- Earnings call transcript Q3 2022

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Operator

Good morning, my name is Katie and I'll be your conference operator today. Welcome to the Luxfer's Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute. After the speakers' prepared remarks, we will hold a question-and-answer session.

Now, I will turn the call over to Mike Gaiden, Vice-President of Investor Relations and Business Development for Luxfer. ahead. go please Mike,

Michael Gaiden

On Welcome me Luxfer’s Luxfer’s today Steve quarter Financial Officer; Katie. details will earnings our of Chief quarter call. and third Officer. Chief Luxfer’s, With is Webster call everyone you, we third provide to XXXX Executive today's reconciled Thank Andy and non-GAAP Please a the release can presentation in yesterday. year-to-date be detailed financials note, webcast presentation. Today's accessed press performance the as luxfer.com. any that to references is are XXXX at the of in issued accompanied appendix Butcher, by

begin, result slide details. Before to and obligation statements results new two further or events of on uncertainties. company's refer friendly are we about financial for a no undertake update a information, the of forward-looking future any reminder that expected Safe-Harbor Please risks presentation statement We otherwise. made forward-looking any subject statements, today's to future to as the whether

turn on before results. will then I please our the financial some for Andy to after Andy ahead. go provide Andy, of will remarks concluding quarter, Now, Steve provide the summary details over comments Q&A. will call his which

Andy Butcher

on quarter with Please details you, to entire team start customers. to and my pleased challenging to slide of expressing growth environment appreciation a share took both includes supply-chain which who Thank the three. Luxfer profits. Mike, our I'm to turn I want year-over-year everyone. welcome to once third serve in performance, and you revenues though our again by

highlight messages. ongoing momentum want sustain On slide the of key focus our helped to results. team's and this to Our first-half I has dedication three

XX% and the realized quarter two. three in financial both nearly year-over-year growth, sales continuing one our gains Firstly, quarters performance we regarding delivered

foreign-exchange in driven revenue by headwinds. more growth passing offset than was success This quarter cost inflation, three which through ongoing our primarily

of current diluted increases in existing performance, end of adjusted variety again our successful by a earnings driven by execution towards wherever guidance. inflation $X.XX continued full-year work related continues Cylinders of cost our per to allowed our passing progress wide QX through share through markets. Elektron Gas Our achievement led challenges, contract.

source remains ratio a position of a capital net Our to strength of X.X EBITDA debt times. with

continue we XX% see pressure growth in general higher Supply response continued in markets, some and the availability growth end industrial in realized QX. revenue chain X% in challenging We and and defense, to material solid demand on Secondly, first overall areas costs. healthcare. both with

ahead Although backlog we healthy we slowing indications some are seeing a prior of markets, well end in of benefit at certain overall end from demand year. the QX, European of still

a of prior our to achieving EPS to on results sound Thirdly, diluted or EPS and to our range to deliver $X expect committed adjusted And more. $X.XX of of of we combination based and outlook remain XXXX $X.XX. assessment $X.XX longer-term goal compared supply $X.XX year-to-date we our of the our chain, macroeconomic now to

are We of the capital mitigating by also levels. conversion impact working focused on prices higher flow our on cash material

Turning to provide the like more conditions. on would current business to four. details slide I

slowing modest We've we some magnesium and pace overall gas cylinders certain products. realized in evidence of quarter solid third the sectors, early During industrial order again (ph) flow. seen as European such a [roll] of some

supply you certain update chain I US key and challenges the demand wanted magnesium. end execute first We flameless to on persist status other At areas. which fuel a though for ration to in alternative the upon medium quarter are book heaters We and for order into of by the cylinders majeure products. encouraged force among healthy ended term year through XXXX. time with same

customers some with business essential secured low maintenance. stocks cover in we have from to the business And demand. QX of the some impact of [indiscernible] the and Towards quarter powders our QX to is strategic supply supplier our to the medium limited an term place. was halted from due end we US alternative have in magnesium There supply the undergo support

work this with also has although are have momentum. of identifying fiber bottlenecks alternatives availability to sustained in somewhat, our seeing qualify helpful. aerospace our improved initial zircon on to Freight which material. work underway is still for capitalize tight We're strong in and gaining sand We reduced, limits ability conditions. our manufacturing certain The areas is supply mid labor although conditions demand

prices and work to continued in and the around volatility material market the of energy through higher latest continue most fiber. carbon raw cost developments, increases including the electricity We in notably costs, the Europe

