5N PLUS INC. Growth in Value-Added Materials Expand 5N Plus' Margins & Improve its Results
All amounts are expressed in
5N Plus concluded 2020 with strong quarterly and full year results - well above the same periods in 2019. The Company's full year gross margin1 surged to 27.6% and Adjusted EBITDA1 to
"I am very pleased with our performance and earnings growth in 2020, despite challenges from the global pandemic and historically low metal notations adversely impacting legacy businesses," said
During the year, higher value-added businesses such as semiconductor compounds and engineered substrates along with health and pharmaceutical compounds experienced strong demand. The demand from materials related to semiconductor applications was exceptionally strong with medical and infrared imaging markets driving the demand. The contribution from these businesses enabled margin expansion in the Company's earnings and notable improvement to Adjusted EBITDA as compared to the previous year.
Fourth Quarter Financial Highlights
- Revenue for the fourth quarter of 2020 reached
$46.2 million compared to$44.7 million for the same period last year, and$177.2 million for fiscal year 2020 as compared to$196.0 million for fiscal year 2019. Revenue contributions from metal sales were significantly lower than the same period last year, while sales mix continued to shift toward products with higher value-added activities enabled by notable contribution from internal growth initiatives resulting in significant year-over-year margin improvements. - On
December 31, 2020 , the Backlog1 represented 189 days of annualized revenue, higher than previous quarter which ended at 171 days. The net difference in backlog is largely attributed to the timing associated with the negotiation of long-term contracts. Bookings1 in the fourth quarter of 2020 reached 133 days compared to 53 days in the third quarter of 2020 and 96 days in the fourth quarter of 2019. - Net earnings in fiscal year 2020 were
$2.2 million or$0.03 per share compared to$1.8 million or$0.02 in fiscal year 2019. - EBITDA1 for the fiscal year 2020 reached
$22 .4 million compared to$19 .1 million for the year 2019. - Adjusted EBITDA1 for the fourth quarter of 2020 reached
$6.5 million compared to$4 .5 million during the same period last year, up 45% quarter-over-quarter. - Adjusted EBITDA in 2020 reached
$28.8 million compared to$22 .0 million in 2019, up 31% year-over-year, supported by an improved product mix favoring semiconductor compounds and engineered substrates, in addition to high demand from health and pharmaceutical products. - Return on Capital Employed ("ROCE")1 reached 14.4% in 2020 compared to 8.2% at the end of 2019.
- Net debt1 stood at
$10.2 million as ofDecember 31, 2020 , a decrease of$24.9 million compared toDecember 31, 2019 . - On
March 5, 2020 , 5N Plus announced that theToronto Stock Exchange had approved its normal course issuer bid ("NCIB"). Under the NCIB, 5N Plus has the right to purchase for cancellation, fromMarch 9, 2020 toMarch 8, 2021 , a maximum of 2,000,000 common shares. FromMarch 9, 2020 toDecember 31, 2020 , 5N Plus purchased and cancelled 1,750,428 of the Company's common shares.
Summary of Key 2020 Developments
- On
June 3, 2020 , 5N Plus announced that its subsidiary, 5N Plus Semiconductors, located inSt. George, Utah , signed a$12.5 million contract with theU.S. Government aimed at further advancing process and product technologies for specialty semiconductors required byU.S. satellite suppliers. - On
July 21, 2020 , 5N Plus announced the introduction of the third generation of engineered semiconductor substrate, INZBE3, designed for infrared imaging and detection applications based on breakthrough process technologies. - On
October 7, 2020 , 5N Plus announced that it has entered the Additive Manufacturing market, (commonly referred to as 3D Printing), as a supplier of high-performance engineered powders and has begun to launch a broad portfolio of metal powder products to support this venture. - On
October 21, 2020 , 5NPlus and Metalpine GmbH , anAustria -based technology leader in the production of high-quality performance powders for Additive Manufacturing, announced that they have entered into a strategic agreement aimed at jointly serving the growing demand from Additive Manufacturing markets. - On
October 28, 2020 , 5N Plus announced the completion of a series of investment packages related to process technologies, totaling nearly$10.0 million . These investments were aimed at enhancing capability, increasing capacity, and decreasing environmental footprint. The focus of these investments were select sites inEurope andChina with segment Eco-Friendly Materials as the major beneficiary. - On
November 12, 2020 , 5N Plus announced that it has secured multi-year contracts for the supply of semiconductor materials associated with the manufacturing of thin-film photovoltaic (PV) modules by First Solar, Inc (Nasdaq FLSR). 5N Plus is the world leading supplier of engineered semiconductor compounds to thin film renewable energy industry.
1 See Non-IFRS Measures |
Subsequent Event
- On
January 12, 2021 , 5N Plus announced that it has entered into a strategic agreement withMontana -basedMicrobion Corporation aimed at furthering the development of Microbion's new class of antibiotic and antibiofilm drugs. Under the terms of the agreement, 5N Plus has taken an equity stake in Microbion and will assume responsibility for the manufacturing of bismuth-based Active Pharmaceutical Ingredients (API) required in Microbion's family of drug products currently under development.
