Q3 2023 Luxfer Holdings PLC Earnings Call
Speaker 1: Please stand by, your program is about to begin. If you need assistance during your conference today, please press star zero.
Please standby your program is about to begin.
If you need assistance during your conference today, Please press Star zero.
Good morning, My name is Angela and I will be your conference coordinator today.
Speaker 1: Good morning, my name is Angela and I will be your conference coordinator today. Welcome to the Luxfers 3rd quarter, 2023 earnings conference call. All lines have been placed on mute.
Welcome to the Luxe versus third quarter 2023 earnings conference call.
All lines have been placed on mute.
Speaker 1: After the speaker's remarks, we will hold a question and answer session. Now I will turn the call over to Kevin Grant, Vice President of Investor Relations and Business Development at Luxfer. Kevin, please go ahead.
After the Speakers' remarks, we will hold a question and answer session now.
Now I will turn the call over to Kevin Grant Vice President of Investor Relations and business development at Lux for Kevin. Please go ahead.
Speaker 2: Thank you, Angela. And good morning, everyone. Welcome to Luxford's third quarter 2023 earnings conference call.
Thank you Angela and good morning, everyone. Welcome to luck for third quarter 2023 earnings Conference call.
Speaker 2: This morning we'll be reviewing Luxford's financial results for the third quarter and it October 1st, 2023. I'm pleased to be joined today by Andy Butcher, our Chief Executive Officer and CBO EPYert? Financial Officer
This morning, we'll be reviewing <unk> financial results for the third quarter ended October one 2023.
I'm pleased to be joined today by Andy Butcher, our Chief Executive Officer.
Webster Chief Financial Officer.
Speaker 2: Today's webcast is accompanied by a presentation that can be accessed at Luxford.com. Please note any reference to non-GAF financials or reconcile in the appendix of the presentation.
Today's webcast is accompanied by a presentation that can be accessed at <unk> dot com.
Please note any reference to non-GAAP financials are reconciled in the appendix of the presentation.
Before we begin a friendly reminder, that any forward looking statements made about the company's expected financial results are subject to future risks and uncertainties.
Speaker 2: Before we begin, a friendlier reminder that any forward-looking statements made about the company's expected financial results are subject to future risks and uncertainty.
Speaker 2: We enter to take no obligations to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
We undertake no obligations to update any forward looking statements.
As a result of new information future events or otherwise.
Please refer to the Safe Harbor statement on slide two.
Speaker 2: Please refer to the safe harbor statement on slide two of today's presentation for further detail.
Today's presentation for further details.
Speaker 2: Now let me introduce Luxford CEO Andy Butcher. Please turn to slide three.
Now, let me introduce <unk> CEO Andy Butcher.
Please turn to slide three.
Andy Please go ahead.
Okay.
Speaker 3: Thank you, Kevin, and welcome to the Luxa team. Good morning, everyone. Thank you for joining us. We have a lot of questions for you.
Kevin and welcome to the Luxor team.
Good morning, everyone. Thank you for joining us.
We have a lot to cover on today's call.
Speaker 3: First, I'll provide a high level overview of after quarterfinancial performance.
I will provide a high level overview of our third quarter financial performance.
Speaker 3: On October the 11th, we announced preliminary Q3 results and a shortfall against full year guidance.
Hello October 11th we announced preliminary Q3 results and the shortfall to guidance full year guidance.
Speaker 3: I will review what drove that shortfall and the ongoing and accelerated initiatives we are executing to address the business conditions we are facing today.
We'll review what drove that shortfall and the ongoing and accelerated initiatives. We are executing to address the business conditions, we are facing today.
Steve will then discuss the quarter in more detail and provide our outlook for the fourth quarter.
Speaker 3: Steve will then discuss the quarter in more detail and provide our outlook for the fourth quarter.
Speaker 3: I'll end by providing colour on the accelerated and expanded strategic review we are undertaking, which we referenced in yesterday's release.
I'll end by providing color on the accelerated and expanded strategic review, we are undertaking which we referenced in yesterday's release.
For the third quarter, we reported sales of $97 4 million.
Speaker 3: For the third quarter, we reported sales of $97.4 million and adjusted diluted earnings per share of four cents, in line with the preliminary results we announced.
And adjusted diluted earnings per share report.
In line with the preliminary results we announced.
Speaker 3: We noted that specific areas of our business will face and continue challenges with either supply chain issues or weakening demands, which we shared on our second quarter earnings call in late July .
We noted that we noted that specific areas of our business. We are facing continued challenges with either supply chain issues or weakening demand, which we shared on our second quarter earnings call in late July.
Speaker 3: Or we lowered our full year 2023 guidance to reflect these challenges. It was not enough.
While we lowered our full year 2023 guidance to reflect these challenges it was not enough.
Headwinds persisted and grew during the quarter, resulting in a disappointing Q3 results.
Speaker 3: On today's call, we will discuss the issues we are facing in more detail and the actions we are taking.
On today's call, we will discuss the issues we are facing in more detail and the actions we are taking.
We are tightly focused on controlling what we can as we navigate the increasingly challenging macro landscape to deliver improved results for <unk> shareholders.
Speaker 3: We are tightly focused on controlling what we can, as we navigate the increasingly challenging right through landscape to deliver improved results for Luxor Shareholders.
Speaker 3: Beginning with revenue, the 2.8% year-over-year drop in sales was the net result of growth in the gasoline segment that was more than offset by a decrease in the electron segment.
Beginning with revenue the two 8% year over year drop in sales was the net result of growth in the gasoline and the segments that was more than offset by a decrease in the elektron segments.
By end market, our business across defense first response, and health care, along with transportation grew revenues compared to last year, while general industrial we saw significant reductions.
Adjusted EBITDA of $6 million was.
It was down from $16 1 million in the prior year, reflecting competitive pressures and rising costs, especially in graphic.
As well as unfavorable exchange rates adverse volume and mix some tough comparisons to prior year on pricing and higher legal costs.
Speaker 3: We did deliver strong cash flow, generating free cash of $8.9 million in the quarter, up by $7.6 million from the same period last year. We reduced net debt by $6.1 million to $78.4 million, resulting in a net debt to EBITDA ratio of 1.7 times.
We did deliver strong cash flow generating free cash of $8 9 million in the quarter up by $7 6 million from the same period last year.
We reduced net debt by $6 1 million to $78 4 million.
<unk> and our net debt to EBITDA ratio of one seven times.
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We are pressing forward with cost cutting initiatives already commenced as well as additional programs to drive margin improvements.
Speaker 3: We are pressing forward with cost-cutting initiatives already commenced, as well as additional programs to drive margin improvement.
Angela: Good morning. My name is Angela and I will be your conference coordinator today. Welcome to the Luxfer's third quarter, 2023 Earnings Conference call.
