Welcome to the Luxfer Group’s Fourth Quarter Conference Call. We will first hear from Luxfer Chief Executive, Brian Purves, and will provide a market overview followed by Group Finance Director, Andy Beaden, he will review financial performance for the quarter and full year of 2012. Brian will then return to sum up and offer an outlook. After that, Brian and Andy will be glad to take your questions. To make sure that as many questioners as possible get a chance to speak, we request that you initially ask only one question. After you have heard the answer, we will give you the opportunity to ask a follow-up question. If you would like to ask additional questions, our operators will be glad to place you back in line. We thank you for your cooperation. We now turn the call over to Brian Purves.

Thank you. Good afternoon, ladies and gentlemen, and welcome to the Luxfer conference call on the fourth quarter of 2012. I will take you through the headline results. Andy Beaden will go through the detail in the financials, and after a brief statement on the outlook, we will take questions. The quarterly result as shown on slide four was in line with our guidance and expectations with underlying sales revenue up by some 10% and EBITDA $1.6 million better than prior year. We generated better than forecast EPS on the strong cash flow. As flagged, we incurred some restructuring costs in quarter four largely due to the actions being taken of the newly acquired Dynetek business in support of our 100-day integration project. On the full year, the good quarterly result brought the year-on-year growth and underlying sales revenue to 7%, on full year EBITDA to a record $83.5 million, some $3 million better than the prior year. Within the overall result, it is pleasing to note the relatively greater improvement in the results of the cylinder division. Our pro forma EPS at $1.58 per ADS was simply ahead of our guidance. And over the year, we delivered a very strong cash flow recovering much of the balance sheet impact of rare earth prices that we had incurred in 2011 on top of the good operating performance. On slide six, looking at sales revenue the slight cracks from the 2011 result at the top of the schedule due to the 2012 result at the bottom. In our ELEKTRON division, the sales revenue line is dominated by the reduction in rare earth surcharges. As the costs of, in particular, Cerium has collapsed to only 10% of its peak although still several times the cost per kilo from the start of 2010.…

Thank you, Brian, and welcome everyone to the call. Brian covered the divisional sales analysis. And my first slide, slide 11 shows how that consolidates to the group revenue changes for Q4 and the full year. Total revenue was $130 million for Q4, 2012 and net revenue, excluding the surcharges was $125.7 million. And the total revenue for the full year is $511.6 million with the net revenue $471.1 million. The chemical surcharge therefore for rare earths was $4.3 million for Q4 and $40.5 million for the year. That compares to $70 million for 2011. The Group’s underlying revenue growth, excluding surcharge changes and adjusting for FX translation and Dynetek’s Q4 2011 revenue was a growth of 9.9% or $11.3 million to Q4 when compared to Q4, 2011, and 7% or $30.4 million of growth for the full year when compared to 2011. Slide 12 shows the trend in sales for Q4, 2012 by geographic region. You can see the U.S. and Asia-Pacific have grown, Asia-Pacific growing the fastest. As a percentage, Europe shrunk and Africa is much lower, just a specific ELEKTRON automotive customer who is based in South Africa, whose both volumes and revenue are down and the revenue there is started by a change in the rare earth surcharges as well. Turning to the trading profit results on slide 13, Brian talked through the factors affecting the revenue and sales changes in the quarter and year. Both divisions increased trading profits in Q4. The main increase came from the ELEKTRON division with its profits up 14.6% to $11.8 million and gas cylinders up 2.4% to $4.3 million. However, Q4 2012 was still the best quarter for gas cylinders since 2010. The main profit driver was sales growth. The gas cylinders’ result is also just despite absorbing the…

Thank you, Andy. In summary then, quarter four was in line with expectations on the sales and operating profit and ahead on EPS and cash generation. Our return on invested capital already outstanding actually increased to above 30%. Our full year 2012 was also in line with our guidance. As flagged in the previous call, there was undoubtedly an element of benefit from rising rare earth prices in the quarter three 2011 result causing it to be well above trend, and so the underlying improvement in 2012 is actually greater than the headline numbers of gas. The summary then, the Board is very pleased with our quarter four result and with the full year 2012 result, which was our best ever from these group of businesses. The outlook for 2013 remains positive with expected substantial growth in our presence in the market for alternative fuel containment overcoming the likelihood that defense will be down and European automotive is likely to remain weak for at least the first half of the year. In quarter one the alternative fuel activity is mainly about build with sales income grew more strongly quarters two to four. European automotive is particularly weak. Accordingly, we are guiding the market to expect our first quarter to be lower than our recent run rate around the $1 million to $2 million down on quarter four of 2012, albeit closely followed by what we expect will be a much stronger quarter two. For the full year, we have not at this stage will see a recovery of the quarter one result, particularly with the uncertainties over the effect of sequestration on the exchange rate moving against us. And so we are lowering our guidance for the year to an increase in operating profit of between $4 million and $7 million. In many respects, the economic environment remains challenging with our diversification as the major strength. Our growth projects on our portfolio, but there is only reason of what we expect changes to the expectant scale and timing of individual projects, but we remain happy with the overall performance. I am very happy with the increased near-term expectations from the alternative fuel and gas transportation sectors. Most of our key ratios such as operating return on sales, return on capital, operating cash flow, and leverage look very healthy and the business is in good shape. Thank you. And we will now take questions.

(Operator Instructions) Your first question comes from the line of Julian Mitchell with Credit Suisse.

Hi, thank you. Yes, my questions on the organic sales growth outlook for the gas cylinders segment, I just wondered if you expected that stay off again around 9% this year and also what your Dynetek revenue assumptions are for 2013? Thank you.

Well, on the cylinders side, we are actually expecting rather double-digit growth in the sales revenue, whereas with the ELEKTRON, it’s likely to be in the low single-digits. So, overall, the group figure will be high single-digit figure. So, the alternative fuel side is such a strong driver that we do expect cylinders’ revenue growth to be double-digit this year. It’s not particularly feasible to isolate Dynetek, because we have already started mixing and marching the production within the facilities, but they made a run-rate revenue of about $20 million in the 2011 calendar year before we acquired them. We would expect that to probably nearly double in the course of the coming year.

Thank you.

Your next question comes from the line of Luke Folta with Jeffries.

So, Luke, good morning.

I just had a question on the outlook for the $4 million to $7 million increase that you are expecting in operating profit, is this forecast assume generally flat ELEKTRON performance for the year?

Yes, it does.

Okay. So, do you have, I mean, you talked about the alternative fuel cylinders sales volumes began, do you have visibility at this point to be able to make the call that the strength that you are seeing in alternative fuels and just the general cylinder business in general should be enough to drive that sort of full year results or is it, I guess, I am trying to just get a sense of what the conviction is on the second half on performance?

Yeah, there are still, I mean the ELEKTRON side is flat as I said, which means that there are some markets which are in there, which are making reasonable progress in order to compensate for the decline in the defense sales, military programs in particular, and for the weaker automotive side. Now, we are assuming a little bit of a pickup in the European automotive in the second half of the year. And that’s still a bit subjective, which is one reason why we are being a little cautious on the outlook. As you will recall, we won’t operate with a very high order bank across the group as a whole. However, the alternative fuel side is a bit different and that we do have a lot of contractual business there and much of which we picked up with Dynetek was on which we had ourselves. Well, they are not volume committed, there are supply arrangements, and we are working on the basis of customer forecast. So, we have got a pretty high degree of confidence that we will see the sort of level of growth that we are talking about in the alternative fuel side. Such uncertainties do remain and there are still uncertainties are really more elsewhere in the business, I would say that the European automotive and the timing of the pickup there is still a bit of question mark.

Okay. And then Andy, you talked a lot about the tax, the deferred tax assets, can you give us some sense of what the tax rate should look like for ‘13 given that you can now utilize those?

Yeah, I mean, I think the income statement one is going to be the actual accounting charge still around 30%, especially as we are of course a lot of the opportunities that Brian spoke about on gas transportation are actually in North America, where the tax rates are much higher than in the UK and Europe. So, that counterbalances any tax saving, but the cash cost, which to me is more important really is going to be much lower than that between really in low 20s, I’d expect the cash cost to the business. So, accounting wise, 30% were cash costs low 20s.

