Luxfer Holdings PLC — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Amounts are in U.S. dollars unless indicated. Luxfer is a global industrial materials and gas-cylinder manufacturer operating through its Elektron and Gas Cylinders segments. The filing reports annual results and selected quarterly data; it is not a standalone fourth-quarter filing.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net sales, continuing operations | $423.4 million | $374.1 million | +13.2% |
| Gross profit / margin | $95.0 million / 22.4% | $96.0 million / 25.7% | Margin down 3.3 percentage points |
| Operating income / margin | $44.8 million / 10.6% | $36.2 million / 9.7% | +23.8% |
| Net income, continuing operations | $32.0 million | $30.0 million | +6.7% |
| Net income, all operations | $26.9 million | $29.9 million | Down, including discontinued-operations loss |
| Adjusted EBITDA, continuing operations | $63.1 million | $63.4 million | Nearly flat |
| Operating cash flow, continuing operations | $15.8 million | $26.0 million | Down $10.2 million |
Revenue rose largely through inflation-related price pass-through and stronger Elektron volumes, partly offset by unfavorable currency translation. Management estimates foreign exchange reduced 2022 sales by $13.9 million; excluding that headwind, sales increased 16.9%. Higher material and labor costs and supply-chain investments—particularly in Gas Cylinders—outpaced price recovery and compressed gross margin. The effective tax rate increased to 22.0% from 15.3%; net interest expense rose to $3.9 million from $3.1 million.
Fourth quarter: Continuing-operations sales were $116.7 million, gross profit $21.9 million, operating income $10.0 million and net income $6.2 million. In Q4 2021, the comparable values were $98.7 million, $23.8 million, $5.5 million and $3.5 million, respectively.
Segments and balance sheet
| Segment | 2022 sales | 2022 adjusted EBITDA | Key comparison |
|---|---|---|---|
| Elektron | $239.7 million | $50.3 million; 21.0% margin | Sales +22.4%; EBITDA +23.6% |
| Gas Cylinders | $183.7 million | $12.8 million; 7.0% margin | Sales +3.0%; EBITDA down 43.6% |
At year-end, cash and cash equivalents were $12.6 million, inventory $111.1 million (up from $90.5 million), and current assets $201.1 million versus current liabilities of $110.2 million. Total debt was $81.2 million net of issuance costs, including $25.0 million of notes due in June 2023 and $31.9 million drawn on the revolving credit facility (RCF). The company reported $68.1 million of undrawn RCF availability at year-end. In January 2023, RCF capacity increased from $100 million to $125 million. The company reported compliance with debt covenants.
Operating cash flow was affected by working-capital investment, including inventory built to secure supply and manage input-cost inflation. Capital expenditures were $8.3 million; management expected approximately $15 million in 2023. The company paid $14.2 million in dividends and repurchased $11.1 million of ordinary shares during 2022.
Material changes, outlook and risks
- Cost and supply pressures: Magnesium and zirconium suppliers invoked force majeure; the U.S. magnesium supplier’s force majeure remained in place. Luxfer reported qualifying alternative supply, but at increased cost. It expected material, energy, labor and transport pressures to continue into 2023 and said future cost increases remained difficult to predict.
- Management priorities: For 2023, Luxfer cited revenue and volume growth, securing critical supplies, productivity and pricing actions, ESG investment, talent development, and cash generation and working-capital discipline. These are operating priorities, not quantified financial guidance.
- Discontinued operations: The U.S. aluminum gas-cylinder and Superform U.K. businesses had been sold; Superform U.S. remained held for sale. Discontinued operations recorded a $5.1 million loss in 2022, including impairment and disposal-related items. After year-end, the purchaser of Superform U.K. entered administration; Luxfer recorded a $2.6 million impairment of a related right-of-use asset in 2022.
- Pensions: The U.K. defined-benefit plan reported a $27.0 million accounting surplus, while U.S./other plans had a $4.5 million deficit. Luxfer agreed to buy out its U.S. plan in early 2023, with an estimated additional employer contribution of approximately $3.5 million. Pension valuations depend on actuarial assumptions.
- Other risks and contingencies: Risks include inability to pass through input inflation, customer and supplier concentration, foreign-exchange and interest-rate exposure, cyclical end markets, regulation, product liability, cybersecurity and environmental obligations. Luxfer is defending lawsuits related to a 2018 third-party waste-site explosion and said it did not expect a material financial impact. It also identified a $3.3 million loss contingency associated with closure of its French site.
The independent auditor issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective. Pension-obligation valuation was identified as a critical audit matter.
Investor verification priorities
- Track whether alternative magnesium and zirconium supplies remain adequate and how much inflation can be passed through, especially under fixed-price or look-back contracts.
- Assess whether Gas Cylinders recovers margins after its adjusted EBITDA fell sharply despite modest sales growth.
- Monitor inventory, receivables, operating cash flow and cash conversion as working-capital investment remains elevated.
- Confirm repayment or refinancing of the $25 million 2023 notes, RCF utilization and ongoing covenant headroom.
- Follow the planned Superform U.S. sale and the consequences of the Superform U.K. purchaser’s administration, including any further discontinued-operation charges.
- Review completion costs and outcomes for the U.S. pension buyout, the 2024 U.K. pension valuation, and developments in the French closure and waste-site litigation contingencies.