www.sedar.com<\/a>.<\/p>\n“Neo is very grateful to the Government of Estonia for choosing to partner with us by providing a grant of up to $18.3 million (\u20ac18.7 million) to help accelerate our plans to construct a vertically integrated rare earth magnet manufacturing facility in Estonia,” said Constantine Karayannopoulos, CEO of Neo.\u00a0 “Coupled with our existing rare earth separations plant in Europe, this new strategic magnet manufacturing facility will help Europe move closer to achieving its greenhouse gas reduction and climate resiliency goals.”<\/p>\n
\u201cWith regard to the quarter, while rare earth pricing remains attractive in absolute dollar terms, and is nearly double pre-pandemic norms, the retreat in pricing we have seen over the past six months placed short-term pressure on our margin levels, as higher cost inventory flows through our results of operations,” he added. “This lead-lag volatility is normal in our industry and, of course, we reap the benefit in a rising price environment.\u00a0 More important, the strategic initiatives we are pursuing are designed to place Neo in a unique position to take full advantage of the long-term opportunities presented by the global energy transition.”<\/p>\n
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HIGHLIGHTS OF Q3 2022 CONSOLIDATED PERFORMANCE<\/strong><\/p>\n <\/p>\n
For the three and nine months ended September 30, 2022, revenues of $146.6\u00a0million and $481.1\u00a0million were 22.4% and 24.7% higher, respectively, than the corresponding periods of 2021.\u00a0 All three segments experienced higher revenues.\u00a0 Selling prices for rare earth products, including Magnequench powders, rose significantly starting from the fourth quarter of 2020 and through the first quarter of 2022.\u00a0 By the third quarter of 2022, rare earth prices declined 30% to 40% from the peak (in the first quarter of 2022), although they remain almost 100% higher than recent historical norms.\u00a0 Neo benefited from rising prices from the fourth quarter of 2020 to the second quarter of 2022 and Neo was adversely affected by the rapid decline in prices in the third quarter of 2022.\u00a0 The overall pricing and margin environment is higher than historical trends but quarterly results are positively (when prices are rising) or negatively (when prices are falling) affected due to the lead-lag effect of higher cost inventory on hand.\u00a0 In addition to lower margin on sales in the quarter, Neo recorded $8.0\u00a0million of provisions for inventories in the third quarter, related to higher cost inventory on hand, relative to lowered selling prices.\u00a0 In the long term, there are higher dollar value margins available with higher prices.<\/p>\n
Operationally, Neo reported significant increases in revenue and earnings year-over-year.\u00a0 Magnequench saw weaker volume across the majority of its applications due primarily to customer slowdowns in Asia related to COVID-19 and the slowdown in automotive due to the semiconductor chip shortage.\u00a0 C&O saw mixed volumes for rare earth elements but slower volumes in the environmental catalyst end markets driven by semiconductor chip shortages.\u00a0 Rare Metals saw record earnings driven by higher selling prices and the continued recovery in aerospace markets and demand from new customers in other end markets, tempered by the elimination of sales to Russian customers.<\/p>\n
