Luxfer (LXFR) 27 Apr 232023 Q1 Earnings call transcript

Good morning. My name is Melinda, I'll be your conference operator today. Welcome to Luxfer's First Quarter 2023 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,

Welcome, me Luxfer's Luxfer's today Steve Financial Officer; Melinda. earnings Chief quarter call. and Officer. Chief Luxfer's With is Webster, everyone, you, first to XXXX Executive Thank Andy Butcher,

of provide will in non-GAAP Please accompanied presentation. note, at reported release the by we call, presentation press the are today's details our reconciled can performance the webcast first Today's yesterday. to luxfer.com. that any financials of in issued a references as quarter is appendix accessed On be

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

after comments comments details a quarter guidance. Now and to Andy and additional results then I for Andy outlook, Steve Q&A. the over XXXX will will offer on the call our financial which some summary before will turn our of provide

go ahead. please Andy,

you, Thank welcome, and everyone. Mike,

quarter pleased turn our Slide of with first Please you to details share to I'm X. performance.

for Luxfer challenging our at drive in and continues team effectively to environment. to execute Our customers hard a

These with posting segments constant efforts of our EPS increased helped line with us both business currency to $X.XX earlier Sales in deliver adjusted growth. X.X% outlined expectations. sales

and sales and performance. Transportation weighed volumes profit sectors our on general industrial

fuels. We year-over-year, with by as impacted macroeconomic in project well are our order in increasing seeing destocking signs is lower of alternative book softness areas as these delays

on front. progress higher input at to are We Gas We costs. offset initiatives demonstrated pass-through enacting important this Cylinders additional

remain achieving incremental our business, see higher confident portions of EPS. we weakness select So in sequentially in we

on would business outlook. now segment our update to to an like X I Slide provide turn to

the other balance by We expect over end areas. tailwinds helpful secular in for this of softer certain outlook offset our although year, the of markets a is

automotive medical firefighters health and remains commercial products. cylinders especially ongoing continues for with to aircraft bring in demand and firm Cylinders. The and aerospace for military oxygen cylinders multiyear recovery The SCBA Gas positives, for care for

opportunities stronger We our new offerings as for and for within zirconium growth are Russian our advantage as products taking UGRE new kits demand well group also chemical of in Elektron.

an same years, At supply challenges fracking gas, business, other particularly we and in as greater the number last seeing where volatile having flattening the we're across headwind areas. few a customer in see time, backdrop oil a of now impact. a over chain growing After destocking is in activity our

in industrial investments. soft are plates we In demand Cylinders anticipated fuels, Europe we've uneven for for to and Gas slowing several continue projects, see after the which photo-engraving seen alternative demand large in and magnesium capitalized

on goals. progressing support efforts a of that number XXXX are we will key Importantly, profit our internal

magnesium we progressed magnesium customer of U.S. flare supply our Overall, Together qualification partners, countermeasure with of outage. our production exceeded flares continuing for military the shipments for amid expectations the of QX. in materials have alternative extended and we

X. both material in cost Combined this than the by and also help segment. fixed quarters costs of annually, with start In improve year we pass-through upcoming April measures to margins will Cylinders, in planned enacted actions reduce this inflation, on in million recoup Gas to further efforts QX to $X at more business

Turning to supply chain. the

seeing are in availability general. We improved

have others basic to and aluminum. such historic materials continues of However, chemicals the rise, sustained levels, Carbon above pricing select as well including pricing Fiber while

our inventory to We has holding. also sources have supply although successfully volume of introduced both price, increased and additional this leverage

on with investments incrementally trended our a Luxfer has environment growth, since we update, our operating continued including infrastructure. talent business tougher the for profitable emphasis and long-term near-and remain delivering focused in last objectives Though on

XXXX our for performance. about our Steve? more Steve specifics QX after reviewing discuss guidance will

Andy. Thanks,

end market. the to quarter. by X Slide with year-over-year report growth on X% we generated that I'll begin I'm summary sales during sales pleased results a our of of

Defense, first chemical pharmaceutical grew saw kits in while as driven SCBA, medical both XX%, applications and category. of increased, to and the growth we and military fourth oxygen for demand robust by magnesium also health end sales zirconium sales aerospace market in alloys care contributed defense response this quarter. Sales

Transportation sales decreased XX%.

from We materials continue magnesium to moved aerospace and recovery automotive aerospace for benefit zirconium Andy the in ongoing as higher. auto-catalysis commercial alloys mentioned, the markets, and

not after entirely quarters, inherent this market. accelerating alternative the slowed, unevenness was disappointing realizing two in the fuel prior in early surprising sales However, stage sales which given but

demand. catalysis sales with chemical industrial declined by saw X%, growing performance General both Zirconium oxide and mixed type. product

were oil the discussed gains categories and magnesium call. more on these in photo-engraving However, by than prior and backdrop for We gas contraction offset these plates. our

by are pleased and growth with quarter. product areas gains secular in key realized resilience during several markets additional demonstrated portfolio the end our the of We some

a Now please results. X financial quarter turn consolidated to first of Slide for summary our

