Q3 2023 Highlights
(unless otherwise noted, all financial amounts in this news release are expressed in
- Q3 2023 revenue of
$136.9 million , lower by 6.6% YoY. - Operating income of
$7.0 million in the quarter. - Adjusted Net Income(1) of
$4.0 million in the quarter, or$0.09 per share. - Adjusted EBITDA(1) of
$13.2 million in the quarter, higher by 87.1% YoY. - Cash balance of
$113.4 million , after funding acquisitions and investments of$16.4 million , distributing$10.1 million in dividends to its shareholders, and repurchasing$16.7 million of shares under the Normal Course Issuer Bid (the "NCIB"). - A quarterly dividend of
Cdn$0.10 per common share was declared onNovember 9, 2023 for shareholders of record atDecember 18, 2023 , with a payment date ofDecember 28, 2023 .
"I am pleased with the direction of our third quarter results as the underlying impact of a more stable rare earth pricing environment validates what the normalized earning power of Neo looks like," said
"Our sintered magnet plant construction in
__________________________ |
(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, available on Neo's website at www.neomaterials.com and on SEDAR at www.sedar.com. |
HIGHLIGHTS OF Q3 2023 CONSOLIDATED PERFORMANCE
For the three months ended
As at
SELECTED FINANCIAL RESULTS
TABLE 1: Selected Consolidated Results | ||||
Quarter-over-Quarter | Year-over-Year Comparison | |||
($000s) | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 |
Revenue | 136,917 | 146,627 | 442,877 | 481,130 |
Operating income | 6,959 | 2,239 | 16,637 | 51,887 |
EBITDA(1) | 11,053 | 5,460 | 24,493 | 66,068 |
Adjusted EBITDA(1) | 13,160 | 7,034 | 34,122 | 66,607 |
Adjusted EBITDA %(1) | 9.6 % | 4.8 % | 7.7 % | 13.8 % |
(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. |
MAGNEQUENCH SEGMENT RESULTS
TABLE 2: Selected Magnequench Results | ||||
Quarter-over-Quarter | Year-over-Year | |||
Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | |
Volume (tonnes) | 1,389 | 1,097 | 3,413 | 3,620 |
($000s) | ||||
Revenue | 54,414 | 67,402 | 158,908 | 219,828 |
Operating income | 2,911 | 4,897 | 4,943 | 27,995 |
EBITDA(1) | 4,477 | 6,345 | 9,116 | 35,814 |
Adjusted EBITDA(1) | 6,042 | 7,282 | 15,199 | 35,384 |
_________________________________ |
(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. |
Magnequench revenue in the third quarter declined by about 19.3% compared to the prior year period, due to substantially lower pass-through prices for magnetic rare earth elements. Volumes improved compared to the prior year period, although the permanent magnet industry remains slow in the near-term. Adjusted EBITDA as a percentage of revenue expanded slightly in the quarter.
