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Ladies and gentlemen, thank you for standing by, and welcome to the Neo Performance Materials Q3 2019 Earnings Announcement. [Operator Instructions] I would now like to hand the conference over to Ali Mahdavi. Please go ahead.
Thank you, operator, and good morning, everyone. As a reminder, today's call will have a replay, which will be available starting tomorrow in the Investor center of our website located at neomaterials.com. Speaking first today will be Neo's President and Chief Executive Officer, Geoff Bedford; Rahim Suleman, Neo's Chief Financial Officer, will then provide additional details regarding the company's Q3 2019 performance. Finally, we will open the call to questions from analysts. Please note that some of the information you will hear during today's presentation and discussion will consist of forward-looking statements, including, without limitation, those regarding revenue, EBITDA, volume, gross margin and other income and expense measures and future business outlook. Non-IFRS financial measures will be used during this conference call. Further information regarding Neo's use of non-IFRS measures is available in Neo's Q3 2019 earnings press release, which is available on SEDAR and on our website at neomaterials.com. Actual results or trends could differ materially from those disclosed today. For more information, please refer to risk factors discussed in Neo's most recent financial filings, which were filed on SEDAR earlier today and are also available on our website. Neo assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. Financial amounts presented today will be in U.S. dollars. Let me now turn the call over to Geoff Bedford for his opening remarks. Geoff?
Thanks, Ali, and welcome, everyone. During the third quarter, we successfully managed our business through a market environment with some continuing soft spots. The macroeconomic challenges that we and other advanced materials manufacturers have faced over the last several quarters continued as expected through the third quarter. In spite of this, Neo's business has remained resilient, profitable and able to consistently generate cash and return dividends to our shareholders. We also continue to progress on several strategic initiatives that are important to future growth for the company. We strengthened our financial position in the quarter with cash and cash equivalents of $74.9 million as of September 30, 2019. That compared to $71 million as of December 31, 2018. In addition, we have approximately $6 million available under our credit facilities with no amount drawn. Our cash position at the end of the quarter was stronger, even after paying $2.9 million in dividends to shareholders repurchasing $5.7 million of stock under the NCIB program and completing our $9.7 million acquisition of Asia Mag in August. In my mind, this underscores the strength of our disciplined economic model and free cash flow conversion. This year-to-date, we have reinvested $17 million in our business, while at the same time, returning more than $21 million to shareholders. Macroeconomic headwinds and commodity cycles are certainly nothing new. At Neo, we have navigated successfully through these cycles across our more than 20 years in business. Our near-term focus remains on reducing costs, managing cash flows, increasing efficiencies and prioritizing capital spending. But our strong financial position enables us to continue to invest in strategic opportunities, especially new product development that will support our long-term growth. While Q3 consolidated revenue, operating income, net income and adjusted EBITDA were all down in the quarter on a year-over-year basis, all were nominally unchanged or slightly improved over the second quarter of this year. That was in line with our expectations. Let me turn it over to Rahim at this point to go over the details of our Q3 results, Rahim?
Thanks, Geoff. Let's summarize our consolidated results for the quarter and year-to-date. Revenue of $102.6 million compared to $114.2 million in the prior year period, and year-to-date revenue was $312.9 million versus $344.8 million in the comparable period of 2018. Operating income in the quarter was $8.4 million that compared to operating income of $10.9 million in Q3 of 2018. Net income totaled $4.1 million or $0.10 per share, and adjusted net income totaled $4.6 million or $0.12 per share, which compared to adjusted net income of $8.7 million or $0.22 per share in Q3 of 2018. For additional context, year-to-date 2019 adjusted EPS works out to $0.45 per share. On an adjusted EBITDA basis, the company earned $12.8 million, that compared to $16.7 million in Q3 of 2018. Year-to-date, adjusted EBITDA was $41.3 million compared to $53.9 million in the prior year. As Geoff noted, these numbers are generally lower on a year-over-year basis, which is generally tied to the economic and automotive slowdown as well as the specific pricing and other factors that we have previously discussed. These results were similar to or ahead of our Q2 results and were generally in line with our expectations. Let's discuss some of these details on a segment-by-segment basis. In the Magnequench segment, consistent with the trends discussed in Q1 and Q2, volumes decreased year-over-year, mostly in legacy and longer running programs. This was largely due to the slowdown in auto sales, slower economic performance in certain sectors and anticipated customer inventory adjustments. However, as we have previously noted, Magnequench continues to experience growth related to its newer product applications. These include traction motors for hybrid and electric vehicles as well as programs that are still ramping up to full production levels, such as motors used in vehicle pumps, seats, trunk assemblies and others. One example to highlight in this quarter is that over the last 12 months, our trunk motor applications have increased over 30% from the previous 12 months. That growth came in spite of the slower automotive environment. Trunk motors still represent a small portion of our total volume, but this is an example of the market's growing demand for stronger, smaller motors and how that demand continues to drive new applications that use our technology