$XX input of rising address adverse sales headwinds. price quarter was offset well million First exchange by million the to $XXX.X prior $X.X costs, mix growth action million driven from year. volume by and of This foreign as increased as partially

our as best addressing quarter million and for enacting of performance environment. million. inflation focused negatively from Consolidated four headcount from $X.X offset the discussed demand also gains of expenses, Growth-related the and pass-through on million with profit by million navigate prior on foreign year. quarter cost $X.X call input investment current remain our $XX.X in period. one impacted year-over-year higher efficiency We a exchange legal reduced adjusted in positive $X.X to decreased partial mix the a EBITDA basis, Volume

turn XX% to volume by push year let's Elektron driven further inflation, Now exchange foreign again $XX.X our headwinds. segment our by through million partially and results increased $X.X of offset a pass on X. mix Slide ago to sales of from million

$X.X of and mix other inevitably by of year-over-year this as decreased make largely for comparisons due million legal Elektron's However, XXXX the and Advanced volume costs EBITDA well to impact during recovery inflationary segment. costs. challenging of XX%, as

year which impacts $X.X mix. of million the $X.X offset cost pass-through. $X.X due foreign from contracted $X.X to of prior exchange of EBITDA a from X% the impact and largely due million positive mix, adverse Cylinder of from to impact volume sales $XX.X X% $X.X million million Gas volume million from decreased in million

Encouragingly, cost in and in fully demonstrating restore in around ultimately business. effort traction pass-through margins quarter, inflation the turn to this offset our

We also cost savings initiatives planned with in implementation cost fixed the of the additional from benefited quarters. actions coming

year I'd continue earlier, $X.XX Now we Balancing picture assets outlook EPS our and to target detailed X. like our to a $X.XX. XXXX updated on XXXX Andy internal of Slide discuss the deficiency, demand full adjusted to with

control projection EPS objectives. XX% call, and prior in lowered achieve XXXX Though X% we to for X%, we're have to down our sales to our on our margin cost to current X% growth focusing

the EPS two. expect to range quarter mid-$X.XX accelerate We in to

We are focus increased bringing also on generation. cash

challenged are by pressure adjusted goal cash our maintaining we on is in this for While performance conversion, which the flow impacted quarter. cash ongoing XXX% first free inventory, somewhat

norms and That CapEx mixed typical Despite we profit improvement sequential and expect our our our full backdrop, said, expectations plans, supported a position. cyclical the business by capital which our does outflow significant going we quarter seasonal for reflect growth-related are year on cash forward. maintaining are sound

proceeds of million for Also to to repay $XX balance plan from benefit to $XXX related in in the outlined the U.S. that million due Furthermore, than that I sheet, design million, we revolver. June placement our we I'm one loan private year our want previously. $X.X pleased of million highlight with to achieved the we this $X.X our less quarter pension plan successful confirm buyout

objectives, updating Pro I relative on for liquidity, $XX but deliver anticipated profit our would you look to macro this robust and positioning we to our forma loan immediate nearly invest million our capital forward which hold business environment. planning repayment, of further to for remains only in long-term evolving growth. our progress not to the on

Now the Andy? hand to to I'd Andy. back like over call

Thank you, Steve.

implementation the to additional Slide Luxfer Business now on details share I X. turn System. of the will some Please

our of the call, outlined During System. Business sustainability Luxfer QX we the segment

segment deployment, of internal like optimizes growth. to you'll focus model, for I the remember strategy processes Today, our discuss profitable which would and key customer another

our have ensure We to with refreshed multiyear growth strategic objectives. our alignment profitable our approach process planning annual to

of and benefiting business, regular maximize our advancement EPS our While such a to effort Reduction the form towards of the the as customer tailwinds balanced innovation potential progress tool Act. ensure goal. continue Inflation strategy, we that we've ensures first to of scorecard incorporated also our cornerstones the This our $X

This a on talented Maintaining new across businesses our and is remains quickly to areas. all the also rolled our us approach enabling growth critical flexibly out being to deploy team aims. in and execute optimal is efforts absolutely resources to our strategic

