Welcome to the Luxfer Group’s Second Quarter Conference Call. We will first hear from Luxfer Chief Executive, Brian Purves, who will provide an overview, followed by Group Financial Director, Andy Beaden, who will review the financial performance for the quarter and year-to-date. Brian will then return to sum up and offer an outlook. After that, Brian and Andy will be glad to take your questions. We request that you initially ask only one question, after you’ve heard the answer we will give you the opportunity for a follow-up question. [Operator Instructions] Thank you for your cooperation. We will now turn the call over to Brian Purves.

Thank you. Good morning, ladies and gentlemen and welcome to the Luxfer conference call on the second quarter of 2016. We've introduced a summary slide on Page 04, the headlines for the quarter are, the result was as expected with continued progress with cylinders. We've successfully rescheduled our term debt, the Brexit the volt is mainly affecting exchange rates which is a positive for us in the medium-term. Our overall guidance on EPS is maintained to 5% to 10% up on prior year, with some business however having been moved from Q3 into Q4. So, looking at the quarter in more detail on Slide 05, as previously forecast, once we adjust for exchange rates, Q2 was only slightly down on what was our best quarter last year. And we remain well up at the half year. Adjusted fully diluted EPS of $0.29 was $0.01 above quarter two last year. Cylinders continues to perform well ahead of prior year, but our product transition efforts in Elektron, while progressing have not yet is towards sustainable growth. Please note rather Elektron’s 2Q results well in line with our expectations from the prior earnings call. Quarter two revenue remained compressed but as we saw in quarter one the mix of sales is stronger. Through our product development activities we continued to focus on developing more and more proprietary products. Turning to Slide 06, the North American SCBA sector remains strong with to the best of our knowledge all market participants now having kits on sale that comply with the latest NIOSH regulations. Although some only recently having achieved that status. Our right sized alternative fuel business remains profitable with overall trading profit for gas cylinders again roughly doubled last year’s level. Sales of aluminum cylinders were up due to improved demand from the medical…

Thank you, Brian and welcome everyone to the call. Our first set of slides will cover the sales analysis for the quarter. Total revenue for Q2 2016 was $111 million compared to $122.8 million for Q2 2015 and 108.8 for Q1 2016. FX translation was a negative $2.7 million with the underlying group revenue reduced by 9.1 million when compared to Q2 2015, though improved by 2.2 million on Q1 2016, gas cylinders’ underlying revenue reduced by 1.3% and Elektron by 14.1%. Slide 10 covers gas cylinders. Revenues in our main cylinder businesses were reasonably stable, demanding composite cylinder markets such as the U.S. self-contained breathing apparatus and AF remained strong while they improved in our aluminum cylinder markets. Shipments from Superform remained temporarily subdued due to several current customer project timeline slippages, mainly in high performance automotive with the run off of historic business and the new contract work scheduled for later in the year. Now onto Slide 11, as expected Elektron's underlying revenue was down 14% in the quarter and remains impacted by the continued weakness in lower margin automotive recycling along with the reduced sales for zirconium auto catalysis. There was some modest improvement in European aerospace demand with U.S. demand still compressed. There was also some further issues in the U.S. defense market similar to powders with the customer outage which is expected to be resolved by Q4. And this constrained shipments falls into the magnesium decoy flare market. Our photoengraving sales remained solid due to ongoing success with the investments in broadening our international distribution resources with its proprietary products, looks a nice tick seeing demand in the domestic U.S. markets also compressed with U.S. defense order intake at the lower end of contracted minimum levels. Though its focus is now on widening its customer…

Thank you, Andy. Just looking at Slide 18 then, summarizing quarter two, the profitability of our cylinder business remains markedly improved, underpinned by growth in the North American SCBA market, our rightsizing program and new business won in the alternative fuel sector. In quarter two we also saw solid improvement in European alternative fuel with a higher level of robust system sales than we've seen for some time. Elektron division continues to have a few key sectors still running below par, but there was an improvement in sales of high performance alloys. Sales of our auto cat products remain compressed and while the outlook for industrial catalysis remains strong there were fewer shipments scheduled in quarter two. Work continues on the next generation of auto cat products and we remain optimistic that our development activity will result in a step change improvement in our product offering to this sector. Although sales revenue was down, the sales mix is stronger and costs have been reduced, so our operating margin remains higher than prior year. With the defense market in the U.S. remaining compressed we are working hard to expand the geographic presence of our U.S. defense space businesses, marketing both to military and civilian customers and we feel that we're making good progress. Our adjusted Q2 EPS is $0.01 above prior year and in line with consensus. Turning to the outlook on Slide 19, we are reaffirming our EPS outlook for 5% to 10% improvement over 2015. The UK referendum vote to leave EU was a surprise, although the polls have suggested that it would be close. Most observers expected a swing towards the status quo in the last few days. This did not happen and then aftermarket of the result we did see some short-term volatility from our UK and…