in Advanced Materials. We continue to work with our customers on qualifying next-generation magnets for a variety of applications in current and future applications, and we see very good prospects for growth in these technologies over the coming years. Adjusted EBITDA for Magnequench was $8.3 million and $27.3 million for the 3 and 9 months ended September 30, 2019, and that compares to $12.5 million and $41.4 million in the corresponding periods of last year. Adjusted EBITDA was affected by lower volumes, both in margin and overhead absorption by changes in foreign exchange rates and by the timing impacts of Neo's input pass-through mechanics. These pass-through mechanics, which we have discussed previously, updates selling prices on a lagged basis, generally monthly or quarterly and is the key feature of Neo's strategic focus on value-added margins. As we have discussed in the past, this timing of rare earth input costs affect comparisons between the first 6 months of '19 and the prior year, rare earth input costs and associated pass-through pricing were relatively stable to declining slightly to 2019. Our C&O segment showed some improvement in the third quarter. Revenue for the quarter of $42.5 million was a 2.7% increase over Q3 of 2018. Year-to-date, C&O revenue is up slightly over 2018. Adjusted EBITDA for the quarter was $6.5 million, up from $5.2 million in the prior year period and year-to-date adjusted EBITDA of $18.5 million was 32.6% over the comparable period of 2018. Our three-way auto catalyst business continues to see incremental growth year-over-year despite a decline in the third quarter of 2019 and a general slowdown in automotive markets throughout the year. This incremental growth was offset by a decline in diesel catalyst products both in the 3 and 9 months ended 20 -- September 2019. With these declining diesel volumes over the past several quarters, overall product mix between three-way and diesel catalysts for Neo is now more reflective of market mix considerations. In addition, the C&O segment did not incur premium freight costs in 2019 as opposed to the $4.2 million incurred in 2018. While the auto catalyst business was down slightly in Q3, C&O business was able to benefit from higher-margin capture in the rare earth separation business. This continuing decline of rare earth commodity prices have led to lagging impact of higher cost inventory relative to current selling prices. And this has generally had a negative impact on margins for the rare earth separation in the 3 and 9 months ended September 30, 2019. However, a strong increase in prices for certain heavy rare earth elements primarily dysprosium and terbium, led to strong margins for the heavy rare earth separation business in the 3 months ended September 2019. Additionally, C&O benefit from increased spot sales in the 3 and 9 months ended September '19, and there were fewer spot sales in the same periods of 2018. In our Rare Metals segment, revenue in the quarter was $22.5 million, up slightly from $22.4 million in the prior year period. And year-to-date revenue of $69.1 million compared to $66.5 million in the prior year period. The segment's improved revenue was driven primarily by increases in hafnium product sales as the business continues to generate additional demand from both new and existing customers. This was offset by a continued decline in the pricing for our tantalum-based products, which impacted the segment because of the higher cost inventory material. We have also seen a market slowdown in our gallium trichloride business this year. Adjusted EBITDA in the 3 and 9 months ended September 30, 2019, was $0.9 million and $3.9 million, respectively, compared to $1.8 million and $8.1 million in the corresponding prior year periods. This quarter's EBITDA for Rare Metals was particularly affected by certain customers delaying their orders late in this quarter into Q4. In general, the Rare Metals segment continues to develop new products and focus on value-added margins to mitigate short-term variations in its earnings due to material price volatility. Here are some additional results and activities in the quarter to note. SG&A expense in the 3 and 9 months ended September 2019 was $11.4 million and $29.9 million, respectively, compared to $11 million and $36.1 million in the corresponding periods last year. Year-to-date spend level was affected by costs recovered as part of the terminated transaction earlier this year. R&D expense in the quarter was $3.6 million compared to $4.2 million in the prior year period. For the 9 months ended, R&D expense was $10 million compared to $13.2 million in the corresponding period of 2018. Neo capitalized expenditures of $12.6 million and $17.2 million for the 3 and 9 months ended December 30, 2019, respectively. These capital expenditures included $9.7 million in assets acquired from the Asia Mag acquisition. Neo paid $4.6 million in cash taxes in the third quarter and $10.8 million year-to-date. Neo continues to have a strong financial position. The company's ability to generate cash from its operations in the short and long-term remain sound. We closed Q3 with $74.9 million of net cash after paying $2.9 million in dividends to shareholders, having purchased $5.7 million of stock under our normal course issuer bid and purchasing Asia Mag for $9.7 million. In the 9 months of 2019, Neo returned over $8.6 million to shareholders in the form of dividends, $13.2 million in stock repurchases, while continuing to invest in the business and maintaining our net cash balances. Our balance sheet is strong. And our financial position is further strengthened by relatively low CapEx, low long-term commodity price exposure and efficient global tax structure and rapid potential scalability. All of these reinforce Neo's free cash flow conversion rate, which stood at 81% year-to-date before the Asia Mag related capital expenditures. A quarterly dividend of CAD 0.10 per common share was declared on November 12, 2019, for shareholders of record at December 20, 2019, with a payment date of December 30, 2019. In short, Neo's financial position remains strong. Our global team continues to improve operational efficiencies and long-term demand trends continue across our product suite. Geoff, back to you.
