Luxfer Reports First-Quarter 2013 Results
Luxfer Reports First-Quarter 2013 Results
SALFORD, England--(BUSINESS WIRE)-- Luxfer Group
UNAUDITED FINANCIAL RESULTS FOR THE FIRST QUARTER OF 2013
The results are summarized as follows:
|Three-month periods ended|
|under IAS 19|
Net revenue (excluding price surcharge below)
Rare earth chemical surcharge
Earnings per £1 ord. share - Basic ((1))
|Adjusted net income ((2))||$||9.4m||$||11.1m|
Adjusted earnings per £1 ord. share - Basic
Adjusted earnings per ADS - Basic ((3))
|Adjusted EBITDA ((4))||$||18.7m||$||21.9m|
Adjusted EBITDA margin
|Net cash inflow from operating activities||$||9.6m||$||9.6m|
|Net Debt (Total debt less cash)||$||26.5m||$||106.0m|
|Total Equity - book value (Net Assets)||$||155.8m||$||86.7m|
£1 ordinary shares outstanding
LXFR - ADS equivalent outstanding ((5))
(1) Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding in the period. The IPO of October 3, 2012, resulted in 3.5 million new ordinary shares being issued.
(2) Adjusted net income consists of net income adjusted for the post tax impact of non-trading items (being IPO costs, restructuring and rationalization costs, share-based compensation and non-trading pension charges or credits). A reconciliation to net income is disclosed in Note 5 to the financial results "Reconciliation of non-GAAP measures."
(3) Each ADS represents one-half of an ordinary share and are listed on the NYSE under the ticker LXFR. Stock prices quoted for LXFR on the NYSE are per ADS and not ordinary share. Earnings per ADS has only been disclosed for Q1 2013, as there was no ADR facility in Q1 2012. The first day of trading was October 3, 2012.
(4) Adjusted EBITDA consists of profit for the period before tax expense, interest items, restructuring and other income (expense) items and depreciation and amortization. A reconciliation to net income is disclosed in Note 5 to the financial results "Reconciliation of non-GAAP measures."
(5) Assumes all £1 ordinary shares are converted into 2 ADSs.
COMMENTARY FOR THE THREE-MONTH
PERIOD ENDED MARCH 31, 2013
INVESTOR PRESENTATION AND CONFERENCE CALL
Luxfer Group will conduct a presentation and conference call on May 8, 2013, at 8:30 a.m. US Eastern Time to discuss the financial results for its first quarter ended March 31, 2013. The US dial-in number is 877-341-8545, the UK dial in number is 0800-051-3806 and the dial-in number for other countries is +1-908-982-4601. The conference ID is 60349228.
Presentation slides for the conference call will also be available at the Company's website (IR section) and via this Internet link: https://event.webcasts.com/starthere.jsp?ei=1016178
Investor and news agency communications should initially be directed to Dan Stracner, Director of Investor Relations, U.S. telephone number +1-951-341-2375 ; email: email@example.com.
ABOUT LUXFER GROUP
Luxfer is a global materials technology company specializing in the design and manufacture of high-performance materials, components and gas cylinders for environmental, healthcare, protection and specialty end-markets. Luxfer customers include both end-users of its products and manufacturers that incorporate Luxfer products into finished goods.
Luxfer products include highly specializedmagnesium alloys, powders, extrusions, plate and rolled sheet used in aerospace, automotive, defense, photo-engraving and medical applications; zirconium chemicals used in automotive and industrial catalysts, filters, and ceramics; high-pressure aluminum and composite gas cylinders used to contain medical oxygen, breathing air for fire-fighters, compressed natural gas for alternative-fuel vehicles and specialty gases for microchip manufacturing; and metal panels "superformed" into complex shapes for aerospace, automotive, and rail applications. For more information, visit www.luxfer.com.
Luxfer Group is listed on the New York Stock Exchange and its American Depositary Shares (ADSs) trade under the symbol "LXFR".
