Neo Performance Materials Reports Third Quarter 2022 Results

TORONTO - Neo Performance Materials Inc. ('Neo', the 'Company') (TSX: NEO) released its third quarter 2022 financial results.

The financial statements and management's discussion and analysis of these results can be viewed on Neo's web site at www.neomaterials.com/investors/ and on SEDAR at www.sedar.com.

'Neo is very grateful to the Government of Estonia for choosing to partner with us by providing a grant of up to $18.3 million (EUR18.7 million) to help accelerate our plans to construct a vertically integrated rare earth magnet manufacturing facility in Estonia,' said Constantine Karayannopoulos, CEO of Neo. 'Coupled with our existing rare earth separations plant in Europe, this new strategic magnet manufacturing facility will help Europe move closer to achieving its greenhouse gas reduction and climate resiliency goals.'

'With regard to the quarter, while rare earth pricing remains attractive in absolute dollar terms, and is nearly double pre-pandemic norms, the retreat in pricing we have seen over the past six months placed short-term pressure on our margin levels, as higher cost inventory flows through our results of operations,' he added. 'This lead-lag volatility is normal in our industry and, of course, we reap the benefit in a rising price environment. More important, the strategic initiatives we are pursuing are designed to place Neo in a unique position to take full advantage of the long-term opportunities presented by the global energy transition.'

HIGHLIGHTS OF Q3 2022 CONSOLIDATED PERFORMANCE

For the three and nine months ended September 30, 2022, revenues of $146.6 million and $481.1 million were 22.4% and 24.7% higher, respectively, than the corresponding periods of 2021. All three segments experienced higher revenues. Selling prices for rare earth products, including Magnequench powders, rose significantly starting from the fourth quarter of 2020 and through the first quarter of 2022. By the third quarter of 2022, rare earth prices declined 30% to 40% from the peak (in the first quarter of 2022), although they remain almost 100% higher than recent historical norms. Neo benefited from rising prices from the fourth quarter of 2020 to the second quarter of 2022 and Neo was adversely affected by the rapid decline in prices in the third quarter of 2022. The overall pricing and margin environment is higher than historical trends but quarterly results are positively (when prices are rising) or negatively (when prices are falling) affected due to the lead-lag effect of higher cost inventory on hand. In addition to lower margin on sales in the quarter, Neo recorded $8.0 million of provisions for inventories in the third quarter, related to higher cost inventory on hand, relative to lowered selling prices. In the long term, there are higher dollar value margins available with higher prices.

Operationally, Neo reported significant increases in revenue and earnings year-over-year. Magnequench saw weaker volume across the majority of its applications due primarily to customer slowdowns in Asia related to COVID-19 and the slowdown in automotive due to the semiconductor chip shortage. C&O saw mixed volumes for rare earth elements but slower volumes in the environmental catalyst end markets driven by semiconductor chip shortages. Rare Metals saw record earnings driven by higher selling prices and the continued recovery in aerospace markets and demand from new customers in other end markets, tempered by the elimination of sales to Russian customers.

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 Toronto, Ontario, Canada; with corporate offices in Greenwood Village, Colorado, United States; Singapore and Beijing, China. Neo has a global platform that includes 10 manufacturing facilities located in China, the United States, Germany, Canada, Estonia, Thailand and South Korea as well as one dedicated research and development centre in Singapore.

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