Enabling Performance™
Building
on our
Momentum
Critical,
Valued and
Trusted
2022 Annual Report
Content
Why Invest in 5N Plus
Message from the Chair
Message from the CEO
Segment Overview
Sustainability
Management’s Discussion and Analysis
Management’s Responsibility
for Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Board of Directors and Executive Committee
Corporate Information
2
4
6
8
10
12
40
41
46
90
91
5N Plus (TSX:VNP) is a leading global
producer of specialty semiconductors
and performance materials. Our ultra-
pure materials often form the core
element of our customers’ products.
We create critical materials that enable various
applications in critical industries, including for the
renewable energy, security, space and medical imaging
sectors under our Specialty Semiconductors segment,
and for the health and pharmaceutical, as well as
industrial sectors under Performance Materials.
1
5N PLUS | 2022 ANNUAL REPORT Why Invest in
5N Plus
1
2
Market leading global
supplier of value-
added products to
leading customers in
high-growth industries
→ Leading supplier of specialty
semiconductor compounds
for renewable energy
→ Leading supplier of solar
cells for space industry
→ Leading supplier of
engineered semiconductor
substrates and ultra-high
purity materials to sensing
and imaging industries
→ Leading supplier of bismuth-
based active pharmaceutical
ingredients
→ Industrial partner and supplier
to governments and agencies
around the world
Integrated
manufacturer of
advanced materials
utilizing unique and
proprietary process
technologies
→ Highly specialized producer
of high-purity metals and
compounds that often form
core components of customer
end-products
→ R&D, manufacturing facilities
→ Operating in stable markets
and commercial centres
strategically located around
the globe close to suppliers
and customers
→ Strong technological platform
and skillset enabling first-
to-market advantage and
continuous improvements
3
Effective
commercialization
strategy
→ Focused on securing
→ Streamlined product
long-term value-added
partnerships with leading
customers in high-growth
markets
portfolio with growing
emphasis on higher
value-added specialty
semiconductors and
performance materials
4
Financial
discipline
5
Committed to
sustainable
development
→ Strong balance sheet
→ Invest in operations in line
→ Disciplined approach to
with demand and ramp up of
commercial agreements
potential acquisitions and/or
entering new end markets
→ ISO-certified operations
committed to high standards
in health and safety, quality
and sustainability
→ Closed-loop resources
management approach
→ Provider of essential
materials for applications
critical to the decarbonization
and the energy transition
2
5N PLUS | 2022 ANNUAL REPORT Mission
Vision
To be critical to our
customers, valued by our
employees and trusted by
our shareholders.
To enable critical industries
through essential products
based on advanced material
technology.
Values
Commitment
Continuous improvement
Customer focus
Health and safety
Integrity
Sustainable development
Revenues
(in millions)
Adjusted
EBITDA1
(in millions)
2
.
4
6
2
$
.
8
8
2
$
.
2
8
2
$
0
.
0
3
$
.
0
0
1
2
$
2
.
7
7
1
$
Backlog1
(number of days
of last quarter
annualized revenue)
3
5
2
1
2
2
9
8
1
2020 2021 2022
2020 2021 2022
2020 2021 2022
800 Employees on Three Continents
North America
HEAD
OFFICE
Canada
Montréal
United States
Bridgeport
St. George
Europe
Germany
Eisenhüttenstadt
Heilbronn
Lübeck
Commercial Activities
Manufacturing
Research & Development
Asia
China
Hong Kong
Shangyu
Laos
Ventiane
Malaysia
Kulim
1 Adjusted EBITDA and backlog are non-IFRS financial measures. See Non-IFRS Measures section in this document for more information.
All amounts in this document are experessed in U.S. dollars unless otherwise indicated.
3
5N PLUS | 2022 ANNUAL REPORT 4
5N PLUS | 2022 ANNUAL REPORT On the Right Path to Unlock Future Growth The year 2022 was a productive year for 5N Plus. Under new leadership, the Company integrated AZUR after it was acquired in late 2021, signed significant commercial agreements, further streamlined the Company’s product mix and made steady progress on its sustainability roadmap. As stewards of the Company on behalf of shareholders, the Board has full confidence in the senior management team and its ability to capitalize on opportunities for growth, underpinned by strong strategic execution. As a Board, we remain committed to ensuring high standards of governance and are highly engaged in the oversight of the Company’s long-term strategy. Luc Bertrand
Chair of the Board
The right talent executing on our strategy
enterprise risk management. We have also remained engaged with,
Gervais Jacques was appointed to the role of interim President and
and supportive of, management in the advancement of the Company’s
CEO on December 1, 2021 and was permanently appointed to the role
sustainability agenda, notably with the publication of the Company’s
in March of 2022. The Board is pleased with the Executive Committee’s
first comprehensive Sustainability Report.
strong leadership and the progress the Company is making in the
execution of its strategy.
We take our responsibility for improved governance at the Board and
executive level very seriously, which includes continually evaluating
The Executive Committee was also further strengthened last fall
Board composition to ensure it is best aligned with the objectives of
with the addition of Roland Dubois as Chief Commercial Officer and
the Company, while maintaining independence and improving upon
Executive Vice President of Specialty Semiconductors. Ensuring that
diversity. Following an extensive search process which began in 2022,
we can attract and retain top talent, as well as succession planning for
in early 2023, we were pleased to welcome Blair Dickerson as an
key roles, remains an ongoing Board priority.
independent director. Ms. Dickenson brings a wealth of experience
Through continuing economic and market challenges, the Company’s
Executive Committee moved ahead decisively as a team by securing
strategic supply agreements and commercial partnerships with Rio
Tinto, Sierra Space and First Solar, among others. The team also took
and expertise in the natural resources sector, communications, public
affairs and public policy work. With the addition of Ms. Dickerson, the
Board has surpassed its diversity objective of having at least 30%
female representation on the Board by 2025.
action to exit less attractive and more commoditized business lines and
Looking ahead, we will continue to be diligent in tracking the
invested in our operations to expand our presence in high-growth end
Company’s progress on the execution of its growth strategy. Our role
markets, like renewable energy and space power. These actions expand
is to guide management as it capitalizes on opportunities through a
the Company’s presence in its target markets, ensure that we have the
diversified, value-added business mix and expands in the right markets
right product mix and focus for the future and demonstrate 5N Plus’
to create long-term value for all stakeholders.
resilience and ability to adapt as it positions itself for further growth.
On behalf of the Board, I would like to express our gratitude to all
A sustainable business fueled by growth
our employees and management for their commitment to the success
The Board and management are aligned when it comes to the need
of the Company and to all our shareholders for your continued trust
to have a sustainable business model as part of its future growth and
and support.
conducting business in an ethical and responsible manner.
Sincerely,
To that end, we continue to work with management to enhance our
disclosure of Environmental, Social and Governance (ESG) matters
and make improvements in all areas, particularly on those over
which we have direct control. In 2023, we intend to officially integrate
ESG oversight and responsibility to the Board’s Governance and
Compensation Committee, which is in addition to the Audit and Risk
Management Committee’s oversight of climate risks, part of our
Luc Bertrand
Chair of the Board
5
5N PLUS | 2022 ANNUAL REPORT Last year marked my first full year as CEO and I am pleased
Strong Partnerships and the Right Product Mix
with what we have been able to accomplish as a team,
Operationally, our sights remained fixed on ensuring commercial
particularly in the context of continuing headwinds and market
excellence in every sector we serve. The year 2022 also marked
challenges. Revenues reached $264.2 million, representing a
the completion of the integration of AZUR, which we acquired in
26% year-over-year increase, and Adjusted EBITDA1 came in at
November 2021. Through AZUR, we signed a ten-year extension
$30 million, at the high end of our 2022 guidance range. These
to an exclusive teaming arrangement with Sierra Space, a
results were supported by both our Specialty Semiconductors
leading U.S. based commercial space company at the forefront
and Performance Materials segments, and the team’s ability to
of space innovation and commercialization. The commercial
remain agile in a dynamic environment.
relationship further establishes 5N Plus as the clear partner in
Our financial performance is a testament to our rigorous focus
on increasing volumes and structurally improving our costs and
high-end space solar cell technology and speaks to what can be
accomplished as one team.
product mix to be better positioned for the long term. We enter
Our long-time relationship with First Solar has reached an
2023 with strong momentum, well-positioned for continued
unprecedented level as reflected in the renewal of our contract.
growth in our key sectors of activity, as illustrated by our
We increased the volume for the supply of semiconductor
historically high backlog1 at year end.
materials associated with the manufacturing of thin-film
photovoltaic modules by 35% in 2023 and over 100% in 2024,
compared to 2022 levels. Related to First Solar, we also reached
a commercial agreement with Rio Tinto to source the tellurium
produced at its Kennecott copper operation in Utah, which began
last December. The tellurium refined at our Montréal facility is
primarily used for the manufacturing of thin-film photovoltaic
modules by First Solar, and for ultra-high purity semiconductor
substrates for the security and medical imaging markets at our
Utah facility.
1 Adjusted EBITDA and backlog are non-IFRS financial measures.
See Non-IFRS Measures section in this document for more information.
All amounts in this document are expressed in U.S. dollars unless otherwise indicated.
6
5N PLUS | 2022 ANNUAL REPORT Building on our MomentumLooking back on 2022, we at 5N Plus are proud of how we continued to execute on our strategy for growth in value-added end markets. We remain at the forefront of our field as a critical supplier to critical industries around the globe and a genuine differentiator and partner of choice in the field of speciality semiconductors. Gervais Jacques
President and CEO
Further to that, we recently completed investments in Montréal to
Our focused strategy strengthens our Company and positions us
expand the development and manufacturing of critical materials,
for the future, as we capitalize on our momentum for further growth
including those containing tellurium for advanced II-VI semiconductor
fueled by our strategic partnerships. In Specialty Semiconductors,
compounds. We will continue to invest in our operations to increase
we expect unprecedented demand and high growth in sectors
our production capacity to meet the needs of our clients.
like renewable energy and space solar power to be sustained and
Finally, in late 2022, we exited the extractive and catalytic sector with
the divestiture of our manufacturing facility in Tilly, Belgium, in line
with our strategy to improve our product mix and reduce exposure to
more commoditized end markets. This also marked the completion of
our strategic review process which served to reinforce our focus on
value-added products.
supported by growing demand in both North America and Europe.
We also expect significant growth in medical imaging applications
in the next three to five years, supported by the introduction of
photon counting detectors to replace scintillator technology,
allowing significantly lower radiation and improved image enhancing
diagnostic accuracy. In Performance Materials, we expect that our
focus on the right sectors and the investments made in the business
We are also proud of the work we completed in 2022 with respect
will enable us to expand our product mix in attractive end markets.
to establishing and setting our sustainability framework. In early
2023, we published our inaugural comprehensive Sustainability
Report, simultaneous with this Annual Report. In the Sustainability
Report, we outline our commitment to and progress in contributing
to a sustainable economy through the critical sectors we serve
As we look ahead, we are invested to meet customer demand and
are ready to unlock the full potential of our strategy supported by our
commercial excellence mindset and investments in value-added and
high-growth markets.
and enable. Going forward, our goal is to further minimize our
I am grateful to our Board for their guidance, oversight and support
environmental footprint and impact, as we continue to contribute to
in my first official year as CEO and to our entire team for their
the communities in which we are present.
dedication and professionalism as we refocused our strategy,
A Focused Strategy for A High-Growth Future
As we move away from more commoditized business lines and invest
in innovative specialty semiconductors and performance materials,
we will continue to develop value-added partnerships leveraging our
brought AZUR into the fold, delivered on commercial excellence and
selectively invested in our sustainable growth. I am extremely excited
by the prospects ahead in 2023 and beyond to drive more growth and
value for our employees, our customers and our shareholders.
unique expertise in enabling critical industries. As an example, we
Sincerely,
are making further developments in our imaging technology business
with strategic partnerships, as well as in active pharmaceutical
ingredients, such as through our investment in Microbion, which is
a longer-term endeavour on which we are progressing.
Gervais Jacques
President and CEO
7
5N PLUS | 2022 ANNUAL REPORT Enabling Products
and Growing
Markets
As a leading global producer of specialty
semiconductors and performance
materials, we create critical materials that
enable a wide variety of technologies and
products essential to people’s daily lives.
Our world-class R&D and manufacturing
capabilities as well as our technical
expertise and proprietary processes enable
us to transform metals into value-added
specialty materials that form the core of our
customers’ products.
8
5N PLUS | 2022 ANNUAL REPORT Specialty Semiconductors
Through our Specialty Semiconductors segment, we sell semiconductor compounds,
semiconductor wafers, ultra-high purity metals, epitaxial semiconductor substrates and
solar cells, primarily derived from from cadmium, zinc, germanium, indium, antimony
and tellurium.
Performance Materials
Through our Performance Materials segment, we sell
bismuth and bismuth-based chemicals, trace element
premixes, as well as optical and low melting point alloys.
This segment is strongly associated with bismuth, which
is non-toxic and possesses anti-microbial activity, and is
used in several applications as a replacement for more
harmful metals and chemicals. Products are primarily
sold as active pharmaceutical ingredients, animal feed
additives, specialized chemicals, commercial grade
metals and alloys.
Renewable Energy
Space
Our engineered
semiconductor compounds
are used to make the black
thin-film photovoltaic
modules on solar panels
enabling the conversion of
solar energy into electricity.
Today, gigawatts of solar
panels incorporating our
materials are installed
in utility-scale projects,
generating renewable power
for consumers worldwide.
Our high-purity germanium
wafers and epitaxial
semiconductor substrates
are used to produce ultra-
high efficiency photovoltaic
solar cells for satellite
power generation and
concentrated photovoltaic
systems. Our enabling
materials are currently in
orbit powering commercial
and defense satellites
around the globe, as well
as incorporated in next-
generation energy storage
infrastructure on land.
Imaging and Sensing
Made of cadmium,
tellurium and zinc of the
very highest purity, our
materials are used to
manufacture radiation
detector chips used in
medical, infrared and earth
imaging applications in
the medical, security and
defense industries, helping
to reduce patient exposure
to x-rays and keeping
nations safe.
Health and
Pharmaceutical
Non-toxic to human
health or the environment
and with anti-microbial
properties, our bismuth
products are used as
active pharmaceutical
ingredients in over-the-
counter antacids, antibiotic
creams and cosmetics
products.
Industrial
Our alloys are used in
aviation for work-holding
applications where
dimensional stability
and low temperature are
critical characteristics.
Bismuth is used as a
replacement for lead
in other industrial
applications, like coatings
and pigments, and is in
electronics, optics and
glass. We also produce
pre-mixes containing
trace elements of iodine,
selenium and cobalt for
animal feed.
9
5N PLUS | 2022 ANNUAL REPORT Enabling a
Sustainable Future
At 5N Plus, sustainable development is at the core of our growth strategy. We
aim to extend our position in the circular economy, enable innovative technology
and be a critical supplier to sectors essential to a sustainable future. Internally,
our sustainability programs aim to reduce our ecological footprint and ensure we
maintain sustainable procurement practices.
We consider ourselves optimally positioned in three areas to support our communities and environment:
Leading the Sustainable Economy,
Supplying the Renewable Energy
Community Responsibility
Minimizing our Environmental
Industry and Enabling New Technology
We give back to our communities and
Footprint and Impact
Solar energy is one of the most important
invest in their development. We have
From our supply chain to our products,
components required for transitioning
provided books and reading materials
we are constantly looking to improve.
the world to a decarbonized economy.
to communities in need and coordinated
Currently, we are initiating two circular
We are proud to be a leading supplier
community tree planting events. We are
economy studies to investigate more
of semiconductor materials for the
committed to maintaining our reputation as
renewable and local raw material sources
manufacturing of thin-film solar power
a great place to work, a trusted supplier and
and our mineral recycling program spans
generating technologies for terrestrial and
valued member of the community.
three continents. We are early adopters of
space power generation. In new technologies,
sustainable procurement programs and
we support pharmaceuticals and medical
focus on reducing waste, proudly ensuring
technology developments by providing
thoughtful circular supply chains.
materials needed for new medical imaging
devices, which reduce x-ray exposure, and
investing in novel class pharmaceuticals,
among other critical sectors.
We continued to work diligently throughout 2022 on the development of our sustainability approach. As a result, in early 2023, guided by
the Global Reporting Initiative (GRI) framework and the recommendations from the Task Force on Climate-Related Financial Disclosures
(TCFD), among other frameworks, we published our first comprehensive Sustainability Report. We continue to mindfully plan our path
forward to further integrate our approach to sustainability into our business model, while engaging with our stakeholders and keeping
them informed of our progress.
We invite you to consult our inaugural Sustainability Report, available at www.5nplus.com.
10
5N PLUS | 2022 ANNUAL REPORT 2022 Sustainability Highlights
~25GW
of solar power equivalent in
the world has been enabled by
5N Plus technology to date 1
30%
reduction in process
water consumption
over five years
40%
female representation on
the Board of Directors 3
100%
of process water is
recycled at our facilities in
Eisenhüttenstadt and Shangyu
65%
reduction in work-related
incidents since 2018
#1
supplier of bismuth 2-based
active pharmaceutical
ingredients, representing
80% of global demand 1
27%
female staff across
the global office
We have the ISO 50001
standard in two sites
in Germany, an energy
management methodology
that aims to improve
energy performance
Our sodium nitrate containing
wastewater in Lübeck is used
for odor reduction
(organic wastewater,
against anaerobic digestion
in the sewers)
4,220
hours of EHS training provided
in 2022
1 Based on management estimates
2 See Performance Materials on page 9
3 Since February 23, 2023
11
5N PLUS | 2022 ANNUAL REPORT Management’s
Discussion
and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations is intended to
assist readers in understanding 5N Plus Inc. (the “Company” or “5N Plus”), its business environment, strategies,
performance and risk factors. This MD&A should be read in conjunction with the audited consolidated financial
statements and the accompanying notes for the year ended December 31, 2022, based on International Financial
Reporting Standards (‘’IFRS’’) as issued by the International Accounting Standards Boards, unless otherwise stated. This
MD&A has been prepared in accordance with the requirements of the Canadian Securities Administrators.
All amounts in this MD&A are expressed in U.S. dollars, and all amounts in the tables are in thousands of U.S. dollars,
unless otherwise indicated.
Information contained herein includes any significant developments until February 21, 2023, the date on which the
MD&A was approved by the Company’s Board of Directors. Unless otherwise indicated, the terms “we”, “us”, “our” and
“the group” as used herein refer to the Company together with its subsidiaries. “Q4 2022” and “Q4 2021” refer to the
three‐month periods ended December 31, 2022 and December 31, 2021, respectively. “FY 2022” and “FY 2021” refer to
the years ended December 31, 2022 and December 31, 2021, respectively.
Non‐IFRS Measures
This MD&A contains certain non‐IFRS financial measures and ratios, which do not have a standard meaning under IFRS
and, therefore, may not be comparable to similar measures presented by other issuers. Such non‐IFRS measures and
ratios include backlog, bookings, EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted operating
expenses, Adjusted net earnings, Basic adjusted net earnings, Adjusted gross margin, total debt, net debt, working capital
and working capital ratio.
For definitions, further information and reconciliation of these measures to the most directly comparable measures
under IFRS, see the “Non‐IFRS Measures” section.
Notice Regarding Forward‐Looking Statements
Certain statements in this MD&A may be forward‐looking within the meaning of applicable securities laws. Forward‐looking
information and statements are based on the best estimates available to the Company at the time and involve known and
unknown risks, uncertainties or other factors that may cause the Company’s actual results, performance or achievements to
be materially different from any future results, performance or achievements expressed or implied by such forward‐looking
statements. Factors of uncertainty and risk that might result in such differences include the risks associated with interest rate,
foreign currency, credit, liquidity, global economic conditions, crisis and climate change management, international operations
including China, environmental regulations, social and governance (ESG) considerations, safety and hazards, prolonged armed
conflict in Ukraine, COVID‐19, availability and retention of qualified employees, collective agreements, litigation, our growth
strategy, competition, commodity price, sources of supply, protection of intellectual property, inventory price, business
interruptions, changes in backlog, acquisitions, systems, network infrastructure and data failure, as well as market price of the
common shares. A description of the risks affecting the Company’s business and activities appears under the heading “Risk and
Uncertainties” of this MD&A dated February 21, 2023.
Forward‐looking statements can generally be identified by the use of terms such as “may”, “should”, “would”, “believe”,
“expect”, the negative of these terms, variations of them or any similar terms. No assurance can be given that any events
anticipated by the forward‐looking information in this MD&A will transpire or occur, or if any of them do so, what benefits that
5N Plus will derive therefrom. In particular, no assurance can be given as to the future financial performance of 5N Plus. The
forward‐looking information contained in this MD&A is made as of the date hereof and the Company has no obligation to
publicly update such forward‐looking information to reflect new information, subsequent or otherwise, unless required by
applicable securities laws. The reader is warned against placing undue reliance on these forward‐looking statements.
12
5N Plus ▪ Management’s Discussion and Analysis ▪ 1
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Overview
5N Plus is a leading global producer of specialty semiconductors and performance materials. The Company’s ultra‐pure
materials often form the core element of its customers’ products. These customers rely on 5N Plus’ products to enable
performance and sustainability in their own products. 5N Plus deploys a range of proprietary and proven technologies
to develop and manufacture its products. The Company’s products enable various applications in several key industries,
including renewable energy, security, space, pharmaceutical, medical imaging, and industrial. Headquartered in
Montréal, Québec, 5N Plus operates R&D, manufacturing and commercial centers in strategically located facilities
around the world including Europe, North America and Asia.
Vision, Mission and Values
The Company’s vision is to enable critical industries through essential products based on advanced material technology
and 5N Plus’ aim is to propel the growth of these markets by developing and manufacturing advanced materials to enable
product performance.
The Company’s mission is to be critical to its customers, valued by its employees and trusted by its shareholders. The
Company’s core values are integrity, commitment and customer development, with an emphasis on sustainable
development, continuous improvement, and health and safety.
Reporting Segments
Following the acquisition of AZUR SPACE Solar Power GmbH (“AZUR”) on November 5, 2021, and the subsequent
integration of its activities within the Company’s operations, 5N Plus repositioned certain products and applications
between its two reportable segments effective in the fourth quarter of 2021.
Since then, the Company has the following two reportable segments: Specialty Semiconductors and Performance
Materials. Corresponding operations and activities are managed accordingly by the Company’s key decision makers.
Segmented operating and financial information and labelled key performance indicators are available and used to
manage these business segments, review performance and allocate resources. Financial performance of any given
segment is evaluated primarily in terms of revenues and Adjusted EBITDA1, which are reconciled to consolidated
numbers considering corporate income and expenses.
Operating in North America and Europe, the Specialty Semiconductors segment is similar to the former Electronic
Materials segment and integrates the products and operations of AZUR since November 5, 2021. The segment
manufactures and sells products used in several applications, such as renewable energy, space satellites and imaging.
Typical end markets include photovoltaics (terrestrial and spatial solar energy), medical imaging, infrared imaging,
optoelectronics and advanced electronics. These products are sold either as semiconductor compounds, semiconductor
wafers, ultra high purity metals, epitaxial semiconductor substrates and solar cells. Revenues and earnings associated
with recycling services and activities provided to Specialty Semiconductors customers are captured in this segment.
The Performance Materials segment operates in North America, Europe and Asia and is similar to the former Eco‐Friendly
Materials segment. The segment manufactures and sells products that are used in several applications in pharmaceutical
and healthcare, industrial, and catalytic and extractive. Main products are sold as active pharmaceutical ingredients,
animal feed additives, specialized chemicals, commercial grade metals, alloys and engineered powders. All commercial
grade metal and engineered powder sales have been regrouped under Performance Materials. Revenues and earnings
associated with recycling services and activities provided to Performance Materials customers are captured in this
segment.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses
(SG&A), together with financial expenses (income), are grouped under “Corporate”.
1 See Non‐IFRS Measures
2 ▪ 5N Plus ▪ Management’s Discussion and Analysis
13
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Q4 and FY 2022 Highlights – Building on our Momentum
Q4 and FY 2022 Highlights – Building on our Momentum
Fiscal 2022 was an important chapter in the history of 5N Plus. Executing on its strategy, the
Fiscal 2022 was an important chapter in the history of 5N Plus. Executing on its strategy, the
Company made significant progress and is now well‐positioned to build on its momentum and
Company made significant progress and is now well‐positioned to build on its momentum and
market leadership in the promising sectors in which it operates, as illustrated by its historically
market leadership in the promising sectors in which it operates, as illustrated by its historically
high backlog as at December 31, 2022.
high backlog as at December 31, 2022.
All amounts are expressed in U.S. dollars.
All amounts are expressed in U.S. dollars.
FY 2023 and FY 2024 Adjusted EBITDA1 guidance is presented in the Outlook section.
FY 2023 and FY 2024 Adjusted EBITDA1 guidance is presented in the Outlook section.
Against the backdrop of geo‐political and macro‐economic challenges, the Company responded swiftly to inflationary
Against the backdrop of geo‐political and macro‐economic challenges, the Company responded swiftly to inflationary
and energy related cost pressures, quickly implementing the first wave of its commercial excellence program to mitigate
and energy related cost pressures, quickly implementing the first wave of its commercial excellence program to mitigate
the negative impact of inflation on product margins. This resulted in a sequential improvement of consolidated adjusted
the negative impact of inflation on product margins. This resulted in a sequential improvement of consolidated adjusted
gross margins1 from 21.9% for Q1 2022 to 26.7% in Q4 2022. The Company continues to approach partnerships and
gross margins1 from 21.9% for Q1 2022 to 26.7% in Q4 2022. The Company continues to approach partnerships and
product development opportunities with discipline.
product development opportunities with discipline.
During the year, the Company renewed and increased its supply agreement with First Solar, for the supply of
During the year, the Company renewed and increased its supply agreement with First Solar, for the supply of
semiconductor materials associated with the manufacturing of thin‐film photovoltaic (PV) modules, further
semiconductor materials associated with the manufacturing of thin‐film photovoltaic (PV) modules, further
strengthening its leadership in renewable energy. Under the new agreement, the Company’s supply volumes will
strengthening its leadership in renewable energy. Under the new agreement, the Company’s supply volumes will
increase by 35% in 2023 and over 100% in 2024, compared to 2022 levels, in line with First Solar’s own growth plans.
increase by 35% in 2023 and over 100% in 2024, compared to 2022 levels, in line with First Solar’s own growth plans.
