Methanex Corporation (MEOH) Cash Flow Statement

The Q2 2026 OCF/NI ratio of 1.85 suggests that reported net income understates cash generation, likely due to non-cash charges like depreciation and potential hedge adjustments. However, in loss-making quarters such as Q1 2026 (OCF/NI of -9.70), operating cash flow remained positive, indicating that cash flows are less volatile than earnings. This divergence implies that earnings quality is low, with accruals and non-cash items distorting the bottom line.

The Q2 2026 FCF margin of 25.2% is well above the 10-quarter average, suggesting a cyclical peak rather than a sustainable trend. The prior quarter's FCF margin of 11.3% and the 2024Q1 trough of 4.8% highlight the volatility. This pattern indicates that the company's cash generation is closely tied to the methanol-to-gas spread, and investors should monitor whether the Q2 2026 level can be maintained.

The sharp decline in CapEx/Revenue from 5.3% in Q1 2025 to 1.1% in Q2 2026 indicates that the major growth phase is over, and spending is now likely maintenance-oriented. This shift may free up cash for debt reduction or shareholder returns, but it also implies that future growth will depend on market conditions rather than new capacity. The low capital intensity relative to peers (e.g., OLN at 1.5% FCF margin) suggests Methanex is becoming more cash-generative per dollar of revenue.

The large negative working capital change in Q2 2026 (a $152.1M outflow) suggests a build-up in inventory or receivables, possibly due to the revenue surge. In contrast, Q4 2025 and Q2 2025 saw positive contributions, indicating collections outpaced sales. This volatility implies that the company's cash flow is sensitive to the timing of shipments and customer payments, which may be influenced by global methanol demand and logistics.

The consistent dividend payments of roughly $12-14M per quarter indicate a stable but modest return to shareholders, while the absence of buybacks and the large acquisition outflow in Q2 2025 ($1.3B) suggest that management is prioritizing balance sheet repair. The high leverage and weak ROE of 3.1% imply that free cash flow may be directed toward debt reduction rather than aggressive shareholder returns, which could limit upside in the near term.

The cumulative OCF exceeding net income by over $1.5B indicates that reported earnings are heavily impacted by non-cash items such as depreciation, amortization, and possibly impairment charges. This gap implies that the company's cash-generating ability is stronger than its earnings suggest, but it also raises questions about the sustainability of these non-cash adjustments. Investors should monitor whether this divergence narrows as the company matures.