Q1 2025 Luxfer Holdings PLC Earnings Call

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Madison: Good morning, My name is Madison and I will be your conference operator today welcome to Lux versus first quarter 2025 earnings conference call. All lines have been placed on mute. After the speaker's prepared remarks, we will hold a question and answer session now I will turn the call over to Kevin Grant Vice.

Operator: Good morning.

Madison: My name is Madison, and I will be your conference operator today. Welcome to Luxfer's first quarter 2025 earnings conference call. All lines have been placed on mute. After the speaker's prepared remarks, we will hold a question and answer session.

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, Madison, and good morning, everyone. Welcome to Luxfer's first quarter 2025 earnings conference call. This morning, we'll be reviewing Luxfer's financial results for the first quarter ended March 31, 2025. I'm pleased to be joined today by Andy Butcher, our Chief Executive Officer, and Steve Webster, our Chief Financial Today's webcast is accompanied by a presentation that can be accessed at Luxfer.com. Please note any references to non-GAAP financials are reconciled in the appendix of the presentation.

Kevin Grant: President of Investor Relations and business development at Lexmark, Kevin. Please go ahead.

Kevin Grant: Thank you, Matt and good morning, everyone. Welcome to luck for its first quarter 2025 earnings Conference call. This morning, we'll be reviewing <unk> financial results for the first quarter ended March 31, 2025, I'm pleased to be joined today by Andy Butcher, Our Chief Executive Officer.

Kevin Grant: Webster, our Chief Financial Officer.

Kevin Grant: Today's webcast is accompanied by a presentation that can be accessed at looks for dot com.

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

Kevin Grant: 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.

Kevin Grant: 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. We undertake no obligation 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 2 of today's presentation for further details. During today's call, we'll be providing adjusted first quarter 2025 financial results, including the graphic arts business and 2024 legal recovery.

Kevin Grant: We undertake no obligation to update any forward looking statements, whether as a result of new information future events or otherwise.

Kevin Grant: Please refer to the Safe Harbor statement on slide two of today's presentation for further details.

Kevin Grant: During today's call, we'll be providing adjusted first Corp, first quarter 2025 financial results, excluding the graphic arts business and 2024 legal recoveries.

Andy Butcher: Now, let me introduce <unk> CEO Andy Butcher.

Andrew Butcher: Now let me introduce Luxfer's CEO, Andy Butcher. please turn to slide three. Andy, please go ahead. Thank you, Kevin, and good morning, everyone. Thank you for joining us. We are very pleased with our first quarter performance. Our team delivered adjusted earnings per share of 23 cents, up from 20 cents a year ago, and maintained net debt at approximately $42 million, or 0.7 times leverage. Sales revenues grew significantly, led by Electron and driven especially by off-cycle demand in flameless rationed heaters, as well as our group rationed UGREs, reflecting higher 2025 demand from our defence applications, as well as commercial customers replenishing inventories.

Kevin Grant: Turn to slide three.

Andy Butcher: Andy Please go ahead.

Andy Butcher: Thank you Kevin and good morning, everyone. Thank you for joining us.

Andy Butcher: We are very pleased with our first quarter performance. Our team delivered adjusted earnings per share of 23 up from 20 cents a year ago and maintained net debt at approximately $42 million or 0.7 times leverage.

Andy Butcher: Sales revenues grew significantly led by electron.

Andy Butcher: And driven especially by off cycle demand. It flamed this Russian heaters as well as our group Russian UGI ease, reflecting higher 2025 demand from our defense applications.

Andy Butcher: Well as commercial customers replenishing inventories.

Andy Butcher: We also saw a continuation of the rebound in defense and.

Andrew Butcher: We also saw a continuation of the rebound in defence flares and aerospace, and our overall order books as we left the quarter were elevated by 12%. We'll dive deeper into the encouraging UGRE outlook later as a flagship example of our Luxfer business system in action.

Andy Butcher: And aerospace and overall order books as we left the quarter were elevated by 12%.

Andy Butcher: We will dive deeper into the encouraging UGI re outlook later as a flagship example of our luxury business system in action.

Andy Butcher: The planned divestiture of our graphic Arts business is nearing completion and remains on track to close by the middle of the year, which will enable us to sharpen our focus on higher margin growth opportunities.

Andrew Butcher: The planned divestiture of our graphic arts business is nearing completion and remains on track to close by the middle of the year, which will enable us to sharpen our focus on higher margin growth opportunities. I'm also pleased to announce that order has been secured for our first bulk gas transportation system in Europe, a milestone that underscores Luxfer's expertise in large-scale compressed gas handling as we expand our international gas solutions portfolio.

Andy Butcher: I'm also pleased to announce the order has been secured its breakfast bulk gas transportation system in Europe.

