For fourth-quarter 2012, 5N Plus Inc of Montreal, Quebec, Canada, a producer of specialty metal and chemical products, has reported revenue of $128.6m, up 6.5% on $120.7m last quarter but down 13.9% on $149.4m a year ago. Revenue for full-year 2012 was $551.7m, up 40.8% on $391.7m for '2011' (although the latter comprised just seven months, since on 24 August 2011 5N Plus changed its financial year-end date from end-May to end-December).
In 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). 5N Plus already focused 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.
For Q4/2012, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $6.4m, down on $7.1m a year ago. However, goodwill and other non-current asset impairment charges were $204.8m due to longer-than-anticipated pricing softness in minor metals and a significant reduction in the market capitalization of the firm. This yielded a net loss of $212m in Q4 and $227.9m for full-year 2012, compared with $37.2m and $22.5m for Q4/2011 and the seven-month period to end-December 2011, respectively. Excluding impairment charges and reversals, restructuring costs and acquisition costs net of the related income tax, adjusted net earnings yielded a loss of $6.9m in Q4/2012, compared with just $0.1m in Q4/2011.
"Despite a very challenging business environment, we managed to maintain market share and generate significant cash flow, enabling a sizeable reduction in debt," says president & CEO Jacques L'Ecuyer. Cash flow from operating activities was $101.8m in full-year 2012. Net debt fell from $260.6m to $136.6m, including falling by $4m in Q4. Total debt fell from $341.9m to $148.4m, including falling by $1.4m in Q4.
"We also achieved commercial, technical and operational milestones including the completion of our Malaysian facility, breakthroughs at our Sylarus subsidiary, relocation of our Fairfield US operations to Wisconsin and further penetration of the Asian market," L'Ecuyer adds.
As at end-December 2012, the backlog of orders expected to translate into sales over the following 12 months stood at $165.8m, up from $162.3m at the end of September but down on $223.2m a year ago.
"Revenues, backlog and profitability were negatively impacted in the quarter and the year by low underlying commodity prices, resulting in significant write-downs in the value of our inventories, non-current assets and goodwill, the latter having now been completely written off," L'Ecuyer notes. "Headwinds related to continuing concerns over European demand, the slowdown in the global economy and the structural changes in the solar industry continued to weigh on our performance. This was further exacerbated by the difficulties encountered with the integration of the former MCP activities, leading to the departure of some senior executives from the former management team and the dispute which followed related to some of the seller's representations and warranties made at the time of the purchase," he adds.
5N Plus has also amended its senior secured multi-currency revolving credit facility, under which the facility will be reduced to $100m starting end-March 2013 and could, at any time, be expanded to $140m at the firm's request through the exercise of an additional $40m accordion feature (subject to review and approval by the lenders).
"The amendment to our credit facility provides us with the required financing flexibility for 2013 and better fits our current financing needs," says L'Ecuyer. "We are now better aligned and we intend to gradually redeploy capital into higher-value opportunities and recycling, with a strong focus on increasing commercial dealings in Asia. We also intend to leverage our dominant market share and take advantage of what we believe will be a much more favorable underlying commodity pricing environment in the coming year," he adds.
"Recognizing that 2013 will be a year of transition, we have established a plan for improving efficiency which includes the closure of the Trail operations [the former Firebird Semiconductors Ltd indium antimonide manufacturing plant in Trail, BC, Canada] and the relocation of all corresponding activities, and more generally significant cost-reduction efforts throughout the group," continues L'Ecuyer. "We also intend to further develop our Asian footprint in Korea, as previously announced [a gallium chemicals plant set up in conjunction with Hong Kong-based primary gallium producer Golden Harvest]. These measures, together with the continuing support from our financial institutions, should enable us to be very well positioned to take advantage of growth opportunities beyond the current year," he reckons.
"We therefore continue to remain cautiously optimistic and are confident on our ability to weather the current challenges," L'Ecuyer concludes.