Let's turn to slide four for a deeper dive into the specific challenges we encountered in Q3.
Speaker 3: Next turns the slide forward, proceed for dive into the specific challenges we encounter in Q3.
All lines have been placed on mute. After the speakers remarks, we will hold a question and answer session.
At a high level the challenges we faced fell into two main categories.
Speaker 3: At a high level, the challenges we faced fell into two main categories.
Speaker 3: The first category is supply chain issues, primarily, although not exclusively related to sourcing magnesium.
The first category is supply chain issues, primarily although not exclusively related to sourcing magnesium.
Kevin Grant: Now I will turn the call over to Kevin Grant, vice president of investor relations and business development at Luxfer. Kevin, please go ahead. Thank you Angela and good morning everyone.
Speaker 3: With the destruction of our supply, originating from US magnisms forced the Schuhr declaration, we and others in North America were forced to find alternative, high-priced magnesium.
The disruption of our supply originating from U S magnesium false matures exploration.
And obviously in North America were forced to find alternative higher priced magnesium.
Kevin Grant: Welcome to Luxfer's third quarter, 2023 Earnings Conference call. This morning we will be reviewing Luxfer's financial results for the third quarter and it October 1st, 2023. I'm pleased to be joined today by Andy Butcher, our chief executive officer and Steve Webster, chief financial officer. Today's webcast is accompanied by a presentation that can be accessed at Luxfer.com. Please note any reference to non-GAF financials or reconcile in the appendix of the presentation. Before we begin, a friendlier reminder that any forward looking statements made about the company's expected financial results are subject to future risks and uncertainties. We undertake no obligations to update any forward looking statements, whether as a result of new information, future events or otherwise. Please refer to the safe harbor statement on slide two of today's presentation for further details.
At this time, we have identified more competitive sources that we are approving for Houston, Some north American products, and we are already cycling through higher priced inputs.
Speaker 3: At this time, we have identified more competitive sources that we are proving for use in some North American products. And we are already cycling through high-applied input.
Speaker 3: Until this is concluded, we incur an adverse impact on failed volumes in certain end markets, particularly in graphic arts, where higher prices have not proved sustainable.
Until this is concluded we incur an adverse impact on sales volumes in certain end markets, particularly in <unk>, where higher prices have not prove sustainable.
Speaker 3: Until we work to alleviate this by focusing on products where we deliver the greatest value.
And so we went to alleviate this by focusing on products, where we deliver the greatest value.
Speaker 3: The second category is a macroeconomic environment that is leading to lower demand in some of our market.
The second category is a macroeconomic environment that is leading to lower demand in some of our markets.
Speaker 3: economic slowdown and uncertainty, along with higher interest rates, tight labor conditions, and rising geopolitical volatility, are impacting demands primarily in our general industrial end markets, and a way on customer buying pay behaviors for these products.
Canonic slowdown and uncertainty along with higher interest rates tight labor conditions, and rising geopolitical volatility are impacting demand primarily in our general industrial end markets in a way on customer buying behavior as for these products.
Speaker 3: This is most evident in markets such as graphic arts, commercial magnesium powders, and industrial zirconium applications, those markets which are also susceptible to pressures from lower-cost Asian-based materials.
This is most evident in markets such as crop accounts commercial magnesium powders and industrial zirconium applications. These markets, which are also susceptible to pressures from lower cost Asian based materials.
Kevin Grant: Now let me introduce Luxfer's CEO, Andy Butcher. Please turn to slide three. Andy, please go ahead.
Andrew Butcher: Thank you, Kevin, and welcome to the Luxfer team. Good morning, everyone. Thank you for joining us. We have a lot to cover on today's call. First, I'll provide a high level overview of our third quarter financial performance. On October 11th, we announced preliminary Q3 results and a shortfall against full-view guidance. I will review what drove that shortfall and the ongoing and accelerated initiatives we are executing to address the business conditions we are facing today.
Speaker 3: Together, these three product categories represented approximately 87% or $10 million of the year over year decline in general industrial and market sales.
Together these three product categories represented approximately 87% with $10 million with the year over year decline in general industrial end market sales.
Speaker 3: Turning to slide 5, I will walk through the actions we are undertaking to address these challenges.
Turning to slide five.
Walk through the actions we are undertaking to address these challenges.
Yeah.
Throughout 2023.
Speaker 3: We've been driving accelerated cost reduction programs, as well as cash flow and supply chain improvement.
We've been driving accelerated cost reduction programs as well as cash flow and supply chain improvements.
Andrew Butcher: Steve will then discuss the quarter in more detail and provide our outlook for the fourth quarter.
Regarding cost reductions we are focused on ongoing structural cost savings. So the benefits are sustainable.
Speaker 3: Regarding cost reductions, we are focused on ongoing structural cost savings, so the benefits are sustainable.
Andrew Butcher: I'll end by providing colour on the accelerated and expanded strategic review we are undertaking, which we referenced in yesterday's release. For the third quarter, we reported sales of $97.4 million and adjusted diluted earnings per share of four cents. In line with the preliminary results we announced. We noted that specific areas of our business will face and continue challenges with either supply chain issues or weakening demand, which we have shared on our second quarter earnings call in late July.
Speaker 3: And, importantly, we continue to invest in the parts of our business where we see long-term profitable growth opportunities, such as new products in electron and new applications for alternative fuels.
Importantly, we continue to invest in the parts of our business, where we see long term profitable growth opportunities.
New products in electronics, and new applications for alternative fuels.
Speaker 3: We have reduced and continue to reduce our headcounts to align our costs with the demand environment. In graphic arts and MacTech, for example, this includes reducing the number of employees by over 20% year to date, up from the 10% reported last quarter, with similar reductions in less regards from the zero.
We have reduced and continue to reduce our head counts to align our costs with the demand environment.
<unk> for example, this includes reducing the number of employees by over 20% year to date.
From the 10% reported last quarter with similar reductions unless we got some of it is Europe.
Andrew Butcher: While we lowered our full year 2023 guidance to reflect these challenges, it was not enough. The headwinds persisted and grew during the quarter resulting in our disappointing Q3 results. On today's call, we will discuss the issues we are facing in more detail and the actions we are making. We are tightly focused on controlling what we can as we navigate the increasingly challenging microlandscape to deliver improved results for lack of shareholders. Beginning with revenue, the 2.8% year-over-year drop-in sales was the net result of growth in the gasoline segment that was more than offset by a decrease in the electron segments.
Speaker 3: In addition to headcount changes, in graphic art for lowing we have identified $750,000 of annualized productivity savings. And we anticipate further reductions in magnesium sourcing costs next year, even before any benefits accruing once US magnesium returns to normal business operation.