The floor is now open for your questions. [Operator Instructions] Your first question comes from Julian Mitchell of Credit Suisse.

Hi. This is Lee Sandquist on for Julian Mitchell. With another quarter of significant weakness in auto cat sales, when should we think about a trough in this segment, it seems like the industrial catalysis offset maybe pretty volatile in nature?

Yes. I wouldn’t say the industrial catalysis is volatile in the sense that we’re working with the benefits of a larger customer base, a large contract base now. But the requirements for the material are certainly more lumpy if you like than the auto cat, which is much more dispersed over a wide range of products under wider range of high volume customers. So I think the industrial catalysis is still a little bit chunky, and will become less so as we grow it. But nonetheless we have a high degree of certainty or a higher degree of certainty at the level of business, we just can’t be precise about which quarter-by-quarter it comes in. On the auto cat side, the real pain that we’ve suffered there, it is through the course of last year. So in the fourth quarter, well certainly the fourth quarter, probably the third quarter last year sales of automotive catalysis were already quite badly hit. So, I'm not conscious that we have dropped much since then, we just haven't picked anything up yet. And there're two efforts as you know where we're looking to achieve that. The first one is the court action, because we do believe there's a lot of the volume that we have lost is because of the people selling infringing product against us and we've been able to track exports out of China to be able to give ourselves confidence on that front. Unfortunately as you'll be aware the court processes are, very longwinded and we can't really expect a positive outcome from that until certainly well into 2017. But at least we have made public our concerns and the customer base is aware of that and has to make their purchasing decisions in the lights of our stated belief. The second effort which I did allude to is that we have been putting a lot of effort into developing a new generation of automotive products and if we're right and we're still awaiting on feedback from our customers on their engine testing of the new material, if we're right then the new material will be a marked improvement over the previous generation of material. And that's the surest way for us to win back market share. Again though nothing happens overnight in this market and it would really be the second half of 2017 before we would realistically start to sell that new product in any large commercial volumes.

And then in Q1 you alluded to a recovery in the medium-term for defense and commercial helicopters, could you just please update us on your thoughts on that end market?

On defense?

No, it's more helicopters I think.

Helicopters yes. Well, I think on that one we did say at the last call that we felt it had bottomed out and we were roughly I think about 14% or 15% down on the high performance alloys, most of which we ascribe to the weakened helicopter industry with reduced demand from both defense and oil and gas sector. We haven't really seen any change on that in North America. But the slight pickup really we're reporting for quarter two for those alloys as compared to the European sector. So, that might be the first sign of some start of a recovery. But the oil and gas sector remains depressed and defense spending remains depressed. So, I don't think we can currently on near-term bonus from those existing markets. And in the meantime we're doing as much as we can to identify alternatives for their customers. We'll found the sectors for the same products. But I do think that we're getting more confident that said that has bottomed out and is starting to pick up again.

[Operator Instructions] Your next question comes from Phil Gibbs of KeyBanc Capital Markets.

In terms of the deferrals into Q4 and some of the orders in Elektron how should we think about the magnitude there in terms of profitability moving from one quarter to the next or anything that you could help us frame up there?

Well, there're quite chunky bits of business, so they will have a material impact. Obviously we'll be doing whatever we can to compensate. But certainly in terms of the errands that have moved, you’re looking at maybe certainly $0.03 worth of earnings shifting out of other Q3 and into Q4. And those are firm reschedules so it is not as though we’re again making our own gas at the times all the new times that the customers have given us. So as long as we stick with that then we should see not much of a ship, out of quarter three but into quarter four. And obviously in quarter four, we get a bit more nervous about it because of last leeway for slippage that was our firm reschedules, I would say it’s probably about $0.03 down Q3 and on Q4.

