Earnings call transcript Q4 2022

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Operator

Good morning. My name is Shelby, and I will be your conference operator today. Welcome to Luxfer's Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions]

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

Michael Gaiden

fourth details On issued Welcome, year me Luxfer's Luxfer's release today XXXX Steve Financial and Officer; Shelby. earnings provide Chief quarter can luxfer.com. webcast Today's is call. detailed and will Officer. Chief Luxfer's With a quarter is the be presentation at as that in full Webster, call, everyone, our of you, press yesterday. we fourth to XXXX performance Executive today's accompanied Thank by Andy accessed Butcher,

Please references appendix any to note, reconciled non-GAAP in of financials the are the presentation.

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

Andy quarter Now his provide I will for and Steve our our after details on and XXXX comments of will financial summary which turn the results outlook, call over guidance. to the

Andy will Q&A. view longer-term go please then a Andy, provide ahead. before

Andy Butcher

and Mike, welcome, everyone. you, Thank

earnings in performance, sales ongoing helping you Luxfer to pleased grateful for includes turn I'm fourth share turn, realize again team's stepped to line per which once year and our in for focus team and in quarter customers, share us of deliver Please growth in our X. adjusted our dedication. with The with guidance. Slide highlights EPS. to full I'm up to

contract, we We saw by our long-term once changes additional and Cylinders. again to their input in Elektron higher four This during increases taking for wherever to Gas actions report pass and growth reinforces of the quarter $X both year. with allowed quarter, quarter best our to in these including at performance volume the four profitable that pleased confidence particularly volumetric I'm through continue Gas Cylinders posting strong costs million plans accelerated growth.

Overall, costs some disruptions and limited sales. uplift operational the higher profit incremental though, from our

our expanded helped and four us generated flow focus into in sales higher and to earnings expectations. Our our cash executional exceeded translate the $XX.X quarter million free

we ahead, are where European customers seeing areas in demand Looking are destocking. in softness

driving aerospace, important of and systems. our hydrogen However, of focused we're areas in growth, orders some defense also including vehicle

now would provide growth X I secular on brief trends encouraging to turn driving business. our like to to Slide the a update

the Gas During fourth posted performance its quarter, alternative year. of best Cylinders fuel the

transportation our green in on CNG. composite interest and executed energy, of both for demand cylinders elevated increasing on bulk the Capitalizing lightweight successfully hydrogen gas we for

stringent the the in in magnesium supply care both manufacturing, step-up a in in-cabin aerospace encouraged fueling particular passenger Additionally, cylinders. of for oxygen as as alloys, sales also we safety auto-catalysis with with coupled along our We're our inflation is lightweight by Gas demand driving improvements products and commercial multiyear our chain products. segments. zirconium in well health The for recovery car ongoing our Cylinder continues Elektron emissions opportunities for SCBA regulations, the and see

our XXXX markets of offerings. growth. volume will transportation expect on our see recovery mixed for tailwind some to outlook a drivers aerospace Sustained we XXXX, nevertheless, outlook and in in Against a our of overall markets the this X. I background, Slide outline but key for notable automotive continue now We end remains

higher our are continue cylinders, to ration SCBA fuels we in in flameless sales. Alternative seeing heater and demand We for be aerospace, chemical anticipate while ongoing defense, will choppy. kit first response

the lower through vehicle hydrogen bulk anticipate products. systems although year, requirements incrementally gas for growing We

destocking Some experiencing And of by are industrial we're our Europe. transitory seeing softness, notably, offerings particularly in some customers.

developments magnesium made to U.S. to the these We've for in efforts ensure and year the supplying progress develops. several facility source the the not to more magnesium. amid with is chain. of domestic military. on magnesium, LLC, We're currently secular the isolated cyclical majeure, supply source expect raw good the our of force initiatives for we key working in as drivers business supply pressures important qualify remains U.S. an offset than additional our U.S. However, success

Indeed, that concluded ration well heaters successfully work is flares. advanced military for for and flameless

normalized we While of a QX the military this resumption year. expect QX is before being rest flare completed, sales of the in lower and early over more cadence

In to inflation seen materials, carbon notably in address Gas the continue we Cylinders, raw most fiber.

January cost further initiated we're we effort, by this of of permitted now X, pass-throughs part As as contract.

also additional costs fixed this the working remove are to We business. in part of

$X continue during to taken million than which annually, conditions chain. see QX, save margins. work have More more supply we recover across improving We but action to will already we broadly, the

these key input pricing with cost quarterly these low impacts in Steve increase, inflation remain chemicals efforts and EPS our shortly. cost and Elektron to segment The and discuss counter for to as as QX energy materials. example, a the dynamics several used will costs Combined, guidance for demand, chain address improving suggests basic continues of However, thereafter. supply well elevated. continues

though, First fourth financial starting performance. our details with quarter on

Steve?