CHEMICALS & OXIDES ("C&O") SEGMENT RESULTS
TABLE 3: Selected C&O Results | ||||
Quarter-over-Quarter Comparison | Year-over-Year Comparison | |||
($000s) | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 |
Revenue | 57,812 | 52,231 | 180,377 | 189,244 |
Operating income (loss) | 6,068 | (5,298) | 1,466 | 21,324 |
EBITDA(1) | 6,958 | (3,231) | 4,053 | 26,490 |
Adjusted EBITDA(1) | 7,737 | (3,863) | 6,088 | 25,710 |
(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. |
C&O revenue improved by 10.7% during the three months ended
RARE METALS SEGMENT RESULTS
TABLE 4: Selected Rare Metals Results | ||||
Quarter-over-Quarter | Year-over-Year Comparison | |||
($000s) | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 |
Revenue | 25,976 | 31,567 | 104,877 | 86,521 |
Operating income | 2,749 | 5,199 | 25,267 | 13,186 |
EBITDA(1) | 4,349 | 6,587 | 26,665 | 16,457 |
Adjusted EBITDA(1) | 3,293 | 5,797 | 26,407 | 15,312 |
(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. |
Rare Metals reported 17.7% lower revenue during the third quarter, although continued to report very strong earnings through the first nine months of 2023. The segment delivered healthy margin performance driven by strength in Hafnium pricing and demand. The upward trend in Hafnium prices which began in the fourth quarter of 2021 has continued throughout the third quarter of 2023 with an increase of over 30% during the three months ended
CONFERENCE CALL ON
Management will host a teleconference call on
NON-IFRS MEASURES
This news release refers to certain non-IFRS financial measures and ratios such as "Adjusted Net Income", "EBITDA", "Adjusted EBITDA", and "Adjusted EBITDA Margin". These measures and ratios 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 and ratios 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 and ratios 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 and ratios 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 and ratios in the evaluation of issuers. Neo's management also uses non-IFRS financial measures to facilitate operating performance comparisons from period to period. For definitions of how Neo defines such financial measures and ratios, 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 | $ 113,419 | $ 147,491 | ||
Restricted cash | 3,207 | 1,179 | ||
Accounts receivable | 71,017 | 81,409 | ||
Inventories | 197,173 | 212,702 | ||
Income taxes receivable | 1,080 | 355 | ||
Assets held for sale | 66 | — | ||
Other current assets | 21,106 | 23,279 | ||
Total current assets | 407,068 | 466,415 | ||
Property, plant and equipment | 96,032 | 75,767 | ||
Intangible assets | 38,571 | 42,984 | ||
64,023 | 66,042 | |||
Investments | 16,942 | 16,363 | ||
Deferred tax assets | 7,707 | 6,956 | ||
Other non-current assets | 1,184 | 1,933 | ||
Total non-current assets | 224,459 | 210,045 | ||
Total assets | $ 631,527 | $ 676,460 | ||
LIABILITIES AND EQUITY | ||||
Current | ||||
Bank advances and other short-term debt | $ — | $ 17,288 | ||
Accounts payable and other accrued charges | 70,303 | 69,093 | ||
Income taxes payable | 9,846 | 10,033 | ||
Provisions | 1,200 | 1,369 | ||
Lease obligations | 1,500 | 1,264 | ||
Derivative liability | 36,492 | 28,570 | ||
Current portion of long-term debt | 2,406 | 747 | ||
Other current liabilities | 671 | 278 | ||
Total current liabilities | 122,418 | 128,642 | ||
Long term debt | 22,844 | 29,885 | ||
Employee benefits | 454 | 489 | ||
Derivative liability | 1,858 | — | ||
Provisions | 24,967 | 23,604 | ||
Deferred tax liabilities | 16,108 | 13,942 | ||
Lease obligations | 3,259 | 813 | ||
Other non-current liabilities | 3,325 | 1,442 | ||
Total non-current liabilities | 72,815 | 70,175 | ||
Total liabilities | 195,233 | 198,817 | ||
Non-controlling interest | 2,906 | 3,193 | ||