Okay, I’ll get back in line. Thank you.

Thank you.

Your next question comes from the line of Neil Morgan with Marathon.

Hi, Neil.

Yeah, hi. Just wanted to ask about the environmental catalysis product, I think you said in the press release that growth has slowed up towards the end of 2012 compared to the sort of gangbusters rate it started off in 2012 at? I was just wondering if you couldn’t tell us why that’s the case? And I think you have mentioned it, but I can’t recall can you just let me know how much of a driver of growth environmental catalysis will be in 2013 please? Thanks.

Just to clarify, Neil, you are talking Neil, what we would tell the industrial catalysis, so the chemical…

Yeah, yeah, but I think it is their industrial catalyst with an environmental benefit, is that right?

Yes, that’s correct. We are classifying that was environmental, because they are doing an environmental job or they are more environmentally friendly and what they replace. I mean, that is one of our strategic growth drivers and we remain as convinced about that as we have been for sometime now. We were looking for substantial additional growth in 2013 on the sales revenue. But in the nature of that business, it is slow bard I mean we have been working at this for at least 6 or 7 years. And it progresses the increases in the number of customers we are dealing with and then you start to see more repeat business coming through. So, we are looking for something like a 50% up increase in the revenue that was into that market in 2013, but that will get us to a volume, which is somewhere south of 300 tons. And the contract that I mentioned for supply in 2014 that itself is a 300 ton contract. So, if we win that contract or our customers win that contract and places a supplier with us, then you would be looking at euros worth of 2013 demand falling into a single contract in 2014 hopefully on top of everything else. So, it is expected to grow, it’s still a bit lumpy, but it’s expected to grow substantially in 2013 and then much more cheaply in 2014.

Okay, so a similar question that if so as published in the good Q4 ‘12 that closely, because it’s a lumpy business at this stage or lumpy project or contract-driven business at this stage?

Yes, that’s correct. I mean, even in December what was a 10 ton contract that slipped out of December and into January, and that is the difference. So, it is still lumpy. We are dealing now with 6 or 7 different customers, but by no means, is it sort of steady month-by-month demand. It’s 10 tons here, 20 tons there, it is lumpy. But obviously as we increased the penetration of that market, increased the customer base, it will start to get more smooth, but we do see a good year-on-year growth.

Okay. And second and final question, so on the gas cylinders’ business, you have obviously got pretty reasonable pricing leverage in that business in a sense that if you can raise the – if you can raise revenues by I don’t know I think you said double-digit growth in 2013, you should see significant percentage growth in operating profit? Am I reading that correctly?

Yeah, I mean, the margins on the cylinder side of the business as you know are lower than on the specialty materials side. The alternative fuel market is one where we are trying to break into the market and really persuade it or the composite technology is the best to go for. So, the prices there are not yet mature and the margins in that area while perfectly acceptable are lower than average, but the rate of revenue growth means that we do expect to drag quite significant additional profitability through. And bear in mind, my earlier comments that we expect the ELEKTRON to be reasonably flat year-on-year, really pretty much all of the group growth and profits that we are holding out the guidance for is going to come from the cylinder business and much of that will come from the alternative fuel sector, which is driving the top line.

Okay, thank you.

Your next question comes from the line of Jason Brocious with KeyBanc Capital Markets.

Hi, good afternoon gentlemen.

Hi.

Hi. I was just wondering if you could talk a bit about the margin compression we saw in ELEKTRON during the 4Q as a percent of base revenues compared to the first to the third quarters?

Well, the automotive demand and the defense demand, which are two of the elements that are growing little bit softer, are higher than average margins. So, that’s for group, but the business, it does of a certain degree of doing employing in it. So, individual quarter result, I wouldn’t put too much emphasis on. We tend to look at it over along the timeframe than that, because in individual contracts and mix changes can make quite a difference in the individual quarter.

In the magnesium extruded products that you buy, you have pointed out as being strong in the fourth quarter, are those I mean above average margin, below average?