New activities on underway cost further pass these. through in to response are

both headwind our dollar as strong is the to to has our results year-to-date. it revenue impact results, While positive a serves line bottom

We Reduction Act pleased passage Hydrogen Inflation of help the will acknowledge the incremental the to are positives in the long-term domestic of markets. development by also which the August, [indiscernible]

backdrop, and both customers we tactical this the emphasize with to with Given suppliers. successful on execution close continue focus coordination

remain also conditions. to We ready softening to respond any macro

to although need the an XXXX this further chain our which of As constraints, headwind risk in outlook recession the supply a planning the recognizes in likely to medium be of part the term spend, of This of the us manage easing which demand provided have for global we've us lower for year. economy. into this case the weakening scenario discretionary the by would throughout brings built and a accompanied possibility

resilient balanced healthcare. our and holds You response supply including many defense, benefits, to will first like also industries portfolio remember diversification that

Our with cost adjust ability manufacturing capacity the benefits profile. the from also a products. and simplified to benefit topline a our and our standpoint, replacement pivot cost From we to footprints recurring number from associated our of cycles

bring Our flexibility. low leverage liquidity and high also position

confident remain slowed. performance, For all these conditions business I even macroeconomic in our if reasons,

our to quarter turn for third over performance. on me call the details financial Steve let Now,

Steve Webster

market. troop quarter five a X.X%, by the more alternative sales our contraction healthcare than than more medical defense levels with ration in summary activities. of offset alloys US levels performance and in the expansion and flameless of and buckets, growth end which Andy. offset the Thanks, aerospace to In on cylinders rebound first commercial of as COVID demand towards begin field. the continue and transportation X.X%, end in three defense, pre by response rose low sales deployments I'll heaters, fuel slide was lower in autocatalysis which Quarterly sales given aerospace in markets, for decreased expected

alternative three in backed of funding government fuels and it upon to expect to seen We by applications, improvement commercial quarter transportation signs sequential storage build commitments deepening the hydrogen and initiatives.

encouraged categories, in fuel industrial sales this strength product industrial our general powders, year-over-year broad Elektron grew by Magnesium Our in the industrial all helped XX% the based quarter are QX continuing strength. results, sales Overall, sales quarter. two. revenue differentiated expansion in overall products and leading for QX, industrial [indiscernible] increased nearly Commercial applications zirconium by offerings. our we

Now our for financial results. third to a six please turn slide summary of quarter

the quarter $X.X prior Third sales or X.X% year. million increased $XXX.X from of million

increased efficiency environment. and $X.X headwinds costs revenue million the year, our by million. contribution prior in quarter active reduction sales quarterly $X.X challenging million and foreign-exchange and to adjusted efforts passing a million We from of along experienced and the excluding contributed of in XX.X% Our increases, revenues million $X.X by as actions Consolidated volume million, from a million. price input positive benefited to inflationary volume or FX EBITDA taken for another helped from growing meaning, $X.X cost added $X.X success address our EBITDA increased well of mix $XX.X $XX.X of cost as foreign-exchange. XX%

amid operating quarter We the challenges are our three environments. the performance posed year-to-date pleased by current with

and segment transportation let's Elektron demand the slide our strong Now $XX.X prior efforts inflation seven. industrial sustained our markets. review increased year. million as by results our to in XX.X% of on well pass-through revenues Driven from timely as end

uplift Our contracts million cost year ongoing by $X.X and $X.X million adverse Gas prior Elektron the as $XX.X to quarter, foreign-exchange of of Cylinders cost EBITDA foreign-exchange million push $XX.X XX.X%, the $X.X from X.X% ability increased execution, impact. on million or decreased initiatives. saving constraints million EBITDA of by inflation strong timing segment decreased sales detracted ago $X.X from through million a by in profitability. on our year certain driven helped

recoup reminder, of quarter bear a to taken fruit start year. actions, committed will inflation As which to materials from we've one next we're

capital on to of remains strengths. slide our eight. let's Luxfer’s business Now and sheet key cash-flow key one balance metrics position turn our

