5N Plus Reports Financial Results for the Third Quarter Ended September 30, 2016

MONTREAL, Nov 1, 2016 /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 third quarter ended September 30, 2016. All amounts are expressed in U.S. dollars.

The Company completed a third quarter characterized by healthy demand for its products in an environment of moderate stability with respect to most commodity prices resulting in the best Adjusted EBITDA1 quarterly performance since end of 2014. In addition, the Company continued to manage cash diligently, reaching its highest level of liquidity since early 2012 and lowest net debt position since the acquisition of MCP Group in 2011 and ending the quarter once again with a solid balance sheet and no usage of its credit facility.

  • Adjusted EBITDA and EBITDA1 reached $6.8 million and $2.1 million in Q3 2016 compared to $1.1 million and ($26.1) million in Q3 2015. The Adjusted EBITDA demonstrates improved profitability from the last six quarters accommodated by moderately stable commodity prices, and continued progress at improving the Company's sales mix and reducing operating expenses.
  • On September 12, 2016, the Company unveiled its strategic plan, dubbed "5N21", with emphasis on significant improvement in profitability and reduction of earnings volatility. The newly designed plan utilizes three main pillars to achieve this goal: a) optimizing balance of contribution from upstream & downstream activities, b) extracting more value from core businesses and global assets, and c) delivering quality growth from both existing and future M&A opportunities.
  • In support of 5N21 and specifically in line with extracting more value from core businesses and global assets, on September 29, 2016, the Company announced its intention to consolidate its operations at Wellingborough, U.K. with other sites within the Group. Moreover, the Company announced consolidation of its operations at DeForest‐Wisconsin and Fairfield‐Connecticut in the first half of 2017 into a newly updated and scaled facility. These initiatives will improve plant capacity utilization, reduce structural inventory, address marginal businesses, and increase share of value-added business. A provision of $3.5 million associated with these initiatives was recorded during the third quarter with an expected EBITDA payback of two years, and an accelerated depreciation of $1.8 million.
  • Net debt1 was further reduced during the quarter standing at $20.1 million as at September 30, 2016 down from $46.7 million one year earlier, following reduction of working capital1 requirements and overall better performance.
  • Revenue for Q3 2016 reached $55.5 million compared to $68.7 million for the same quarter of 2015, impacted by significant decrease of underlying commodity prices over the course of 2015, while gross margin1 for Q3 2016 improved to 26.2% compared to negative gross margin for the same period last year.
  • Backlog1 reached as at September 30, 2016 a level of 148 days of sales outstanding, lower than previous quarter following the renewal pattern of most contracts which generally occurs in the fourth quarter or the first quarter of the year. Bookings1 in Q3 2016 reached 77 days compared to 86 days in Q2 2016 and 50 days in Q3 2015.
  • On October 5, 2016, the Toronto Stock Exchange approved the Company's Normal Course Issuer Bid, enabling it to purchase for cancellation shares equal to 1.35% of the Company's public float.

1 See Non-IFRS Measures

Arjang (AJ) Roshan, President and Chief Executive Officer, said "After improvements in profitability in the first half of 2016, we continued to improve our operating performance in the third quarter of 2016 resulting in the best Adjusted EBITDA quarterly performance since 2014. Our performance during this period was supported by healthy demand across various products and favorable sales mix in an environment of moderate price stability with respect to the basket of metals we utilized in our products."

Mr. Roshan concluded, "During the third quarter, the demand for gallium based products showed a notable improvement after two quarters of lackluster performance, while the demand for nearly all other products remained at or above the same level as compared to the same period last year. We continued to exercise selectivity as the tenet of our business development which contributed to the favorable mix and improvement in gross margin as compared to last year. In addition, we continued to manage cash diligently, reaching our highest level of liquidity since early 2012 and lowest net debt position since the acquisition of MCP Group in 2011, ending the quarter once again with a solid balance sheet and no usage of our credit facility."

Webcast Information
5N Plus will host a conference call on Wednesday, November 2, 2016 at 8:00 am ET with financial analysts and institutional investors to discuss results of the quarter ended September 30, 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 November 9, 2016.

To participate in the conference call:

  • Montreal area: 514-807-9895
  • Toronto area: 647-427-7450
  • Toll-Free : 1-888-231-8191

Enter access code 7262432.

Non-IFRS Measures
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.

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.

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.

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.

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' 2015 MD&A dated February 23, 2016 and notes 11 and 12 of the unaudited condensed interim consolidated financial statements for the three and nine-month periods ended September 30, 2016 and 2015, 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.

Condensed Interim Consolidated Statements of Financial Position
(in thousands of United States dollars) (unaudited)




September 30, 2016


December 31, 2015


$

$

Assets



Current



Cash and cash equivalents

23,247

8,816

Accounts receivable

29,028

37,325

Inventories

82,893

89,052

Income tax receivable

3,421

2,632

Other current assets

2,067

1,820

Total current assets

140,656

139,645

Property, plant and equipment

60,253

67,646

Intangible assets

10,009

7,315

Deferred tax assets

3,763

3,478

Investment accounted for using the equity method

825

310

Derivative financial assets

1,042

-

Other assets

1,271

2,343

Total non-current assets

77,163

81,092

Total assets

217,819

220,737

Liabilities



Current



Trade and accrued liabilities

57,251

38,744

Income tax payable

6,169

6,598

Current portion of long-term debt

338

435

Total current liabilities

63,758

45,777

Long-term debt

-

1,512

Convertible debentures

44,078

40,288

Deferred tax liabilities

725

668

Employee benefit plan obligation

16,319

13,934

Derivative financial liabilities

84

1,530

Other liabilities

4,570

20,403

Total non-current liabilities

65,776

78,335

Total liabilities

129,534

124,112

Equity



Equity holders of 5N Plus Inc.

88,293

96,632

Non-controlling interests

(8)

(7)

Total equity

88,285

96,625

Total liabilities and equity

217,819

220,737

 

5N PLUS INC.

Condensed Interim Consolidated Statements of Earnings (Loss)
For the three and nine-month periods ended September 30
(in thousands of United States dollars, except per share information) (unaudited)






Three months

Nine months


2016

2015

2016

2015


$

$

$

$

Revenue

55,491

68,732

176,794

251,645

Cost of sales

44,583

88,923

145,235

265,469

Selling, general and administrative expenses

6,640

7,443

19,791

21,186

Other expenses

6,023

3,964

10,589

18,291

Share of loss (gain) from joint ventures

37

(36)

(37)

(15)


57,283

100,294

175,578

304,931

Operating (loss) earnings

(1,792)

(31,562)

1,216

(53,286)






Finance expense





Interest on long-term debt

838

1,187

2,594

3,575

Imputed interest and other interest expense

988

938

3,796

3,380

Changes in fair value of debenture conversion option

(258)

(194)

(6)

(1,840)

Foreign exchange and derivative loss (gain)

93

(2,810)

(467)

(2,871)


1,661

(879)

5,917

2,244

Loss before income taxes

(3,453)

(30,683)

(4,701)

(55,530)

Income tax expense (recovery)






Current

539

(417)

1,585

(389)


Deferred

240

1,905

(232)

(555)


779

1,488

1,353

(944)

Net loss

(4,232)

(32,171)

(6,054)

(54,586)






Attributable to:





Equity holders of 5N Plus Inc.

(4,232)

(32,171)

(6,053)

(54,583)

Non-controlling interests

-

-

(1)

(3)


(4,232)

(32,171)

(6,054)

(54,586)

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

(0.05)

(0.38)

(0.07)

(0.65)

Basic loss per share

(0.05)

(0.38)

(0.07)

(0.65)

Diluted loss per share

(0.05)

(0.38)

(0.07)

(0.65)

 

5N PLUS INC.

(Figures in thousands of United States dollars)






Funds from Operations

Q3 2016

Q3 2015

YTD 2016

YTD 2015


$

$

$

$

Funds from (used in) operations1

238

(620)

7,230

(4,117)

Net acquisition of PPE and intangible assets

(1,368)

(5,081)

(4,811)

(16,648)

Working capital changes

9,160

14,460

13,026

51,994

Others

(691)

2,930

(710)

6,086


7,101

12,309

7,505

41,432

Total movement in net debt1

7,339

11,689

14,735

37,315

Net debt1, beginning of period

(27,466)

(58,381)

(34,862)

(84,007)

Net debt1, end of period

(20,127)

(46,692)

(20,127)

(46,692)






Revenue by Segment and Gross Margin

Q3 2016

Q3 2015

YTD 2016

YTD 2015


$

$

$

$

Electronic Materials

20,431

24,999

59,705

85,432

Eco-Friendly Materials

35,060

43,733

117,089

166,213

Total revenue

55,491

68,732

176,794

251,645

Cost of sales

(44,583)

(88,923)

(145,235)

(265,469)

Depreciation on property, plant and equipment

3,606

2,341

8,307

6,318

Gross margin1

14,514

(17,850)

39,866

(7,506)

Gross margin percentage1

26.2%

(26.0%)

22.5%

(3.0%)






EBITDA and Adjusted EBIDTA

Q3 2016

Q3 2015

YTD 2016

YTD 2015


$

$

$

$

Revenue

55,491

68,732

176,794

251,645

Operating expenses*

(48,675)

(67,680)

(161,014)

(248,360)

Adjusted EBITDA1

6,816

1,052

15,780

3,285

Impairment of inventory

-

(27,245)

-

(33,745)

Allowance for a doubtful note receivable from a related party

-

(2,447)

-

(2,447)

Litigation and restructuring costs

(4,915)

(500)

(5,945)

(500)

Change in fair value of debenture conversion option

258

194

6

1,840

Foreign exchange and derivative gain (loss)

(93)

2,810

467

2,871

EBITDA1

2,066

(26,136)

10,308

(28,696)

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

1,826

2,125

6,390

6,955

Depreciation and amortization

3,693

2,422

8,619

19,879

Loss before income taxes

(3,453)

(30,683)

(4,701)

(55,530)


*Excluding litigation and restructuring costs and depreciation and amortization.

  

Backlog and Bookings


BACKLOG1



BOOKINGS1



Q3 2016

Q2 2016

Q3 2015

Q3 2016

Q2 2016

Q3 2015


$

$

$

$

$

$

Electronic Materials

40,929

49,790

54,965

11,570

21,015

11,596

Eco-Friendly Materials

49,046

48,825

45,603

35,281

33,362

26,355

Total

89,975

98,615

100,568

46,851

54,377

37,951










BACKLOG1



BOOKINGS1


(number of days based on annualized revenues) *

Q3 2016

Q2 2016

Q3 2015

Q3 2016

Q2 2016

Q3 2015

Electronic Materials

183

231

201

52

97

42

Eco-Friendly Materials

128

118

95

92

81

55

Weighted average

148

157

134

77

86

50


*Bookings and backlog are also presented in number of days to normalize the impact of commodity prices.

 

_________________________________________

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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