Q3 2021 Highlights
(unless otherwise noted, all financial amounts in this news release are expressed in
/CNW/ -
- Q3 2021 revenue of
$119.8 million higher by 53.9% YoY. - Volumes in the quarter of 3,523 tonnes improved by 16.1% YoY.
- Operating income of
$12.6 million in the quarter. - Adjusted Net Income(1) of
$9.8 million , or$0.26 per share. - Adjusted EBITDA(1) of
$17.7 million . - Cash balance of
$51.7 million after distributing$3.0 million in dividends to shareholders. - A quarterly dividend of
Cdn$0.10 per common share was declared onNovember 8, 2021 for shareholders of record atDecember 20, 2021 , with a payment date ofDecember 30, 2021 .
HIGHLIGHTS OF Q3 2021 CONSOLIDATED PERFORMANCE
Neo reported strong year-over-year ("YoY") gains in revenue, volumes, operating income, Adjusted EBITDA, and profitability in the quarter ended
Consolidated revenue in the quarter was
As of
_______________________ |
(1) Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this new release and in the MD&A, available on Neo's website at www.neomaterials.com and on SEDAR at www.sedar.com. |
"Neo benefitted from strong demand for our products as the global economy continues to gain speed," said
SELECTED FINANCIAL RESULTS
TABLE 1: Selected Consolidated Results | ||||||||
Quarter-over-Quarter | Year-over-Year | |||||||
Q3 2021 | Q3 2020 | YTD Q3 2021 | YTD Q3 2020 | |||||
Volume (tonnes) | 3,523 | 3,035 | 11,792 | 8,883 | ||||
($000s) | ||||||||
Revenue | 119,841 | 77,864 | 385,837 | 236,295 | ||||
Operating income (loss) | 12,558 | 1,137 | 47,161 | (58,849) | ||||
EBITDA(1) | 16,441 | 5,491 | 53,051 | (44,990) | ||||
Adjusted EBITDA(1) | 17,650 | 5,730 | 62,263 | 16,566 | ||||
Adjusted EBITDA %(1) | 14.7 % | 7.4 % | 16.1 % | 7.0 % | ||||
_________________________ |
(1)Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A. |
For the three and nine months ended
MAGNEQUENCH SEGMENT RESULTS
TABLE 2: Selected Magnequench Results | |||||||
Quarter-over-Quarter Comparison | Year-over-Year Comparison | ||||||
Q3 2021 | Q3 2020 | YTD Q3 2021 | YTD Q3 2020 | ||||
Volume (tonnes) | 1,374 | 1,095 | 4,608 | 3,390 | |||
($000s) | |||||||
Revenue | 60,063 | 31,620 | 192,856 | 100,413 | |||
Operating income | 8,130 | 2,965 | 31,805 | 11,925 | |||
EBITDA(1) | 9,773 | 5,559 | 39,240 | 19,323 | |||
Adjusted EBITDA(1) | 10,503 | 5,244 | 38,872 | 18,524 | |||
_________________________ |
(1)Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A. |
In the three and nine months ended
Over the last few years, Magnequench has focused on key macro growth trends that are yielding positive sales volume growth in areas such as compression magnets and electrified-automotive applications, including traction motors and pumps. Despite the slowdown in automotive, Magnequench is continuing to produce near-record volumes in the compression magnet sector. Magnequench margins benefited from increased volumes and better absorption of fixed costs as well as the lead-lag impact of prices rising in rare earth components of its powder composition. Although Magnequench has strategically structured most of its sales contracts to contain pass-through pricing provisions for rare earth raw materials, in the three and nine months ended
CHEMICALS & OXIDES ("C&O") SEGMENT RESULTS
TABLE 3: Selected C&O Results | ||||
Quarter-over-Quarter Comparison | Year-over-Year Comparison | |||
Q3 2021 | Q3 2020 | YTD Q3 2021 | YTD Q3 2020 | |
Volume (tonnes) | 2,106 | 1,929 | 6,972 | 5,330 |
($000s) | ||||
Revenue | 45,677 | 36,031 | 152,322 | 94,889 |
Operating income | 7,142 | 3,145 | 27,184 | (31,629) |
EBITDA(1) | 8,099 | 4,150 | 22,091 | (28,197) |
Adjusted EBITDA(1) | 8,059 | 3,896 | 29,712 | 6,847 |