This report 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, including those related to financing, products or services,
(iii) statements of future economic performance and
(iv) statements of assumptions underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "forecasts" and "plans" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. The Group cautions that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to:
(i) future revenues being lower than expected; (ii) increasing competitive pressures in the industry; (iii) general economic conditions or conditions affecting demand for the services offered by us in the markets in which we operate, both domestically and internationally, being less favorable than expected; (iv) the amount of indebtedness we have incurred and may incur and the obligations to service such indebtedness and to comply with the covenants contained therein; (v) fluctuations in the price of raw materials and utilities; (vi) currency fluctuations and hedging risks; and (vii) worldwide economic and business conditions and conditions in the industries in which we operate.
The Group cautions that the foregoing list of important factors is not exhaustive. These factors are more fully discussed in the sections "Forward-Looking Statements" and "Risk Factors" in our annual report on form 20-F dated March 29, 2013 filed with the U.S. Securities and Exchange Commission. When relying on forward-looking statements to make decisions with respect to the Group, investors and others should carefully consider the foregoing factors and other uncertainties and events. Such forward-looking statements speak only as of the date on which they are made, and the Group does not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise.
TRADING STATEMENT FOR THE THREE-MONTH
PERIOD ENDED MARCH 31, 2013
Luxfer Group revenue for the first quarter of 2013 was $122.4m and, excluding rare earth chemical surcharges of $3.2m, net revenue was $119.2m. This represents a small decrease on Q1 2012 of $0.4m in net revenue, after adjusting for a $1.5m negative impact due to differences in the exchange rates in Q1 2013, compared to Q1 2012, used to translate the revenue of non-U.S. operations into US dollars. In our Gas Cylinders Division, revenue in the alternative fuel (AF) sector increased significantly in the first quarter of 2013 compared to the equivalent period in 2012 due to substantial growth in demand and the benefit of utilizing the additional capacity of recently acquired Dynetek operations. We also saw an increase in demand for our composite life-support cylinders in both Europe and the United States. In our Elektron Division, we experienced challenging trading conditions, with revenues from the automotive catalyst, photo engraving plate and military powders markets lower in the first quarter of 2013 than in the first quarter of 2012. Overall, the growth we achieved in our Gas Cylinders Division almost offset the negative economic conditions that impacted our Elektron Division. On an IFRS reported basis, Group revenue was down $19.0m in the first quarter of 2013 compared to the first quarter of 2012, with the rare earth surcharge component of the revenue down $17.1m, in line with the underlying decrease in the costs of rare earth materials.
Trading profit, of $14.9m for the first quarter of 2013 (Q1 2012 restated: $18.2m), was in line with our guidance of approximately $1m to $2m lower than the $16.1m reported in the fourth quarter of 2012. Though it was pleasing that growth in the Gas Cylinder Division's revenue almost offset the underlying decrease in the Elektron Division's revenue, operating margins in Gas Cylinders were lower than the operating margins in Elektron, which resulted in the reduction in trading profit. Operating profit margins in both divisions were up in Q1 2013 compared to Q1 2012, at 7.6% for Gas Cylinders and 18.0% for Elektron in Q1 2013, compared to 6.7% for Gas Cylinders and 17.6% for Elektron in Q1 2012. Operating profit for the first quarter of 2013 was $14.5m (Q1 2012 restated: $18.2m), better than our guidance, which predicted operating profit similar to the $14.0m reported in the fourth quarter of 2012.
Divisional Analysis of Revenue and Trading Profit
FIRST QUARTER 2013
FIRST QUARTER 2012
|Restated under IAS 19 (Revised)|
|Net Revenue (excluding RE surcharge)||68.4||50.8||119.2||61.1||60.0||121.1|
|Return on Sales %||7.6||%||18.0||%||12.2||%||6.7||%||17.6||%||12.9||%|
The Gas Cylinder Division's revenue of $68.4m for Q1 2013 was $7.3m higher than Q1 2012. Underlying revenue increased by $8.0m, or 13.2%, offset in part by FX translation differences of $0.7m. We generated year-on-year sales growth both in composite alternative fuel (AF) cylinders for containment of compressed natural gas (CNG) and composite life-support cylinders used in self-contained breathing apparatuses (SCBA). Sales of large composite AF cylinders and systems were $12.6m in the quarter.
Trading profit for the first quarter of 2013 was $5.2m, an increase of $1.1m or 26.8% over the $4.1m trading profit for the first quarter of 2012. Integration of the Dynetek business into the division is progressing well with previous trading losses at Dynetek having been eliminated by the end of the quarter. We also absorbed an additional $0.3m negative impact from less favorable exchange rates on import/export prices in the first quarter of 2013 compared to the equivalent period of 2012.
