Methanex Completes Highly Profitable Year-Momentum into 2005 Remains S

    Business Editors

    VANCOUVER, British Columbia--(BUSINESS WIRE)--Jan. 26, 2005--Methanex Corporation (NASDAQ:MEOH)(TSX:MX) recorded net income of US$66.1 million (US$0.55 per share) and generated EBITDA(1) of US$120.8 million for the fourth quarter ended December 31, 2004. This compares to a net loss in the fourth quarter of 2003 of US$111.7 million (US$0.93 per share) and EBITDA of US$81.6 million. Excluding unusual items related to non-cash asset restructuring charges, the Company reported income before unusual items (after-tax) of US$27.7 million (US$0.23 per share) for the fourth quarter of 2003.

    For the year ended December 31, 2004, net income was US$236.4 million (US$1.95 per share) and EBITDA was US$434.4 million. In 2003, income before unusual items (after-tax) was US$180.6 million (US$1.47 per share) and EBITDA was US$386.5 million. After unusual items, the Company reported net income for the year ended December 31, 2003 of US$1.4 million (US$0.01 per share).

    Bruce Aitken, President and CEO of Methanex commented, "2004 has been a record year for us with the highest ever sales volumes and EBITDA per share. Tight methanol supply/demand conditions continued in the fourth quarter resulting in further price strengthening. Our average realized price for the fourth quarter of 2004 was US$248 per tonne compared with US$245 per tonne for the previous quarter and US$204 per tonne for the fourth quarter of 2003. As we enter 2005, the market remains tight, with global Methanex reference prices ranging from US$300 to $316 per tonne (US$0.90 - $0.95 per gallon) before discounts."

    Mr. Aitken continued, "The 1.7 million tonne per year Atlas methanol facility in Trinidad, in which we have a 63.1% interest, commenced production in the third quarter of 2004 and has operated near capacity during the fourth quarter. In Chile, we expect to start up our new 840,000 tonne per year plant at the end of the first quarter of 2005. Together, these two new plants will represent a step-change in our cost structure and will enhance our ability to generate cash throughout the methanol price cycle."

    Mr. Aitken added, "Looking ahead, we remain optimistic that tight market conditions and above average methanol pricing will continue in 2005. We expect that the impact of planned methanol capacity additions in 2005 should be largely offset by further industry restructuring and increased demand."

    Mr. Aitken concluded, "In May 2004 our Board of Directors approved a normal course issuer bid for 5% of our total outstanding shares and in November approved an increase in this bid raising the maximum allowable repurchase to 12.2 million shares, or 10% of the public float. As at the end of 2004 a total of 6.1 million shares have been repurchased at an average share price of US$13.95. With US$210 million cash on hand at the end of 2004 and a US$250 million undrawn credit facility, we have the financial capacity to complete Chile IV and our capital maintenance spending program, pursue new opportunities to enhance our strategic 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, January 27 at 11:00 am EST (8:00 am PST) to review these fourth 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 261994. 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 discussion and reconciliation to the most comparable GAAP measure refer to "Additional Information - Supplemental Non-GAAP Measures" included in the attached Interim Report.

    Information in this news release and the attached management's discussion and analysis 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. 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 page 43 of our 2003 Annual Report for more information on forward-looking statements.

Interim Report

For the year ended December 31, 2004

At January 25, 2005, the Company had 119,991,067 common shares issued and outstanding and stock options exercisable for 1,179,063 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

E-mail: invest@methanex.com Methanex Toll-Free: 1-800-661-8851

FOURTH QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS Except where otherwise noted, all currency amounts are stated in United States dollars.

This fourth 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.

THREE MONTHS ENDED(1) YEARS ENDED(1) --------------------------------------- ($ millions, except DEC 31 SEP 30 DEC 31 DEC 31 DEC 31 where noted) 2004 2004 2003 2004 2003 -------------------------------------------------------------------- Sales volumes (thousands of tonnes) Company produced 1,531 1,307 1,328 5,298 4,933 Purchased 402 423 399 1,960 1,392 Commission sales(2) 128 41 - 169 254 -------------------------------------------------------------------- 2,061 1,771 1,727 7,427 6,579 Average realized methanol price ($ per tonne)(3) 248 245 204 234 220 Net income (loss) 66.1 71.2 (111.7) 236.4 1.4 Income before unusual items (after-tax)(4) 66.1 71.2 27.7 236.4 180.6 Operating income 98.9 105.7 54.4 355.7 290.4 Cash flows from operating activities(5) 103.5 108.7 63.3 374.7 330.4 EBITDA(6) 120.8 125.9 81.6 434.4 386.5 Basic net income (loss) per common share ($ per share) 0.55 0.59 (0.93) 1.95 0.01 Diluted net income (loss) per common share ($ per share) 0.54 0.58 (0.93) 1.92 0.01 Basic income per share before unusual items (after-tax)(4) ($ per share) 0.55 0.59 0.23 1.95 1.47 Number of common shares outstanding, end of period (millions of shares) 120.0 120.0 120.0 120.0 120.0 Weighted average number of common shares outstanding (millions of shares) 120.4 121.6 119.7 121.5 123.0 -------------------------------------------------------------------- (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 attached consolidated financial statements. (2) Revenue includes the commission earned on sales of the 36.9% of production from Atlas that we do not own. Commission sales volume in 2003 represents commission sales of production from Titan Methanol Company prior to our acquisition of Titan effective May 1, 2003. (3) Average realized price presented in the above table is calculated net of inland shipping and handling costs billed to customers. For financial statement presentation purposes, these amounts are included in cost of sales. Refer to note 1 of the consolidated financial statements. (4) Income before unusual items (after-tax) and basic income per share before unusual items (after-tax) differ from the most comparable GAAP measures, net income and basic net income (loss) per share because certain transactions considered to be non-operational and/or non-recurring have been excluded. Refer to Additional Information - Supplemental Non-GAAP Measures. (5) Before changes in non-cash working capital and the utilization of prepaid natural gas. (6) 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 Measures.
    CONTINUED STRONG FINANCIAL RESULTS