Our our a at and elevated long at differentiator in working remain serving in to end. near capital position in inventory quarter million our committed We recent key XX% working sales realized range, supply to from exceeds year volumes our in our XX% the our in the our continues up Accelerating delivered capital end. is projected QX, our XX% us XX% contributed finding to balance be further amid seen annualized standing of XX% to targeted $X.X flow working we million quarters. support capital QX. Though that sheet free-cash in $X.X customers enable of sales to target a We to generated are strained strategy. period investments the chain to as of first ongoing customer

towards back target the progress chains normalize. level supply will when We

Our debt net EBITDA X.X well current million ratio climate. times afford debt the us of flexibility that to in serves net related $XX.X and of

XX trailing investments XX.X% platform. the month of Our of the attractiveness demonstrates ROIC Luxfer

Let's now review nine. financial guidance on XXXX slide our updated

macroeconomic $X.XX. full $X.XX challenges, chain to EPS expect and outlook current year the adjusted supply now Given deliver we to of

when raw of On softening impact We of translation, to aforementioned also Europe. X% exchange and the signs certain foreign currently project XXXX demand of materials exchange, XX%, Sterling, constrained sales the by with pound revenue growth availability UK foreign lower negative the in of of weak portion to favorable cost other currencies base is a our translated into complementing dollars. than business, operating profitability sizable a generally a in invoiced

UK the can variable. However, the given key inputs that to actual sourced many United from be are somewhat States, of the impact the

$XX plans confident a back of long-term ability $X signs million investment expect capital are to We amid our while we opportunities. to XXXX of rewarding growth softening we million in scrutinizing our macro-economy expenditure and many remain

$XX around As previously, XXXX expect outlays year. to million exceptional contribution pension expect compared XXXX. $XX our contributions restructuring in we cash we've of And no in we for said the million

committed our the XXXX to we're Given pleased goal. year and range more remain the results very or guidance $X remain to posed full EPS long-term environment, within deliver external to by our EPS we existing challenges on-track

allocation XX. review priorities to on slide like capital I'd Finally, our

drive a against of a in capital of backdrop an of our the we're cash prioritizing proceeding to business continue judiciously an and operates We balanced the We productivity in the strength, employ Luxfer redeployment lowest and organic capital approach profit Overall, revenue evolving innovation We're free use our and growth of growth in climate. advantage to investments to is investments current risk from which flow. position the over as this expect and do time. business our return environment. highest

million through accelerated $X.X for we Year-to-date During $X.X quarter XXXX. the which shares, repurchase our we’ve repurchased outstripped the three all total third quarter already activity. of share calendar again of million

well pipeline developments macroeconomic for reinforce return us I'd Recent We meet the also call outcomes and selective served approach our has This current like our environment. objectives. of turn will acquisitions. and to generate to and discerning opportunities the for historically that Andy. And positive Andy? M&A balanced importance to framework add to scrutinize our over now, bolt-on continued investing our of free-cash flow in the growth back

Andy Butcher

Steve. you, Thank

Before concluding listing as comments, slide to on our to would anniversary prepared development. XX. York strategy our briefly reached the as brings Stock XXXth the on two in this turn I milestones XXth Chicago, our founding year, well XXXX the anniversary growth as of since public Please Exchange. well reflect New as like our