Thanks, Rahim. As we discussed on our last call, we expected the challenging and uncertain macro environment to impact our third quarter. Our customers continue to see these challenges extending into the fourth quarter. And we continue to take active measures to reduce costs and prioritize capital spending as this cycle runs its course. None of this has changed our fundamental outlook for growth. Neo is very well positioned, and will continue to invest in markets that are forecasted to see robust long-term growth. These include vehicle electrification, industrial automation, consumer electronics, energy-efficient lighting, air and water pollution control and [ superalloys ]. Our most recent investment is our acquisition in August of the Asia Mag facility. This company manufactures compression molded bonded magnets using NdFeB powders that are produced in our Magnequench business. While there's a relatively small producer of these magnets today, Asia Mag is a strategic acquisition for Magnequench in several respects. First, it will help us grow and expand business with our existing customers. We have been tolling production of compression molded magnets, which use our Magnequench powders to various Chinese magnet producers. Now that we can produce more of these magnets internally, it will allow us to deliver better and more consistent quality to our customers. This acquisition also will help us better address the compression molded market, which is primarily in China and typically involves smaller bespoke programs such as handheld power tools, cooling fans for consumer electronics and other applications where lightweight, small size and energy efficiency are important. We believe this segment presents good growth potential for Neo. And finally, sharpening our magnet making knowhow internally will help our magnetic powder product development efforts and will remove a middleman between us and our ultimate customer. I'm happy to note that the integration process for the Asia Mag business is going well, and the business is performing as expected. Customer reaction has been very positive. While we are only about 6 weeks into running the facility, productivity has increased, and we plan to bring additional magnet presses online in 2020 to meet expected demand. Also, from a strategic perspective, our long-term development efforts are continuing to advance across all 3 lines of the business. We continue to partner with our customers and our product development efforts to add further value and improve their product performance. Product development is a top priority for the company. Our goal remains to have 20% of our revenues derived from products that did not exist 5 years ago. Our success in continuing to provide new products and advanced industrial materials to rapidly growing markets, the key differentiator for Neo. Our overall growth strategy has not changed. Identify growth markets driven by global macro trends and then produce highly engineered industrial materials for those markets that are critical to performance. We execute this strategy by focusing on 3 things: first, building world-class technical knowhow within each business group; second, maintaining strong and long-lasting customer relationships and development partnerships; and third, investing in assets that allow us to operate across the global, cost competitive manufacturing footprint. Very few companies in our space have been successful at building a global business with this unique combination of assets. Much less operate profitably in the face of sometimes challenging global market conditions. Decades of careful investment in both our people and our product development capabilities have positioned Neo extremely well. We look forward to growing along with our customers. We serve some of the world's most forward-looking markets to deliver some of the world's most innovative technologies. Our robust balance sheet and cash flow generation will enable us to look for ways to build on this strategy and continue to return value to our shareholders through dividends and share buybacks. As I look forward, I am pleased with where we are headed and our prospects for future growth. So with that, let's open the call for questions.
[Operator Instructions] Your first question today comes from the line of Yuri Lynk of Canaccord Genuity.
