• • Q4 2020 revenue of $110.4 million higher by 16.8% YoY and by 41.8% over Q3 2020.

• • Volumes in the quarter of 3,683 tonnes improved by 9.3% YoY and by 21.4% sequentially.

• • Operating income of $3.2 million in the quarter lower YoY but sharply higher by 180.6% sequentially.

• • Adjusted Net income⁽¹⁾ of $9.6 million ($0.25 per share) improved by 56.7% YoY and reversed a loss in Q3 2020. Full-year Adjusted Net income $6.2 million ($0.16 per share).

• • Adjusted EBITDA⁽¹⁾ of $12.3 million off by 1.4% YoY but higher by 114.8% sequentially.

• • Cash balance of $72.2 million after distributing $11.3 million in dividends to shareholders

• A quarterly dividend of Cdn$0.10 per common share was declared on March 10, 2021 for shareholders of record at March 22, 2021, with a payment date of March 30, 2021.

TORONTO, March 22, 2021 /CNW/ – Neo Performance Materials Inc. (“Neo“, the “Company“) (TSX: NEO) released its 2020 year-end financial results. The financial statements and management’s discussion and analysis (“MD&A“) of these results can be viewed on Neo’s web site at https://www.neomaterials.com and on SEDAR at https://www.sedar.com.

HIGHLIGHTS OF Q4 2020 AND YEAR-END CONSOLIDATED PERFORMANCE

Neo booked significantly stronger sequential results in the fourth quarter of 2020, driven largely by a sharp rebound in automotive and industrial end markets in the latter portion of 2020.  On a consolidated basis and for the quarter ended December 31, 2020, volumes of 3,683 tonnes increased by 21.4%, revenues of $110.4 million increased by 41.8%, operating income of $3.2 million was higher by 180.6%, and Adjusted EBITDA of $12.3 million improved by 114.8%, all as compared to the quarter ended September 30, 2020.  Q4 2020 volumes, revenue, and Adjusted Net income all were also higher over the prior-year period.

For the year ended December 31, 2020, consolidated revenue was $346.7 million compared to $407.5 million in 2019; a decrease of $60.8 million or 14.9%.  Neo reported a net loss of $60.1 million, or $(1.54) per share.  Adjusted Net Income⁽¹⁾ totaled $6.2 million, or $0.16 per share.

As of December 31, 2020, Neo had cash and cash equivalents of $72.2 million plus restricted cash of $4.2 million, compared to $84.7 million plus $4.2 million as at December 31, 2019.  Neo paid $11.3 million in dividends to its shareholders and $3.7 million to its non-controlling interest partners and purchased $3.1 million of its shares under the Normal Course Issuer Bid program in the year ended December 31, 2020.  In addition, Neo has approximately $6.8 million available under its credit facilities with $2.4 million drawn as at December 31, 2020.

“Automotive and industrial markets saw a strong resurgence in the fourth quarter, driving growth across many of Neo’s business lines, increasing volumes to more normalized levels, and helping Neo finish out 2020 on a very solid footing,” said Constantine Karayannopoulos, Neo’s Chief Executive Officer.  “Moreover, we are seeing these trends continue to strengthen into 2021, especially as automotive and industrial end markets accelerate toward increasing electrification of vehicles, reduced energy intensity in factories and homes, and meaningful reductions of greenhouse gas emissions, all of which will require greater supplies of rare earth materials.  Neo is very well positioned to benefit both from organic growth as the global economy continues to rebound and from additional strategic alliances and opportunistic investments that we are examining in the near- and mid-term horizons.”

SELECTED FINANCIAL RESULTS

For the year ended December 31, 2020, revenues of $346.7 million were 14.9% lower than in 2019.  All three segments experienced significant decreases in revenues as volumes were adversely affected by slower economic activities, including impacts due to the COVID-19 pandemic.  For Q4 2020, revenues of $110.4 million were increased by 16.8% compared to the prior year, largely due to a rebound in automotive and industrial end markets in the latter portion of 2020.

Neo reported an operating loss of $55.7 million and a net loss of $60.1 million for the year ended December 31, 2020. Operating loss and net loss were mainly a result of the $59.1 million impairment of assets in the C&O and Rare Metals segments. For Q4 2020, net operating income was $3.2 million, as compared to $7.0 million in the same period of 2019.

Operationally, for the year ended December 31, 2020, the most significant impact to financial performance is from lower volumes across all three business units, which can largely be attributed to COVID-19 and the impact to customer demand across the supply chain.  All three business units engaged in various cost-cutting initiatives including shortening shifts, temporarily idling certain facilities, reducing project costs and executing on other working capital reduction initiatives. Volumes and economic activity began to recover in the latter half of the third quarter and continued into the fourth quarter for both the Magnequench and C&O segments, while the aerospace market for the Rare Metals segment did not exhibit any rebound or recovery.  In the three months ended December 31, 2020, the Magnequench and C&O segments saw broad volume recoveries and across key areas such as traction motors and environmental catalysts for automotive.

Adjusted EBITDA for the year ended December 31, 2020 was $28.9 million, a decrease of $24.9 million compared to 2019.

On March 1, 2021, Neo announced that it entered into a non-binding agreement in principle with Energy Fuels Inc., to create an initiative to produce value-added rare earth products from natural monazite sands, a by-product of heavy mineral sands mined in the southeastern U.S.  Energy Fuels will process the monazite sands into a mixed rare earth carbonate in Utah for use as feed material for rare earth separation production in Neo’s European-based processing facility in Sillamäe, Estonia.