of accomplished sustainable since I'm create fiber, the capabilities affected reducing in to so safe think developing to impacted And years zirconium Kentucky of which back safe, with we Ian including the commercial safety heaters, world performance a those our proprietary those technological If a recent and for XX reduced help way. to advances environments, introducing flooding on facilities this successes. and some lifting have using a flexible, the batteries deliver journey. systems being the for have alloys supplying long-term growth. responders, flameless great breathing in modes magnesium glass proud our to disaster, and Florida. simplifying to of clean at cells, many want build in began we and hydrogen fully-integrated manufacturing that carbon markets transportation apparatus energy footprint successes to helping have by has I contributing hurricane We more platform military I aimed Luxfer natural prisms to shipments to of of enhanced highlight cylinders efficient by to by across Luxfer to first varying Delivering increase whole more team much integrated, ultimately and this mission weight cleaner more resourcing others profitable XXXX manufacture platform continue about our deploying automated and and costs for the rechargeable by solutions the are based innovative aircraft, in provide our ration and to fuel products magnesium These our more and and both finally, a

range tools enable manufacturing to On one the our five to Luxfer the like work the call our last future that key discuss would success, slide talked turn System. about of I of last XX. the opportunities the Now, to product growth development we years over simplify Please successful for Business by and our that our will to needs enhanced our be footprint, base. this supported on the next years profitable this drive the creates focus how a discussed now internal operating model. cost We of an five and

weeks six to critical other months growth a pockets Luxfer areas we're selected leading form we business manufacturing Luxfer. very our development the what team. of personally this, of the created of Business existing The best next in related are framework. we've of already on to conferences in carefully of over in of outline over Over commitments underway, excellence aerospace incentives the of deliver within and calling over definitive well XX the the recovering technology to as sustainability key many the companies, execute system introduce and was as after both in the the members stages excited Luxfer In the for last led Customer of by evaluating look-forward leadership reviewing health some three areas, the will medium materials. and products our investments all center many for energy. in Global operating programs Detailed And are improved lightweight models four practice System. safety, opportunities I last months. I Demand lean and last are is will our term clean operations. to long to helping confidence requiring months. in has few ways these participate market the to business US my which And the Government is propel accelerating. execution

invest we also taking Business with Luxfer our continue while actions growth, So to term execution, part for key will to this. a the is focus on long-term near confidence System of

to like by our would conclude to for briefly creation. I value XX. turn Now, highlighting strong Please slide position

we Luxfer’s is efficient that and know, products clean to embedded attractive to tailwinds world working you are a with help mission to energy of leading safe, create returns, As harness in secular generate growth financial portfolio. the our

share end further shareholders. products of we that to our compelling a target opportunities been into unlock our to bright with value you and beyond. is on We've our bringing are results for innovative commercial ahead to us. quarter We market year There sustaining today and three future pleased are focused momentum

would turn Now, Q&A ahead. go the session. please call over to begin I to Katie, to like the the operator

Operator

Thank you. you. [Operator Thank Instructions]

Securities. Our come Chris first Moore will with CJS question from

open. line now Your is

Chris Moore

Good questions. morning, guys. Thanks for of taking couple

bit you in morning, you Gas little good I early -- you a Europe and further graphic there? affecting Cylinders of talked kind softness hoping about arts. was maybe So, of go signs just could

Andy Butcher

the that have those two our would would be outlook Chris. [indiscernible] bit. Thank this Yes. in -- areas impacted you, morning. talk those little Yes, a Good to be Europe

that gas Cylinders four. the specialty gas in well four seen electronic on the quarter arts, applications for some industrial order there with business over go six And intake lower we've market or there. seen roll product our the the also for weeks then graphic we've environmental last as as can applications, reduction Gas some bookings applications, some in into and calibration So side

coming Europe. on signs SCBA balanced extent slowing for that's in orders we're some and certain on alternative our of by yes, magnesium seeing but stronger some now of cylinders products, fuel, in Now sort early

Chris Moore

Got it. Helpful.

pass improvement as in still there by it will about Cylinders, in right? talked QX, that contractual correctly mode you I seeing you in If throughs. So start heard is constrained pricing catch-up like looks Gas

Andy Butcher

Yeah.

wherever increases seen increases recovered. our XX% contracts by cost have passing So year-to-date and overall And think agreements. customers we're material through cost to I have allowed you'll our been of

And business moved. So we fuel come round has our do more already cylinder of spot we're alternative- European the increases both just Cylinders, business to guess, have at business cylinders. In and I where we've And two Gas encouraged on to where composite elements latest have tend by then business. that. different spot price aluminum we where this, some here through