And in terms of the UK translation back in the U.S. earnings, you said that is a $1 million to $2 million headwind for the second half. How much of that is in Elektron versus cylinders?

More of it would be in Elektron than cylinders amendment. So Elektron is because simply Elektron more profitable. And so you will portion that on the profit ratio of the two divisions.

The euro benefit going forward however is more equitably split between cylinders and Elektron.

Yes. The benefits of that the UK production cylinders does have a big production base in the UK. So the euro upside for 2017 is probably more even but the translation impact working with a portion on the profit apportionment that you see at a group level for those divisions.

Okay. And then that’s a good, that’s kind of the good lead into just a currency discussion in general. So if you’ve got a call it 1.5 million headwind for the second half, you talked about some hedges rolling off into next year, which may give you up to a $4 million benefit. You obviously, you’re also in a more competitive cost position in general with the weaker sterling. So how do you think about all else equal? How you think about the currency headwinds to the trading profit this year with competitiveness baked in as well. And then how you’re thinking about it for next year for just the weakened you think about how the business could be positioned?

Well, the transactional impact of currency is something that we’ve been living with for some time. So the hedges that we have in place at the moment are on the euro, which is what is locking us out of the short-term gain from the weakness of sterling. That is at levels where we’ve not done business and we know the level of profitability that’s baked in. So there is an opportunity there to get better profitability from those exports on the amount that is not hedged and that amount will increases as we go forward, because we don’t really take long-term hedges on foreign currency. So the short term impact is purely the translation of non-U.S. earnings back into U.S. dollars. And that’s not with affecting our competitiveness at all. Going forward, if we can access euro exchange rates at today’s levels then the profitability of exports into Europe is certainly much healthier than has been recently. The euro sterling exchange rate howsoever being at this level within the last three years, it’s just in the last 18 to 24 months that we’ve seen the sterling euro rate get quite painful for us so we've been suffering compressed margins for that period but nonetheless been willing to do business up that level. But if the exchange rate falls the way it is today initially the profitability of those exports will be considerably benefitted. Obviously, that does open up the possibility of attempting to win more business. That's something that we would only do once we were pretty confident that the exchange rate have stabilized at that level. It is not something we've seen for several years, so, it's more of an impact on profitability that on volume opportunity, although there certainly would be some volume opportunity in the medium-term if we get confident that the exchange rate has in fact stayed stable at these levels.

And of course we can now hedge at the new rates. So, what they are doing is looking to try and lock in at the new rates for 2017, potentially 2018, currency flows. But definitely we do hedge 12 to 18 months out, so simply the balance of this year is ruled out as an advantage but certainly 2017 and even 2018, we can see the advantage coming through.

In terms of raw material side, are the raw materials in the second half of this year more of a headwind, more of a tailwind, more -- or the same versus the first half and then how are you thinking about raw materials in 2017 relative to 2016? Thanks.

I think at the moment fairly it's pretty stable on raw materials. If we look at where aluminum has been and then you find that the other metals that we work with obviously track back or a similar that that will touchwood very stable and year-on-year probably now steady stable, we saw some benefit last year which helps us but as we look forward it isn't seen as a major headwind or any real movements at the moment.

The only issue where we're buying in dollars, then the…

FX.

The FX impact.

Yes.

Makes it slightly more expensive in sterling but we don't really mention that much because we're pretty well balanced on the dollar between sales and purchases so that the two wash through together. It's only the euro where we have a large net sales exposure where we buy very little in euros. Dollars are fairly well covered.

Yes.

But the dollar prices of our raw materials as Andy says look pretty stable at the moment. We can't at the moment see much in a way of any macroeconomic factors that would change that.

[Operator Instructions] Your next question comes from Jonathan Sacks of Stonehill Capital.

Just a few mostly cleanup type questions, on the Elektron division revenues, when you cite the drop in revenues versus prior year and the magnesium recycling which is a low margin business was a significant part of that. Can you give us a sense of the magnitude of how much of the sales profit is from that magnesium recycling?

Well, Jonathan about half the sales for was in either the recycling or related lower margin magnesium alloy sales, which automated alloys. So about half, the fall was in lower margin and half the fall was in the more normal Elektron margin.