MAGNEQUENCH SEGMENT RESULTS

Operating income for the year ended December 31, 2020 was $20.0 million, a decrease of $9.0 million compared to the year ended December 31, 2019.   Full-year 2020 Adjusted EBITDA in the Magnequench segment was $29.9 million, compared to $37.1 million in 2019; a decrease of $7.1 million.  Sales volumes, and their impact on margins and overhead absorption, were the largest contributors to the decrease in Adjusted EBITDA with other impacts being from mix, price reductions, timing of certain operational activities, changes in foreign exchange rates, and timing of pricing pass-through mechanics on material inputs.

For the year ended December 31, 2020, volumes in the Magnequench segment were adversely affected by customer shutdowns and slowdowns, primarily as a result of the continued impact of COVID-19. The slowdown of volumes was seen across most applications that utilize Magnequench’s neodymium-iron-boron (“NdFeB“) magnetic powders.  However, Magnequench saw increases in the production and sales of NdFeB compression molded (“NdFeB CM“) magnets, particularly with respect to sales from the NdFeB CM magnet business purchased in 2019.  The current magnet product line services primarily laptop computers and consumer electronics and has been on a growth trajectory gaining market share since the purchase by Magnequench.  Volumes, revenues, and earnings are all higher in the three months ended December 31, 2020, compared to the prior year and compared to the prior sequential quarters.  Certain programs and end markets, including traction motors for hybrid and electric vehicles, that utilize Magnequench NdFeB powders and NdFeB CM magnets began to recover in the latter half of the third quarter and continued to recover and grow in the fourth quarter of 2020, partially due to some economic recovery and partially due to supply chains being refilled.

CHEMICALS & OXIDES (“C&O”) SEGMENT RESULTS

For the year ended December 31, 2020, an operating loss of $26.5 million was reported, compared to an operating income of $18.4 million in 2019.  The operating loss in 2020 was mainly due to the $35.1 million impairment charge recorded in the second quarter of 2020.  For the year ended December 31, 2020, Adjusted EBITDA was $14.0 million, compared to $22.9 million in 2019; a decrease of $8.9 million or 39.0%.

For the year ended December 31, 2020, volumes in the C&O segment were affected by the general economic slowdown, primarily as a result of COVID-19.  Customers of environmental catalysts had various periods of shutdowns and slowdowns and markets for rare earth products were slowed in terms of both volume and price.  Overall, C&O auto-catalyst volumes in 2020 performed slightly ahead of the prior year despite the slowdown in automotive due to market share gains and new product launches.  In Q4 2020, as certain portions of the economy began to recover, the C&O segment saw growth in the auto-catalyst segment compared to the prior year, and particularly compared to the prior sequential quarters, supported by market share gains and new product launches.  A portion of these strong volumes is related to the economic recovery and a portion is related to refilling the supply chain.

In rare earth separation, C&O benefited from an increase in the market price of certain products in the latter portion of the third quarter and continuing into the fourth quarter of 2020, fueled by increased demand, primarily in magnetic applications, as the economy rebounds from the impact of COVID-19.

Volumes and revenues in C&O’s water treatment products exceeded prior years but growth was slowed during the year due to new customer trials and launches being delayed due to COVID-19.

RARE METALS SEGMENT RESULTS

For the year ended December 31, 2020, the Rare Metals segment reported an operating loss of $30.0 million compared to a loss of $0.4 million in 2019. The operating loss in 2020 was mainly due to the $24.0 million impairment charge recorded in the second quarter of 2020.  For the year ended December 31, 2020, Adjusted EBITDA in the Rare Metals segment was $(2.2) million, compared to $5.1 million in 2019; a decrease of $7.3 million.

Operationally, the Rare Metals segment was impacted by lower volumes and selling prices in the year ended and three months ended December 31, 2020 compared to the prior-year comparable periods.  These lower volumes and selling prices were largely a result of the impact of COVID-19 impacting customer demand and the related supply chains, including receiving supply of raw materials.

FIRST QUARTER 2021 OUTLOOK

Neo advises that the positive trends in volumes and higher selling prices that occurred in Q4 2020 have continued into Q1 2021 for the C&O and the Magnequench business units, resulting in a significant positive variance between what Neo anticipates it will report for Q1 2021 and current analyst consensus estimates. Neo expects that its Q1 2021 financial results will exceed current analyst consensus estimates of $84.9 million in revenue and $9.9 million in EBITDA for the period, as well as being significantly higher than the Q4 2020 financial results.  Neo plans to announce Q1 2021 results in May 2021.

CONFERENCE CALL ON MONDAY MARCH 22, 2021 AT 10 AM EASTERN

Management will host a teleconference call on Monday, March 22, 2021 at 10:00 a.m. (Eastern Time) to discuss the fourth quarter 2020 results.  Interested parties may access the teleconference by calling (647) 427-7450 (local) or  (888) 231-8191 (toll-free long distance) or by visiting https://cnw.en.mediaroom.com. A recording of the teleconference may be accessed by calling (416) 849-0833 (local) or (855) 859-2056 (toll-free long distance), and entering pass code 4528893# until April 22, 2021 or by visiting https://cnw.en.mediaroom.com

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 year ended December 31, 2020, available on Neo’s web site at https://www.neomaterials.com and on SEDAR at https://www.sedar.com.

TABLE 5: CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

TABLE 6: CONSOLIDATED RESULTS OF OPERATIONS

Comparison of the year ended and three months ended December 31, 2020 to the year ended and three months ended December 31, 2019:

TABLE 7: RECONCILIATION OF NET INCOME (LOSS) TO EBITDA, ADJUSTED EBITDA AND FREE CASH FLOW

Notes:

TABLE 8: RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)

Notes:

For further information:

Ali Mahdavi, Investor Relations, (416) 962-3300, Email: a.mahdavi@neomaterials.com;

Jim Sims, Media Relations, (303) 503-6203, Email: j.sims@neomaterials.com