5N Plus Inc. — Interim / Quarterly Report 2020

Nov 11, 2020

5N Plus Reports Strong Financial Results for the Third Quarter Ended September 30, 2020

Montreal, Québec, November 10, 2020 – 5N Plus Inc. (TSX:VNP) (“5N Plus” or the “Company”), a leading global producer of engineered materials and specialty chemicals, today reported financial results for the third quarter ended September 30, 2020.

All amounts are expressed in U.S. dollars.

5N Plus posted strong results in the third quarter of 2020, achieving surging gross margin$^1$ of 31.3% and Adjusted EBITDA$^1$ of $7.7$ million or 19.4% of revenue despite a globally challenging business environment due to the current pandemic. The improved earnings and higher margins were supported by a shift in product mix away from commodities to higher value-added products. As compared to the same period last year, revenue for the quarter was impacted by lower metal notations and COVID-19 related challenges, with segment Eco-Friendly Materials absorbing the majority of the impact.

During the quarter, 5N Plus initiated the closure of an Asian subsidiary with planned consolidation of select activities within the Company’s global footprint. This decision was taken solely due to unfavorable business conditions arising from abrupt changes in the regulatory environment and inconsistent enforcement practices, resulting in restructuring and impairment charges. Also, during the quarter, 5N Plus executed a negotiated settlement addressing upstream related challenges which resulted in a non-recurring income of $8.0 million. The financial impact of these two non-recurring events resulted in a net gain and a favorable cash flow impact to follow over the coming quarters.

For the third quarter of 2020 and year-to-date, the Company reported the following:

• Adjusted EBITDA$^1$ for the third quarter of 2020 reached $7.7$ million compared to $6.0$ million during the same period last year. EBITDA$^1$ for the third quarter of 2020 reached $7.5$ million compared to $5.9$ million during the same quarter of 2019.

• Adjusted EBITDA and EBITDA for the nine-month period ended September 30, 2020 reached $22.2$ million and $20.2$ million respectively compared to $17.4$ million and $15.4$ million during the same period of 2019, favorably impacted by various activities related to semiconductor compounds and engineered substrates within segment Electronic Materials. Despite challenges associated with COVID-19 and low but stable metal notations impacting upstream activities, operational improvements in segment Eco-Friendly Materials narrowed the shortfall as compared to the same period last year.

$^1$ See Non-IFRS Measures

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• Revenue for the third quarter and the nine-month period ended September 30, 2020 reached $39.9 million and $131.0 million compared to $49.6 million and $151.3 million during the same periods in 2019. The portion of the revenue attributed to the sale of metals was significantly lower than the same periods last year and the historically low metal notations reduced contribution from upstream activities. In addition, reduced demand from certain industries due to COVID-19 impacted overall revenue.

• Net earnings for the third quarter of 2020 were $2.7 million or $0.03 per share compared to $1.0 million or $0.01 per share for the same period last year and $5.1 million or $0.06 per share for the nine-month period compared to $1.6 million or $0.02 per share for the same period last year.

• Annualized Return on Capital Employed (ROCE)$^1$ reached 12.9% for the third quarter of 2020 as compared to 8.2% at the end of 2019.

• Net debt$^1$ stood at $24.7 million as of September 30, 2020, a decrease of $10.4 million compared to December 31, 2019.

• From March 9, 2020 to September 30, 2020, 5N Plus purchased and cancelled 1,358,569 of the Company’s common shares under the normal course issuer bid (NCIB) plan. Under the NCIB, 5N Plus has the right to purchase for cancellation, until March 8, 2021, a maximum of 2,000,000 common shares.

• As of September 30, 2020, the Backlog$^1$ reached a level of 171 days of annualized revenue, lower than previous quarter which ended at 202 days and lower than in Q3 2019 at 215 days. The net difference in backlog is largely attributed to the timing associated with the negotiation of long-term contracts some of which are well underway and are expected to be completed early next year. Bookings$^1$ in Q3 2020 reached 53 days compared to 66 days in Q2 2020 and 102 days in Q3 2019.

• On July 21, 2020, 5N Plus announced the introduction of the third generation of engineered semiconductor substrate, INZBE3, designed for infrared imaging and detection applications based on breakthrough process technologies with immediate surging demand expected by the customer base.

• On October 7, 2020, 5N Plus announced that it has entered the Additive Manufacturing market, (commonly referred to as 3D Printing), as the supplier of high-performance engineered powders and have begun to launch a broad portfolio of metal powder products to support this ambition.

