Luxfer Holdings PLC

Good morning. My name is Lisa and I will be your conference operator today. Welcome to Luxor's 2021 Second Quarter Earnings Conference Call. All lines have been placed on mute. After the speaker's remarks, there will be a question and answer session. Now I will turn the call over to Heather from Luxor. Heather, please go ahead.

Thank you, Lisa. Welcome to Luxor's Second Quarter 2021 Earnings Call. We're happy to have you all with us today. I'm Heather Harding, Luxor's Chief Financial Officer. With me today is Alok Mascara, Luxor's Chief Executive Officer. On today's call, we will provide details on our second quarter 2021 performance as outlined in the press release issued yesterday. Today's webcast is accompanied by a presentation that can be accessed at luxor.com. Please note any references to non-GAAP financials are reconciled in the appendix of this presentation. And 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. Please refer to the safe harbor statement on slide two of today's presentation for further details. Now let me turn the call over to Alok.

Thanks, Heather, and welcome everyone. Please turn to slide three for highlights from our second quarter results. I want to highlight three key messages on this page. First, successful execution of our growth initiatives and strong recovery in our end markets combined with the benefit of the SCI acquisition resulted in 29% year-over-year growth in our second quarter revenues. Our adjusted diluted EPS was $0.36, an increase of almost 90% from the prior year. The resulting EBITDA margin expanded 370 basis points to 17.5% driven by volume leverage and operational excellence. We remain confident of sustaining and improving our margins in the long term. Second, we have been able to timely satisfy our customers' growing demand despite the ongoing material supply and talent availability challenges. However, We remain cautious and concerned about the impact of persistent material and talent shortages on our near-term results. I am grateful to the Luxfer team who continue to work diligently to secure material and attract talent so that we can minimize any customer disruption. Third, we further strengthened our balance sheet this quarter with a net debt to EBITDA ratio of 0.6 times, enabling us to maintain and accelerate investments in organic growth and operational excellence projects. In addition, we will remain thoughtful and disciplined in our approach to acquisitions while increasing shareholder returns through dividends and share buybacks. During the quarter, we also made significant progress on our key strategic and operational initiatives and I'm going to highlight them in the next few pages. Please turn to slide four for an update on alternative fuel growth initiatives. We are optimistic about the growth potential of our alternative fuel product line. We believe that the industry is growing at 20 to 25% per year and that the total addressable market for this opportunity will be $300 million by 2025. We serve a small part of this total addressable market and have the opportunity to expand our offering in addition to capturing market growth. We continue to make growth investments to expand our product offerings and geographical reach to increase our compressed natural gas and hydrogen sales. Luxfer's value proposition for this product line is driven by our decades of experience during which we had developed proprietary technology and relevant engineering capability. We offer a growing range of large diameter cylinders that range from 16-inch diameter typically used for buses to 27-inch diameter typically used for trucks. For hydrogen, we offer a high temperature version that enables fast filling and are planning to introduce a larger diameter hydrogen cylinder in 2022. I want to point out that we offer solutions for both CNG and hydrogen and have established positions in both. The hydrogen end market is currently small but is expected to grow faster and become larger than CNG beyond 2025. We are proud of our ability to meet our customers' need for CNG and hydrogen transport storage solution for public buses, commercial trucks, and bulk gas transportation. We believe that alternative fuel will drive long-term growth for Luxfer. While composite cylinders for alternative fuel is our fastest growing product line, we also continue to drive innovation and growth in our other product lines. Turning to slide five, I am excited to share recent innovations in our magnesium product line. Luxfer is the world's leading producer of magnesium alloys for a range of niche applications across multiple industries, including aerospace and industrial packaging. Today, I want to highlight three innovative magnesium growth opportunities being pursued by Luxfer. For graphic arts application, We are launching a new magnesium alloy photo engraving plate that will increase the life of magnesium dye and make it more competitive versus other materials such as copper and brass. This innovation is expected to greatly enhance the total addressable market for magnesium alloys in the graphic arts application. To penetrate new applications, we are increasing focus on engineered magnesium powders for Grignard reactions that are used in a wide variety of manufacturing processes, including production of lithium ion batteries, hydrogen storage, lightweight composites, and 3D printing. As part of core innovation to develop new capabilities, our Manchester location has recently enhanced the billet and slab casting process that is expanding LuxFor reach into new customers and applications while reducing our own manufacturing carbon footprint. In addition to growth through the focused investment highlighted, success of our transformation plan is also enabling growth in other product lines. For an example of growth fueled by transformation plan success, please turn to slide six. Our graphic art business has been going through the Luxford transformation plan for the past three years and is now embarking on the growth and continuous improvement phase. The transformation journey at the Luxor Graphic Arts Business Unit started with simplification, which included de-layering the organization to increase accountability and consolidating two US sites into one to reduce customer lead times while generating savings. The larger consolidated site allowed us to attract and deploy Stronger management and manufacturing leadership while purposefully deploying the Luxor values to a leader-led training program. In addition to cost savings, these changes have resulted in significant improvements in many operating metrics such as safety, on-time delivery, lead times, and customer quality. As a result of these improved customer service levels and deployment of global growth talent and growth processes, The business is poised for growth and expected to capture greater share of the end market through innovation and customer excellence. In addition to maintaining our growth focus, our teams are proactively responding to the current manufacturing challenges as summarized on slide seven. Just like many other manufacturing companies, Luxfor is facing a difficult set of challenges in ramping up production to meet the demand recovery. Our teams are diligently working around the clock to address and mitigate these challenges, including material supply issues, freight delivery lead times, and talent availability. In the second quarter, two of our critical suppliers declared force majeure, which is forcing our teams to identify additional suppliers for these critical raw materials to serve our customers. Attracting manufacturing hourly employees remains a challenge, particularly in the U.S. We are proactively adjusting our wage structure and shift pattern while implementing one-time actions such as larger incentives to attract and retain talent. While we are making solid progress, we remain cautious about the impact of these disruptions on our results for the remainder of the year. Now, let me turn the call over to Heather for details of our second quarter financials.