Yes, it's Chris on for Yuri. I just wanted to start with the outlook there in your comment, just at the end. I think when we were going back to last quarter, we were thinking that Q4 was going to be the return to growth in certainly 2020. So I would just like to see if you could clarify your expectations for Q4, maybe with respect to Q3, and then kind of just how early indications are shaping up for 2020?
Sure. So I -- thinking about Q4, I think there'll be some puts and takes. What our customers are -- what we're seeing from our customers currently is more of the same, quite frankly, through Q4. When we look at what -- there'll be some programs in our Magnequench business that we will continue to see some demand declining, but others that are growing, but we think sort of similar, sort of volume expectations, to what we saw in Q3 is what we're seeing today. On the C&O business, we were -- we benefited from some spot pricing and margin in the third quarter that we likely won't see similar thing in the fourth. But having said that, we also expect some of the challenges we face in our Rare Metals business, we may see some of that subsiding as well. So overall, we're thinking, as I said in my remarks, that we think Q4 will be similar to that of what we saw in Q3.
Okay. And then, yes, just to touch on those benefits that you saw in C&O. Is there any way you could quantify the spot and margin impacts in the quarter?
We've talked about this before the -- spot sales do happen all the time. And in every quarter, but when we're talking about these, we're talking about more lumpier type spot sales. So in this quarter, maybe I'd attribute $1 million to the lumpier type spot sales specific to C&O this quarter.
Great. And then I just have a final modeling question. The tax rate in the business seems to jump around a lot from quarter-to-quarter. So kind of how do you think about the tax rate and just kind of how do you model that going forward?
Yes. I think that -- I understand the comment about the tax rate. And I guess, it always depends compared to what. So if we think about the comparison to the prior year, I think the first thing to note in the prior year is that there was a large insurance proceeds amount that came in the prior year, which was nontaxable. So when you adjust for that, you end up with kind of, I don't know, high 20s-percent tax rate. I think year-to-date, we're low 30s-percent tax rate. I think that the -- I think of a tax rate is kind of high 20s. It really does depend on where in the world, the earnings are earned, because we do have operations all over the world. And there are puts and takes and movements across that all the time. But I think kind of mid- to high 20s is probably the way that I would think about it.
Your next question comes from the line of Mark Neville of Scotiabank.
Maybe just first, on C&O. Again, pretty good quarter. I'm just curious, the volume declines, I guess, holistically, in this business, what was behind that?
I would say that the volume declines probably just relate to the mix of products that sold within the separation business. I mean, we did, as we talked about, saw -- see some volume declines in the auto catalyst business, but I'd say that they're fairly small now. And especially, as we said, three-way really growing through year-over-year small step back here in Q3, against a broader market, I think that the step back is pretty good, and there's growth overall. But within C&O within -- particularly within the separation business, there's lots of different molecules that have lots of different values. So if we happen to sell a lot of kind of less expensive molecules, you'll get more volume. And then it'll compare -- it'll just contrast over time. Overall, I would suggest that we always kind of sell-out the volume that comes out of separation by the end of the year, generally, I mean, maybe it'll slip a little bit into Q1. But we never have a problem moving the molecules, generally, our choice is always to move the molecules to better jurisdictions, which show up in a margin.
Right. Okay. Okay. And I guess, just on the separation business itself. Again, it sounds like a pretty strong profit quarter, probably more to do with what you sold, meaning the heavies, the mix between heavies and sort of maybe some of the lights, but just again, so I'm understanding this within part of the business, there's some margin pressure because of compression and price. But on the heavy side, prices went up, so there's a pretty good profit capture in Q3. Is that what happened?
Yes. I mean -- and I would say, in particular, those 2 particular heavies. And those particular 2 heavies are important to point out because they're the 2 heavies that get used in sintered magnets, the baseline of those, now they went up, I would say, on top of my head, 30%. In Q3, they've come down a little bit since. But I would say even overall, they're much higher price year-over-year, whereas the lights have actually been decreasing kind of sequentially quarter-over-quarter for several quarters notwithstanding small bumps here and there.
Okay. And so there will still be a year-on-year benefit in Q4 from the heavies?
Yes, they are retracting a little bit, so there won't be as much of a heavy-specific or those 2 molecules specific benefit in Q4, but there'll still be a benefit.
