16 May 2012

5N Plus’ revenue grows 8.5% in Q1

5N Plus Inc of Montreal, Quebec, Canada, a producer of specialty metal and chemical products, has reported results for first-quarter 2012, with numbers for the comparable period to end-February 2011 restated to reflect changes resulting from the implementation of IFRS (International Financial Reporting Standards) and the adoption of the US dollar as the firm’s functional and reporting currency.

5N Plus focuses on specialty high-purity metals such as tellurium, cadmium, selenium, germanium, indium and antimony and also produces related II-VI semiconducting compounds such as cadmium telluride (CdTe), cadmium sulphide (CdS) and indium antimonide (InSb) as precursors for the growth of crystals for electronic applications, including solar photovoltaic, radiation detector and infrared markets. In addition, in mid-April 2011, 5N Plus paid $317m to acquire MCP Group SA of Tilly, Belgium, a producer and distributor of bismuth and bismuth chemicals (with a 50% global market share) as well as other specialty metals (including gallium, indium, selenium and tellurium).

Consequently, while up 8.5% on$149.4m last quarter, revenue for first-quarter 2012of $162.2m was up 685% on $20.7m for the quarter to end-February 2011.

“Sales returned to more expected levels, with contributions from both business units reflecting healthy demand in their respective markets,” says president & CEO Jacques L’Ecuyer. Compared with last quarter, revenue in the Eco-Friendly Materials business unit increased by $9m and bookings by 16%. Revenue also increased in the Electronic Materials business unit but bookings fell, due mainly to the restructuring of the contract with the firm’s main customer in the solar market (CdTe PV module maker First Solar Inc of Tempe, AZ, USA). Although up on $73.2m at the end of February 2011, during the quarter the backlog of orders (expected to translate into sales over the next 12 months) fell from $223m to $215.6m.  

5N Plus entered into a revised CdTe supply agreement with First Solar that came into effect on 1 April, replacing three existing supply agreements between 5N Plus and First Solar. The new agreement provides that 5N Plus will supply substantially all of the CdTe required by First Solar. However, pricing in the new supply agreement was adjusted downwards from the prior agreements, in line with more competitive environments in both the solar and material-feedstock markets.

Compared with an adjusted net loss of $0.1m last quarter, net earnings were $5m, although this is down on $5.5m for the quarter to end-February 2011. However, before the amortization of intangible assets related to the acquisition of MCP, net earnings were $7.2m. EBITDA (earnings before interest, taxes, depreciation and amortization) has risen from $6m for the quarter to end-February 2011 and from $7.3m last quarter to $16.9m.

Funds from operations were a record $11.2m (up on $10.3m last quarter and $6.6m for the quarter to end-February 2011), “highlighting our ability to adjust working capital requirements to best match our long-term plan,” says L’Ecuyer. “In particular, we were able to successfully reduce our inventory levels, increasing correspondingly our financial flexibility,” he adds. As a result of funds from operations and a reduction in working capital, during the quarter net debt fell from $260.6m to $232.1m.

“The accounting treatment related to the previously announced restructuring of our contract with our main customer in the solar market, which is effective from 1 April 2012 onwards, is expected to result in minimal profit being booked on this contract as long as the corresponding existing inventory has not been completely used up,” notes L’Ecuyer. “The current sales outlook related to this contract is such that we expect this element to impact profitability for the next two quarters. Regardless, we continue to focus on strong cash flow generation and on debt reduction,” he adds.

Tags: 5N Plus

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