    For the fourth quarter of 2004 we recorded EBITDA of $120.8 million and net income of $66.1 million ($0.55 per share). This compares with EBITDA of $125.9 million and net income of $71.2 million ($0.59 per share) for the third quarter of 2004 and EBITDA of $81.6 million and a net loss of $111.7 million for the fourth quarter of 2003. During the fourth quarter of 2003, we recorded before and after-tax non-cash asset restructuring charges of $139.4 million related to the write-down of property, plant and equipment and related assets in New Zealand and Medicine Hat, Alberta. Excluding the impact of the asset restructuring charges, we recorded income before unusual items (after-tax) of $27.7 million for the fourth quarter of 2003.

    For the year ended December 31, 2004, we recorded EBITDA of $434.4 million and net income of $236.4 million ($1.95 per share) compared with EBITDA of $386.5 million and income before unusual items (after-tax) of $180.6 million ($1.47 per share). Including the impact of the Medicine Hat and New Zealand asset restructuring charges and the write off of Australia project development costs, we recorded net income of $1.4 million ($0.01 per share) for the year ended December 31, 2003.

    EBITDA

    The change in EBITDA resulted from:

Q4-2004 Q4-2004 2004 COMPARED WITH COMPARED WITH COMPARED WITH ($ millions) Q3-2004 Q4-2003 2003 -------------------------------------------------------------------- Higher realized price of produced methanol 3 62 72 Higher total cash cost (31) (47) (84) Higher sales volume of produced methanol 26 18 35 Higher (lower) margin on the sale of purchased methanol (3) 6 25 -------------------------------------------------------------------- Increase (decrease) in EBITDA (5) 39 48 --------------------------------------------------------------------
    Q4 2004 compared with Q3 2004

    Our fourth quarter of 2004 average realized price was $248 per tonne compared with $245 per tonne for the third quarter of 2004. Strong demand and industry supply disruptions have resulted in low global inventories and the continuation of a very strong methanol price environment. This favourable price environment is underpinned by high North American natural gas prices and high global energy prices.

    We publish non-discounted reference prices for each major methanol market and offer discounts to customers based on various factors. The methanol industry is highly competitive and prices are affected by supply / demand fundamentals. For the fourth quarter of 2004 our average realized price is approximately 18% lower than our published average non-discounted reference price in the United States for the same period. This compares to approximately 12% lower for the third quarter of 2004. In order to reduce the impact of cyclical pricing on our earnings we have strategically 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 has increased as a result of higher methanol prices together with higher volumes sold under these types of arrangements during the fourth quarter of 2004. While the discount from reference prices in the current favourable pricing environment has increased, the discount should narrow during periods of lower pricing. We believe it is important to maintain financial flexibility throughout the methanol price cycle and these strategic contracts are a component of our prudent approach to liquidity.

    Our total cash costs for the fourth quarter of 2004 were higher than in the third quarter of 2004 and this decreased EBITDA by $31 million. Approximately $16 million of this increase in costs relates to our New Zealand operations. During the fourth quarter, our favourable New Zealand Dollar foreign currency forward contracts expired and this, together with higher natural gas costs, decreased EBITDA by approximately $13 million compared with the third quarter. Also during the fourth quarter we restructured and limited our New Zealand operations to the 500,000 tonne per year Waitara Valley facility. As a result of the restructuring we reduced our workforce and paid severance costs of approximately $3 million. We have positioned our New Zealand operations to be flexible and will continue to critically assess our operating plan during 2005 with consideration given to prevailing market conditions and our ability to generate positive cash margins.

    Natural gas purchase contracts for our strategic assets in Chile and Trinidad are linked to methanol prices in order to reduce our commodity price risk exposure and we believe this enables these facilities to be competitive throughout the methanol price cycle. Higher natural gas costs in Chile and Trinidad and other costs impacted by changes in methanol prices decreased EBITDA by approximately $6 million. We also incurred $2 million in costs related to unplanned maintenance during the fourth quarter in Chile and Trinidad. The remaining increase in costs relates primarily to an increase in stock-based compensation expense of $2 million due to an appreciation in our share price and costs for strategic initiatives as we continue to pursue opportunities to enhance our strategic position in the methanol industry.

    Our total sales volume of 2.1 million tonnes for the fourth quarter of 2004 was approximately 290,000 tonnes higher than the third quarter. Approximately 40% of this increase relates to new customer contracts with the remaining increase primarily the result of differences in the timing of customer deliveries. Higher sales volumes of produced methanol during the fourth quarter of 2004 increased EBITDA by $26 million compared with the third quarter.

    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. Consequently, 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 fixed storage and handling costs of approximately $5 per tonne. During the fourth quarter of 2004, the loss on the sale of purchased methanol was $3 million higher than the third quarter of 2004.

    Q4 2004 compared with Q4 2003

    The fourth quarter of 2004 average realized price of $248 per tonne is $44 per tonne higher than the average realized price of $204 per tonne for the same period in 2003 and this increased EBITDA by $62 million.