In addition to head count changes and graphic Arts alone, we have identified $750000 of annualized productivity savings and we anticipate further reductions in magnesium sourcing costs next year, even before any benefits accruing once U S magnesium returns to normal business operations.
The consolidation of our Elektron Pavel just manufacturing from 3% to two facilities is on track to conclude in the fourth quarter delivering $900000 of annualized run rate savings and allowing us to sell the vacant property in 2024.
Speaker 3: The consolidation of our electron powders manufacturing from 3 to 2 facilities is on track to conclude in the fourth quarter delivering $900,000 of annualised run rate savings and allowing us to sell the vacant property in 2024.
In our gas cylinders business, we are continuing to take important proactive measures in collaboration with our customers to address high carbon sliding costs.
Speaker 3: In our gas cylinders business, we are continuing to take important, proactive measures in collaboration with our customers to address high carbon-fired costs.
Andrew Butcher: By end-market, our business across defence, first response and healthcare, along with transportation, grew revenues compared to last year, while general industrial saw significant reductions. I just did evidour of $6 million with down from $16.1 million in the prior year, reflecting competitive pressures and rising costs, especially in graphic arts, as well as unfavorable exchange rates, adverse volume and mix, some tough comparisons to prior year on pricing and higher legal costs. We did deliver strong cash flow, generating free cash of $8.9 million in the quarter, up by $7.6 million from the same period last year.
Speaker 3: within alternative fuel. As we shared last quarter, we are simplifying our footprints by transferring production from Pomona to Riverside and Calgary.
We didnt alternative fuel as we shared last quarter, we are simplifying our footprint by transferring production from promoted to Riverside in Calgary.
Speaker 3: This is improving productivity while preserving the existing capacity and already delivering $1.1 million of ongoing annual fixed cost reductions.
This is improving productivity, while preserving the existing capacity and already delivering $1 $1 billion of ongoing annual fixed cost reductions.
Speaker 3: We plan to sublet a portion of the Pomona site in 2024.
We plan to sublet a portion of the component side in 2024.
Speaker 3: Our outlook for the alternative fuel market long-term remains positive, fostered by the recent U.S. administration's announcement that seven regional clean hydrogen hubs have now been selected to receive $7 billion from the Infrastructure Investment and Jobs Act.
Our outlook for the alternative fuel market long term remains positive bolstered by the recent U S. Administration's announcement that seven regional clean hydrogen hubs, but now being selected to receive $7 billion from the infrastructure investments and job sites.
Andrew Butcher: We reduced net debt by $6.1 million to $78.4 million, resulting in a net debt to evidour ratio of 1.7 times. We are pressing forward with cost-cutting initiatives already commenced, as well as additional programmes to drive margin improvements.
Finally in addition to reducing expenses, we are managing working capital primarily inventory and receivables. We have made good initial progress here and expect to continue driving cash flow as we work through higher cost of magnesium in our inventory.
Speaker 3: Finally, in addition to reducing expenses, we are managing working capital, primarily inventory and receivables. We have made good initial progress here and expect to continue driving cash flow as we work through higher cost magnesium in our inventory.
Speaker 3: At this time, I'll turn the call over to Steve to discuss our Q3 results in greater detail and updated full year 2023 outlook, after which I'll provide details on our strategic review.
Andrew Butcher: I turn to slide 4 for a deeper dive into the specific challenges we encountered in Q3. At a high level, the challenges we faced fell into two main categories. The first category is supply chain issues, primarily, although not exclusively, related to sourcing magnesium. With the destruction of our supply, originating from US magnesium's forced matured exploration, we and others in North America were forced to find alternative high-priced magnesium. At this time, we have identified more competitive sources that we are approving for use in some North American products, and we are already cycling through high-priced inputs.
At this time.
Turn the call over to Steve to discuss our Q3 results in greater detail and updated full year 2023 outlook.
Until this is concluded, we incur an adverse impact on failed volumes in certain end markets, particularly in graphic arts, where higher prices have not proved sustainable. Until we work to alleviate this by focusing on products where we deliver the greatest value, the second category is a macroeconomic environment that is leading to lower demand in some of our markets. Economic slowdown and uncertainty, along with higher interest rates, tight labor conditions and rising geopolitical volatility, are impacting demands, primarily in our general industrial end markets, and are weighing on customer buying pay behaviors for these products. This is most evidence in markets such as graphic arts, commercial magnesium powders, and industrial zirconium applications. Those markets which are also susceptible to pressures from lower-cost Asian-based materials.
After which I will provide details on our strategic review.
Steve.
Speaker 3: Thanks Andy. I'll begin on slide 6 of the summary of our sales performance by end March.
Thanks, Andy I'll begin on slide six with a summary of our sales performance by end market.
Defense first response and health care sales grew by a notable 20% in the third quarter driven by strong demand for our lightweight firefighter CBA cylinders and continued contributions from chemical case, Flameless ration heaters and pharmaceuticals.
Speaker 3: Defense first response health care sales grew by a notable 20% in the third quarter, driven by strong demand for our lightweight firefighter SCBA cylinders and continued contributions from chemical kits, flameless ration heaters and pharmaceuticals.
Transportation sales grew 6% as automotive remains strong on the back of increased auto catalysis shipments and the completion of this year's wrote to Mac alloy wheel program.
Speaker 3: Transportation sales grew 6% as automotive remained strong on the back of increased auto catalysis shipments and the completion of this year's Rotamag alloy wheel program.
Meanwhile, alternative fuels inflatable cylinders and aerospace alloys sales was flat in the quarter.
Speaker 3: Meanwhile, alternative fuels, inflatable cylinders and aerospace alloy sales were flat in the quarter.
General industrial sales decreased 30% being most impacted by the macro headwinds mentioned earlier.
Speaker 3: General industrial sales decreased 30% being most impacted by the macro headwinds mentioned earlier.
The issues, we faced in photo engraving plagues commercial magnesium powders and industrial is the cardiome applications weighed on our performance.
Speaker 3: The issues we faced in photoengraving plates, commercial magnesium powders and industrial zirconium applications weighed on our performance.
Speaker 3: One area of strength, though, was an increase in our new green hydrogen product line.
One area of strength, though was an increase in our new green hydrogen product line.
Speaker 3: Please turn to slide 7 for a summary of our consolidated third quarter financial results.
Please turn to slide seven for summary of our consolidated third quarter financial results.
Third quarter sales of $97 $4 million decreased $2 8 million or two 8% from the prior year impacted by volume declines and unfavorable mix primarily in industrial markets. We.
Speaker 3: Third quarter sales of $97.4 million decreased $2.8 million, or 2.8% from the prior year, impacted by volume declines and unfavourable mix, primarily in industrial markets.