Through its subsidiary AZUR, 5N Plus signed a ten‐year extension to an exclusive teaming arrangement with Sierra Space,
Through its subsidiary AZUR, 5N Plus signed a ten‐year extension to an exclusive teaming arrangement with Sierra Space,
a leading U.S.‐based commercial space company, to produce a new solar cell for use in the production of Sierra Space’s
a leading U.S.‐based commercial space company, to produce a new solar cell for use in the production of Sierra Space’s
unique Space Solar Surface Mount Technology solar array systems. Sales to Sierra Space are anticipated to reach
unique Space Solar Surface Mount Technology solar array systems. Sales to Sierra Space are anticipated to reach
$10 million in 2023 and over $20 million in 2024, incremental to the current sales. The commercial relationship
$10 million in 2023 and over $20 million in 2024, incremental to the current sales. The commercial relationship
entrenches 5N Plus as a trusted partner in a sector experiencing rapidly accelerating demand which is expected to exceed
entrenches 5N Plus as a trusted partner in a sector experiencing rapidly accelerating demand which is expected to exceed
current available capacity. AZUR is uniquely positioned to supply both North America and Europe. In 2022, the Company
current available capacity. AZUR is uniquely positioned to supply both North America and Europe. In 2022, the Company
completed its integration of AZUR, which was acquired in November 2021.
completed its integration of AZUR, which was acquired in November 2021.
In December 2022, the Company exited the manufacturing of low margin extractive and catalytic products with the
In December 2022, the Company exited the manufacturing of low margin extractive and catalytic products with the
divestiture of its Tilly, Belgium operations to a third party, thereby completing the strategic review of its operations. On
divestiture of its Tilly, Belgium operations to a third party, thereby completing the strategic review of its operations. On
a forward‐looking basis, exiting this business is expected to provide incremental Adjusted EBITDA1 contribution to
a forward‐looking basis, exiting this business is expected to provide incremental Adjusted EBITDA1 contribution to
consolidated results and support more favourable net working capital levels.
consolidated results and support more favourable net working capital levels.
By year end, the Company completed its St‐Laurent project (Montréal, Canada), expanding the development and
By year end, the Company completed its St‐Laurent project (Montréal, Canada), expanding the development and
manufacturing of critical minerals for advanced II‐VI based semiconductor compounds. For this facility, by‐products
manufacturing of critical minerals for advanced II‐VI based semiconductor compounds. For this facility, by‐products
sourced from Rio Tinto’s copper operations from its Kennecott, Utah copper operation started late December 2022, part
sourced from Rio Tinto’s copper operations from its Kennecott, Utah copper operation started late December 2022, part
of a strategic commercial agreement with Rio Tinto announced in May 2022 to secure a North American supply of
of a strategic commercial agreement with Rio Tinto announced in May 2022 to secure a North American supply of
tellurium.
tellurium.
Financial Highlights
Financial Highlights
Revenue in Q4 2022 reached $61.0 million, compared to $64.6 million for the same period last year. The decrease is
Revenue in Q4 2022 reached $61.0 million, compared to $64.6 million for the same period last year. The decrease is
primarily attributable to the phase out and divestiture of the Tilly, Belgium operations. Revenue increased by 26% to
primarily attributable to the phase out and divestiture of the Tilly, Belgium operations. Revenue increased by 26% to
$264.2 million in FY 2022, compared to $210.0 million last year, supported by the acquisition of AZUR and higher
$264.2 million in FY 2022, compared to $210.0 million last year, supported by the acquisition of AZUR and higher
demand for renewable energy in Specialty Semiconductors, as well as for pharmaceutical and health in Performance
demand for renewable energy in Specialty Semiconductors, as well as for pharmaceutical and health in Performance
Materials.
Materials.
1 See Non‐IFRS Measures
1 See Non‐IFRS Measures
14
5N Plus ▪ Management’s Discussion and Analysis ▪ 3
5N Plus ▪ Management’s Discussion and Analysis ▪ 3
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Adjusted EBITDA1 in Q4 2022 reached $6.7 million, compared to $10.1 million for the same period last year, due to
AZUR realizing the majority of its 2021 annual Adjusted EBITDA in the months following its acquisition. Adjusted
EBITDA for FY 2022 reached $30.0 million, achieving the high end of the Company’s FY 2022 guidance, compared to
$28.2 million last year, despite the negative impact of the Russia/Ukraine conflict in Q1 2022, rising inflation and the
winding down and divestiture of the Tilly, Belgium operations.
In Q4 2022, the Company recorded a loss on divestiture of $7.8 million on the winding down and divestiture of the
Tilly, Belgium operations completed in December 2022, as well as a $3.2 million in litigation and restructuring costs,
mainly attributable to the same transaction.
On December 31, 2022, the backlog1 represented 253 days of annualized revenue, 61 days higher than the previous
quarter, and 32 days higher than the same period last year. The increase in the backlog is attributable to favourable
negotiations of long‐term contracts under Specialty Semiconductors.
Net debt1 stood at $78.3 million on December 31, 2022, down from $80.1 million at the end of the prior year.
Outlook
Under its Specialty Semiconductors segment, 5N Plus continues to be the only viable global supplier, outside China, of
ultra‐high purity semiconductor compounds used in a wide range of critical technologies essential to people’s lives. With
unprecedented demand for applications, such as terrestrial renewable energy and space solar power, the Company is
well‐positioned to unlock the full potential of its enhanced product offering and is investing in its operations to meet
exceptional customer demand in the years to come.
The Company is uniquely positioned to play a significant role in the new Photon Counting Detectors technology for CT
scan, which is set to revolutionize medical imaging in the medium‐term. The Company also continues to explore other
potential market opportunities for its specialty semiconductor products in namely the defence and security sectors.
Under Performance Materials, management expects its health and pharmaceutical products to continue providing high
profitability and consistent cashflows. The Company will continue to focus on the right sectors to expand the segment’s
product mix in attractive end markets.
The Company will continue to implement operational optimization initiatives, where appropriate, to bring incremental
benefits to 5N Plus in support of organic growth, while remaining opportunistic regarding M&As.
Given its investments in high‐growth potential opportunities, with unprecedented demand in key end markets and a
simplified business and product mix, management expects its projected Adjusted EBITDA1 range to be between
$35 million and $40 million for FY 2023, with a higher contribution in the second half of the year, and between $45 million
and $50 million for FY 2024.
Looking ahead, 5N Plus is focused on meeting customer demand and building on its momentum to reap the full potential
of its strategy, supported by its commercial excellence program and investments in value‐added and high‐growth
markets.
1 See Non‐IFRS Measures
4 ▪ 5N Plus ▪ Management’s Discussion and Analysis
15
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Q4 and FY 2022 Highlights – Building on our Momentum
Summary of Results
Fiscal 2022 was an important chapter in the history of 5N Plus. Executing on its strategy, the
(in thousands of U.S. dollars, except per share amounts)
FY 2021
Company made significant progress and is now well‐positioned to build on its momentum and
$
market leadership in the promising sectors in which it operates, as illustrated by its historically
Revenue
209,990
Adjusted operating expenses1*
(181,751)
high backlog as at December 31, 2022.
Adjusted EBITDA1
28,239
Impairment of inventories
‐
All amounts are expressed in U.S. dollars.
Share‐based compensation recovery (expense)
(689)
(2,144)
Litigation and restructuring costs
FY 2023 and FY 2024 Adjusted EBITDA1 guidance is presented in the Outlook section.
Impairment of non‐current assets
‐
Loss on divestiture of subsidiary
‐
Against the backdrop of geo‐political and macro‐economic challenges, the Company responded swiftly to inflationary
Loss on disposal of assets held for sale
‐
and energy related cost pressures, quickly implementing the first wave of its commercial excellence program to mitigate
Foreign exchange and derivative gain (loss)
(418)
EBITDA1
the negative impact of inflation on product margins. This resulted in a sequential improvement of consolidated adjusted
24,988
gross margins1 from 21.9% for Q1 2022 to 26.7% in Q4 2022. The Company continues to approach partnerships and
Interest on long‐term debt, imputed interest and other interest expense
3,713
Depreciation and amortization
12,535
product development opportunities with discipline.
8,740
FY 2022
$
264,223
(234,195)
30,028
‐
(999)
(3,823)
(12,478)
(7,834)
(216)
(42)
4,636
5,192
17,732
(18,288)
Q4 2022
$
61,042
(54,337)
6,705
‐
171
(3,210)
‐
(7,834)
‐
497
(3,671)
716
4,051
(8,438)
Q4 2021
$
64,556
(54,470)
10,086
‐
460
(1,644)
‐
‐
‐
(1,080)
7,822
1,164
4,364
2,294
Current
Deferred
During the year, the Company renewed and increased its supply agreement with First Solar, for the supply of
5,580
semiconductor materials associated with the manufacturing of thin‐film photovoltaic (PV) modules, further
50
strengthening its leadership in renewable energy. Under the new agreement, the Company’s supply volumes will
5,630
increase by 35% in 2023 and over 100% in 2024, compared to 2022 levels, in line with First Solar’s own growth plans.
3,110
6,865
(2,154)
4,711
(22,999)
43
(335)
(292)
(8,146)
1,446
(132)
1,314
980
Net (loss) earnings
(Loss) earnings before income taxes
Income tax expense (recovery)
Basic (loss) earnings per share
Diluted (loss) earnings per share
Through its subsidiary AZUR, 5N Plus signed a ten‐year extension to an exclusive teaming arrangement with Sierra Space,
a leading U.S.‐based commercial space company, to produce a new solar cell for use in the production of Sierra Space’s
unique Space Solar Surface Mount Technology solar array systems. Sales to Sierra Space are anticipated to reach
*Excluding impairment of inventories, share‐based compensation recovery (expense), litigation and restructuring costs, impairment of non‐current assets, loss on
$10 million in 2023 and over $20 million in 2024, incremental to the current sales. The commercial relationship
divestiture of subsidiary, loss on disposal of assets held for sale, and depreciation and amortization.
entrenches 5N Plus as a trusted partner in a sector experiencing rapidly accelerating demand which is expected to exceed
Revenue by Segment and Adjusted Gross Margin
current available capacity. AZUR is uniquely positioned to supply both North America and Europe. In 2022, the Company
completed its integration of AZUR, which was acquired in November 2021.
($0.09)
($0.09)
($0.26)
($0.26)
$0.04
$0.04
$0.01
$0.01
(in thousands of U.S. dollars)
Change
Change
Q4 2022
$
31,951
29,091
61,042
(47,909)
Q4 2021
$
30,160
34,396
64,556
(53,090)
FY 2022
$
121,918
142,305
264,223
(215,715)
FY 2021
$
70,655
139,335
209,990
(171,214)
(10%)
9%
73%
2%
26%
26%
3,515
14,981
23.2%
3,155
16,288
26.7%
6%
(15%)
(5%)
(10%)
In December 2022, the Company exited the manufacturing of low margin extractive and catalytic products with the
Specialty Semiconductors
divestiture of its Tilly, Belgium operations to a third party, thereby completing the strategic review of its operations. On
Performance Materials
a forward‐looking basis, exiting this business is expected to provide incremental Adjusted EBITDA1 contribution to
Total revenue
Cost of sales
consolidated results and support more favourable net working capital levels.
Depreciation included in cost of sales
Adjusted gross margin1
Adjusted gross margin percentage1
By year end, the Company completed its St‐Laurent project (Montréal, Canada), expanding the development and
manufacturing of critical minerals for advanced II‐VI based semiconductor compounds. For this facility, by‐products
sourced from Rio Tinto’s copper operations from its Kennecott, Utah copper operation started late December 2022, part
Revenue in Q4 2022 decreased by 5%, reaching $61.0 million, compared to $64.6 million for the same period last year.
of a strategic commercial agreement with Rio Tinto announced in May 2022 to secure a North American supply of
The decrease is primarily attributable to the phase out, initiated earlier in the year, of the Company’s extractive and
tellurium.
catalytic products manufactured in Tilly, Belgium, and its divestiture in late December 2022, recorded under
Performance Materials. In FY 2022, revenue increased by 26%, reaching $264.2 million, compared to $210.0 million in
Financial Highlights
FY 2021, supported by the acquisition of AZUR completed in November 2021, higher demand from renewable energy
under Specialty Semiconductors, as well as pharmaceutical and health under Performance Materials.
Revenue in Q4 2022 reached $61.0 million, compared to $64.6 million for the same period last year. The decrease is
primarily attributable to the phase out and divestiture of the Tilly, Belgium operations. Revenue increased by 26% to
Adjusted gross margin1 in Q4 2022 was favourably impacted by the product mix and the Company’s commercial
$264.2 million in FY 2022, compared to $210.0 million last year, supported by the acquisition of AZUR and higher
excellence program launched earlier this year aimed at rapidly mitigating the negative impact of inflation on product
demand for renewable energy in Specialty Semiconductors, as well as for pharmaceutical and health in Performance
margins. The Adjusted gross margin reached $16.3 million, or 26.7%, compared to $15.0 million, or 23.2%, in Q4 2021.
Materials.
In FY 2022, Adjusted gross margin was also favourably impacted by higher volumes and the acquisition of AZUR, reaching
$62.7 million, or 23.7%, compared to $49.3 million, or 23.5%, in FY 2021.
14,208
62,716
23.7%
10,539
49,315
23.5%
35%
27%
1 See Non‐IFRS Measures
1 See Non‐IFRS Measures
16
5N Plus ▪ Management’s Discussion and Analysis ▪ 3
5N Plus ▪ Management’s Discussion and Analysis ▪ 5
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Specialty Semiconductors Segment
Revenue in Q4 2022 increased by 6%, reaching $32.0 million, compared to $30.2 million in Q4 2021. In FY 2022, revenue
reached $121.9 million, compared to $70.7 million in FY 2021, supported by higher demand over and above the
contribution from AZUR.
Adjusted gross margin1 in Q4 2022 was 31.0%, compared to 29.5% in Q4 2021. In FY 2022, Adjusted gross margin was
28.1%, compared to 31.5% in FY 2021, mainly explained by inflation.
Performance Materials Segment
Revenue in Q4 2022 reached $29.1 million, compared to $34.4 million in Q4 2021, impacted by the phase out, initiated
earlier in the year, of the Company’s extractive and catalytic products manufactured in Tilly, Belgium, and its divestiture
in late December 2022. In FY 2022, revenue reached $142.3 million, compared to $139.3 million in FY 2021, favourably
impacted by product mix and price increases, primarily in pharmaceutical and health sectors.
Adjusted gross margin in Q4 2022 was 22.5%, compared to 18.8% in Q4 2021, favourably impacted by product mix and
price increases to mitigate inflation. In FY 2022, Adjusted gross margin was 20.4%, compared to 19.8% in FY 2021.
Operating (Loss) Earnings, EBITDA and Adjusted EBITDA
(in thousands of U.S. dollars)
Specialty Semiconductors
Performance Materials
Corporate
Adjusted EBITDA1
EBITDA1
Operating (loss) earnings
Q4 2022
$
5,690
3,997
(2,982)
6,705
(3,671)
(8,219)
Q4 2021
$
8,304
5,159
(3,377)
10,086
7,822
4,538
Change
(31%)
(23%)
(12%)
(34%)
(147%)
(281%)
FY 2022
$
24,318
17,277
(11,567)
30,028
4,636
(13,054)
FY 2021
$
18,817
18,957
(9,535)
28,239
24,988
12,871
Change
29%
(9%)
21%
6%
(81%)
(201%)
Adjusted EBITDA1 in Q4 2022 reached $6.7 million, a decrease of $3.4 million, compared to $10.1 million in the same
period last year. Adjusted EBITDA decreased by $2.6 million under Specialty Semiconductors, mainly explained by AZUR’s
better balanced quarterly Adjusted EBITDA contribution throughout FY 2022 compared to in FY 2021 when most of the
contribution was realized in Q4 2021 following their acquisition in November 2021. Under Performance Materials,
Adjusted EBITDA decreased by $1.2 million, mainly impacted by inflation, and the phase out and divestiture of the
Company’s low‐margin product manufacturing activities in Tilly, Belgium. For more information, see the “Divestiture of
5N Belgium SA” section.
Adjusted EBITDA for FY 2022 reached $30.0 million, compared to $28.2 million last year, despite the negative impact of
the Russia/Ukraine conflict in Q1 2022, rising inflation and the winding down and divestiture of the Tilly, Belgium
operations. Corporate incurred additional expenses related to the integration of AZUR, other corporate projects and
the impact of inflation.
In Q4 2022, EBITDA1 was negative $3.7 million, compared to $7.8 million in Q4 2021. The decrease of $11.5 million is
mainly explained by a decrease in Adjusted EBITDA of $3.4 million mentioned above, a loss on divestiture of a subsidiary
of $7.8 million and $1.6 million in litigation and restructuring costs.
In FY 2022, EBITDA was $4.6 million, compared to $25.0 million in FY 2021. While the Adjusted EBITDA increase by
$1.8 million, this increase did not compensate for the elements mentioned above and for the impairment on non‐current
assets of $5.4 million recorded earlier in the year to reflect the assessment of the carrying value of intangible assets
impacted by the Russia/Ukraine conflict. In addition to the loss on divestiture recorded in Q4 2022, the Company
recorded an impairment on non‐current assets of $7.1 million in Q3 2022 following the Company’s intention to exit the
manufacturing of low margin extractive and catalytic products in Tilly, Belgium.
1 See Non‐IFRS Measures
6 ▪ 5N Plus ▪ Management’s Discussion and Analysis
17
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Q4 and FY 2022 Highlights – Building on our Momentum
In Q4 2022, operating loss amounted to $8.2 million, compared to operating earnings of $4.5 million in Q4 2021. In
FY 2022, operating loss amounted to $13.1 million, compared to operating earnings of $12.9 million in FY 2021. The
Fiscal 2022 was an important chapter in the history of 5N Plus. Executing on its strategy, the
decreases are mainly explained by the same reasons mentioned above.
Company made significant progress and is now well‐positioned to build on its momentum and
market leadership in the promising sectors in which it operates, as illustrated by its historically
Specialty Semiconductors Segment
high backlog as at December 31, 2022.
Adjusted EBITDA1 in Q4 2022 decreased by $2.6 million to $5.7 million, representing an Adjusted EBITDA margin1 of 18%,
compared to 28% in Q4 2021 due to the recognition timing of R&D subsidies and other income. Adjusted EBITDA in
All amounts are expressed in U.S. dollars.
FY 2022 increased by $5.5 million to $24.3 million, representing an Adjusted EBITDA margin of 20%, compared to 27%
for the same period in 2021, which was favourably impacted by the contribution timing from AZUR.
FY 2023 and FY 2024 Adjusted EBITDA1 guidance is presented in the Outlook section.
Performance Materials Segment
Adjusted EBITDA in Q4 2022 decreased by $1.2 million to $4.0 million representing an Adjusted EBITDA margin of 14%,
Against the backdrop of geo‐political and macro‐economic challenges, the Company responded swiftly to inflationary
compared to 15% in Q4 2021. Adjusted EBITDA in FY 2022 decreased by $1.7 million to $17.3 million, representing an
and energy related cost pressures, quickly implementing the first wave of its commercial excellence program to mitigate
Adjusted EBITDA margin of 12%, compared to 14% in FY 2021.
the negative impact of inflation on product margins. This resulted in a sequential improvement of consolidated adjusted
gross margins1 from 21.9% for Q1 2022 to 26.7% in Q4 2022. The Company continues to approach partnerships and
Net (Loss) Earnings and Adjusted Net Earnings (Loss)
product development opportunities with discipline.
(in thousands of U.S. dollars, except per share amounts)
Q4 2022
$
(8,146)
($0.09)
During the year, the Company renewed and increased its supply agreement with First Solar, for the supply of
semiconductor materials associated with the manufacturing of thin‐film photovoltaic (PV) modules, further
strengthening its leadership in renewable energy. Under the new agreement, the Company’s supply volumes will
increase by 35% in 2023 and over 100% in 2024, compared to 2022 levels, in line with First Solar’s own growth plans.
Net (loss) earnings
Basic (loss) earnings per share
Reconciling items:
Share‐based compensation (recovery) expense
Litigation and restructuring costs
Impairment of non‐current assets
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Income tax recovery on taxable items above
Adjusted net earnings (loss)1
Basic adjusted net earnings per share1
689
(171)
Through its subsidiary AZUR, 5N Plus signed a ten‐year extension to an exclusive teaming arrangement with Sierra Space,
2,144
3,210
a leading U.S.‐based commercial space company, to produce a new solar cell for use in the production of Sierra Space’s
‐
‐
unique Space Solar Surface Mount Technology solar array systems. Sales to Sierra Space are anticipated to reach
‐
7,834
$10 million in 2023 and over $20 million in 2024, incremental to the current sales. The commercial relationship
‐
‐
(589)
(595)
entrenches 5N Plus as a trusted partner in a sector experiencing rapidly accelerating demand which is expected to exceed
5,354
2,132
current available capacity. AZUR is uniquely positioned to supply both North America and Europe. In 2022, the Company
$0.06
$0.02
completed its integration of AZUR, which was acquired in November 2021.
999
3,823
12,478
7,834
216
(2,618)
(267)
$‐
(460)
1,644
‐
‐
‐
(285)
1,879
$0.02
FY 2022
$
(22,999)
($0.26)
Q4 2021
$
980
$0.01
FY 2021
$
3,110
$0.04
In Q4 2022, net loss was $8.1 million or $0.09 per share, compared to net earnings of $1.0 million or $0.01 per share in
In December 2022, the Company exited the manufacturing of low margin extractive and catalytic products with the
Q4 2021. Adjusted net earnings1 were $2.1 million or $0.02 per share in Q4 2022, compared to $1.9 million or $0.02 per
divestiture of its Tilly, Belgium operations to a third party, thereby completing the strategic review of its operations. On
share in Q4 2021.
a forward‐looking basis, exiting this business is expected to provide incremental Adjusted EBITDA1 contribution to
consolidated results and support more favourable net working capital levels.
In FY 2022, net loss was $23.0 million or $0.26 per share, compared to net earnings of $3.1 million or $0.04 per share in
FY 2021. Adjusted net loss was $0.3 million or $nil per share in FY 2022, compared to Adjusted net earnings of
By year end, the Company completed its St‐Laurent project (Montréal, Canada), expanding the development and
$5.4 million or $0.06 per share, in FY 2021.
manufacturing of critical minerals for advanced II‐VI based semiconductor compounds. For this facility, by‐products
sourced from Rio Tinto’s copper operations from its Kennecott, Utah copper operation started late December 2022, part
Excluding income tax recovery, the items reconciling to Adjusted net earnings (loss) in Q4 2022 and FY 2022 were share‐
of a strategic commercial agreement with Rio Tinto announced in May 2022 to secure a North American supply of
based compensation (recovery) expense, litigation and restructuring costs, an impairment of non‐current assets, a loss
tellurium.
on divestiture of subsidiary and a loss on disposal of assets held for sale. For more information, see the “Expenses”
section.
Financial Highlights
Backlog and Bookings
Revenue in Q4 2022 reached $61.0 million, compared to $64.6 million for the same period last year. The decrease is
BACKLOG1
primarily attributable to the phase out and divestiture of the Tilly, Belgium operations. Revenue increased by 26% to
Q3 2022
$264.2 million in FY 2022, compared to $210.0 million last year, supported by the acquisition of AZUR and higher
$
demand for renewable energy in Specialty Semiconductors, as well as for pharmaceutical and health in Performance
104,336
Materials.
35,054
139,390
BOOKINGS1
Q3 2022
$
71,013
23,959
94,972
Specialty Semiconductors
Performance Materials
Total
Q4 2022
$
57,325
33,648
90,973
Q4 2022
$
129,710
39,611
169,321
Q4 2021
$
83,180
39,512
122,692
Q4 2021
$
94,363
60,454
154,817
(in thousands of U.S. dollars)
Comparative results have been adjusted to reflect a change in our reporting segments
1 See Non‐IFRS Measures
1 See Non‐IFRS Measures
18
5N Plus ▪ Management’s Discussion and Analysis ▪ 3
5N Plus ▪ Management’s Discussion and Analysis ▪ 7
5N PLUS | 2022 ANNUAL REPORT
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Management’s Discussion and Analysis
(number of days based on annualized revenues) *
Specialty Semiconductors
Performance Materials
Weighted average
* Backlog and bookings are also presented in number of days to normalize the impact of commodity prices.
Q4 2022
370
124
253
Q4 2021
293
160
221
Q4 2022
164
106
136
BACKLOG1
Q3 2022
297
93
192
BOOKINGS1
Q3 2022
202
64
131
Q4 2021
258
105
175
Q4 2022 vs. Q3 2022
Backlog1 on December 31, 2022, represented 253 days of annualized revenue, an increase of 61 days, or 32%, over the
backlog on September 30, 2022. The increase in the backlog is mainly attributable to favourable negotiations of long‐
term contracts under Specialty Semiconductors, confirming the near‐term growth potential in renewable energy and
space applications.
Backlog on December 31, 2022, for Specialty Semiconductors represented 370 days of annualized revenue an increase
of 73 days, or 25%, over the backlog on September 30, 2022. The backlog for Performance Materials represented
124 days of annualized revenue, an increase of 31 days, or 33%, over the backlog on September 30, 2022. The increase
under Performance Materials is mainly associated with the timing of the renewal of key contracts, usually occurring in
the fourth quarter of the year.
Bookings1 for Specialty Semiconductors decreased by 38 days, from 202 days in Q3 2022 to 164 days in Q4 2022.
Bookings for Performance Materials increased by 42 days, from 64 days in Q3 2022 to 106 days in Q4 2022. Bookings are
calculated by adding revenues to the increase or decrease in backlog for the period divided by annualized revenues. As
such, the increase or decrease in bookings is attributable to the same factors as the increase or decrease in backlog.
Q4 2022 vs. Q4 2021
Backlog on December 31, 2022, for Specialty Semiconductors increased by 77 days, largely attributable to favourable
negotiations of long‐term contracts under Specialty Semiconductors, confirming the near‐term growth potential in
renewable energy and space applications. The backlog for Performance Materials decreased by 36 days, compared to
December 31, 2021, reaching 124 days, compared to 160 days in Q4 2021. The decrease is mainly associated with the
Company’s divestiture of its Tilly, Belgium operations.
Following the acquisition of AZUR in Q4 2021, the integration of its backlog led to a higher than usual increase in bookings
and mainly explained the decrease of 94 days in bookings for Specialty Semiconductors in Q4 2022. Bookings for
Performance Materials increased by 1 day compared to the previous year quarter.
