive
  change in
  legislation 16,879           -           -      16,879           -
--------------------------------------------------------------------
Income
 before
 unusual
 items
 (after-
 tax)      $  24,215 $    62,935 $    71,178 $   163,182 $   170,383
--------------------------------------------------------------------
Diluted
 weighted
 average
 number
 of common
 shares
 outstanding
 (millions
 of
 shares) 117,849,760 118,938,355 123,242,174 119,262,710 123,380,954
--------------------------------------------------------------------
Diluted
 income
 before
 unusual
 items
 (after-
 tax) per
 share     $    0.21 $      0.53 $      0.58 $      1.37 $      1.38
--------------------------------------------------------------------


QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of selected financial information for the prior eight
quarters is as follows:

                                        THREE MONTHS ENDED
                          ------------------------------------------
($ thousands, except per      SEP 30     JUN 30     MAR 31    DEC 31
 share amounts)                 2005       2005       2005      2004
--------------------------------------------------------------------
--------------------------------------------------------------------
Revenue                   $  349,291 $  410,914 $  438,300 $ 485,408
Net income (loss)            (21,789)    62,935     76,032    66,061
Basic net income (loss)
 per common share              (0.19)      0.53       0.63      0.55
Diluted net income (loss)
 per common share              (0.19)      0.53       0.63      0.54
--------------------------------------------------------------------

                                        THREE MONTHS ENDED
                          ------------------------------------------
($ thousands, except per      SEP 30     JUN 30     MAR 31    DEC 31
 share amounts)                 2004       2004       2004      2003
--------------------------------------------------------------------
--------------------------------------------------------------------
Revenue                   $  428,840 $  412,283 $  392,953 $ 358,421
Net income (loss)             71,178     52,375     46,830  (111,696)
Basic net income (loss)
 per common share               0.59       0.43       0.39     (0.93)
Diluted net income (loss)
 per common share               0.58       0.42       0.38     (0.93)
--------------------------------------------------------------------

Our quarterly revenues are not materially impacted by seasonality.

HOW WE ANALYZE OUR BUSINESS

We review our results of operations by analyzing changes in the components of our Adjusted EBITDA, depreciation and amortization, interest expense, interest and other income and income taxes. In addition to the methanol that we produce at our facilities, we also purchase and re-sell methanol produced by others. We analyze the impact of produced methanol sales separately from purchased methanol sales as the margin characteristics of each are very different.

The discussion of purchased methanol and its impact on our results of operations is more meaningfully discussed on a net margin basis, because the cost of sales of purchased methanol consists principally of the cost of the methanol itself, which is directly related to the price of methanol at the time of purchase. We previously allocated storage and handling costs to each source of product for the purposes of this analysis. These costs are now included in the cost variance described below as they do not fluctuate significantly from one period to another and are not impacted by the sales volumes of purchased methanol.

Commencing in 2005, we are providing discussion of the changes in Adjusted EBITDA related to our Kitimat and New Zealand facilities separately from the changes in Adjusted EBITDA related to our Chile and Trinidad facilities. The average realized methanol price, total cash cost and sales volume variances described in this Management's Discussion and Analysis represent the changes in Adjusted EBITDA excluding the changes related to sales of Kitimat and New Zealand produced methanol. The change in cash margin related to our Kitimat and New Zealand facilities is presented separately. Natural gas is the primary feedstock at our methanol production facilities. Our low cost Chile and Trinidad production hubs are underpinned by long-term low cost take-or-pay natural gas purchase contracts with pricing terms that vary with methanol prices. We believe this relationship enables these facilities to be competitive throughout the methanol price cycle and, accordingly, changes in the average realized methanol price, sales volume and total cash cost for methanol produced at these facilities are the key drivers of changes in our Adjusted EBITDA. In comparison, our facilities in Kitimat and New Zealand incur higher production costs and their operating results represent a smaller proportion of our Adjusted EBITDA.

The price, cost and volume variances included in our Adjusted EBITDA analysis are defined and calculated as follows:


PRICE     The change in our Adjusted EBITDA as a result of changes
          in average realized methanol price is calculated as the
          difference from period-to-period in the selling price of
          produced methanol multiplied by the current period sales
          volume of methanol produced at our Chile and Trinidad
          facilities. Sales under long-term contracts where the
          prices are either fixed or linked to our costs plus a
          margin are included as sales of produced methanol.

COST      The change in our Adjusted EBITDA as a result of changes
          in cash costs is calculated as the difference from period-
          to-period in variable cash cost per tonne multiplied by
          the sales volume of methanol produced at our Chile and
          Trinidad facilities in the current period, plus the change
          in fixed production costs, selling, general and
          administrative expenses and fixed storage and handling
          costs.

VOLUME    The change in our Adjusted EBITDA as a result of changes
          in sales volume is calculated as the difference from
          period-to-period in the sales volume of methanol produced
          at our Chile and Trinidad facilities multiplied by the
          margin per tonne for the prior period. The margin per
          tonne is calculated as the difference between the selling
          price per tonne and the variable cash cost per tonne.

FORWARD-LOOKING STATEMENTS

Statements made in this document that are based on our current expectations, estimates and projections constitute forward-looking statements. Forward-looking statements are based on our experience and perception of trends, current conditions, expected future developments and other factors. By their nature, forward-looking statements involve uncertainties and risks that may cause the stated outcome to differ materially from the actual outcome.

Important factors that can cause anticipated outcomes to differ materially from actual outcomes include worldwide economic conditions; conditions in the methanol and other industries, including the supply and demand balance for methanol; actions of competitors; changes in laws or regulations; the ability to implement business strategies, pursue business opportunities and maintain and enhance our competitive advantages; the risks attendant with methanol production and marketing, including operational disruption; the risks associated with carrying out capital expenditure projects, including disruptions during the start up phase of our Chile IV plant or that this project will be completed on budget; availability and price of natural gas feedstock; foreign exchange risk; raw material and other production costs; transportation costs; the ability to attract and retain qualified personnel; the risks associated with investments and operations in multiple jurisdictions and other risks that we may describe in publicly available documents filed from time to time with securities commissions.

Having in mind these and other factors, many of which are described in this document, readers are cautioned not to place undue reliance on forward-looking statements. We do not guarantee that anticipated outcomes made in forward-looking statements will be realized.


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

                        THREE MONTHS ENDED         NINE MONTHS ENDED
                 -------------------------  ------------------------
                       SEP 30       SEP 30       SEP 30       SEP 30
                         2005         2004         2005         2004
--------------------------------------------------------------------

Revenue          $    349,291  $   428,840  $ 1,198,505  $ 1,234,076
Cost of sales
 and operating
 expenses             280,019      302,938      874,943      920,458
Depreciation
 and amortization      23,315       20,188       64,799       56,817
Kitimat closure
 costs (note 10)       29,125            -       29,125            -
--------------------------------------------------------------------
Operating income
 before undernoted
 items                 16,832      105,714      229,638      256,801
Interest expense
 (note 8)             (11,424)      (8,715)     (30,999)     (21,344)
Interest and other
 income                 7,001          941        8,371        4,500
--------------------------------------------------------------------
Income before
 income taxes          12,409       97,940      207,010      239,957

Income taxes:
 Current              (11,011)     (13,944)     (41,207)     (33,870)
 Future                (6,308)     (12,818)     (31,746)     (35,704)
 Adjustment related
  to retroactive change
  in tax legislation
  (note 5)            (16,879)           -      (16,879)           -
--------------------------------------------------------------------
                      (34,198)     (26,762)     (89,832)     (69,574)
--------------------------------------------------------------------
Net income
 (loss)          $    (21,789) $    71,178  $   117,178  $   170,383
--------------------------------------------------------------------