Together, these three product categories represented approximately 87% or 10 million dollars of the year over year decline in general industrial end market sales.
Speaker 3: We did see favorable pricing in gas cylinders, partially offset by electrons.
We did see favorable pricing in gas cylinders, partially offset by electronics.
Speaker 3: Consolidated adjusted EBITDA of $6 million decreased $10.1 million or 62.7% from the prior year.
Consolidated adjusted EBITDA was $6 million decreased $10 1 million or <unk> 62, 7% from the prior year.
Andrew Butcher: Turning to slide five, I will walk through the actions we are undertaking to address these challenges. Throughout 2023, we have been driving accelerated cost reduction programs, as well as cash flow and supply chain improvements. Regarding cost reductions, we are focused on ongoing structural cost savings so that benefits are sustainable, and, importantly, we continue to invest in the parts of our business where we see long-term profitable growth opportunities. It's just new products in the electron and new applications for alternative fuels.
Proactive price recovery assets were not sufficient to overcome combined headwinds of inflation volume and mix.
Speaker 3: Proactive price recovery efforts were not sufficient to overcome combined headwinds of inflation, volume and mix.
Speaker 3: In addition, we faced tougher comps in the Electron business, as in the prior year we were successful in driving price in advance of realising material cost increases, which now act as a headwind by comparison.
In addition, we face tougher comps in the Elektron business as in the prior year, we were successful in driving price in advance of realizing material cost increases, which now acts as a headwind by comparison.
Speaker 4: Finally, foreign exchange had a negative impact of $0.9 million and we incurred increased legal costs.
Finally, foreign exchange had a negative impact of <unk> $9 million and we incurred increased legal costs.
Turning to slide eight and our segment results.
Speaker 4: Electron sales of $52.7 million decreased 7% from the prior year, driven by lower demand in the general industrial end market, and some lower pricing passed through where input costs have fallen.
Elektron sales of $52 $7 million decreased 7% from the prior year driven by lower demand in the general industrial end market and some lower pricing pass through where input costs have fallen.
Andrew Butcher: We have reduced and continue to reduce our headcounts to align our costs with the demand environment. In Graphic Arts and Magtech, for example, this includes reducing the number of employees by over 20% year to date up from the 10% reported last quarter with similar reductions in Luxfer Gaffs on the Europe. In addition to headcount changes, in Graphic Arts and Lowing, we have identified $750,000 of annualised productivity savings, and we anticipate further reductions in magnesium sourcing costs next year, even before any benefits accruing once US magnesium returns to normal business operations.
Electrons adjusted EBITDA was $3 2 million decreased 75% due to the impact from lower demand cost and volume pressures in graphic offs. The non recurrence of the accelerated prior year price increases and the higher legal costs.
Speaker 4: Gas cylinders sales of $44.7 million increased 3%, with momentum building in the quarter, as an SCBA sales increase offset lower sales of cylinders for industrial applications.
Gas cylinder sales of $44 $7 million increased 3% with momentum building in the quarter as an ex DBA sales increase offset lower sales of cylinders for industrial applications.
Andrew Butcher: The consolidation of our fourth quarter delivering $900,000 of annualised run rate savings and allowing us to sell the vacant property in 2024. In our capital and business, we are continuing to take importance, proactive measures in collaboration with our customers to address high carbon-fied costs. Within alternative fuel, as we shared last quarter, we are simplifying our footprints by transferring production from Pomona to Riverside and Calgary. This is improving productivity or preserving the existing capacity and already delivering $1.1 million of ongoing annual fixed cost reductions.
Speaker 4: We continue to benefit from improvements in cost pass-through and this positive trend is being maintained in October .
We continued to benefit from improvements in cost pass through and this positive trend is being maintained in October.
Adjusted EBITDA of $2 $8 million declined 18% due to the impact from lower volumes of high margin industrial cylinders and adverse short term productivity offsetting higher pricing and fixed cost savings.
Speaker 4: Now, let me address our balance sheet and capital allocation priorities on slide 9.
Now, let me address our balance sheet and capital allocation priorities on slide nine.
We remain steadfast in maintaining a strong balance sheet and driving strong free cash flow, which provide the flexibility to continue to invest in our business for future growth and return cash to shareholders.
Speaker 4: We remain steadfast in maintaining our strong balance sheet and driving strong free cash flow, which provide the flexibility to continue to invest in our business for future growth and return cash to shareholders.
During Q3, we allocated $2 $5 million towards organic growth initiatives, including the recent announcement of a new production facility. It looks like Epsilon does Nottingham U K site to assemble bulk gas systems, enabling the transportation of hydrogen and other gases across Europe.
Speaker 4: During Q3, we allocated $2.5 million towards organic growth initiatives, including the recent announcement of a new production facility at Luxford, Gasoline, does notting a new case fight to assemble bulk gas systems, enabling the transportation of hydrogen and other gases across Europe .
Andrew Butcher: We plan to sublet a portion of the Pomona site in 2024. Our outlook for the alternative fuel market, long-term, remains positive, fostered by the recent US administration's announcement that seven regional clean hydrogen hubs have now been selected to receive $7 billion from the infrastructure investments in jobs tax. Finally, in addition to reducing expenses, we are managing working capital, primarily inventory and receivables. We have made good initial progress here, and expect to continue driving cashflow as we work through fire cost magnesium in our inventory.
Speaker 4: Year-to-date, CapEx is $7.5 million and we are still on track to invest up to $11 million this year.
Year to date Capex is $7 $5 million and we are still on track to invest up to $11 million. This year.
As always we are being thoughtful and selective with our approach to capital spend projects focusing on growth opportunities in operational efficiency and supporting our effort to deliver cash flow.
Speaker 4: As always, we are being thoughtful and selective with our approach to capital spend projects, focusing on growth opportunities and operational efficiency, and supporting our effort to deliver cash flow.
Steve Webster: At this time, our firm will call over to Steve to discuss our few three results in greater detail and updated fully of 2023 outlook, after which I will provide details on our strategic review. Steve, thanks Andy.
During the quarter, we paid $3 5 million in dividends and bought back $6 million in shares.
Speaker 4: During the quarter, we paid $3.5 million in dividends and bought back $0.6 million in shares.
Speaker 4: We have $12 million remaining on our share repurchase authorization.
We have $12 million remaining on our share repurchase authorization.
Let's turn to slide 10 for our updated 2023 guidance.
Speaker 4: That's 10 to slide 10 for our updated 2023 guidance.
Steve Webster: I'll begin on slide six of the summary of our sales performance by end market. Defence first response to healthcare sales grew by a notable 20% in the third quarter, driven by strong demand for our lightweight firefighter SCBA cylinders, and continued contributions from chemical kits, famous ration heaters, and pharmaceuticals. Transportation sales grew 6%, as automotive remains strong on the back of increased auto-catalysis shipments, and the completion of this year's Rotemag alloy wheel program.