And a carbon realized and we're where decent-sized agreements some January business pass that XXXX. of of we throughs customer navigating in segments

is which helpful. communicated that's so to customers, of All

recovered As don't I before, which, and I by But catch-up normalize, think prices overall, have mean, carbon we prices our we across business. fully discussed yes, stop year-to-date increases increasing even XX% decreasing. until been carbon cost of the perhaps

Chris Moore

me EPS a as saying presentation today's it Anything one is $X you that. EPS adjusted appreciate had that? long-term Last read I XXXX, characterize by previously we that should specifically -- it. goal plus more from just discussed just target ’XX. the adjusted into Got without of

Andy Butcher

We at committed the to and to the and $X certainly remain the -- goal level. EPS XXXX

the thinking So, seeing but conscious changes in that deliver this we of that, that because no the carefully for Chris. to time moment are Thanks XXXX, XXXX. the the on at we $X we're EPS to change expect we're macroeconomic and clarification still at about

Chris Moore

will appreciate guys. Got it, it. I there. leave it I

Andy Butcher

Thank you.

Operator

Thank you.

Our next Gibbs Markets. Phil KeyBanc with come question Capital will from

now Your is open. line

Phil Gibbs

Hey, good morning.

Andy Butcher

Hi, Phil.

Phil Gibbs

production increases that kind we within of overall decent production that? And remind just total of the you're region? amount I -- a frame-up a in Europe, energy seeing well, should be about light you of And have us know you been the in as just so footprint of how terms then, can of also maybe exposure what your terms In your we've through there of all sales? the Europe how managing percentage in as revenue thinking price

Andy Butcher

Yes. Thanks.

XX% our over-time, revenues. in typically a that's of a terms you in America, Asia. breakdown, Europe XX% see over South Obviously, and how little under revenue little over but in varies XX% that North our little So and in

in both the of those, facilities zirconium. of assembling Elektron systems. cylinders footprint the two in our alternative weight aluminum UK, of is and Nottingham then manufacturing plants footprint, terms one plants And magnesium our fuel and our in making making North-America, involved In

footprint. add So anything to Steve, that's the on that.

Steve Webster

you cost. I No, enough. have that's fair also on a Did energy question, think Phil,

Phil Gibbs

in No, terms in on got if the other managing [indiscernible] just manage through the escalation those broadly, UK things you've assets terms two at what how hedged to or you're seeing energy of you're in of of we're in going that? terms some there, through cost least

Steve Webster

opportunity, keeping have clearly Yeah. especially do to mean, and we Europe on a the energy on we're an in close I market eye some hedging. do

those our we energy sort there see them of is North-America two are if needs we’re up -- and years eye in will a And So certainly been we've spot. back contracts more be lock for over by it end next and Europe. those certain and we obviously amount an in on negotiations up In more the if cost can XXX% our sell run the then obviously needs to but an into early will we of and moment, but a to what some project we in price but over And potentially deals. that that on as we're clearly new paying to to on-contract forward we we’ll terms even they year above see will current uplift we a at in forward buy, in, some of then them stay prices suits forward will there of and keep date. or come

Phil Gibbs

you to let at release of typically And much expect $XX I a QX? we cash mentioned has second seasonally in you. release of how the in side be -- year, the for much may Thank net question be within QX we working QX? cash that. as out that's look is, for is to you it's capital the million restructuring that and if case How pointing a then their within should And then Okay. the think

Steve Webster

that, yeah, said supply-chain capital keep point, we that first the obviously in said is challenging, Yeah, continuing that be That’s prepared you've in seen working we’d we investments I continues. the which elevated. being And the remarks. much – would remains to We've level Okay. would in our elevated. so always envision inventory as very

challenges. We are those still seeing

come fact to of in in would gone XX% So sequentially. not come down, the hence We fourth down XX% to, it up said, to it's I revenue annualized quarter. it's expect

I expectation, cash. reasonable think a that's will it free-up some

and year. normalize to our probably significant quarter we're quarter Although in quarter going conditions if start I current of next think quarter cash one one making not into even And contributions one, to better net four expect until cash generation. be inroads I I supply debt don't level, in than think terms chain

part second of the Sorry, your question.