Expenses
(in thousands of U.S. dollars)
Depreciation and amortization
SG&A
Share‐based compensation (recovery) expense
Litigation and restructuring costs
Impairment of non‐current assets
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Financial expense
Income tax (recovery) expense
Total expenses
Q4 2022
$
Q4 2021
$
4,051
7,183
(171)
3,210
‐
7,834
‐
219
(292)
22,034
4,364
7,025
(460)
1,644
‐
‐
‐
2,244
1,314
16,131
FY 2022
$
17,732
28,565
999
3,823
12,478
7,834
216
5,234
4,711
81,592
FY 2021
$
12,535
21,883
689
2,144
‐
‐
‐
4,131
5,630
47,012
1 See Non‐IFRS Measures
8 ▪ 5N Plus ▪ Management’s Discussion and Analysis
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5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Depreciation and Amortization
Depreciation and amortization expenses in Q4 2022 and FY 2022 amounted to $4.1 million and $17.7 million,
respectively, compared to $4.4 million and $12.5 million, respectively, for the same periods in 2021. The increase in
FY 2022 is mainly explained by the increase in property, plant and equipment (“PPE”), intangible assets and right‐of‐use
assets following the acquisition of AZUR in Q4 2021.
SG&A
SG&A expenses in Q4 2022 and FY 2022 were $7.2 million and $28.6 million, respectively, compared to $7.0 million and
$21.9 million, respectively, for the same periods in 2021. The increases are mainly explained by the acquisition of AZUR
in Q4 2021, inflation impacting various expenses and the lifting of restrictions related to COVID‐19.
Share‐based Compensation (Recovery) Expense
Share‐based compensation recovery in Q4 2022 amounted to $0.2 million, compared to $0.5 million in Q4 2021. In
FY 2022, share‐based compensation expense amounted to $1.0 million, compared to $0.7 million in FY 2021.
Litigation and Restructuring Costs
In Q4 2022 and FY 2022, the Company recorded litigation and restructuring costs of $3.2 million and $3.8 million,
respectively. These include $2.6 million related to the divestiture of a subsidiary, $0.4 million for the site closure in Asia,
$0.2 million due to a change to its senior executive management recorded in Q2 2022, and $0.4 million for the settlement
of a contract by mutual agreement recorded in Q1 2022.
In FY 2021, the Company recorded a charge of $1.5 million following the announcement of a change to its senior
executive management as well as a provision for restructuring costs of $0.6 million which consisted of severance and
other related costs related to the site closure in Asia.
Impairment of Non‐Current Assets
In Q3 2022, the Company recorded an impairment of non‐current assets of $7.1 million ($2.4 million for buildings,
$4.6 million for machinery and $0.1 million for furniture and fixtures), under its Performance Materials segment, to
reflect the assessment of the carrying value of PPE following its intention to halt production at its manufacturing facility
in Tilly, Belgium.
In Q1 2022, the Company recorded an impairment of non‐current assets of $5.4 million ($5.1 million for customer
relationships and $0.3 million for other intangibles) under its Specialty Semiconductors segment, to reflect the
assessment of the carrying value of intangible assets due to the impact of the Russia/Ukraine conflict on the Company’s
Russia‐based customer relationships. The Company’s initial assumptions regarding future cashflows from these
customers are no longer supported given the international sanctions in place against Russia and the uncertainty related
to, and the unknown duration of, the Ukraine/Russia conflict.
Loss on Divestiture of Subsidiary
In Q4 2022, the Company divested its 100% interest in 5N Belgium SA and recognized a loss on divestiture of $7.8 million.
For more information, see the “Divestiture of 5N Belgium SA” section.
Loss on Disposal of Assets Held for Sale
In Q3 2022, the Company recorded a loss of $0.2 million on the disposal of assets held for sale. The asset, previously
presented as held for sale within the Specialty Semiconductors segment, pertains to a building reclassification of
$3.0 million in Q2 2022. The reclassification was related to the planned relocation of operations to Canada from one of
the Company’s subsidiaries in Asia, announced in the third quarter of 2020.
Financial Expense
Financial expense in Q4 2022 amounted to $0.2 million, compared to $2.2 million in Q4 2021. The positive impact is
mainly due to interest income earned following the recent settlement of an international tax arbitration between two
jurisdictions where the Company operates, a gain of foreign exchange and derivatives mitigated by higher interest on
long‐term debt and imputed interest following the acquisition of AZUR, as well as a significant increase in interest rates
in the second half of FY 2022.
20
5N Plus ▪ Management’s Discussion and Analysis ▪ 9
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Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
In FY 2022, financial expense amounted to $5.2 million, compared to $4.1 million in FY 2021. The negative impact is
mainly due to the same reasons mentioned above, with the exception of a lower loss on foreign exchange and derivatives
recorded in FY 2022 compared to FY 2021.
Income Taxes
The Company reported a loss before income taxes of $8.4 million in Q4 2022 and $18.3 million in FY 2022. Income tax
recovery in Q4 2022 and income tax expense in FY 2022 was $0.3 million and $4.7 million, respectively, compared to
income tax expense of $1.3 million and $5.6 million, respectively, in the same periods in 2021. Both periods were
impacted by deferred tax assets applicable only in certain jurisdictions.
Liquidity and Capital Resources
(in thousands of U.S. dollars)
Funds from operations before the following
Net changes in non‐cash working capital items
Cash from operating activities
Cash used in investing activities
Cash (used in) from financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Q4 2022
$
5,478
7,927
13,405
(8,895)
(2,308)
317
2,519
Q4 2021
$
5,604
(3,233)
2,371
(42,615)
42,922
107
2,785
FY 2022
$
13,498
10,243
23,741
(18,994)
2,409
(405)
6,751
FY 2021
$
16,553
(6,283)
10,270
(49,929)
36,219
(570)
(4,010)
In Q4 2022, cash generated by operating activities amounted to $13.4 million, compared to $2.4 million in Q4 2021
positively impacted by the realization of working capital held at Tilly, Belgium prior to the divestiture. In FY 2022, cash
generated by operating activities amounted to $23.8 million, compared to $10.3 million in FY 2021. The increase in
FY 2022 was due to the positive changes in non‐cash working capital.
In Q4 2022, cash used in investing activities totaled $8.9 million, compared to $42.6 million in Q4 2021. In FY 2022, cash
used in investing activities totaled $19.0 million, compared to $49.9 million in FY 2021, of which $42.3 million was
attributable to the acquisition of AZUR and $2.0 million to the acquisition of a minority equity stake in Microbion
Corporation. In contrast, cash used in investing activities in FY 2022 is mainly attributed to the timing of additions to
PPE, such as the St‐Laurent project (Montréal, Canada), partially mitigated by the proceeds of $2.8 million from the
disposal of assets held for sale in Q3 2022.
In Q4 2022, cash used in financing activities amounted to $2.3 million, compared to cash from financing of $42.9 million
in Q4 2021. In FY 2022, cash generated by financing activities amounted to $2.4 million, compared to $36.2 million in
FY 2021, mainly explained by the difference in the net drawdown of the credit facility during the periods. In FY 2021, the
Company made a significant drawdown of the credit facility to finance the acquisition of AZUR, net of repayment of
equipment loans in AZUR.
Working Capital
(in thousands of U.S. dollars)
Inventories
Other current assets
Current liabilities
Working capital1
Working capital current ratio1
As at December 31, 2022
$
86,254
100,908
(62,846)
124,316
2.98
As at December 31, 2021
$
95,526
99,996
(65,059)
130,463
3.01
The decrease of $6.1 million in working capital1, as compared to December 31, 2021, was mainly attributable to the
divestiture of Tilly, Belgium at the end of FY 2022, net of higher other current assets and lower current liabilities for the
remaining operations.
1 See Non‐IFRS Measures
10 ▪ 5N Plus ▪ Management’s Discussion and Analysis
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5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Net Debt
(in thousands of U.S. dollars)
Bank indebtedness
Long‐term debt including current portion
Total Debt1
Cash and cash equivalents
Net Debt1
As at December 31, 2022
$
‐
121,000
As at December 31, 2021
$
‐
116,000
121,000
(42,691)
78,309
116,000
(35,940)
80,060
Total debt1 stood at $121.0 million on December 31, 2022, from $116.0 million at the end of last year, following a
drawdown of $10.0 million in Q2 2022 and reimbursements of $2.5 million in Q3 2022 and in Q4 2022 related to the
credit facility.
Net debt1, after considering cash and cash equivalents, decreased by $1.8 million to $78.3 million on December 31, 2022,
from $80.1 million on December 31, 2021.
Available Short‐Term Capital Resources
(in thousands of U.S. dollars)
Cash and cash equivalents
Available revolving credit facility
Available short‐term capital resources
As at December 31, 2022
$
42,691
As at December 31, 2021
$
35,940
28,000
70,691
33,000
68,940
In June 2022, the Company signed a senior secured multi‐currency revolving credit facility of $124.0 million maturing
in April 2026 to replace its existing $124.0 million senior secured revolving facility maturing in April 2023. At any time,
the Company has the option to request that the credit facility be expanded through the exercise of an additional
$30.0 million accordion feature, subject to review and approval by the lenders. This revolving credit facility can be
drawn in U.S. dollars, Canadian dollars or Hong Kong dollars (up to $4.0 million). Drawings bear interest at either the
Canadian prime rate, U.S. base rate, Hong Kong base rate or SOFR, plus a margin based on the Company’s senior net
debt to consolidated EBITDA1 ratio. Under the terms of its credit facility, the Company is required to satisfy certain
restrictive covenants as to financial ratios. As at December 31, 2022 and December 31, 2021, the Company had met all
covenants.
In February 2019, the Company signed a five‐year subordinated term loan with Investissement Québec. The loan was
disbursed in two tranches: the first tranche of $5.0 million on February 6, 2019 and the second tranche of $20.0 million
on March 22, 2019. The two tranches of the term loan bear interest equivalent to the five‐year U.S. dollar swap rate plus
a margin of 4.19%, which equals to 6.82% and 6.64%, respectively. Under the terms of the loan, the Company is required
to satisfy certain restrictive covenants as to financial ratios. As at December 31, 2022 and December 31, 2021, the
Company had met all covenants.
Share Information
Issued and outstanding shares
Stock options potentially issuable
As at February 21, 2023
88,330,236
1,598,938
As at December 31, 2022
88,330,236
1,598,938
Restricted Share Unit and Performance Share Unit Plan
On November 4, 2015, the Company adopted a new Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”)
Plan (the “RSU & PSU Plan”) to replace the previous RSU Plan. The RSU & PSU Plan enables the Company to award eligible
participants: (i) phantom RSUs that vest no later than three years following the grant date; and (ii) phantom PSUs that
vest after certain periods of time, not exceeding three years, and subject to the achievement of certain performance
criteria as determined by the Board of Directors. Such plan provides for the settlement of RSUs and PSUs through either
1 See Non‐IFRS Measures
22
5N Plus ▪ Management’s Discussion and Analysis ▪ 11
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
cash or the issuance of common shares of the Company from treasury, for an amount equivalent to the volume weighted
average of the trading price of the common shares of the Company on the TSX for the five trading days immediately
preceding the applicable RSU vesting determination date or PSU vesting determination date.
In FY 2022, the Company granted 95,881 RSUs (2021 – 164,412), 146,549 RSUs were paid (2021 – 413,710) and
13,110 RSUs were forfeited (2021 – 143,851). On December 31, 2022, 278,481 RSUs were outstanding (2021 –
342,259).
In FY 2022, the Company granted nil PSUs (2021 – nil), nil PSUs were paid (2021 – 166,700) and 200,000 were cancelled
(2021 – 230,000). On December 31, 2022, nil PSUs were outstanding (2021 – 200,000).
Stock Option Plan
On April 11, 2011, the Company adopted a new stock option plan under which a maximum number of options granted
cannot exceed 5,000,000. Options granted under the Stock Option Plan may be exercised during a period not exceeding
ten years from the date of grant. The stock options outstanding on December 31, 2022, may be exercised during a period
not exceeding six years from their date of grant. Unless the Board of Directors decides otherwise at its sole discretion,
options vest at a rate of 25% (100% for directors) per year, beginning one year following the grant date of the options.
Any unexercised options will expire one month after the date beneficiary ceases to be an employee, director or officer
and one year for retired directors.
The following table presents information concerning all outstanding stock options:
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Exercisable, end of year
Number of options
825,968
772,970
‐
‐
1,598,938
457,749
2022
Weighted average
exercise price
CA$
2.46
1.33
‐
‐
1.91
2.41
Number of options
672,600
648,212
(428,678)
(66,166)
825,968
267,007
2021
Weighted average
exercise price
CA$
2.09
2.49
1.88
2.78
2.46
2.33
Off‐balance Sheet Arrangements
The Company has few off‐balance sheet arrangements since most of the leases are recognized on the consolidated
statement of financial position following the adoption of the standard, IFRS 16 – Leases, as at January 1, 2019. Any off‐
balance sheet arrangements consist of contractual obligations in the normal course of business.
The Company is exposed to currency risk on sales in euros and other currencies, as well as interest rate fluctuations on
its credit facility, and, therefore, may periodically enter into foreign currency forward contracts and interest rate or
foreign currency swap contracts to protect itself against interest rate and currency fluctuations. The reader will find more
details related to these contracts in Notes 19 and 27 of the audited consolidated financial statements for the year ended
December 31, 2022.
The following table reflects the contractual cash flows of the Company’s financial liabilities as at Dec 31, 2022:
(in thousands of U.S. dollars)
Trade and accrued liabilities
Long‐term debt
Lease liabilities
Total
Carrying
amount
$
40,200
121,000
30,402
191,602
1 year
$
40,200
7,836
2,770
50,806
2 years
$
‐
31,584
2,601
34,185
3 years
$
‐
6,166
2,494
8,660
4 years
$
‐
98,055
2,451
100,506
Over
5 years
$
‐
‐
24,834
24,834
Total
$
40,200
143,641
35,150
218,991
12 ▪ 5N Plus ▪ Management’s Discussion and Analysis
23
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Commitments
As at December 31, 2022, in the normal course of business, the Company contracted letters of credit for an amount of
$0.9 million ($1.0 million as at December 31, 2021).
Contingencies
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or
assets. As at the date of issue of the consolidated financial statements, the Company was not aware of any significant
events that would have a material effect on its consolidated financial statements.
Acquisition of AZUR
On November 5, 2021, the Company acquired all of the issued and outstanding shares of AZUR for a purchase price of
50.1 million euros, subject to post‐closing adjustments. The consideration transferred was comprised of 6.5 million
shares of 5N Plus, which were issued from the treasury at 12.4 million euros, along with a cash payment of
37.7 million euros. Furthermore, the Company financed the working capital and equipment loans for an amount of
23.8 million euros. The cash portion and the working capital of the transaction were funded through the Company's
liquidity and senior debt facility. Transaction fees for an amount of $0.3 million for 2022 (2021 ‐ $0.7 million and 2020 ‐
$0.5 million) were expensed as incurred in the consolidated statement of earnings.
Located in Heilbronn, Germany, AZUR is a global leader and develops and manufactures multi‐junction solar cells based
on III‐V compound semiconductor materials. The integration of AZUR has not only expanded the Company's position
within renewable energy, but has also established 5N Plus as a reliable and competitive supplier to the European and
U.S. space programs through Canada's membership in the European Space Agency (ESA).
To estimate the fair value of the intangible assets, management used the excess earnings method to value customer
relationships and the royalty relief method to value technology and trade names using discounted cash flow models.
Management developed significant assumptions related to revenue and gross margin forecasts, customer retention
rates, royalty rates and discount rates.
The tables below present the consideration paid and the Company’s final assessment of the fair values of the assets
acquired and liabilities assumed. As a result of finalizing its assessment, the Company has not restated the consolidated
statement of financial position as at December 31, 2021 as the adjustments were deemed not material. The Company
also determined that the net impact on net earnings as a result of these adjustments was not material for the year ended
December 31, 2021, and, as such, were accounted for in the consolidated statement of (loss) earnings for the year ended
December 31, 2022.
Consideration transferred
Cash and cash equivalents
Consideration payable (1)
Common shares issued
$
34,301
9,158
14,249
57,708
(1) This amount of 8.0 million euros held in escrow and recorded in Other current assets, is expected to be released within 12 months in accordance with the
terms of the Share Purchase Agreement.
24
5N Plus ▪ Management’s Discussion and Analysis ▪ 13
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MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Management’s Discussion and Analysis
Identified assets acquired and liabilities assumed
(in thousands of U.S. dollars)
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Property, plant and equipment
Right‐of‐use assets
Intangible assets
Other assets
Goodwill
Total assets acquired
Trade and accrued liabilities
Current portion of deferred revenue
Long‐term debt(1)
Employee benefit plan obligations
Lease liabilities
Deferred revenue
Other liabilities
Deferred tax liabilities
Total liabilities assumed
Total net assets
Preliminary
$
1,017
8,342
21,394
256
31,128
21,626
32,144
5
13,841
129,753
7,291
4,906
27,396
2,673
21,626
‐
1,059
7,094
72,045
57,708
Adjustments
$
‐
1,057
(1,057)
‐
4,993
(938)
(973)
‐
(2,016)
1,066
‐
(1,294)
‐
‐
(938)
2,011
216
1,071
1,066
‐
Final
$
1,017
9,399
20,337
256
36,121
20,688
31,171
5
11,825
130,819
7,291
3,612
27,396
2,673
20,688
2,011
1,275
8,165
73,111
57,708
(1) The long‐term debt acquired was repaid in full on November 5, 2021.
For the 57‐day period ended December 31, 2021, AZUR contributed $17.0 million of revenue and $2.3 million of net
earnings to the Company’s consolidated statement of earnings based on operations after the acquisition date. If the
acquisition of AZUR had been completed as of January 1, 2021, the Company estimates that its consolidated revenues
and net earnings for the year ended December 31, 2021 would have totalled $261.0 million and $nil respectively,
inclusive of the additional depreciation and amortization expenses recorded in reference to the preliminary purchased
price allocation. AZUR delivers products to its customers on a project basis creating an unequal distribution of revenue
and profitability from one period to another.
The amount recorded for goodwill is not deductible for tax purposes. The accounts receivable are presented net of a loss
allowance of $28 thousand.
Divestiture of 5N Belgium SA
On December 19, 2022, the Company divested its 100% interest in 5N Plus Belgium SA, previously included within its
Performance Materials segment, and recognized a loss on divestiture of $7.8 million. The decision to cease the
production of lower margin products used in catalytic and extractive applications was made following a strategic review
of the Company’s legacy operations. As part of the transaction, a provision of $2.6 million, of which 2.0 million euros or
$2.1 million is held in escrow, was recorded under Litigation and Restructuring costs to support the new owners to ensure
site compliance with most recent environmental standards and other related costs. Prior to the divestiture, the Company
recorded an impairment charge of $7.1 million on PPE following the announcement of its intention to halt production at
its manufacturing facility in Tilly, Belgium.
If the divestiture of 5N Belgium SA had been completed as of January 1, 2022, the consolidated Adjusted EBITDA1 would
have been higher by approximately $2.0 million, and revenue under Performance Materials segment lower by
$39.3 million.
1 See Non‐IFRS Measures
14 ▪ 5N Plus ▪ Management’s Discussion and Analysis
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5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Governance
As required by Multilateral Instrument 52‐109 of the Canadian Securities Administrators (“MI 52‐109”), 5N Plus has filed
certificates signed by the Chief Executive Officer and the Chief Financial Officer that, among other things, attest to the
design of the disclosure controls and procedures and the design and effectiveness of internal controls over financial
reporting.
Disclosure Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer have designed disclosure controls and procedures, or have
caused them to be designed under their supervision, in order to provide reasonable assurance that:
Material information relating to the Company has been made known to them; and
Information required to be disclosed in the Company’s filings is recorded, processed, summarized and reported
within the time periods specified in securities legislation.
An evaluation of the effectiveness of the Company’s disclosure controls and procedures was carried out under the
supervision of the Chief Executive Officer and Chief Financial Officer. Based on this evaluation, the Chief Executive Officer
and the Chief Financial Officer concluded that the disclosure controls and procedures are effective.
Internal Control over Financial Reporting
The Chief Executive Officer and the Chief Financial Officer have also designed internal controls over financial reporting
(ICFR) or have caused them to be designed under their supervision, in order to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
IFRS.
Based on their evaluation carried out to assess the effectiveness of the Company’s ICFR, the Chief Executive Officer and
the Chief Financial Officer have concluded that the ICFR were designed and operated effectively using the Internal
Control – Integrated Framework (“2013 Framework”) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO 2013 Framework”).
Changes in Internal Control over Financial Reporting
No changes were made to the ICFR during the fiscal year ended December 31, 2022 that have materially affected, or are
reasonably likely to materially affect, the ICFR.
Adoption of New Accounting Standards and Future Changes in Accounting Policies
Adoption of new accounting standards
IFRS 3 – Business combinations
On January 1, 2022, the Company adopted the amendments to IFRS 3 regarding its reference to the Conceptual
Framework. With this amendment, IFRS 3 will reference the current version of the Conceptual Framework rather than
the Conceptual Framework in effect at the time of IFRS 3’s development. The amendments to IFRS 3 also indicate that
for the purposes of identifying certain liabilities within the context of a business combination, the definition of a liability
as per IAS 37 – Provisions Contingent Liabilities and Contingent assets, shall supersede the definition within the
Conceptual Framework. The amendments are effective for annual periods beginning on or after January 1, 2022, with
earlier application permitted. In adopting the amendments, there has been no significant impact to the financial
statements for the year ended December 31, 2022.
26
5N Plus ▪ Management’s Discussion and Analysis ▪ 15
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Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
IAS 16 – Property, plant and equipment
On January 1, 2022, the Company adopted the amendments to IAS 16 regarding the accounting of Proceeds before
Intended Use. Proceeds received from the sale of items produced by property, plant and equipment (PPE) which is still
being prepared for its intended use cannot be deducted from the PPE’s cost. Instead proceeds must be immediately
recognized in the consolidated statement of earnings. The amendments are effective for annual periods beginning on or
after January 1, 2022, with earlier application permitted. In adopting the amendments, there has been no significant
impact to the financial statements for the year ended December 31, 2022.
IFRS 9 – Financial Instruments
On January 1, 2022, the Company adopted the amendment to IFRS 9 which clarifies which fees should be considered for
the purpose of applying the derecognition test to a modified financial liability. The IASB clarified that only fees paid or
received between the borrower and the lender should be considered. The amendment is effective for annual periods
beginning on or after January 1, 2022, with earlier application permitted. In adopting the amendments, there has been
no significant impact to the financial statements for the year ended December 31, 2022.
Future Changes in accounting policies
The following standards have been issued but not yet effective:
IAS 1 – Presentation of Financial Statements
In January 2020, the IASB issued amendments to IAS 1 to clarify its requirements for the presentation of liabilities in the
statement of financial position. The amendments are effective from annual reporting periods beginning on or after
January 1, 2024. The Company is currently evaluating the impact of the amendments on its consolidated financial
statements.
Significant Management Estimation and Judgment in Applying Accounting Policies
The following are significant management judgments used in applying the accounting policies of the Company that have
the most significant effect on the consolidated financial statements.
Estimation uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
Impairment of non‐financial assets
Non‐financial assets are reviewed for an indication of impairment at each consolidated statement of financial position
date upon the occurrence of events or changes in circumstances indicating that the carrying value of the assets may not
be recoverable, which requires significant judgement.
An impairment loss is recognized for the amount by which an asset’s or cash‐generating unit’s (“CGU") carrying amount
exceeds its recoverable amount, which is the higher of fair value less cost of disposal and value in use.
16 ▪ 5N Plus ▪ Management’s Discussion and Analysis
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Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
An intangible asset and related equipment that are not yet available for their intended use and CGUs to which goodwill
is allocated are tested for impairment at least annually, which also requires significant judgement. To determine the
recoverable amount (value in use or fair value less cost to dispose of these assets), management estimates expected
future cash flows from the asset or CGU and determines a suitable interest rate in order to calculate the present value
of those cash flows. In the process of measuring expected future cash flows for intangible and tangible assets not yet
available for their intended use and CGUs to which goodwill is allocated, management makes assumptions about future
operating results using the estimated forecasted prices obtained from various market sources. These key assumptions
relate to future events and circumstances. The actual results will vary and may cause adjustments to the Company’s
assets in future periods.
In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk
and to asset specific risk factors. Assets not yet available for intended use have a higher estimation uncertainty, since
they depend on future market information and the Company’s ability to finish the project and realize the budgeted
earnings. Management believes that the following assumptions are the most susceptible to change and therefore could
impact the valuation of the assets in the next year: metal prices which have an impact on revenues and metal margins
and the discount rate.
Inventories
Inventories are carried at the lower of cost and net realizable value, with cost determined using the average cost method.
In estimating net realizable values, management takes into account the most reliable evidence available at the time the
estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted
metal prices which may cause future selling prices to change rapidly. The Company evaluates its inventories using a
group of similar items basis and considers expected future prices as well as events that have occurred between the
consolidated statement of financial position date and the date of the completion of the consolidated financial
statements. Net realizable value for inventory to satisfy a specific sales contract is measured at the contract price.
Business Combination
The Company must make assumptions and estimates to determine the fair value of identifiable assets acquired and
liabilities assumed. These estimates are based on future events, forecasts of future cash flows, future operating costs,
future capital expenditures and estimated discount rates. Changes to the preliminary measurements of assets and
liabilities acquired may be retrospectively adjusted when new information is obtained until the final measurements are
determined within one year of the acquisition date.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the
Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income and
the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future profitability
may change due to future market conditions, changes in tax legislation and other factors that could adversely affect the
ongoing value of the deferred income tax assets. These changes, if any, may require a material adjustment of these
deferred income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment
would reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized
and would be recorded in the period such a determination was to be made. Refer to note 18 of the 2022 audited
consolidated financial statements of the Company.
28
5N Plus ▪ Management’s Discussion and Analysis ▪ 17
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Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Related Party Transactions
The Company’s related parties are its directors and executive members. Transactions with these related parties are
described in Note 26 in the 2022 audited consolidated financial statements of the Company.
Financial Instruments and Risk Management
Fair Value of Financial Instruments
A detailed description of the methods and assumptions used to measure the fair value of the Company’s financial
instruments and their fair value is discussed in Note 19 – Fair Value of Financial Instruments in the 2022 audited
consolidated financial statements of the Company.
The fair value of the financial instruments was as follows:
(in thousands of U.S. dollars)
Indexed deposit agreement
Investment in equity instruments
Restricted investment
Interest rate swap agreement
2022
$
5,517
2,000
620
‐
2021
$
4,819
2,000
713
(109)
Financial Risk Management
For a detailed description of the nature and extent of risks arising from financial instruments, and their related risk
management, refer to Note 27 of the 2022 audited consolidated financial statements of the Company.