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SELECTED FINANCIAL RESULTS<\/strong><\/p>\n\n\n\nTABLE 1: Selected Consolidated Results<\/strong><\/span><\/td>\n<\/tr>\n\n| <\/td>\n | Quarter-over-Quarter Comparison<\/em><\/strong><\/span><\/td>\nYear-over-Year Comparison<\/em><\/strong><\/span><\/td>\n<\/tr>\n\n($000s)<\/em><\/span><\/td>\nQ3 2022<\/strong><\/span><\/td>\nQ3 2021<\/strong><\/span><\/td>\nYTD Q3 2022<\/strong><\/span><\/td>\nYTD Q3 2021<\/strong><\/span><\/td>\n<\/tr>\n\n| Revenue<\/span><\/td>\n | 146,627<\/span><\/td>\n | 119,841<\/span><\/td>\n | 481,130<\/span><\/td>\n | 385,837<\/span><\/td>\n<\/tr>\n\n| Operating income<\/span><\/td>\n | 2,239<\/span><\/td>\n | 12,558<\/span><\/td>\n | 51,887<\/span><\/td>\n | 47,161<\/span><\/td>\n<\/tr>\n\nEBITDA(1)<\/sup><\/span><\/td>\n| 5,460<\/span><\/td>\n | 14,695<\/span><\/td>\n | 66,068<\/span><\/td>\n | 51,305<\/span><\/td>\n<\/tr>\n\nAdjusted EBITDA(1)<\/sup><\/span><\/td>\n| 7,034<\/span><\/td>\n | 17,650<\/span><\/td>\n | 66,607<\/span><\/td>\n | 62,263<\/span><\/td>\n<\/tr>\n\nAdjusted EBITDA %(1)<\/sup><\/span><\/td>\n| 4.8 %<\/span><\/td>\n | 14.7 %<\/span><\/td>\n | 13.8 %<\/span><\/td>\n | 16.1 %<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n _________________________<\/strong><\/p>\n(1)<\/sup><\/em>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.<\/em><\/span><\/p>\n\u00a0<\/strong><\/p>\n\u00a0<\/strong><\/p>\nMAGNEQUENCH SEGMENT RESULTS<\/strong><\/p>\n <\/p>\n \n\n\nTABLE 2: Selected Magnequench Results<\/strong><\/span><\/td>\n<\/tr>\n\n| <\/td>\n | Quarter-over-Quarter Comparison<\/em><\/strong><\/span><\/td>\nYear-over-Year Comparison<\/em><\/strong><\/span><\/td>\n<\/tr>\n\n| <\/td>\n | Q3 2022<\/strong><\/span><\/td>\nQ3 2021<\/strong><\/span><\/td>\nYTD Q3 2022<\/strong><\/span><\/td>\nYTD Q3 2021<\/strong><\/span><\/td>\n<\/tr>\n\n| Volume (tonnes)<\/span><\/td>\n | 1,097<\/span><\/td>\n | 1,374<\/span><\/td>\n | 3,620<\/span><\/td>\n | 4,608<\/span><\/td>\n<\/tr>\n\n($000s)<\/em><\/span><\/td>\n| <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \n| Revenue<\/span><\/td>\n | 67,402<\/span><\/td>\n | 60,063<\/span><\/td>\n | 219,828<\/span><\/td>\n | 192,856<\/span><\/td>\n<\/tr>\n\n| Operating income<\/span><\/td>\n | 4,897<\/span><\/td>\n | 8,130<\/span><\/td>\n | 27,995<\/span><\/td>\n | 31,805<\/span><\/td>\n<\/tr>\n\nEBITDA(1)<\/sup><\/span><\/td>\n| 6,345<\/span><\/td>\n | 9,773<\/span><\/td>\n | 35,814<\/span><\/td>\n | 39,240<\/span><\/td>\n<\/tr>\n\nAdjusted EBITDA(1)<\/sup><\/span><\/td>\n| 7,282<\/span><\/td>\n | 10,503<\/span><\/td>\n | 35,384<\/span><\/td>\n | 38,872<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n _________________________<\/strong><\/p>\n(1)<\/sup><\/em>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.<\/em><\/span><\/p>\n\u00a0<\/strong><\/p>\nFor the three and nine months ended September 30, 2022, revenue in the Magnequench segment of $67.4\u00a0million and $219.8\u00a0million, respectively, were higher by 12.2% and 14.0%, respectively, over the prior-year periods. Volumes in the segment saw a decline with respect to the prior-year period as well as sequentially, driven largely by the recent spike in COVID-19 cases and resulting shutdowns in Asia, several natural disasters impacted production facilities and customers, and the on-going semiconductor chip shortage.