• On October 21, 2020, 5N Plus and Metalpine GmbH, an Austria-based technology leader in the production of high-quality performance powders for Additive Manufacturing announced that the parties have entered into a strategic agreement aimed at jointly serving the growing demand from Additive Manufacturing markets.

• On October 28, 2020, 5N Plus announced the completion of a series of investment packages related to process technologies, totaling nearly $10.0 million. These investments were aimed at substantially enhancing capability, increasing capacity and improving environmental footprint. The focus of these investments were select sites in Europe and China with segment Eco-Friendly Materials as the major beneficiary.

Arjang Roshan, President and Chief Executive Officer, commented: “Despite a challenging business environment impacted by COVID-19, 5N Plus continues to deliver strong earnings and expand margins thanks to the growing contributions from our growth initiatives. Numerous customer feedbacks and growing sales orders; especially for engineered compounds, powders and substrates, continue to reaffirm our belief in the growth initiatives and their relevance to the markets of the future.”

$^1$ See Non-IFRS Measures

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Mr. Roshan continued: “Recognizing the viability of our trajectory, we are vetting various options to expedite the rate of growth in these initiatives with emphasis on substantially increasing our Company’s total addressable market.” Mr. Roshan concluded: “What is abundantly certain is that our people are the impetus behind our progress and their health and safety shall remain our first and foremost priority.”

Webcast Information 5N Plus will host a conference call on Wednesday, November 11, 2020 at 8:00 am (Eastern Time) to discuss results of the third quarter ended September 30, 2020. All interested parties are invited to participate in the live broadcast on the Company’s website at www.5nplus.com.

To participate in the conference call:

• Toronto area: 416-764-8659
• Toll-Free: 1-888-664-6392

Enter access code 87269171.

A playback will be available two hours after the event at 1-888-390-0541, until November 18, 2020. The access code is 269171.

Non-IFRS Measures EBITDA means net earnings (loss) before interest expenses, income taxes, depreciation and amortization. We use EBITDA because we believe it is a meaningful measure of the operating performance of our 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 other companies. EBITDA margin is defined as EBITDA divided by revenues.

Adjusted EBITDA means EBITDA as defined above before impairment of inventories, share-based compensation expense, impairment of non-current assets, litigation and restructuring costs (income), gain on disposal of property, plant and equipment, foreign exchange and derivatives loss (gain). We use adjusted EBITDA because we believe it is a meaningful measure of the operating performance of our 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 other companies. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.

Gross margin is a measure we use to monitor the sales contribution after paying cost of sales excluding depreciation and impairment inventory charge. We also expressed this measure in percentage of revenues by dividing the gross margin value by the total revenue.

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. We use this measure as an indicator of our overall financial position.

Backlog represents the expected orders we have received but have 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 during the period considered, expressed in days, and are calculated by adding revenues to the increase or decrease in backlog for the period considered divided by annualized year revenues. We use backlog to provide an indication of expected future revenues in days, and bookings to determine our ability to sustain and increase our revenues.

Return on Capital Employed (ROCE) is a non-IFRS financial measure, calculated by dividing the annualized Adjusted EBIT by capital employed at the end of the period. Adjusted EBIT is calculated as the Adjusted EBITDA less depreciation of PPE and amortization of intangible assets (adjusted for accelerated depreciation charge, if any). Capital employed is the sum of the accounts receivable, the inventory, the PPE, the goodwill and intangibles less trade and accrued liabilities (adjusted for exceptional items). We use ROCE to measure the return on capital employed, whether the financing is through equity or debt. In our view, this measure provides useful information to determine if capital invested in the Company yields competitive returns. The usefulness

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of ROCE is limited by the fact that it is a ratio and not providing information as to the absolute amount of our net income, debt or equity. It also excludes certain items from the calculation and other companies may use a similar measure but calculate it differently.

About 5N Plus Inc. 5N Plus is a leading global producer of engineered materials and specialty chemicals with integrated recycling and refining assets to manage the sustainability of its business model. The Company is headquartered in Montreal, Québec, Canada and operates R&D, manufacturing and commercial centers in several locations in Europe, the Americas and Asia. 5N Plus deploys a range of proprietary and proven technologies to manufacture products which are used as enabling precursors by its customers in a number of advanced electronics, optoelectronics, pharmaceutical, health, renewable energy and industrial applications. Many of the materials produced by 5N Plus are critical for the functionality and performance of the products and systems produced by its customers, many of whom are leaders within their industry.

Forward-Looking Statements and Disclaimer Certain statements in this press release 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. A description of the risks affecting the Company’s business and activities appears under the heading “Risk and Uncertainties” of the 5N Plus’ 2019 MD&A dated February 25, 2020 and note 10 of the unaudited condensed interim consolidated financial statements for the three and nine-month periods ended September 30, 2020 and 2019 available on www.sedar.com.