Net income (loss)
 per common share:
 Basic           $      (0.19) $      0.59  $      0.99  $      1.40
 Diluted         $      (0.19) $      0.58  $      0.98  $      1.38

Weighted average
 number of common
 shares outstanding:
 Basic            117,507,684  121,618,362  118,604,678  121,904,763
 Diluted          117,507,684  123,242,174  119,262,710  123,380,954

Period end number
 of common shares
 outstanding      116,624,767  119,952,367  116,624,767  119,952,367

See accompanying notes to consolidated financial statements.


METHANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(thousands of U.S. dollars)

                                                  SEP 30      DEC 31
                                                    2005        2004
--------------------------------------------------------------------
                                              (unaudited)
ASSETS

Current assets:
 Cash and cash equivalents                  $    152,246 $   210,049
 Receivables                                     212,300     293,207
 Inventories                                     161,986     142,164
 Prepaid expenses                                 17,036      16,480
--------------------------------------------------------------------
                                                 543,568     661,900
Property, plant and equipment (note 2)         1,392,588   1,366,787
Other assets                                      87,873      96,194
--------------------------------------------------------------------
                                            $  2,024,029 $ 2,124,881
--------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Accounts payable and accrued liabilities   $    171,626 $   230,758
 Current maturities on long-term debt
  and other long-term liabilities                 22,056     268,303
--------------------------------------------------------------------
                                                 193,682     499,061
Long-term debt (note 4)                          493,932     350,868
Other long-term liabilities                       61,132      60,170
Future income taxes (note 5)                     314,163     265,538
Shareholders' equity:
 Capital stock                                   515,355     523,255
 Contributed surplus                               3,520       3,454
 Retained earnings                               442,245     422,535
--------------------------------------------------------------------
                                                 961,120     949,244
--------------------------------------------------------------------
                                            $  2,024,029 $ 2,124,881
--------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


METHANEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
(thousands of U.S. dollars, except number of common shares)

                      NUMBER                                   TOTAL
                          OF                CON-               SHARE-
                      COMMON   CAPITAL TRIBUTED  RETAINED    HOLDERS'
                      SHARES     STOCK  SURPLUS  EARNINGS     EQUITY
--------------------------------------------------------------------
Balance,
 December 31,
 2003            120,007,767 $ 499,258 $  7,234 $ 279,039 $  785,531
Year ended
 December 31,
 2004
 Net income                -         -        -   236,444    236,444
 Compensation
  expense related
  to stock options
  included in net
  income                   -         -    1,738         -      1,738
 Proceeds on issue
  of shares on
  exercise of
  stock options    6,158,250    44,654        -         -     44,654
 Reclassification
  of grant date
  fair value on
  exercise of
  stock options            -     5,518   (5,518)        -          -
 Payments for shares
  repurchased     (6,143,600)  (26,175)       -   (59,545)   (85,720)
 Dividend payments         -         -        -   (33,403)   (33,403)
--------------------------------------------------------------------
Balance,
 December 31,
 2004            120,022,417   523,255    3,454   422,535    949,244
Six month period
 ended June 30, 2005
 Net income                -         -        -   138,967    138,967
 Compensation expense
  related to stock
  options included
  in net income            -         -    1,316         -      1,316
 Proceeds on issue
  of shares on exercise
  of stock options 1,254,600     9,944        -         -      9,944
 Reclassification of
  grant date fair
  value on exercise
  of stock options         -     1,950   (1,950)        -          -
 Payments for shares
  repurchased     (3,649,400)  (15,684)       -   (51,089)   (66,773)
 Dividend payments         -         -        -   (22,541)   (22,541)
--------------------------------------------------------------------
Balance,
 June 30, 2005   117,627,617 $ 519,465 $  2,820 $ 487,872 $1,010,157
Three month
 period ended
 September 30,
 2005
 Net loss                  -         -        -   (21,789)   (21,789)
 Compensation expense
  related to stock
  options included
  in net loss              -         -      786         -        786
 Proceeds on issue
  of shares on
  exercise of
  stock options       27,150       230        -         -        230
 Reclassification
  of grant date fair
  value on exercise
  of stock options         -        86      (86)        -          -
 Payments for shares
  repurchased     (1,030,000)   (4,426)       -   (10,938)   (15,364)
 Dividend payments         -         -        -   (12,900)   (12,900)
--------------------------------------------------------------------
Balance,
 September 30,
 2005            116,624,767 $ 515,355 $  3,520 $ 442,245 $  961,120
--------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


