Neo Performance Materials Touts Rare Earth Magnet Boom, Raises 2026 EBITDA Outlook

Key Points

• Neo Performance Materials raised its fiscal 2026 adjusted EBITDA outlook to $140 million-$150 million, up from earlier guidance of $75 million-$80 million, after reporting its strongest quarterly EBITDA performance ever in Q1.
• The company is expanding its rare earth magnet footprint in Europe, where it already operates a 2,000-ton facility and plans a further 3,000-ton expansion, with demand driven by automotive, robotics, power tools and renewable energy customers.
• Neo is also benefiting from broader critical materials demand across its Rare Metals Division, while its European heavy rare earth separation line is now complete, though management says it will not meaningfully boost near-term results.

Neo Performance Materials TSE: NEO Chief Financial Officer Jonathan Baksh said the company is benefiting from rising demand for rare earth permanent magnets and other critical materials, while emphasizing its existing manufacturing base, technical expertise and expanding European platform.

Speaking at the Virtual Investor Conferences Precious Metals and Critical Minerals Conference hosted by OTC Markets, Baksh described Neo as both a rare earth permanent magnet provider and a critical materials supplier, with operations spanning rare earth separation, metal making, magnet making and recycling of specialized materials.

Baksh said rare earths and permanent magnets have returned to the spotlight amid geopolitical tensions and supply chain concerns. He cited China’s export restrictions on heavy rare earths and permanent magnets following U.S. tariffs as a key event that brought the issue to the forefront for automotive supply chains in the U.S. and Europe.

He also noted that Neo’s magnets were highlighted during the G7 Summit, where European Commission President Ursula von der Leyen and Canadian Prime Minister Mark Carney held up Neo magnets in speeches about supply chain stability.

Company Raises 2026 EBITDA Guidance

Baksh said Neo posted the strongest quarterly EBITDA performance in its history in the first quarter and is seeing momentum across its business units, led by its Rare Metals Division.

The company has raised its adjusted EBITDA guidance multiple times this year, according to Baksh. Neo began the year guiding for $75 million to $80 million, later raised that range to $100 million to $110 million, and more recently increased its fiscal 2026 EBITDA outlook to $140 million to $150 million.

Baksh said that would represent a record year for the company if achieved. He also cited adjusted EBITDA of $37 million in 2023, $64 million in 2024 and $76 million in 2025.

Asked about capital allocation and dividends, Baksh said Neo has paid a dividend since its IPO and reviews its dividend policy quarterly. However, he said growth opportunities may represent a higher priority for capital than a dividend increase.

Rare Earth Magnet Expansion Focused on Europe

Baksh said Neo is not a mining company, but operates in parts of the rare earth supply chain where bottlenecks are most acute: separation, metal making and magnet making. He said China accounts for about 85% of rare earth separation, 90% of metal making and 93% of magnet making globally.

Neo has roughly 10,000 tons of installed magnetics capacity worldwide, including about 4,000 tons outside China, split between 2,000 tons in Thailand and 2,000 tons in Europe, Baksh said.

The company opened a 2,000-ton European permanent magnet facility in September of last year after investing about $75 million. Baksh said Neo is targeting commercial production later this year on two to three programs and has already delivered qualification magnets from the facility.

Neo plans to expand that facility by another 3,000 tons under what it calls phase I-B. Baksh said the expansion is “a statement of when, not if,” adding that the company has already contemplated advanced purchases of capital equipment. He said the pacing will depend more on customer qualification timelines and ramp planning than on contracted volume.

Baksh said Europe was chosen for the first plant because of its demand profile, renewable energy mandates and strong base of motor and actuator manufacturers. He said Europe produces 34% of the world’s actuators and identified Bosch, Schaeffler, ZF and Brose as examples of major European players, some of which are Neo customers.

Heavy Rare Earth Separation Line Completed

Baksh also highlighted Neo’s European separation asset, located about 14 miles from its magnet facility. The site has light rare earth separation capacity of roughly 3,000 tons and recently added a small-scale heavy rare earth production line.

He said heavy rare earths are a key constraint for Western rare earth supply chains, with commercial-scale supply currently available primarily from China. The new line in Estonia demonstrates Neo’s ability to separate heavy rare earths, but Baksh said it is not expected to materially affect financial results in the near term.

“The trigger would be new mines producing something that we could separate,” Baksh said, adding that a larger commercial-scale heavy rare earth line would depend on new deposits coming online.

Rare Metals Division Benefits From Critical Materials Demand

Baksh said Neo’s Rare Metals Division produces and recycles materials including gallium, hafnium, tantalum and niobium. He said those materials are used in industrial gas turbines, commercial engines, space applications, superconductors, MRIs, capacitors and semiconductors.

He identified Neo as the only gallium recycler in North America capable of upgrading material to semiconductor grade, and the largest and only hafnium recycler in Europe. Baksh said the division is benefiting from strong pricing, demand, export controls and government stockpiling initiatives.

On tariffs, Baksh said the company has been “pretty insulated” and has seen minimal impact. He said much of Neo’s Asian magnetics business does not import into the U.S., while hafnium imported from Europe into the U.S. has been tariffed. In that case, Baksh said Neo generally has been able to pass the tariff on to customers.

Customer Pipeline Extends Beyond Automotive

Baksh said Neo’s European magnet facility is currently the only facility capable of supplying the European automotive market with EV-grade permanent magnets. He said the company has a large pipeline of automotive opportunities for electric vehicle platforms in 2027, 2028 and 2029.

He also pointed to demand from robotics, power tools and renewable energy, saying more end markets are seeking geographic diversification in supply chains.

Baksh said Neo is monitoring the broader rare earth market but is not necessarily interested in taking on the risk profile of mining assets. He said the company wants other Western rare earth players to succeed because a broader ecosystem could encourage customers and original equipment manufacturers to allocate business across capable suppliers.

About Neo Performance Materials (TSE:NEO)

Neo manufactures the building blocks of many modern technologies that enhance efficiency and sustainability. Neo's advanced industrial materials - magnetic powders, rare earth magnets, magnetic assemblies, specialty chemicals, metals, and alloys - are critical to the performance of many everyday products and emerging technologies. Neo's products fast-forward technologies for the net-zero transition. The business of Neo is organized along three segments: Magnequench, Chemicals & Oxides and Rare Metals.

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