    Our total cash costs for the fourth quarter of 2004 were higher than in the fourth quarter of 2003 and this decreased EBITDA by $47 million. Approximately $29 million of this impact relates to higher natural gas costs for our New Zealand operations, including the expiration of favourable New Zealand dollar foreign currency forward contracts and severance costs. 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. Higher North American energy prices increased the natural gas costs of our Kitimat facility by $5 million for the fourth quarter of 2004 compared with the same period in 2003. The cost of natural gas for our strategic facilities in Chile and Trinidad is linked to methanol prices. As a result of higher methanol prices we incurred higher costs for natural gas in Chile and Trinidad and this decreased EBITDA by $8 million for the fourth quarter of 2004 compared with the fourth quarter of 2003. The remaining increase in costs relates primarily to the impact of the increase in our share price on stock-based compensation expense of $3 million and costs incurred to enhance our strategic position in the methanol industry.

    The Atlas methanol facility in Trinidad commenced operations during the third quarter of 2004 and has strengthened our strategic asset base. Primarily, as a result of the addition of this new low cost production capacity, our sales volume of produced methanol for the fourth quarter of 2004 was approximately 203,000 tonnes higher than in same period last year and this increased EBITDA by $18 million.

    During the fourth quarter of 2004 we sold 402,000 tonnes of purchased methanol and incurred a loss of $6 million compared with a loss of $12 million on the sale of 399,000 tonnes for the fourth quarter of 2003. The cost for purchased methanol includes allocated fixed storage and handling costs of approximately $5 per tonne in 2004 and 2003.

    2004 compared with 2003

    Tight market conditions as a result of strong demand and industry supply disruptions resulted in a favourable price environment throughout 2004. Our average realized price for the year ended December 31, 2004 was $234 per tonne compared with $220 per tonne for 2003 and this increased EBITDA by $72 million.

    Our total cash costs were higher in 2004 compared with 2003 and this decreased EBITDA by $84 million. Approximately 50% of this impact relates to higher costs for our New Zealand operations. Despite the increase in operating costs, our New Zealand operations earned positive cash margins throughout 2004. Higher methanol prices in 2004 compared with 2003 increased the natural gas costs for our facilities in Chile and Trinidad and this decreased EBITDA by $22 million. Natural gas costs for our Kitimat facility were higher in 2004 and this decreased EBITDA by $7 million.

    Our share price appreciated by over 60% during 2004 and this increased compensation expense related to restricted and deferred share units by $6 million compared with 2003. Compensation expense for restricted and deferred share units is impacted by movements in our share price with changes in the fair value of the related liability recognized in earnings for the percentage of the requisite service that has been rendered at each reporting date.

    Our sales volume of produced methanol in 2004 was higher than 2003 by 365,000 tonnes and this increased EBITDA by $35 million. During the year ended December 31, 2004 we sold 2.0 million tonnes of purchased methanol and incurred a loss of $15 million compared with a loss of $40 million on the sale of 1.4 million tonnes for the same period in 2003.

    DEPRECIATION AND AMORTIZATION

    Depreciation and amortization expense for the fourth quarter of 2004 was $22 million compared with $27 million for the fourth quarter of 2003. For the year ended December 31, 2004, depreciation and amortization expense was $79 million compared with $96 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 YEARS ENDED ------------------ ---------------- Interest expense DEC 31 DEC 31 DEC 31 DEC 31 ($ millions) 2004 2003 2004 2003 -------------------------------------------------------------------- Interest expense before interest capitalized for plant and equipment under construction $ 13 $ 17 $ 55 $ 59 Less capitalized interest: Chile IV (4) (2) (14) (5) Atlas - (5) (10) (15) -------------------------------------------------------------------- Interest expense $ 9 $ 10 $ 31 $ 39 --------------------------------------------------------------------
    Capitalized interest relates to the construction of Chile IV and Atlas. The Atlas methanol facility commenced operations at the end of July 2004 and subsequent to this date no interest expense was capitalized.

    INTEREST AND OTHER INCOME

    Interest and other income for the fourth quarter of 2004 was $2 million compared with $3 million for the fourth quarter of 2003. For the year ended December 31, 2004, interest and other income was $7 million compared with $14 million for the same period in 2003. The decrease in interest and other income relates primarily to decreased foreign exchange gains in 2004 compared with 2003.

    INCOME TAXES

    The effective income tax rate for the fourth quarter of 2004 was 28% compared with 41% for the fourth quarter of 2003, excluding the impact of unusual items. The effective tax rate for the year ended December 31, 2004 was 29% compared with 32% for the same period in 2003. Our facilities in Trinidad receive preferential tax treatment. Titan has a tax holiday until mid-2005 and the tax rate for Atlas will increase over a ten-year period from 0% to 35%. In addition, our New Zealand and Kitimat operations have previously unrecognized tax loss carryforward balances. Substantially, all of our consolidated income tax expense relates to our operations in Chile, where we record taxes at a rate of 35%.

    OPERATING PERFORMANCE

QUARTERLY OPERATING Q4-2004 Q3-2004 (thousands of tonnes) CAPACITY PRODUCTION PRODUCTION -------------------------------------------------------------------- Chile 750 690 640 Titan, Trinidad 213 154 176 Atlas, Trinidad (63.1% interest) 268 264 157 New Zealand (i) 363 266 304 Kitimat 125 122 121 -------------------------------------------------------------------- 1,719 1,496 1,398 -------------------------------------------------------------------- (i) Quarterly operating capacity for New Zealand includes only the plants that operated during the fourth quarter of 2004.
    Our facilities in Chile and the Titan facility in Trinidad were impacted by unplanned shutdowns during the fourth quarter of 2004 and production from these facilities was 120,000 tonnes lower than full operating capacity.