Steve Webster

Thanks, Andy.

summary by and X this growth that Slide flameless end kits each and health demand. our first of the growth end in alloys, of of XX% propelled in realized I'm quarter. back care while pleased performance largely experienced our the on military a Defense increased of we markets sales heaters on ration market, end steady. In health response aerospace begin response care, held our first chemical report we market. defense, and strong I'll during to

realized aerospace market. quarter also of subcategories for meaningfully contributed of nearly the rose Commercial transportation. growth. products Alternative alloy ongoing Both hydrogen our wheels Transportation sales fuels sales strength to in with amid commercial XX% adoption consecutive acceleration, higher. from second performance RotaMag auto-catalysis all a and automotive benefited

which as zirconium for for however, industrial by General XX%, sales plate sales conditions, long-term reflect helped of macroeconomic demand magnesium the as of and these unique consumer and applications attractiveness commercial arts markets. slowed, the which for portfolio our sector. catalysis. was end the product SoluMag results, our expanded by by competition attributes magnesium We're particularly of powders industrial Graphic as well well sales in influenced as encouraged

fourth of financial XX% mix contribution quarter rose both a came X our input volume from growth Now from positive of well a actions costs. and price as million $X please from or Fourth offset turn This million quarter to million of million year $XXX.X to $XX as ago. of Slide summary results. for $XX sales rising

constant million of Excluding a exchange basis. sales underlying grew on $X adverse movements, our foreign XX% currency

million adjusted $XX.X inflation, million Consolidated pricing Despite our $X.X or actions our quarter increases the through to four initiatives. of quarter cost offset in X%. pass EBITDA decreased in

growth-related curtailed our period. a realized overall investment incremental our healthy volumes, for variances the we profit on margin While and adverse production headcount

in $X Furthermore, the which of disclosed matter the we in legal associated of powder Form excess with relating magnesium to incurred our in costs XX-K. been waste a materials million defense of has XXXX, disposal of

We expect XXXX. this rate into higher early to of expense throughout XXXX continue and

focused navigating initiated materials, also raw for pricing our remain while have on from of further managing within XXXX. the dynamic end, we control. our the To this start been actions Overall, costs price

our let's review segment Slide results X. on Now

exchange. XX% mix, of cost $XX.X volume by sales incremental million and XXXX. increased driven Elektron a Elektron's as expanded from effective to by best by performance foreign through mix helped and volume million, from push of X/X $X.X to pass-through our well and the pass and the uplift year, sustained EBITDA inflation, million, as $XX prior

and by impact Pass-through adverse $X.X a sales million. also or X%, performance from million million foreign million offset sales than volume the led rose of factors contributed the another exchange. Combined, Gas of $XX.X mix, $X.X from $X Cylinder these initiatives uplift $X.X best XXXX. more million

offset million $X the from contracts, in partially to declined million saving pass-through and $X and cost cost EBITDA volume year prior improvement mix timing initiatives. by in of on certain due

X. our sales and gains balance fourth let's earnings in to cash and already capital flow I'm that Now pleased translated turn into quarter our sheet our sound on metrics position. key Slide further

acceleration. quarter generated We free reduce million turn, flow This us in cash third million the leverage free debt flow, helped our of net $X X, in sequentially and to X.Xx. quarterly cash $XX.X improved by consecutive

basis of call. our XX% as in with earnings outlined quarter capital working sequentially that to to we during sales a contracted XX.X%, XXX line three range the points XX% Operating percentage

of Our allocate capital. trailing XX.X% ability compelling to Luxfer our of repurchased ROIC demonstrating We XX-month of during X, $X.X the dynamically stock profile the million illustrates platform. quarter

on financial Let's end XX. year currently macroeconomic adjusted of EPS outlined now to to earlier, market our XXXX Taking Slide and factors we into guidance $X.XX account the Andy turn $X.XX. expect full XXXX to deliver

Our sales price projection to and growth additional of XX% X% roughly split volumes outlook. evenly underpins EPS between this

alternative affecting expense project quarter to EPS in underlying we of $X.XX higher interest prior Cylinders, similar Broadly, one into EPS constrains per project back by expect year Gas quarterly half limited tax expectations. of and $X.XX our and particularly to middle the the to share year, Though accelerate timing we legal with results the EBITDA fuels.

magnesium destocking Elektron, in military. and impacting of finalization materials SoluMag result the the magnesium in to our a pause qualification temporary in Additionally, will flare of is sales alternative

quarter one in Overall, thereafter. likely strong is to improvement the range of EPS $X.XX adjusted be with

reinvest year-over-year free on high focus management. helped Elektron fuels. cash working expenditures plan expect capital to free growth We continued of visibility XXXX, within by portion and in well lower incremental projects our restructuring into as alternative in this a as flow cash We cash expand to flow

contribution an Given again funding plan position, the to in improvement U.K. our expect no in we pension XXXX.

simplify to aim and our plan $X.X eliminate sheet. out for in million to pension we buy first liability quarter U.S. the our Furthermore, around balance further this

constrained, is XXXX plan further position. volumes While our organic flow, acknowledging reinvesting and and XXXX growth that our EPS to for advances incremental this cash drive also while attractive adjusted capital our effort free solidifying

over the to now like And Andy? back I'd turn call to Andy.

