5N Plus Inc. Reports Results for Quarter and Fiscal Year Ended December 31, 2016

MONTREAL, Feb. 21, 2017 /CNW Telbec/ - 5N Plus Inc. (TSX: VNP) ("5N Plus", the "Group" or the "Company"), the leading producer of specialty metal and chemical products, today reported financial results for the quarter and fiscal year ended December 31, 2016. All amounts are expressed in U.S. dollars.

The Company completed a year with tangible results in numerous areas including reduction in operating expenses, in net debt and in net working capital1 including inventory, while bolstering the balance sheet and improving profit margins despite a challenging operating environment. In 2016, the Company launched various initiatives and achieved a number of milestones including concrete progress toward its renewed vision and strategic plan named 5N21.

  • Adjusted EBITDA1 and EBITDA1, reached $20.1 million and $15.1 million in fiscal year 2016, compared to $4.0 million and ($54.7) million in fiscal year 2015. The Adjusted EBITDA demonstrates improved profitability accommodated by moderately stable commodity prices, sustainable demand for most metals, and most importantly continued progress at improving the Company's sales mix and reducing operating expenses.
  • On September 29, 2016, 5N Plus announced the consolidation of its operations at Wellingborough, United Kingdom and DeForest, Wisconsin, U.S.A. with other sites within the Group. The restructuring fees associated with these two initiatives along with the closure of redundant administrative offices, and the renegotiation of prior years' unfavorable contracts negatively impacted the EBITDA for fiscal year 2016 by $5.9 million.
  • Adjusted EBITDA and EBITDA for the fourth quarter 2016 reached $4.3 million and $4.8 million compared to $0.7 million and ($26.0) million during the same period in 2015.
  • Revenue for fiscal year 2016 reached $231.5 million compared to $311.0 million for fiscal year 2015, impacted significantly by the decrease in the underlying commodity prices over the course of 2015, while gross margin1 for 2016 improved to 22.4% compared to a negative gross margin in 2015.
  • During the year 2016, net debt1 was further reduced to $19.0 million as at December 31, 2016 down from $34.9 million for the same period in 2015, positively impacted by working capital management and overall improvement in performance.
  • Backlog1 reached as at December 31, 2016, a level of 136 days of sales outstanding, lower than the previous quarter, resulting from restructuring of certain contracts to balance market share against profitability, as well as client activities associated with retooling and upgrading of their manufacturing footprint. Bookings in Q4 2016 reached 78 days compared to 77 days in Q3 2016 and 95 days in Q4 2015.
  • The Company does not expect any deviation to its most recent guidance for 2017 as per 5N21.
  • On January 11, 2016, Mr. Luc Bertrand was appointed as the new Chairman of the Company's Board succeeding Mr. Jean-Marie Bourassa, who continues to serve on the Board and as Chair of the Audit & Risk Management Committee.
  • On October 5, 2016, 5N Plus announced that the Toronto Stock Exchange approved 5N Plus normal course issuer bid under which, 5N Plus has the right to purchase for cancellation, from October 11, 2016 to October 10, 2017, a maximum of 600,000 common shares.
  • On February 20, 2017, 5N Plus announced changes to its executive management structure. Responsibilities assumed by the former functions of Chief Commercial Officer and Chief Operating Officer will be reallocated across the existing business segments (Eco-Friendly and Electronic Materials). Mr. Nicholas Audet, formerly Chief Commercial Officer has been appointed Executive Vice President, Electronic Materials and Mr. Paul Tancell, formerly Global General Manager at Umicore, has joined 5N Plus and has been appointed Executive Vice President, Eco-Friendly Materials. Mr. Bertrand Lessard, Chief Operating Officer of the Company since 2014, will be leaving 5N Plus to pursue other interests.