Interest Rate
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates. The
Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion of its long‐
term debt is made of subordinated debts at fixed rate. The Company is exposed to interest rate fluctuations on its
revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest rates would have an
impact of approximately $1.0 million on the Company’s net earnings on a twelve‐month horizon based on the balance
outstanding on December 31, 2022.
Foreign Currency
The Company’s sales are primarily denominated in U.S. dollars whereas a portion of its operating costs are realized in
local currencies, such as euros and Canadian dollars. Even though the purchases of raw materials are denominated in
U.S. dollars, which reduce to some extent exchange rate fluctuations, we are subject to currency translation risk which
can negatively impact our results. Management has implemented a policy for managing foreign exchange risk against
the relevant functional currency.
In addition, the Company will occasionally enter into foreign exchange forward contracts to sell U.S. dollars in exchange
for Canadian dollars and euros. These contracts would hedge a portion of ongoing foreign exchange risk on the
Company’s cash flows since much of its non‐US dollar expenses are incurred in Canadian dollars and euros. The Company
may also enter into foreign exchange contracts to sell euros for U.S. dollars. As at December 31, 2022, the Company had
no foreign exchange contracts outstanding.
18 ▪ 5N Plus ▪ Management’s Discussion and Analysis
29
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
The following table summarizes in U.S. dollar equivalents the Company’s major currency exposures as at
December 31, 2022:
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
(in thousands of U.S. dollars)
Cash and cash equivalents
Accounts receivable
Other current assets
Other non‐current assets
Trade and accrued liabilities
Lease liabilities
Net financial assets (liabilities)
CA$
$
686
513
EUR
$
4,164
4,707
5,517
10,613
‐
620
GBP
$
14
‐
‐
‐
(10,834)
(16,175)
(317)
(6,033)
(10,151)
(339)
3,590
‐
(303)
HKD
$
21
‐
‐
‐
(199)
(171)
(349)
MYR
$
156
1
‐
‐
(219)
‐
(62)
Other
$
9
128
‐
‐
(149)
‐
(12)
For the Company’s subsidiaries with a functional currency other than the U.S. dollar, their exposures of financial assets
and financial liabilities denominated in U.S. dollars are $6.8 million and $0.6 million, respectively, with a net position of
$6.3 million. A strengthening or weakening in the exchange rate between the functional currencies of these subsidiaries
and the U.S. dollar of five‐percentage points results in a decrease or increase of $0.3 million to earnings before income
tax.
The following table shows the impact on earnings before income tax of a five‐percentage point strengthening or
weakening of foreign currencies against the U.S. dollar as at December 31, 2022 for the Company’s financial instruments
denominated in non‐functional currencies:
(in thousands of U.S. dollars)
5% Strengthening
5% Weakening
CA$
$
(508)
508
EUR
$
179
(179)
GBP
$
(15)
15
HKD
MYR
Other
$
(17)
17
$
(3)
3
$
(1)
1
Credit
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and,
as a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit practice.
This policy dictates that all new customer accounts be reviewed prior to approval and establishes the maximum amount
of credit exposure per customer. The creditworthiness and financial well‐being of the customer are monitored on an
ongoing basis.
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected
credit loss allowance for trade receivables. The expected loss rates are based on the Company’s historical credit losses
experienced over the three‐year period prior to the period end. The historical loss rates are then adjusted for current
and forward‐looking information on macroeconomic factors affecting the Company’s customers. Historically, the
Company has not incurred any significant losses in respect of its trade receivables. Therefore, the loss allowance at
the end of each period and the change recorded for each period is insignificant.
As at December 31, 2022 and 2021, the Company had a loss allowance of $0.1 million. The loss allowance is included in
selling, general and administrative expenses in the consolidated statement of (loss) earnings and is net of any
recoveries that were provided for in prior periods.
30
5N Plus ▪ Management’s Discussion and Analysis ▪ 19
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Liquidity
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company
manages liquidity risk through the management of its capital structure. It also manages liquidity risk by continually
monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and matching the
maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s
annual operating and capital budgets as well as any material transactions out of the ordinary course of business,
including proposals on acquisitions and other major investments. Under the terms of its credit facility, the Company is
required to satisfy certain restrictive covenants. In order to comply with these covenants, the Company will need to
execute on its EBITDA1 and cash flow estimates. Management believes that the assumptions used by the Company in
preparing its estimates are reasonable. However, risk remains. Successful achievement of these estimates results is
dependent on stability in the price of metals and other raw materials, the reduction of debt due to the optimization of
the Company’s working capital and the continued viability and support of the Company’s banks.
Risk and Uncertainties
In the normal course of business, we are subject to a number of risk factors which may limit our ability to execute our
strategy and achieve our long‐term growth objectives. We identify these risks and implement strategies in order to
minimize their impact on the Company's performance. The Audit Committee together with the Corporate Internal Audit
and site leadership teams have the mandate to review all business risks semi‐annually. The risks and risk reduction
measures are presented to the Audit Committee and the Board of Directors on an ongoing basis. The realization of the
risks described in any of the following risk factors could have a material adverse effect on the Company’s business, results
of operations and financial condition.
Risks and uncertainties not presently known to the Company or that the Company currently considers as not material
could become material in the future or impair its business operations or cause a decline in the price of shares.
Global Economic Conditions
Current global economic conditions, which have been subject to increased volatility, may impact the Company's access
to public financing and its ability to obtain equity or debt financing on favourable terms. The Company operates in a
volatile economic environment. As a result, if unemployment, interest or inflation rates fluctuate substantially or
increase to significant levels, they could have an impact on the Company’s operating activities, financial position and
profitability. In addition, the Company is exposed to market risk related to the current global inflationary situation, as
the various environmental, social, political, economic and health factors had significant consequences on the world
economy. In order to reduce inflation, several central banks are now tightening their monetary policies, which has an
impact on interest rates, foreign currency exchange rates and economic development. The risks of recession in one or
several of the countries where the Company operates are growing and could have an adverse impact on the Company’s
net earnings, financial position or cash flows.
Crisis and Climate Change Management
Unexpected events including geopolitical crises, pandemic and epidemic outbreaks, catastrophes, and natural disasters,
such as extreme and increasingly frequent weather‐related disasters linked to climate change, could have a negative
impact on the continuation of the Company's operations as well as its suppliers.
International Operations
We operate in several countries, including China and Laos, and as such, face risks associated with international business
activities. We could be significantly affected by such risks, which include, but are not limited to, the integration of
international operations, challenges associated with dealing with numerous legal and tax systems, the potential for
volatile economic and labor conditions, political instability, foreign exchange, expropriation, changes in taxes, and other
regulatory costs. Although we operate primarily in countries with relatively stable economic and political climates, there
can be no assurance that our business will not be adversely affected by the risks inherent in international operations.
1 See Non‐IRFS Measures
20 ▪ 5N Plus ▪ Management’s Discussion and Analysis
31
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
The following conditions or events could disrupt our supply chain, interrupt production at our facilities or those of our
suppliers or customers, increase our cost of sales and other operating expenses, result in material asset losses, or require
additional capital expenditures to be incurred:
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
fires, pandemics (including regional and global infectious diseases), extraordinary weather conditions, or
natural disasters, such as hurricanes, tornadoes, floods, tsunamis, typhoons, and earthquakes;
political instability, social and labor unrest, war, or terrorism;
disruptions in port activities, shipping and freight forwarding services;
interruptions in the availability of basic services and infrastructure, including power and water shortages;
changes in a specific country’s or region’s economic conditions, such as a recession;
new certification requirements; significant fluctuations in currency exchange rates;
the invasion of Ukraine by Russia;
new trade barriers; and
change to legal, political, social, cultural, tax or other regulatory requirements.
Our insurance programs do not cover every potential loss associated with our operations, including potential damage to
assets, lost profits, and liability that could result from the aforementioned conditions or events. In addition, our
insurance may not fully cover the consequences resulting from a loss event, due to insurance limits, sub‐limits, or policy
exclusions. Any occurrence not fully covered by insurance could have a negative effect on our business.
Risks Related to China
The legal system in mainland China is a civil law system based on written statutes. Unlike common law systems, it is a
system in which decided legal cases have little precedential value. The legal system in mainland China evolves rapidly,
and the interpretations of many laws, regulations and rules may contain inconsistencies and their interpretation and
enforcement involve uncertainties. These uncertainties could limit the legal protections available to us. In addition, the
Company cannot predict the effect of future developments in the mainland Chinese legal system, including the
promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre‐emption of
local regulations by national laws. Such unpredictability towards the Company's contractual, property (including
intellectual property) and procedural rights could adversely affect the Company's business and impede its ability to
continue operations. Furthermore, any litigation in mainland China may be protracted and result in substantial costs and
diversion of resources and management attention.
The mainland Chinese government exercises significant control over mainland China's economic growth through
strategically allocating resources, controlling the payment of foreign currency‐denominated obligations, setting
monetary policy and providing preferential treatment to particular industries or companies. Any growth in the Chinese
economy may not continue and any slowdown may have a negative effect on our business. Any adverse changes in
economic conditions in mainland China, in the policies of the mainland Chinese government, or in the laws and
regulations in mainland China, could have a material adverse effect on the overall economic growth of mainland China.
Such developments could adversely affect the Company's business, lead to reduction in demand for its products and
adversely affect the Company's competitive position.
Environmental Regulations
Our operations involve the use, handling, generation, processing, storage, transportation, recycling and disposal of
hazardous materials and are subject to extensive environmental laws and regulations at the national, provincial, local
and international level. These environmental laws and regulations include those governing the discharge of pollutants
into the air and water, the use, management and disposal of hazardous materials and wastes, the clean‐up of
contaminated sites and occupational health and safety. Failure to comply with such laws, regulations and permits can
have serious consequences, including damage to our reputation; stopping us from pursuing operations at one of our
facilities; being subject to substantial fines, penalties, criminal proceedings, third party property damage or personal
injury claims, clean‐up costs or other costs; increasing the costs of development or production and litigation or regulatory
action against us, and materially adversely affecting our business, results of operations or financial condition. Future
changes in applicable environmental and health and safety laws and regulations could substantially increase costs and
burdens to achieve compliance or otherwise have an adverse impact on our business, results of operations or financial
condition.
32
5N Plus ▪ Management’s Discussion and Analysis ▪ 21
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
We have incurred and will continue to incur capital expenditures in order to comply with environmental laws and
regulations. Exceedances in wastewater and air emissions generated by some Company facilities over the limits
prescribed in applicable laws and permits have been registered in the past. At such facilities, the Company is
collaborating with governmental authorities and implementing various measures including upgrading equipment to
ensure compliance. Management believes that dealing with these environmental compliance issues will not have a
material effect on the Company's earnings or competitive position during fiscal 2023. Future developments such as more
aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery of
currently unknown environmental conditions may require expenditures that could have a material adverse effect on our
business, results of operations and financial condition.
Environmental, Social and Governance (ESG) Considerations
The Company could be subject to growing stakeholder expectations as it relates to ESG factors, including from investors,
who are increasingly placing a greater emphasis on ESG factors when assessing investment options. Future investments
made in the Company, or future partnerships or business relations made with the Company may depend on various ESG
standards.
Safety Risks and Hazards
The Company’s health, safety and wellbeing systems, processes and policies are aimed at reducing risks to employees,
subconsultants and others; however, work sites can put employees and others in proximity with large equipment,
moving vehicles, dangerous processes or highly regulated materials in challenging or remote locations which may
increase the risk to health and safety. Failure to implement or follow appropriate safety procedures by the Company or
others could result in personal injury, illness or loss of life to people, or environmental and other damage to the
Company’s property or the property of others.
Prolonged Armed Conflict in Ukraine
In February 2022, Russian military forces invaded Ukraine; the invasion is being actively resisted by Ukrainian military
personnel and the people of Ukraine, and the outcome of the ongoing conflict is uncertain at this time. Although AZUR
had sales in Russia in the past, the amount of such sales is not material to the Company as a whole. A prolonged armed
conflict in Ukraine or an expansion of the armed conflict to other European countries could have a negative effect on
the European and global economies. As well, Russia is a major exporter of oil and natural gas. Any disruption of supplies
of oil and natural gas from Russia could have a significant adverse effect on the European and world economies. All the
foregoing factors could potentially have a negative impact on the Company’s sales and results of operations.
COVID‐19
The worldwide outbreak of a disease, a virus including the COVID‐19 pandemic or any other contagious disease could
have an adverse impact on the Company’s operations, operating results and financial position. While it is sudden, its
impact on economic cycles can give rise to unfavourable temporary disruptions in the market where the Company
operates as well as on its internal structure, such as plant closures, shortages of raw materials and labour, and in supply
chains and distribution channels.
Availability and Retention of Qualified Employees
We rely on the expertise and know‐how of our personnel to conduct our operations. The loss of any member of our
team could have a material adverse effect on us. Our future success also depends on our ability to execute succession
plans, attract and retain key employees, train, retain and successfully integrate new talent into our management and
technical teams. Recruiting and retaining talented personnel, particularly those with expertise in the specialty metals
industry and refining technology is vital to our success and may prove difficult. We cannot provide assurance that we
will be able to attract and retain qualified personnel when needed, especially in light of the current labor shortage
affecting several markets in which we operate. If the Company is unable to recruit and retain additional qualified
personnel in the future, its business, financial condition and operating results could be adversely affected.
22 ▪ 5N Plus ▪ Management’s Discussion and Analysis
33
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Collective Agreements
A portion of our workforce is unionized, and we are party to collective agreements that are due to expire at various times
in the future. If we are unable to renew these collective agreements on similar terms as they become subject to
renegotiation from time to time, this could result in work stoppages or other labour disturbances, such as strikes,
walkouts or lockouts, potentially affecting our performance.
Litigation Risks
We may be subject to a variety of civil or other legal proceedings, with or without merit. Although the Company
establishes provisions for such litigation, there can be no assurance that the provisions for all claims correspond to the
settlement amount. A significant judgment against the Company or the imposition of a significant fine or penalty could
have a material adverse effect on its business, financial condition and results of operations.
Risks Associated with our Growth Strategy
5N Plus’ strategic plan is designed to enhance profitability while reducing earnings volatility, delivering quality growth
from both existing growth initiatives and future M&A opportunities. There is a risk that some of the expected benefits
will fail to materialize or may not occur within the time periods anticipated by management. The realization of such
benefits may be affected by a number of factors, many of which are beyond our control.
Competition
We are a leading producer of specialty semiconductors and performance materials with a limited number of competitors,
few of which are as fully integrated as we are or have a similar range of products. Accordingly, they have limitations to
provide the same comprehensive set of services and products as we do. However, there can be no guarantee that this
situation will continue in the future and competition could arise from new low‐cost metal refiners or from certain of our
customers who could decide to backward integrate. Greater competition could have an adverse effect on our revenues
and operating margins if our competitors gain market share and we are unable to compensate for the volume lost to our
competition.
Commodity Price
The price we pay for, and availability of, various inputs fluctuate due to numerous factors beyond our control, including
political and economic conditions, currency exchange rates, inflation or deflation, global supply and demand for metal
products, fluctuations in the value of the U.S. dollar and foreign currencies, speculative trading, trade sanctions, tariffs,
labor costs, competition, over capacity of producers and price surcharges. Fluctuations in availability and cost of inputs
may materially affect our business, financial condition, results of operations and cash flows. These fluctuations can be
unpredictable and can occur over short periods of time. To the extent that we are not able to pass on any increases, our
business, financial condition, results of operations and cash flows may be materially adversely affected.
Sources of Supply
We may not be able to secure the critical raw material feedstock on which we depend for our operations. We currently
procure our raw materials from a number of suppliers with whom we have had long‐term commercial relationships. The
loss of any one of these suppliers or a reduction in the level of deliveries to us may reduce our production capacity and
impact our deliveries to customers. This would in turn negatively impact our sales, net margins and may lead to liabilities
with respect to some of our supply contracts.
In addition, supplemental supply‐chain challenges created by the economic conjecture following the COVID‐19 global
pandemic could negatively affect the Company’s general procurement through longer delays of transportation or
through an increase in prices to obtain supplies. This may adversely affect the business, financial condition and operating
results of the Company.
34
5N Plus ▪ Management’s Discussion and Analysis ▪ 23
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Protection of Intellectual Property
Protection of our proprietary processes, methods and other technologies is important to our business. We rely on
international patents as well as trade secrets and employee confidentiality agreements to safeguard our intellectual
property. We have deliberately chosen to limit our patent position for certain intellectual properties to avoid disclosing
valuable information. Failure to protect and monitor the use of our existing intellectual property rights could result in
the loss of valuable technologies and processes. There can be no assurance that our confidentiality agreements will
provide meaningful protection for our intellectual property rights or other proprietary information in the event of any
unauthorized use or disclosure or that we will be able to meaningfully protect our trade secrets.
Inventory Price
We monitor the risks associated with the value of our inventories in relation to the market price of such inventories.
Because of the highly illiquid nature of many of our inventories, we rely on a combination of standard risk measurement
techniques, such as value at risk as well as a more empirical assessment of the market conditions. Decisions on
appropriate physical stock levels are taken by considering both the value at risk calculations and the market conditions.
Business Interruptions
We may incur losses resulting from business interruptions. In many instances, especially those related to our long‐term
contracts, we have contractual obligations to deliver product in a timely manner. Any disruption in our activities which
leads to a business interruption could harm our customers’ confidence level and lead to the cancellation of our contracts
and legal recourse against us. Although we believe that we have taken the necessary precautions to avoid business
interruptions and carry business interruption insurance, we could still experience interruptions which would adversely
impact our financial results.
Changes to Backlog
The Company cannot guarantee that the revenues projected in its backlog will be realized. In addition, contract delays,
suspensions, terminations, cancellations, reductions in scope or other adjustments may occur from time to time due to
considerations beyond the Company’s control and may have an impact on the value of reported backlog with a
corresponding adverse impact on future revenues and profitability.
Acquisition Risk
The Company completed the acquisition of AZUR in November 2021 and may from time to time acquire or propose to
acquire other companies. The Company’s inability to properly integrate acquired companies, unanticipated acquisition
costs, unforeseen delays and unknown liabilities associated with acquisitions, the potential loss of key employees
following acquisitions, challenges with the integration of new operations and new personnel, the diversion of
management’s time and focus from other business concerns, opportunities and operational matters to work on
acquisitions or integrate acquisitions, the loss of momentum in ongoing operations and disruptions to operations,
possible inconsistencies in procedures and policies among the combined companies, and the need to implement new
accounting, information technology, human resources or other administrative systems, may each materially and
adversely affect the Company’s business, results of operations or financial condition.
Systems, Network Infrastructure and Data Failure, Interruption and Breach
Our operations rely on information systems, communications technology, business and other technology applications,
including global and regional networks, complex server infrastructure and operating systems, in order to operate
properly. If we are unable to continually maintain our software and hardware, effectively upgrade our systems and
network infrastructure, and take other steps to improve the efficiency and protect our systems, the Company’s operation
systems could be interrupted or delayed. The same applies if our network, communication and operations systems are
damaged or interrupted by natural disasters, telecommunications failures, acts of war or terrorism, computer viruses,
sabotage, human errors, physical or electronic security breaches, or similar events or disruptions. The Company also
faces the threat of unauthorized system access, computer hackers, malicious code and organized cyber‐attacks. The
COVID‐19 pandemic context with a significant number of employees working remotely contributes to an increase in
cyber‐attack attempts.
24 ▪ 5N Plus ▪ Management’s Discussion and Analysis
35
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Executive Management consultations are held regularly to monitor the progress of various cybersecurity projects, review
Executive Management consultations are held regularly to monitor the progress of various cybersecurity projects, review
Executive Management consultations are held regularly to monitor the progress of various cybersecurity projects, review
Executive Management consultations are held regularly to monitor the progress of various cybersecurity projects, review
significant incidents and review various security‐related performance indicators. Executive Management reports on its
significant incidents and review various security‐related performance indicators. Executive Management reports on its
significant incidents and review various security‐related performance indicators. Executive Management reports on its
significant incidents and review various security‐related performance indicators. Executive Management reports on its
work to the members of the Board of Directors on a biannual basis. The Corporate IT function sets up and coordinates
work to the members of the Board of Directors on a biannual basis. The Corporate IT function sets up and coordinates
work to the members of the Board of Directors on a biannual basis. The Corporate IT function sets up and coordinates
work to the members of the Board of Directors on a biannual basis. The Corporate IT function sets up and coordinates
prevention, detection, and remediation measures in the area of cybersecurity. Cybersecurity measures include, among
prevention, detection, and remediation measures in the area of cybersecurity. Cybersecurity measures include, among
prevention, detection, and remediation measures in the area of cybersecurity. Cybersecurity measures include, among
prevention, detection, and remediation measures in the area of cybersecurity. Cybersecurity measures include, among
others, setting up strong controls with respect to systems access, implementing information security awareness
others, setting up strong controls with respect to systems access, implementing information security awareness
others, setting up strong controls with respect to systems access, implementing information security awareness
others, setting up strong controls with respect to systems access, implementing information security awareness
programs, and hiring specialized firms to carry out occasional intrusion tests.
programs, and hiring specialized firms to carry out occasional intrusion tests.
programs, and hiring specialized firms to carry out occasional intrusion tests.
programs, and hiring specialized firms to carry out occasional intrusion tests.
Although the Company has not experienced any material losses relating to cyberattacks or other information security
Although the Company has not experienced any material losses relating to cyberattacks or other information security
Although the Company has not experienced any material losses relating to cyberattacks or other information security
Although the Company has not experienced any material losses relating to cyberattacks or other information security
breaches in the past, there can be no assurance that the Company will not experience such losses in the future due to
breaches in the past, there can be no assurance that the Company will not experience such losses in the future due to
breaches in the past, there can be no assurance that the Company will not experience such losses in the future due to
breaches in the past, there can be no assurance that the Company will not experience such losses in the future due to
the evolving nature of these threats.
the evolving nature of these threats.
the evolving nature of these threats.
the evolving nature of these threats.
Market Price of Common Shares
Market Price of Common Shares
Market Price of Common Shares
Market Price of Common Shares
The common shares of the Company are traded on the Toronto Stock Exchange under the symbol ''VNP''. The market
The common shares of the Company are traded on the Toronto Stock Exchange under the symbol ''VNP''. The market
The common shares of the Company are traded on the Toronto Stock Exchange under the symbol ''VNP''. The market
The common shares of the Company are traded on the Toronto Stock Exchange under the symbol ''VNP''. The market
price of securities of many companies experiences wide fluctuations from time to time that are not necessarily related
price of securities of many companies experiences wide fluctuations from time to time that are not necessarily related
price of securities of many companies experiences wide fluctuations from time to time that are not necessarily related
price of securities of many companies experiences wide fluctuations from time to time that are not necessarily related
to the operating performance, underlying asset values or future growth prospects of such companies. There can be no
to the operating performance, underlying asset values or future growth prospects of such companies. There can be no
to the operating performance, underlying asset values or future growth prospects of such companies. There can be no
to the operating performance, underlying asset values or future growth prospects of such companies. There can be no
assurance that fluctuations in the price of the common shares of the Company will not occur.
assurance that fluctuations in the price of the common shares of the Company will not occur.
assurance that fluctuations in the price of the common shares of the Company will not occur.
assurance that fluctuations in the price of the common shares of the Company will not occur.
Non‐IFRS Measures
Non‐IFRS Measures
Non‐IFRS Measures
Non‐IFRS Measures
In this Management’s Report, certain non‐IFRS measures are used. The Company’s management believes that these non‐
In this Management’s Report, certain non‐IFRS measures are used. The Company’s management believes that these non‐
In this Management’s Report, certain non‐IFRS measures are used. The Company’s management believes that these non‐
In this Management’s Report, certain non‐IFRS measures are used. The Company’s management believes that these non‐
IFRS measures provide useful information to investors regarding the Company’s financial condition and results of
IFRS measures provide useful information to investors regarding the Company’s financial condition and results of
IFRS measures provide useful information to investors regarding the Company’s financial condition and results of
IFRS measures provide useful information to investors regarding the Company’s financial condition and results of
operations as they provide additional key metrics of its performance. These non‐IFRS measures are not recognized under
operations as they provide additional key metrics of its performance. These non‐IFRS measures are not recognized under
operations as they provide additional key metrics of its performance. These non‐IFRS measures are not recognized under
operations as they provide additional key metrics of its performance. These non‐IFRS measures are not recognized under
IFRS, do not have any standardized meaning prescribed under IFRS and may differ from similarly named measures as
IFRS, do not have any standardized meaning prescribed under IFRS and may differ from similarly named measures as
IFRS, do not have any standardized meaning prescribed under IFRS and may differ from similarly named measures as
IFRS, do not have any standardized meaning prescribed under IFRS and may differ from similarly named measures as
reported by other issuers, and accordingly may not be comparable. These measures should not be viewed as a substitute
reported by other issuers, and accordingly may not be comparable. These measures should not be viewed as a substitute
reported by other issuers, and accordingly may not be comparable. These measures should not be viewed as a substitute
reported by other issuers, and accordingly may not be comparable. These measures should not be viewed as a substitute
for the related financial information prepared in accordance with IFRS.
for the related financial information prepared in accordance with IFRS.
for the related financial information prepared in accordance with IFRS.
for the related financial information prepared in accordance with IFRS.
Backlog represents the expected orders the Company has received, but has not yet executed, and that are expected to
Backlog represents the expected orders the Company has received, but has not yet executed, and that are expected to
Backlog represents the expected orders the Company has received, but has not yet executed, and that are expected to
Backlog represents the expected orders the Company has received, but has not yet executed, and that are expected to
translate into sales within the next twelve months, expressed in number of days. Bookings represent orders received
translate into sales within the next twelve months, expressed in number of days. Bookings represent orders received
translate into sales within the next twelve months, expressed in number of days. Bookings represent orders received
translate into sales within the next twelve months, expressed in number of days. Bookings represent orders received
during the period considered, expressed in number of days, and calculated by adding revenues to the increase or
during the period considered, expressed in number of days, and calculated by adding revenues to the increase or
during the period considered, expressed in number of days, and calculated by adding revenues to the increase or
during the period considered, expressed in number of days, and calculated by adding revenues to the increase or
decrease in backlog for the period considered, divided by annualized year revenues. 5N Plus uses backlog to provide an
decrease in backlog for the period considered, divided by annualized year revenues. 5N Plus uses backlog to provide an
decrease in backlog for the period considered, divided by annualized year revenues. 5N Plus uses backlog to provide an
decrease in backlog for the period considered, divided by annualized year revenues. 5N Plus uses backlog to provide an
indication of expected future revenues in days, and bookings to determine its ability to sustain and increase its revenues.
indication of expected future revenues in days, and bookings to determine its ability to sustain and increase its revenues.
indication of expected future revenues in days, and bookings to determine its ability to sustain and increase its revenues.
indication of expected future revenues in days, and bookings to determine its ability to sustain and increase its revenues.