    The fourth quarter of 2004 was the first full quarter of production for the 1.7 million tonne per year Atlas methanol facility. During the fourth quarter, our share of production from this facility was near capacity at 264,000 tonnes.

    In December 2004, we reduced our operations in New Zealand to the 500,000 tonne per year Waitara Valley plant. We have positioned the New Zealand operations to be flexible and will continue to critically assess our operating plan during 2005 with consideration given to prevailing market conditions and our ability to generate positive cash margins.

    As discussed in our third quarter Management's Discussion and Analysis, we suffered curtailments of natural gas to our facilities in Chile during the period mid-May to August as a result of reduced supply from our suppliers in Argentina. We have not suffered any curtailments since early August. We continue to closely monitor this issue as there can be no assurance as to its ultimate outcome.

    SUPPLY/DEMAND FUNDAMENTALS

    Poor industry operating performance and strong demand for methanol was experienced throughout the fourth quarter of 2004 resulting in the continuation of very favourable methanol market conditions and low global inventories. The introduction of product from the 1.7 million tonne per year Atlas facility was primarily offset by the shutdowns of Lyondell's Channelview facility (750,000 tonnes) and Terra Industries' Beaumont plant (700,000 tonnes) during the second half of 2004. The 1.0 million tonne per year NPC facility in Iran also commenced operations during the third quarter of 2004 and a 1.0 million tonne facility in Saudi Arabia started up late in 2004.

    Our 840,000 tonne per year Chile IV facility will be the next significant increment of industry supply. Additional capacity additions for 2005 are planned and we believe that the impact of this new supply will be largely offset by increased demand and further shutdowns of higher cost methanol production exposed to high North American natural gas prices or high energy prices. Production from our New Zealand facilities during 2004 totalled 1.1 million tonnes and as we are currently operating only one facility in New Zealand the production from this flexible asset will be lower in 2005.

    The Methanex non-discounted reference prices for January 2005 are $316 per tonne ($0.95 per gallon) in the United States and $302 per tonne in Asia. In Europe, the January 2005 contract transaction price was held at EUR 230 (US$309 per tonne at the time of settlement compared with US$282 at October 2004). Currently, spot prices in the United States are approximately $299 per tonne ($0.90 per gallon) and spot prices in Europe (FOB Rotterdam) are approximately EUR 215 per tonne. Prices in Asia are currently between $280 and $295 per tonne.

METHANEX NON DISCOUNTED REGIONAL POSTED CONTRACT PRICES

JAN OCT US$ per tonne 2005 2004 -------------------------------------------------------

United States $316 $279 Europe(x) $309 $282 Asia $302 $272

(x) The European contract transaction price is Euros 230 at October 2004 and January 2005 and is presented in the above table in United States dollars converted at the date of settlement. -------------------------------------------------------
    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 fourth quarter of 2004 were $104 million compared with $63 million for the same period in 2003. For the year ended December 31, 2004, cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas were $375 million compared with $330 million for the same period in 2003. The improvement in cash flows from operating activities in 2004 compared with 2003 is primarily the result of higher levels of earnings.

    During 2004 we have returned $119 million of cash to shareholders through share repurchases and quarterly dividend payments. On November 18, 2004, we announced an increase in our normal course issuer bid, raising the maximum allowable repurchase from 6.1 million common shares to 12.2 million common shares. The normal course issuer bid expires May 16, 2005. During the fourth quarter, we repurchased for cancellation 1.5 million shares at an average price of US$16.51 per share, or $25 million. To December 31, 2004, we have repurchased for cancellation 6.1 million shares under this bid at an average price of US$13.95 per share, totaling $86 million. During the fourth quarter of 2004, we paid a quarterly dividend of US$0.08 per share, or approximately $10 million.

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

    During the fourth quarter of 2004 we contributed $9 million to fund our portion of a debt reserve related to the limited recourse long-term debt of the Atlas joint venture and capital expenditures for this facility were $7 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 start up at the end of the first quarter of 2005. Capital expenditures for Chile IV during the fourth quarter were $15 million, including capitalized interest of $4 million. Total capital expenditures for Chile IV during 2004 were $80 million, including capitalized interest of $14 million.

    We have excellent financial capacity and flexibility. Our cash balance at December 31, 2004 was $210 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 $80 million for the period to the end of 2007. At December 31, 2004, our estimated remaining expenditures to complete the construction of Chile IV were $57 million, including capitalized interest of $6 million. We have $250 million of public bonds due August 2005 and are currently reviewing our refinancing options.

    With $210 million cash on hand at the end of 2004 and a $250 million undrawn credit facility, we have the financial capacity to complete Chile IV and our capital maintenance spending program, pursue new opportunities to enhance our strategic 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 December 31, 2004 were as follows:

------------------------------------------- Standard & Poor's BBB-(stable) Moody's Investor Service Ba1 (stable) Fitch 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.

    SHORT-TERM OUTLOOK

    Global economic growth and tight supply conditions resulted in a favourable pricing environment in 2004. As we enter 2005 the methanol market remains extremely tight and global inventory levels are low. We expect that the impact of planned new capacity additions during 2005 is likely to be largely offset by further shutdowns of higher cost global methanol production and increased demand. 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.

    January 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 certain supplemental non-GAAP measures. These are EBITDA, income before unusual items (after-tax) and basic income before unusual items (after-tax) per share. These measures do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. These measures are provided to assist readers in evaluating the operating performance and liquidity of the Company's ongoing business. These measures 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.