1 See Non-IFRS Measures

Arjang Roshan, President and Chief Executive Officer, said "After a difficult year in 2015, 2016 was a foundational year in the Company's history. During the year, we focused our efforts on realigning the overall cost structure, vetting investment opportunities, reducing inventory requirements, restructuring various contracts and reducing future volatility, especially due to metal prices. Furthermore, we adopted a new commercial approach aimed at balancing market share with quality of earnings. With the introduction of 5N21, we put more emphasis on growth initiatives."  Mr. Roshan concluded, "We are invigorated by the tangible progress demonstrated by our results.  We expect further enhancements in 2017 and as we continue to execute our plan."

Webcast Information
5N Plus will host a conference call on Wednesday, February 22, 2017 at 8:00 am ET with financial analysts to discuss results of the quarter and fiscal year ended December 31, 2016. All interested parties are invited to participate in the live broadcast on the Company's Web site at www.5nplus.com.  A replay of the webcast and a recording of the Q&A will be available until March 1, 2017.

To participate in the conference call:

  • Montreal area:    514-807-9895
  • Toronto area:      647-427-7451
  • Toll-Free :          1-888-231-8192

Enter access code 74244845.

Non-IFRS Measures
EBITDA means net earnings (loss) before interest expenses (revenues), 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, allowance for doubtful of a receivable from a related party, litigation and restructuring costs, gain on disposal of property, plant and equipment, change in fair value of debenture conversion option, 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 inventory write-downs. 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.

Net debt or net cash is a measure we use to monitor how much debt we have after taking into account cash and cash equivalents. We use it as an indicator of our overall financial position, and calculate it by taking our total debt, including the current portion and the cross-currency swap related to the convertible debenture, and subtracting cash and cash equivalents.

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 is 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.

Gross margin is a measure we use to monitor the sales contribution after paying cost of sales excluding depreciation of property, plant and equipment. We also expressed this measure in percentage of revenues by dividing the gross margin value by the total revenue.

Working capital is a measure of liquid assets that is calculated by taking current assets and subtracting current liabilities.  Given that the Company is currently indebted, we use it as an indicator of our financial efficiency and aim to maintain it at the lowest possible level.

About 5N Plus Inc.
5N Plus is the leading producer of specialty metal and chemical products.  Fully integrated with closed-loop recycling facilities, the Company is headquartered in Montreal, Québec, Canada and operates manufacturing facilities and sales offices in several locations in Europe, the Americas and Asia.  5N Plus deploys a range of proprietary and proven technologies to produce products which are used in a number of advanced pharmaceutical, electronic and industrial applications.  Typical products include purified metals such as bismuth, gallium, germanium, indium, selenium and tellurium, inorganic chemicals based on such metals and compound semiconductor wafers.  Many of these are critical precursors and key enablers in markets such as solar, light-emitting diodes and eco-friendly materials.

Forward-Looking Statements and Disclaimer
This press release may contain forward-looking information within the meaning of applicable securities laws.  All information and statements other than statements of historical facts contained in this press release are forward-looking information.  Such statements and information may be identified by words such as "about", "approximately", "may", "believes", "expects", "will", "intends", "should", "plans", "predicts", "potential", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof or other comparable terminology.  Forward-looking statements are based on the best estimates available to 5N Plus at this time and involve known and unknown risks, uncertainties and other factors that may cause 5N Plus' 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 5N Plus' business and activities appears under the heading "Risk and Uncertainties" of 5N Plus' 2016 MD&A dated February 21, 2017 available on SEDAR at www.sedar.com. 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 5N Plus undertakes 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.

5N PLUS INC.
Consolidated Statements of Financial Position
(in thousands of United States dollars)