EBITDA means net earnings (loss) before interest expenses, income taxes, depreciation and amortization. 5N Plus uses
EBITDA means net earnings (loss) before interest expenses, income taxes, depreciation and amortization. 5N Plus uses
EBITDA means net earnings (loss) before interest expenses, income taxes, depreciation and amortization. 5N Plus uses
EBITDA means net earnings (loss) before interest expenses, income taxes, depreciation and amortization. 5N Plus uses
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business, without the
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business, without the
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business, without the
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business, without the
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
other companies.
other companies.
other companies.
other companies.
EBITDA is reconciled to the most comparable IFRS measure:
EBITDA is reconciled to the most comparable IFRS measure:
EBITDA is reconciled to the most comparable IFRS measure:
EBITDA is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
(in thousands of U.S. dollars)
(in thousands of U.S. dollars)
(in thousands of U.S. dollars)
Net (loss) earnings
Net (loss) earnings
Net (loss) earnings
Net (loss) earnings
Interest on long‐term debt, imputed interest and other interest expense
Interest on long‐term debt, imputed interest and other interest expense
Interest on long‐term debt, imputed interest and other interest expense
Interest on long‐term debt, imputed interest and other interest expense
Income taxes (recovery) expense
Income taxes (recovery) expense
Income taxes (recovery) expense
Income taxes (recovery) expense
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
EBITDA
EBITDA
EBITDA
EBITDA
EBITDA margin is defined as EBITDA divided by revenues.
EBITDA margin is defined as EBITDA divided by revenues.
EBITDA margin is defined as EBITDA divided by revenues.
EBITDA margin is defined as EBITDA divided by revenues.
Q4 2022
Q4 2022
Q4 2022
Q4 2022
$
$
$
$
(8,146)
(8,146)
(8,146)
(8,146)
716
716
716
716
(292)
(292)
(292)
(292)
4,051
4,051
4,051
4,051
(3,671)
(3,671)
(3,671)
(3,671)
Q4 2021
Q4 2021
Q4 2021
Q4 2021
$
$
$
$
980
980
980
980
1,164
1,164
1,164
1,164
1,314
1,314
1,314
1,314
4,364
4,364
4,364
4,364
7,822
7,822
7,822
7,822
FY 2022
FY 2022
FY 2022
FY 2022
$
$
$
$
(22,999)
(22,999)
(22,999)
(22,999)
5,192
5,192
5,192
5,192
4,711
4,711
4,711
4,711
17,732
17,732
17,732
17,732
4,636
4,636
4,636
4,636
FY 2021
FY 2021
FY 2021
FY 2021
$
$
$
$
3,110
3,110
3,110
3,110
3,713
3,713
3,713
3,713
5,630
5,630
5,630
5,630
12,535
12,535
12,535
12,535
24,988
24,988
24,988
24,988
Adjusted EBITDA means Operating earnings (loss) as defined before the effect of impairment of inventories, share‐based
Adjusted EBITDA means Operating earnings (loss) as defined before the effect of impairment of inventories, share‐based
Adjusted EBITDA means Operating earnings (loss) as defined before the effect of impairment of inventories, share‐based
Adjusted EBITDA means Operating earnings (loss) as defined before the effect of impairment of inventories, share‐based
compensation expense (recovery), litigation and restructuring costs, impairment of non‐current assets, loss on
compensation expense (recovery), litigation and restructuring costs, impairment of non‐current assets, loss on
compensation expense (recovery), litigation and restructuring costs, impairment of non‐current assets, loss on
compensation expense (recovery), litigation and restructuring costs, impairment of non‐current assets, loss on
divestiture of subsidiary, loss on disposal of assets held for sale and depreciation and amortization. 5N Plus uses adjusted
divestiture of subsidiary, loss on disposal of assets held for sale and depreciation and amortization. 5N Plus uses adjusted
divestiture of subsidiary, loss on disposal of assets held for sale and depreciation and amortization. 5N Plus uses adjusted
divestiture of subsidiary, loss on disposal of assets held for sale and depreciation and amortization. 5N Plus uses adjusted
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business without the
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business without the
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business without the
EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing business without the
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by
other companies.
other companies.
other companies.
other companies.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
5N Plus ▪ Management’s Discussion and Analysis ▪ 25
5N Plus ▪ Management’s Discussion and Analysis ▪ 25
5N Plus ▪ Management’s Discussion and Analysis ▪ 25
5N Plus ▪ Management’s Discussion and Analysis ▪ 25
36
5N PLUS | 2022 ANNUAL REPORT
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Adjusted EBITDA and Adjusted EBITDA margin are reconciled to the most comparable IFRS measure:
Management’s Discussion and Analysis
(in thousands of U.S. dollars)
Revenues
Operating expenses
Operating (loss) earnings
Share‐based compensation (recovery) expense
Litigation and restructuring costs
Impairment of non‐current assets
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Depreciation and amortization
Adjusted EBITDA
Adjusted EBITDA margin
Q4 2022
$
61,042
(69,261)
(8,219)
(171)
3,210
‐
7,834
‐
4,051
6,705
11.0%
Q4 2021
$
64,556
(60,018)
4,538
(460)
1,644
‐
‐
‐
4,364
10,086
15.6%
FY 2022
$
264,223
(277,277)
(13,054)
999
3,823
12,478
7,834
216
17,732
30,028
11.4%
FY 2021
$
209,990
(197,119)
12,871
689
2,144
‐
‐
‐
12,535
28,239
13.4%
Adjusted operating expenses means operating expenses before impairment of inventories, share‐based compensation
expense (recovery), litigation and restructuring costs, impairment of non‐current assets, loss on divestiture of subsidiary,
loss on disposal of assets held for sale and depreciation and amortization. 5N Plus uses adjusted operating expenses to
calculate Adjusted EBITDA. 5N Plus believes it is a meaningful measure of the operating performance of its ongoing
business. The definition of this non‐IFRS measure used by the Company may differ from that used by other companies.
Adjusted operating expenses are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Operating expenses
Share‐based compensation recovery (expense)
Litigation and restructuring costs
Impairment of non‐current assets
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Depreciation and amortization
Adjusted operating expenses
Q4 2022
$
Q4 2021
$
69,261
171
(3,210)
‐
(7,834)
‐
(4,051)
54,337
60,018
460
(1,644)
‐
‐
‐
(4,364)
54,470
FY 2022
$
277,277
(999)
(3,823)
(12,478)
(7,834)
(216)
(17,732)
234,195
FY 2021
$
197,119
(689)
(2,144)
‐
‐
‐
(12,535)
181,751
Adjusted net earnings (loss) means the net earnings (loss) before the effect of impairment of inventory, share‐based
compensation expense (recovery), litigation and restructuring costs, impairment of non‐current assets, loss on
divestiture of subsidiary and loss on disposal of assets held for sale, net of the related income tax. 5N Plus uses adjusted
net earnings (loss) because it believes it is a meaningful measure of the operating performance of its ongoing business
without the effects of unusual expenses or income. The definition of this non‐IFRS measure used by the Company may
differ from that used by other companies.
Basic adjusted net earnings (loss) per share means adjusted net earnings (loss) divided by the weighted average number
of outstanding shares. 5N Plus uses basic adjusted net earnings (loss) per share because it believes it is a meaningful
measure of the operating performance of its ongoing business without the effects of unusual expenses or income. The
definition of this non‐IFRS measure used by the Company may differ from that used by other companies.
26 ▪ 5N Plus ▪ Management’s Discussion and Analysis
37
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Adjusted net earnings (loss) and Basic adjusted net earnings (loss) are reconciled to the most comparable IFRS measures:
(in thousands of U.S. dollars, except per share amounts and
number of shares)
Q4 2022
Q4 2021
FY 2022
FY 2021
Net (loss) earnings
Basic (loss) earnings per share
Reconciling items:
Share‐based compensation (recovery) expense
Litigation and restructuring costs
Impairment of non‐current assets
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Income tax recovery on taxable items above
Adjusted net earnings (loss)
Basic weighted average number of shares
Basic adjusted net earnings per share
$
(8,146)
($0.09)
(171)
3,210
‐
7,834
‐
(595)
2,132
88,330,236
$0.02
$
980
$0.01
(460)
1,644
‐
‐
‐
(285)
1,879
88,330,236
$0.02
$
(22,999)
($0.26)
999
3,823
12,478
7,834
216
(2,618)
(267)
$
3,110
$0.04
689
2,144
‐
‐
‐
(589)
5,354
88,330,236
$‐
88,330,236
$0.06
Adjusted gross margin is a measure used to monitor the sales contribution after paying cost of sales, excluding
depreciation and inventory impairment charges. 5N Plus also expressed this measure in percentage of revenues by
dividing the gross margin value by the total revenue.
Adjusted Gross margin is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Total revenue
Cost of sales
Gross margin
Depreciation included in cost of sales
Adjusted Gross margin
Adjusted Gross margin percentage
Q4 2022
$
61,042
(47,909)
13,133
3,155
16,288
26.7%
Q4 2021
$
64,556
(53,090)
11,466
3,515
14,981
23.2%
FY 2022
$
264,223
(215,715)
48,508
14,208
62,716
23.7%
FY 2021
$
209,990
(171,214)
38,776
10,539
49,315
23.5%
Net debt is calculated as total debt less cash and cash equivalents. Any introduced IFRS 16 reporting measures in
reference to lease liabilities are excluded from the calculation. 5N Plus uses this measure as an indicator of its overall
financial position.
Total debt and Net debt are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Bank indebtedness
Long‐term debt including current portion
Lease liabilities including current portion
Subtotal Debt
Lease liabilities including current portion
Total Debt
Cash and cash equivalents
Net Debt
As at December 31, 2022
$
‐
121,000
30,402
As at December 31, 2021
$
‐
116,000
32,640
151,402
(30,402)
121,000
(42,691)
78,309
148,640
(32,640)
116,000
(35,940)
80,060
Working capital is a measure of liquid assets that is calculated by taking current assets and subtracting current liabilities.
Given that the Company is currently indebted, it uses it as an indicator of its financial efficiency and aims to maintain it
at the lowest possible level.
Working capital ratio is calculated by dividing current assets by current liabilities.
38
5N Plus ▪ Management’s Discussion and Analysis ▪ 27
5N PLUS | 2022 ANNUAL REPORT
Management’s Discussion and Analysis
MMaannaaggeemmeenntt’’ss DDiissccuussssiioonn aanndd AAnnaallyyssiiss
Working capital is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Inventories
Other current assets excluding inventories
Current assets
Current liabilities
Working capital
Working capital current ratio
As at December 31, 2022
$
86,254
100,908
187,162
(62,846)
124,316
2.98
As at December 31, 2021
$
95,526
99,996
195,522
(65,059)
130,463
3.01
Additional Information
5N Plus’ common shares trade on the Toronto Stock Exchange (TSX) under the ticker symbol VNP. Additional information
relating to the Company, including the Company’s annual information form, is available under the Company’s profile on
SEDAR at www.sedar.com.
Selected Quarterly Financial Information
(in thousands of U.S. dollars, except per share
amounts)
Dec 31,
2022
Sept 30,
2022
Revenue
EBITDA1
Adjusted EBITDA1
Net (loss) earnings
Basic (loss) earnings per share
Diluted (loss) earnings per share
Adjusted net earnings (loss)1
Basic adjusted net earnings (loss) per share1
Funds from operations
Backlog1
61,042
(3,671)
6,705
(8,146)
($0.09)
($0.09)
2,132
$0.02
5,478
253 days
66,372
1,751
9,114
(6,968)
($0.08)
($0.08)
520
$‐
2,055
192 days
June 30,
2022
$
72,388
6,739
8,583
(2,130)
($0.02)
($0.02)
(997)
($0.01)
3,165
140 days
March 31,
2022
$
64,421
(183)
5,626
(5,755)
($0.07)
($0.07)
(1,922)
($0.02)
2,800
196 days
Dec 31,
2021
$
64,556
7,822
10,086
980
$0.01
$0.01
1,879
$0.02
5,604
221 days
Sept 30,
2021
$
50,839
5,105
5,537
(792)
($0.01)
($0.01)
(246)
$‐
2,394
174 days
June 30,
2021
$
47,719
6,318
6,336
2,159
$0.03
$0.03
1,932
$0.02
3,656
199 days
March 31,
2021
$
46,876
5,743
6,280
763
$0.01
$0.01
1,789
$0.02
4,899
195 days
Net (loss) earnings are completely attributable to equity holders of 5N Plus Inc.
Selected Yearly Financial Information
As at and for the years ended December 31
(in thousands of U.S. dollars except per share amounts)
Revenue
EBITDA
Adjusted EBITDA
Net (loss) earnings
Basic (loss) earnings per share
Diluted (loss) earnings per share
Adjusted net (loss) earnings
Basic adjusted net earnings per share
Funds from operations
Backlog
Balance Sheet
Total assets
Total non‐current liabilities
Net debt1
Shareholders’ equity
Net (loss) earnings are completely attributable to equity holders of 5N Plus Inc.
2022
$
264,223
4,636
30,028
(22,999)
($0.26)
($0.26)
(267)
$‐
13,498
253 days
347,985
172,363
78,309
112,776
2021
$
209,990
24,988
28,239
3,110
$0.04
$0.04
5,354
$0.06
16,553
221 days
373,590
172,284
80,060
136,247
2020
$
177,192
22,424
28,791
2,186
$0.03
$0.03
4,980
$0.06
25,830
189 days
226,678
71,752
10,159
118,376
1 See Non‐IFRS Measures
28 ▪ 5N Plus ▪ Management’s Discussion and Analysis
39
5N PLUS | 2022 ANNUAL REPORT
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements and related notes have been prepared by management in conformity with
generally accepted accounting principles in Canada which incorporate International Financial Reporting Standards as
issued by the IASB (IFRS). Management is responsible for the selection of accounting policies and making significant
accounting judgements and estimates.
Management is also responsible for all other information included in the management’s discussion and analysis and
for ensuring that this information is consistent with the information contained in the consolidated financial
statements.
Management is responsible for establishing and maintaining adequate internal control over financial reporting which
includes those policies and procedures that provide reasonable assurance over the safeguarding of assets and over
the completeness, fairness and accuracy of the consolidated financial statements.
The Audit and Risk Management Committee, which is comprised entirely of independent directors, reviews the quality
and integrity of the Company’s financial reporting and provides its recommendations, in respect of the approval of
the financial statements, to the Board of Directors; oversees management’s responsibilities as to the adequacy of the
supporting systems of internal controls; provides oversight of the independence, qualifications, and appointment of
the external auditor; and reviews audit, audit-related, and non-audit fees and expenses. The Board of Directors
approves the Company’s consolidated financial statements and management’s discussion and analysis disclosures
prior to their release. The Audit and Risk Management Committee meets with management, the internal auditor and
external auditors at least four times each year to review and discuss financial reporting, disclosures, auditing and
other matters.
The external auditors, PricewaterhouseCoopers LLP, conduct an independent audit of the consolidated financial
statements in accordance with Canadian generally accepted auditing standards and express their opinion thereon.
Those standards require that the audit is planned and performed to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The external auditors have unlimited access to
the Audit and Risk Management Committee and meet with the Committee on a regular basis.
(signed) Gervais Jacques__________________
Gervais Jacques
President and Chief Executive Officer
(signed) Richard Perron____________________
Richard Perron
Chief Financial Officer
Montreal, Canada
February 21, 2023
40
5N Plus ▪ Consolidated Financial Statements
5N PLUS | 2022 ANNUAL REPORT
Independent auditor’s report
To the Shareholders of 5N Plus Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of 5N Plus Inc. and its subsidiaries (together, the Company) as at December 31,
2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2022 and 2021;
the consolidated statements of (loss) earnings for the years then ended;
the consolidated statements of comprehensive (loss) income for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
41
5N PLUS | 2022 ANNUAL REPORT Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2022. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of inventories
Refer to note 2 – Summary of principal accounting
policies and note 6 – Inventories to the
consolidated financial statements.
The carrying value of inventories on the Company’s
consolidated financial statements was $86.2 million
as at December 31, 2022. Inventories are carried at
the lower of cost and net realizable value. In
estimating net realizable value, management takes
into account the most reliable evidence available at
the time the estimates are made. The Company’s
core business is subject to changes in foreign
policies and internationally accepted metal prices,
which may cause future selling prices to change
rapidly. Management applied judgment in
estimating the net realizable value of inventories,
which involved the use of significant assumptions,
including the consideration of prices of similar
products in the market at the time the estimates are
made and expected future selling prices.
We considered this a key audit matter due to the
magnitude of the inventory balance, the various
types of inventory items and the judgment made by
management in determining the net realizable value
of inventories, which in turn led to increased audit
effort in performing audit procedures.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management estimated the net
realizable value of inventories, which included
the following:
Tested the data used by management in
determining the net realizable value.
Evaluated the appropriateness of the method
of estimating net realizable value.
Evaluated the reasonableness of significant
assumptions used by management in the
calculation of net realizable value of
inventories, by comparing them to:
o
o
prices of similar products in the market
at the time the estimates are made; and
expected future selling prices.
For a sample of inventory items, compared the
prior year estimates of inventory prices to their
actual selling prices during the year.
42
5N PLUS | 2022 ANNUAL REPORT Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial
reporting process.
43
5N PLUS | 2022 ANNUAL REPORT Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
44
5N PLUS | 2022 ANNUAL REPORT We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Marc-Stéphane Pennee.
/s/PricewaterhouseCoopers LLP1
Montréal, Quebec, Canada
February 21, 2023
1 CPA auditor, public accountancy permit No. A123642
45
5N PLUS | 2022 ANNUAL REPORT Consolidated Statements of Financial Position
(in thousands of United States dollars)
5N PLUS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of United States dollars)
Assets
Current
Cash and cash equivalents
Accounts receivable
Inventories
Income tax receivable
Other current assets
Total current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Goodwill
Deferred tax assets
Other assets
Total non-current assets
Total assets
Liabilities
Current
Trade and accrued liabilities
Income tax payable
Derivative financial liabilities
Current portion of deferred revenue
Current portion of lease liabilities
Total current liabilities
Long-term debt
Deferred tax liabilities
Employee benefit plan obligations
Lease liabilities
Deferred revenue
Other liabilities
Total non-current liabilities
Total liabilities
Equity
Total liabilities and equity
Commitments and contingencies (Note 25)
The accompanying notes are an integral part of these consolidated financial statements.
Notes
December 31
2022
$
December 31
2021
$
5
6
18
7
8
9
10
11
18
12
13
18
19
16
9
14
18
15
9
16
17
42,691
32,872
86,254
5,488
19,857
187,162
77,951
30,082
31,563
11,825
6,002
3,400
160,823
347,985
40,200
8,780
-
11,730
2,136
62,846
121,000
6,959
11,643
28,266
2,354
2,141
172,363
235,209
112,776
347,985
35,940
42,098
95,526
5,054
16,904
195,522
81,526
32,198
40,474
13,841
7,007
3,022
178,068
373,590
46,454
5,615
109
10,394
2,487
65,059
116,000
7,645
17,231
30,153
-
1,255
172,284
237,343
136,247
373,590
46
5N Plus ▪ Consolidated Financial Statements ▪ 1
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS
Years ended December 31
(in thousands of United States dollars, except per share information)
Consolidated Statements of (Loss) Earnings
Years ended December 31
(in thousands of United States dollars, except per share information)
Revenue
Cost of sales
Selling, general and administrative expenses
Other expenses (income), net
Operating (loss) earnings
Financial expenses
Interest on long-term debt
Imputed interest and other interest (income) expense
Foreign exchange and derivative loss
(Loss) earnings before income taxes
Income tax expense (recovery)
Current
Deferred
Net (loss) earnings
(Loss) earnings per share
Basic (loss) earnings per share
Diluted (loss) earnings per share
Net (loss) earnings are completely attributable to equity holders of 5N Plus Inc.
The accompanying notes are an integral part of these consolidated financial statements.
Notes
29
29
29
14
18
18
23
23
23
2022
$
264,223
215,715
28,565
32,997
277,277
(13,054)
5,466
(274)
42
5,234
(18,288)
6,865
(2,154)
4,711
(22,999)
(0.26)
(0.26)
(0.26)
2021
$
209,990
171,214
21,883
4,022
197,119
12,871
2,865
848
418
4,131
8,740
5,580
50
5,630
3,110
0.04
0.04
0.04
2 ▪ 5N Plus ▪ Consolidated Financial Statements
47
5N PLUS | 2022 ANNUAL REPORT
Consolidated Statements of Comprehensive (Loss) Income
Years ended December 31
(in thousands of United States dollars)
5N PLUS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
Years ended December 31
(in thousands of United States dollars)
Net (loss) earnings
Other comprehensive (loss) income
Items that may be reclassified subsequently to net (loss) earnings
Currency translation adjustment
Notes
Items that will not be reclassified subsequently to net (loss) earnings
Remeasurement of employee benefit plan obligations
Income taxes
15
Other comprehensive (loss) income
Comprehensive (loss) income
Comprehensive (loss) income is completely attributable to equity holders of 5N Plus Inc.
The accompanying notes are an integral part of these consolidated financial statements.
2022
$
(22,999)
(3,657)
(3,657)
4,159
(1,300)
2,859
(798)
2021
$
3,110
(31)
(31)
814
(256)
558
527
(23,797)
3,637
5N Plus ▪ Consolidated Financial Statements ▪ 3
48
5N PLUS | 2022 ANNUAL REPORT
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Consolidated Statements of Changes In Equity
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5N PLUS | 2022 ANNUAL REPORT
Consolidated Statements of Cash Flows
Years ended December 31
(in thousands of United States dollars)
5N PLUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
(in thousands of United States dollars)
Operating activities
Net (loss) earnings
Adjustments to reconcile net (loss) earnings to cash flows
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Amortization of other assets
Impairment of non-current assets
Increase on loss allowance
Loss on divestiture of a subsidiary
Share-based compensation expense (recovery)
Deferred income taxes
Imputed interest
Employee benefit plan obligations
Loss on disposal of assets held for sale
(Gain) loss on disposal of property, plant and equipment
Unrealized (gain) loss on non-hedge financial instruments
Unrealized foreign exchange (gain) loss on assets and liabilities
Funds from operations before the following :
Net change in non-cash working capital balances
Cash from operating activities
Investing activities
Acquisition of subsidiary, net of cash acquired
Divestiture of a subsidiary, net of cash divested
Cash outflows to cash held in escrow
Additions to property, plant and equipment
Additions of intangible assets
Acquisition of investment in equity instruments
Proceeds on disposal of assets held for sale
Proceeds on disposal of property, plant and equipment
Cash used in investing activities
Financing activities
Repayment of long-term debt
Proceeds from issuance of long term debt
Deferred costs related to long-term debt
Common shares repurchased
Issuance of common shares
Principal elements of lease payments
Increase in other liabilities
Cash from financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information(1)
Income tax paid
Interest paid
Notes
8
9
10
12
4, 8, 10, 29
5, 27
4
24
18
9
15
29
21
4
4
4
8, 21
10
12
29
8
4, 14
14
12
22
22
21
17
2022
$
(22,999)
11,717
2,702
3,313
260
12,478
3
7,834
1,893
(2,154)
605
(403)
216
(13)
(1,003)
(951)
13,498
10,243
23,741
-
(2,652)
(2,123)
(16,062)
(993)
-
2,816
20
(18,994)
(5,000)
10,000
(732)
-
-
(2,999)
1,140
2,409
(405)
6,751
35,940
42,691
3,745
5,360
2021
$
3,110
8,969
1,764
1,802
253
-
3
-
(623)
50
336
(481)
-
171
982
217
16,553
(6,283)
10,270
(33,284)
-
(9,004)
(5,385)
(541)
(2,000)
-
285
(49,929)
(32,505)
71,000
(260)
(809)
646
(1,872)
19
36,219
(570)
(4,010)
39,950
35,940
2,493
2,790
(1) Amounts paid for income tax and interest were reflected as cash flows from operating activities in the consolidated statements of cash flows.
The accompanying notes are an integral part of these consolidated financial statements.
5N Plus ▪ Consolidated Financial Statements ▪ 5
50
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
1. Nature of Activities
5N Plus Inc. (“5N Plus” or the “Company”) is a Canadian-based international company. 5N Plus is a leading global producer
of specialty semiconductors and performance materials. The Company’s ultra-pure materials often form the core element
of its customer products. These customers rely on 5N Plus’s products to enable performance and sustainability in their
own products. 5N Plus deploys a range of proprietary and proven technologies to develop and manufacture its products.
The Company’s products enable various applications in a number of key industries including renewable energy, security,
space, pharmaceutical, medical imaging, and industrial. The Company is headquartered at 4385 Garand Street, Montreal,
Quebec (Canada) H4R 2B4. The Company operates R&D, manufacturing and commercial centers in strategically located
facilities around the world including Europe, North America and Asia. The Company’s mission is to be critical to its
customers, valued by its employees and trusted by its shareholders. The Company’s core values focus on integrity,
commitment and customer development along with emphasis on sustainable development, continuous improvement,
health and safety. The Company’s shares are listed on the Toronto Stock Exchange (“TSX”). 5N Plus and its subsidiaries
represent the “Company” mentioned throughout these consolidated financial statements. The Company has two
reportable business segments, namely Specialty Semiconductors and Performance Materials.
These consolidated financial statements were approved by the Board of Directors on February 21, 2023.
In February 2022, Russian military forces invaded Ukraine; the invasion is being actively resisted by Ukrainian military
personnel and the people of Ukraine, and the outcome of the ongoing conflict remains uncertain at this time. Although
AZUR SPACE Solar Power GmbH (AZUR), a subsidiary of the Company, had sales in Russia in the past, the amount of such
sales is not material to the Company as a whole. A prolonged armed conflict in Ukraine or an expansion of the armed
conflict to other European countries could have a negative effect on the European and global economies. As well, Russia
is a major exporter of oil and natural gas. Any disruption of supplies of oil and natural gas from Russia could have a
significant adverse effect on the European and world economies. All of the foregoing factors could potentially have a
negative impact on the Company’s sales and results of operations.
2. Summary of Principal Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
as issued by the IASB (IFRS). The consolidated financial statements have been prepared under the historical cost
convention, except for derivative financial instruments which are recorded at fair value.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements, are also further disclosed in this note, in the “Significant management
estimation and judgment in applying accounting policies” section.
