Welcome to the Luxfer Third Quarter Conference Call. We will first hear from Chief Executive, Brian Purves, who will provide a market overview, followed by Group Finance Director, Andy Beaden, who will review the financial performance. Brian will then return and 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 participate, 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 now turn the call over to Brian Purves.

Thank you. Well, good morning, everyone. And welcome to the Luxfer Conference Call on the Third Quarter of 2015. I will start on Slide 4, on quarter three. While we achieved several of the targets that we had set for quarter three, our operating profitability did not improved quite as hoped remaining flat over prior year after the impact of adverse exchange rates. We continue to make progress in the area of alternative fuels winning new business in North America and winding down the loss-making German operation. The important North American SCBA sector remains well up on prior year and the Luxfer Magtech acquisition continues to perform well with $7.6 million of sales in the quarter. The areas that held us back were firstly, auto-catalysts products where demand was particularly weak and secondly, aerospace alloys, where it appears there is an addition to military production being down, civilian helicopter build rates have also fallen with lack of demand from offshore oil and gas customers being cited. Adjusted fully diluted EPS of $0.28 was slightly below consensus, but $0.04 ahead of quarter three last year. And quarter three was again good on cash flow. Turning to Slide 5, the North American market self-contained breathing air kits is well up over 20% on prior year with the main manufacturers having their new kits approved. Although the euro has recovered a few cents from its low point, the continued weakness of the currency is hurting margins on sales out of our UK businesses, as hedges taken more than a year ago mature, and the newer hedges at plural rates come into play. After several years of consistent growth, we have seen the sales of our high-performance magnesium alloys lower this year, with there is a lower build rates on both military and civilian…

Thank you, Brian and welcome everyone to the call. Brian covered the divisional sales analysis and my first slide is Slide 13 and it shows how that consolidates into the Group revenue changes for Q3 2015. Total revenue for Q3 2015 was $113.3 million with no separate rare earth chemical surcharge now required after and this compares to $120.5 million of net revenue in Q3 2014. From the slide you can see FX translation differences reduced net revenue in the quarter by $4.8 million. The accretive benefits of Luxfer Magtech was $1.1 million. Other underlying revenue was down $3.6 million or 3.1%. And as Brian’s slide showed, this was a result of the lower Elektron revenue with gas cylinders’ underlying revenue improved on Q3 2014. Slide 14 shows the trend in sales for Q3 2015 by geographic region. The percentage improvements in North American sales to 55% from 51% represents that region holding up better with stronger self contained breathing apparatus sales improving AF and the addition of Luxfer Magtech, offsetting any negativity in the aerospace and the Zirconium markets. The main falls in sales are in Asia and Europe. Now European Zirconium business has particularly suffered in the quarter. AF was also weaker outside North America. Turning to the trading profits and adjusted EBITDA results on Slide 15, the Q3 2015 Group trading profits was $10.6 million, the same as Q3 2014. At constant exchange rates, trading profits was up $0.3 million or 3%. Elektron results of $7.5 million was down on $1.4 million on Q3 last year. The negative FX impact was $0.8 million and the underlying profits was therefore down $0.6 million. The negative impact from the full in Zirconium catalysts sales had a much larger impact on this. If Luxfer Magtech improvements in magnesium photo engraving…

Thank you, Andy. On Slide 20, then summarizing quarter three, the profitability of our cylinder business is improving with North American SCBA back on growth and progress being made on improving sales and cutting costs in the alternative fuel business stream. Unfortunately, it is the turn of the Elektron division to have a couple offset that’s below par with the aerospace alloys down for the first time in several years and our auto-cat sales also down. Having researched the decline that we have experienced in auto-cat over the past three years, we believe that much of it is a direct result of losing sales to products made by a process that infringes our G4 patent and we have now commenced legal action. The highly publicized problems of Volkswagen Group seem also to be creating short-term disruption to supplies. Although our adjusted quarter three EPS was just below consensus, it was $0.04 better than in 2014 and our cash performance remains very strong. Turning to the outlook for the divisions. Weak sales of aerospace alloys and auto-cat products seem likely to continue through Q4 with the current disruption in the European market with Volkswagen Group another unhelpful factor. Elektron will have a very good boost from its first sales of the new SoluMag material for the oil and gas industry. There is magnesium Elektron video showing the material on YouTube for those interested. The weakness of the euro is hurting the profitability of our European operations and we can see little change in that outlook. The North American sale of the cylinder business has strengthened and we believe that will continue. Alternative fuel losses will not be eliminated until the end of the year, but we expect the alternative fuel business to be profitable thereafter. And order cover for European medical…

Our first question comes from the line of Julian Mitchell of Credit Suisse.

Hi this is Lee Sandquist on for Julian Mitchell. Can you please give us some color on the timing of the restructuring benefits? And secondly, can you please remind us what your capital allocation priorities are moving into 2016?

Well, the benefit from alternative fuel should really be felt as soon as the German operation closes which is kind of the schedule to be right at the end of 2015. So, we have been getting benefits through the course of the year in North America, but as the German plant has been wound down, the level of sales in the European market has reduced. So the German losses if you like have worsened which has offset the improving profitability of the North American alternative fuel business. But over the course of the year, we expect to lose roughly the amount of money that we said previously and we expect the business to be profitable in 2016. So, this should be a delta there of around $4 million with 2016 being best than 2015 with the benefit being seen more or less right away at the start of 2016. In terms of capital allocation, we obviously put a budget together which we will be presenting to the Board in the coming weeks. We will be constraining capital expenditure to preserve cash to the extent reasonable, but we adopt a process whereby the businesses have to basically bid for capital expenditures on the anticipated IRR that they can generate. And so, the capital expenditure for 2016 will be heavily focused towards those business units and those projects which will generate the best medium-term payback.

Great, thank you.

[Operator Instructions] Our next question comes from the line of Phil Gibbs of KeyBanc Capital Markets.

Hey, morning.

Hi, Phil.

Hey, Phil.

I had a question on the Zirconium market and specifically the auto-catalysts business and the diesel and the CamCad, I just kind of want to take a piece-by-piece here kind of weave that into some of the comments that you made about Volkswagen and market share losses there, I know the market share losses appear to be going on for a while, but just maybe queue us in on maybe not the patent infringement, but what’s new really in the business and how you are looking at the whole mosaic here for the Zirconium side?

Okay, first of all, what I’ve been talking about catalysts on the course of the call is really the automotive side. The industrial catalysts side continues to grow very slowly, not as fast as we’d like, but it is growing and we still expect it to grow further into the future. So, nothing much has changed on that side. It still comes through in lumps of business, it’s not a stable month-on-month revenue stream, but the trend is still we believe positive and we still think that there is the possibility of they are much bigger contracts as we go forward. Turning to the auto-cat side, we have been losing sales in auto-cat for sometime as you say. On the root there I think goes back to the rare earth pricing crisis in 2011. 2012 when the prices that we have to push into the market to recover the dramatic increases in rare earth costs were major shock to the market. And unfortunately, we were – we had to do that as a survival matter but, Chinese manufacturers or the Chinese base manufacturers had access to domestic pricing for rare earth which is much, much lower than the export prices that we were having to pay. Secondly, our Japanese competitor Daiichi Kigenso which is a listed Japanese company, they chose not to pass on those rare earth prices and surcharges and they lost $100 million over a two year period. Those are published figures you can go and check them, but they got build out by the Japanese government which has decided to protect Japanese industry from the rare earth issues. So, at that time, we started to lose market share, because basically, with us passing on the full cost of the rare earths, our pricing was hugely higher than…

Okay, Brian and then, is the automotive-catalysts business, your legacy business, is that inclusive of the diesel business? Is that predominantly the end-market, I know you were reading some comments from Volkswagen and there, so, I am just trying to understand how much of this is light vehicle, non-diesel versus maybe some diesel markets which I know that you had outlined as a growth opportunity?

Well, we don’t – as I said, we don’t have that much presence in the diesel market today. The vast majority of our catalytic materials go into three way catalysts or for gasoline engined vehicles. So the diesel side is – was an opportunity for us, maybe could be an opportunity again with the problems of being publicized about the Volkswagen’s difficulty in achieving the emission standards. So that – if anything that’s an opportunity but it’s very difficult to quantify at this time. However, the fact that Volkswagen has taken a hit on sales, and I think it’s fair to say that subjectively the view seems to be Volkswagen sales have taken a hit whether on diesel or petrol and there has been some suggestion that some of their petrol engines are similarly affected. That does seem to have introduced a degree of disruption into the European supply chain and of course some of the manufacturers that we supply in Europe are quite heavily dependent on Volkswagen Group, which is by far in a way the biggest manufacturer in Europe at various times, it’s been the biggest in the world, because we are not just talking about Volkswagen, the brand, we are talking about Volkswagen, Audi, Seat, Skoda. Volkswagen Group is by far in a way the biggest player in Europe. It does seem to be that the supply chain in Europe has been disrupted by what Volkswagen is suffering, I hope that’s a relatively short-term answer, because people will get over the propensity or indeed they will move to other manufacturers and start buying petrol engine cars from them. But, right at this short period of time, our customers are cutting back on demand and we know that some of them are quite heavily dependent on the Volkswagen Group.

Okay, that’s very helpful. Just a couple of follow-ups. On the CapEx, I think you said, $18 million this year, does that include the investment that you made in the Australian energy venture?

No, Phil that’s separate.

Okay. And then, can you remind us on what if things stated – you call it a 106 to the euro and then also the current relationship to the UK sterling, what the impact from the hedges would be next year in terms of the headwinds that you would see? Sorry if I missed it.

Well, we’ve quantified it before, but certainly, if the exchange rate stays where it is, and we are not fully hedged for next year. So it is substantial spot exposure. But, year-on-year, we’d have to recon on $2 million to $3 million adverse being the impact – additional impact of the euro 2016 over 2015. On the cumulative impact over the past 2.5 years, it’s probably going towards $10 million.

When you bring that seven Brian, of course, we’ve discussed this before, there are other favorable movements would not have the full ventral or even significant benefits yet to lower quantity cuts because of low hedging and inventories in the system. So, I think we discussed that that the euro is a negative commodity cost or input costs would be at similar positive.

Yes, similar – similar – similar, positive.

Okay, so the commodity cost deflation on steel and aluminum et cetera could offset those FX headwinds next year?

Yes.

That’s helpful and where would you be seeing those commodity costs benefits? Is that mostly in the cylinders side, because you buy a lot of steel and aluminum?

We buy a lot of aluminum in the cylinders business. So that would be a benefit both from the falling LME price, but also from the delivery premium which has dropped quite significantly in the last six months. The Midwest delivery premium has dropped from over $500 down to - I think below $200. So that’s quite material on the LME price, it obviously dropped as well, but we do hedge the LMEs, so, that’s more a gradual benefit where the premium is more immediate. Not of course is a global benefit, whereas the euro exchange rate is an adverse of the European business. The commodity price benefit is global. But we have also seen the price of Chinese magnesium fall and to some extent the price of Zirconium fall. So, there is a general malaise as you know in the global commodity market and that is starting to help offset some of the negatives that we talked about.

All right. Thank you.

[Operator Instructions] Our next question comes from the line of Garo Norain of Palisade Capital Management.

Great, hi guys.

Hi, hello.

You made in the release some comments about 2016, at the end of the release since the oil and gas industry being depressed defense spending, whether it recovers or not et cetera. There is a lot kind of in that paragraphs and I was wondering if you could just help kind of just directionally, I mean, if you net things out, it doesn’t look like kind of up, flat or down directionally for next year.

Well, I think, I was trying to give that impression in the strip that, we definitely see it as an up. The euro exchange rate is certainly potentially a negative, but the commodity price benefit is hopefully at least a bigger positive. So those two should really net out. Then of course, our big step change year-on-year as we expect to be profitable in the alternative fuel business stream where we have made some very significant losses in 2015. So that’s probably the biggest single positive. And then of course we have the indeterminate but hopefully positive benefit of taking action on intellectual property protection in the catalysts area along with the other actions that we are trying to take there to recover market share. And then finally, we threw in that, we have another new product out there being the SoluMag dissolving magnesium alloy for the oil and gas industry. Our overall gas industry is weak at the moment, but they are still producing and we don’t have a presence there. So, any sales that we make is incremental business to us. And having made what we hope for the breakthrough sales, we are just trying to build that into our numbers for 2016. The other positive I think in the script was that the bioabsorbable alloy does – it might get into the market a little earlier than we’ve previously thought and that’s clearly rare, I have to admit or a lot of these long-term projects is more common for them to slip backwards and come forwards, but that particular one at the moment we are feeling optimistic about we’ll get into the market, possibly six months earlier than we had originally thought.

Great. Thanks so much for that.

Okay.

[Operator Instructions] We have a question from the line of Phil Gibbs of KeyBanc Capital Markets.

Thanks. Just had a follow-up on what you are thinking about in terms of targeted margin potential in gas cylinders right now, given all the moving pieces in the commodity cost downside that you are expecting? I know you had wanted to get 2016 back to what – 2013 levels with the restructuring actions that you’ve taken, is that still possible or are we still a year away from that? Thank you.

I think, 2013 I think was the sort of record year. So, that’s probably a little overambitious for 2016 right at the moment, but we certainly anticipate seeing a significant improvement in the percentage return from the business because of course, we are suffering quite badly still from the alternative fuel side. I mean, we are really quite positive now about the – admittedly the reduced scale of the North American business, but that we can – pretty positive. But the European business, we absolutely made the right decision to shut down the German operation, because that market for bulk gas transportation modules and bus systems has just got weaker and weaker through the course of the year. Sometimes when you close a plant, you see a flurry of activity as customers come in and order materials and equipment before the plant shuts, we’ve definitely not seen that here. The business has just got worse and worse. And so, that’s got a very negative effect on the margins for the division. Removing that, and getting the AF business stream into a positive by itself, we will generate an improvement in the margins on the net benefit in cylinders, between the mix of exchange rates and commodity prices it should be a positive as well, because the euro exchange rate, this benefit that we often cite is spread across several businesses and the material cost benefit will be more towards cylinders. So, again we will see percentage improvement from that side. So, we don’t think that we can see a significant uplift in cylinders year-on-year, but the biggest single element to all that will be the turning round of those AF losses into some degree of AF profitability.

Perfect. Thanks so much.

Okay.

At this time, I am showing no further questions. I would now like to turn the floor back over to management for any additional or closing remarks.

Okay, thank you very much everyone for listening in and for those questions and we will talk to you again when our quarter four results come out in the New Year. Thank you. Good bye.

An Encore recording of this conference call will be available in about two hours. You can access the recording on the Luxfer Group website at www.luxfer.com. Thank you for participating in the call.