In Q1 2013, we incurred $0.2m of restructuring and rationalization costs in the division related to integrating Dynetek and other cost-saving measures. These costs are included in "Restructuring and other income/(expense)."
The Elektron Division's revenue was $54.0m for Q1 2013, a decrease of $26.3m from Q1 2012. The continuing reduction in the cost of rare earths has allowed us to reduce rare earth surcharges to customers by $17.1m in Q1 2013 compared to Q1 2012. Net revenue, excluding the surcharge, for Q1 2013, was down $9.2m to $50.8m compared to Q2 2012. Adjusting prior year revenue for a negative $0.8m movement on FX translation rates, underlying revenue was down $8.4m, or 14.2%. As we reported in March 2013, two key markets, European automotive and U.S. defense, are currently weak, and this, combined with an expected short-term reduction in demand from some other market sectors, impacted divisional profits in the first quarter of 2013.
Elektron's trading profit of $9.7m for Q1 2013 was $4.4m lower than Q1 2012, which mainly related to lower sales volumes. Also, less favorable FX transaction rates on imports and exports had a $0.4m negative impact in the quarter compared to the equivalent period of 2012.
Operating Profit to Net Income for the Period
Operating profit was $14.5m in Q1 2013 compared to $18.2m for Q1 2012. In addition to the $0.2m restructuring and rationalization costs outlined in the Gas Cylinder's trading profit narrative above, operating profit in Q1 2013 included a $0.2m charge under IFRS 2 in relation to IPO-related share options granted at the time of the IPO, where the cost is spread over the vesting period. There were no charges in respect of restructuring and other income or expense in the first quarter of 2012.
The net interest charge fell to $1.5m (Q1 2012: $1.7m) for Q1 2013, a result of reduced borrowing levels.
As previously reported, a change to IAS 19, Employee Benefits (revised) requires us to charge current-year service costs and scheme paid administration costs to operating profit and to make a notional (non-cash) finance charge, in respect of the level of accounting pension deficit and based upon corporate bond yields, to finance costs. In the first quarter of 2012, operating profit and EBITDA were impacted by a charge of $0.1m (allocated to the Elektron Division), while profit before taxation and net income were impacted by charges of $1.0m and $0.7m, respectively. Results for Q1 2012 have been restated to reflect these changes and make the prior-year figures comparable to the current year. See note 7 of the attached financial statements for a summary of the Q1 2012 restatement. These charges are non-cash changes to the accounting presentation and do not affect any deficit calculations, as the additional charges are cancelled out by corresponding positive credits in equity reserves, resulting in no change in total Group assets.
Profit on operations before tax was $12.1m for Q1 2013 (Q1 2012 restated: $15.6m). Tax expense was $3.8m (Q1 2012 restated: $5.2m), and the effective tax rate was 31.4%, compared to a Q1 2012 effective rate of 33.3%. The fall in the effective tax rate can be attributed to the reduction in the rate of the UK corporation tax in 2013 compared to 2012 and various other incentives and allowances being utilized.
Net Income in the period was $8.3m (2012 restated: $10.4m). Adjusting for non-trading items (IPO costs, restructuring and rationalization costs, share-based compensation and non-trading pension charges or credits), adjusted net income in Q1 2013 was $9.4m (Q1 2012 restated: $11.1m).
Earnings per £1 ordinary share for Q1 2013 unadjusted was $0.62. Using Adjusted Net Income, earnings per £1 ordinary share was $0.70 and the ADS equivalent was $0.35 for Q1 2013.
Cash Flow and Net Debt
The Group achieved a $9.6m net cash inflow from operating activities in Q1 2013, equal to the inflow of $9.6m in Q1 2012. There was an outflow of working capital of $6.9m in Q1 2013 compared to an outflow of $9.5m in Q1 2012. Purchases of property, plant and equipment resulted in a cash outflow of $3.9m in Q1 2013 (Q1 2012: $3.1m). In the first quarter of 2013, we also invested $2.5m in a partnership to support our presence in the bulk compressed gas transportation market in North America. Q1 2012 benefited from receipt of a payment of deferred consideration of $0.8m related to the sale of our former Speciality Aluminium division. There was a net cash inflow before financing of $3.2m in Q1 2013 compared to an inflow of $6.9m in Q1 2012.
