November 10, 2020 | Montréal, Québec
5N Plus Inc. (TSX:VNP) (“5N Plus” or the “Company”), a leading global producer of engineered materials and specialty chemicals, today reported financial results for the third quarter ended September 30, 2020.All amounts are expressed in U.S. dollars.
5N Plus posted strong results in the third quarter of 2020, achieving surging gross margin1 of 31.3% and Adjusted EBITDA1 of $7.7 million or 19.4% of revenue despite a globally challenging business environment due to the current pandemic. The improved earnings and higher margins were supported by a shift in product mix away from commodities to higher value-added products. As compared to the same period last year, revenue for the quarter was impacted by lower metal notations and COVID-19 related challenges, with segment Eco-Friendly Materials absorbing the majority of the impact.
During the quarter, 5N Plus initiated the closure of an Asian subsidiary with planned consolidation of select activities within the Company’s global footprint. This decision was taken solely due to unfavorable business conditions arising from abrupt changes in the regulatory environment and inconsistent enforcement practices, resulting in restructuring and impairment charges. Also, during the quarter, 5N Plus executed a negotiated settlement addressing upstream related challenges which resulted in a non-recurring income of $8.0 million. The financial impact of these two non-recurring events resulted in a net gain and a favorable cash flow impact to follow over the coming quarters.
Arjang Roshan, President and Chief Executive Officer, commented: “Despite a challenging business environment impacted by COVID-19, 5N Plus continues to deliver strong earnings and expand margins thanks to the growing contributions from our growth initiatives. Numerous customer feedbacks and growing sales orders; especially for engineered compounds, powders and substrates, continue to reaffirm our belief in the growth initiatives and their relevance to the markets of the future.”
Mr. Roshan continued: “Recognizing the viability of our trajectory, we are vetting various options to expedite the rate of growth in these initiatives with emphasis on substantially increasing our Company’s total addressable market.” Mr. Roshan concluded: “What is abundantly certain is that our people are the impetus behind our progress and their health and safety shall remain our first and foremost priority.”
1 See Non-IFRS Measures
5N Plus will host a conference call on Wednesday, November 11, 2020 at 8:00 am (Eastern Time) to discuss results of the third quarter ended September 30, 2020. All interested parties are invited to participate in the live broadcast on the Company’s website at www.5nplus.com.
To participate in the conference call:
A playback will be available two hours after the event at 1-888-390-0541, until November 18, 2020. The access code is 269171.
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 Montreal, Québec, Canada and operates R&D, manufacturing and commercial centers in several locations in Europe, the Americas and Asia. 5N Plus deploys a range of proprietary and proven technologies to manufacture products which are used as enabling precursors by its customers in a number of advanced electronics, optoelectronics, pharmaceutical, health, renewable energy and industrial applications. Many of the materials produced by 5N Plus are critical for the functionality and performance of the products and systems produced by its customers, many of whom are leaders within their industry.
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’ 2019 MD&A dated February 25, 2020 and note 10 of the unaudited condensed interim consolidated financial statements for the three and nine-month periods ended periods ended September 30, 2020 and 2019 available on www.sedar.com.
The Company is not aware of any significant changes to its risk factors previously disclosed, however since January 2020, the gradual outbreak of the novel strain of the coronavirus, COVID-19 and its declaration as a pandemic by the World Health Organization, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures have caused material disruption to businesses globally resulting in an economic slowdown. While the Company has been able to mitigate the short-term impact from the crisis, it is not possible to reliably estimate the length, severity and long-term impact the global pandemic may have on the Company's financial results, conditions and cash flows. The outbreak of the COVID-19 should be considered a new risk factor.
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.
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.
Chief Financial Officer
5N Plus Inc.