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

                          THREE MONTHS ENDED       NINE MONTHS ENDED
                       --------------------- -----------------------
                          SEP 30      SEP 30      SEP 30      SEP 30
                            2005        2004        2005        2004
--------------------------------------------------------------------

CASH FLOWS FROM
 OPERATING
 ACTIVITIES
Net income (loss)      $ (21,789)   $ 71,178   $ 117,178   $ 170,383
Add:
 Depreciation and
  amortization            23,315      20,188      64,799      56,817
 Future income taxes      23,187      12,818      48,625      35,704
 Other                     4,347       4,493      13,638       8,257
--------------------------------------------------------------------
Cash flows from
 operating activities
 before undernoted
 changes                  29,060     108,677     244,240     271,161
Receivables               43,571     (13,499)     91,269     (34,695)
Inventories              (15,949)    (30,405)    (16,101)    (14,438)
Prepaid expenses           1,628       1,982        (556)       (369)
Accounts payable and
 accrued liabilities     (12,532)     (3,499)    (63,765)       (503)
--------------------------------------------------------------------
                          45,778      63,256     255,087     221,156
--------------------------------------------------------------------

CASH FLOWS FROM
 FINANCING ACTIVITIES
Repayment of
 long-term debt         (250,000)          -    (250,000)          -
Proceeds on issue
 of long-term debt,
 net of discount and
 financing costs         148,090           -     148,090           -
Payments for
 shares repurchased      (15,364)    (42,314)    (82,137)    (60,230)
Dividend payments        (12,900)     (9,360)    (35,441)    (23,778)
Proceeds on issue
 of shares on
 exercise of
 stock options               230       1,789      10,174      33,600
Repayment of limited
 recourse long-term debt       -           -      (4,032)   (182,758)
Proceeds on issue of
 limited recourse
 long-term debt                -           -           -      14,887
Release of restricted cash     -           -           -      14,258
Repayment of other
 long-term liabilities      (282)     (7,728)     (7,922)    (11,654)
--------------------------------------------------------------------
                        (130,226)    (57,613)   (221,268)   (215,675)
--------------------------------------------------------------------

CASH FLOWS FROM
 INVESTING ACTIVITIES
Plant and equipment
 under construction       (7,419)    (25,263)    (39,377)   (111,878)
Property, plant
 and equipment           (25,837)     (9,892)    (57,073)    (17,229)
Changes in non-cash
 working capital
 related to
 investing activities      3,592      (8,534)      5,968       1,994
Other assets                 246      (2,426)     (1,140)     (4,532)
--------------------------------------------------------------------
                         (29,418)    (46,115)    (91,622)   (131,645)
--------------------------------------------------------------------
Increase (decrease)
 in cash and cash
 equivalents            (113,866)    (40,472)    (57,803)   (126,164)
Cash and cash
 equivalents,
 beginning of period     266,112     202,171     210,049     287,863
--------------------------------------------------------------------
Cash and cash
 equivalents,
 end of period         $ 152,246   $ 161,699   $ 152,246   $ 161,699
--------------------------------------------------------------------

SUPPLEMENTARY
 CASH FLOW INFORMATION
Interest paid, net of
 capitalized interest  $  13,485   $  14,664   $  35,018   $  32,686
Income taxes paid, net
 of amounts refunded   $  16,904   $   7,521   $  40,756   $  35,196
--------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

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 are prepared in accordance with generally accepted accounting principles in Canada on a basis consistent with those followed in the most recent annual consolidated financial statements. 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 2004 Annual Report.