    EBITDA

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

THREE MONTHS ENDED YEARS ENDED ----------------------------- -------------------- DEC 31 SEP 30 DEC 31 DEC 31 DEC 31 ($ thousands) 2004 2004 2003 2004 2003 ------------------------------------------------------------------- ------------------------------------------------------------------- Cash flows from operating activities $ 114,463 $ 63,256 $ 95,357 $ 335,619 $ 360,964 Add (deduct): Changes in non-cash working capital and the utilization of prepaid natural gas (10,928) 45,421 (32,093) 39,077 (30,554) Other non-cash operating expenses (4,638) (4,493) (7,418) (12,895) (18,279) Asset restructuring charges - cash settlements - - 9,787 - 9,787 Interest expense 9,297 8,715 10,358 30,641 38,815 Interest and other income (expense) (2,127) (941) (3,195) (6,627) (13,843) Income taxes - current 14,702 13,944 8,783 48,572 39,586 ------------------------------------------------------------------- EBITDA $ 120,769 $ 125,902 $ 81,579 $ 434,387 $ 386,476 -------------------------------------------------------------------
    Income before Unusual Items (after-tax) and Basic Income before Unusual Items (after-tax) Per Share

    Income before unusual items (after-tax) and basic income before unusual items (after-tax) per share are provided to assist readers in comparing earnings from one period to another without the impact of unusual items that are considered to be non-operational and/or non-recurring.

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

($ thousands, THREE MONTHS ENDED YEARS ENDED except number ----------------------------- -------------------- of shares and DEC 31 SEP 30 DEC 31 DEC 31 DEC 31 per share amounts 2004 2004 2003 2004 2003 ------------------------------------------------------------------- ------------------------------------------------------------------- Net income (loss) $ 66,061 $ 71,178 $(111,696) $ 236,444 $ 1,416 Add unusual items Asset restructuring charges (after-tax) - - 139,352 - 139,352 Write-off of Australia project development costs - - - - 39,833 ------------------------------------------------------------------- Income before unusual items (after-tax) $ 66,061 $ 71,178 $ 27,656 $ 236,444 $ 180,601 ------------------------------------------------------------------- Weighted average number of common shares outstanding (millions of shares) 120.4 121.6 119.7 121.5 123.0 Basic income before unusual items (after-tax) per share $ 0.55 $ 0.59 $ 0.23 $ 1.95 $ 1.47 -------------------------------------------------------------------

QUARTERLY FINANCIAL DATA (unaudited)

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

THREE MONTHS ENDED ---------------------------------------------- ($ thousands, except DEC 31 SEP 30 JUN 30 MAR 31 per share amounts) 2004 2004 2004 2004 -------------------------------------------------------------------- -------------------------------------------------------------------- Revenue $ 485,408 $ 428,840 $ 412,283 $ 392,953 Net income 66,061 71,178 52,375 46,830 Basic net income per common share 0.55 0.59 0.43 0.39 Diluted net income per common share 0.54 0.58 0.42 0.38 --------------------------------------------------------------------

THREE MONTHS ENDED(1) ---------------------------------------------- ($ thousands, except DEC 31 SEP 30 JUN 30 MAR 31 per share amounts) 2003 2003 2003 2003 -------------------------------------------------------------------- -------------------------------------------------------------------- Revenue $ 358,421 $ 340,180 $ 377,603 $ 343,342 Net income (loss) (111,696) (9,253) 48,415 73,950 Basic net income (loss) per common share (0.93) (0.08) 0.38 0.59 Diluted net income (loss) per common share (0.93) (0.08) 0.37 0.57 -------------------------------------------------------------------- (1) The 2003 financial results have been restated. Refer to note 1 of the attached consolidated financial statements.
    FORWARD-LOOKING STATEMENTS

    Information in this management's discussion and analysis 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. 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 and carrying out major capital expenditure projects. Please also refer to page 43 of our 2003 Annual Report for more information on forward-looking statements.

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

THREE MONTHS ENDED YEARS ENDED ------------------------ ----------------------- DEC 31 DEC 31 DEC 31 DEC 31 2004 2003 2004 2003 --------------------------------------------------------------------

Revenue (note 1) $ 485,408 $ 358,421 $1,719,484 $1,419,546 Cost of sales and operating expenses (note 1) 364,639 276,842 1,285,097 1,033,070 Depreciation and amortization 21,884 27,181 78,701 96,078 -------------------------------------------------------------------- Operating income before undernoted items 98,885 54,398 355,686 290,398 Interest expense (note 8) (9,297) (10,358) (30,641) (38,815) Interest and other income 2,127 3,195 6,627 13,843 Asset restructuring charges (note 10) - (139,352) - (139,352) Write-off of Australia project development costs - - - (39,833) -------------------------------------------------------------------- Income (loss) before income taxes 91,715 (92,117) 331,672 86,241 Income taxes: Current (14,702) (8,783) (48,572) (39,586) Future (10,952) (10,796) (46,656) (45,239) -------------------------------------------------------------------- (25,654) (19,579) (95,228) (84,825) -------------------------------------------------------------------- Net income (loss) $ 66,061 $ (111,696) $ 236,444 $ 1,416 --------------------------------------------------------------------

Weighted average number of common shares outstanding(x) 120,378,149 119,677,786 121,515,689 122,961,809 Diluted weighted average number of common shares outstanding(x) 121,968,879 119,677,786 122,955,016 125,811,353

(x) number of common shares outstanding at December 31, 2004: 120,022,417 (December 31, 2003: 120,007,767)

Basic net income (loss) per common share $ 0.55 $ (0.93) $ 1.95 $ 0.01 Diluted net income (loss) per common share $ 0.54 $ (0.93) $ 1.92 $ 0.01