Those are spot on average for the ELEKTRON division. So, they are above average for the group as a whole. That obviously is another developing market and we only installed the new extrusion press there just over a year ago. It’s we are breaking into the market. And of course one of the bigger applications for the output from that press will be once the FAA approved the use of magnesium in civil airliners. The extrusion market that we are aiming for is in the aerospace market. We are selling quite increasing products today, but it’s mainly into defense and military applications, but we do see that as one of the type of material that we are supplying to the civil airliner market once the approval comes through. So, the revenue in the extrusion side is growing quite nicely from a small very base today. So, it’s still not a major product line. That will take another three or four years to get it to the equivalent on some of the other major lines.

Okay. And I think you guys had indicated previously your long-term margin goal for cylinders is double-digits, I mean, do you see that is possible for the second half of ‘13?

No, I think that was too early. When I said that and we are talking multi-year program. So, I think 2016 maybe run rate and 2015 that’s more realistic on that front not next year, especially not when we are still developing a major market like alternative fuel.

Okay. And just one final one, could you just kind of, from a business flow perspective, just kind of explain your comments that 1Q ‘12 will be a build quarter in cylinders and you will see more of a – more sales flow through second quarter and beyond? Could you just kind of explain that a bit?

Well, for example, I mean, previously we haven’t done a great deal of business on these gas transportation modules. But what these are large ISO freight containers, which contain quite a large quantity of our alternative fuel cylinder, all sort of wired in together to provide bulk gas transportation system. But previously, we would have been supplying these cylinders into other customers who will be making up the units. And now effectively we are going to be supplying the units, so that extends the pipeline if you like adding a number of weeks between the start of the process and the selling point. So, you got extension, you lose, and what you lose is a few weeks when you are entering into the market. If we were still selling to other customers, the sales of the cylinders would grow in Q1. Well, of course, we are taking the additional time to manufacture them into end units that would take until Q2 to get them out very simplistically.

Okay. So, you’ve got – so basically you’ve got the orders in hand and I mean, 1Q will be – you’ll be putting these units together and 2Q will see the sales flow through and should lumpiness kind of subside from there on now, should be more – more than even growth type trajectory?

Yes, the Q1 is when you take a bit of a one-off hit, because you are extending the supply pipeline. Obviously, as the growth of the business comes through, you get a smaller hit in subsequent quarters, but the Q1 is the main one, yes.

Okay, thank you.

Your next question comes from the line of Julian Mitchell with Credit Suisse.

Thanks. I just had a couple of follow-ups on the balance sheet and the cash flow outlook. So, just on the cash flow, your free cash flow in the full year ‘12 was about $50 million against adjusted net income of about $45 million. When you think about 2013, are there any major moving parts that should cause the free cash flow to fall below net income in terms of say a CapEx spike or you think that’s mostly behind you?

Yeah. Well, Julian, our guidance on CapEx is from high 20 to low $30 million for this year, which is significantly up than last year as we invest in areas like the transportation systems and alternative fuel and the other growth projects. So, that will be a difference. Last year, we had a cash inflow from working capital, which was down to that underlying business is actually growing. It was down to rare earth costs falling. In the normal year of growth, you would expect a natural outflow to support the increase in revenue. So, that’s (sort of been) at $7.5 million inflow that would be an outflow in the ratio of the sales growth. And those two items you’ll find will change the free cash flow generation and bring it back to a figure which is quite a bit lower than 2012, where it’s also due with investments in the growth side of the business.

Got it, thanks. And then just on the balance sheet, the net debt to EBITDA is obviously very low at the end of the year?

Yeah.

I understand you have some cash outflows or some cash hits in the ‘13, but you feel with your balance sheet structure even adjusting for those items, you are thinking about further acquisitions like Dynetek?

I’ll take on that one Julian. Yes, I mean, we are interested in further acquisitions and we are keeping an eye on the potential in that side. We are very happy with the way that Dynetek is coming through. We are very pleased with the timing on that one. So, we just have to be careful about what and where, but we are quite keen to do that. And we’d be delighted if we could do another one in the course of the next 12 months, but there is nothing specifically in the pipeline at the moment we are just keeping an eye open and looking at few possibilities.

