Mr. Jim Sims reports

NEO PERFORMANCE MATERIALS REPORTS FIRST QUARTER 2023 RESULTS

Neo Performance Materials Inc. has released its first quarter 2023 financial results. The financial statements and management's discussion and analysis (MD&A) of these results can be viewed on Neo's website and on SEDAR.

Unless otherwise noted, all financial amounts in this news release are expressed in United States dollars.

Highlights of Q1 2023

For the three months ended March 31, 2023, consolidated revenue was $135.5-million compared with $166.3-million for the same period in the prior year. Neo reported a net loss of $10.7-million, or a loss of 23 cents per share, compared with a net income of $22.7-million, or 55 cents per share, in the same period of 2022. Adjusted net loss totalled $9-million, or a loss of 19 cents per share, compared with an adjusted net income of $23.5-million, or 57 cents per share, in the corresponding period of the prior year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $800,000, compared with adjusted EBITDA of $33.1-million in the first quarter of 2022. Adjusted EBITDA for the three months ended March 31, 2023, was negatively impacted by $5.6-million of provisions for inventories during the quarter, compared with $600,000 during the corresponding period in 2022.

As of March 31, 2023, Neo had cash and cash equivalents of $145.7-million plus restricted cash of $1.2-million, compared with $147.5-million plus $1.2-million as at Dec. 31, 2022. In the three months ended March 31, 2023, Neo distributed $3.4-million in dividends to its shareholders. Neo generated positive net cash of $12.2-million in the period.

Neo reported operating loss of $4-million and net loss of $10.7-million for the three months ended March 31, 2023. Operating income in the three months ended March 31, 2023, was higher as compared with the prior-year period in the rare metals segment but was lower in both the Magnequench and C&O (chemicals and oxides) segments.

Adjusted EBITDA also was higher in the quarter as compared with the prior-year period in rare metals, but was lower in C&O and Magnequench.

Magnequench segment results

Volumes in the three months ended March 31, 2023, were lower primarily due to the impact of slower economic activity in China, which experienced a slowdown after the removal of the COVID-19 zero tolerance from December, 2022. This lower economic activity (particularly in durable goods) continued through the balance of the quarter. Volumes were also negatively impacted by the continued semi-conductor chip shortages, primarily in the automotive industry.

Margins for Magnequench were lower in the quarter due to the decline in rare earth magnetic prices in the quarter and lower volume affecting absorption of production costs. Magnequench has pass-through agreements on the vast majority of its contracts so that in the long term, Magnequench expects to earn steadier margins on its value-add conversion activities. However, in the first quarter of 2023, with declining rare earth magnetic prices, Magnequench has been passing through the lower replacement costs while utilizing some of the higher-cost inventory on hand. Pass-through is a key strategic focus of Magnequench and ensures that Magnequench focuses on generating long-term sustainable and value-added margins.

Chemicals and oxides (C&O) segment results

The C&O segment was negatively impacted by a steep decline in rare earth prices during the quarter. Rare earth finished good prices, particularly for the magnetic elements, declined 20 per cent to 30 per cent from December, 2022. This rapid decline had a negative impact on rare earth separation margins as C&O processed raw materials purchased three to five months ago (at higher raw material input costs). The rapid decline, primarily in March, 2023, also necessitated C&O to record a $6.4-million provision for inventories in the first quarter of 2023. Volumes in rare earth separation were also slower in the quarter related to the slow down in the magnetics industry in China.

Volumes in the emissions catalyst business were down slightly from prior year, with a significant decline in volumes in China (for the reasons noted above) while other regions demonstrated growth. C&O's environmentally protective water treatment solutions business continues to perform well, with higher volume and new customer adoption.

Rare metals segment results

Rare metals continued its strong earnings growth trend with a strong first quarter of 2023. Hafnium pricing, in particular, has continued its upward trajectory which began in the fourth quarter of 2021. The recycling purchases and activities of rare metals were particularly impactful to maintaining lower raw material costs resulting in additional margins.

The rare metals business continues to make progress in several key strategic initiatives, including selling more products outside of the aerospace industry, expanding its customer base and diversifying its total end-market exposure. Key progress continues to be made in expanding the capacity of key products (with minimal capital investment) and refocusing the sales pipeline and manufacturing capacity toward more profitable end products that require higher purity and more demanding specifications.

Conference call on Friday, May 12, 2023, at 10 a.m. ET

Management will host a teleconference call on Friday, May 12, 2023, at 10 a.m. ET to discuss the first quarter 2023 results. Interested parties may access the teleconference on-line, or by calling 416-764-8650 (local) or 888-664-6383 (toll-free long distance). A recording of the teleconference may be accessed by calling 416-764-8677 (local) or 888-390-0541 (toll-free long distance) and entering pass code 029840 followed by the pound sign, until June 12, 2023.

About Neo Performance Materials Inc.

Neo manufactures the building blocks of many modern technologies that enhance efficiency and sustainability. Neo's advanced industrial materials -- magnetic powders and magnets, specialty chemicals, metals and alloys -- are critical to the performance of many everyday products and emerging technologies. Neo's products help to deliver the technologies of tomorrow to consumers today. The business of Neo is organized along three segments: Magnequench, chemicals and oxides, and rare metals. Neo is headquartered in Toronto, Ont., Canada, with corporate offices in Greenwood Village, Colo., United States, Singapore, and Beijing, China. Neo has a global platform that includes nine manufacturing facilities located in China, the United States, Germany, Canada, Estonia and Thailand, as well as one dedicated research and development centre in Singapore.

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