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

Current assets: Cash and cash equivalents $ 210,049 $ 287,863 Receivables 293,207 220,871 Inventories 142,164 126,729 Prepaid expenses 16,480 14,852 -------------------------------------------------------------------- 661,900 650,315 Property, plant and equipment (note 2) 1,366,787 1,320,227 Other assets 96,194 111,258 -------------------------------------------------------------------- $ 2,124,881 $ 2,081,800 --------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: Accounts payable and accrued liabilities $ 230,758 $ 178,420 Current maturities on long-term debt and other long-term liabilities (note 4) 268,303 33,026 -------------------------------------------------------------------- 499,061 211,446 Long-term debt (note 4) 350,868 756,185 Other long-term liabilities 60,170 67,420 Future income taxes (note 5) 265,538 261,218 Shareholders' equity: Capital stock 523,255 499,258 Contributed surplus (note 1) 3,454 7,234 Retained earnings (note 1) 422,535 279,039 -------------------------------------------------------------------- 949,244 785,531 -------------------------------------------------------------------- $ 2,124,881 $ 2,081,800 --------------------------------------------------------------------

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

TOTAL NUMBER OF CONTRI- SHARE- COMMON CAPITAL BUTED RETAINED HOLDERS' SHARES STOCK SURPLUS EARNINGS EQUITY -------------------------------------------------------------------- -------------------------------------------------------------------- Balance, December 31, 2002, as previously reported 125,651,639 $ 517,210 $ - $ 386,868 $ 904,078 Adjustments for retroactive adoption of new accounting policies (note 1): Stock-based compensation - - 3,444 (3,444) - Asset retirement obligations - - - 4,259 4,259 -------------------------------------------------------------------- Balance, December 31, 2002, as restated 125,651,639 517,210 3,444 387,683 908,337 Year ended December 31, 2003 Net income, as previously reported - - - 7,508 7,508 Adjustments for retroactive adoption of new accounting policies (note 1): Stock-based compensation expense - - 3,790 (3,790) - Asset retirement obligations - - - (2,302) (2,302) Proceeds on issue of shares on exercise of stock options 3,356,128 19,173 - - 19,173 Payment for shares repurchased (9,000,000) (37,125) - (51,523) (88,648) Dividend payments - - - (58,537) (58,537) -------------------------------------------------------------------- Balance, December 31, 2003, as restated 120,007,767 499,258 7,234 279,039 785,531 Nine month period ended September 30, 2004 Net income - - - 170,383 170,383 Stock-based compensation expense - - 1,408 - 1,408 Proceeds on issue of shares on exercise of stock options 4,544,600 33,600 - - 33,600 Reclassification of grant date fair value on exercise of options - 3,489 (3,489) - - Payment for shares repurchased (4,600,000) (19,542) - (40,688) (60,230) Dividend payments - - - (23,778) (23,778) -------------------------------------------------------------------- Balance, September 30, 2004 119,952,367 516,805 5,153 384,956 906,914 Three month period ended December 31, 2004 Net income - - - 66,061 66,061 Stock-based compensation expense - - 330 - 330 Proceeds on issue of shares on exercise of stock options 1,613,650 11,054 - - 11,054 Reclassification of grant date fair value on exercise of options - 2,029 (2,029) - - Payment for shares repurchased (1,543,600) (6,633) (18,857) (25,490) Dividend payments - - - (9,625) (9,625) -------------------------------------------------------------------- Balance, December 31, 2004 120,022,417 $ 523,255 $ 3,454 $ 422,535 $ 949,244 --------------------------------------------------------------------

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

THREE MONTHS ENDED YEARS ENDED ------------------------ ----------------------- DEC 31 DEC 31 DEC 31 DEC 31 2004 2003 2004 2003 -------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 66,061 $ (111,696) $ 236,444 $ 1,416 Add: Depreciation and amortization 21,884 27,181 78,701 96,078 Future income taxes 10,952 10,796 46,656 45,239 Asset restructing charges (note 10) - 129,565 - 129,565 Write-off of Australia project development costs - - - 39,833 Other 4,638 7,418 12,895 18,279 -------------------------------------------------------------------- Cash flows from operating activities before undernoted changes 103,535 63,264 374,696 330,410 Receivables (37,641) 5,066 (72,336) 1,732 Inventories (1,127) (15,620) (15,565) 28,894 Prepaid expenses (1,259) (10,913) (1,628) (2,773) Accounts payable and accrued liabilities 50,955 53,560 50,452 552 Utilization of prepaid natural gas - - - 2,149 -------------------------------------------------------------------- 114,463 95,357 335,619 360,964 --------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES Repayment of limited recourse long-term debt - (11,731) (182,758) (40,731) Release of restricted cash - - 14,258 - Funding of debt service reserve account (9,060) - (9,060) - Proceeds on issue of limited recourse long-term debt - 17,434 14,887 46,547 Proceeds on issue of shares on exercise of stock options 11,054 3,118 44,654 19,173 Payment for shares repurchased (25,490) - (85,720) (88,648) Dividend payments (9,625) (7,194) (33,403) (58,537) Repayment of other long-term liabilities (2,934) (5,403) (14,588) (16,470) -------------------------------------------------------------------- (36,055) (3,776) (251,730) (138,666) --------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES Plant and equipment under construction or development (22,306) (74,208) (134,184) (206,968) Property, plant and equipment (5,310) (6,956) (22,539) (35,982) Accounts payable related to capital expenditures (108) (6,930) 1,886 1,522 Acquisition of Titan Methanol Company, net of cash acquired - - - (74,130) Other assets (2,334) (24,204) (6,866) (40,264) -------------------------------------------------------------------- (30,058) (112,298) (161,703) (355,822) -------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 48,350 (20,717) (77,814) (133,524) Cash and cash equivalents, beginning of period 161,699 308,580 287,863 421,387 -------------------------------------------------------------------- Cash and cash equivalents, end of period $ 210,049 $ 287,863 $ 210,049 $ 287,863 --------------------------------------------------------------------