Given the increasingly challenging demand environment and increased geopolitical risk impact. We currently expect full year sales will be 5% to 7% lower than the prior year.
Speaker 4: Given the increasingly challenging demand environment and increased geopolitical risk impact, we currently expect full-year sales will be 5-7% lower than the prior year.
Speaker 4: We anticipate Magtech sales to be soft in Q4 due to timing of orders, which we expect to recover in Q1, and we remain positive on the long-term demand profile of that business.
We anticipate magnetek sales to be soft in Q4 due to timing of orders, which we expect to recover in quarter one.
And we remain positive on the long term demand profile of that business.
In the fourth quarter overall, we forecast on increased revenue and profitability in gas cylinders is offset by continued weakness in elektron.
Speaker 4: In the fourth quarter overall, we forecast that increased revenue and profitability in gas cylinders is offset by continued weakness in electrons.
Meanwhile, alternative fuels inflatable cylinders and aerospace alloy sales were flat in the quarter. General industrial sales decreased 30%, being most impacted by the macro headwinds mentioned earlier. The issues we faced in photo engraving plates, commercial magnesium powders, and industrial zirconium applications weighed on our performance. One area of strength, though, was an increase in our new green hydrogen product line.
We anticipate that resulting adjusted EPS will be in the range of zero to five.
Speaker 4: We anticipate that resulting adjusted EPS will be in the range of 0 to 5 cents.
Speaker 4: we remain focused on cash generation and inventory levels and expect to achieve our goal of 100% adjusted free cash flow conversion.
We remain focused on cash generation and inventory levels and expect to achieve our goal of 100% adjusted free cash flow conversion.
We are operating in a dynamic environment with several challenges to navigate.
Speaker 4: We are operating in a dynamic environment with several challenges to navigate. Our team is focused on executing our self-help cost saving and profitability initiatives to set Luxford up for success in 2024. Now, I'd like to turn the call back to Andy. Andy.
Our team is focused on executing our self help cost savings and profitability initiatives to set looks for up for success in 2024.
Steve Webster: These tend to slide seven for a summary of our consolidated third quarter financial results. Third quarter sales of $97.4 million decreased $2.8 million or $2.8% from the prior year, impacted by volume declines and unfavorable mix, primarily in industrial markets. We did see favorable pricing in gas cylinders partially offset by electron.
Now I would like to turn the call back to Andy.
Andy.
Thanks, Steve I'm on to slide 11.
Speaker 3: As we announced for October the 11th, we are accelerating and expanding our annual strategic review process.
As we announced on October the 11th we are accelerating and expanding our annual strategic review process.
Speaker 3: The purpose of this comprehensive and portfolio-wide exercise is to review our business and operations, to inform strategy development, and evaluate future opportunities.
The purpose of this comprehensive portfolio wide exercise is to review our business and operations to inform strategy development and evaluate future opportunities.
Insolidated to just the EBITDA of $6 million decreased $10.1 million or $62.7% from the prior year. Corrective price recovery efforts were not sufficient to overcome combined headwinds of inflation, volume and mix. In addition, we faced tougher comps in the electron business. As in the prior year, we were successful in driving price in advance of realizing material cost increases, which now acted a headwind by comparison. Finally, foreign exchange had a negative impact of $0.9 million and we incurred increased legal costs.
To support our efforts and to ensure a rigorous independent assessments, we've engaged a leading global investment bank that is in the process of evaluating all of our businesses.
Speaker 3: To support our efforts and to ensure a rigorous independent assessment we have engaged a leading global investment bank that is in the process of evaluating all of our businesses, our capital structure and a range of available opportunities to unlock and maximise value.
Capital structure in the range of available opportunities to unlock and maximize value.
Speaker 3: The scope of this activity is comprehensive, and we are executing the review with an open mind, considering all possible paths to value maximization.
The scope of this activity is comprehensive and we are executing the review with an open mind, considering all possible path to value maximization.
Speaker 3: Luxfer offers unique capabilities in materials technology and we want to make sure we are in the right markets and businesses to best leverage those advantages for our customers, employees and shareholders.
Let's start offers unique capabilities in materials technology.
Steve Webster: Turning to slide eight and our segment results. Electron sales of $52.7 million decreased 7% from the prior year, driven by lower demand in the general industrial end market and some lower pricing passed through where input costs have fallen.
And we want to make sure we are in the right markets and businesses to best leverage those advantages for our customers employees and shareholders.
Speaker 3: The strategic review has kicked off in earnest and is ongoing.
The strategic review has kicked off in earnest and is ongoing.
Speaker 3: we are committed to transparency and plan to provide an update on or before our fourth quarter and 2023 full year earnings call in February .
We are committed to transparency and plan to provide an update on or before our fourth quarter and 2023 full year earnings call in February.
Electrons of just the EBITDA are $3.2 million decreased 75% due to the impact from lower demand, cost and volume pressures and graphic arts, the non-recurrence of the accelerated prior year price increases and the higher legal costs. Gas cylinders sales of $44.7 million increased 3% with momentum building in the core delta. As an FDBA sales increase, offset lower sales of cylinders for industrial applications. We continued to benefit from improvements in cost pass-through and this positive trend is being maintained in October.
Given the macroeconomic uncertainty and pending the outcome of the strategic review, we have decided that it is responsible and appropriate to withdraw our previous adjusted EPS goal of $2 in 2025.
Speaker 3: Given the macroeconomic uncertainty and pending the outcome of the strategic review, we have decided that it is responsible and appropriate to withdraw our previous adjusted EPS goal of $2 in 2025.
Speaker 3: We will revisit long-term targets when our strategic review is complete, and we are in a position to provide a more informed outlook.
We will revisit long term targets with our strategic review is complete and we are in a position to provide a more informed outlook.
I want to underscore that our board and leadership team are committed to driving improved performance and taking the necessary actions to transform luxor.
Speaker 3: I want to underscore that our board and leadership team are committed to driving improved performance and taking the necessary actions to transform Luxfer. And so that end, I-
Steve Webster: Adjusted EBITDA of $2.8 million declined 18% due to the impact from lower volumes of high margin industrial cylinders and adverse short term productivity, offsetting higher pricing and fixed cost savings.
And so thats and I want to thank our stakeholders to.
Speaker 3: to our employees around the world who are working hard to ensure we are able to meet the needs of our customers.
To our employees around the world, who are working hard to ensure we are able to meet the needs of our customers.
