TORONTO, May 10, 2024 /CNW/ - Neo Performance Materials Inc. ("Neo") (TSX:NEO) released its first quarter 2024 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 www.neomaterials.com/investors/ and on SEDAR+ at www.sedarplus.ca. Key Takeaways Strong Start to the Year Confirms Outlook: Despite the decline in rare earth prices, with $10.8 million of Adjusted EBITDA(1), Neo is off to a strong start to fiscal year 2024 and is on path to meet its outlook for double-digit percentage growth in Adjusted EBITDA(I) for fiscal year 2024, as compared to fiscal year 2023. Strong Cash and Liquidity Position: Neo's maintains a strong cash position as at March 31, 2024 with $101.7 million of cash and $170.6 million of inventory. Rare Metals Performance Bounces Back Quarter Over Quarter and Confirming Outlook: The Rare Metals business unit bounced back from Q4 2023 results with Adjusted EBITDA(I) on path to exceed 2023 Full Year results. Silmet Rare Metals Operational Transformation Bearing Fruit: The closure of the midstream hydromet process for tantalum and niobium at Silmet, completed in Q4 2023, shows initial positive results as transformation continues with shift to operational improvements and opportunities for higher value sales. Neo expects to reduce inventories by the end of the year. Closure of Separation Operations at Zibo: In Zibo, China, Neo closed the light rare earth separation operation in April 2024.  This closure is expected to improve Return on Capital Employed ("ROCE"), reduce earnings volatility and decrease the concentration risk in China.  The closure is not expected to have a negative impact on Adjusted EBITDA(1) going forward, and is expected to benefit overall cash. Rare Earth Separation Gross Margins Negative but Significant Positive Margins in Downstream: The rare earth separation business continued to be adversely affected by the declining rare earth price environment. The downstream segments of Neo report strong positive margins where Neo's margin are driven by high value-add operations. Major De-Risking of NAMCO Plant Construction — Almost Complete & Under Budget: Neo's new relocated and modernized manufacturing plant for specialty materials for automotive emissions control catalysts is now almost complete.  Continuing customer qualifications and expecting to be running full production again by the end of the year.  Expected to be completed $5.0 million under budget. Europe Sintered Magnet Plant Construction — On Time & On Budget: Neo is about halfway into the construction and the project continues to be within the original budget. Additional Outside-of-China Feedstock Partnerships: Neo executed a Memorandum of Understanding ("MOU") with Meteoric Resources for rare earth supply to Neo's European midstream facility and to support Neo's sintered magnet facility in Europe. Q1 2024 Highlights (unless otherwise noted, all financial amounts in this news release are expressed in United States dollars) Neo's Q1 2024 revenue was $122.1 million, vs Q4 2023 revenue of $128.7 million; vs Q1 2023 revenue of $135.5 million. Operating income for Q1 2024 was $5.9 million, vs Q4 2023 operating loss of $5.5 million; vs Q1 2023 operating loss of $4.0 million. Adjusted Net Income(1) for Q1 2024 was $0.4 million, or $0.01 per share, vs Q4 2023 of $0.9 million or $0.02 per share; vs Q1 2023 Adjusted Net Loss of $9.0 million or $0.19 per share. Adjusted EBITDA(1) for Q1 2024 was $10.8 million, vs Q4 2023 of $3.1 million; vs Q1 2023 of $0.8 million. Neo's cash balance was $101.7 million, after spending $16.0 million on capital projects, distributing $3.1 million in dividends to Neo's shareholders, and repurchasing $2.3 million of common shares under the normal course issuer bid.  A quarterly dividend of Cdn$0.10 per common share was declared on May 8, 2024 for shareholders of record on June 18, 2024, with a payment date of June 27, 2024. "Neo began the year in a strong position, considering the underlying pricing environment," said Rahim Suleman, President and CEO. "Despite continued pressure on rare earth prices and softer magnetic demand which contributed to lower revenue, we generated improved gross profit and improved Adjusted EBITDA(1) on both a sequential and year over year basis.  We benefited from another strong quarter of our Rare Metals business unit and are encouraged by the supportive results in Magnequench and automotive catalysts.  Overall, the first quarter is aligned with our outlook of double-digit Adjusted EBITDA(1) growth for 2024."  On strategic initiatives, Rahim Suleman added "The future of our Company continues to be shaped by the strategic review of all of our operating assets and strategies and our team's execution of our plan to achieve higher ROCE and reduce earnings volatility across each of our businesses. During the first quarter, (i) we began commissioning our newly constructed environmental catalyst plant, (ii) we changed the operational footprint in Zibo (China) by shutting down light rare earth separation lines, (iii) we began to see the fruits of our Silmet Rare Metals transformation plan announced in Q4 2023, (iv) we continued to build our new sintered magnet facility in Europe, and (v) we signed an MOU with Meteoric Resources for offtake of feedstock for the new magnet facility from a mining exploration project in Brazil." ________________________ (1)Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A, available on Neo's website at www.neomaterials.com and on SEDAR+ at www.sedarplus.ca. HIGHLIGHTS OF FIRST QUARTER 2024 CONSOLIDATED PERFORMANCE ($000s, except volume and per share information) Three Months Ended March 31, 2024 2023 Volume Magnequench 1,213 987 C&O 1,802 1,849 Rare Metals 87 98 Corporate / Eliminations (20) — Total Volume 3,082 2,934 Revenue Magnequench $           45,480 $           55,165 C&O 40,513 51,289 Rare Metals $           37,278 $           29,076 Corporate / Eliminations (1,176) — Consolidated Revenue $         122,095 $         135,530 Operating Income (Loss) Magnequench $             3,384 $                955 C&O (2,104) (6,126) Rare Metals 8,800 5,832 Corporate / Eliminations (4,132) (4,658) Consolidated Operating Income (Loss) $             5,948 $           (3,997) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") (1) Magnequench $             6,112 $             3,256 C&O (380) (4,562) Rare Metals 9,238 6,164 Corporate / Eliminations (4,210) (4,071) Consolidated Adjusted EBITDA $           10,760 $                787 Net Income (Loss) $                849 $         (10,700) Earnings (Loss) per share attributable to equity holders of Neo Basic $               0.02 $             (0.23) Diluted $               0.02 $             (0.23) Cash spent on property, plant and equipment and intangible assets $           15,979 $             3,512 Cash taxes paid $             7,513 $             5,261 Dividends paid to shareholders $             3,084 $             3,379 Repurchase of common shares under Normal Course Issuer Bid $             2,250 $                  — March 31 December 31 2024 2023 Cash and cash equivalents $         101,689 $           86,895 Restricted cash $                  52 $             3,357 Current & long-term debt $           49,400 $           25,331   Neo's consolidated revenue for the three months ended March 31, 2024 was $122.1 million compared to $135.5 million for the same period in the prior year.  Neo reported a net income of $0.8 million, or $0.02 per share, compared to net loss of $10.7 million, or $0.23 per share, for the same period in the prior year.  Adjusted Net Income(1) totaled $0.4 million, or $0.01 per share, compared to Adjusted Net Loss(1) of $9.0 million or $0.19 per share, for the same period in the prior year.  Adjusted EBITDA(1) was $10.8 million, compared to Adjusted EBITDA(1) of $0.8 million for the same period in the prior year. As of March 31, 2024, Neo had cash and cash equivalents of $101.7 million plus $0.1 million of restricted cash, compared to $86.9 million plus $3.4 million as at December 31, 2023.  ________________________ (1)Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A, available on Neo's website at www.neomaterials.com and on SEDAR+ at www.sedarplus.ca. MAGNEQUENCH Magnequench revenue in the three months ended March 31, 2024 declined by 17.6% as compared to the prior period.  Magnequench segment volumes increased by 22.9% compared to the same period in 2023, driven by growth in the magnet business and a recovery in traction motor volumes. The magnet business has been a strategic focus area for Magnequench with volume gains driven by growth in automotive applications.  Magnetic heavy-rare-earth-free powders in traction motor applications also delivered substantial growth with first quarter volume up more than 300% compared to the same period in 2023, as the market recovers back to run rate levels with additional upside driven by customer inventory build ahead of new vehicle model launch.  Although the business had a strong quarter, volumes remain below expectations as demand remains soft within the remaining portion of the magnetic powder business.  As majority of Magnequench contracts have pass-through rare earth pricing, relative to the other business units, declining rare earth prices put relatively less pressure on Magnequench gross margin, which is close to management's expectations.  On operational improvements, Magnequench continued building on its progress in reducing conversion costs by 20% last year. CHEMICALS & OXIDES ("C&O") For the three months ended March 31, 2024, C&O revenue declined by 21.0% as compared to prior period, primarily due to rare earth pricing headwinds.  The impact of declining market prices drove negative gross margins within the rare earth separation portion of the business.  The C&O business faced challenges from falling rare earth prices, leading to unfavourable lead-lag effects ...