SUPPLEMENTARY CASH FLOW INFORMATION Interest paid, net of capitalized interest $ - $ 1,389 $ 31,277 $ 34,278 Income taxes paid $ 14,432 $ 5,500 $ 49,628 $ 33,716 --------------------------------------------------------------------

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 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 in the 2003 annual consolidated financial statements. These costs have been reclassified from revenue to cost of sales and operating expenses with no impact on reported earnings. For the three month period and year ended December 31, 2004, $6 million (2003 - $7 million) and $22 million (2003 - $25 million) of these inland shipping and handling costs have been included in cost of sales and operating expenses, respectively.

    (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 as a charge to 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 granted since January 1, 2002.

    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 recorded for stock options granted on or after January 1, 2002. The restatement of the results for the three month period and year ended December 31, 2003 resulted in an increase to cost of sales and operating expenses of $1 million and $4 million, respectively. Compensation expense related to stock options was $0.3 million for the three month period ended December 31, 2004 and $2 million for the year ended December 31, 2004.

    (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 month period and year ended December 31, 2003 resulted in a reduction to net income of $1 million and $2 million, respectively. The application of this standard results in charges to net income of $0.3 million for the three month period ended December 31, 2004 and $1 million for the year ended December 31, 2004.

    2. PROPERTY, PLANT AND EQUIPMENT:

ACCUMULATED NET COST DEPRECIATION BOOK VALUE -------------------------------------------------------------------- At 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 --------------------------------------------------------------------

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 commenced operations on July 29, 2004.

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

DEC 31, 2004 DEC 31, 2003 -------------------------------------------------------------------- Consolidated Balance Sheets: Cash and cash equivalents $ 13,981 $ 18,429 Other current assets 21,677 2,443 Property, plant and equipment 284,336 235,718 Other assets 14,930 5,996 Current liabilities 30,112 4,486 Limited recourse long-term debt 159,012 144,125 --------------------------------------------------------------------

THREE MONTHS ENDED YEARS ENDED -------------------- ------------------- DEC 31 DEC 31 DEC 31 DEC 31 2004 2003 2004 2003 -------------------------------------------------------------------- Consolidated Statements of Income: Revenue $ 51,632 $ - $ 68,980 $ - Expenses 33,438 - 46,692 - -------------------------------------------------------------------- Net income $ 18,194 $ - $ 22,288 $ - -------------------------------------------------------------------- Consolidated Statements of Cash Flows: Cash inflows from operating activities $ 25,547 $ - $ 32,865 $ - Cash inflows (outflows) from financing activities (9,060) 17,434 5,827 46,547 Cash outflows from investing activities (5,510) (20,962) (52,676) (74,365) --------------------------------------------------------------------

4. LONG-TERM DEBT:

DEC 31, 2004 DEC 31, 2003 -------------------------------------------------------------------- Unsecured notes $ 449,920 $ 449,783 Atlas limited recourse facilities 159,012 144,125 Titan limited recourse facilities - 183,638 -------------------------------------------------------------------- 608,932 777,546 Less current portion (258,064) (21,361) -------------------------------------------------------------------- $ 350,868 $ 756,185 --------------------------------------------------------------------
    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 in effect at the date of acquisition. As a result, at March 31, 2004, the Company recorded a balance sheet adjustment to reduce the future income tax liability and property, plant and equipment by $42 million.

6. NET INCOME PER SHARE:

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

THREE MONTHS ENDED YEARS ENDED ------------------------ ------------------------ DEC 31 DEC 31 DEC 31 DEC 31 2004 2003 2004 2003 -------------------------------------------------------------------- Denominator for basic net income per common share 120,378,149 119,677,786 121,515,689 122,961,809 Effect of dilutive stock options 1,590,730 - 1,439,327 2,849,544 -------------------------------------------------------------------- Denominator for diluted net income per common share 121,968,879 119,677,786 122,955,016 125,811,353 --------------------------------------------------------------------

7. STOCK-BASED COMPENSATION:

(a) Stock options:

i) Incentive stock options:

Common shares reserved for incentive stock options at December 31, 2004 were as follows:

OPTIONS DENOMINATED OPTIONS DENOMINATED IN CAD$ IN US$ -------------------- -------------------- NUMBER OF WEIGHTED NUMBER OF WEIGHTED STOCK AVERAGE STOCK AVERAGE OPTIONS EXERCISE OPTIONS EXERCISE PRICE PRICE -------------------------------------------------------------------- Outstanding at December 31, 2003 4,682,775 $ 11.27 3,105,550 $ 7.51 Granted - - 93,300 11.56 Exercised (3,094,600) 10.82 (923,800) 7.32 Cancelled (200,000) 23.75 (67,400) 8.94 -------------------------------------------------------------------- Outstanding at September 30, 2004 1,388,175 10.50 2,207,650 7.72 Granted - - 10,000 13.39 Exercised (603,500) 10.08 (815,150) 6.68 Cancelled - - (5,500) 7.97 -------------------------------------------------------------------- Outstanding at December 31, 2004 784,675 $ 10.82 1,397,000 $ 8.36 --------------------------------------------------------------------
    As at December 31, 2004, 784,675 incentive stock options denominated in CAD$ and 249,038 incentive stock options denominated in US$ had vested and were exercisable at average prices of CAD$10.82 and US$8.65, respectively.