Steve Webster: Now, let me address our balance sheet in capital allocation priorities on slide 9. We remained steadfast in maintaining our strong balance sheet and driving strong free cash flow, which provide a flexibility to continue to invest in our business for future growth and return cash to shareholders. During Q3, we allocated $2.5 million towards organic growth initiatives, including the recent announcement of a new production facility that looks for gas cylinders, notting a new case fight, to assemble bulk gas systems, enabling the transportation of hydrogen and other gases across Europe.
Speaker 3: to our customers who placed their trust in us to deliver innovative and valuable solutions.
To our customers.
Placed their trust in us to deliver innovative and valuable solutions.
And to our stakeholders for their interest and support over the long term.
Speaker 3: and to our stakeholders for their interest and support over the long term.
With that I'd like to turn the call back to the operator to begin the Q&A session after which I'll provide some final remarks.
Speaker 3: With that, I'd like to turn the call back to the operator to begin the Q&A session, after which I'll provide some final remarks. Angela?
Please go ahead.
At this time, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker 1: At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We will pause for a moment to allow questions to queue.
Remove yourself from the queue at any time by pressing star team. Once again that is star one to ask a question, we will pause for a moment to allow questions to queue.
Year-to-date CAPEX is $7.5 million and we are still on track to invest up to $11 million this year. As always, we are being thoughtful and selective with our approach to capital spend projects, focusing on growth opportunities and operational efficiency and supporting our effort to deliver cash flow.
Our first question comes from Steve <unk> with Sidoti. Please go ahead.
Speaker 1: Our first question comes from Steve Ferazani with Sedoti. Please go ahead.
Speaker 5: Morning, Andy, I appreciate you taking my questions this morning and appreciate the detail on the call. Trying to get a better sense of your outlook on graphic arts now with the new competitive pressures. You know, it would seem like that margin pressure won't go away even if US Mag comes back. How do you look at that business going forward given that you've been willing to divest lower margin business, the slower growth businesses in the past?
Good morning, Andy Steve I. Appreciate you taking my questions. This morning, and I appreciate the detail on the call.
Trying to get a better sense of your outlook on graphic Arts now with.
During the quarter, we paid $3.5 million in dividends and bought back $0.6 million in shares. We have $12 million remaining on our share repurchase authorisation.
New competitive pressures.
It would seem like that margin pressure won't go away, even if U S. Meg comes back how do you look at that business going forward given that you've been willing to die fast.
Steve Webster: Let's turn to slide 10 for our updated 2023 guidance. Given the increasingly challenging demand environment and increased geopolitical risk impact, we currently expect four-year sales will be 5-7% lower than the prior year. We anticipate mag-tech sales to be soft in Q4 due to timing of orders which we expect to recover in Q1 and we remain positive on the long-term demand profile of that business.
Lower margin business with slower growth businesses in the past.
Thank you, Steve and welcome to the call. Let me first of all talk about craft accounts demands and then our strategic review process.
Speaker 3: Thank you Steve and welcome to the call. Let me first of all talk about graphic art demands and then our strategic review process. The trading conditions with graphic arts remain very difficult in Europe at the moment to see currently that outage of US magnesium means we're working with much higher material costs than our competitors in Europe who are predominantly using Chinese based material.
The trading conditions of graphic outs remain very difficult in Europe at the moment, Steve Kirk.
Currently the outage of U S. Magnesium means we're working with much higher material costs than our competitors in Europe, who are predominantly using Chinese based material.
In the fourth quarter overall, we forecast that increased revenue and profitability in gas cylinders is offset by continued weakness in electron. We anticipate that resulting adjusted EPS will be in the range of 0 to 5 cents. We remain focused on cash generation and inventory levels and expect to achieve our goal of 100% adjusted free cash flow conversion.
Speaker 3: In due for, we will be introducing an improved photo engraving plant that we expect to deliver a strong value proposition to end users. So that will be helpful. And I do believe that long term the magnesium raw material market will likely stabilize at lower prices. We may have opportunity to purchase some notably lower cost magnesium in 2024. So those will be significant positives for the future prospects of the business.
In Q4, we will be introducing an improved photoengraving plate that we expect to deliver a strong value proposition to end users so that will be helpful and.
And I do believe that long term the magnesium raw material market will likely stabilize at lower prices.
We might have opportunity to purchase some node to be lower cost magnesium in 2024, So those will be significant positive for the future prospects of the business.
Steve Webster: We are operating in a dynamic environment with several challenges to navigate. Our team is focused on executing our self-help cost-faving and profitability initiatives to set Luxfer up for success in 2024.
Turning to your specific question on traffic apps and our strategic review. This strategic review includes the comprehensive review of all of our businesses.
Speaker 3: Turning to your specific question on traffic arts and our strategic review, the strategic review includes the comprehensive review of all of our businesses, which will include the traffic arts business.
This includes the graphic arts business.
Andrew Butcher: Now I'd like to turn the call back to Andy. Andy? Thanks, Steve. I'm on to slide 11.
Speaker 3: Right now we're very focused internally in graphic arts in reducing the costs and improving the profitability.
Right now, we're very focused internally and graphic arts in reducing the costs and improving the profitability.
Andrew Butcher: As we announced on October 11, we are accelerating and expanding our annual strategic review process. The purpose of this comprehensive and portfolio-wide exercise is to review our business and operations to inform strategy developments and evaluate future opportunities. To support our efforts and to ensure a rigorous independent assessment, we've engaged a leading global investment bank that is in the process of evaluating all of our businesses, our capital structure, and the range of available opportunities to unlock and maximize value.
Speaker 3: If after the strategic review is complete, it's determined that Luxury's not the best owner of the graphic arts business, then we would embark on a process to find what that best owner of the graphics art business is. We couldn't commit to a transaction today, of course, and we'd never sell any business if we couldn't get greater value than the value of the business under Luxury's ownership.
Case after the strategic review is complete it's determined that luxury is not the best owner of the crop accounts business. Then we would embark on a process defined what that best owner of the graphics office is.
We couldnt commit to a transaction today of course, and we would never sell any business, if we couldnt get greater value than the value of the business from deluxe was flexes ownership.
Speaker 3: I think the best takeaway overall on this is that the board and the management are aligned and committed to unlocking and delivering long-term, straight-fold the value and open to any and all alternatives to do so.
I think the best takeaway overall loan basis.
The board and management are aligned and committed to <unk>.
Locking in delivering long term stakeholder value and open to any and all alternatives to do so.
Great I appreciate the answer turning to a couple of others.
Andrew Butcher: The scope of this activity is comprehensive and we are executing the review with an open mind, considering all possible paths to value maximization. Luxfer offers unique capabilities in materials technology and we want to make sure we are in the right markets and businesses to best leverage those advantages for our customers, employees, and shareholders. The strategic review has kicked off in earnest and is ongoing.