So Luxfer to quickly on XX. Development I our Program want Slide Management highlight

part sustained Manchester an in XX their to These organization. all strengthen resource as high-performing further talent program projects professional base of overall drive our We an joint in benefits growth. will this who to session provide help last a bring This our Luxfer. accelerate to employees also junior met executing profitable initiative many activity week across our while of specific our development launched to team important for members will promising to

conclude Luxe's Luxfer's capital helping let's world, customers, energy-efficient and briefly Please to by to strongly Slide for to to Now value attract and with our refreshing XX. creation. clean and mission and position to a strong stakeholders create continues turn safe, employees partners. on help retain resonate is

of and care, offset to cyclical some weakness of transportation our quarter, clean the some general defense energy introduced markets. products health in industrial recently helped generation the in have During the and

positioned and in Together a creation. value for premium commercial innovation We ahead confident opportunity the bring These well ahead. offerings talent drive in long investment of bright Luxfer's to us. runway of with future growth, our remain further

call operator to please go Q&A Now session. turn ahead. to back the I'd to Melinda, the the like begin

question from go we [Operator Please take Leshock ahead. Capital our Instructions] with Markets. KeyBanc And first Michael

morning. good Hi,

Michael. Good morning,

to volume to start it guidance. wanted asking price as split between relates your I about the and

that expect removed a it going contribution from you're expecting was forward? roughly what's the now. value split, XX-XX guidance verbiage within Should be your to guidance? Or but You said we previously be that price-driven that this predominantly would

sectors, defense, about health is question reduction that This guidance the Yes. for volume most but on that. first the and expectations, in the response notably comes industrial talked care. revenue offset by Thanks the strength from The in general we partially Andy.

especially pricing expect progress cases, in So Michael, in to Gas most we goals hold make to Cylinders. our and

So of X%, at to top end perhaps not us, end. some X% lower growth the there's likely at that the for

two we're remains energy that As softening But the in see of EBITDA the lower buoyed full products. end inflate, some first as we may last care although likely. make in of more the opportunities perhaps the over think health overall, continuation of as about for markets defense, some the what we that us response well by our guidance months and the clean means

that provide And magnitude any then What potential going there's and more could and some if recur check. that was that, detail on you if forward? exactly the might maybe legal the

our in Yes, Michael, in XX-Q matter disclosed entirely our referred related to XX-K Yes, the call, now. our is it's Steve cost and to legal that. we here. I'll which prior the take that is

So have is it's line the very And much expectation saw what spend going of situation. last in with also forward. quarter the and level we same we the

million cost $X the about in of around So quarter. legal

lastly Got you for Any carbon it's it. challenging material me, any I color fiber for And seeing great. be the materials? magnesium zirconium, ask wanted are whether then been improvement? other What's or would Where or raw on to you, most availability. there raw

zirconium. the Yes, big those, three carbon and sources of all introduced we've seeing of And all now you've we're with hit there supply. availability. of And those fiber, good secondary magnesium

with So some some time. to there's see from availability where continue in very discontinuities do to areas supply We the pleased time there. smaller

some So occasionally, fiber, pyramid materials. of basic or the or kevlar

improved, difficulties chain much don't big some supply I the we're So entirely, but on three. very think through especially of the

you. Thank Great.

Hutton. Instructions] go to on [Operator we EF Moore Please Chip with And move ahead.

Maybe discuss talk for could taking what you ask to you term. with if wanted about and then think I see that maybe of expand that flow to alternative, Thanks you could I morning. some as you've mid- about well. there. identified on the saw you in magnitude alluded and that questions. savings longer And Good sort the you

Yes. the Welcome Chip. Thanks, to call.

with start alternative fuel. Let's

cleaner You'll remember, about of are energy and course, hydrogen. compressed fuel alternative that sources, gas into all sales providing natural

gas bulk vehicles. secondly, slower And of on has area in for QX fuel and the us For transporting those storing fuels transport. bulk been in that quantities

projects a North Asia boost XXXX. in in were number a America There us that gave of and

engine. delays we're in areas programs and actually And Europe. the really upcoming newer of then new some Now of by follow-on CNG traditional we're the the looking are sales most vehicles. some decent those in that can approvals on seeing launch some buoyed for of the of convert But vehicle opportunities there on side, larger the

progress Generally, we look for alternative quite the we fuel considerably considerable through strengthen year. as to now

sites our On into simplification specific two. from of the cost powders, the have footprint side fixed of the announced offs. reduce projects we we've previously two consolidating business, and three In to

operate We some cost that we've while structural year, changes the plant us to expect effectively. end that will will be significant complete introduced allow of California that Pomona, to by the also in more

on Got and you on it. the And development, That's expand second the on some that. my headcount investment maybe question refresh of maybe related very on partially helpful. strategic you about talked

You reduction may referenced inflation sort arise, apps and that. be expand of getting on that, opportunities ready may things where like Thanks. for

Yes.

been as XX growth, know, last of defense, you quarter we've XX strong first program months, emphasizing pleased first very So profitable over and and response years the in saw - that we sales health care. in this about the the

benefits business, from some business results engineering, and development, starting in particularly research into we're extra but some of putting Elektron just been sales have and and development not see we to that. and to part the the the So of also

of about two website at A for The regularly webcast call. when joining company be will you scheduled XXXX financial today. www.luxfer.com. us discusses link recording available ends Thank encore call Luxfer this on conference late in in a This conference hours. An results. the of quarter its to the available be be Luxfer second will this July will next recording the