Andy Butcher: Stone to underscores <unk> expertise in large scale compressed gas handling as we expand our international gas solutions portfolio.

Andy Butcher: Turning to tariffs through a variety of proactive and reactive steps, we have effectively avoided or neutralized incremental direct duty costs as of now.

Andrew Butcher: Turning to tariffs. Through a variety of proactive and reactive steps, we have effectively avoided or neutralised incremental direct duty costs as of now. This insulation from recent tariff actions reflects deliberate, forward-looking activities across the business. Based on work of the past several years, there are fully approved reciprocal tariff exemptions covering our electron alloys and most of our zirconium input. Nearly all cylinder trade within North America benefits from USMCA protection. and we have additionally used duty drawback programmes and local sourcing to limit cross-border exposure. combined with some minor price changes where necessary.

Andy Butcher: This installation from recent tariff actions reflects deliberate forward looking activities across the business.

Andy Butcher: Based on work of the past several years there are fully approved reciprocal tariff exemptions covering our elektron alloys and most of our zirconium inputs.

Andy Butcher: Nearly all still in Detroit within North America benefits from U S MCA protections.

Andy Butcher: And we have additionally, use duty drawback programs and local sourcing to liberate cross border exposure.

Andy Butcher: Combined with some minor price changes where necessary I'm pleased to say that these strategies have positioned us to minimize direct reciprocal tariff impacts to date.

Andrew Butcher: I'm pleased to say that these strategies have positioned us to minimise direct reciprocal tariff impacts today. That said, we remain attentive to evolving macro risks. We are very closely monitoring ongoing developments around rare earth supply channels from China and broader trade policy dynamics.

Andy Butcher: That said, we remain attentive to evolving macro risks, we are very closely monitoring ongoing developments around railroads supply channels from China and broader trade policy dynamics.

Andrew Butcher: Furthermore, should new duties emerge, we are prepared to adjust our sourcing, pricing and operational strategies as needed, and our heavy weighting in defence, first response and aerospace continues to position us well against any broader economic slowdown.

Speaker Change: Furthermore, Shouldnt you do TC Mitch we are prepared to adjust our sourcing pricing and operational strategies as needed.

Speaker Change: Our heavy weighting in defense first response, and aerospace continues to position us well against any broad economic slowdown.

Speaker Change: Overall Q1 demonstrates that locks that can execute effectively in a dynamic environment with.

Andrew Butcher: Overall, Q1 demonstrates that Luxfer can execute effectively in a dynamic environment. With a strengthened backlog, we remain encouraged by our internal performance and the near-term outlook.

Speaker Change: With a strengthened backlog, we remain encouraged by our internal performance and the near term outlook.

Speaker Change: Yeah.

Stephen Webster: With that, I'll hand the call over to Steve, who will provide details of our financials and share our 2025 guidance. Thanks, Andy, and good morning, everyone. Let's turn to slide four for a review of our consolidated financial results. In the first quarter, sales were $90.5 million, up 8.9% year-over-year, on solid end-market demand. Adjusted EBITDA rose 9.7% to $11.3 million, delivering a 12.5% margin. We generated $5.1 million of cash from operations, a $1.5 million increase, and maintained a low net debt of $41.9 million. On the right, our sales bridge shows that volume and mix contributed $7.2 million, driven by off-cycle defence pull-ins for MREs and flares, plus an improving aerospace backlog.

Speaker Change: With that I'll hand, the call over to Steve who will provide details of our financials and share our 2025 guidance.

Speaker Change: Keith.

Speaker Change: Thanks, Andy and good morning, everyone.

Let's turn to slide four for a review of our consolidated financial results.

Speaker Change: In the first quarter sales were $95 million up eight 9% year over year on solid end market demand.

Adjusted EBITDA rose nine 7% to $11 $3 million, delivering a 12, 5% margin.

Speaker Change: We generated $5 $1 million of cash from operations of $1 5 million dollar increase and maintained a low net debt to $41.9 million.

Speaker Change: On the right our sales bridge shows that volume and mix contributed $7 $2 million driven by off cycle defense pull ins frame arrays, and flat plus an improving aerospace backlog.

Speaker Change: Pricing added zero point $5 million, reflecting CPI escalators and selected customer increases, partially offset by repricing intellectual and future sets and lower input costs.

Stephen Webster: Pricing added $0.5 million, reflecting SCBA escalators and selective customer increases, partially offset by repricing in Electron due to certain lower input costs. FX was a modest $0.3 million headwind. For our adjusted EBITDA walk, net deflation added $0.6 million, volume and mix and pricing contributed $3.7 million and $0.5 million respectively. While adverse factors of $3.7 million largely reflect $1.7 million of transitional production costs and $1.2 million of elevated logistics and ongoing investment.

Speaker Change: FX was a mosaic theoretically 3 million dollar headwind.

Speaker Change: For adjusted EBITDA walk net deflation that is zero point $6 million volume and mix and pricing contributed $3 $7 million and $5 million respectively.

Speaker Change: This fact is a $3 $7 million largely reflect $1 $7 million of transitional production costs and $1 $2 million of elevated logistics I don't going investments.

Speaker Change: For full breakdown. Please see the detailed waterfall in the appendix on slide 12.

Stephen Webster: For a full breakdown, please see the detailed waterfall in the appendix on slide 12.

Speaker Change: Now, let's turn to slide five for a detailed review of electrons first quarter financial performance.

Stephen Webster: Now let's turn to slide 5 for a detailed review of Electron's first quarter financial performance. Our electron segment harnesses proprietary magnesium and zirconium platforms in markets where higher performance is critical. We serve customers who demand deep technical expertise, whether that's ultra-lightweight alloys that extend aircraft range and cut fuel burn, countermeasure flares and self-heating MRE powders that protect and sustain personnel in extreme conditions. or zirconium-based catalysts and oxides that drive precision in advanced manufacturing, clean energy solutions and critical healthcare applications. by focusing on high barrier defense and aerospace driven end markets. Electron commands premium pricing and high margins, powering sustained growth as global demand for safety, reliability and performance continues to climb.

Speaker Change: Our elektron segment harnesses proprietary magnesium and zirconium platforms in markets, where high performance is critical.

Speaker Change: We serve customers, who demand deep technical expertise, whether that's ultra lightweights alloys that extend at Kraft range and feel bad Council.

Speaker Change: Countermeasure flares and south teaching MRV powders that protect and sustained personnel in extreme conditions, what was a Canadian based catalysts oxides that drive precision and advanced manufacturing clean energy solutions and critical health care applications.

Speaker Change: By focusing on high barrier defense and aerospace driven end markets.

Speaker Change: Elektron command premium pricing and high margins.

Speaker Change: Seeing sustained growth as global demand for safety reliability and performance continues to decline.

Speaker Change: Yeah.

Speaker Change: In the first quarter Elektron sales rose to $49 $4 million up 31% from $37 $7 million a year ago.

Stephen Webster: In the first quarter, electron sales rose to $49.4 million, up 31% from $37.7 million a year ago. Adjusted EBITDA increased to $8.7 million and our EBITDA margin expanded to 17.6%, a 120 basis point improvement versus the prior year. Growth was broad-based across our core end market. Defence, First Response and Healthcare led the way, up 76%. customers continue to restock flameless ration heaters and Meals Ready to Eat products, and demand for our related UGRE product is still increasing. We also saw a meaningful pickup of demand for both our magnesium aerospace alloys and magnesium powders for countermeasure flares, as customer manning and production issues began to ease across both market sectors.

Speaker Change: Adjusted EBITDA increased to $8 $7 million and our EBITDA margin expanded to 17, 6%, a 120 basis points improvement versus the prior year.

Speaker Change: Growth was broad based across our core end markets Defense first response and health care led the way up 76% cut.

Speaker Change: Customers continue to restart Flameless ration heaters are meals ready suite products and demand for our related you jewelry product is still increasing.

Speaker Change: We also saw a meaningful pickup of demand for both our magnesium aerospace alloys, and magnesium powders for countermeasure flares as customer mining and production issues began to ease across both market sectors.

Speaker Change: Alloys lifted our transportation revenues by approximately 11% despite some softness in automotive catalysis.

Stephen Webster: Alloys lifted our transportation revenues by approximately 11 percent, despite some softness in automotive catalysis. In specialty industrial, market conditions resulted in flat to modest growth of around 1%. Adjusted EBITDA margin expansion reflects the impact of higher volumes relative to fixed costs. as well as a favourable shift towards higher value defence programmes.

Speaker Change: In specialty industrial market conditions resulted in flat to modest growth of around 1%.

Speaker Change: Adjusted EBITDA margin expansion reflects the impact of higher volumes related to fixed cost.

Speaker Change: As well as a favorable shift towards higher value defense programs.

Stephen Webster: Furthermore, there is ongoing payoff from the site consolidation and lean operational efficiencies we embedded under our Luxfer business system last year, which will continue to deliver cost savings and margin resilience. Overall, Electron's performance underscores the power of focused execution and targeted innovation.

Speaker Change: Furthermore, there is ongoing payoff from the site consolidation and lean operational efficiencies, we embedded on dry docks for business system last year.

Speaker Change: Which will continue to deliver cost savings and margin resilience.

Speaker Change: Overall electrons performance underscores the power of focused execution and targeted innovation.

Speaker Change: With that let's turn to slide six for our gas cylinders results.

Stephen Webster: With that, let's turn to slide six for our gas cylinders results. Luxfer Gas Cylinders is the benchmark for mission-critical pressure vessels, anchored by SCBA market leadership and long-standing partnership with Blue Chip OEM. Our lightweight, rugged cylinders protect fire, emergency and hazardous environment teams, while our high-performance, high-strength cylinders enable life support and operations in aerospace and space exploration applications. We also serve specialty industrial, medical and alternative fuel markets with precision-engineered solutions. Backed by proprietary processes and rigorous qualifications, this segment commands premium pricing and delivers resilient margins in high-barrier markets.

Speaker Change: Lux for gas cylinders as the benchmark for mission critical pressure vessels anchored by S. CPA market leadership and long standing partnership with Blue Chip Oems.

Speaker Change: Our lightweight rugged southern does protect fire <unk> emergency and hazardous environment teams, while our high performance high strength cylinders enable life support and operations in aerospace and space exploration applications.

Speaker Change: We also serve specialty industrial medical and alternative fuel markets with precision engineered solutions.

Speaker Change: Backed by proprietary processes and rigorous qualifications. This segment command premium pricing and delivers resilient margins in high barrier markets.

Speaker Change: In the first quarter gas cylinders revenue was $41 $1 million down 9% from $45 $4 million in quarter, one 2024.

Stephen Webster: In the first quarter, gas cylinder's revenue was $41.1 million, down 9% from $45.4 million in Q1 2024. An adjusted EBITDA came in at $2.6 million, reflecting a 6.3% margin versus 9% last year. This performance was largely in line with our expectations.

Speaker Change: And adjusted EBITDA came in at $2 $6 million, reflecting a six 3% margin versus 9% last year.

Speaker Change: This performance was largely in line with our expectations.

Stephen Webster: we saw softer demand in alternative fuel cylinders with the heavy-duty truck market still subdued. Aerospace, and especially space exploration, demand is robust, although overall transportation sales declined about 23% year-over-year. However, despite the anticipated softness in alternative fuels, the strong aerospace volumes and the order for our first bulk gas transportation module will open new opportunities for future growth. Below down 7%, our Defence first response and healthcare business held up relatively well with steady orders for SCBA and an improving outlook. Specialty Industrial posted a notable 25% increase driven by electronic and calibration gas applications. Margin compression resulted from the lower volume.

Speaker Change: We saw softer demand in alternative fuel cylinders with the heavy duty truck market is still subdued.

Speaker Change: Aerospace and especially space exploration demand is robust.

Speaker Change: Although overall transportation sales declined about 23% year over year.

Speaker Change: How is that despite the anticipated softness in alternative fuels, the strong aerospace volumes and the order for our first bulk gas transportation module will open new opportunities for future growth.

Speaker Change: Although down 7% are defense first response, and health care business held up relatively well with steady or distress CBA and an improving outlook.

Speaker Change: Specialty industrial posted a notable 25% increase driven by electronic and calibration gas applications.

Speaker Change: Margin compression resulted from the lower volumes.

Stephen Webster: although pricing actions helped offset some headwinds.

Speaker Change: Although pricing actions helped offset some headwinds and.

Stephen Webster: Importantly, the efficiency initiatives we put in place last year are now starting to stabilise margins and we expect these permanent measures to support stronger second half. In summary, while gas cylinders faced headwinds in certain end markets, our core first responder, aerospace and healthcare-related cylinders remained resilient, and our cost and efficiency focus will continue to drive improvement.

Speaker Change: Ultimately the efficiency initiatives, we've put in place last year are now starting to stabilize margins and we expect these permanent measures to support stronger second half.

Speaker Change: In summary, Wildcats southern does face headwinds in certain end markets. Our core first responders at aerospace and health care related cylinders. It remained resilient and our cost and efficiency focus will continue to drive improvements.

Speaker Change: Now please turn to slide seven for an update on our full year 2025 financial guidance.

Stephen Webster: Now please turn to slide 7 for an update on our full year 2025 financial guidance. I'd like to reinforce two key themes from Andy's opening comments, our tariff resilience and the strength of our backlog across defence, first response and aerospace applications. Combined with our diversified portfolio, these factors give us some confidence despite the uncertain macroeconomic outlook.

Speaker Change: I'd like to reinforce two key themes from Andy's opening comments, our tariff resilience and the strength of our backlog across defense first response and aerospace applications.

Speaker Change: Combined with our diversified portfolio. These factors give us some confidence despite the uncertain macroeconomic outlook.

Speaker Change: Accordingly, we are reaffirming our full year 2025 guidance unchanged from what we communicated in February.

Stephen Webster: Accordingly, we are reaffirming our full year 2025 guidance, unchanged from what we communicated in February. with expectations for flat revenue growth. We continue to anticipate adjusted diluted earnings per share in the range of $0.95 to $1.05 and adjusted EBITDA between $48 million and $52 million and free cash flow generation of $20 million to $25 million for the full year. This outlook reflects our confidence in the aggregate underlying demand from our end markets, combined with disciplined cost management, prudent price actions, and tight working capital controls.

Speaker Change: Expectations for flat revenue growth.

Speaker Change: We continue to anticipate adjusted diluted earnings per share in the range of 95 to $1 five and adjusted EBITDA between 48 million and $52 million and free cash flow generation of 20 million to $25 million for the full year.

Speaker Change: This outlook reflects our confidence in the aggregate underlying demand from our end markets combined with disciplined cost management prudent prudent price actions and tight working capital controls.

Stephen Webster: That said, foreign exchange does remain a key sensitivity, and indeed we have seen significant volatility in the last few weeks. For our business, a five cent move in the dollar versus sterling can shift our full year earnings by around $1 million, although we continue to hedge selectively to mitigate some of that risk.

Speaker Change: That said foreign exchange does remain a key sensitivity.

Speaker Change: And indeed, we have seen significant volatility in the last few weeks.

Speaker Change: For our business a five cent move in the dollar versus Sterling can shift our full year earnings by around $1 billion.

Speaker Change: Though we continue to hedge selectively to mitigate some of that risk.

Speaker Change: On capital deployment, we will maintain a routine share repurchase program with board authorization for up to $10 million of additional opportunistic buybacks.

Stephen Webster: On capital deployment, we'll maintain our routine share repurchase programme, with board authorisation for up to $10 million of additional opportunistic buyback. We're also evaluating further simplification and cost reduction initiatives to drive improved efficiencies across our operations. We remain confident that our Fortress balance sheet and diversified end market exposure will enable us to navigate any remaining headwinds and deliver on our projections.

Speaker Change: We're also evaluating further simplification and cost reduction initiatives to drive improved efficiencies across our operations.

Speaker Change: We remain confident that our fortress balance sheet and diversified end market exposure will enable us to navigate any remaining headwinds and deliver on our projections.

Andrew Butcher: Now I'd like to pass the call back to Andy. Thank you, Steve.

Andy Butcher: Now I'd like to pass the call back to Andy.

Andy Butcher: Thank you Steve Please turn to slide eight.

Andrew Butcher: Please turn to slide 8. Our Luxfer business system gives us a structured way to innovate, drive efficiency, and stay agile, always focused on meeting customer needs and delivering profitable growth. A prime example is our unitised group rations UGRE platform, where lean principles and direct user feedback have produced a highly portable, low-touch module crafted with environmentally friendly materials, perfectly suited for today's dynamic field environment. Military teams operating in austere or rapidly changing settings have found this additional option vital, not only in deployments without dedicated kitchen staff, but also during training exercises where permanent mess facilities are not available.

Andy Butcher: Our <unk> business system gives us a structured way to innovate drive efficiency and stay agile.

Andy Butcher: He is focused on meeting customer needs and delivering profitable growth.

Andy Butcher: A Prime example is our Unitize group Russians UGI, Ari platform, where lean principles and direct user feedback has produced a highly portable low touch module crafted with environmentally friendly materials perfectly suited for today's dynamic environments.

Andy Butcher: Military teams operating steer or rapidly changing settings. The found this additional option vital.

Andy Butcher: In deployments without dedicated kitchen staff, but also during training exercises with permanent facilities are not available.

Andrew Butcher: By minimising manpower requirements and setup complexity, UGRE enables sustained operations anywhere. Sales of UGRE reached a record $4.6 million in 2024 and our backlog for this year indicates demand will more than double that level in 2025.

Andy Butcher: By minimizing manpower requirements and setup complexity UGI E enable sustained operations anyway.

Andy Butcher: Okay.

Andy Butcher: Sales of <unk> reached a record $4 $6 million in 2024, and our backlog for this year indicates demand will more than double that level in 2025.

Andrew Butcher: I'm especially proud to share that the US military is tendering new GRE modules for its war stock under a vendor-managed inventory programme. This underscores our confidence in UGRE as a strategic complement to traditional, single-person meals ready to eat, and highlights our ability to deliver and replenish these platforms seamlessly. These advancements – portability, low-touch operation and military-validated infantry support – exemplify how the Luxfer business system embeds continuous, customer-driven innovation into everything we do.

Speaker Change: I'm, especially proud to share that the U S. Military is tendering, new GRE modules Fritz Wolf stock under a vendor managed inventory program.

Speaker Change: This underscores our confidence in <unk> as a strategic complement to traditional single person meals ready to eat and highlights our ability to deliver and replenish these platform seamlessly.

Speaker Change: These advancements possibility low touch operation and military validated inventory support exemplify how the Luxor business system embedded continuous customer driven innovation into everything we do.

Speaker Change: Now please turn to slide no.

Andrew Butcher: Now please turn to slide 9 to review the highlights and achievements of the first quarter. We delivered solid operational execution in Q1, posting adjusted earnings per share of 23 cents and generating $5.1 million of cash from operations. turning a typically working capital intensive first quarter into a net inflow.

Speaker Change: Review, the highlights and achievements of the first quarter.

Speaker Change: We delivered solid operational execution in Q1, posting adjusted earnings per share of <unk> 23.

Speaker Change: Generating $5 $1 billion of cash from operations, turning are typically working capital intensive first quarter into a net inflow.

Speaker Change: The sale of our graphic Arts business remains on track to close in the first half of 2025, freeing up capital and talent to fuel higher margin growth opportunities.

Andrew Butcher: The sale of our graphic arts business remains on track to close in the first half of 2025, freeing up capital and talents to fuel higher margin growth opportunities. Margin and cash discipline remain at the core of our model. Permanent process improvements, disciplines working capital management, and careful pricing decisions have not only widened margins, but also maintained low levels of net debt. Our targeted innovation continues to drive results. The lean-driven redesign of UGRE and standout MRE performance showcase how the Luxfer business system accelerates customer-focused solutions in one of our important defence-oriented product lines.

Speaker Change: Margin and cash discipline remain at the core of our model permanent process improvements disciplined working capital management and careful pricing decisions have not only widened margins, but also maintained low levels of net debt.

Targeted innovation continues to drive results the lean driven redesign the few GRE and standout MRE performance showcases how the luxury business system accelerates customer focused solutions.

Speaker Change: One of our important defense oriented product lines.

Speaker Change: Finally, our proactive approach to tariff risk from leveraging critical material exclusions and U S. MCA coverage to long term supply agreements inventory buffers and dynamic pricing position.

Andrew Butcher: Finally, our proactive approach to tariff risk, from leveraging critical material exclusions and USMCA coverage to long-term supply agreements, inventory buffers and dynamic pricing, positions us to weather tariff disruptions with minimal impact.

Speaker Change: Positions us to weather, a tariff disruptions with minimal impact.

Speaker Change: The results we have shared this morning reflects how long seven focus executing today, while investing in tomorrow.

Andrew Butcher: The results we have shared this morning reflect our long-term focus, executing today while investing in tomorrow. Since our October 2023 strategic review, we've acted on key opportunities, divesting graphic arts on track for H1 2025 and driving cost, innovation and margin gains in both electron and gas cylinders. to sharpen our portfolio and boost profitability. We also remain attentive in assessing market conditions to maximise future shareholder value.

Speaker Change: Since our October 2023 strategic review, we've acted on key opportunities divesting traffic us on track for <unk>, 2025, and driving cost innovation and margin gains in both electric and gas cylinders to sharpen our portfolio and boost profitability.

Speaker Change: We also remain attentive in assessing market conditions to maximize future shareholder value.

Speaker Change: Thank you to our global associates for their dedication.

Andrew Butcher: Thank you to our Global Associates for their dedication and thanks to all of you for your continued interest in Luxfer. I will now turn the call back to the operator for questions.

Speaker Change: Thanks to all of you for your continued interest in Luxor.

Speaker Change: I will now turn the call back to the operator for questions.

Operator: Madison, please go ahead. And at this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 to ask a question.

Speaker Change: Madison. Please go ahead.

Speaker Change: And at this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star to you. Once again that is star one to ask a question and we will take our first question from Steve <unk> with Sidoti. Please go ahead. Your line is open.

Stephen Ferazani: And we will take our first question from Steve Ferazani with Sidoti. Please go ahead. Your line is open. Morning, Andy. Morning, Steve. Appreciate all the detail on the call. Certainly strong start to the year, outperformed our expectations.

Speaker Change: Yeah.

Steve: Good morning, Andy Good morning, Steve I appreciate all the detail on the call.

Speaker Change:

Speaker Change: Certainly strong start to the year outperformed our expectations I don't know if it outperformed your internal.

Andrew Butcher: I don't know if it outperformed your internal expectations, but just trying to find out anything special in the quarter. Were there any pull forwards? And, you know, does this set you up, because you didn't raise guidance, does this set you up for a better year?

Speaker Change: Expectations, but just trying to find out anything special in the quarter were there any pull forwards and does this set you up because you didn't raise guidance does this set you up for a better year.

Speaker Change: Thanks, Ed Thanks, Steven and good day and good morning, Yes, we were pleased with the Q1 results I think the thing we were most pleased about was the strength in the defense market.

Andrew Butcher: Thanks, Steve, and good morning. Yes, we were pleased with the Q1 results. I think the thing we were most pleased about was the strength in the defence market. Q1 was particularly encouraging in that respect. The sales of the flameless Russian heaters were good and should remain elevated. UGRE range ramping up, that's helpful. Magnesium powders for flares, magnesium alloys for defence, those are encouraging, especially flares. So overall, we're very positive on the defence sector for 2025. Of course, we're conscious about monitoring macro economic changes closely, thinking about future tariffs, exchange rates, supply of rare earths, but we like where we sit at the end of Q1, and that's why we're reaffirming our guidance.

Speaker Change: Q1 was particularly encouraging in that respect are the sales of the flame disruption heaters were good and should remain elevated.

Speaker Change: You Jerry range ramping up.

Speaker Change: That's helpful.

Speaker Change: <unk> empowers <unk> magnesium alloys for for rest of defense.

Speaker Change: Those are encouraging, especially flat so.

Speaker Change: Overall, we're very positive on the defense sector for 2025 and of course, we're conscious about about monitoring macroeconomic changes closely thinking about future terrorists exchange rise supply of <unk>, but we are but we like where we sit at the end of quarter one.

Speaker Change: And that's why we're reaffirming our guidance.

Speaker Change: Okay.

Andrew Butcher: I was particularly surprised by, I know it's off a small base, but the strength you saw in specialty industrials in the gas cylinder side, anything driving that? Yes, I think there's some long-term trends in specialty industrial gas cylinders. Our product there is targeted on profitable niches, high-value niches, where customers are looking for special, high-purity gases to be stored in cylinders with inert surfaces. So these aren't routine industrial gas products. These are specialty items. They find their way into gases for semiconductors, for other electronics applications, for calibration gases. And there are a number of reports suggesting that long-term the need for those gases will increase.

Speaker Change: I was particularly surprised by I know, it's off a small base, but the strength you saw in specialty industrials and the <unk>.

Speaker Change: Cylinder side anything driving that.

Speaker Change: Yes, I think theres, some long term trends E&S specially I, let's see industrial gas cylinders, a product there is targeted on profitable niches, where high value niche is where customers are looking for special high purity gases to be stored in cylinders with.

Speaker Change: Within that <unk>. So these are routine industrial gas products. These are these are specialty items, they find their way into gasses for semiconductors for other electronics applications for us the calibration gases and there are a number of reports, suggesting that long term the need for those guests as well.

Speaker Change: <unk> will increase so yes, that's encouraging.

Andrew Butcher: So yes, that's encouraging.

Speaker Change: Great.

Stephen Ferazani: Great. If I can ask about uses of cash, obviously your balance sheet now is in such virtually pristine shape.

Speaker Change: If I can ask about our uses of cash obviously your balance sheet now is in such.

Speaker Change: Virtually pristine shape it sounded Steve like you had mentioned that you had increased the buyback by $10 million for opportunistic purchases can you talk about capital allocation in this environment, where your capex is so low.

Stephen Ferazani: It sounded, Steve, like you had mentioned that you would increase the buyback by $10 million for opportunistic purchases.

Stephen Ferazani: Can you talk about capital allocation in this environment where your capex is so low? You know, how do you think about buybacks?

Speaker Change: How do you think about buybacks and also if you can touch on M&A potential.

Stephen Webster: And Yeah, I mean, first of all, I'll cover that. Thanks, Steve. I'll cover the buyback.

Speaker Change: Yes, I mean first of all I'll cover thanks, Steve I'll cover the buyback. So what I've said is that we're continuing a standard buyback program, which is effectively an anti dilution program for Manhattan and incentives.

Stephen Webster: So what I said is that we're continuing our standard buyback program, which is effectively an anti-dilution program for management incentives. We have authorization of $10 million from the board to do opportunistic buybacks. We have not commenced that yet, but we're clearly looking at that. That's an interesting area for us, particularly if the price, the stock price remains where it is.

Speaker Change: We have authorization for $10 million from the board to do opportunistic buybacks, we have not commenced that yet, but we're clearly looking at that so that's an interesting area for us.

Speaker Change: Particularly if the if the price the stock price remains where it is.

Stephen Webster: In terms of CapEx, yeah, I mean, we only spent around $1 million in quarter one. That said, we will be expecting to spend more this year than we have in previous years. So the guidance says $12 to $15 million of CapEx. We're still looking at, so we've a ramp up in CapEx this year. There's some good opportunities for growth CapEx as well as our standard maintenance CapEx.