Okay. And maybe just on the Magnequench again, Geoff, you said sort of similar type volumes, I believe you're speaking to Magnequench. But just so I understand it, again, there were some pretty big declines, Q2, Q3, there were some inventory adjustments happening. But have you sort of worked through the adjustments and now it's sort of just sort of growing with macro or growing with market? Or is that sort of how to think about it?
Yes, I think so. So we -- so what we saw and what we're seeing is, as we talked about, the 2 programs, particularly legacy programs. We call them HDE being one of them. We've seen continued decline there, and we expect that to continue. We are seeing growth in some of the other programs, Rahim pointed a couple of in his remarks. But generally, I think that we -- it seems we've worked through the inventory correction. And this is just, as you said, being impacted by what's going on in the macro environment and the overall demand. And when we see that sort of turn up, we would expect we'll turn up with it.
Right. If I could just maybe sort of sneak one last question in. I guess it's sort of broader. But I guess, just thinking about sort of the auto exposure within the business. Again, I guess, the secular trends aside, am I sort of correct? Are we sort of correct and sort of characterizing that Magnequench would be, I guess, more exposed to the Asian or the China auto market, and C&O is more global, and that's why the business held up a little better through the year? Is that a fair characterization? Or am I wrong?
So generally, yes, I think that Magnequench has more exposure in China, but they're also exposed in Europe as well, which, as you know, Germany also has been a challenge. We've seen orders decline there as well. I think C&O, the auto catalyst, business is fewer players that supply the global market. So I think that C&O is probably more macro, as you pointed out, in particular, than Magnequench, which is more focused in certain countries.
[Operator Instructions] Your next question comes from the line of Frederic Bastien of Raymond James.
In the Magnequench section, you mentioned that you anticipate growth in programs other than traction motors. You did touch on trunk motors, but can you speak to how sales into the water pump and water treatment sectors are going?
Sure. So I mean, I would say, and will -- we gave the trunk motor as kind of one example. And what we'll try to do is, over time, we'll give a different example of a different application. I would say the trunk motors is representative growth of what we would see in various different types of programs like traction motors and seat motors and the like and pumps. So we'll talk about those, kind of, over the next couple of quarters. In terms of the water treatment business, that water treatment business resides in the C&O segment. And I think we are seeing some pretty good growth there, too. We caveat that again as it's a small number today, but we're getting out in front of customers. There -- the value proposition is becoming more clear for our customers. Our trials are very successful in front of our customers, and we're just working through adoption curves of customers there. So I think the growth is actually pretty strong year-over-year, but it's a really small number still. The opportunity remains large. But that's kind of -- we'll grow into that, I would say, over coming years.
Okay. And speaking of Chemicals & Oxide. There's a note in the MD&A, you mentioned that one large customer delayed an order in the quarter, and there's also some increases in SG&A due to management changes. So can you speak to those 2 variables, please?
Yes. So they're both actually related to Rare Metals. And [ therefore were -- no worries ]. So essentially, as I said, a couple of customers, but one in particular, just quantum, we talked about the one customer delayed their orders into Q3 -- sorry, from Q3, late in Q3 into Q4. They did actually take product in, in October. So they have kind of caught up with that. But that doesn't necessarily mean that they're likely to do the same thing in December. I think that there is a slower economic environment. We're working off an order book that was put together probably 12 months ago from this customer. So we think there's probably dynamics where their business is slower, too, and we're feeling that. I don't think we're seeing it in terms of lost share within the customer, but we are seeing that the economic environment has been moving for folks. So as I said, we moved -- they moved, and we agreed to move one of their sales out of September and into October, yet to be seen what happens in December, but we're having positive dialogue still. With respect to the management changes in SG&A, we did make some more management changes. And I would say, we're just building the team and building more bench strength in a couple of our facilities.
Your next question comes from the line of Mac Whale of Cormark Securities.
When you look at -- you talk about the -- and you already answered this question, I think, a little bit, but I just wanted to dig a little bit more deeply. On the C&O, you are aligned with vehicle mix now. So -- but at the same time, your program development, your launches are pretty well known, well in advance. So how do you look at your current set of contracts? And how those run over the next year? How do they align with the outlook for vehicle mix and your customers?
I think we're much better aligned. When we look at what we're introducing, I think, what we're seeing is that we are much more imbalanced with what we would think is sort of normal market conditions. But I will say that we continue to introduce new products into the diesel platform. So we've seen -- clearly, we've seen a mix shift in that -- in our historical performance, but we continue to see opportunities in diesel and to grow diesel, but albeit from the smaller baseline where we're at now.