Phil Gibbs

in than outlined of that your So less much the cash restructuring how is QX. you deck,

Steve Webster

in we're It’s $X.X million million through about $X expecting go four. quarter to to

Phil Gibbs

so much. Thanks Okay.

Operator

come Hutton. question Instructions] you. Chip Moore will [Operator from with Thank next Our EF

now is line open. Your

Chip Moore

that Yeah. turn Good the some potential morning. Thanks it on see you about. near-term sounds levers It question. you horizon? take I uncertainties the like of do environment can words. talked versus taking for demand the follow-up balance for in the you how if guess, to does you scenario the I that any recession you wanted have pull term a those medium

Andy Butcher

Good Yes. morning. Thanks, Chip.

was We as of option. we're quite in our completed for not is and yet at have strength median the movements. That Whatever and our sheet. probably built we're it’s mix on term upcoming the we preparing volatility the an seeing in like I that case portfolio course our think indicators a balance happens, and advanced, recession into scenario planning

to book we where like very developments. [indiscernible] sitting. market conscious So moment we're our At though, the order

order quarter four, good quarter a quarter have booking one are most well for our and of into We markets book two.

seeing year, particularly pleased alloys, So that. We we're alternative SCBA about three. we continue -- picked-up of we're cylinders, momentum next we in pleased to the in are fuel quarter expect what like some magnesium we

outside the the the what with I we're But like at what's beyond bank, happening think order making in So sure and [indiscernible] spirit of we're looking we're XXXX just approaching optimism. world. not to that in we

Chip Moore

you, on just Andy. follow Thank Perfect. a It innovation. is

areas excited how look-back the product about, maybe those of are what new progressing? through kind over at walk next more pipeline that you the expect And your us there then to months? XX you're some of to can recent terms In of XX

Andy Butcher

Yes.

over commercial Thanks that exciting opportunities be products. the the new three to comment been on the we're with to seeing chance for months that. reviewing it's the So,

like of be, we starting would filling have alloys to [indiscernible] for [indiscernible], Aerospace products that I aramid electrolyzers light on business find lighter doing on. kind The good fuel the the I go our for some batteries. hydrogen technology I'd carbon the cylinders progress development. high-performance ethylene in of automobiles. electrode of pleased to where and fast zirconium type zirconium the really could and magnesium the the magnesium cells, We're think use roll well And The replace some Cylinders highlight technology, doing and weighting solutions with old weight with for are with visions. three products medical is some of the rechargeable growing on on things Russians and pharmaceutical I unitized maybe our on new like some through application.

Chip Moore

last That’s follow-up that. pretty on just clear. a And

the Just buyback more we're in that very leverage some you in of on organic. is seeing been maybe you've areas flexible, taking flexibility, terms side, those of low. you're are M&A, and more active bolt-on quite on innovated the the Thanks.

Andy Butcher

Yes to those. both of

macro multiple transactions seem a uncertainties. visited change, much high meeting remain but yet pipeline week, not in we imminent, given market. but couple And seeing Valuations potential and the we've would in coming active. remain to a expect of our so nothing that a to do early-stage. I done got remain selective, next slowdown seen all some we've the especially correction. pretty ago, We're guess, up of of I weeks We evidence, target a engaged, remains we

in alert of possibilities, and prefer best but we're active I'd the continue use the growth So as organic say, our capital. reinvestment we to

Chip Moore

very Got it. makes Thanks much. It sense.

Andy Butcher

Thanks, Chip.

Operator

us conference be hours. you a of the be webcast does you. of QX call. Q&A. be Have available conference This recording at Thank discusses Thank joining the about its scheduled in on website call ends regularly will for This XXXX XXXX www.luxfer.com. will today. fourth results. next Luxfer the in to conclude great two link when The financial day. quarter a a company available will An today's this And recording Luxfer the call encore of

Luxfer (LXFR) 26 Oct 222022 Q3 Earnings call transcript