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Company has control. Control exists when the
Company is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through the power over the entity.
The subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are
deconsolidated from the date that control ceases.
6 ▪ 5N Plus ▪ Consolidated Financial Statements
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5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The following table includes the principal entities which significantly impact the results or assets of the Company:
5N Plus Inc.
5N PV GmbH
AZUR SPACE Solar Power GmbH (Note 4)
5N Plus Lübeck GmbH
5N Plus Belgium SA(1)
5N Plus Asia Limited
5N Plus Wisconsin Inc.
Country of incorporation
Canada
Germany
Germany
Germany
Belgium
Hong Kong
United States
% Equity interest
2022
100%
100%
100%
100%
-
100%
100%
2021
100%
100%
100%
100%
100%
100%
100%
(1) On December 19, 2022, the Company divested its investment in 5N Plus Belgium SA. The revenues and expenses of this investment from January 1, 2022 until
the date of disposition have been included within the Company’s consolidated statement of (loss) earnings. See note 4 for additional information.
Intercompany transactions, balances, income and expenses on transactions between group companies are eliminated.
Profits and losses resulting from intercompany transactions that are recognized in assets are also eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the
Company.
Foreign currency translation
a) Functional and presentation currency
The Company’s functional and presentation currency is the US dollar. Functional currency is determined for each of
the Company’s entities, and items included in the financial statements of each entity are measured using that
functional currency.
b) Transactions and balances
Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the
reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign
currencies are translated into the functional currency using the exchange rate prevailing at the date of the respective
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in
the consolidated statement of (loss) earnings.
Foreign exchange gains and losses are presented in the consolidated statement of (loss) earnings within “foreign
exchange and derivative loss”.
c) Foreign operations
Assets and liabilities of subsidiaries that have a functional currency other than US dollar are translated from their
functional currency to US dollars at exchange rates in effect at the reporting date. The resulting translation
adjustments are included in the currency translation adjustment in other comprehensive (loss) income. Revenue and
expenses are translated at the average exchange rates for the period.
Business combination
Business combinations are accounted for using the acquisition method. Under this method, the identifiable assets
acquired and liabilities assumed, including contingent liabilities, are recorded at their fair value at the date of acquisition.
The acquisition date is the date at which the Company obtains control over the acquiree, which is generally the date that
consideration is transferred and the Company acquires the assets and assumes the liabilities of the acquiree.
5N Plus ▪ Consolidated Financial Statements ▪ 7
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5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the
fair values of the assets at the acquisition date transferred by the Company, the liabilities incurred or assumed, including
contingent liabilities, and equity instruments issued by the Company in exchange for control of the acquiree. The excess
of the consideration transferred over the fair value of the net identifiable assets acquired is recorded as goodwill. Any
negative goodwill is recognized directly in the consolidated statement of (loss) earnings. Acquisition costs are expensed as
incurred in the consolidated statement of (loss) earnings.
Segment reporting
Following the acquisition of AZUR and the subsequent integration of its activities within the Company’s operations,
the Company repositioned certain products and applications between its two reportable segments, effective in the
fourth quarter of 2021. For the two new principal segments, Specialty Semiconductors and Performance Materials,
corresponding operations and activities are managed accordingly by the Company’s key decision makers. Segmented
operating, financial information and labelled key performance indicators are available and used to manage these business
segments, review performance and allocate resources.
The Specialty Semiconductors segment operates in North America and Europe and is similar to the former Electronic
Materials segment, and now integrating the products and operations of AZUR since November 5, 2021. The segment
manufactures and sells products used in several applications such as renewable energy, space satellites and imaging.
Typical end markets include photovoltaics (terrestrial and spatial solar energy), medical imaging, infrared imaging,
optoelectronics and advanced electronics. These products are sold either in semiconductor compounds, semiconductor
wafers, ultra high purity metals, epitaxial semiconductor substrates and solar cells. Revenues and earnings associated with
recycling services and activities provided to Specialty Semiconductors customers are captured in this segment.
The Performance Materials segment operates in North America, Europe and Asia, and is similar to the former Eco-Friendly
Materials segment. The segment manufactures and sells products that are used in several applications in pharmaceutical
& healthcare, industrial, and catalytic and extractive. Main products are sold as active pharmaceutical ingredients, animal
feed additives, specialized chemicals, commercial grade metals, alloys, and engineered powders. All commercial grade
metal and engineered powder sales have been regrouped under Performance Materials. Revenues and earnings
associated with recycling services and activities provided to Performance Materials customers are captured in this
segment.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses, together
with financing expenses have been regrouped under the heading “Corporate and unallocated”.
Each operating segment is managed separately as each of these service lines requires different technologies, resources
and marketing approaches. The financial information of the recycling and trading of complex material is allocated to the
two main segments. All intersegment transactions between the Specialty Semiconductors and the Performance Materials
segments have been eliminated on consolidation.
Revenue recognition
Revenue comprises the sale of manufactured products and the rendering of services and is measured at the amounts
specified in the customer’s arrangement.
Sales of manufactured products are recognized when products are delivered to the customer, which is also the moment
when control of the products is transferred, and when there is no unfulfilled obligation that could affect the customer’s
acceptance of the products. Delivery occurs when the products have been shipped to the specified location, the risks of
loss have been transferred to the customer and the customer has accepted the products in accordance with the sales
contract. Revenue from custom refining activities, often referred to as tolling, is recognized when services are rendered,
at a point in time.
8 ▪ 5N Plus ▪ Consolidated Financial Statements
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5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Accounts receivable are recognized when the products are delivered or services are rendered, as this is the point in time
that the consideration is unconditional because only the passage of time is required before the payment is due. The
Company does not expect to have any contracts where the period between the transfer of the promised products or
services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust
any of the transaction prices for the time value of money.
Deferred revenue is recognized by the company as a non-current liability in relation to long-term revenue contracts with
customers which involve performance obligations which are satisfied over time rather than at a point in time. The amount
of which is expected to be realized within one year is recorded within the heading “Current portion of deferred revenue”.
Cash payments received or advances due pursuant to contractual arrangements related to the sale of goods are also
recorded as deferred revenue until all of the foregoing conditions of revenue recognition have been met. The Company
does not expect to have any contractual arrangements whereby the cash payment or advance is received more than one
year before the underlying goods are delivered and therefore these advances are also presented within the heading
“Current portion of deferred revenue”.
Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will
be received and the Company will comply with all attached conditions.
Grants that compensate the Company for a specific expense incurred are recognized in the consolidated statement of
(loss) earnings against the expenses.
Grants that are related to assets are recognized by deducting the grant from the carrying amount of the specific asset. The
grant is recognized in the consolidated statement of (loss) earnings over the life of a depreciable asset as a reduced
depreciation expense.
Property, plant and equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation, accumulated impairment losses
and subsequent reversals, if applicable. Property, plant and equipment are depreciated using the straight-line method
over their estimated useful lives, taking into account any residual values. Useful lives are as follows:
Land
Building
Production equipment
Furniture
Office equipment
Rolling stock
Leasehold improvements
Period
Not depreciated
25 years
Up to 15 years
3 to 10 years
3 to 10 years
3 to 10 years
Over the term of the lease
Major overhaul and replacement are capitalized in the consolidated statement of financial position as a separate
component, with the replaced part or previous overhaul derecognized from the consolidated statement. Maintenance
and repairs are charged to expense as incurred.
Construction in progress is not depreciated until the assets are put into use. Costs are only capitalized if they are directly
attributable to the construction or development of the assets.
Residual values, method of depreciation and useful life of the assets are reviewed annually and adjusted if appropriate.
5N Plus ▪ Consolidated Financial Statements ▪ 9
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5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Leases
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Company. Assets and liabilities arising from a lease are initially measured on a present value basis.
Right-of-use assets
Right-of-use assets are measured at cost comprising the following:
-
-
-
-
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
any initial direct costs; and
estimated restoration costs.
The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Lease liabilities
Lease liabilities include the net present value of the following lease payments:
-
-
-
-
-
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payment that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the consolidated
statement of (loss) earnings over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an
expense in the consolidated statement of (loss) earnings. Short-term leases are leases with a lease term of 12 months or
less. Low-value assets comprise IT-equipment and small items of office furniture.
Extension options are included in a number of property and equipment leases across the Company. These terms are used
to maximise operational flexibility in terms of managing contracts. The majority of extension options held are exercisable
only by the Company and not by the respective lessor.
Intangible assets
Intangible assets acquired separately are recorded at cost, net of accumulated amortization, accumulated impairment
losses and reversals, if applicable. Intangible assets acquired through a business combination are recognized at fair value
at the date of acquisition.
10 ▪ 5N Plus ▪ Consolidated Financial Statements
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5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Intangible assets are amortized on a straight-line basis over their useful lives according to the following annual terms:
Customer relationships
Technology
Trade name
Software
Development costs
Backlog
Goodwill
Period
15 years
Not exceeding 15 years
10 years
5 years
Not exceeding 10 years
3 years
Goodwill represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired in
a business combination and is initially measured at the acquisition date. Goodwill is subsequently carried at cost less any
accumulated impairment losses.
At the date of acquisition, goodwill is assigned to the cash-generating unit (CGU) or group of CGUs that is expected to
benefit from the synergies of the business combination. For the purposes of impairment testing, goodwill is allocated to
the Company’s operating segments, which is the level at which the chief operating decision maker monitors goodwill.
The CGU is tested for impairment annually, or more frequently when there is indication that the CGU may be impaired. If
the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the
goodwill allocated to the CGU and then, to reduce the carrying amounts of the other assets in the CGU on a pro-rata basis.
Any impairment loss is recognized in the consolidated statement of (loss) earnings. An impairment loss recognized for
goodwill is not reversed in subsequent periods.
Impairment of non-financial assets
The carrying amounts of the Company’s non-financial assets that have an indefinite useful life, such as goodwill, are not
subject to amortization and are tested annually for impairment or whenever indicators of impairment exist. Assets that
are subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Assets that are not yet available for use are tested for impairment annually or
at any time if an indicator of impairment exists.
An impairment loss is recognized if the carrying amount of an asset or a cash-generating unit (CGU) exceeds its recoverable
amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less cost of disposal.
The recoverable amount is determined for an individual asset; unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. In such case, the CGU to which the asset belongs is
used to determine the recoverable amount. Impairment losses are recognized in the consolidated statement of (loss)
earnings.
The Company evaluates impairment losses for potential reversals at each reporting date. An impairment loss is reversed
if there is any indication that the loss has decreased or no longer exists due to changes in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss
had been recognized. Such reversal is recognized in the consolidated statement of (loss) earnings.
56
5N Plus ▪ Consolidated Financial Statements ▪ 11
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have
been transferred and the Company has transferred substantially all risks and rewards of ownership.
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position
when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis,
or realize the asset and settle the liability simultaneously.
Measurement
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case
of a financial asset or financial liability not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs of financial assets or
financial liabilities carried at FVPL are expensed in the consolidated statement of (loss) earnings.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payment of principal and interest.
Measurement in subsequent periods depends on the classification of the financial instrument. The Company has classified
its financial instruments in the following categories depending on the purpose for which the instruments were acquired
and their characteristics.
Financial assets
Debt instruments
For the subsequent measurement, there are two measurement categories into which the Company classifies its debt
instruments:
-
-
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortized cost. Interest income from these financial
assets is included in finance income using the effective interest rate method. Any gain or loss arising on
derecognition is recognized directly in the consolidated statement of (loss) earnings and presented in other gains
(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item
in the consolidated statement of (loss) earnings.
Fair value through profit or loss (FVPL): Assets that do not meet the criteria for amortized cost or fair value
through other comprehensive (loss) income (FVOCI) are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognized in the consolidated statement of (loss) earnings and
presented net within other gains (losses) in the period in which it arises.
Investment in equity instruments
For the subsequent measurement, investments in equity instruments which the Company did not make an irrevocable
election to present in FVOCI are measured at FVPL. A gain or loss on an investment in equity instruments that is subsequently
measured at FVPL is recognized in the consolidated statement of (loss) earnings and presented net within “Other expenses
(income), net” in the period in which it arises.
Financial liabilities
Financial liabilities are subsequently measured at amortized cost using the effective interest method, except for financial
liabilities at FVPL. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
12 ▪ 5N Plus ▪ Consolidated Financial Statements
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5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The Company has classified its financial instruments as follows:
Category
Financial assets and liabilities at fair value through profit and loss
Financial assets and liabilities at amortized cost
Financial instrument
Indexed deposit agreement (Note 7)
Derivative financial assets
Investment in equity instrument (Note 12)
Restricted investment (Note 12)
Derivative financial liabilities
Cash and cash equivalents
Accounts receivable
Cash held in escrow (Note 7)
Trade and accrued liabilities
Long-term debt
Impairment
At each reporting date, the Company assesses, on a forward-looking basis, the expected credit losses associated with its
debt instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a
significant increase in credit risk.
For trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognized from initial recognition of the receivables (Note 27). The Company assumes that there is no
significant increase in credit risk for instruments that have a low credit risk.
Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument and, if so, the nature of the item being hedged. The Company designates certain
derivatives as hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast
transaction (cash flow hedge).
The Company will apply cash flow hedge accounting to certain foreign exchange forward contracts entered into to hedge
forecasted transactions. In a cash flow hedge relationship, the portion of gains or losses on the hedging item that is
determined to be an effective hedge is recognized in other comprehensive (loss) income, while the ineffective portion is
recorded in the consolidated statement of (loss) earnings. The amounts recognized in other comprehensive (loss) income
are reclassified in the consolidated statement of (loss) earnings as a reclassification adjustment when the hedged item
affects net earnings.
For the year ended December 31, 2022 and 2021, the Company has no derivative financial instruments designated as a
hedging instrument.
Embedded financial liabilities derivatives
Embedded derivatives are recorded at fair value separately from the host contract when their economic characteristics
and risks are not clearly and closely related to those of the host contract. Subsequent changes in fair value are recorded
in financial expenses in the consolidated statement of (loss) earnings. For the year ended December 31, 2022 and 2021,
the Company has no embedded derivative.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand.
5N Plus ▪ Consolidated Financial Statements ▪ 13
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5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Cash held in escrow
Cash held in escrow represents cash which is restricted pursuant to a contractual arrangement and is held in a separate
bank account. Cash held in escrow is presented within “Other current assets”.
Inventories
Inventories are carried at the lower of cost and net realizable value. Cost includes all expenditures directly attributable to
the manufacturing process as well as suitable portions of related production overheads based on normal operating
capacity. Costs of ordinarily interchangeable items are assigned using weighted average cost. Net realizable value is the
estimated selling price in the ordinary course of business less costs of completion and any applicable selling expenses.
When the circumstances that previously caused inventories to be written down below cost no longer exist or when there
is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the
impairment is reversed (i.e. the reversal is limited to the amount of the original impairment) so that the new carrying
amount is the lower of the cost and the revised net realizable value.
From time to time, when substantially all required raw materials are in inventory, the Company may choose to enter into
long-term fixed-price sales contracts. The quantity of raw materials required to fulfill these contracts is specifically
assigned, and the average cost of these raw materials is accounted for separately throughout the duration of the contract.
Income taxes
The tax expense for the year which comprises current and deferred tax is recognized in the consolidated statement of
(loss) earnings, except to the extent that it relates to items recognized in other comprehensive (loss) income or directly
in equity. In which case, the tax expense is also recognized in other comprehensive (loss) income or directly in equity,
respectively.
a) Current tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date
of the consolidated statement of financial position in the countries where the Company and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
b) Deferred tax
Deferred income tax is recognized using the liability method on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that are enacted or substantively enacted at the date of the consolidated statement of
financial position and are expected to apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.
Deferred income tax is presented to provide impact of temporary differences arising on investments in subsidiaries,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by
the Company and it is probable that the temporary difference will not be reversed in the foreseeable future.
14 ▪ 5N Plus ▪ Consolidated Financial Statements
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5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority, on either the same taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis.
Provisions
A provision is recognized when the Company has a present legal or constructive obligation as a result of past events; it is
probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
Restructuring provisions comprise mainly employee termination payments. Provisions are not recognized for future
operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the obligation.
The increase in the provision due to passage of time is recognized as interest expense.
Restructuring provisions, consisting of severance and other related costs to sites closure, are recognized when a detailed
formal plan identifies the business or part of the business concerned, the location and number of employees affected,
detailed estimates of the associated costs, and an appropriate timelines which has been communicated to those affected
by it.
Research and development expenses
Research expenses are charged to the consolidated statement of (loss) earnings in the period they are incurred and are
included under “Other expenses (income), net”. Development expenses which are directly attributable expenses, either
internal or external, are charged to the consolidated statement of (loss) earnings, except if the Company can demonstrate
all of the following (in that case capitalised as an intangible assets – development costs):
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
Its intention to complete the intangible asset and use or sell it;
Its ability to use or sell the intangible asset;
-
-
-
- How the intangible asset will generate probable future economic benefits. Among other things, the Company can
demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it
is to be used internally, the usefulness of the intangible asset;
The availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
Its ability to measure reliably the expenditure attributable to the intangible asset during its development.
-
-
Employee future benefits
The Company contributes to two defined benefit pension plans. The significant policies related to employee future benefits
are as follows:
-
-
-
The cost of pension and other post-retirement benefits earned by employees is actuarially determined using the
projected benefit method prorated on service, market interest rates and management’s best estimate of
expected plan investment performance, retirement age of employees and expected health care costs;
Fair value is used to value the plan assets for the purpose of calculating the expected return on plan assets; and
Actuarial gains and losses arising from experience adjustment and change in actuarial assumptions are charged
or credited to equity in other comprehensive (loss) income in the period in which they arise.
5N Plus ▪ Consolidated Financial Statements ▪ 15
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5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Share-based payments
The fair value of the equity-settled share-based payment plan is determined using the Black-Scholes model on the grant
date. Measurement inputs include the share price on the measurement date, the exercise price of the instrument,
expected volatility, weighted average expected life of the instrument, expected dividends, expected forfeiture rate, and
the risk-free interest rate. The impact of service and non-market vesting conditions is not taken into account in
determining fair value. The compensation expense of the equity-settled awards is recognized in the consolidated
statement of (loss) earnings over the graded vesting period, where the fair value of each tranche is recognized over its
respective vesting period.
For cash-settled share-based payment plans, the compensation expense is determined based on the fair value of the
liability incurred at each reporting date until the award is settled. The fair value of compensation expense is calculated by
multiplying the number of units expected to vest with the fair value of one unit as of grant date based on the market price
of the Company’s common shares. Until the liability is settled, the Company re-mesures the fair value of the liability at the
end of each reporting period and at the date of settlement, with any changes in fair value recognized in the consolidated
statement of (loss) earnings.
Earnings per share
Basic (loss) earnings per share is calculated by dividing net (loss) earnings for the year by the weighted average number of
common shares outstanding during the year.
Diluted (loss) earnings per share assume the conversion, exercise or contingent issuance of securities only when such
conversion, exercise or issuance would have a dilutive effect on the income per share. The treasury stock method is used
to determine the dilutive effect of share options.
Significant management estimation and judgment in applying accounting policies
The following are significant management judgments used in applying the accounting policies of the Company that have
the most significant effect on the consolidated financial statements.
Estimation uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
Impairment of non-financial assets
Non-financial assets are reviewed for an indication of impairment at each consolidated statement of financial position
date upon the occurrence of events or changes in circumstances indicating that the carrying value of the assets may not
be recoverable, which requires significant judgement.
An impairment loss is recognized for the amount by which an asset’s or CGU’s carrying amount exceeds its recoverable
amount, which is the higher of fair value less cost of disposal and value in use.
16 ▪ 5N Plus ▪ Consolidated Financial Statements
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5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
An intangible asset and related equipment that are not yet available for their intended use and CGUs to which goodwill is
allocated are tested for impairment at least annually, which also requires significant judgement. To determine the
recoverable amount (value in use or fair value less cost to dispose of these assets), management estimates expected future
cash flows from the asset or CGU and determines a suitable interest rate in order to calculate the present value of those
cash flows. In the process of measuring expected future cash flows for intangible and tangible assets not yet available for
their intended use and CGUs to which goodwill is allocated, management makes assumptions about future operating
results using the estimated forecasted prices obtained from various market sources. These key assumptions relate to
future events and circumstances. The actual results will vary and may cause adjustments to the Company’s assets in future
periods. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market
risk and to asset-specific risk factors.
Inventories
Inventories are carried at the lower of cost and net realizable value, with cost determined using the average cost method.
In estimating net realizable values, management takes into account the most reliable evidence available at the time the
estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted
metal prices which may cause future selling prices to change rapidly. The Company evaluates its inventories using a group
of similar items basis and considers expected future prices as well as events that have occurred between the consolidated
statement of financial position date and the date of the completion of the consolidated financial statements. Net realizable
value for inventory to satisfy a specific sales contract is measured at the contract price.
Business Combination
The Company must make assumptions and estimates to determine the fair value of identifiable assets acquired and
liabilities assumed. These estimates are based on future events, forecasts of future cash flows, future operating costs,
future capital expenditures and estimated discount rates. Changes to the preliminary measurements of assets and
liabilities acquired may be retrospectively adjusted when new information is obtained until the final measurements are
determined within one year of the acquisition date.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period
in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the
Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income and
the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future profitability may
change due to future market conditions, changes in tax legislation and other factors that could adversely affect the ongoing
value of the deferred income tax assets. These changes, if any, may require a material adjustment of these deferred
income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment would
reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized and would
be recorded in the period such a determination was to be made (Note 18).
62
5N Plus ▪ Consolidated Financial Statements ▪ 17
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
3. Adoption of New Accounting Standards and Future Changes in Accounting Policies
Adoption of new accounting standards
IFRS 3 – Business combinations
On January 1, 2022, the Company adopted the amendments to IFRS 3 regarding its reference to the Conceptual
Framework. With this amendment, IFRS 3 will reference the current version of the Conceptual Framework rather than the
Conceptual Framework in effect at the time of IFRS 3’s development. The amendments to IFRS 3 also indicate that for the
purposes of identifying certain liabilities within the context of a business combination, the definition of a liability as per
IAS 37 – Provisions Contingent Liabilities and Contingent assets, shall supersede the definition within the Conceptual
Framework. The amendments are effective for annual periods beginning on or after January 1, 2022, with earlier
application permitted. In adopting the amendments, there has been no significant impact to the financial statements for
the year ended December 31, 2022.
IAS 16 – Property, plant and equipment
On January 1, 2022, the Company adopted the amendments to IAS 16 regarding the accounting of Proceeds before
Intended Use. Proceeds received from the sale of items produced by property, plant and equipment (PPE) which is still
being prepared for its intended use cannot be deducted from the PPE’s cost. Instead proceeds must be immediately
recognized in the consolidated statement of earnings. The amendments are effective for annual periods beginning on or
after January 1, 2022, with earlier application permitted. In adopting the amendments, there has been no significant
impact to the financial statements for the year ended December 31, 2022.
IFRS 9 – Financial Instruments
On January 1, 2022, the Company adopted the amendment to IFRS 9 which clarifies which fees should be considered for
the purpose of applying the derecognition test to a modified financial liability. The IASB clarified that only fees paid or
received between the borrower and the lender should be considered. The amendment is effective for annual periods
beginning on or after January 1, 2022, with earlier application permitted. In adopting the amendments, there has been no
significant impact to the financial statements for the year ended December 31, 2022.
Future Changes in accounting policies
The following standards have been issued but not yet effective:
IAS 1 – Presentation of Financial Statements
In January 2020, the IASB issued amendments to IAS 1 to clarify its requirements for the presentation of liabilities in the
statement of financial position. The amendments are effective for annual reporting periods beginning on or
after January 1, 2024. The Company is currently evaluating the impact of the amendments on its consolidated financial
statements.
4. Business Combination and Divestiture of Subsidiary
Business Combination
On November 5, 2021, the Company acquired all of the issued and outstanding shares of AZUR SPACE Solar Power GmbH
(AZUR) for a purchase price of 50.1 million euros, subject to post-closing adjustments. The consideration transferred was
comprised of 6.5 million shares of 5N Plus, which were issued from the treasury at 12.4 million euros, along with a cash
payment of 37.7 million euros. Furthermore, the Company financed the working capital and equipment loans for an
amount of 23.8 million euros. The cash portion and the working capital of the transaction were funded through the
Company's liquidity and senior debt facility. Transaction fees for an amount of $266 for 2022 (2021 - $666 and 2020 - $490)
were expensed as incurred in the consolidated statement of earnings.
Located in Heilbronn, Germany, AZUR develops and manufactures multi-junction solar cells based on III-V compound
semiconductor materials. The integration of AZUR has not only expanded the Company's position within renewable
energy, but, through Canada's membership in the European Space Agency (ESA), has also established 5N Plus as a supplier
to the European and U.S. space programs.
18 ▪ 5N Plus ▪ Consolidated Financial Statements
63
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
To estimate the fair value of the intangible assets, management used the excess earnings method to value customer
relationships and the royalty relief method to value technology and trade names using discounted cash flow models.
Management developed significant assumptions related to revenue and gross margin forecasts, customer retention rates,
royalty rates and discount rates.
The tables below present the consideration paid and the Company’s final assessment of the fair values of the assets
acquired and the liabilities assumed. As a result of finalizing its assessment, the Company has not restated the consolidated
statement of financial position as at December 31, 2021 as the adjustments were deemed not material. The Company also
determined that the net impact on the net earnings as a result of these adjustments was not material for the year ended
December 31, 2021, and as such, they were accounted for in the consolidated statement of (loss) earnings for the year
ended December 31, 2022.
Consideration transferred
Cash and cash equivalents
Consideration payable(1)
Common shares issued
$
34,301
9,158
14,249
57,708
(1) This amount of 7,950 euros, held in escrow and recorded in Other current assets, is expected to be released within 12 months in accordance with the terms
of the Share Purchase Agreement (Notes 7 and 13).
Identified assets acquired and liabilities assumed
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Other assets
Goodwill
Total assets acquired
Trade and accrued liabilities
Current portion of deferred revenue
Long-term debt(1)
Employee benefit plan obligations
Lease liabilities
Deferred revenue
Other liabilities
Deferred tax liabilities
Total liabilities assumed
Total net assets
Preliminary
$
1,017
8,342
21,394
256
31,128
21,626
32,144
5
13,841
129,753
7,291
4,906
27,396
2,673
21,626
-
1,059
7,094
72,045
57,708
Adjustments
$
-
1,057
(1,057)
-
4,993
(938)
(973)
-
(2,016)
1,066
-
(1,294)
-
-
(938)
2,011
216
1,071
1,066
-
Final
$
1,017
9,399
20,337
256
36,121
20,688
31,171
5
11,825
130,819
7,291
3,612
27,396
2,673
20,688
2,011
1,275
8,165
73,111
57,708
(1) The long-term debt acquired was repaid in full on November 5, 2021.