    ii) Performance stock options:

    Common shares reserved for performance stock options at December 31, 2004 are as follows:

NUMBER OF AVERAGE EXERCISE STOCK OPTIONS PRICE (CAD$) -------------------------------------------------------------------- Outstanding at December 31, 2003 925,200 $ 4.47 Exercised (526,200) 4.47 -------------------------------------------------------------------- Outstanding at September 30, 2004 399,000 4.47 Exercised (195,000) 4.47 -------------------------------------------------------------------- Outstanding at December 31, 2004 204,000 $ 4.47 --------------------------------------------------------------------
    As at December 31, 2004, 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 $0.3 million for the three month period ended December 31, 2004 (2003 - $0.9 million) and $1.7 million for the year ended December 31, 2004 (2003 - $3.8 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% --------------------------------------------------------------------
    For the year ended December 31, 2004, the weighted average grant date fair value of stock options granted was US$3.36 per share (2003 - $2.59 per share).

    (b) Deferred and restricted share units:

    Deferred and restricted share units outstanding at December 31, 2004 are as follows:

NUMBER OF NUMBER OF DEFERRED RESTRICTED SHARE UNITS SHARE UNITS -------------------------------------------------------------------- Outstanding at December 31, 2003 366,389 500,640 Granted 183,165 579,700 Dividend equivalents 8,237 16,535 Redeemed - (77,833) -------------------------------------------------------------------- Outstanding at September 30, 2004 557,791 1,019,042 Granted 4,608 - Dividend equivalents 2,432 4,514 Cancelled - (9,243) Redeemed (109,312) - -------------------------------------------------------------------- Outstanding at December 31, 2004 455,519 1,014,313 --------------------------------------------------------------------
    The fair value of deferred and restricted share units at December 31, 2004 was $26.9 million compared with an accrued value of $15.4 million. Compensation expense related to deferred and restricted share units included in cost of sales and operating expenses is $4.5 million for the three month period ended December 31, 2004 (2003 - $1.0 million) and $12.8 million for the year ended December 31, 2004 (2003 - $3.6 million). Included in compensation expense for the three month period and year ended December 31, 2004 is $3.4 million (2003 - $0.5 million) and $7.0 million (2003 - $1.3 million), respectively, related to the increase in our share price since the date of grant.

    8. INTEREST EXPENSE:

THREE MONTHS ENDED YEARS ENDED --------------------- -------------------- DEC 31 DEC 31 DEC 31 DEC 31 2004 2003 2004 2003 -------------------------------------------------------------------- Interest expense before capitalized interest $ 13,364 $ 17,531 $ 54,503 $ 58,991 Less: capitalized interest (4,067) (7,173) (23,862) (20,176) -------------------------------------------------------------------- Interest expense $ 9,297 $ 10,358 $ 30,641 $ 38,815 --------------------------------------------------------------------
    9. RETIREMENT PLANS:

    Total net pension expense for the defined benefit and defined contribution pension plans charged to operations during the three month period and year ended December 31, 2004 was $1.3 million (2003 - $1.6 million) and $6.2 million (2003 - $6.4 million), respectively.

    10. ASSET RESTRUCTURING CHARGES:

    During the fourth quarter of 2003, the Company recorded a non-cash asset impairment charge totaling $129.6 million relating to the carrying value of property, plant and equipment and related assets in New Zealand and Medicine Hat, Alberta. The Company also incurred costs and made payments of $9.8 million primarily for employee termination benefits to reduce the workforce at the Company's New Zealand operations by approximately 82 employees and for costs to re-mothball the Medicine Hat facility.

METHANEX CORPORATION QUARTERLY HISTORY (unaudited)

2004 Q4 Q3 Q2 Q1 --------------------------------------------------------------------

METHANOL SALES VOLUME (thousands of tonnes)

Company produced product 5,298 1,531 1,307 1,233 1,227 Purchased product 1,960 402 423 600 535 Commission sales(1) 169 128 41 - - --------------------------------------------------------------------

7,427 2,061 1,771 1,833 1,762 --------------------------------------------------------------------

METHANOL PRODUCTION (thousands of tonnes)

Chile 2,692 690 640 666 696 New Zealand 1,088 266 304 229 289 Canada 486 122 121 121 122 Titan, Trinidad 740 154 176 220 190 Atlas, Trinidad (63.1%) 421 264 157 - - --------------------------------------------------------------------

5,427 1,496 1,398 1,236 1,297 --------------------------------------------------------------------

METHANOL PRICE(2) ($/tonne) 234 248 245 222 220 ($/gallon) 0.70 0.75 0.74 0.67 0.66

PER SHARE INFORMATION Net income (loss) $ 1.95 0.55 0.59 0.43 0.39

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

METHANOL SALES VOLUME (thousands of tonnes)

Company produced product 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 New Zealand 968 158 229 225 356 Canada 449 109 91 122 127 Titan, Trinidad 577 222 202 153 - Atlas, Trinidad (63.1%) - - - - - --------------------------------------------------------------------

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

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

PER SHARE INFORMATION Net income (loss) $ 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 1,821 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 Titan, Trinidad - - - - - Atlas, Trinidad (63.1%) - - - - - --------------------------------------------------------------------

5,691 1,413 1,466 1,446 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) 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) Produced and purchased product.

--30--JC/na*

CONTACT: Methanex Corporation Wendy Bach Director, Investor Relations (604) 661-2600 Website: www.methanex.com

KEYWORD: NEW YORK INTERNATIONAL CANADA INDUSTRY KEYWORD: OIL/GAS ENERGY SOURCE: Methanex Corporation

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