Andy Butcher

Thank you, Steve.

focus: is two the earnings system. in I business key by and on Luxfer areas of implementation per provide share, our update $X goal that of how will now path an to supported adjusted

long-term XX. EPS target aspects. growth. to our Please To organic $X.XX includes advance turn key from to We profitable three our pathway Slide goal,

of our remains hydrogen We source demand commercial we include growing of will profits. products Magtech in solutions. these both military products drive drive potential business expect from This growth new in which several with areas for further the next Cylinders to and over largest newer Gas to development of Within in years. both Elektron and segment, market, along the products expanded our key success incremental zirconium, magnesium expect the secular

has the conditions $X.XX particular seen sector also outsized been relative Additionally, contribute. the business current XXXX return the in in costs. of Gas should impacted The increases baseline anticipate labor energy more European carbon normalized Cylinders by recovery. and operating in to from margin We industrial fiber, another

in areas, which are provide opportunity for to period a stability expectations these recovery. Our an for of emerge margin will

structural and businesses. from powders benefit savings also our will in We both cost Gas Cylinders

In from including finance expect the currently legal $X.XX end costs, addition, charges outlined. lower that and of elevated legal Steve the of we uplift

of one clear are across that the attainment. both hold towards satisfaction. system all goal, $X-plus a the growth Luxfer to a are of tools business we team, As key its leadership employing and business, deliver to working EPS is line this we sight actively The customer we

Please turn business. Key introduced our this to operating working to Luxfer serve embedded we enhanced the program, our team components Slide the call, our members unlock in of potential our system. last are XX. of to will and On the develop which implement model, growth business internal

Sustainability when convenient. I'm encourage forms the I biannual one sustainability was key December. second review element report, you Today, in our here report highlighting of to published model. which the

that key few reporting achieved in XX% delivered the incremental ESG the team and in of of forward last look the on future. see will I'm at decrease customers progress end our You to XXXX. Luxfer our and to in advancement the you XXXX to absolute a our I proud goals compared years, emissions has

on briefly refreshing importance. by and to Please Slide position mission to clean value in turn to relevance conclude help energy-efficient and a let's Luxfer's strong continues grow safe, to create creation. Luxfer's XX. for Now world

our of innovation, to address many portfolio working generate that in products compelling market-leading opportunities, returns. us. harness see we of our future secular bright and with tailwinds the our Combined are to growth drive with ahead attractive a We financial commercial efforts our embedded

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

Operator

And Instructions] we'll Philip Gibbs with KeyBanc. first take [Operator our question from

Philip Gibbs

good Hi, morning.

Steve Webster

you? How're Phil. morning, Good

Philip Gibbs

started you underlying talk and but tax a speaking little in then have that by QX, Can bit EBITDA other legal interest I you're the mean, specifically. I you of, off and year-on-year think saying these similar is about you Good. items.

talk to just those maybe So things?

Steve Webster

mean, yes, in I year. details Thanks, saw take disclosed go basically picked our and XX-K. the a we too in the into of Phil. X, many Yes. bit in the that. cost, itself first can't of million. it quarter in terms what's over But legal, I'll Yes, little so up excess $X of all, about case In obviously, we

rate So XXXX. expecting continue we're run that to throughout

legal you there So $X can least million see at of cost.

slightly is Clearly, the two I we at the elevated interest that Interest, borrowing are factors level there. there's of rates the mean, have because moment higher.

our quite is around rate, borrowing X%, which we're historically about So high. paying to incremental X%

basically, free a this cash eventually. interest our expecting we year, cost. going Clearly, we're flow, higher as that then will come through and down do driving are So to be so to generate borrowings

But incremental an or that profitability will will - it XXXX. effect detract in our basically, have on from

tax, in before Finally we I the the think about U.K. rate talked tax

So rate profits April. been is enacted ahead, XX% and to the XX%, it going XX% in are going XX% the of tax up has from it's U.K. in our the corporation U.S. from

So the the is roughly U.K. rest in

So that just to modeling. taking around sort we're a XX% in are ETR an weighted average, drives of about our increase

around you combined costs, number year. is on around that we it EBITDA, to the our which numbers what EPS. we've - see underlying, EBITDA or similar But expect our is on a if So out, the can sort obviously normally similar EBITDA to there, we you impact illegal excluding a this be to about of had strip as say, matter.