In 2020, 5N Plus began the next phase of its strategic transformation toward advanced materials with improved margins and away from products affected by metal notations and commoditization. In support of the former, the Company has begun to consider M&A opportunities to augment and expedite its growth, specifically in the field of advanced materials. To address the latter, 5N Plus has launched a strategic review of certain legacy businesses to assess their long-term compatibility with the Company's transformation focus. The aim of this review is to identify the best option for the future of these businesses. To that end, nearly all non-recurring charges taken by the Company during the year relate to the preparation of these businesses for their future options.
"As a result of our previous strategic plan, our company is now engaged in promising growth initiatives and legacy businesses which have been optimized for performance - the culmination of which has yielded a strong balance sheet," added
Webcast Information
5N Plus will host a conference call on
To participate in the conference call:
Toronto area: 416-764-8659- Toll-Free: 1-888-664-6392
- Enter access code: 17301716
A replay of the webcast and a recording of the Q&A will be available until
Non-IFRS Measures
EBITDA means net earnings (loss) before interest expenses, income taxes, depreciation and amortization. We use EBITDA because we believe it is a meaningful measure of the operating performance of our ongoing business without the effects of certain expenses. The definition of this non-IFRS measure used by the Company may differ from that used by other companies. EBITDA margin is defined as EBITDA divided by revenues.
Adjusted EBITDA means EBITDA as defined above before impairment of inventories, share-based compensation expense, impairment of non-current assets, litigation and restructuring costs (income), gain on disposal of property, plant and equipment, foreign exchange and derivatives loss (gain). We use adjusted EBITDA because we believe it is a meaningful measure of the operating performance of our ongoing business without the effects of certain expenses. The definition of this non-IFRS measure used by the Company may differ from that used by other companies. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Gross margin is a measure we use to monitor the sales contribution after paying cost of sales excluding depreciation and impairment inventory charge. We also expressed this measure in percentage of revenues by dividing the gross margin value by the total revenue.
Net debt is calculated as total debt less cash and cash equivalents. Any introduced IFRS 16 reporting measures in reference to lease liabilities are excluded from the calculation. We use this measure as an indicator of our overall financial position.
Backlog represents the expected orders we have received but have not yet executed and that are expected to translate into sales within the next twelve months expressed in number of days.
Bookings represent orders received during the period considered, expressed in days, and are calculated by adding revenues to the increase or decrease in backlog for the period considered divided by annualized year revenues. We use backlog to provide an indication of expected future revenues in days, and bookings to determine our ability to sustain and increase our revenues.
Return on Capital Employed ("ROCE") is a non-IFRS financial measure, calculated by dividing the annualized Adjusted EBIT by capital employed at the end of the period. Adjusted EBIT is calculated as the Adjusted EBITDA less depreciation of PPE and amortization of intangible assets (adjusted for accelerated depreciation charge, if any). Capital employed is the sum of the accounts receivable, the inventory, the PPE, the goodwill and intangibles less trade and accrued liabilities (adjusted for exceptional items). We use ROCE to measure the return on capital employed, whether the financing is through equity or debt. In our view, this measure provides useful information to determine if capital invested in the Company yields competitive returns. The usefulness of ROCE is limited by the fact that it is a ratio and not providing information as to the absolute amount of our net income, debt or equity. It also excludes certain items from the calculation and other companies may use a similar measure but calculate it differently.
About 5N Plus Inc.
5N Plus is a leading global producer of engineered materials and specialty chemicals with integrated recycling and refining assets to manage the sustainability of its business model. The Company is headquartered in
Forward-Looking Statements and Disclaimer
Certain statements in this press release may be forward-looking within the meaning of applicable securities laws. Forward-looking information and statements are based on the best estimates available to the Company at the time and involve known and unknown risks, uncertainties or other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. A description of the risks affecting the Company's business and activities appears under the heading "Risk and Uncertainties" of the 5N Plus 2020 MD&A dated
Forward-looking statements can generally be identified by the use of terms such as "may", "should", "would", "believe", "expect", the negative of these terms, variations of them or any similar terms. No assurance can be given that any events anticipated by the forward-looking information in this press release will transpire or occur, or if any of them do so, what benefits that 5N Plus will derive therefrom. In particular, no assurance can be given as to the future financial performance of 5N Plus. The forward-looking information contained in this press release is made as of the date hereof and the Company has no obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws. The reader is warned against placing undue reliance on these forward-looking statements.
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$ | $ | |
Assets | ||
Current | ||
Cash and cash equivalents | 39,950 | 20,065 |
Accounts receivable | 30,110 | 28,477 |
Inventories | 67,139 | 83,367 |
Income tax receivable | 5,440 | 5,433 |
Other current assets | 8,256 | 7,371 |
Total current assets | 150,895 | 144,713 |
Property, plant and equipment | 53,191 | 58,590 |
Right-of-use assets | 5,047 | 6,050 |
Intangible assets | 9,668 | 10,990 |
Deferred tax assets | 6,789 | 8,425 |
Other assets | 1,088 | 1,174 |
Total non-current assets | 75,783 | 85,229 |
Total assets | 226,678 | 229,942 |
Liabilities | ||
Current | ||
Trade and accrued liabilities | 31,671 | 32,066 |
Income tax payable | 3,328 | 3,374 |
Current portion of long-term debt | 109 | 107 |
Current portion of lease liabilities | 1,442 | 1,469 |
Total current liabilities | 36,550 | 37,016 |
Long-term debt | 50,000 | 55,000 |
Deferred tax liabilities | - | 269 |
Employee benefit plan obligation | 17,202 | 15,398 |
Derivative financial liabilities | 439 | - |
Lease liabilities | 3,916 | 4,767 |
Other liabilities | 195 | 195 |
Total non-current liabilities | 71,752 | 75,629 |
Total liabilities | 108,302 | 112,645 |
Equity | 118,376 | 117,297 |
Total liabilities and equity | 226,678 | 229,942 |
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2020 | 2019 | |
$ | $ | |
Revenue | 177,192 | 195,971 |
Cost of sales | 140,806 | 161,213 |
Selling, general and administrative expenses | 19,874 | 21,179 |
Other expenses (income), net | 3,015 | 5,351 |
163,695 | 187,743 | |
Operating earnings | 13,497 | 8,228 |
Financial expenses | ||
Interest on long-term debt | 2,666 | 2,914 |
Imputed interest and other interest expense | 824 | 1,165 |
Foreign exchange and derivative loss | 2,798 | 316 |
6,288 | 4,395 | |
Earnings before income taxes | 7,209 | 3,833 |
Income tax expense (recovery) | ||
Current | 3,385 | 2,187 |
Deferred | 1,638 | (139) |
5,023 | 2,048 | |
Net earnings | 2,186 | 1,785 |
Attributable to: | ||
Equity holders of | 2,186 | 1,785 |
2,186 | 1,785 | |
Earnings per share attributable to equity holders of | 0.03 | 0.02 |
Basic earnings per share | 0.03 | 0.02 |
Diluted earnings per share | 0.03 | 0.02 |
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Revenue by Segment and Gross Margin | Q4 2020 | Q4 2019 | FY 2020 | FY 2019 |
$ | $ | $ | $ | |
Electronic Materials | 21,567 | 20,517 | 81,484 | 81,281 |
Eco-Friendly Materials | 24,663 | 24,197 | 95,708 | 114,690 |
Total revenue | 46,230 | 44,714 | 177,192 | 195,971 |
Cost of sales | (39,241) | (37,221) | (140,806) | (161,213) |
Impairment of inventories | 2,411 | - | 2,411 | - |
Depreciation included in cost of sales | 2,231 | 2,457 | 10,064 | 9,931 |
Gross margin1 | 11,631 | 9,950 | 48,861 | 44,689 |
Gross margin percentage1 | 25.2% | 22.3% | 27.6% | 22.8% |
Adjusted EBITDA and EBITDA | Q4 2020 | Q4 2019 | FY 2020 | FY 2019 |
$ | $ | $ | $ | |
Revenue | 46,230 | 44,714 | 177,192 | 195,971 |
Adjusted operating expenses1 * | (39,687) | (40,212) | (148,401) | (174,021) |
Adjusted EBITDA1 | 6,543 | 4,502 | 28,791 | 21,950 |
Impairment of inventories | (2,411) | - | (2,411) | - |
Impairment of non-current assets | - | - | (4,934) | - |
Share-based compensation expense | (867) | (455) | (1,801) | (2,583) |
Litigation and restructuring income (costs), net | - | - | 5,577 | - |
Foreign exchange and derivative loss | (1,035) | (365) | (2,798) | (316) |
EBITDA1 | 2,230 | 3,682 | 22,424 | 19,051 |
Interest on long-term debt, imputed interest and other interest expense | 770 | 789 | 3,490 | 4,079 |
Depreciation and amortization | 2,651 | 2,887 | 11,725 | 11,139 |
(Loss) earnings before income taxes | (1,191) | 6 | 7,209 | 3,833 |
Income tax expense (recovery) | ||||
Current | 439 | 186 | 3,385 | 2,187 |
Deferred | 1,234 | (326) | 1,638 | (139) |
1,673 | (140) | 5,023 | 2,048 | |
Net (loss) earnings | (2,864) | 146 | 2,186 | 1,785 |
Basic (loss) earnings per share | ( | $- | ||
Diluted (loss) earnings per share | ( | $- | ||
*Excluding impairment of inventories and non-current assets, share-based compensation expense, litigation and restructuring income (costs), and depreciation and amortization. | ||||
Net Debt | As at | As at |
$ | $ | |
Bank indebtedness | - | - |
Long-term debt including current portion | 50,109 | 55,107 |
Total Debt1 | 50,109 | 55,107 |
Cash and cash equivalents | (39,950) | (20,065) |
Net Debt1 | 10,159 | 35,042 |
1 See Non-IFRS Measures |
SOURCE
© Canada Newswire, source
