Mr. Rahim Suleman reports

NEO PERFORMANCE MATERIALS REPORTS RECORD SECOND QUARTER 2023 RESULTS

Neo Performance Materials Inc. has released its second 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.

"Neo reported record sales during the second quarter, driven by the strength of our rare metals business unit," said Rahim Suleman, chief executive officer of Neo. "Despite the subdued market environment for rare earth magnetics, and continuing lead-lag pricing challenges that we must navigate, our top-line performance was helped by high volumes for value-added rare earth products outside of China. This performance generated healthy cash from operations and free cash flow, which allowed us to fund the acquisition of SG Technologies Group Ltd., the investment in Neo North Star Resources and the groundbreaking for our permanent magnet manufacturing plant in Narva, Estonia. Neo continues to be well positioned to execute our future growth initiatives."

Mr. Suleman added, "As a leading global rare earths magnetics company, we are keenly focused on executing against our growth initiatives, and we look forward to expanding our parallel supply chains inside and outside of China."

Highlights of Q2 2023 consolidated performance

For the three months ended June 30, 2023, consolidated revenue was $170.4-million compared with $168.2-million for the same period in the prior year, an increase of $2.2-million or 1.3 per cent. Neo reported net income of $300,000, or one cent per share, compared with $14.7-million, or 36 cents per share, in the same period of 2022. Adjusted net income totalled $2.5-million, or five cents per share, compared with $15.9-million, or 39 cents per share, in the corresponding period of the prior year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $19.5-million, a decline of 26.1 per cent compared with adjusted EBITDA of $26.5-million in the second quarter of 2022.

As of June 30, 2023, Neo had cash and cash equivalents of $126.9-million plus restricted cash of $3.3-million, compared with $147.5-million plus $1.2-million as at Dec. 31, 2022. For the six months ended June 30, 2023, Neo financed $11.6-million for the acquisition of SGTec, net of cash acquired of $800,000 and $2-million of the proceeds held in escrow, invested $4.5-million in NNSR, paid $6.7-million in dividends to its shareholders and spent $1.2-million in shares repurchased under the normal course issuer bid. Neo also repaid $24.3-million of its bank advances and its debt facility in the six months ended June 30, 2023.

For the three and six months ended June 30, 2023, volumes in the Magnequench segment saw a decline with respect to the prior-year period. The permanent magnet industry remains sluggish which has impacted volumes across all applications. This has impacted markets in China, Japan and Europe and has also contributed to the general price weakness of rare earth magnetic elements. In addition, with changing demand outlooks and excess inventory across supply chains, select customers have focused on destocking which has impacted Magnequench volumes in the short term. To address the economic impact of declining volumes in the short term, Magnequench conducted a rationalization of its work force and other cost savings activities in the first half of 2023.

In the three months ended June 30, 2023, the chemicals and oxides volume and pricing dynamics were mixed with rare earth pricing for neodymium and praseodymium elements continuing to face pricing headwinds offset by strong performance in high-purity dysprosium. The dysprosium volumes were related to the higher-value, multilayer ceramic capacitor (MLCC) market as opposed to the standard-grade dysprosium which goes into the magnetics market. C&O's environmental emissions catalyst business also showed strong volumes as China recovered from a slower first quarter of 2023. The rare earth separation operations benefited from lead-lag (using historical cost inventory with current sales prices) in 2022; reversely, the decline in rare earth prices has negatively impacted lead-lag in 2023.

Rare metals continued its strong earnings trend in the first six months of 2023. In the three months ended June 30, 2023, the segment delivered record margin performance driven by strength in hafnium pricing and demand. The upward trend in hafnium prices which began in the fourth quarter of 2021 has continued in the second quarter of 2023 with an increase of over 30 per cent during the three months ended June 30, 2023. The recycling purchases and activities of rare metals were particularly impactful to maintaining and growing margins as the scrap material purchased in the same quarter is not rising as fast as selling prices for finished goods.

In July, 2023, the government of China announced export restrictions on gallium and germanium effective Aug. 1, 2023. The rare metals segment is one of the only gallium recycling operations outside of China and presents an opportunity for companies to source high-purity gallium outside of China. The segment continues to seek sourcing additional gallium waste streams to support global market growth.

Conference call on Friday, Aug. 11, 2023, at 10 a.m. Eastern Time

Management will host a teleconference call on Friday, Aug. 11, 2023, at 10 a.m. Eastern Time to discuss the second quarter 2023 results. Interested parties may access the teleconference 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 665836 followed by the pound key until Sept. 11, 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 10 manufacturing facilities located in China, the United States, Germany, Canada, Estonia, Thailand and the United Kingdom, as well as one dedicated research and development centre in Singapore.

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