Equity attributable to equity holders of | 433,388 | 474,450 | ||
Total equity | 436,294 | 477,643 | ||
Total liabilities and equity | $ 631,527 | $ 676,460 |
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 | ||||||
2023 | 2022 | 2023 | 2022 | |||||
Revenue | $ 136,917 | $ 146,627 | $ 442,877 | $ 481,130 | ||||
Cost of sales | ||||||||
Cost excluding depreciation and amortization | 106,255 | 120,137 | 355,465 | 356,249 | ||||
Depreciation and amortization | 2,674 | 2,279 | 7,210 | 7,045 | ||||
Gross profit | 27,988 | 24,211 | 80,202 | 117,836 | ||||
Expenses | ||||||||
Selling, general and administrative | 13,688 | 13,781 | 44,670 | 42,296 | ||||
Share-based compensation | 1,024 | 735 | 1,792 | 1,873 | ||||
Depreciation and amortization | 1,794 | 1,781 | 5,374 | 5,529 | ||||
Research and development | 4,523 | 5,675 | 11,729 | 15,956 | ||||
Impairment of assets | — | — | — | 295 | ||||
21,029 | 21,972 | 63,565 | 65,949 | |||||
Operating income | 6,959 | 2,239 | 16,637 | 51,887 | ||||
Other income (expense) | 1,011 | (448) | 362 | (1,736) | ||||
Finance income (cost), net | 648 | (1,437) | (7,449) | (4,143) | ||||
Foreign exchange loss | (190) | (723) | (1,432) | (175) | ||||
Income (loss) from operations before income taxes and equity (loss) income of associates | 8,428 | (369) | 8,118 | 45,833 | ||||
Income tax expense | (4,124) | (3,775) | (11,722) | (15,771) | ||||
Income (loss) from operations before equity (loss) income of associates | 4,304 | (4,144) | (3,604) | 30,062 | ||||
Equity (loss) income of associates (net of income tax) | (1,195) | 332 | (3,658) | 3,518 | ||||
Net income (loss) | $ 3,109 | $ (3,812) | $ (7,262) | $ 33,580 | ||||
Attributable to: | ||||||||
Equity holders of | $ 3,069 | $ (3,719) | $ (7,075) | $ 33,238 | ||||
Non-controlling interest | 40 | (93) | (187) | 342 | ||||
$ 3,109 | $ (3,812) | $ (7,262) | $ 33,580 | |||||
Earnings (loss) per share attributable to equity holders of | ||||||||
Basic | $ 0.07 | $ (0.09) | $ (0.16) | $ 0.81 | ||||
Diluted | $ 0.07 | $ (0.09) | $ (0.16) | $ 0.80 |
See Management's Discussion and Analysis for the Three and Nine Months Ended |
TABLE 7: RECONCILIATIONS OF NET INCOME (LOSS) TO EBITDA, ADJUSTED EBITDA AND FREE CASH FLOW
($000s) | Three Months Ended | Nine Months Ended | ||||||
2023 | 2022 | 2023 | 2022 | |||||
Net income (loss) | $ 3,109 | $ (3,812) | $ (7,262) | $ 33,580 | ||||
Add back (deduct): | ||||||||
Finance (income) cost, net | (648) | 1,437 | 7,449 | 4,143 | ||||
Income tax expense | 4,124 | 3,775 | 11,722 | 15,771 | ||||
Depreciation and amortization included in cost of sales | 2,674 | 2,279 | 7,210 | 7,045 | ||||
Depreciation and amortization included in operating expenses | 1,794 | 1,781 | 5,374 | 5,529 | ||||
EBITDA | 11,053 | 5,460 | 24,493 | 66,068 | ||||
Adjustments to EBITDA: | ||||||||
Other (income) expense (1) | (1,011) | 448 | (362) | 1,736 | ||||
Foreign exchange loss (2) | 190 | 723 | 1,432 | 175 | ||||
Equity loss (income) of associates | 1,195 | (332) | 3,658 | (3,518) | ||||
Share-based compensation (3) | 1,024 | 735 | 1,792 | 1,873 | ||||
Fair value adjustments to inventory acquired (4) | 423 | — | 995 | — | ||||
Impairment of assets | — | — | — | 295 | ||||
Transaction and project startup costs (recoveries) (5) | 286 | — | 2,114 | (22) | ||||
Adjusted EBITDA (6) | $ 13,160 | $ 7,034 | $ 34,122 | $ 66,607 | ||||
Adjusted EBITDA Margins (6) | 9.6 % | 4.8 % | 7.7 % | 13.8 % | ||||
Less: | ||||||||
Capital expenditures (7) | $ 7,793 | $ 1,734 | $ 19,629 | $ 11,098 | ||||
Free Cash Flow (6) | $ 5,367 | $ 5,300 | $ 14,493 | $ 55,509 | ||||
Free Cash Flow Conversion (6) | 40.8 % | 75.3 % | 42.5 % | 83.3 % |
Notes:
(1) | Represents other (income) expenses resulting from non-operational related activities, including provisions for damages for outstanding legal claims related to historic volumes. These costs and recoveries are not indicative of Neo's ongoing activities. |
(2) | Represents unrealized and realized foreign exchange losses that include non-cash adjustments in translating foreign denominated monetary assets and liabilities. |
(3) | Represents share-based compensation expense in respect of the Plan and the LTIP. |
(4) | In accordance with IFRS 3 Business Combinations, and on completion of the acquisition of SGTec, Neo recorded SGTec's acquired inventory at fair value, which included a mark-up for profit of |
(5) | These represent primarily legal, professional advisory fees and other transaction costs for capital structuring associated with Neo or investments of Neo. Neo has removed these charges to provide comparability with historic periods. For the three and nine months ended |
(6) | Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin", "Free Cash Flow" and "Free Cash Flow Conversion". 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.com and on SEDAR at www.sedar.com. |
(7) | Includes capital expenditures of |
TABLE 8: RECONCILIATIONS OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
($000s) | Three Months Ended | Nine Months Ended | ||||||
2023 | 2022 | 2023 | 2022 | |||||
Net income (loss) | $ 3,109 | $ (3,812) | $ (7,262) | $ 33,580 | ||||
Adjustments to net income (loss): | ||||||||
Foreign exchange loss (1) | 190 | 723 | 1,432 | 175 | ||||
Impairment of assets | — | — | — | 295 | ||||
Share-based compensation (2) | 1,024 | 735 | 1,792 | 1,873 | ||||
Transaction and project startup costs (recoveries) (3) | 286 | — | 2,114 | (22) | ||||
Other items included in other expense (4) | (897) | 520 | (278) | 2,014 | ||||
Fair value adjustments to inventory acquired (5) | 423 | — | 995 | — | ||||
Tax impact of the above items | (122) | (76) | (669) | (473) | ||||
Adjusted net income (loss) | $ 4,013 | $ (1,910) | $ (1,876) | $ 37,442 | ||||
Attributable to: | ||||||||
Equity holders of Neo | $ 3,973 | $ (1,817) | $ (1,689) | $ 37,100 | ||||
Non-controlling interest | $ 40 | $ (93) | $ (187) | $ 342 | ||||
Weighted average number of common shares outstanding: | ||||||||
Basic | 44,517,503 | 41,368,970 | 44,967,960 | 40,913,207 | ||||
Diluted | 45,019,400 | 41,368,970 | 44,967,960 | 41,353,231 | ||||
Adjusted earnings (loss) per share (6) attributable to equity holders of Neo: | ||||||||
Basic | $ 0.09 | $ (0.04) | $ (0.04) | $ 0.91 | ||||
Diluted | $ 0.09 | $ (0.04) | $ (0.04) | $ 0.90 |
Notes:
(1) | Represents unrealized and realized foreign exchange losses that include non-cash adjustments in translating foreign denominated monetary assets and liabilities. |
(2) | Represents share-based compensation expense in respect of the Plan and the LTIP. |
(3) | These represent primarily legal, professional advisory fees and other transaction costs for capital structuring associated with Neo or investments of Neo. Neo has removed these charges to provide comparability with historic periods. For the three and nine months ended |
(4) | Represents other expenses resulting from non-operational related activities, including provisions for damages for outstanding legal claims related to historic volumes. These costs and recoveries are not indicative of Neo's ongoing activities. |
(5) | In accordance with IFRS 3 Business Combinations, and on completion of the acquisition of SGTec, Neo recorded SGTec's acquired inventory at fair value, which included a mark-up for profit of |
(6) | Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin", "Free Cash Flow" and "Free Cash Flow Conversion". 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.com and 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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