Speaker 5: Great. You should the answer. Turning to a couple of the stronger areas for the quarter. Transportation was up year over year. Alternative fuels still flat. Was this a one quarter up tick look like you had some benefits? We're going to be one off this quarter or the conclusion of the wheels.
Stronger earnings for this quarter transportation was up year over year alternative fuels still flat. So is this a one quarter uptick look like.
You had some benefits we're going to be one off this quarter or the conclusion of the wheels.
Speaker 5: Sales for the year. Can you give us an outlook on near-term outlook on transportation given maybe an improving regulatory environment for hydrogen?
Sales for the year can you give us an outlook on near term outlook on transportation, given maybe an improving regulatory environment for hydrogen.
We are committed to transparency and plans to provide an update on all before our fourth quarter in 2023 full year earnings call in February. Given the macroeconomic uncertainty and pending the outcome of the strategic review, we've decided that it is responsible and appropriate to withdraw our previous adjusted EPS goal of $2 in 2025. We will revisit long-term targets when our strategic review is complete and we are in a position to provide a more informed outlook.
Speaker 3: Yes, thank you. So transportation for the quarter was up. You're right. The whip.
Yes, yes. Thank you so <unk> transportation for the quarter was was up your Youre right.
Yes.
Yes.
Speaker 3: particularly encouraged by what we see long-term from the alternative fuel market. And especially I would say at the moment in the CNG area.
I'm, particularly encouraged by what we see long term from the from the alternative fuel market.
Especially I would say at the moment in the in the CMG area. Some some lower natural gas prices.
Speaker 3: Some lower natural gas prices, increasing low emissions vehicle requirements have made that the need for C&G vehicles, especially in North America, are quite strong. I was seeing earlier this week more details on the new multi-fuel 15-liter engine coming out from Cummins for the C&G.
<unk> low emissions vehicle requirement. So it made the need for <unk> vehicles, especially in North America.
Quite strong.
I was saying earlier this week have more details on the new multi fuel 15 liter engine coming out from Cummins for efficacy at Engie rolling out into extended trials and we're seeing some good benefits from from that now.
Andrew Butcher: I want to underscore that our board and leadership team are committed to driving improved performance and taking the necessary actions to transform Luxfer. And to that end, I want to thank our stakeholders to our employees around the world who are working hard to ensure we are able to meet the needs of our customers, who are customers who place their trust in us to deliver innovative and valuable solutions and to our stakeholders for their interest and support over the long term.
Speaker 3: rolling out into extended trials and we're seeing some good benefits from that now and I hope that will be an additional tailwind for us in 2024.
That will be an additional tailwind for us in 2024.
Speaker 3: I feel good about our C&G range. In hydrogen, yes, the outlook still pretty choppy, I think. The tailwind from some of these government infrastructure investments isn't really being felt yet. Although that news on the expenditure in seven specific hydrogen hubs was very encouraging.
I feel good about our CMG range.
Hydrogen, yes, the outlook still.
Pretty choppy I think the tailwind from some of these government infrastructure investments isn't really being felt yet although that news on the expenditure in certain specific hydrogen hubs.
With that, I'd like to turn the call back to the operator to begin the Q&A session after which I will provide some final remarks. Angela, please go ahead.
With very encouraging.
Alternative fuels is an important part of our strategy for value creation, we might have to be a little patient on hydrogen.
Speaker 3: alternative role is an important part of our strategy for value creation. We may have to be a little patient on hydrogen. It was good to see that from development.
Angela: At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question.
It was good to see that strong development and Sanjay.
Speaker 5: Fantastic. Last one for me if I could squeeze it in. Looks like you benefit on gas cylinders primarily from pricing, and you're pricing more than offsetting inflationary pressures. Surprise, we didn't see margin improvement. Can you give a little bit of detail on why that didn't result in margin improvement?
Fantastic last one from me if I could squeeze it in.
We will pause for a moment to allow questions to queue.
It looks like you.
You benefit on gas cylinders from primarily from pricing and your pricing.
More than offsetting inflationary pressures surprised we didn't see margin improvement can you give a little bit of detail on why that didn't result in margin improvement.
Stephen Ferazani: Our first question comes from Steve Ferazani with Sedoti. Please go ahead. Good morning, Andy. I appreciate you taking my questions this morning and appreciate the detail on the call. Trying to get a better sense of your outlook on graphic arts now with the new competitive pressures. It would seem like that margin pressure won't go away even if US Mag comes back. How do you look at that business going forward given that you've been willing to divest lower margin business to slower growth businesses in the past?
Speaker 3: Yes, we are pleased with the progress been made on pricing in Luxfer gas cylinders. That's been a positive this year, and we believe we'll be for the future. Some of the longer term contracts that we have are rolling off, and that's giving us opportunity to recover some of those higher costs that we've been seeing from some time. So that's been very helpful for us.
Yes, we are pleased with the progress been made on pricing in <unk>.
Cylinders thats been a positive this year and we believe we will be for the rest of the future. So.
Longer term contracts that we have rolling out rolling off and that's giving us opportunity to recover some of those higher costs that we've been seeing for some time. So that's been so thats been very helpful for us in the in the periods. We did see some early in the period, we saw some productivity shortfalls in one of the <unk>.
Speaker 3: In the period, we did see some early in the period, we saw some productivity shortfalls in one of the facilities.
Andrew Butcher: Thank you, Steve, and welcome to the call. Let me first of all talk about graphic arts demands and then our strategic review process. The trading conditions for graphic arts remain very difficult in Europe at the moment that Steve currently, that outage of US magnesium means we're working with much higher material costs than our competitors in Europe who are predominantly using Chinese based material. In June 4th, we will be introducing an improved photo engraving plant that we expect to deliver a strong value proposition to end users, so that will be helpful.
<unk>.
Speaker 3: That was associated with a shortage of labour and some equipment.
<unk> with a shortage of labor and some equipment.
Speaker 3: difficult is but that's in the past. Now that time was much stronger. The high performance has continued into October .
Difficulties, but thats, but thats in the past now September was much stronger the high performance has continued into October.
Speaker 3: And we're projecting in the notes and the scripts a better performance again out of custom and is in Q4, which I believe will carry forward into the new year. Great. That's it.
We are projecting.
In the notes in the script.
A better performance again out of gasoline in the in Q4, which I believe will carry forward into the new year.
Andrew Butcher: I do believe that long-term the magnesium raw material market will likely stabilize at lower prices. We may have opportunity to purchase some notably lower cost magnesium in 2024, so those will be significant positives for the future prospects of the business. Turning to your specific question on graphic arts and our strategic review, the strategic review includes the comprehensive review of all of our businesses, which will include the graphic arts business. Right now, we're very focused internally in graphic arts in reducing the costs and improving the profitability.