2. PROPERTY, PLANT AND EQUIPMENT:

                                            ACCUMULATED     NET BOOK
                                     COST  DEPRECIATION        VALUE
--------------------------------------------------------------------
--------------------------------------------------------------------
September 30, 2005
Plant and equipment          $  2,720,698  $  1,361,772 $  1,358,926
Other                              66,415        32,753       33,662
--------------------------------------------------------------------
                             $  2,788,813  $  1,394,525 $  1,392,588
--------------------------------------------------------------------

December 31, 2004
Plant and equipment          $  2,422,148  $  1,302,701 $  1,119,447
Plant and equipment
 under construction               222,443             -      222,443
Other                              53,976        29,079       24,897
--------------------------------------------------------------------
                             $  2,698,567  $  1,331,780 $  1,366,787
--------------------------------------------------------------------


During June 2005, Chile IV entered the start-up phase of operations
and the cost has been reclassified from plant and equipment under
construction to plant and equipment.

3. INTEREST IN ATLAS JOINT VENTURE:

The Company has a 63.1% joint venture interest in Atlas Methanol
Company (Atlas), a joint venture that has a 1.7 million tonne per
year methanol plant in Trinidad. Included in the consolidated
financial statements are the following amounts representing the
Company's proportionate interest in the Atlas joint venture:

                                        SEP 30, 2005    DEC 31, 2004
--------------------------------------------------------------------
Consolidated Balance Sheets:
 Cash and cash equivalents              $     39,302    $     13,981
 Other current assets                         27,183          21,677
 Property, plant and equipment               285,328         284,336
 Other assets                                 14,590          14,930
 Current liabilities, excluding
  current maturities on long-term debt        20,529          30,112
 Future income taxes                          19,783               -
 Long-term debt, including
  current maturities                         154,980         159,012
--------------------------------------------------------------------

                        THREE MONTHS ENDED         NINE MONTHS ENDED
                     ---------------------     ---------------------
                        SEP 30,     SEP 30,       SEP 30,     SEP 30,
                          2005        2004          2005        2004
--------------------------------------------------------------------
--------------------------------------------------------------------
Consolidated Statements
 of Income (loss):

 Revenue             $  27,654   $  17,348     $ 153,681   $  17,348
 Expenses               23,649      13,254       103,885      13,254
--------------------------------------------------------------------
 Income before
  income taxes           4,005       4,094        49,796       4,094
 Future income taxes   (19,783)          -       (19,783)          -
--------------------------------------------------------------------
 Net income (loss)   $ (15,203)  $   4,094     $  30,588   $   4,094
--------------------------------------------------------------------

Consolidated Statements
 of Cash Flows:
 Cash inflows
  from operating
  activities         $   7,786   $   7,318     $  38,767   $   7,318
 Cash inflows
  (outflows) from
  financing
  activities                 -           -        (4,032)     14,887
 Cash outflows
  from investing
  activities            (5,606)     (4,752)       (9,414)    (47,166)
--------------------------------------------------------------------
--------------------------------------------------------------------

4. LONG-TERM DEBT:

                                        SEP 30, 2005    DEC 31, 2004
--------------------------------------------------------------------
Unsecured notes
 8.75% due August 15, 2012              $    200,000    $    200,000
 6.00% due August 15, 2015                   150,000               -
 7.75% due August 15, 2005                         -         249,920
--------------------------------------------------------------------
                                             350,000         449,920
Atlas limited recourse debt facilities       154,980         159,012
--------------------------------------------------------------------
                                             504,980         608,932
Less current maturities                      (11,048)       (258,064)
--------------------------------------------------------------------
                                        $    493,932    $    350,868
--------------------------------------------------------------------

The limited recourse debt facilities of Atlas are described as
limited recourse as they are secured only by the assets of the joint
venture.

