Luxfer Holdings PLC · NYSE:LXFR
Luxfer — Q3 2015 Earnings Presentation
27 slides from Luxfer's earnings presentation, 2015
Slide 1: Q3 2015 conference call
LUXFER Q3 2015 conference call
Slide 2: Forward-looking statements
2 This presentation contains forward-looking statements. Examples of such forward-looking statements include, but are not limited to: (i) statements regarding the Group’s results of operations and financial condition, (ii) statements of plans, objectives or goals of the Group or its management, incl
Slide 3: Agenda
3 • Brian Purves, Chief Executive Officer • Q3 2015 overview • Market situation • Divisional performance • Andy Beaden, Group Finance Director • Quarterly earnings review • Liquidity and capital resources • Brian Purves • Summary • Outlook • Questions? © 2015 Luxfer Group Limited, All Rights Reserve
Slide 4: Q3 2015 overview: revenue and profitability
4 • Revenue • $113.2m compared to $120.9m in Q3 2014. • FX translation differences reduced USD revenue by $4.8m. • Rare earth surcharge now nil—was $0.4m in Q3 2014. • Luxfer Magtech added $7.6m compared to $6.5m in Q3 2014, other trading revenues down $3.6m. • Profitability • Trading profit $10.6m,
Slide 5: Market situation
5 • North American SCBA up, improved AF revenue, sales weakness in Elektron, progress on AF rationalization. • North American sales of SCBA composite cylinders up by 20% (YTD). • Return to profitability of North American AF business. • Higher sales of photo-engraving products. • Continued low oil pr
Slide 6: AF rationalization restructuring costs
6 • Following our decision to rationalize our AF manufacturing, we continue to charge costs of this exercise through the income statement line item “Restructuring and other expense”. • Q1 – $8m charged, including $7.5m post-balance-sheet event for impairment of assets at German and Utah facilities.
Slide 7: SUB161 recapitalization and investment
7 • In Q1 2015, we reported uncertainty about the financial position of SUB161, our virtual pipeline customer in Western Australia. • In July, SUB161 was recapitalized: • Debt-for-equity swap by noteholders. • Settlements with other debt providers and creditors. • New equity raised, Luxfer participa
Slide 8: Elektron divisional performance
8 • Underlying Q3 revenue decreased by Elektron $5.2m or 9.0% compared to Q3 2014. Q3 YTD $M $M • Reduced sales of zirconium auto- catalysis products is the main reason for Net revenue 58.6 170.3 RE surcharge 0.4 1.9 the decrease. 2014 Revenue analysis 59.0 172.2 • Lower activity in helicopter indus
Slide 9: Gas Cylinders divisional performance
9 • Q3 underlying revenue (excluding Gas FX translation) up $1.6m or 2.7% Cylinders on Q3 2014. Q3 YTD • AF revenue up $1.3m: $M $M • New customers in North America more 2014 Revenue analysis 61.9 193.9 than offsetting continuing weak European bus market. Changes in period: • Favorable FX transactio
Slide 10: Product and market developments
10 • Magnesium alloys for commercial aircraft: Continue to generate strong interest from seat manufacturers. • Synermag® bio-absorbable alloy: Latest feedback from clinical trials is encouraging. • Medical oxygen delivery system: Commenced testing to support CE approval. Modification to SmartFlow ®
Slide 11: Molycorp litigation and UK retirement plan
11 • Molycorp litigation • Legal action lodged on October 30, 2015, against Molycorp Chemicals & Oxides (Europe) Limited and its Chinese affiliate (parent in chapter 11). • Claim relates to infringement of a patent covering our G4 process for the preparation of zirconium-cerium based mixed oxides (a
Slide 12: © 2015 Luxfer Group Limited, All Rights Reserved
12 © 2015 Luxfer Group Limited, All Rights Reserved
Slide 13: Revenue analysis by division
13 Gas Elektron Cylinders Group Q3 YTD Q3 YTD Q3 YTD $M $M $M $M $M $M Net revenue 58.6 170.3 61.9 193.9 120.5 364.2 RE surcharge 0.4 1.9 ‐ ‐ 0.4 1.9 2014 Revenue analysis 59.0 172.2 61.9 193.9 120.9 366.1 Changes in period: FX translation (2.0) (8.4) (2.8) (12.4) (4.8) (20.8) Rare earth surcharge (
Slide 14: Revenue by geography Q3 2015 vs Q3 2014
14 Q3 2015 Q3 2014 Africa 1% South Africa South America 1% America Asia UK 3% UK 2% Pacific 11% Asia 10% Pacific 11% 12% Europe Europe (other) (other) 21% 22% North North America America 51% 55% $113.2 million $120.9 million © 2015 Luxfer Group Limited, All Rights Reserved
Slide 15: Trading profit and adjusted EBITDA
15 2015 2015 2015 2015 2014 2014 2014 2014 Trading profit $M Q1 Q2 Q3 YTD Q1 Q2 Q3 YTD Gas Cylinders Trading profit $M 1.3 1.7 3.1 6.1 1.6 1.7 1.7 5.0 ROS % 2.2% 2.7% 5.1% 3.4% 2.4% 2.6% 2.7% 2.6% Elektron Trading profit $M 9.2 10.0 7.5 26.7 10.7 9.5 8.9 29.1 ROS % 15.7% 16.6% 14.3% 15.6% 18.7% 17.0
Slide 16: Income statement
16 2015 2015 2015 2015 2014 2014 2014 2014 Variance Q3 $M Q1 Q2 Q3 YTD Q1 Q2 Q3 YTD $m % Net revenue 116.9 122.8 113.2 352.9 122.4 121.3 120.5 364.2 (7.3) (6.1%) Re surcharge ‐ ‐ ‐ ‐ 0.9 0.6 0.4 1.9 (0.4) (100.0%) Gas Cylinders 58.4 62.7 60.7 181.8 66.1 65.9 61.9 193.9 (1.2) (1.9%) Elektron 58.5 60.
Slide 17: Balance sheet movement
17 December Trading FX Sept 2014 Translation Rationalization 2015 $M $M $M $M $M Property, plant & equipment 143.8 (4.1) (3.1) (2.1) 134.5 Intangible assets 93.3 (0.4) (1.5) (3.6) 87.8 Investments 7.4 5.3 (0.3) 12.4 Deferred tax assets 19.2 (0.6) 0.1 1.0 19.7 Long term assets 263.7 0.2 (4.8) (4.7) 2
Slide 18: Cash flow
18 2015 2015 2015 2015 2014 2014 2014 2014 Q1 Q2 Q3 YTD Q1 Q2 Q3 YTD $M $M $M $M $M $M $M $M Operating profit 2.5 8.8 10.3 21.6 12.3 10.4 10.0 32.7 Depreciation and amortization 4.6 4.7 4.7 14.0 4.3 4.3 4.6 13.2 Share based compensation charges 0.3 0.3 0.2 0.8 0.3 0.8 0.8 1.9 Non‐cash restructuring
Slide 19: © 2015 Luxfer Group Limited, All Rights Reserved
19 © 2015 Luxfer Group Limited, All Rights Reserved
Slide 20: Summary
20 • Gas Cylinders • North American SCBA showing good improvement after 2014 disruption. • Although AF market remains weak, we are winning business in North America. • Weakness of Euro hurting margins in our European business units. • No recovery in price of oil: continued depressed European CNG bus
Slide 21: Outlook by division
21 • Elektron • Reduced sales of zirconium automotive products likely to continue. • Restricted military spending and reduced helicopter build rates likely to continue. • First commercial sales of SoluMag ® material. Gas Cylinders • The important North American SCBA market’s 2014 problems are behind
Slide 22: Group outlook
22 • Group • Trading out-turn for 2015 is now expected to be flat to slightly lower than 2014 (although higher on constant exchange rates). • We will complete the restructuring of our AF manufacturing facilities, and are on target to make the AF business stream a profitable part of the Gas Cylinders
Slide 23: © 2015 Luxfer Group Limited, All Rights Reserved
23 © 2015 Luxfer Group Limited, All Rights Reserved
Slide 24: © 2015 Luxfer Group Limited, All Rights Reserved
24 © 2015 Luxfer Group Limited, All Rights Reserved
Slide 25: Adjusted net income and EBITDA
25 Adjusted net income and EBITDA: 2015 2015 2015 2015 2014 2014 2014 2014 Q1 Q2 Q3 YTD Q1 Q2 Q3 YTD $M $M $M $M $M $M $M $M Net (loss) / income for the period ‐ as reported (0.5) 3.1 6.1 8.7 7.2 5.7 4.5 17.4 Accounting charges relating to acquisitions and disposals of businesses: Unwind of discount
Slide 26: Segmental adjusted EBITDA and trading profit
26 Segmental adjusted EBITDA and trading profit: 2015 2015 2015 2015 2014 2014 2014 2014 Q1 Q2 Q3 YTD Q1 Q2 Q3 YTD Gas Cylinders Adjusted EBITDA $M 3.2 3.7 5.0 11.9 3.6 3.9 4.0 11.5 Other share based compensation charges (0.1) (0.2) (0.1) (0.4) (0.1) (0.3) (0.4) (0.8) Depreciation and amortization (
Slide 27: Return on invested capital (ROIC)
27 Return on invested capital (ROIC): 2012 2013 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 (restated)* $M $M $M $M $M $M $M $M $M $M Trading profit ‐ per income statement 68.5 59.2 44.8 12.3 11.2 10.6 10.7 10.5 11.7 10.6 Effective tax rate ‐ per income statement 28.8% 27.0% 19.6% 2