Okay. Now what I was thinking specifically was the China vehicle market, like there was some turmoil in the market with that move from 4 to 5 in terms of the emission changes. And I know that, that's sort of behind Europe, how does that play into your -- both your volume in terms of your various lines you have running in China? How does that work towards margin and the capacity utilization of those lines?
So I would say that what we see in the auto customer, there are few things. I mean, when you think about China, similar where their standards are continuing to tighten with kind of railroad driving conditions, everyone's moving towards that. So what our customers are telling as it means for them. And then for us, is that there'll be more wash coat being required for these -- for these -- to meet these standards. So kind of on a content basis, there's just going to be more wash coat going in. And I think also that's what's happening as we move towards gas particulate filters, which is sort of the next stage of the standard, some of those filters, and not all of them will be designed with a wash coat as well. So we think that's an opportunity. So I think that our view is that when you look out over the next few years as these standards move, that there will be sort of a content per vehicle opportunity for us as well as just growth in vehicles. And -- yes, I think that irrespective of country, quite frankly, like to your point, each country goes through it at different times, but they're all heading in that direction, and those are all the things that we're working toward. Sorry to cut you off there.
Yes, no problem. It's just that -- it's interesting when we went toward -- you're, we were able to sort of grasp the idea that when one jurisdiction moves to a new chemistry, if you will, a new composition, you're able to keep those older lines running because places like China is somewhat behind. So is that largely the case still?
Yes. So certain countries move faster than others. And so -- and the countries will move, and we will update the technology or our customers will update their technology, and we will update with them, depending on the timing of when that is cutting in and that jurisdiction for that particular facility. And the legacy programs will continue as they are until there's an update required for those markets.
Actually, to your question on line utilization, our lines are reasonably agnostic in terms of we can run various products across various lines. Now as a practical matter, sure, we dedicate lines to run for certain types of products. But to the degree that there's no demand there and there's demand in a different product, to change the line, there might be some tweaks, but generally, it's not -- that's not an abandoned line or buying a new capital line. That's just tweaking and reinvesting in the line.
Okay, I understand. And then largely speaking in terms of technology, when you go to these higher -- there's higher loadings in the various catalyst recipes. Is that a sustainable thing? Or are there technology advances that we should, if you're looking out more than 2 years, say, on the things you're working on, will there be a path towards declining content in terms of the grams because we've seen the grams per vehicle, say, go up. Does that -- does that keep going up? Or are you working on things where you can actually start to get on a new path where that starts coming down?
So I think the -- look at -- the automotive, like our customers are always looking for ways to try to thrift, more particularly the precious metals in our products because of the cost difference. But -- and trying to sort of reduce the amount that they're having to put on these brakes. But I can tell you that, I mean, I was in Europe recently meeting with one of the large customers of ours and talking about, specifically China and how they're thinking about addressing it, and at this point, he said we're going to put more volume, we're loading, we're putting higher loads on these brakes, that's where they are right now. So -- but we're always looking at new technologies with them to try to figure out ways that we can reduce, but at this point, I think if you look on the websites of the other -- of our big customers, you'll see that they're all talking about more loading on the brakes currently.
Yes. Mac, if I could just add to that. Customers certainly are approaching it differently. But I guess, the way to think about that in terms of kind of what time horizon you're thinking through here, but the technology that is being developed and is getting out and being qualified that now is the technology that is supportive of more content on the [ brake ]. So if you're talking about the world 10 years from now, sure it'll change again. But as we've talked about in the past, change is generally our friend, in this industry with the way that we've kind of invested in technology and development. But I think this round, call it, the next 5 or 10 years, the path from our customers seems to be, at least some of our customers, seems to be more content. That's our next generation.
And then broadly speaking, like switching to like markets where you see motors, we talk a lot about automotive, what about the other markets where in consumer products and you talked about like Dyson and those types of products? Like how is, how does that look? Does that just keep steadily growing? Or does that -- have you seen a sort of a cycle with that as well, like a buying cycle that may or may not be aligned with automotive for whatever reason. I'm just wondering what that looks like in terms of growth?
So look, I would say that we talked about some of the consumer products that Magnequench is supplying into, we're probably seeing better results there than what we've seen in the automotive side as far as what the cycle has done, no question. And there's been some ups and downs. I think circulation pumps are tied a little more to sort of house building and that type of thing in Europe. The Dyson continues to be a very good program for us. But I think this is kind of one of the areas why we like and moved and bought Asia Mag. I think that this opens up, sort of, some of the consumer electronics, some of the smaller applications that we typically weren't really targeting and well set up for and allows us to open up into those markets more, and we really do see that as an opportunity going forward.