For the 57-day period ended December 31, 2021, AZUR contributed $17,034 of revenue and $2,342 of net earnings to the
Company’s consolidated statement of earnings based on operations after the acquisition date. If the acquisition of AZUR
had been completed as of January 1, 2021, the Company estimates that its consolidated revenues and net earnings for the
year ended December 31, 2021 would have totalled $260,990 and $nil respectively, inclusive of the additional depreciation
and amortization expenses recorded in reference to the preliminary purchased price allocation. Azur delivers products to
its customers on a project basis creating an unequal distribution of revenue and profitability from one period to another.
5N Plus ▪ Consolidated Financial Statements ▪ 19
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5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The amount recorded for goodwill Is not deductible for tax purposes. The accounts receivable are presented net of a loss
allowance of $28.
Divestiture of Subsidiary
On December 19, 2022, the Company divested its 100% interest in 5N Plus Belgium SA, previously included within its
Performance Materials segment, and recognized a loss on divestiture of $7,834. The decision to cease the production of
lower margin products used in catalytic and extractive applications was made following a strategic review of the
Company’s legacy operations. As part of the transaction, a provision of $2,594 was recorded under Litigation and
Restructuring to support the new owners to ensure site compliance with most recent environmental standards and for
other related costs, of which 2.0 million euros or $2,133 is held in escrow. Prior to the divestiture, the Company recorded
an impairment charge of $7,092 on Property, plant, and equipment (Note 7) following the intention to halt production at
its manufacturing facility in Tilly, Belgium.
These expenses are presented within the consolidated statement of (loss) earnings within Other expenses (income), net.
5. Accounts Receivable
Gross trade receivables
Loss allowance (Note 27)
Trade receivables
Sales taxes receivable
Other receivables
Total accounts receivable
2022
$
26,255
(152)
26,103
3,265
3,504
32,872
2021
$
35,014
(149)
34,865
3,508
3,725
42,098
All of the Company’s accounts receivable are short term. The net carrying value of accounts receivable is considered a
reasonable approximation of fair value.
The Company’s exposure to credit risks and the calculation of the loss allowance related to accounts receivable are
disclosed in Note 27.
Most of the accounts receivable are pledged as security for the revolving credit facility (Note 14).
20 ▪ 5N Plus ▪ Consolidated Financial Statements
65
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
6.
Inventories
Raw materials
Finished goods
Total inventories
2022
$
28,436
57,818
86,254
2021
$
30,845
64,681
95,526
For the year ended December 31, 2022, a total of $118,643 of inventories was included as an expense in cost of sales
(2021 – $94,881).
For the year ended December 31, 2022, a total of $1,464 previously written down was recognized as a reduction of
expenses in cost of sales concurrently with the related inventories being sold ($22 for the Specialty Semiconductors
segment and $1,442 for the Performance Materials segment). For the year ended December 31, 2021, a total of $815
previously written down was recognized as a reduction of expenses in cost of sales concurrently with the related
inventories being sold ($169 for the Specialty Semiconductors segment and $646 for the Performance Materials segment).
The majority of inventories are pledged as security for the revolving credit facility (Note 14).
7. Other current assets
Cash held in escrow (Note 4)
Indexed deposit agreement
Prepaids and others
Total other current assets
2022
$
10,613
5,517
3,727
19,857
2021
$
9,004
4,819
3,081
16,904
In June 2017, the Company entered into an indexed deposit agreement with a major Canadian financial institution to
reduce its income exposure to fluctuations in its share price relating to the DSU, PSU, RSU and SAR programs. Pursuant to
the agreement, the Company receives the economic benefit of the share price appreciation while providing payments to
the financial institution for the institution’s cost of funds and any share price depreciation. The net effect of the indexed
deposit partly offset movements in the Company’s share price impacting the cost of the DSU, PSU, RSU and SAR programs.
As at December 31, 2022, the indexed deposit agreement covered 2,571,569 common shares of the Company.
66
5N Plus ▪ Consolidated Financial Statements ▪ 21
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
8. Property, Plant and Equipment
Net book value as at December 31, 2020
Business combination (Note 4)
Additions
Disposals
Depreciation
Transfer between categories
Effect of foreign exchange
Net book value as at December 31, 2021
Business combination (Note 4)
Additions
Disposals
Reclassification to assets held for sale (Note 29)
Depreciation
Impairment
Transfer between categories
Effect of foreign exchange
Net book value as at December 31, 2022
As at December 31, 2021
Cost
Accumulated depreciation
Net book value
As at December 31, 2022
Cost
Accumulated depreciation
Net book value
Construction in
progress and
production
equipment
$
33,261
28,874
6,971
(456)
(6,334)
(402)
(1,058)
60,856
4,638
14,818
(3)
-
(8,940)
(4,599)
(2,363)
(1,735)
62,672
Furniture,
office
equipment and
rolling stock
$
2,518
472
429
-
(1,263)
376
(26)
2,506
-
378
-
-
(1,304)
(119)
10
(52)
1,419
Land and
buildings
$
16,203
-
290
-
(951)
-
43
15,585
-
86
(4)
(3,032)
(764)
(2,374)
1,597
(150)
10,944
Leasehold
improvements
$
1,209
1,782
15
-
(421)
26
(32)
2,579
355
14
-
-
(709)
-
756
(79)
2,916
23,916
(8,331)
15,585
18,823
(7,879)
10,944
100,973
(40,117)
60,856
110,068
(47,396)
62,672
5,116
(2,610)
2,506
5,135
(3,716)
1,419
5,244
(2,665)
2,579
6,275
(3,359)
2,916
Total
$
53,191
31,128
7,705
(456)
(8,969)
-
(1,073)
81,526
4,993
15,296
(7)
(3,032)
(11,717)
(7,092)
-
(2,016)
77,951
135,249
(53,723)
81,526
140,301
(62,350)
77,951
During the third quarter of 2022, the Company recorded an impairment of non-current assets of $7,092, included in the
Performance Materials segment, to reflect the assessment of the carrying value of property, plant and equipment
following the intention to halt production at its manufacturing facility in Tilly, Belgium. Consequently, the Company’s
projections regarding the future cashflows from the property, plant and equipment of Tilly were minimal. The impairment
charges are recognized under Other expenses within the consolidated statement of (loss) earnings (Note 4).
As at December 31, 2022, property, plant and equipment that were not depreciated until ready for their intended use
amounted to $19,911 (2021 ─ $14,418) (mainly production equipment).
Most of the property, plant and equipment are pledged as security for the revolving credit facility (Note 14).
22 ▪ 5N Plus ▪ Consolidated Financial Statements
67
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
9. Leases
Right-of-use assets
Net book value as at December 31, 2020
Business combination (Note 4)
Additions
Modification to lease contracts
Depreciation
Effect of foreign exchange and others
Net book value as at December 31, 2021
Business combination (Note 4)
Additions
Modification to lease contracts
Divestiture of subsidiary (Note 4)
Depreciation
Effect of foreign exchange and others
Net book value as at December 31, 2022
As at December 31, 2021
Cost
Accumulated depreciation
Net book value
As at December 31, 2022
Cost
Accumulated depreciation
Net book value
Lease liabilities
Current portion
Non-current portion
Total lease liabilities
Buildings
$
4,356
21,559
-
7,402
(1,413)
(361)
31,543
(938)
2,300
198
-
(2,364)
(1,167)
29,572
34,923
(3,380)
31,543
35,319
(5,747)
29,572
Amounts recognized in the consolidated statements of earnings:
Imputed interest(1)
Income from sub-leasing right-of-use assets(2)
Expenses relating to short-term leases(3)
Expenses relating to leases of low-value assets,
excluding short-term leases of low-value assets(3)
Included in financial expenses.
Included in other expenses (income), net.
Included in cost of sales and selling, general and administrative expenses.
(1)
(2)
(3)
68
Production
equipment
$
356
-
27
-
(145)
-
238
-
107
-
(55)
(128)
(4)
158
Office equipment
and rolling stock
$
335
67
217
5
(206)
(1)
417
-
290
-
(140)
(210)
(5)
352
619
(381)
238
305
(147)
158
790
(373)
417
509
(157)
352
2022
$
2,136
28,266
30,402
2022
$
605
(123)
188
312
Total
$
5,047
21,626
244
7,407
(1,764)
(362)
32,198
(938)
2,697
198
(195)
(2,702)
(1,176)
30,082
36,332
(4,134)
32,198
36,133
(6,051)
30,082
2021
$
2,487
30,153
32,640
2021
$
336
(33)
251
284
5N Plus ▪ Consolidated Financial Statements ▪ 23
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
10. Intangible Assets
Net book value as at December 31, 2020
Business combination (Note 4)
Additions
Amortization
Effect of foreign exchange
Net book value as at December 31, 2021
Business combination (Note 4)
Additions
Divestiture of subsidiary (Note 4)
Amortization
Impairment
Effect of foreign exchange
Net book value as at December 31, 2022
As at December 31, 2021
Cost
Accumulated amortization
Net book value
As at December 31, 2022
Cost
Accumulated amortization
Net book value
Customer
relationship
$
-
15,971
-
(166)
-
15,805
(423)
-
-
(742)
(5,123)
-
9,517
15,971
(166)
15,805
10,425
(908)
9,517
Trade name,
software,
development costs
and others
$
8,136
6,274
541
(1,288)
(66)
13,597
(3,534)
993
(66)
(1,320)
(263)
(129)
9,278
Technology
$
1,532
9,899
-
(348)
(11)
11,072
2,984
-
-
(1,251)
-
(37)
12,768
12,077
(1,005)
11,072
15,023
(2,255)
12,768
19,799
(6,202)
13,597
15,465
(6,187)
9,278
Total
$
9,668
32,144
541
(1,802)
(77)
40,474
(973)
993
(66)
(3,313)
(5,386)
(166)
31,563
47,847
(7,373)
40,474
40,913
(9,350)
31,563
In 2022, the Company recorded an impairment of non-current assets of $5,386, included in the Specialty Semiconductors
segment, to reflect the assessment of the carrying value of intangible assets impacted by the invasion of Ukraine by Russia,
more precisely in reference to Russia based customers. The Company’s initial assumptions regarding the timing of future
cashflows from these customers can no longer be supported given the uncertainty associated with recent international
sanctions against Russia, and the unknown duration of the conflict. The impairment charges are recognized under Other
expenses within the consolidated statement of (loss) earnings.
As at December 31, 2022, intangible assets that were not depreciated until ready for their intended use amounted to $812
(2021 ─ $1,963). The category of development costs which includes capitalized costs of $10,798 (2021 - $14,367), primarily
consists of internally generated intangible assets.
24 ▪ 5N Plus ▪ Consolidated Financial Statements
69
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
11. Goodwill
Net book value as at December 31, 2021
Business combination (Note 4)
Net book value as at December 31, 2022
2022
$
13,841
(2,016)
11,825
2021
$
-
13,841
13,841
Goodwill recognized as part of the acquisition of AZUR on November 5, 2021 is allocated to the Specialty Semiconductor
segment. For the purposes of the Company’s annual goodwill impairment test, AZUR is considered as its own CGU. Based
on the result of this test, no impairment charges are required. The recoverable amount was determined based on the
CGU’s value in use which was calculated by using a discounted cash flow (DCF) approach.
The key assumptions used for the purposes of the DCF are outlined below:
-
-
Cash flows: Estimated cash flows were projected based on actual operating results from internal sources as well
as industry and market trends. The first three years of the five-year projection period was forecasted by
Management. The extended two-year period was calculated using the 2017-2022 Compound Annual Growth Rate
for the revenues;
Terminal growth rate: A terminal growth rate of 5.0% is used to extrapolate the Company’s projection and it was
determined using the industry expectation and market trends; and
- Discount rate: Cash flows are discounted using pre-tax discount rate which is estimated based on the historical
industry average weighted-average cost of capital. The discount rate used is 9.9%.
12. Other assets
Deferred costs
Investment in equity instruments
Restricted investment and other
Total other assets
2022
$
777
2,000
623
3,400
2021
$
305
2,000
717
3,022
In January 2021, the Company acquired a minority equity stake in Microbion Corporation (Microbion) for an amount of
$2,000.
The Company also owns a restricted investment of $620 (2021 - $713) which is valued at fair value through profit or loss.
13. Trade and Accrued Liabilities
Trade payables
Accrued liabilities(1)
Consideration payable (Note 4)
Total trade and accrued liabilities
2022
$
14,281
17,440
8,479
40,200
2021
$
22,116
15,334
9,004
46,454
(1) As at December 31, 2022, an amount of $nil was still outstanding with respect to the provision of $258 outstanding as at December 31, 2021. Provisions of
$2,869 were taken in 2022, of which $2,675 was still outstanding as at December 31, 2022.
70
5N Plus ▪ Consolidated Financial Statements ▪ 25
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
14. Long-Term Debt
Senior secured revolving facility of $124,000 with a syndicate of banks,
maturing in April 2026
Subordinated term loan, maturing in March 2024
Less current portion of long-term debt
2022
$
96,000
25,000
121,000
-
121,000
2021
$
91,000
25,000
116,000
-
116,000
Senior secured revolving facility
In June 2022, the Company signed a senior secured multi-currency revolving credit facility of $124,000 maturing in
April 2026 to replace its existing $124,000 senior secured revolving facility maturing in April 2023. At any time, the
Company has the option to request that the credit facility be expanded through the exercise of an additional $30,000
accordion feature, subject to review and approval by the lenders. This revolving credit facility can be drawn in US dollars,
Canadian dollars or Hong Kong dollars (up to $4,000). Drawings bear interest at either the Canadian prime rate, US base
rate, Hong Kong base rate or SOFR, plus a margin based on the Company’s senior net debt to consolidated EBITDA ratio.
Under the terms of its credit facility, the Company is required to satisfy certain restrictive covenants as to financial ratios.
As at December 31, 2022, the Company had met all covenants.
Subordinated term loan
In February 2019, the Company signed a five-year subordinated term loan with Investissement Québec. The loan was
disbursed in two tranches: the first tranche of $5,000 on February 6, 2019 and the second tranche of $20,000 on March
22, 2019. The two tranches of the term loan bear interest equivalent to the 5-year US dollar swap rate plus a margin of
4.19%, which equals to 6.82% and 6.64% respectively. Under the terms of the loan, the Company is required to satisfy
certain restrictive covenants as to financial ratios. As at December 31, 2022, the Company has met all covenants.
15. Employee Benefit Plan Obligations
The Company operates two defined pension plans in Germany based on employee pensionable earnings and length of
service.
Unfunded defined benefit plan
Former general and senior managers had been provided with direct benefit commitments. Employees had been provided
with indirect benefit commitments via the Unterstützungseinrichtung der HEK GmbH e.V. Such promises had been made
for employees with an entry date of December 31, 1993 or earlier.
Funded defined benefit plan
The pension obligations are via a pension fund with commitments to old-age, disability and survivors’ pension to managers
as well as employees. Such promises had been made for employees with an entry date of December 31, 2007 or earlier.
Vesting of benefits is being determined by the employers’ pension-plan act (Gesetz über die Verbesserung der
betrieblichen Altersversorgung). The pension scheme is fully funded by two absolute return strategies funds at Generali
Pensionsfond AG. These investment funds have quoted prices in active markets.
Fair value of plan assets
Present value of funded obligation
Present value of net obligation for funded obligation
Present value of unfunded obligation
Present value of net obligations
26 ▪ 5N Plus ▪ Consolidated Financial Statements
2022
$
2,363
3,425
1,062
10,581
11,643
2021
$
3,069
5,575
2,506
14,725
17,231
71
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Movement in the defined benefit obligations is as follows:
Beginning of year
Business combination (Note 4)
Current service cost
Interest cost
Effect of foreign exchange
Benefits paid
Actuarial gains
End of year
Unfunded
$
14,725
-
58
165
(862)
(655)
(2,850)
10,581
Funded
$
5,575
-
-
63
(350)
(177)
(1,686)
9
3,425
Movement in plan assets is as follows:
2022
Total
$
20,300
-
58
228
(1,212)
(832)
(4,536)
14,006
Unfunded
$
17,202
-
89
147
(1,308)
(722)
(683)
14,725
Funded
$
-
5,782
-
10
(93)
(34)
(90)
5,575
Beginning of year
Business combination (Note 4)
Interest income
Return on plan assets, excluding amounts included in interest income
Pension benefits paid
Effect of foreign exchange
End of year
The principal actuarial assumptions as at December 31 were as follows:
2022
$
3,069
-
34
(377)
(177)
(186)
2,363
Discount rate
Salary growth rate
Pension growth rate
Unfunded
4.2%
2.5%
2.3%
2022
Funded
4.2%
2.5%
2.0%
Unfunded
1.2%
2.0%
1.8%
2021
Total
$
17,202
5,782
89
157
(1,401)
(756)
(773)
20,300
2021
$
-
3,109
5
41
(34)
(52)
3,069
2021
Funded
1.2%
2.0%
2.0%
Assumptions regarding mortality are based on mortality tables “Richttafeln 2018 G” by Prof. Dr. Klaus Heubeck as
biometrical basis in accordance with age of earliest retirement by law RV‐Altersgrenzenanpassungsgesetz, dated
April 20, 2007 for the unfunded defined benefit plan and with age of earliest retirement by 65 years for the funded defined
benefit plan.
The sensitivity of the defined benefit obligations to changes in assumptions is set out below. The effects on each plan of a
change in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each
assumption presented.
72
5N Plus ▪ Consolidated Financial Statements ▪ 27
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Impact on defined benefit obligations
Change in assumption
Increase in assumption
Decrease in assumption
Discount rate
Salary growth rate
Pension growth rate
Unfunded
0.50%
0.50%
0.50%
Funded
0.50%
0.50%
0.50%
Unfunded
(4.93%)
0.26%
4.38%
Funded
(5.77%)
-%
5.12%
Unfunded
5.40%
(0.26%)
(4.07%)
Funded
6.39%
-%
(4.74%)
Life expectancy
Increase by 1 year
in assumption
Decrease by 1 year
in assumption
Unfunded
3.77%
Funded
3.21%
Unfunded
(3.35%)
Funded
(2.88%)
The weighted average duration of the unfunded and funded defined benefit obligations are 10.29 years and 12.10 years
(2021 – 13.03 years and 16.13 years).
Though its defined benefit pension plans, the Company is exposed to a number of risks, the most significant of which are
detailed below:
Specific to employee benefit obligations, the Company is mainly exposed to economic and demographic risks such as salary
inflation and changes in life expectancy. The plans’ obligations are to provide benefits for the duration of the life of its
members, therefore, increases in life expectancy will result in an increase in the plans’ liabilities. In addition, the obligations
are impacted by the discount rate.
Defined benefit pension plan assets are invested in order to meet funded pension obligations. The ability of the Company’s
fund assets to meet employee benefit obligations is subject to market risk such as foreign currency risk, interest rate risk,
and other price risk. Credit risk also affects plan assets, as they are partially comprised of investments in bonds. The default
of a bond issuer would decrease plan assets and the Company’s corresponding ability to meet employee benefit
obligations.
Expected maturity analysis of undiscounted pension liability:
Less than a year
Between 1 and 5 years
Over 5 years
Total
Unfunded
$
676
2,796
14,140
17,612
Funded
$
186
786
5,378
6,350
2022
Total
$
862
3,582
19,518
23,962
Unfunded
$
693
2,794
13,954
17,441
Funded
$
189
806
5,887
6,882
Expected contributions to pension benefit plans for the year ending December 31, 2023 are $862.
16. Deferred revenue
Current portion of deferred revenue
Non-current portion of deferred revenue
Total deferred revenue
2022
$
11,730
2,354
14,084
2021
Total
$
882
3,600
19,841
24,323
2021
$
10,394
-
10,394
For the year ended December 31, 2022, $5,605 (2021 - $2,016) of revenue was realized in relation to the deferred revenue
balance outstanding at the beginning of the year.
28 ▪ 5N Plus ▪ Consolidated Financial Statements
73
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
17. Other Liabilities
Beginning of year
Business combination (Note 4)
Divestiture of subsidiary (Note 4)
Increase in liabilities
Effect of foreign exchange
End of year
18. Income Taxes
Current tax:
Current tax for the year
Adjustment in respect of prior years’ estimates
Total current tax
Deferred tax:
Recognition and reversal of temporary differences
Adjustment in respect of prior years’ estimates
Total deferred tax
Income tax expense
2022
$
1,255
-
(195)
1,140
(59)
2,141
2022
$
7,213
(348)
6,865
(2,446)
292
(2,154)
4,711
A reconciliation of income taxes at Canadian statutory rates with the reported income taxes is as follows:
(Loss) earnings before income tax
Canadian statutory income tax rates
Income tax on (losses) earnings at Canadian statutory rate
Increase (decrease) resulting from:
Unrecorded losses carried forward
Non-deductible expense (non-taxable gain) for tax purposes
Non-deductible (non-taxable) foreign exchange
Effect of difference of foreign tax rates compared to Canadian tax rates
Withholding tax on group dividend
Adjustment in respect of prior years’ estimates
Other
Income tax expense
2022
$
(18,288)
26.5%
(4,846)
3,268
3,670
1,868
299
522
(56)
(14)
4,711
2021
$
195
1,059
-
19
(18)
1,255
2021
$
5,309
271
5,580
826
(776)
50
5,630
2021
$
8,740
26.5%
2,316
553
622
1,599
1,048
-
(505)
(3)
5,630
The Company’s applicable tax rate is the Canadian combined rates applicable in the jurisdiction in which the Company
operates.
Movement in the deferred income tax amounts is as follows:
Beginning of year
Business combination
Tax charge relating to components of other comprehensive income (loss)
Credited (charged) to consolidated statement of earnings
Impact of foreign exchange
End of year
2022
$
(638)
(1,071)
(1,300)
2,154
(102)
)
(957)
2021
$
6,789
(7,094)
(256)
(50)
(27)
(638)
5N Plus ▪ Consolidated Financial Statements ▪ 29
74
5N PLUS | 2022 ANNUAL REPORT
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75
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Deferred tax assets of $nil (2021 – $3,161), included in the consolidated statements of financial position, are dependent
on projection of future taxable profits for entities that have suffered a loss in the current period.
Deferred income tax liabilities have not been recognized for the withholding tax and taxes that would be payable on the
unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. Unremitted earnings totalled
$43,260 as at December 31, 2022 (2021 - $41,329).
As at December 31, 2022, the Company had the following operating tax losses available for carry forward for which no
deferred tax benefit has been recorded in the accounts:
Belgium
United States
Hong Kong
China
$
14,956
35,193
8,992
713
Expiry
No limit
No limit
No limit
2023-2027
As at December 31, 2022, the Company had other deductible temporary differences of $440 for which no deferred tax
benefit has been recorded (2021 – $375).
19. Fair Value of Financial Instruments
The fair value of a financial instrument is determined by reference to the available market information at the reporting
date. When no active market exists for a financial instrument, the Company determines the fair value of that
instrument based on valuation methodologies as discussed below. In determining assumptions required under a
valuation model, the Company primarily uses external, readily observable market data inputs. Assumptions or inputs
that are not based on observable market data incorporate the Company’s best estimates of market participant
assumptions, and are used when external data is not available. Counterparty credit risk and the Company’s own credit
risk are taken into account in estimating the fair value of all financial assets and finan cial liabilities.
The following assumptions and valuation methodologies have been used to measure fair value of financial instruments:
-
-
-
-
-
The fair value of its short-term financial assets and financial liabilities, including cash and cash equivalents,
accounts receivable, cash held in escrow and trade and accrued liabilities approximates their carrying value due
to the short-term maturities of these instruments;
The fair value of its investment in equity is determined using significant unobservable inputs such as the best
information available.
The fair value of its restricted investment is determined using the expected mortality of life, present value of the
estimated future cash flows and estimated discount rates. Assumptions are based on market conditions prevailing
at each reporting date.
The fair value of derivative instruments, which include the indexed deposit agreement and the interest rate swap,
is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve,
foreign exchange rate and the stock price. Assumptions are based on market conditions prevailing at each
reporting date. Derivative instrument reflect the estimated amount that the Company would receive or pay to
settle the contracts at the reporting date; and
The fair value of long-term debt is estimated based on discounted cash flows using current interest rate for
instruments with similar terms and remaining maturities.
76
5N Plus ▪ Consolidated Financial Statements ▪ 31
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The carrying values which approximate the fair values of financial instruments, by class, are as follows as at December 31,
2022 and 2021:
As at December 31, 2022
Financial assets
Cash and cash equivalents
Accounts receivable
Other current assets
Other non-current assets
Total
Financial liabilities
Trade and accrued liabilities
Long-term debt
Total
As at December 31, 2021
Financial assets
Cash and cash equivalents
Accounts receivable
Other current assets
Other non-current assets
Total
Financial liabilities
Trade and accrued liabilities
Long-term debt
Derivative financial liabilities
Total
At fair value
through profit
or loss
$
At amortized
cost
$
Financial
liabilities at
amortized
cost
$
-
-
5,517
2,620
8,137
-
-
-
42,691
32,872
10,613
-
86,176
-
-
-
At fair value
through profit
or loss
$
At amortized
cost
$
-
-
4,819
2,713
7,532
-
-
109
109
35,940
42,098
9,004
-
87,042
-
-
-
-
-
-
-
-
-
40,200
121,000
161,200
Financial
liabilities at
amortized
cost
$
-
-
-
-
-
46,454
116,000
-
162,454
Carrying
value
Total
$
42,691
32,872
16,130
2,620
94,313
40,200
121,000
161,200
Carrying
value
Total
$
35,940
42,098
13,823
2,713
94,574
46,454
116,000
109
162,563
32 ▪ 5N Plus ▪ Consolidated Financial Statements
77
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Fair value hierarchy
The fair value hierarchy reflects the significance of the inputs used in making the measurements and has the following
levels:
-
-
-
Level 1:
Level 2:
Level 3:
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table presents the financial instruments, by level, which are recognized at fair value in the consolidated
statements of financial position:
As at December 31, 2022
Financial assets
At fair value through profit or loss
Indexed deposit agreement (Note 7)
Investment in equity instruments (Note 12)
Restricted investment (Note 12)
Total
As at December 31, 2021
Financial assets (liabilities)
At fair value through profit or loss
Indexed deposit agreement (Note 7)
Investment in equity instruments (Note 12)
Restricted investment (Note 12)
Interest rate swap agreement (Note 14) (1)
Level 1
$
-
-
-
-
Level 1
$
-
-
-
-
-
Level 2
$
5,517
-
-
5,517
Level 2
$
4,819
-
-
(109)
4,710
Level 3
$
-
2,000
620
2,620
Level 3
$
-
2,000
713
-
2,713
Total
(1)
78
In February 2020, the Company entered into an interest rate swap agreement, which matured in April 2022, with a major Canadian financial institution
to reduce its financial expense fluctuations on Libor rate on a portion of its credit facility (Note 14). Under this interest rate swap, the Company
exchanged interest payments. The terms were such that on each interest payment date, the Company received or paid the net difference between the
fixed rate of 1.435% and its Libor rate on a notional amount of $25,000.