_________________________ |
(1)Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A. |
The C&O segment continues to see strong demand for various rare earth products, particularly its magnetic-based products, as the global economy continues to recover from the economic impacts of COVID-19. Demand and pricing for rare earth magnetic elements continues to increase given their use in the electrification of automobiles and other environmentally sustainable technologies. Higher REE prices, and higher demand for magnetic rare earth products in particular, benefitted the rare earth separation business through higher-dollar value margins and the lead-lag impact of lower cost inventory on hand relative to selling prices. In environmental catalysts, customer re-stocking of inventory levels positively affected volumes in the first three months of 2021, while the unit saw reduced volumes in Q3, both year-over-year and sequentially, primarily related to the slowdown in automotive production. C&O's environmentally protective water treatment solutions business continues to perform well with higher volume and new customer adoption, although sales volumes were partially impacted by the challenges in global shipping and logistics availability.
RARE METALS SEGMENT RESULTS
TABLE 4: Selected Rare Metals Results | ||||
Quarter-over-Quarter Comparison | Year-over-Year Comparison | |||
Q3 2021 | Q3 2020 | YTD Q3 2021 | YTD Q3 2020 | |
Volume (tonnes) | 110 | 91 | 389 | 323 |
($000s) | ||||
Revenue | 19,509 | 13,613 | 56,308 | 47,592 |
Operating income (loss) | 2,074 | (892) | 4,168 | (25,797) |
EBITDA(1) | 1,733 | (535) | 6,014 | (23,362) |
Adjusted EBITDA(1) | 2,715 | (179) | 6,080 | 1,108 |
_________________________ |
(1)Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A. |
Similar to Neo's Magnequench and C&O segments, the prior-year comparable period for the Rare Metals segment was also impacted by COVID-19, although more so after the first quarter of 2020 and continuing later into 2020. For the three- and nine-month periods ended
EARNINGS CONFERENCE CALL
In order to comply with regulatory best practices, the Company anticipates holding its earnings conference call (the "Call") following the completion of the distribution of common shares of the Company in connection with the bought deal treasury and secondary offering (the "Offering") of its common shares. Neo expects the Offering to close on or around
NON-IFRS MEASURES
This news release refers to certain non-IFRS financial measures such as "Adjusted Net Income", "EBITDA", "Adjusted EBITDA", and "Adjusted EBITDA Margin". These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS, and may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS financial measures by providing further understanding of Neo's results of operations from management's perspective. Neo's definitions of non-IFRS measures used in this news release may not be the same as the definitions for such measures used by other companies in their reporting. Non-IFRS measures have limitations as analytical tools and should not be considered in isolation nor as a substitute for analysis of Neo's financial information reported under IFRS. Neo uses non-IFRS financial measures to provide investors with supplemental measures of its base-line operating performance and to eliminate items that have less bearing on operating performance or operating conditions and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. Neo believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the evaluation of issuers. Neo's management also uses non-IFRS financial measures in order to facilitate operating performance comparisons from period to period. For definitions of how Neo defines such financial measures, please see the "Non-IFRS Financial Measures" section of Neo's management's discussion and analysis filing for the three and nine months ended
TABLE 5: CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($000s) | |||||
ASSETS | |||||
Current | |||||
Cash and cash equivalents | $ | 51,734 | $ | 72,224 | |
Restricted cash | 3,964 | 4,219 | |||
Accounts receivable | 68,838 | 51,851 | |||
Inventories | 156,587 | 130,867 | |||
Income taxes receivable | 1,491 | 2,186 | |||
Assets held for sale | — | 415 | |||
Other current assets | 24,760 | 13,889 | |||
Total current assets | 307,374 | 275,651 | |||
Property, plant and equipment | 73,599 | 74,322 | |||
Intangible assets | 50,676 | 53,653 | |||
69,379 | 68,967 | ||||
Investments | 11,609 | 10,045 | |||
Deferred tax assets | 3,481 | 3,040 | |||
Other non-current assets | 3,275 | 864 | |||
Total non-current assets | 212,019 | 210,891 | |||
Total assets | $ | 519,393 | $ | 486,542 | |
LIABILITIES AND EQUITY | |||||
Current | |||||
Bank advances and other short-term debt | $ | 5,485 | $ | 2,428 | |
Accounts payable and other accrued charges | 68,216 | 79,106 | |||
Income taxes payable | 5,857 | 2,945 | |||
Provisions | 3,878 | 2,628 | |||
Lease obligations | 1,439 | 1,297 | |||
Derivative liability | 11,843 | 9,428 | |||
Other current liabilities | 2,964 | 940 | |||
Total current liabilities | 99,682 | 98,772 | |||
Employee benefits | 2,259 | 2,358 | |||
Provisions | 16,010 | 4,201 | |||
Deferred tax liabilities | 13,926 | 13,970 | |||
Lease obligations | 1,974 | 2,243 | |||
Other non-current liabilities | 1,555 | 1,513 | |||
Total non-current liabilities | 35,724 | 24,285 | |||
Total liabilities | 135,406 | 123,057 | |||
Non-controlling interest | 2,340 | 1,490 | |||
Equity attributable to equity holders of | 381,647 | 361,995 | |||
Total equity | 383,987 | 363,485 | |||
Total liabilities and equity | $ | 519,393 | $ | 486,542 |
____________________________ |
See accompanying notes to this table in Neo's Consolidated Financial Statements for the Three and Nine Months Ended |
TABLE 6: CONSOLIDATED RESULTS OF OPERATIONS
Comparison of the three and nine months ended
($000s) | Three Months Ended | Nine Months Ended | |||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
Revenue | $ | 119,841 | $ | 77,864 | $ | 385,837 | $ | 236,295 | |||
Costs of sales | |||||||||||
Costs excluding depreciation and amortization | 83,330 | 57,395 | 268,830 | 174,824 | |||||||
Depreciation and amortization | 1,980 | 1,996 | 5,771 | 7,431 | |||||||
Gross profit | 34,531 | 18,473 | 111,236 | 54,040 | |||||||
Expenses | |||||||||||
Selling, general and administrative | 13,347 | 10,938 | 41,024 | 37,589 | |||||||
Share-based compensation | 1,198 | 973 | 2,761 | 916 | |||||||
Depreciation and amortization | 1,908 | 1,797 | 5,798 | 5,851 | |||||||
Research and development | 5,520 | 3,628 | 14,492 | 9,449 | |||||||
Impairment of assets | — | — | — | 59,084 | |||||||
21,973 | 17,336 | 64,075 | 112,889 | ||||||||
Operating income (loss) | 12,558 | 1,137 | 47,161 | (58,849) | |||||||
Other income (expense) | 462 | (92) | (5,399) | (65) | |||||||
Finance cost, net | (747) | (99) | (2,420) | (3,362) | |||||||
Foreign exchange loss | (755) | (128) | (1,844) | (440) | |||||||
Income (loss) from operations before income taxes | 11,518 | 818 | 37,498 | (62,716) | |||||||
Income tax expense | (3,670) | (1,198) | (10,282) | (811) | |||||||
Income (loss) from operations before equity income | 7,848 | (380) | 27,216 | (63,527) | |||||||
Equity income of associates (net of income tax) | 288 | 781 | 1,564 | 1,082 | |||||||
Net income (loss) | $ | 8,136 | $ | 401 | $ | 28,780 | $ | (62,445) | |||
Attributable to: | |||||||||||
Equity holders of Neo | $ | 8,036 | $ | 423 | $ | 28,442 | $ | (60,150) | |||
Non-controlling interest | 100 | (22) | 338 | (2,295) | |||||||
$ | 8,136 | $ | 401 | $ | 28,780 | $ | (62,445) | ||||
Earnings (Loss) per share attributable to equity holders of Neo: | |||||||||||
Basic | $ | 0.21 | $ | 0.01 | $ | 0.75 | $ | (1.60) | |||
Diluted | $ | 0.21 | $ | 0.01 | $ | 0.75 | $ | (1.60) |
____________________________ |
See Management's Discussion and Analysis for the Three and Nine Months Ended |
TABLE 7: RECONCILIATION OF NET INCOME (LOSS) TO EBITDA, ADJUSTED EBITDA AND FREE CASH FLOW
($000s) | Three Months Ended | Nine Months Ended | |||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
Net income (loss) | $ | 8,136 | $ | 401 | $ | 28,780 | $ | (62,445) | |||
Add back (deduct): | |||||||||||
Finance cost, net | 747 | 99 | 2,420 | 3,362 | |||||||
Income tax expense | 3,670 | 1,198 | 10,282 | 811 | |||||||
Depreciation and amortization included in costs of sales | 1,980 | 1,996 | 5,771 | 7,431 | |||||||
Depreciation and amortization included in operating expenses | 1,908 | 1,797 | 5,798 | 5,851 | |||||||
EBITDA | 16,441 | 5,491 | 53,051 | (44,990) | |||||||
Adjustments to EBITDA: | |||||||||||
Other (income) expense (1) | (462) | 92 | 5,399 | 65 | |||||||
Foreign exchange loss (2) | 755 | 128 | 1,844 | 440 | |||||||
Equity income of associates | (288) | (781) | (1,564) | (1,082) | |||||||
Share and value-based compensation (3) | 1,198 | 931 | 2,761 | 660 | |||||||
Impairment of assets (4) | — | — | — | 59,084 | |||||||
Other costs (5) | 6 | (131) | 772 | 2,389 | |||||||
Adjusted EBITDA | $ | 17,650 | $ | 5,730 | $ | 62,263 | $ | 16,566 | |||
Adjusted EBITDA Margins | 14.7 % | 7.4 % | 16.1 % | 7.0 % | |||||||
Less: | |||||||||||
Capital expenditures | $ | 2,374 | $ | 3,407 | $ | 6,631 | $ | 6,436 | |||
Free Cash Flow | $ | 15,276 | $ | 2,323 | $ | 55,632 | $ | 10,130 | |||
Free Cash Flow Conversion (6) | 86.5 % | 40.5 % | 89.4 % | 61.1 % |
Notes: | |
(1) | Represents other expenses resulting from non-operational related activities, including provisions for estimated damages for outstanding legal claims related to historic volumes, costs for disposal of historically generated naturally occurring radioactive materials ("NORM") and fair value remeasurement of equity securities. These costs and recoveries are not indicative of Neo's ongoing activities. |
(2) | Represents unrealized and realized foreign exchange losses (gains) that include non-cash adjustments in translating foreign denominated monetary assets and liabilities. |
(3) | Represents share and value-based compensation expense in respect of the Plan, the Legacy Plan, the LTIP and the long-term value bonus plan. The long-term value bonus plan is included in selling, general, and administration expenses and has similar vesting criteria to the share-based plan and is settled in cash for non-executives and non-North Americans where implementation of a share settlement plan would have been prohibitively expensive in terms of administration and compliance. For the three and nine months ended |
(4) | The negative economic impacts of COVID-19 were determined to be an impairment indicator as of |
(5) | These represent primarily legal, professional advisory fees and other transaction costs incurred with respect to non-operating capital structure related transactions and restructuring costs related to management team changes. Neo has removed these charges to provide comparability with historic periods. |
(6) | Calculated as Free Cash Flow divided by Adjusted EBITDA. |
TABLE 8: RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