5. FUTURE INCOME TAXES:

During the third quarter of 2005, the government of Trinidad
introduced new tax legislation retroactive to January 1, 2004. As
a result, during the three month period ended September 30, 2005
we recorded a $17 million adjustment to increase future income taxes
to reflect the retroactive impact for the period January 1, 2004 to
June 30, 2005. The government has announced that it is considering an
amendment to change the retroactive date to January 1, 2005. We
estimate that changing the retroactive date to January 1, 2005 would
substantially reverse our adjustment. There can be no assurance,
however, that an amendment will be introduced and passed into law.

6. NET INCOME (LOSS) PER COMMON SHARE:

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

                        THREE MONTHS ENDED         NINE MONTHS ENDED
                   -----------------------   -----------------------
                        SEP 30,     SEP 30,       SEP 30,     SEP 30,
                          2005        2004          2005        2004
--------------------------------------------------------------------
--------------------------------------------------------------------
Denominator for
 basic net income
 (loss) per
 common share      117,507,684 121,618,362   118,604,678 121,904,763
Effect of dilutive
 stock options               -   1,623,812       658,032   1,476,191
--------------------------------------------------------------------
Denominator for
 diluted net
 income (loss)
 per common share  117,507,684 123,242,174   119,262,710 123,380,954
--------------------------------------------------------------------

The effect of diluted stock options of 342,076 has not been
included in the computation of the denominator for diluted net
income (loss) per common share for the three month period ended
September 30, 2005 as the effect would be anti-dilutive.

7. STOCK-BASED COMPENSATION:

(a) Stock options:

i) Incentive stock options:

Common shares reserved for outstanding incentive stock options
at September 30, 2005:

                                      OPTIONS                OPTIONS
                                  DENOMINATED            DENOMINATED
                                      IN CAD$                 IN US$
                           ------------------  ---------------------
                            NUMBER   WEIGHTED     NUMBER    WEIGHTED
                                OF    AVERAGE         OF     AVERAGE
                             STOCK   EXERCISE      STOCK    EXERCISE
                           OPTIONS      PRICE    OPTIONS       PRICE
--------------------------------------------------------------------
--------------------------------------------------------------------
Outstanding at
 December 31, 2004         784,675  $   10.82  1,397,000  $     8.36
Granted                          -          -    652,750       17.73
Exercised                 (403,800)     11.76   (696,800)       7.93
Cancelled                  (15,500)     14.63          -        9.64
--------------------------------------------------------------------
Outstanding at
 June 30, 2005             365,375  $    9.61  1,348,100  $    13.12
Granted                          -          -     30,000       15.04
Exercised                   (9,500)      8.84    (17,650)       9.02
Cancelled                        -          -     (5,500)      13.93
--------------------------------------------------------------------
Outstanding at
 September 30, 2005        355,875  $    9.63  1,354,950  $    13.21
--------------------------------------------------------------------
--------------------------------------------------------------------
Exercisable at
 September 30, 2005        355,875  $    9.63    396,300  $     8.20
--------------------------------------------------------------------

ii) Performance stock options:

Common shares reserved for outstanding performance stock options
at September 30, 2005:


                                       NUMBER OF    AVERAGE EXERCISE
                                   STOCK OPTIONS         PRICE (CAD$)
--------------------------------------------------------------------
--------------------------------------------------------------------
Outstanding at December 31, 2004         204,000         $      4.47
Exercised                               (154,000)               4.47
--------------------------------------------------------------------
Outstanding at June 30, 2005
 and September 30, 2005                   50,000         $      4.47
--------------------------------------------------------------------

As at September 30, 2005, all outstanding performance stock options
have vested and are exercisable.

iii) Compensation expense related to stock options:

Compensation expense related to stock options included in cost of
sales and operating expenses is $0.8 million for the three month
period ended September 30, 2005 (2004 - $0.3 million) and $2.1
million for the nine month period ended September 30, 2005 (2004 -
$1.4 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:

                                            2005                2004
--------------------------------------------------------------------
--------------------------------------------------------------------
Risk-free interest rate                        4%                  3%
Expected dividend yield                        2%                  2%
Expected life                            5 years             5 years
Expected volatility                           43%                 35%
--------------------------------------------------------------------

For the nine month period ended September 30, 2005, the weighted
average grant date fair value of stock options granted was US$6.51
per share (2004 - US$3.63 per share).

(b) Deferred and restricted share units:

Deferred and restricted share units outstanding at September 30,
2005 are as follows:

                                       NUMBER OF           NUMBER OF
                                        DEFERRED          RESTRICTED
                                     SHARE UNITS         SHARE UNITS
--------------------------------------------------------------------
--------------------------------------------------------------------
Outstanding at December 31, 2004         455,519           1,014,313
 Granted                                  77,075             561,150
 Dividend equivalents                      5,425              13,632
 Redeemed                                      -             (29,672)
 Cancelled                                     -             (33,900)
--------------------------------------------------------------------
Outstanding at June 30, 2005             538,019           1,525,523
 Granted                                   1,884               8,084
 Dividend equivalents                      3,981              11,277
 Redeemed                                      -              (1,713)
--------------------------------------------------------------------
Outstanding at September 30, 2005        543,884           1,543,171
--------------------------------------------------------------------

The fair value of deferred and restricted share units at September
30, 2005 was $33.8 million compared with an accrued value of $21.9
million. Compensation expense related to deferred and restricted
share units included in cost of sales and operating expenses is $1.9
million for the three month period ended September 30, 2005 (2004 -
$3.3 million) and $6.9 million for the nine month period ended
September 30, 2005 (2004 - $8.3 million).

8. INTEREST EXPENSE:

                        THREE MONTHS ENDED         NINE MONTHS ENDED
                   -----------------------   -----------------------
                        SEP 30,     SEP 30,       SEP 30,     SEP 30,
                          2005        2004          2005        2004
--------------------------------------------------------------------
--------------------------------------------------------------------
Interest expense
 before capitalized
 interest          $    11,424 $    14,037   $    38,763 $    41,139
Less: capitalized
 interest                    -      (5,322)       (7,764)    (19,795)
--------------------------------------------------------------------
                   $    11,424 $     8,715   $    30,999 $    21,344
--------------------------------------------------------------------

9. RETIREMENT PLANS:

Total net pension expense for the Company's defined benefit and defined contribution pension plans during the three and nine month periods ended September 30, 2005 was $1.2 million (2004 - $1.6 million) and $3.7 million (2004 - $4.9 million), respectively.

10. KITIMAT CLOSURE COSTS:

During the three month period ended September 30, 2005 we announced the planned November 1, 2005 closure of the Kitimat methanol and ammonia facilities. The total closure costs are estimated to be approximately $41 million and include employee severance costs of approximately $13 million and contract termination costs of approximately $28 million. Contract termination costs include costs to terminate a take-or-pay natural gas transportation agreement and an ammonia supply agreement. A portion of the total costs has been recognized in the third quarter of 2005 and the remaining costs will be recognized in the fourth quarter. As a result, during the three month period ended September 30, 2005, we recorded Kitimat closure costs of $29 million and the remaining Kitimat closure costs of approximately $12 million will be recorded during the fourth quarter of 2005. Approximately $7 million of the total Kitimat closure costs are expected to be paid during the fourth quarter of 2005 with the remainder paid in early 2006.