5N Plus ▪ Consolidated Financial Statements ▪ 33
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
20. Operating Segments
The following tables summarize the information reviewed by the entity’s chief operating decision maker when
measuring performance:
Specialty Semiconductors
Performance Materials
Total revenue
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Adjusted EBITDA(1)
Interest on long-term debt, imputed interest and
other interest expense
Share-based compensation expense
Litigation and restructuring costs (Note 29)
Foreign exchange and derivative loss
Impairment of non-current assets (Note 29)
Loss on divestiture of subsidiary (Notes 4 and 29)
Loss on disposal of assets held for sale (Note 8)
Depreciation and amortization
(Loss) earnings before income tax
2022
$
121,918
142,305
264,223
24,318
17,277
(11,567)
30,028
5,192
999
3,823
42
12,478
7,834
216
17,732
(18,288)
2021
$
70,655
139,335
209,990
18,817
18,957
(9,535)
28,239
3,713
689
2,144
418
-
-
-
12,535
8,740
(1)
(Loss) earnings before income tax, depreciation and amortization, impairment of non-current assets, share-based compensation expense, loss on
disposal of assets held for sale, loss on divestiture of subsidiary, litigation and restructuring costs and financial expense.
Capital expenditures
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Total
Assets excluding the deferred tax assets
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Total
2022
$
10,038
5,944
80
16,062
2022
$
180,473
129,901
31,609
341,983
2021
$
595
4,790
-
5,385
2021
$
189,022
146,111
31,450
366,583
34 ▪ 5N Plus ▪ Consolidated Financial Statements
79
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The geographic distribution of the Company’s revenues based on the location of the customers for the years ended
December 31, 2022 and 2021, and the identifiable non-current assets as at December 31, 2022 and 2021 are summarized
as follows:
Revenues
Asia
China
Japan
Other(1)
Americas
United States
Other
Europe
Germany
Belgium
Netherlands
France
Other(1)
Other
Total
(1) None exceeding 10%
Non-current assets (other than deferred tax assets)
Asia
United States
Canada
Europe
Belgium
Germany
Total
2022
$
10,815
4,453
27,139
95,517
19,911
41,314
7,276
9,604
13,831
29,587
4,776
264,223
2022
$
3,411
13,590
29,156
-
108,664
154,821
2021
$
10,531
4,545
24,056
66,077
19,206
29,738
11,229
9,945
6,285
23,931
4,447
209,990
2021
$
7,850
12,836
25,176
8,631
116,568
171,061
For the year ended December 31, 2022, one customer represented approximately 17% (2021 – 19%) of revenues of which
14% (2021 – 13%) is within the Specialty Semiconductors segment and 3% (2021 – 6%) is within the Performance Materials
Segment.
21. Supplemental Cash Flow Information
a) Net change in non-cash working capital balances related to operations consists of the following:
Decrease (increase) in assets:
Accounts receivable
Inventories
Income tax receivable
Other current assets
(Decrease) increase in liabilities:
Trade and accrued liabilities
Income tax payable
Deferred revenue
Net change
80
2022
$
5,364
2,435
(437)
(427)
(1,691)
3,169
1,830
10,243
2021
$
(3,649)
(6,993)
386
(9,560)
6,604
2,287
4,642
(6,283)
5N Plus ▪ Consolidated Financial Statements ▪ 35
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
b) The reconciliation of assets/liabilities arising from financing activities consists of the following:
December 31
2021
$
116,000
109
32,640
Cash flows
$
5,000
-
(2,999)
Imputed
interest
$
-
-
605
Non-Cash changes
Foreign
exchange
movement
$
-
-
(1,617)
Fair value
changes
$
-
(109)
-
Non-cash
working
capital
$
-
-
1,773(1)
December 31
2022
$
121,000
-
30,402
148,749
2,001
605
(1,617)
(109)
1,773
151,402
December
31 2020
$
50,109
439
5,358
Cash flows
$
38,495(1)
-
(1,872)
Imputed
interest
$
-
-
336
Non-Cash changes
Foreign
exchange
movement
$
-
-
(459)
Fair value
changes
$
-
(330)
-
Non-cash
working
capital
$
27,396(2)
-
29,277(1)
December
31 2021
$
116,000
109
32,640
55,906
36,623
336
(459)
(330)
56,673
148,749
Long-term debt
Interest rate swap
Lease liabilities
Total net liabilities from
financing liabilities
Long-term debt
Interest rate swap
Lease liabilities
Total net liabilities from
financing liabilities
(1)
(2)
Includes an amount of ($938) in 2022 and an amount of $21,626 in 2021 following the acquisition of AZUR (Note 4).
Includes an amount of $27,396 following the acquisition of AZUR which was repaid in full on November 5, 2021 (Note 4).
c) The consolidated statements of cash flows exclude or include the following transactions:
Excluded additions unpaid at end of the year:
Additions to property, plant and equipment
Included additions unpaid at beginning of year:
Additions to property, plant and equipment
Excluded share issuance related to the acquisition of AZUR (Note 4)
22. Share Capital
2022
$
2,329
3,095
-
2021
$
3,095
775
14,249
Authorized:
-
-
An unlimited number of common shares, participating, with no par value, entitling the holder to one vote per
share; and
An unlimited number of preferred shares, issuable in one or more series with specific terms, privileges and
restrictions to be determined for each class by the Board of Directors. As at December 31, 2022 and 2021, no
preferred shares were issued.
On November 5, 2021, in connection with the acquisition of AZUR (Note 4), the Company issued 6,500,000 common shares
at an average price of $1.90 to finance the purchase.
On March 5, 2020, the TSX approved the Company’s normal course issuer bid (NCIB). Under this NCIB, the Company had
the right to purchase for cancellation, from March 9, 2020 to March 8, 2021, a maximum of 2,000,000 common shares.
In 2021, the Company repurchased and cancelled 249,572 common shares at an average price of $3.24 for a total amount
of $809. An amount of $17 has been applied against share capital, and an amount of $792 has been applied against the
deficit.
36 ▪ 5N Plus ▪ Consolidated Financial Statements
81
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
23. Earnings per Share
The following table reconciles the numerators and denominators used for the computation of basic and diluted (loss)
earnings per share:
Numerators
Net (loss) earnings for the year
Denominators
Basic weighted average number of shares
Dilutive effect:
Stock options
Diluted weighted average number of shares
2022
$
(22,999)
2022
2021
$
3,110
2021
88,330,236
82,636,023
-
88,330,236
151,297
82,787,320
As at December 31, 2022, a total number of 1,598,938 stock options was excluded from the diluted weighted average
number of shares due to their anti-dilutive effect due to net loss for the year.
As at December 31, 2021, a total number of 79,152 stock options was excluded from the diluted weighted average number
of shares due to their anti-dilutive effect because of the Company’s stock price.
24. Share-Based Compensation
Restricted Share Unit and Performance Share Unit Plan
On November 4, 2015, the Company adopted a new Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”)
Plan (the “RSU & PSU Plan”) to replace the previous RSU Plan, for the purpose of enhancing the Company's ability to attract
and retain talented individuals to serve as employees, officers and executives of the Company and its affiliates and
promoting a greater alignment of interests between such employees, officers and executives and the shareholders of the
Company. The RSU & PSU Plan enables the Company to award eligible participants: (i) phantom RSUs that vest no later
than three years following the grant date; and (ii) phantom PSUs that vest after certain periods of time, not exceeding
three years, and subject to the achievement of certain performance criteria as determined by the Board of Directors. Such
plan provides for the settlement of RSUs and PSUs through either cash or the issuance of common shares of the Company
from treasury, for an amount equivalent to the volume weighted average of the trading price of the common shares of
the Company on the TSX for the five trading days immediately preceding the applicable RSU vesting determination date
or PSU vesting determination date.
In the case of a participant’s termination by the Company for cause or as a result of a voluntary resignation by the
participant before the end of a performance cycle, all RSUs and PSUs will be forfeited immediately as of the date on which
the participant is advised of his termination or resigns.
In the case of a participant’s termination by the Company other than for cause, if such participant is deemed to be on long-
term disability or if such participant retires before the end of a performance cycle, the number of RSUs which will vest at
such event will be prorated based on the number of months worked at the end of the performance cycle and all PSUs will
be forfeited immediately.
In the case of a participant’s death before the end of a performance cycle, the number of RSUs which will vest will be
prorated based on the number of months worked at the end of the fiscal year preceding the participant’s death and all
PSUs will be forfeited immediately.
82
5N Plus ▪ Consolidated Financial Statements ▪ 37
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The maximum number of common shares which may be issued under the RSU & PSU Plan is 5,000,000. Common shares
in respect of RSUs or PSUs to be settled through the issuance of common shares but that have been forfeited, cancelled
or settled in cash shall be available for RSUs or PSUs to be granted thereafter pursuant to this plan. No RSUs or PSUs to be
settled through the issuance of common shares may be granted to any participant unless the number of common shares:
(a) issued to "Insiders" within any one-year period; and (b) issuable to "Insiders" at any time, under the plan, or when
combined with all of the Company's other security-based compensation arrangements, could not exceed 10% of the total
number of issued and outstanding common shares, respectively.
For the year ended December 31, 2022, the Company granted 95,881 RSUs (2021 – 164,412), 146,549 RSUs were paid
(2021 – 413,710) and 13,110 RSUs were forfeited (2021 – 143,851). As at December 31, 2022, 278,481 RSUs were
outstanding (2021 – 342,259).
For the year ended December 31, 2022, the Company granted nil PSUs (2021 – nil), nil PSUs were paid (2021 – 166,700)
and 200,000 were cancelled (2021 – 230,000). As at December 31, 2022, nil PSUs were outstanding (2021 – 200,000).
Stock Appreciation Rights Plan
On June 7, 2010, the Company adopted a Restricted Share Unit for Foreign Employees Plan (the “RSUFE Plan”) which was
slightly amended on November 7, 2012 by the Company to become the Stock Appreciation Rights plan (the “SAR Plan”)
which replaced the RSUFE Plan. The SAR Plan enables the Company to award eligible participants phantom stock options
to foreign directors, officers and employees. SARs usually have a six-year term and vest equally over a four-year period at
an annual rate of 25% per year beginning one year following the SARs grant date. The amount of cash payout is equal to
the sum of the positive differences between the volume weighted average trading price of the common shares of the
Company on the TSX in the last twenty (20) trading days immediately preceding the exercise date and the grant price of
each SAR redeemed.
At the end of each financial period, changes in the Company’s payment obligations due to changes in the market value of
the common shares on the TSX are recorded as an expense. For the year ended December 31, 2022, the Company granted
171,025 SARs (2021 – 1,116,244), 200,000 SARs were paid (2021 – 364,499) and 377,500 SARs were forfeited
(2021 – 678,813). As at December 31, 2022, 924,157 SARs were outstanding (2021 – 1,330,632).
Deferred Share Unit Plan
On May 7, 2014, the Company adopted a Deferred Share Unit (“DSU”) Plan (the “DSU Plan”) which enables the Company
to provide Board directors and key officers and employees designated by the Board with phantom share units to enhance
the Company's ability to attract and retain individuals with the right combination of skills and experience to serve on the
Company’s Board or as Company’s executives. Unless the Board of Directors decides otherwise at its sole discretion, DSUs
vest entirely at their date of grant and become payable in cash upon termination of services of a director, or termination
of employment of an officer or employee. The amount of cash payout is equal to the volume weighted average trading
price of the common shares of the Company on the TSX of the twenty (20) trading days immediately preceding the date
of payment of the DSU.
For the year ended December 31, 2022, the Company granted 476,152 DSUs (2021 – 220,073) and 348,277 DSUs were
paid (2021 – 650,000). As at December 31, 2022, 1,702,843 DSUs were outstanding (2021 – 1,574,968).
38 ▪ 5N Plus ▪ Consolidated Financial Statements
83
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Stock Option Plan
On April 11, 2011, the Company adopted a new stock option plan replacing the previous plan (the “Old Plan”), in place
since October 2007, with the same features as the Old Plan with the exception of a maximum number of options granted
which cannot exceed 5,000,000. The aggregate number of shares which could be issued upon the exercise of options
granted under the Old Plan could not exceed 10% of the issued shares of the Company at the time of granting the options.
Options granted under the Stock Option Plan may be exercised during a period not exceeding ten years from the date of
grant. The stock options outstanding as at December 31, 2022 may be exercised during a period not exceeding six years
from their date of grant. Unless the Board of Directors decides otherwise at its sole discretion, options vest at a rate of
25% (100% for directors) per year, beginning one year following the grant date of the options. Any unexercised options
will expire one month after the date a beneficiary ceases to be an employee, director or officer and one year for retired
directors.
The following table presents information concerning all outstanding stock options:
2022
Number
of options
Weighted average
exercise price
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Exercisable, end of year
825,968
772,970
-
-
1,598,938
457,749
The outstanding stock options as at December 31, 2022 are as follows:
February 2023
February 2024
March 2025
March 2026
May 2027
December 2027
March 2028
May 2028
Exercise price
Low
CA$
1.75
2.71
3.43
2.10
3.38
2.42
2.27
1.23
CA$
2.46
1.33
-
-
1.91
2.41
High
CA$
1.75
2.71
3.43
2.10
3.38
2.42
2.27
1.23
Number
of options
672,600
648,212
(428,678)
(66,166)
825,968
267,007
2021
Weighted average
Exercise price
CA$
2.09
2.49
1.88
2.78
2.46
2.33
Number of options
Exercisable
Outstanding
63,000
35,165
23,205
24,326
12,053
300,000
-
-
457,749
63,000
35,165
30,940
48,651
48,212
600,000
72,970
700,000
1,598,938
The fair value of stock options at the grant date was measured using the Black-Scholes option pricing model. The historical
share price of the Company’s common shares is used to estimate expected volatility, and government bond rates are used
to estimate the risk-free interest rate.
The following table illustrates the inputs used in the average measurement of the fair values of the stock options at the
grant date granted during the years ended December 31, 2022 and 2021:
Expected stock price volatility
Dividend
Risk-free interest rate
Expected option life
Fair value – weighted average of options issued
84
2022
53%
None
2.59%
4 years
CA$0.57
2021
48%
None
1.24%
4 years
CA$0.96
5N Plus ▪ Consolidated Financial Statements ▪ 39
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The following table shows the share-based compensation expense recorded in the consolidated statements of earnings
for the years ended December 31, 2022 and 2021:
Expense
RSUs
PSUs
SARs
DSUs
Stock options
Indexed deposit agreement (Note 7)
Total
The following amounts were recorded:
Liability
RSUs
SARs
DSUs
Total
Intrinsic value of vested units
25. Commitments and Contingencies
Commitments
2022
$
202
-
244
1,121
326
(894)
999
2022
$
375
562
3,906
4,843
4,015
2021
$
432
(552)
(331)
(320)
148
1,312
689
2021
$
433
455
2,957
3,845
4,469
As at December 31, 2022, in the normal course of business, the Company contracted letters of credit for an amount of
$883 (2021 – $953).
Contingencies
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or assets.
As at the date of issue of the consolidated financial statements, the Company was not aware of any significant events that
would have a material effect on its consolidated financial statements.
26. Related Party Transactions
The Company’s related parties are its directors and executive members.
Unless otherwise stated, none of the transactions incorporated special terms and conditions and no guarantees were given
or received. Outstanding balances are settled in cash.
Key management compensation
Key management includes directors (executive and non-executive) and certain senior management. The compensation
expense paid or payable to key management for employee services is as follows:
Wages and salaries
Share-based compensation and others (Note 24)
Total
40 ▪ 5N Plus ▪ Consolidated Financial Statements
2022
$
1,995
1,677
3,672
2021
$
3,597
(914)
2,683
85
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
27. Financial Risk Management
In the normal course of operations, the Company is exposed to various financial risks. These risk factors include market
risk (foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates, equity prices and interest rates, will
affect the Company’s net earnings or the value of financial instruments.
The objective of market risk management is to mitigate exposures within acceptable limits, while maximizing
returns.
a) Foreign currency risk
Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments
as a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability
primarily in relation to certain sales commitments, expected purchase transactions, certain local operating expenses
and debt denominated in a foreign currency. In addition, these operations have exposure to foreign exchange rates
primarily through cash and cash equivalents and other working capital accounts denominated in currencies other
than their functional currencies.
The following table summarizes
December 31, 2022:
in US dollar equivalents the Company’s major currency exposures as at
Cash and cash equivalents
Accounts receivable
Other current assets
Other non current assets
Trade and accrued liabilities
Lease liabilities
Net financial assets (liabilities)
CA$
$
686
513
5,517
-
(10,834)
(6,033)
(10,151)
EUR
$
4,164
4,707
10,613
620
(16,175)
(339)
3,590
GBP
$
14
-
-
-
(317)
-
(303)
HKD
$
21
-
-
-
(199)
(171)
(349)
MYR
$
156
1
-
-
(219)
-
(62)
2022
Other
$
9
128
-
-
(149)
-
(12)
For the Company’s subsidiaries with a functional currency other than the US dollar, their exposures of financial assets and
financial liabilities denominated in US dollars are $6,848 and $597 respectively with a net position of $6,251. A
strengthening or weakening in the exchange rate between the functional currencies of these subsidiaries and the US dollar
of five-percentage points results in a decrease or increase of $313 to earnings before income tax.
The following table shows the impact on earnings before income tax of a five-percentage point strengthening or weakening
of foreign currencies against the US dollar as at December 31, 2022 for the Company’s financial instruments denominated
in non-functional currencies:
5% Strengthening
5% Weakening
86
CA$
$
(508)
508
EUR
$
179
(179)
GBP
$
(15)
15
HKD
$
(17)
17
MYR
$
(3)
3
Other
$
(1)
1
5N Plus ▪ Consolidated Financial Statements ▪ 41
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The Company will occasionally enter into foreign exchange forward contracts to sell US dollars in exchange for Canadian
dollars and Euros. These contracts would hedge a portion of ongoing foreign exchange risk on the Company’s cash flows
since much of its non-US dollar expenses are incurred in Canadian dollars and Euros. The Company may also enter into
foreign exchange contracts to sell Euros for US dollars. As at December 31, 2022, the Company has no foreign exchange
contracts outstanding.
b)
Interest rate risk
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates.
The Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion
of its long-term debt is made of subordinated debts at fixed rate. The Company is exposed to interest rate
fluctuations on its revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest
rates would have an impact of approximately $960 on the Company’s net earnings on a twelve-month horizon based
on the balance outstanding on December 31, 2022.
c) Other price risk
Other price risk is the risk that fair value or future cash flows will fluctuate because of changes in market prices, other
than those arising from interest rate risk or currency risk.
Credit risk
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and, as
a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit practice.
This policy dictates that all new customer accounts be reviewed prior to approval and establishes the maximum amount
of credit exposure per customer. The creditworthiness and financial well-being of the customer are monitored on an
ongoing basis.
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected
credit loss allowance for trade receivables.
The expected loss rates are based on the Company’s historical credit losses experienced over the three-year period
prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on
macroeconomic factors affecting the Company’s customers. Historically, the Company has not incurred any significant
losses in respect of its trade receivables. Therefore, the loss allowance at the end of each period and the change
recorded for each period is insignificant.
The past due receivables are as follows:
Current
More than 30 days past due
More than 60 days past due
Gross carrying amount
Loss allowance
Total trade receivables
2022
$
24,152
192
1,911
26,255
(152)
26,103
2021
$
33,838
413
763
35,014
(149)
34,865
42 ▪ 5N Plus ▪ Consolidated Financial Statements
87
5N PLUS | 2022 ANNUAL REPORT
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The following table summarizes the changes in the loss allowance for trade receivables:
Beginning of year
Increase during the year
Trade receivables written off during the year as uncollectible
Unused amounts reversed
End of year
2022
$
149
3
-
-
152
2021
$
146
119
-
(116)
149
The loss allowance is included in selling, general and administrative expenses in the consolidated statement of earnings,
and is net of any recoveries that were provided for in prior periods.
Amounts charged to the loss allowance account are generally written off when there is no reasonable expectation of
recovery.
Counterparties to financial instruments may also expose the Company to credit losses in the event of non-performance.
Counterparties for derivative and cash transactions are limited to high credit quality financial institutions, which are
monitored on an ongoing basis. Counterparty credit assessments are based on the financial health of the institutions and
their credit ratings from external agencies, therefore no impairment loss was identified as at December 31, 2022.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company
manages liquidity risk through the management of its capital structure. It also manages liquidity risk by continually
monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and matching the
maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s
annual operating and capital budgets as well as any material transactions out of the ordinary course of business, including
proposals on acquisitions and other major investments.
The following table reflects the contractual cash flows of the Company’s financial liabilities as at December 31, 2022:
Carrying
amount
$
40,200
121,000
30,402
191,602
1 year
$
40,200
7,836
2,770
50,806
2 years
$
-
31,584
2,601
34,185
3 years
$
-
6,166
2,494
8,660
4 years
$
-
98,055
2,451
100,506
Over
5 years
$
-
-
24,834
24,834
2022
Total
$
40,200
143,641
35,150
218,991
Trade and accrued liabilities
Long-term debt
Lease liabilities
Total
28. Capital Management
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Company requires the approval of its lenders on some of the capital transactions such as the payment of dividends
and capital expenditures over a certain level.
The Company monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as net debt divided by total
equity. Net debt is calculated as total borrowings (comprising long-term debt in the consolidated statement of financial
position) less cash and cash equivalents. Any introduced IFRS 16 reporting measures in reference to lease liabilities are
excluded from the calculation.
5N Plus ▪ Consolidated Financial Statements ▪ 43
88
5N PLUS | 2022 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Debt-to-equity ratios as at December 31, 2022 and 2021 are as follows:
Long-term debt including current portion
Total debt
Less: Cash and cash equivalents
Net debt
Shareholders’ equity
Debt-to-equity ratio
29. Expenses by Nature
Expenses by nature include the following:
Wages and salaries
Depreciation of property, plant and equipment (Note 8)
Depreciation of right-of-use assets (Note 9)
Amortization of other assets (Note 12)
Other expenses (income), net
Amortization of intangible assets (Note 10)
Share-based compensation expense (Note 24)
Loss (gain) on disposal of property, plant and equipment
Loss on disposal of assets held for sale (Note 8)(1)
Loss on divestiture of subsidiary (Note 4)
Impairment of non-current assets (Notes 4, 8 and 10)
Research and development, net of tax credit(2)
Litigation and restructuring costs (income), net(3)
Other income
2022
$
121,000
121,000
(42,691)
78,309
112,776
69%
2022
$
55,107
11,717
2,702
260
3,313
999
(13)
216
7,834
12,478
4,638
3,823
(291)
2021
$
116,000
116,000
(35,940)
80,060
136,247
59%
2021
$
40,353
8,969
1,764
253
1,802
689
171
-
-
-
736
2,144
(1,520)
(1)
A loss of $216 on the disposal of assets held for sale was recorded in 2022 within “Other expenses (income), net” within the consolidated
statement of (loss) earnings. The asset, which was previously presented as held for sale within the Specialty Semiconductors segment, pertains
to a reclassification from buildings for an amount of $3,032 in 2022. The reclassification relates to the planned relocation of operations from
Canada of one of the Company’s subsidiaries situated in Asia, announced in the third quarter of 2020.
(2) Reduced research and development, net of tax credit by an amount of $3,667 for the year ended December 31, 2022 resulting from research
and development subsidies. There is an outstanding receivable related to this grant as at December 31, 2022 for an amount of $1,460 included
within Accounts receivable.
Reduced research and development, net of tax credit by an amount of $1,590 for the year ended December 31, 2021 resulting from research
and development subsidies. There is no outstanding balance of deferred income or receivable related to this grant as at December 31, 2021.
(3)
In 2022, the Company recorded litigation and restructuring costs. The main costs are as follows:
- Costs related to the divestiture of a subsidiary of $2,594 (Note 4);
- Change in senior executive management for an amount of $241;
- Settlement of a contract by mutual agreement for an amount of $372; and
- Costs related to site closure in Asia for an amount of $358.
During 2021, the Company recorded a charge of $1,534 following the announcement of a change to its senior executive management for which
a balance of $94 was outstanding as at December 31, 2021. In addition, a provision for restructuring costs was recorded for an amount of $610
during 2021. This provision consisted of severances and other related costs to site closure.
44 ▪ 5N Plus ▪ Consolidated Financial Statements
89
5N PLUS | 2022 ANNUAL REPORT
Board of
Directors
Luc Bertrand
Chair of the Board
Jean-Marie Bourassa
Chair of the Audit and
Risk Management Committee
Blair Dickerson
Director
Gervais Jacques
Director
Nathalie Le Prohon
Chair of the Governance and
Compensation Committee
Executive
Committee
Roland Dubois
Chief Commercial Officer
and Executive Vice President,
Specialty Semiconductors
Gervais Jacques
President and Chief Executive Officer
Richard Perron
Chief Financial Officer
Paul Tancell
Executive Vice President,
Performance Materials
90
5N PLUS | 2022 ANNUAL REPORT Corporate
Information
Stock Exchange
5N Plus is listed on the Toronto Stock Exchange, under the symbol VNP.
Transfer Agent and Registrar
Computershare Investor Services Inc.
Auditors
PricewaterhouseCoopers LLP
Head Office
4385 Garand Street, Montreal, Quebec H4R 2B4
For more information, please contact:
Investor Relations
5N Plus Inc.
4385 Garand Street, Montreal, Quebec H4R 2B4
T: 514-856-0644 F: 514-856-9611
invest@5nplus.com
Si vous souhaitez obtenir une copie en français de ce rapport annuel,
communiquez avec :
Relations avec les investisseurs
5N Plus inc.
4385, rue Garand, Montréal (Québec) H4R 2B4
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5N Plus Inc.
4385 Garand Street
Montréal, Quebec, Canada
H4R 2B4
Enabling Performance™
www.5nplus.com