Philip Gibbs

a Thank I that of and there's heaters first then off and in call then to bit you you and by sort year. flameless the and throughout for of for the said hiatus but like defense as outlook part it the a flares, things decontamination that. a think relates good aerospace of also And military that defense, ration there's started saying buying

full take us the through year the and thoughts maybe then the timing. So outlook behind

Andy Butcher

I'll Yes. This is cover Phil. Andy, that.

we're modeling commercial. both in So defense stronger yes, and year, the aerospace

our both pleased cylinders we're the that outlook So with and benefits business. there magnesium

have ticked nicely. Flameless ration up kits chemical and heaters

strong consistently areas. a those we're in projecting year So

we've of that's second terms flameless source in and magnesium, about flares, additional supply in a outage heard, we for supply and quarter military will source those see approved one quarter of the on heaters. two. little down That's identified the In of all in and ration going as a U.S. you

already for but advanced the are well flares. these very approved, alloys are some approvals are and Indeed, powders. military sophisticated of The military flares

those. still go through at go the And approve up see to there's to pick of all So we'll cadence of maybe one back we sort normalized three to that months year. then a as

broadly, yes, the positives So will aerospace year defense for be and for us.

Philip Gibbs

some these it fair we the is cylinders, got new in some to that about as and think entirety, broadly price contracts to some in some cost business of the think a of legal just and that the excluding then cost is you've written price in for way think it? maybe challenges - And you've Elektron improvements fair costs is with good about it now,

Andy Butcher

a Maybe little that. to bit different

with So the we're pass-throughs. pleased what on was cost achieved last year

passed I increased think were in quarter nearly XX% our X. costs of through

cylinders, good. all the were composite only of where there able the was that of So XX% pass costs. year - business on In at was we last cylinders, in for year, example, start the our of to

started that's off. this the contracts to roll increased end the That XX% about we year, year. of as to And XX%. Further by up

commented. still but progress as In passing you some in some place. successful cylinders, costs, restrictions been through on we've Elektron, good So in

overall. improving So situation

Philip Gibbs

you. Thank

Operator

question [Operator with Chip Hutton. EF from Instructions] We'll Moore take our next

Chip Moore

Good for morning. taking questions. the Thanks

the ask if 'XX wanted handicap I targets. can biggest Maybe to you risks. about So

you think - European some you in normalization talked area, the for expecting maybe I example. about

about assumptions. some Just underlying the of market curious

Andy Butcher

Thanks, be We're to some - to to pleased Yes. call. of in able details Chip. this goal behind we're that prepared $X the EPS share

the we that, overall, on achievable. legal risks think, financial. suitably have think is $X.XX some as ambitious we the about goal lowest to of the I to be and must If the and categorize I'd that risk related

the guess don't our see incrementally of higher lower models. extending risk model. generation XXXX, lead there's associated cash the an one-off finance improvement just part situation the I into with margin should legal to I and

competitive and around value in into must have The development like forces impact. We we will really have But uncertainty. customers have model market strong the we growth, tie recognize options risk be some profitable highest propositions, growth. secular and but do offers Luxfer product

the teams happen, and proven on Some to track magnesium We've it confidence records, we're the Europe, hydrogen this industrial of Chip. believe, make experience based in decades constraints and we zirconium their of alleviate. in will of investing foundation and in got great

Chip Moore

Maybe expand to in, And horizon? newer on some in you're more reception maybe can Perfect. recent just of areas about some helpful. of of just follow-up. investing on That's products and point, investments a what you're the and the you that just excited the terms

Andy Butcher

Yes.

investment XXXX to do have million $XX we targeting we're We're So $XX about. elevated of in that capital capital investment. pleased million

half over the capabilities. we got and ensuring Technologies, Just of magnesium, remaining Gas Elektron part zirconium, our hydrogen those areas. maintaining capacity alloys growth business CapEx Cylinders, of in need that into significant MEL the is and including infrastructure of goes part then the the allocated a we've to And around

for are opportunities no investment, good There shortage frankly. of

So those some that support related maintenance environmental and of profitable growth, projects. along, course, our we necessary and prioritize with safety

Chip Moore

Perfect.

you Okay. very Thank much.

Andy Butcher

Thanks Chip.

Operator

the And questions appears of to time. two webcast available An of it at this conference will will for us on recording a This recording encore Thank when XXXX company this call link the next available about be results. further quarter no late we that conference be joining be will regularly The have first this today. the scheduled A in call at Luxfer hours. in call. ends its you Luxfer website www.luxfer.com. April financial discusses

Luxfer (LXFR) 1 Mar 232022 Q4 Earnings call transcript