<\/p>\n Margins per ton in the Magnequench segment remained strong in the quarter despite being lower than margins in the first half of 2022.\u00a0 Magnequench has pass-through pricing agreements on the vast majority of its sales contracts, and with rare earth magnetic prices having declined from March 2022, Magnequench is beginning to see the reversal of the lead-lag benefit in the three months ended September 30, 2022.<\/p>\n <\/p>\n \u00a0<\/strong><\/p>\nCHEMICALS & OXIDES (“C&O”) SEGMENT RESULTS<\/strong><\/p>\n <\/p>\n \n\n\nTABLE 3: Selected C&O Results<\/strong><\/span><\/td>\n<\/tr>\n\n| <\/td>\n | Quarter-over-Quarter Comparison<\/em><\/strong><\/span><\/td>\nYear-over-Year Comparison<\/em><\/strong><\/span><\/td>\n<\/tr>\n\n($000s)<\/em><\/span><\/td>\nQ3 2022<\/strong><\/span><\/td>\nQ3 2021<\/strong><\/span><\/td>\nYTD Q3 2022<\/strong><\/span><\/td>\nYTD Q3 2021<\/strong><\/span><\/td>\n<\/tr>\n\n| Revenue<\/span><\/td>\n | 52,231<\/span><\/td>\n | 45,677<\/span><\/td>\n | 189,244<\/span><\/td>\n | 152,322<\/span><\/td>\n<\/tr>\n\n| Operating (loss) income<\/span><\/td>\n | (5,298)<\/span><\/td>\n | 7,142<\/span><\/td>\n | 21,324<\/span><\/td>\n | 27,184<\/span><\/td>\n<\/tr>\n\nEBITDA(1)<\/sup><\/span><\/td>\n| (3,231)<\/span><\/td>\n | 8,099<\/span><\/td>\n | 26,490<\/span><\/td>\n | 22,091<\/span><\/td>\n<\/tr>\n\nAdjusted EBITDA(1)<\/sup><\/span><\/td>\n| (3,863)<\/span><\/td>\n | 8,059<\/span><\/td>\n | 25,710<\/span><\/td>\n | 29,712<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n _________________________<\/strong><\/p>\n(1)<\/sup><\/em>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.<\/em><\/span><\/p>\n <\/p>\n The C&O segment continues to see strong demand for various rare earth products, particularly its magnetic-based products, although the segment was adversely affected by the rapid decline of rare earth prices while processing higher cost inventory (lead-lag impact).\u00a0 Rare earth prices are still more than 100% higher than prices in the 2-3 years prior to the third quarter of 2020.\u00a0 The outlook, both in demand and pricing, remains strong for rare earths, which is expected to lead to higher dollar value margins for C&O in the long term.\u00a0 The rapid decline in prices necessitated C&O to record $6.0 million of provisions for inventories in the three months ended September 30, 2022.<\/p>\n In C&O’s environmental catalysts business, volumes were reasonably strong in the first nine months of 2022, although they were lower than the comparable period in the prior year, which benefited from customers refilling their supply chains.\u00a0 Volumes have seen less of an impact from the semiconductor chip shortage as occurred in Magnequench.\u00a0 C&O’s environmentally protective water treatment solutions business continues to perform well with higher volume and new customer adoption, despite challenges in global shipping and logistics availability.<\/p>\n \u00a0<\/strong><\/p>\n <\/p>\n RARE METALS SEGMENT RESULTS<\/strong><\/p>\n <\/p>\n \n\n\nTABLE 4: Selected Rare Metals Results<\/strong><\/span><\/td>\n<\/tr>\n\n| <\/td>\n | Quarter-over-Quarter Comparison<\/em><\/strong><\/span><\/td>\nYear-over-Year Comparison<\/em><\/strong><\/span><\/td>\n<\/tr>\n\n($000s)<\/em><\/span><\/td>\nQ3 2022<\/strong><\/span><\/td>\nQ3 2021<\/strong><\/span><\/td>\nYTD Q3 2022<\/strong><\/span><\/td>\n | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |