5N Plus Reports Financial Results for Quarter and Fiscal Year Ended December 31, 2017

MONTREAL, Feb. 20, 2018 /CNW Telbec/ - 5N Plus Inc. (TSX: VNP) ("5N Plus", the "Company" or the "Group"), a leading producer of specialty chemicals and engineered materials, today reported financial results for the quarter and fiscal year ended December 31, 2017. All amounts are expressed in U.S. dollars.

5N Plus completed a second financial year under the guidance of its strategic plan 5N21 ("5N21"), delivering significant improvement reflected by the various financial metrics, lending credence to the efficacy of the plan. By the end of 2017, nearly all initiatives linked to the first pillar of 5N21, namely extraction of more value from core businesses and existing assets, were successfully completed. At the same time, new initiatives related to the second and third pillars of 5N21, namely increasing contribution from upstream activities and delivering quality growth from new initiatives gained momentum. Consequently, at the end of the year, significant enhancement in margins and profitability were achieved, while, earnings volatility reduced as the Company continued to shift focus from lower margin products with high content of pass-through commodities to products and services requiring higher contribution from value-added activities and technological solutions. Furthermore, the Company continued to deliver recurrent cashflows and further solidified its balance sheet which has enhanced its options going forward.

• During the year, Adjusted EBITDA¹ and EBITDA¹ reached $25.1 million and $26.9 million, compared to $20.1 million and $15.1 million in 2016. The Adjusted EBITDA demonstrates improved profitability, with gross margin¹ reaching 26.1% compared to 22.4% in 2016 largely supported by growth in value-added activities and services within an environment of stable commodity prices and sustainable demand.
• A number of factors culminated in a net positive impact on EBITDA for 2017 such as optimizing commercial agreements yielding a $3.0 million gain and a realized gain of $1.9 million on real estate disposal, all of which were envisioned to support the first pillar of 5N21, namely extracting more value from core businesses and existing assets. However, the EBITDA was negatively impacted by the repositioning of activities linked to production of powder alloys triggering an impairment charge of $3.1 million.
• The Adjusted EBITDA and EBITDA for the fourth quarter reached $6.1 million and $4.4 million in 2017 compared to $4.3 million and $4.8 million in 2016.
• Net earnings for the year 2017 reached $12.0 million or $0.14 per share compared to a net loss of $5.9 million or ($0.07) per share for the year 2016.
• Growth in sales from products and services with higher value-added component resulted in significant improvement in gross margin percentage and absolute dollars reaching $57.3 million in 2017 compared to $51.8 million in 2016. Revenue in 2017 reached $219.9 million compared to $231.5 million in 2016, mainly due to lower sales of pass-through metal component, consistent with the Company's plan to reduce its earnings volatility.  Return on Capital Employed (ROCE)¹ reached 12.3% in 2017 as compared to 6.7% in 2016 reflecting the overall margin expansion associated with the Company's products and services.
• Net debt¹ was further reduced during the year and stood at $11.4 million as at December 31, 2017 down from $19.0 million for the same period last year, positively impacted by working capital management and overall better performance.
• Backlog¹ reached as at December 31, 2017 a level of 187 days of sales outstanding, higher than the 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 Q4 2017 reached 108 days compared to 118 days in Q3 2017 and 78 days in Q4 2016.
• 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 were reallocated across the existing business segments Eco‐Friendly and Electronic Materials.
• On March 2, 2017, la Caisse de dépôt et placement du Québec announced the acquisition of 8,700,000 additional shares of 5N Plus on the secondary market, reinvesting $14.8 million, bringing la Caisse's ownership to 18.93%.
• On October 11, 2017, 5N Plus announced that its Electronic Materials segment had been awarded a multi‐year program by the U.S. Government to supply engineered semiconductor materials essential for space and aeronautical missions. The award was granted following a comprehensive multi‐party competitive process with emphasis on total value creation based on products and services rendered. The program is expected to commence in the second half of 2018.
• On November 6, 2017, 5N Plus announced that the footprint optimization initiatives announced a year earlier, when unveiling its 5N21, had been completed. As a part of this initiative, all key product lines formerly produced at its Wellingborough, U.K, plant have been successfully relocated to other plants within the Group, namely plants in Canada, Germany and China.
• On December 7, 2017, 5N Plus announced its entry into the animal feed minerals market, focusing initially on the production and development of animal feed containing trace elements essential for good health and nutrition. This sector of the feed minerals market is assessed to be worth in excess of $100 million annually. The Company's investments will be in multiple phases with the initial tranche aimed at establishing capacity and capability in Europe and is slated for completion within 12 months, with qualification samples available in Q4 2018 and volume production shortly thereafter.

Arjang Roshan, President and Chief Executive Officer, said "The end of 2017 marks the second, and a full year, under 5N21. Thus far, our performance is driven by the execution of the plan's short‐term objectives, mainly related to optimizing core businesses and global assets. The outcome can be summarized by significant growth in profitability, enhancement in quality of earnings and reduction of earnings volatility. Consequently, return on capital employed has improved markedly and we have continued to strengthen our balance sheet aided by recurrent cashflows."

Mr. Roshan concluded, "With the short-term objectives of the plan successfully fulfilled, we have intensified our focus on mid to long-term objectives under 5N21 with the aim of transforming ourselves from a specialty chemicals and metals company to a leading materials technology company across the globe. Further expansion into future markets with value-added activities, increased contribution from growth initiatives and exerting more control over pass-through component of sales will be the topics of focus and relevance."

Webcast Information
5N Plus will host a conference call on Wednesday, February 21, 2018 at 8:00 am Eastern Time with financial analysts and institutional investors to discuss results of the quarter and fiscal year ended December 31, 2017. 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 February 28, 2018.

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 6698626.

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, impairment of non-current assets, litigation and restructuring costs (income), 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.

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.

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 and amortization (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.

About 5N Plus Inc.
5N Plus is a leading producer of specialty chemicals and engineered materials. 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 pharmaceutical, healthcare, renewable energy, aerospace, security and sensing, imaging, technical and industrial materials, extractive and catalytic materials, and animal feed additive.

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' 2017 MD&A dated February 20, 2018 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 2017	December 31 2016
	$	$
Assets
Current
Cash and cash equivalents	34,024	24,301
Accounts receivable	25,639	29,799
Inventories	90,647	80,309
Income tax receivable	6,145	6,819
Other current assets	8,773	2,831
Total current assets	165,228	144,059
Property, plant and equipment	56,607	59,945
Intangible assets	10,856	11,109
Deferred tax assets	6,891	1,883
Investment accounted for using the equity method	718	779
Derivative financial assets	3,602	189
Other assets	1,030	1,093
Total non-current assets	79,704	74,998
Total assets	244,932	219,057
Liabilities
Current
Trade and accrued liabilities	57,043	57,381
Income tax payable	11,339	8,422
Current portion of long-term debt	271	325
Total current liabilities	68,653	66,128
Convertible debentures	48,768	43,157
Deferred tax liabilities	251	715
Employee benefit plan obligation	15,396	14,813
Derivative financial liabilities	-	68
Other liabilities	6,436	5,662
Total non-current liabilities	70,851	64,415
Total liabilities	139,504	130,543
Equity
Equity holders of 5N Plus Inc.	105,446	88,522
Non-controlling interest	(18)	(8)
Total equity	105,428	88,514
Total liabilities and equity	244,932	219,057

5N PLUS INC. CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) Years ended December 31 (in thousands of United States dollars, except per share information)
		2017	2016
		$	$
Revenue		219,916	231,498
Cost of sales		170,514	190,036
Selling, general and administrative expenses		26,220	25,986
Other expenses, net		4,441	12,072
Share of loss (gain) from joint ventures		110	(23)
		201,285	228,071
Operating earnings		18,631	3,427
Financial expenses
Interest on long-term debt		3,261	3,429
Imputed interest and other interest expense		2,836	4,812
Changes in fair value of debenture conversion option		(85)	(20)
Foreign exchange and derivative loss (gain)		79	(925)
		6,091	7,296
Earnings (loss) before income taxes		12,540	(3,869)
Income tax expense (recovery)
	Current	3,595	440
	Deferred	(3,068)	1,587
		527	2,027
Net earnings (loss)		12,013	(5,896)
Attributable to:
Equity holders of 5N Plus Inc.		12,023	(5,895)
Non-controlling interest		(10)	(1)
		12,013	(5,896)
Earnings (loss) per share attributable to equity holders of 5N Plus Inc.		0.14	(0.07)
Basic earnings (loss) per share		0.14	(0.07)
Diluted earnings (loss) per share		0.14	(0.07)

5N PLUS INC. (Figures in thousands of United States dollars)
Revenue by Segment and Gross Margin		Q4 2017	Q4 2016	FY 2017	FY 2016
		$	$	$	$
Electronic Materials		17,917	19,333	73,448	79,038
Eco-Friendly Materials		34,575	35,371	146,468	152,460
Total revenue		52,492	54,704	219,916	231,498
Cost of sales		(41,035)	(44,802)	(170,514)	(190,037)
Depreciation on property, plant and equipment		2,363	2,046	7,908	10,353
Gross margin^1		13,820	11,948	57,310	51,814
Gross margin percentage^1		26.3%	21.8%	26.1%	22.4%
Adjusted EBITDA and EBITDA		Q4 2017	Q4 2016	FY 2017	FY 2016
		$	$	$	$
Revenue		52,492	54,704	219,916	231,498
Adjusted operating expenses[1] *		(46,441)	(50,373)	(194,799)	(211,387)
Adjusted EBITDA^1		6,051	4,331	25,117	20,111
Impairment of inventory		-	-	-	-
Gain on disposal of property, plant and equipment		1,497	-	1,887	-
Impairment of non-current assets		(3,100)	-	(3,100)	-
Litigation and restructuring (costs) income		(415)	-	2,953	(5,945)
Change in fair value of debenture conversion option		67	14	85	20
Foreign exchange and derivative gain (loss)		320	458	(79)	925
EBITDA1		4,420	4,803	26,863	15,111
Interest on long-term debt, imputed interest and other interest expense		1,372	1,851	6,097	8,241
Depreciation and amortization		2,434	2,120	8,226	10,739
Earnings (loss) before income taxes		614	832	12,540	(3,869)
Income tax expense (recovery)
	Current	243	(1,145)	3,595	440
	Deferred	(1,851)	1,819	(3,068)	1,587
		(1,608)	674	527	2,027
Net earnings (loss)		2,222	158	12,013	(5,896)
Basic earnings (loss) per share		$0.03	$0.00	$0.14	($0.07)
Diluted earnings (loss) per share		$0.03	$0.00	$0.14	($0.07)

*Excluding litigation and restructuring (income) costs, impairment of non-current assets, gain on disposal of property, plant and equipment and depreciation and amortization.

Net Debt	As at December 31, 2017	As at December 31, 2016
	$	$
Bank indebtedness	-	-
Long-term debt including current portion	271	325
Convertible debentures	48,768	43,157
Cross-currency swap	(3,602)	(189)
Total Debt	45,437	43,293
Cash and cash equivalents	(34,024)	(24,301)
Net Debt^1	11,413	18,992

______________________
¹ See Non-IFRS Measures

SOURCE 5N Plus Inc.

Jean Mayer, Vice President, Legal Affairs, also in charge of investor relations, 5N Plus Inc., [phone] x6178, [email protected]

Related Links

http://www.5nplus.com