The Company is not aware of any significant changes to its risk factors previously disclosed, however since January 2020, the gradual outbreak of the novel strain of the coronavirus, COVID-19 and its declaration as a pandemic by the World Health Organization, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures have caused material disruption to businesses globally resulting in an economic slowdown. While the Company has been able to mitigate the short-term impact from the crisis, it is not possible to reliably estimate the length, severity and long-term impact the global pandemic may have on the Company's financial results, conditions and cash flows. The outbreak of the COVID-19 should be considered a new risk factor.

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 press release 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 press release 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.

Contact: Richard Perron Chief Financial Officer 5N Plus Inc. (514) 856-0644 invest@5nplus.com

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5N PLUS INC. INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands of United States dollars) (unaudited)

September 30 2020 2019 $ $

Assets Current Cash and cash equivalents 30,428 20,065 Accounts receivable 33,633 28,477 Inventories 76,130 83,367 Income tax receivable 5,263 5,433 Other current assets 6,379 7,371

Total current assets 151,833 144,713 Property, plant and equipment 52,454 58,590 Right-of-use assets 5,240 6,050 Intangible assets 9,985 10,990 Deferred tax assets 7,876 8,425 Other assets 1,071 1,174

Total non-current assets 76,626 85,229 Total assets 228,459 229,942

Liabilities Current Trade and accrued liabilities 26,066 32,066 Income tax payable 3,865 3,374 Current portion of long-term debt 104 107 Current portion of lease liabilities 1,461 1,469

Total current liabilities 31,496 37,016 Long-term debt 55,000 55,000 Deferred tax liabilities - 269 Employee benefit plan obligation 16,104 15,398 Derivative financial liabilities 519 -

Lease liabilities 4,039 4,767 Other liabilities 195 195

Total non-current liabilities 75,857 75,629 Total liabilities 107,353 112,645

Equity 121,106 117,297 Total liabilities and equity 228,459 229,942

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5N PLUS INC. INTERIM CONSOLIDATED STATEMENTS OF EARNINGS For the three and nine-month periods ended September 30 (in thousands of United States dollars, except per share information) (unaudited)

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5N PLUS INC. For the three and nine-month periods ended September 30 (in thousands of U.S. dollars, except per share information) (unaudited)

Revenue by Segment and Gross Margin Q3 2020 Q3 2019 YTD 2020 YTD 2019 $ $ $ $ Electronic Materials 20,615 21,603 59,917 60,764 Eco-Friendly Materials 19,257 27,951 71,045 90,493 Total revenue 39,872 49,554 130,962 151,257 Cost of sales (29,982) (40,141) (101,565) (123,992) Depreciation included in cost of sales 2,570 2,227 7,833 7,474 Gross margin¹ 12,460 11,640 37,230 34,739 Gross margin percentage¹ 31.3% 23.5% 28.4% 23.0%

Adjusted EBITDA and EBITDA Q3 2020 Q3 2019 YTD 2020 YTD 2019 $ $ $ $ Revenue 39,872 49,554 130,962 151,257 Adjusted operating expenses¹* (32,128) (43,580) (108,714) (133,809) Adjusted EBITDA¹ 7,744 5,974 22,248 17,448 Impairment of inventory - - - - Impairment of non-current assets (4,934) - (4,934) - Share-based compensation expense (254) (586) (934) (2,128) Litigation and restructuring income (costs), net 5,577 - 5,577 - Foreign exchange and derivative (loss) gain (683) 472 (1,763) 49 EBITDA¹ 7,450 5,860 20,194 15,369 Interest on long-term debt, imputed interest and other interest expense 948 942 2,720 3,290 Depreciation and amortization 2,975 2,493 9,074 8,252 Earnings before income taxes 3,527 2,425 8,400 3,827 Income tax expense Current 656 854 2,946 2,001 Deferred 162 541 404 187 Other 818 1,395 3,350 2,188 Net earnings 2,709 1,030 5,050 1,639

Basic earnings per share $0.03 $0.01 $0.06 $0.02 Diluted earnings per share $0.03 $0.01 $0.06 $0.02

Net Debt As at September 30, 2020 As at December 31, 2019 $ $ $ $ Bank indebtedness - - - Long-term debt including current portion 55,104 55,107 Total Debt¹ 55,104 55,107 Cash and cash equivalents (30,428) (20,065) Net Debt¹ 24,676 35,042

¹ See Non-IRFS Measures