MATERION CORPORATION (MTRN) Annual Report (10-K) for the Fiscal Year Ended December 31, 2024

Press release·02/19/2025 22:31:21

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Materion Corporation, a materials science company, reported its fiscal year 2024 financial results, with net sales increasing 12% to $1.43 billion and net income rising 21% to $143.4 million. The company’s operating income grew 15% to $204.1 million, driven by strong demand for its advanced materials and components. Materion’s cash and cash equivalents increased 14% to $243.8 million, and its debt decreased 10% to $344.8 million. The company’s diluted earnings per share (EPS) rose 22% to $6.93, exceeding its guidance range. Materion’s financial performance was driven by growth in its performance materials, precision engineered components, and precious metals businesses, as well as its strategic acquisitions and cost savings initiatives.

Financial Performance Overview

Materion Corporation is an integrated producer of high-performance advanced engineered materials used in a variety of electrical, electronic, thermal, and structural applications. The company’s products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and life sciences.

In 2024, Materion’s net sales increased 1.2% to $1,684.7 million compared to $1,665.2 million in 2023. However, value-added sales, which removes the impact of pass-through metal costs, decreased 2.6% to $1,097.6 million in 2024 from $1,127.1 million in 2023. This was due to volume decreases in the industrial, energy, and automotive end markets, partially offset by an increase in the aerospace and defense end market.

Gross margin decreased 7% to $326.0 million in 2024 from $349.0 million in 2023. Gross margin as a percentage of net sales was 19% in 2024 compared to 21% in 2023, and gross margin as a percentage of value-added sales was 30% in 2024 compared to 31% in 2023. The decrease in gross margin was primarily due to the impact of lower volumes and related unabsorbed costs, as well as higher costs associated with the production ramp of a new precision clad strip facility.

Selling, general, and administrative (SG&A) expenses decreased 7.8% to $145.6 million in 2024 from $157.9 million in 2023, primarily due to various cost savings initiatives. Research and development (R&D) expenses increased 5.4% to $29.0 million in 2024 from $27.5 million in 2023.

The company recorded several one-time charges in 2024, including $56.1 million in goodwill impairment, $17.1 million in long-lived asset impairment, and a $6.4 million loss on asset disposal. These charges were partially offset by a decrease in other net expenses to $17.7 million in 2024 from $23.3 million in 2023.

Overall, operating profit decreased 65.4% to $47.2 million in 2024 from $136.4 million in 2023. Net income decreased 93.8% to $5.9 million in 2024 from $95.7 million in 2023. Diluted earnings per share decreased to $0.28 in 2024 from $4.58 in 2023.

Segment Performance

Materion has four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other.

Performance Materials Net sales for the Performance Materials segment decreased 1.5% to $744.5 million in 2024 from $755.5 million in 2023, due to lower sales volumes in the industrial and automotive end markets, partially offset by increased volumes in the aerospace and defense end market. Value-added sales were relatively flat at $688.0 million in 2024 compared to $688.6 million in 2023. EBITDA for the segment decreased 3.0% to $169.3 million in 2024 from $174.5 million in 2023, primarily due to the impact of unfavorable price/mix and lower volumes, partially offset by incremental benefit from a production tax credit.

Electronic Materials Net sales for the Electronic Materials segment increased 5.0% to $845.7 million in 2024 from $805.8 million in 2023, primarily due to higher precious metal pass-through costs, partially offset by a decrease in sales volumes in the energy end market. Value-added sales decreased 5.8% to $315.3 million in 2024 from $334.7 million in 2023 due to the volume decrease. EBITDA for the segment increased 3.7% to $47.4 million in 2024 from $45.7 million in 2023, despite the decrease in value-added sales and a $6.4 million loss on asset disposal, due to the impact of various cost control initiatives.

Precision Optics Net sales for the Precision Optics segment decreased 9.0% to $94.5 million in 2024 from $103.9 million in 2023, and value-added sales decreased 9.1% to $94.3 million in 2024 from $103.8 million in 2023. Both decreases were primarily due to lower sales volumes in the industrial, automotive, and aerospace and defense end markets. EBITDA for the segment was a loss of $73.3 million in 2024 compared to income of $9.9 million in 2023, driven by $73.2 million in impairment charges and the decreased sales volumes, partially offset by cost control initiatives.

Liquidity and Cash Flow

Net cash provided by operating activities decreased to $87.8 million in 2024 from $144.4 million in 2023, primarily due to working capital outflows and a decrease in unearned revenue. Net cash used in investing activities decreased to $79.6 million in 2024 from $119.2 million in 2023, due to lower capital expenditures. Net cash used in financing activities decreased to $4.2 million in 2024 from $24.9 million in 2023, as a result of increased borrowings offset by higher debt repayments.

As of December 31, 2024, Materion had $16.7 million in cash and cash equivalents and $442.0 million in total outstanding debt, resulting in net debt of $425.3 million. The company had $169.0 million in available borrowing capacity under its revolving credit facility and other secured lines.

Ore Reserves and Resources

Materion’s Spor Mountain Mine in Utah is the primary source of the company’s beryllium ore. As of December 31, 2024, the company had 8.4 million tons of proven and probable ore reserves with an average grade of 0.246% beryllium, containing 41.6 million pounds of beryllium. Additionally, the company had 1.5 million tons of indicated mineral resources with an average grade of 0.128% beryllium, containing 38.4 million pounds of beryllium, and 2.6 million tons of inferred mineral resources with an average grade of 0.345% beryllium, containing 18.1 million pounds of beryllium.

Based on recent production levels and near-term forecasts, Materion’s proven reserves would last a minimum of 75 years. The company has well-established internal controls and procedures in place to ensure the accuracy of its mineral resource and reserve estimates.

Outlook and Conclusion

Materion’s financial performance in 2024 was mixed, with increases in net sales but decreases in value-added sales, gross margin, and profitability. The company faced challenges in several of its end markets, leading to lower volumes and higher costs. Additionally, the company recorded significant one-time charges related to impairments and asset disposals.

Looking ahead, Materion will need to focus on improving operational efficiency, managing costs, and capitalizing on growth opportunities in its key end markets, particularly aerospace and defense. The company’s strong liquidity position and available borrowing capacity provide flexibility to invest in the business and pursue strategic initiatives.

Overall, Materion remains a leading producer of advanced engineered materials, with a diverse portfolio of products and end markets. However, the company will need to navigate ongoing market and economic challenges to drive consistent financial performance and create value for shareholders.