Great. That's it for me thanks, Andy Thanks, Steve.
Thank you.
Speaker 1: That this title will turn the call over to CEO Andy Butcher for any final remarks.
At this time I will turn the call over to CEO, Andy. Thank you for any final remarks.
Speaker 3: Thank you Angela, please turn to slide 12.
Thank you Angela please turn to slide 12.
Andrew Butcher: If after the strategic review is complete, it's determined that Luxury is not the best owner of the graphic arts business, then we would embark on a process to find what that best owner of the graphics art business is. We couldn't commit to a transaction today, of course, and we'd never sell any business if we couldn't get greater value than the value of the business under Luxury's ownership. I think the best takeaway overall on this is that the ball and the management are aligned and committed to unlocking and delivering long-term straight-holder value and open to any and all alternatives to do so.
Speaker 3: Thanks for the questions and dialogue today. Well, this is a difficult period. I want to remind us that much to continue to offer a strong customer value proposition, supported by competitive advantages across diverse niche applications.
Thanks for the questions and dialog today.
Well this is a difficult period and I wanted to remind us that much the continues to offer strong customer value proposition.
Fortify competitive advantage across diverse niche applications.
Great. I appreciate the answer.
Speaker 3: Our materials engineering expertise, broad array of proprietary technologies, technical know-how and manufacturing expertise, deliver innovative and superior solutions to our customers.
Our materials engineering expertise.
Broad array of proprietary technologies technical Knowhow and manufacturing expertise deliver innovative and superior solutions to our customers.
We are continuing to concentrate the protocol folio in segments that create sustainable long term value.
Speaker 3: We are continuing to concentrate the product portfolio in segments that create sustainable long-term value.
Speaker 3: Currently, we are facing supply chain and macroeconomic challenges to the creating headwinds for our business.
Currently we are facing supply chain and macroeconomic challenges that are creating headwinds for our business.
To combat. These factors, we have and continue to take decisive actions, which are gaining traction.
Speaker 3: To combat these factors, we have and continue to take decisive actions which are gaining traction, executing initiatives focused on pricing, for print optimization, cost savings and cash flow management. But these actions...
Executing initiatives focused on pricing footprint optimization cost savings and cash flow management.
But these actions alone are not sufficient.
Andrew Butcher: Turning to a couple of the stronger areas for you this quarter, transportation was up year over year, alternative fuels still flat. Was this a one-quarter uptick look like you had some benefits? We're going to be one-off this quarter, the conclusion of the wheels. Sales for the year. Can you give us an outlook on near-term outlook on transportation, given maybe an improving regulatory environment for high-fishing? Yes, yes, thank you. So transportation for the quarter was up, you're right.
Our expanded annual strategic review process will thoroughly explore a comprehensive range of opportunities to fully unlock and maximize value.
Speaker 3: Our expanded annual strategic review process will thoroughly explore a comprehensive range of opportunities to fully unlock and maximize value.
We look forward to sharing the results of that strategic review with you and outlining the next steps in our value creation journey.
Speaker 3: We look forward to sharing the results of that strategic review with you and outlining the next steps in our value creation journey. Thank you and again for your time today.
Thank you for your time today.
Operator.
Speaker 1: This concludes LuxFers Q3 2023 earnings call. A recording of this conference will be available in about two hours. A link to the recording of this webcast will be available on the LuxFer website at www.LuxFer.com.
This concludes <unk> Q3, 2023 earnings call a.
A recording of this conference will be available in about two hours.
To the recording of this webcast will be available on the Lux for web site at Www Dot Lux for Dot com.
Andrew Butcher: We're particularly encouraged by what we see long-term from the alternative fuel market. And especially, I would say at the moment, in the CNG area, some lower natural gas prices, increasing low emissions vehicle requirements have made that the need for CNG vehicles, especially in North America, are quite strong. I was seeing earlier this week more details on the new multi-fuel 15-litre engine coming out from Cummins for the CNG rolling out into extended trials, and we're seeing some good benefits from that now, and I hope that will be an additional tailwind for us in 2024.
Okay.
Andrew Butcher: I feel good about our CNG range. In hydrogen, yes, the outlook still pretty choppy, I think. The tailwind from some of these government infrastructure investments isn't really being felt yet, although that news on the expenditure in 7-specific hydrogen hubs was very encouraging. In terms of fuel, it was an important part of our strategy for value creation. We may have to be a little patient on hydrogen. It was good to see that strong development in CNG.
Andrew Butcher: Fantastic. Last one for me, if I could squeeze it in, looks like you benefit on gas cylinders primarily from pricing, and you're pricing more than offsetting inflationary pressures. Surprise, we didn't see margin improvement. Can you give a little bit of detail on why that didn't result in margin improvement? Yes, we are pleased with the progress been made on pricing in Luxfer gas cylinders. That's been a positive this year, and we believe we'll be for the future.
Andrew Butcher: Some of the longer-term contracts that we have are rolling off, and that's giving us opportunity to recover some of those higher costs that we've been seeing from some time. So that's been very helpful for us. In the period, we did see some early in the period, we saw some productivity shortfalls in one of the facilities that was associated with a shortage of labour and some equipment difficulties, but that's in the past.
Andrew Butcher: Now, September was much stronger. The higher performance has continued into October, and we're projecting in the notes and the scripts a better performance again out of gas cylinders in Q4, which I believe will carry forward into the new year.
Great. That's just from me. Thanks, Andy. Thanks, Steve. Thank you.
That's a title.
Andrew Butcher: Turn the call over to CEO Andy Butcher for any final remarks. Thank you, Angela. Please turn to slide 12. Thanks for the questions and dialogue today. Well, what this is a difficult period, and I want to remind us that much to continue to offer a strong customer value proposition, supported by competitive advantages across diverse niche applications. A material with engineering expertise, broad array of proprietary technologies, technical know-how and manufacturing expertise, deliver innovative and superior solutions to our customers.
Andrew Butcher: We are continuing to concentrate the product portfolio in segments that create sustainable long-term value. Currently, we are facing supply chain and macroeconomic challenges that are creating headwinds for our business. To combat these factors, we have and continue to take decisive actions which are gaining traction, executing initiatives focused on pricing, for print optimization, cost savings and cash flow management. But these actions alone are not sufficient. Our expanded annual strategic review process will thoroughly explore a comprehensive range of opportunities to fully unlock and maximize value. We look forward to sharing the results of that strategic review with you and outlining the next steps in our value creation journey.
Thank you for your time today. Operator?
Angela: This concludes Luxfer's Q3 2023 earnings call. A recording of this conference will be available in about two hours.
A link to the recording of this webcast will be available on the Luxfer website at www.luxfer.com.