($000s) | Three Months Ended | Nine Months Ended | |||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
Net income (loss) | $ | 8,136 | $ | 401 | $ | 28,780 | $ | (62,445) | |||
Adjustments to net income (loss): | |||||||||||
Foreign exchange loss (1) | 755 | 128 | 1,844 | 440 | |||||||
Impairment of assets (2) | — | — | — | 59,084 | |||||||
Share and value-based compensation (3) | 1,198 | 931 | 2,761 | 660 | |||||||
Other costs (income) (4) | 6 | (131) | 772 | 2,389 | |||||||
Other items included in other (income) expense (5) | (260) | — | 6,162 | — | |||||||
Tax impact of the above items | (43) | (38) | (1,341) | (3,546) | |||||||
Adjusted net income (loss) | $ | 9,792 | $ | 1,291 | $ | 38,978 | $ | (3,418) | |||
Attributable to: | |||||||||||
Equity holders of Neo | $ | 9,692 | $ | 1,313 | $ | 38,640 | $ | (3,390) | |||
Non-controlling interest | $ | 100 | $ | (22) | $ | 338 | $ | (28) | |||
Weighted average number of common shares outstanding: | |||||||||||
Basic | 37,913,275 | 37,610,846 | 37,738,354 | 37,671,721 | |||||||
Diluted | 38,228,888 | 37,653,807 | 38,084,902 | 37,671,721 | |||||||
Adjusted earnings (loss) per share (6) attributable to equity holders of Neo: | |||||||||||
Basic | $ | 0.26 | $ | 0.03 | $ | 1.02 | $ | (0.09) | |||
Diluted | $ | 0.25 | $ | 0.03 | $ | 1.01 | $ | (0.09) |
Notes: | |
(1) | Represents unrealized and realized foreign exchange losses (gains) that include non-cash adjustments in translating foreign denominated monetary assets and liabilities. |
(2) | The negative economic impacts of COVID-19 were determined to be an impairment indicator as of |
(3) | Represents share and value-based compensation expense in respect of the Plan, the Legacy Plan, the LTIP and the long-term value bonus plan. The long-term value bonus plan is included in selling, general, and administration expenses and has similar vesting criteria to the share-based plan and is settled in cash for non-executives and non-North Americans where implementation of a share settlement plan would have been prohibitively expensive in terms of administration and compliance. For the three and nine months ended |
(4) | These represent primarily legal, professional advisory fees and other transaction costs incurred with respect to non-operating capital structure related transactions and restructuring costs related to management team changes. Neo has removed these charges to provide comparability with historic periods. |
(5) | Represents other expenses resulting from non-operational related activities, including provisions for estimated damages for outstanding legal claims related to historic volumes, costs for disposal of historically generated NORM and fair value remeasurement of equity securities. These costs and recoveries are not indicative of Neo's ongoing activities. |
(6) | Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this new release and in the MD&A, available on Neo's website www.neomaterials.comand on SEDAR at www.sedar.com. |
About Neo Performance Materials
Neo manufactures the building blocks of many modern technologies that enhance efficiency and sustainability. Neo's advanced industrial materials - magnetic powders and magnets, specialty chemicals, metals, and alloys - are critical to the performance of many everyday products and emerging technologies. Neo's products help to deliver the technologies of tomorrow to consumers today. The business of Neo is organized along three segments: Magnequench, Chemicals & Oxides and Rare Metals. Neo is headquartered in
Cautionary Statements Regarding Forward Looking Statements
This news release contains "forward-looking information" within the meaning of applicable securities laws in
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