Speaker Change: In terms of Capex, yes, I mean, we only spent around $1 million in quarter. One that said, we will be expecting to spend more this year than we have in previous years. So the guidance is $12 million to $15 million of Capex.

Speaker Change: We're still looking at so we've maintained the same as it was.

Speaker Change: At the end of quarter four so yes, we are looking for a ramp up in Capex this year.

Speaker Change: Some good opportunities for growth Capex as well as a standard maintenance capex.

Stephen Webster: And on M&A, yeah, we always remain open-minded. We have a pipeline of opportunities that we constantly review with our business units. So nothing imminent at the moment, but it is something we're always looking at.

Speaker Change: And on M&A, yet, we always remain open minded we have a pipeline of opportunities that we constantly review with all business units.

Speaker Change: So nothing nothing imminent at the moment, but it is something we're always looking at.

Speaker Change: Great Great and can I, just ask about I know some of your defense business some of the higher margin like camera can be lumpy.

Stephen Ferazani: Great. And can I just ask about, I know some of your defense business, some of the higher margin, like MREs, can be lumpy, but you've had almost three consecutive quarters of very strong numbers there.

Speaker Change: But you've had almost three consecutive quarters with very strong numbers there is that because of you.

Andrew Butcher: Is that because of the UGRE launch, or is there something else driving that, and how sustainable is it? It's two things, Steve. It's the UGRE, which continues to ramp up, as you've highlighted. But it's also some elevated levels of replenishments that's going on most of this year, probably at least through quarter three in military stocking. So there's some way to go on that, as well as stronger sales in the flares market. So, yes, it does look positive at the moment. Great. Great start to the year, guys. Thanks, Andy. Thanks, Steve. Thanks. Thank you. There are no more questions in queue.

Speaker Change: <unk> launch or is there something else driving that and how sustainable is it.

Speaker Change: It's a it's two things Steve it's the UGI re which continues to ramp up as you've highlighted.

Speaker Change: But it's also some elevated levels of replenishment.

Speaker Change: Most of most of this year, probably at least through quarter, three and and military stocking. So there's some way to go on that.

Speaker Change: As well as stronger sales in the flash market. So yes. It does look to flip positive at the moment.

Speaker Change: Great.

Speaker Change: Great start to the year guys. Thanks, Andy Thanks, Steve.

Speaker Change: Thanks, Steve.

Speaker Change: Thank you.

Speaker Change: There are no more questions in queue at this time I will turn the call over to CEO, Andy better for final remarks.

Andrew Butcher: At this time, I'll turn the call over to CEO Andy Butcher for final remarks. Thank you. As we conclude, I want to remind you what makes Luxfer a compelling investment. In Q1, we not only delivered strong first-quarter cash flow, but we also expanded margins and generated top-line growth in our core defence and aerospace end market. Our lean-driven Luxfer business system has permanently embedded cost and process improvements. Well-targeted innovations such as UGRE and the recently launched bulk gas transportation module demonstrate our ability to respond to customer needs. We have a solid balance sheet, low leverage, and recurring demand in high barrier businesses.

Speaker Change: Thank you.

Speaker Change: As we conclude I want to remind you what makes <unk> a compelling investments in.

Speaker Change: In Q1, we not only delivered strong first quarter cash flow, but we also expanded margins and generated top line growth in our core defense and aerospace end markets.

Speaker Change: Our lean driven lots of business system.

Speaker Change: Les impacted cost and process improvements, while targeted innovations such as <unk> and the recently launched bulk gas transportation module demonstrates our ability to respond to customer needs.

Speaker Change: We have a solid balance sheet low leverage and recurring demand in high barrier businesses.

Andrew Butcher: and with board authorised share repurchases, disciplined capital allocation and a robust backlog underpinning our outlook, we are well positioned to deliver sustainable long-term value.

Speaker Change: And with board authorized share repurchase is disciplined capital allocation.

Speaker Change: And a robust backlog underpinning our outlook, we are well positioned to deliver sustainable long term value.

Speaker Change: Thank you to our global team for their dedication and thank you all for your support.

Andrew Butcher: Thank you to our global team for their dedication, and thank you all for your support.

Andrew Butcher: We look forward to updating you next quarter.

Speaker Change: We look forward to updating you next quarter.

Speaker Change: Okay.

Speaker Change: Thank you.

Operator: This concludes Luxfer's Q1 2025 earnings call. A recording of this conference call will be available in about two hours. A link to a recording of this webcast will be available on the Luxfer website at www.luxfer.com.

Speaker Change: This concludes flex versus Q1 2025 earnings call a recording of this conference call will be available in about two hours a link to a recording of this webcast will be available on <unk> website at www Dot Boksburg Dot com.

Speaker Change: Yeah.

Speaker Change: [music].