Thanks. And then just finally on the automotive end market that you are selling into, so it sounds like your guidance kind of embeds it down first half and then sort of flattish second half or you are expecting a sort of a big bounce back in the second half in automotive in your guidance?

Well, we are certainly we are not expecting a big bounced by, but we are expecting if you like in the end to this de-stocking cycle and a better second half than the first half. It’s difficult to predict quite when these things come around, but we do think the real come around. And we are being reasonably cautiously hope in our expectation, but we are expecting a better second half than first. I wouldn’t go quite surprised to say bounced by, but certainly an end to de-stocking and a moderate pick up in the underlying demand.

Great, thank you.

(Operator Instructions) Your next question comes from the line of Stefan Mykytiuk with Pike Place Capital.

Hello, good morning. Couple of questions. I guess, first, the guidance the improvement in profit of $4 million to $7 million, which excludes the ‘13 restructuring costs, right that’s 4%?

Yeah.

Okay. Now, are we adding that to the adjusted number on 2012 or the unadjusted, in other words, are you – should I add that to the $83.5 million of adjusted EBITDA?

No, you should add it to the operating profit of $66.7 million to get you to the operating profit before finance costs.

We have already addressed it in the $83.5 million which is not affected by the $2.1 million.

So, if you are working down your income statement with saying that the operating profit, which is after exceptionals, the guidance of that would be $4 million to $7 million better in 2013.

Okay. So, in other words, the $12 million that’s on the reported 2012 number is not the adjusted?

Yeah.

That’s correct.

On the adjusted, we have given guidance $2 million to $4 million.

Okay. I didn’t know if the $2 million to $4 million, because you are saying you are going to have some restructuring costs in ‘13 as well, aren’t you?

We are only forecasting very small assuming that no major.

On the contrary, we have no plans at the moment for restructuring costs in 2013.

Okay, got you. And then with your – in terms of kind of the cadence of the year though you are saying Q1 will be down from Q4 and then Q2 will be better than Q1 and better than Q4?

Yes.

Okay, but it still implies you are going to exit the year, the second half you are going to be at much higher run rate than kind of the reported for the year?

It’s really Q2 through Q4 we expect to be that we see that all much stronger than Q1.

Yeah.

Right, right, okay. And then in terms of, I am sorry…

We just mentioned specifically quarter two, because it’s so close to hand.

Right, okay. And then in terms of the free cash flow, I think there was a question about free cash flow versus earnings in 2013, obviously you are saying CapEx is going to be higher than depreciation by $12 million or $14 million or something like that, the working capital is going to be a use of funds, it looks like your working capital is around 25% of sales. So, is that a good number take 25% of the increase in revenues in ‘13 as a…

Well, it’s more 20% on a normalized basis.

Okay, okay. And then cash taxes are pretty probably it looks like based on my numbers $5 million or $6 million less than the reported taxes due to the…?

Yeah.

Okay, I am with you.

Thanks very much.

Okay, probably we have time for just one more.

Your final question comes from the line of Luke Folta with Jefferies.

Thanks guys for allowing next couple of more just quickly your lockup period is expiring here in early April, can you just give us some thoughts on what we should expect there, are we planning a formal secondary?

Well we have given some thoughts here because the lockup goes and I think on the 2nd of April. But I did have a (ring around) to the larger of the pre-existing shareholders and there really isn’t a level of selling interest to justify secondary offering. So, we are – we are not planning one at this stage, we obviously have the possibility of doing that at some first group stage. But I think that there will be little interest in doing that until such time as the share prices as well the higher than it is at the moment.

Great and just lastly can you talk about what’s your thoughts are for dividend policy for next year – for this year?

Well, we continue with our $0.10 on ADS which at the current price is pretty much on the targeted yield of 3% or so and we will not review that as a Board as and why the circumstances that causes to do so. So, at the moment our anticipation is that we will continue to pay at a quarterly $0.10 dividend through 2013.

Thanks a lot, gentlemen.

Okay thank you very much everyone. We will speak to you and not too distant time actually on the quarter one results at some point in May. Thank you.

Thank you. This concludes today’s conference call you may now disconnect.