Luxfer Holdings PLC

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

Thank you, Emma, and welcome to Luxfer's Third Quarter 2021 Earnings Call. We're happy to have you all with us today. I'm Heather Harding, Luxfer's Chief Financial Officer, and with me today is Alok Maskara. Luxor's Chief Executive Officer. On today's call, we will provide details of our third 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 that any references to non-GAAP financials are reconciled in the appendix of this presentation. Now, 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. So 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. Before I dive into the results, I want to express my gratitude to the LuxFor team, who continue to work diligently during the pandemic to secure the material and talent needed to increase manufacturing output during the ongoing global supply chain disruptions. I also want to thank our customers for their patience and support through these difficult times as the Luxfer team races to overcome multiple unprecedented issues impacting our supply chain. Now, please turn to slide three for highlights from our third quarter results. I want to highlight four key messages on this page. We delivered 17.4% year-over-year sales growth in the third quarter, as strong demand across our end markets was aided by solid contributions from our SCI acquisition, which added 10.2% to sales. Excluding the impact of FX and the acquisition, we achieved 4.5% organic volume growth, even though we were unable to fully convert strong demand into sales. due to global supply chain constraints. Second, we generated good free cash and maintained a strong balance sheet this quarter with a net debt to EBITDA ratio of 0.6 times. We returned over $5.3 million to shareholders this quarter through dividends and share buyback. We will remain thoughtful and disciplined in our approach to acquisitions while continuing to invest in automation and growth projects to increase shareholder returns. Third, we continue to make progress in reshaping our portfolio with the completion of the SuperFarm UK divestiture. This is an important strategic milestone as we align our portfolio towards LuxForce differentiated technology and attractive end markets. Finally, Q3 EBITDA was flat and our margins in Q3 were lower as we faced rapid inflation and incurred extra costs to combat the supply chain disruptions. We remain confident about offsetting the inflationary pressures in the medium term. Please turn to slide four for a summary of the current manufacturing and supply chain challenges. Just like many other manufacturing companies, we are facing supply chain challenges that are constraining our ability to fully satisfy the high level of demand from our customers. On the raw material supply side, three key suppliers declared force majeure during the past several months, while many others have delayed the delivery of critical raw materials. This has forced us to temporarily stop accepting new customers and orders for certain products, while alternate suppliers ramp up production. The manufacturing labor shortage continues to impact many of our locations, causing us to reduce shifts and adjust our production rates to match the labor availability. In response, we have aggressively increased starting wages and doubled our recruiting resources. Our team is further ramping up recruiting and retention efforts to increase manufacturing output to fully satisfy the elevated demand levels from our customers. Freight availability and cost of freight remains challenging, especially for international goods transportation. We have implemented freight surcharges and are aggressively working with our transportation providers to reduce freight costs and delays. The price of critical raw materials such as magnesium, carbon fiber, aluminum, and zirconium have increased rapidly, and in many cases, we are facing record high prices. We have good relationships and contracts with our suppliers and are jointly working with them to secure appropriate supply and understand future price levels. In many cases, the price hike is caused by recent and temporary changes in output from China. We remain confident of maintaining our medium to long-term margins by offsetting inflation. I would like to remind everyone that our supply chain is more localized than our peers, and therefore, we are better positioned to gain share during this period of unprecedented global supply chain disruptions. Please turn to slide five for an update on our alternative fuel growth initiative. Alternative fuel is a strategically important product line for us, and the focus application of storing and transporting compressed natural gas and hydrogen is a fast-growing product line for Luxfor gas cylinders. The three different type of AF solutions that we offer our customers are, one, high-pressure composite cylinders for heavy-duty vehicles, two, alternative fuel bus systems, and three, bulk gas transportation cylinders and modules. Sales of all three of our solutions are growing rapidly, and today I wanted to highlight our leading solution for hydrogen bulk gas transportation. As shown on the schematic on the left of page five, hydrogen bulk gas transportation is required to efficiently move hydrogen from the point of production, such as a solar or wind farm, to the point of use, such as a refueling station for hydrogen electric public buses. Our proprietary solution fills a critical gap in the evolving hydrogen supply chain and supports the adoption of clean energy. End-user bulk gas transportation solutions using Luxor hydrogen technology provides the customer operator with significant advantages, such as lower filling time, higher filling temperature, and higher hydrogen capacity per trailer. We are investing in innovation to enhance our value proposition and in localized capacity expansion to better serve our customers. We are excited to partner with other industry leaders to commercialize this proven practical solutions for hydrogen transportation and hence accelerate the transition towards a green, zero-carbon economy. In summary, we remain confident in capturing the growth opportunities ahead for our alternative fuel product lines. Now, let me turn the call over to Heather for details of our third quarter financials.