Okay. And is there a potential to see that meaningfully change your overall exposure because investors will kind of point out fairly high exposure to automotive? Like is there something on the horizon that we might not be aware of that, that you guys are looking at, and you're saying, well, this is going to really help make our mix a lot less automotive centric? Or does it just play out over years.
I think that it plays out over years. But Mac, I guess it's harder for us to make the statement that we can compete -- that those segments are going to compete against automotive growth when we're seeing growth in the traction motor, we're seeing growth in pumps and seats and trunk motor. So the problem -- the challenge is going to be, you've got to outgrow the growth that we do see already. So automotive is -- the secular trend there is just so large, that secular trend exists in other markets as well. And it absolutely does and Asia Mag will tap into those other markets as well, and we'll get capture there. A really good example is the circulation pumps, that we think that if China adopts similar technology and standards as Europe, we think that, that there'd be certainly outgrowth, statistics out of that space. But it's against the backdrop of -- we think automotive is growing a multiple of SAR for us in our primary programs. So it's going to be growth on top of growth. So when that changes, mix over time remains to be seen.
Yes. And I think just to add to that. I think that when we think about growth, we -- obviously, we think about it from a sector point of view, but it's really sort of the innovation that's going to drive the growth here, and we see opportunities in Asia Mag there as well, where we can bring sort of our -- some of our innovation to opening up new markets for us. So I think that's the way we think about it.
[Operator Instructions] Your next question comes from the line of Mark Neville of Scotiabank.
Just a quick question for Rahim. Sorry, just on the working capital, there is a fairly significant investment last year, and I think some more in Q1, but we saw that come out in Q3. I'm just curious, is there an amount that would come out just naturally? Or is there any excess sort of work cap that needs to come out in the next year or 2 for sure?
Well, I would say that -- yes, I mean, I would say, going from last year to this year, there was a concerted effort to get working capital out. I think that we thought working capital was high. Last year, we did consume cash and hold it up in working capital last year. So we did work through that although, quite frankly, I think Q3 '18 as a singular point in time might be a little bit on the lower side. We do campaign one of our facilities, so we'll probably put some working capital in at December 31. Longer term, we still think there's opportunity to streamline and get working capital out. We do have still projects on the horizon that we're looking at. We think we've made significant progress this year, but I don't think progress stops this year. So you might see a little bit of a build in Q4 just because I said there's timing and campaigning and things like that. But I think fundamentally, we still see opportunities.
Okay, yes. No, that's helpful. Maybe just lastly, on CapEx, I guess, excluding Asia Mag, where you might -- or, I guess, where you might end up this year, I guess, more importantly, sort of what you're thinking for 2020 at this point?
I think we'll spend a little bit more in Q4, but that's actually related to infrastructure growth. So again, if we separate kind of how we think about maintenance CapEx versus growth CapEx, we are building more footprint and really magnet making capability at the primary facility in Magnequench as well in Tianjin. So we'll put that building and some presses in it, in Q4, maybe some of that will fall into Q1. I think our overall view is maintenance CapEx remains in the $8 million to $10 million to $12 million type range, and we have specific projects that go on top of that number. I don't think that's different necessarily for 2020. We'll look at the deck of what we think are specific additional projects. We have some projects in the pipeline that we think are going to be impactful, but we've got to make the assessment on our view of whether they're ready for commercialization and at what point in time we make those investments. So I think there's growth CapEx that's coming, but to pick the date at which it comes, I think, it really depends on other factors.
Yes. That makes sense. And maybe, sorry, just on that to Q4, you said I wasn't sure that you spent a little more. I guess, that's just where you've been versus the, call it 2, 2.5, you've been spending year-to-date, up a bit from there is what you meant?
Yes. Yes, I think it will be higher spend. But the higher spend is not tied to maintenance, it's tied to strategic growth.
And there are no further questions in queue at this time. I turn the call back to the presenters for any closing remarks.
Thank you, operator. On behalf of the Neo team, thank you again for joining us this morning for the review of the third quarter 2019 financial results. We look forward to reporting again in the new year. That concludes today's call. Should you have any questions, feel free to follow up with myself. Thank you. Operator?
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.