December 31

2016

December 31

2015


$

$

Assets



Current



Cash and cash equivalents

24,301

8,816

Accounts receivable

29,799

37,325

Inventories

80,309

89,052

Income tax receivable

6,819

2,632

Other current assets

2,831

1,820

Total current assets

144,059

139,645

Property, plant and equipment

59,945

67,646

Intangible assets

11,109

7,315

Deferred tax assets

1,883

3,478

Investment accounted for using the equity method

779

310

Derivative financial assets

189

-

Other assets

1,093

2,343

Total non-current assets

74,998

81,092

Total assets

219,057

220,737




Liabilities



Current



Trade and accrued liabilities

57,381

38,744

Income tax payable

8,422

6,598

Current portion of long-term debt

325

435

Total current liabilities

66,128

45,777

Long-term debt

-

1,512

Convertible debentures

43,157

40,288

Deferred tax liabilities

715

668

Employee benefit plan obligation

14,813

13,934

Derivative financial liabilities

68

1,530

Other liabilities

5,662

20,403

Total non-current liabilities

64,415

78,335

Total liabilities

130,543

124,112




Equity



Equity holders of 5N Plus Inc.

88,522

96,632

Non-controlling interest

(8)

(7)

Total equity

88,514

96,625

Total liabilities and equity

219,057

220,737

5N PLUS INC.
Consolidated Statements of Loss
Years ended December 31
(in thousands of United States dollars, except per share information)





2016

2015


$

$




Revenue

231,498

311,012

Cost of sales

190,036

346,970

Selling, general and administrative expenses

25,986

28,494

Other expenses

12,072

23,210

Share of (gain) loss from joint ventures

(23)

316


228,071

398,990

Operating earnings (loss)

3,427

(87,978)




Financial expenses



Interest on long-term debt

3,429

4,617

Imputed interest and other interest expense

4,812

4,350

Changes in fair value of debenture conversion option

(20)

(1,840)

Foreign exchange and derivative gain

(925)

(4,276)


7,296

2,851

Loss before income taxes

(3,869)

(90,829)

Income tax expense




Current

440

3,655


Deferred

1,587

2,717


2,027

6,372

Net loss

(5,896)

(97,201)




Attributable to:



Equity holders of 5N Plus Inc.

(5,895)

(97,198)

Non-controlling interest

(1)

(3)


(5,896)

(97,201)

Loss per share attributable to equity holders of 5N Plus Inc.

(0.07)

(1.16)

Basic loss per share

(0.07)

(1.16)

Diluted loss per share

(0.07)

(1.16)

5N PLUS INC.
(in thousands of United States dollars)






Revenue by Segment and Gross Margin

Q4 2016

Q4 2015

2016

2015


$

$

$

$

Electronic Materials

19,333

18,833

79,038

104,265

Eco-Friendly Materials

35,371

40,534

152,460

206,747

Total revenue

54,704

59,367

231,498

311,012

Cost of sales

(44,802)

(81,501)

(190,037)

(346,970)

Depreciation on property, plant and equipment

2,046

7,317

10,353

13,635

Gross margin1

11,948

(14,817)

51,814

(22,323)

Gross margin percentage1

21.8%

(25.0%)

22.4%

(7.2%)
















EBITDA and Adjusted EBITDA

Q4 2016

Q4 2015

2016

2015


$

$

$

$

Revenue

54,704

59,367

231,498

311,012

Operating expenses*

(50,373)

(58,693)

(211,387)

(307,053)

Adjusted EBITDA1

4,331

674

20,111

3,959

Impairment of inventory

-

(24,582)

-

(58,327)

Allowance for a doubtful note receivable from a related party

-

(544)

-

(2,991)

Litigation and restructuring costs

-

(2,953)

(5,945)

(3,453)

Change in fair value of debenture conversion option

14

-

20

1,840

Foreign exchange and derivative gain (loss)

458

1,405

925

4,276

EBITDA1

4,803

(26,000)

15,111

(54,696)

Interest on long-term debt, imputed interest and other interest expense

1,851

2,012

8,241

8,967

Depreciation and amortization

2,120

7,287

10,739

27,166

Loss before income taxes

832

(35,299)

(3,869)

(90,829)


*Excluding litigation and restructuring costs and depreciation and amortization.

               

______________________

1 See Non-IFRS Measures

SOURCE 5N Plus Inc.

For further information: Jean Mayer, Vice President, Legal Affairs also in charge of investor relations, 5N Plus Inc., (514) 856-0644 x6178, invest@5nplus.com

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