On Wednesday, July 31, before market open, 5N Plus will report its Q2, 2013 results.
Safrance says volatile commodity prices, such as the markets for Tellurium and Bismuth, have carved into 5N Plus’s margins, but the market lately is characterized by relatively flat pricing. What’s more, he notes, 5N Plus is now in better position to reduce its costs by restocking supplies at lower prices, a move that will effectively head off any impact on margins.
This morning, ahead of Wednesday’s earnings, Safrance reiterated his $3.50 one-year target and BUY rating on VNP.
St. Laurent, Quebec’s 5N Plus, which derives its name from the purity of its products, 99.999% (five nines), took off when the company, which produces essential components of thin-film solar modules, became a primary material supplier to American cleantech giant First Solar. When First Solar’s revenue was skyrocketing, it was being supplied cadmium telluride cells by 5N Plus.
5N Plus, meanwhile, was mirroring First Solar’s action, albeit on a much smaller scale. Sales increased from $10.3 million for the fiscal year ended May 31, 2005 to over $181 million in fiscal 2011. That moved shares of the company from a 2008 low of $3.50 to a high of $9.85 in March of 2011. The company hit a speedbump as commodity prices fell at the same time the company was having trouble digesting the $315-million acquisition of Belgium’s MCP Group.
Safrance says management spent the second half of fiscal 2012 integrating MCP Group. But 5N Plus, he says, has gotten a handle on its inventory and managed to lower its debt load of late. He now thinks the company’s overall margins will begin to steadily improve.