METHANEX CORPORATION
QUARTERLY HISTORY (unaudited)

                 YTD
                2005    Q3    Q2    Q1  2004    Q4     Q3    Q2    Q1
---------------------------------------------------------------------

METHANOL SALES
 VOLUMES
(thousands of
 tonnes)

 Company
  produced     3,837 1,130 1,332 1,375 5,298 1,531  1,307 1,233 1,227
 Purchased
  product        890   325   269   296 1,960   402    423   600   535
 Commission
  sales(1)       378    75   158   145   169   128     41     -     -
---------------------------------------------------------------------

               5,105 1,530 1,759 1,816 7,427 2,061  1,771 1,833 1,762
---------------------------------------------------------------------

METHANOL
 PRODUCTION
(thousands of
 tonnes)

 Chile         2,113   684   702   727 2,692   690    640   666   696
 Titan,
  Trinidad       521   184   135   202   740   154    176   220   190
 Atlas,
  Trinidad
  (63.1%)        644   157   252   235   421   264    157     -     -
 New Zealand     343   120   103   120 1,088   266    304   229   289
 Kitimat         341   102   120   119   486   122    121   121   122
---------------------------------------------------------------------

               3,962 1,247 1,312 1,403 5,427 1,496  1,398 1,236 1,297
---------------------------------------------------------------------

METHANOL
 PRICE(2)
 ($/tonne)       253   240   256   262   237   251    248   225   223
 ($/gallon)     0.76  0.72  0.77  0.79  0.71  0.75   0.75  0.68  0.67

PER SHARE
 INFORMATION
 ($ per share)
 Basic net
  income
  (loss) $      0.99 (0.19) 0.53  0.63  1.95  0.55   0.59  0.43  0.39
 Diluted net
  income
  (loss) $      0.98 (0.19) 0.53  0.63  1.92  0.54   0.58  0.42  0.38


METHANEX CORPORATION
QUARTERLY HISTORY (unaudited)

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

METHANOL SALES VOLUMES
(thousands of tonnes)

 Company produced                      4,933 1,328  1,200 1,211 1,194
 Purchased product                     1,392   399    350   332   311
 Commission sales(1)                     254     -      -    55   199
---------------------------------------------------------------------

                                       6,579 1,727  1,550 1,598 1,704
---------------------------------------------------------------------

METHANOL PRODUCTION
(thousands of tonnes)

 Chile                                 2,704   640    624   732   708
 Titan, Trinidad                         577   222    202   153     -
 Atlas, Trinidad (63.1%)                   -     -      -     -     -
 New Zealand                             968   158    229   225   356
 Kitimat                                 449   109     91   122   127
---------------------------------------------------------------------

                                       4,698 1,129  1,146 1,232 1,191
---------------------------------------------------------------------

METHANOL PRICE(2)
 ($/tonne)                               224   208    219   245   227
 ($/gallon)                             0.67  0.63   0.66  0.74  0.68

PER SHARE INFORMATION ($ per share)
 Basic net income (loss) $              0.01 (0.93) (0.08) 0.38  0.59
 Diluted net income (loss) $            0.01 (0.93) (0.08) 0.37  0.57

(1) Commission sales volumes include the 36.9% of production from
    Atlas that we do not own. Commission sales volumes prior to 2004
    represents commission sales of production from Titan Methanol
    Company prior to our acquisition of Titan effective May 1, 2003.
(2) Average realized price is calculated as revenue, excluding
    commissions earned, divided by the total sales volumes of
    produced and purchased methanol. Prior to 2005, in-market
    distribution costs were also deducted from revenue when
    calculating average realized methanol price for presentation in
    the Management's Discussion and Analysis. The presentation of
    average methanol price for prior periods has been restated.


FOR FURTHER INFORMATION PLEASE CONTACT:

Methanex Corporation
Wendy Bach
Director, Investor Relations
(604) 661-2600 or Toll-Free: 1-800-661-8851

invest@methanex.com
www.methanex.com

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