The actual recycling drop was about $8 million in other half year, year-on-year.

Yes.

Jonathan. So the business has dropped, the recycling business would have been $30 million business, it’s now about half that and that is all falling through into our overall sales revenue. But as we’ve said before, the recycling business operates on very low cost, low margins. So its impact on profitability is not very higher, but those are factory issues.

Yes. And the strip exchange out, which we did in the release Elektron’s sales fell in Q2 by 8.3 million and obviously you can work out from what Brian is saying about half of that is the recycling?

It is a structural issue really the recycling in Europe is others are too much capacity. But the main issue at the moment is the price differential between U.S. magnesium and Chinese magnesium, because of the import barriers in the U.S., against the implication of Chinese magnesium there is a very-very wide delta today which means the cost for the U.S. produced magnesium on Chinese produced. And that import barrier does not apply to magnesium scrap. So people are exporting scrap over Europe and into the states and all together on the import duty and there is no demand or less demand on the recycling industry in Europe.

And then…

Yes.

Can you just touch on its expectations for CapEx and pension payments in the coming year as well as sort of current view of normalized rates for both?

Well, we certainly touching back a little bit on the capital expenditure in the current year from our earlier indications. And that’s quite normal we tend to understand in the first half of the year and then review the situation. So I think our full year number for this year is now rather below $20 million. We have a good budget for 2017 together yet that is something that the Board will be looking at in the next couple of months. But I would be surprised that it was much different from the 20ish million type level. And on pensions, those payments are fairly stable being that is a remediation payment. So we assume on our forward planning roughly $10 million.

Yes. For those exchange, of course it’s slightly lower now Brian the -- so it’s probably, I think it’s going to be between $8 million to $9 million unless we put any additional one-off amounts in for the special project.

Yes. Because we think the sale of a topic is the sterling payment into the UK on it so $8 million or $9 million and that is fairly stable. We have an agreed position with the UK trustees, which is for a three year period of which we have only had one year. So actually it would be stable for the next couple of years.

Great, thank you. And I know that there had been some changes to the pension plan, which is why I asked for an update. And then just the last question and you’ve talked about Brexit a fair amount and then most of the impact is on FX, which you've elaborated which is very helpful. But is there a risk that there're export restrictions put in place or import duties or other barriers to trade in terms of product that you produce in the UK and sell into Europe?

Well, there certainly is inferior risk most people are discounting it because the UK imports are lot more from Mainland Europe, than exports to Mainland Europe. So, if there was an imposition of trade barriers it was the Mainland Europeans that would suffer the most. And so, for example the German car markers, I think would be well being heavily against there being like these on manufactured goods. However that's not going to become clear for at least two years and probably more likely longer than that. We have looked at it just I mean what the exposure is, I mean at the moment if we take the cylinder business that is in the UK, we import aluminum log from North America and we pay import duty on importing into Mainland Europe or but I think it's 6%. And we export obviously duty free into Mainland Europe today the standard of that tyre for non-EU companies is between 4% and 8%. And that's a sort of range so you could end up with as not paying any import duty on the log but paying something to export into Europe of that sort of magnitude. However you then look at our major competitor in Mainland Europe for aluminum cylinders it was actually a Turkish company and Turkey has free trade arrangement with the EU, so, they import free of charge, so, it would seem inequitable if we ended up paying. So, at the moment our backing is that there won't be any such changes, but they won't become clear for two or three years I am afraid.

Great, thank you very much.

Even if…

Yes.

Even if there are changes we will cope with it. They're not of a larger magnitude that would cause us to be, become uneconomic because of it.

They're not as significant to the FX changes and they are certainly not as significant to some of the headwinds we faced in the past in material cost changes. So, you're talking of net duty input-output changes of a few percent.

Your next question comes from Phil Gibbs of KeyBanc Capital Markets.

Thanks for taking my follow-up I think for the time being gents I am all set I think you hit on most of my follow-ups. I appreciate it.

Thanks Phil.

Okay. Are there any more people on the list?

This concludes the question-and-answer session of today's call.

Okay, well thank you very much everyone and we'll speak to you again with the quarter three results in early November. Thank you, good day.

Yes.