In Q1 2013, cash flows from financing activities were a net outflow of $4.2m compared to an outflow of $18.5m in Q1 2012. The amount of interest paid to debt-holders reduced from $1.5m in Q1 2012 to $1.2m in Q1 2013 due to the lower level of indebtedness. In Q1 2013, the remaining $0.3m of IPO share issue costs accrued at December 31, 2012, were paid. In Q1 2012, we repaid $17.0m of the outstanding revolving credit facility. In Q1 2013, we paid a quarterly dividend of $2.7m (Q1 2012: nil). Total cash flow movements were a net outflow of $1.0m in Q1 2013 compared to an outflow of $11.6m in Q1 2012.
Luxfer Group had $37.0m of cash and cash equivalents as at March 31, 2013, compared to an equivalent figure of $10.9m as at March 31, 2012. As at March 31, 2013, net debt had been reduced to $26.5m from $106.0m as at March 31, 2012.
The Group negotiated the release of security on the revolving credit facility and the Senior Notes due 2018 as part of the modification of the banking facilities in late 2012 following the IPO.
As indicated in our report on Q4 of 2012, two key markets, European automotive and US defense, are currently weak as a result of both destocking and reduced end-market demand and, given current uncertain economic conditions, are likely to remain so for some time. These two markets mainly affect our Elektron Division and will impact the contribution from the materials division until at least later in 2013, when European automotive demand may be expected to improve, although the short-lead times that characterize this market make it difficult to predict this far in advance.
Also, compared with 2012, the current strength of the US dollar is reducing the value of profits generated outside the US when translated into US dollars for the reporting of our consolidated results. In Q1 2013 the impact of the strength of the US dollar reduced trading profit by $0.3m compared to the first quarter of 2012. In addition, since the IPO last October, we have been carrying certain additional costs of being a listed business, which slows down the near-term potential for profit improvements.
Thus far in 2013, however, our Gas Cylinders business is seeing substantial growth in the market for CNG containment and transportation, a progressive turn-around of the Dynetek businesses, and partnerships with key customers. Our Superform operation is also targeting improving results as a result of winning additional business from high-end automotive customers. Overall, we expect our Gas Cylinders Division to make further significant improvements in revenues and operating profits in 2013.
The strong outlook for Gas Cylinders means that, despite the weak macroeconomic situation, we expect the Group to make further progress in trading profit in 2013. The weaknesses of some key Elektron markets have resulted in Q1 2013 trading profit being $1.2m lower than Q4 2012, but in the absence of restructuring costs, operating profit is similar to Q4 2012. Although the same markets remain weak, forecast demand for Q2 2013 is stronger than for Q1 2013, and, based on market projections and customer forecasts, we currently expect the second half of the year to be stronger than the first. We expect Q2 2013 trading profit to be $1.5m to $2.5m higher than Q1 2013. Provided that we achieve at least that level in Q2, and based on a US dollar-to-sterling translation exchange rate of $1.53, we expect the full-year trading profit to be $2m to $5m ahead of 2012; assuming no more than $1m restructuring and other non-trade costs, operating profit would then improve $3m to $6m in 2013.
Looking further ahead, the Board remains positive about the ability of our business to grow profits and cash flow, especially as more of our strategic growth projects reach market in 2014 and onwards.
CONSOLIDATED INCOME STATEMENT FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2013 AND 2012
|For the three-month|
|periods ended March 31,|
|Cost of sales||(94.1||)||(107.7||)|
|Restructuring and other income (expense)||(0.4||)||-|
|IAS 19 - retirement benefits (non-cash) finance charge||(0.9||)||(0.9||)|
|PROFIT ON OPERATIONS BEFORE TAXATION||12.1||15.6|
|NET INCOME FOR THE PERIOD||8.3||10.4|
NET INCOME FOR THE PERIOD
|Restructuring and other (income) expense||0.4||-|
|Other share based compensation charge||0.1||-|
|IAS 19 - retirement benefits (non-cash) finance charge||0.9||0.9|
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