Welcome to the Luxfer Group’s Fourth Quarter Conference Call. We will first hear from Luxfer Chief Executive, Brian Purves, who will provide a market overview, followed by Group Financial Director, Andy Beaden, who will review the financial performance. 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 fourth quarter of 2016. Looking at slide 4, first of all, the headlines for the quarter are as expected, it was a difficult quarter, as our magnesium business continued to experience a downfall principally defense orders. Our earnings result was however in line with our updated guidance. We consolidated a significant improvement in cylinders profits over the year. The defense order book for 2017 did increase during the quarter but still below par as much improved. We have several new products commercializing this year and despite Q1 likely to be only partly recovered overall we expect 2017 to be at least 10% up over 2016. Turn to slide 5 our adjusted diluted EPS of $0.14 in the quarter was in line with our guidance but $0.13 below quarter four last year. So, we had seasonably weak fourth quarter but consolidated a good improvement over the year. As in the third quarter, the principle headwind came from sales of our North American magnesium products and in particular defense-related products. We occupy a very strong position in supplying the U.S. Military with all its requirements from military powders, flameless heaters and personal chemical agents, detection and decontamination products. It is a great place to be when demand is strong. But it has been problematic during this period of tight budgets and de-stocking, as I will discuss later of our underlying improvements in the background. Revenues compressed by the lower defense sales but also by lower activity at our Czech recycling plant albeit with marginal impact on profitability and by foreign exchange rates translating our non-U.S. sales into dollars. Looking at the quarter more details slide 6, following 2015’s right-sizing actions, results from the alternative fuel cylinder…

Thank you, Brian and welcome everyone to the call. My first of the slides will cover sales analysis for the quarter. Total revenue for Q4 2016 was $96.1 million compared to $107.4 million for Q4 2015. FX translation was a negative $4.9 million with underlying group revenue lower by $6.4 million, though improved by 2.2 million on Q1 2016, gas cylinders’ underlying revenue reduced by 1.3% and Elektron by 14.1%. Gas cylinders underlying revenue was lowered by 5.7% and less from 6.9%. Overall, this was actually slightly ahead of consensus but in line with our own expectations. While we had flagged some demand disruption in the second half of 2016, after a stronger start to the year, for the year, revenue was down at $414.8 million from 2015 $460.3 million. FX translation was negative $13.4 million and FX transaction differences providing benefit in the end of $4.2 million. Therefore underlying revenue was down $36.3 million. Of this Elektron was reduced by $29.6 million with $10 million relating to low margin magnesium recycling and the remainder relating to magnesium Elektron’s mainstream higher margin products. The gas cylinders reduction was $6.7 million mainly relating to the medical demand in Europe. Slide 17, gas cylinders, consolidated revenue to Q4 2016 was $3.1 million less than a year earlier. Shipments for the U.S. self-contained breathing apparatus market were reduced from earlier in the year and the higher run rate then, but this could appear to relate to quarterly phasing and end demand rather than any major changes. And our customers remain very positive about 2017. In 2016, we have a news week for medical composite demand in Europe. We now know this is probably related to some destocking in the cylinder inventories of at least one of our major customers. However, new products have…

Thank you, Andy. Turning to slide 24, in summary, we’ve made good progress with our cylinder business in 2016 turning around the alternative fuel business stream. The alternative SCBA held up well despite the unwinding of the backlog of orders generated by the regulatory approval delays of 2014. Medical demand was unusually low throughout 2016 but our customers are forecasting higher requirements for 2017. The Elektron division was badly affected in the second half by the deleted orders, and watched some other short-term market disruption. But there were several pieces of business placed in the quarter that will drive improvement in 2017. Our adjusted EPS for 2016 is in-line with our updated guidance. But we recognized that we [indiscernible] on prior year, is unsatisfactory. And we are doing everything that we can to make 2017 more robust including looking again at our cost base. For the older group for magnesium products has improved with all that quarter one will be partly impacted as some of the new business only starts up during the quarter. And all the cover for decontamination products remained low. The backlog promised of freeing up of monetary budgets is clearly helpful. And there are regular reports [indiscernible] of a continuing threat from the use of chemical engines to highlight the risk of running with low stocks. I should emphasize that we believe that we have maintained our market share at all these areas that impacted us in the last months of 2016. It is simply that we are leading the market. Increasingly a weaker sterling against the Euro should be beneficial to the profitability of our exports until mid-June. We have several new products that are expected to make a progressively meaningful contribution during 2017. Although while the older cover for magnesium products is not yet fully restored, with a lot of initiatives coming through in 2017, and the market growth is sufficiently positive but we do expect to improve profitability by at least 10%. Hopefully back close to the 2015 level and all-rising plant. Finally, as an update on the recruitment process following last year’s announcement by recurring 2017, both and those are interviewed in the short-list of candidates over the coming weeks. Unfortunately I cannot actually give you a name or firm date I am told that we can make that announcement about both in advance of the AGM in May. Thank you. And we will now take questions.

[Operator Instructions] Our first question comes from the line of Julian Mitchell of Credit Suisse.

Hi, good morning, this is actually Lee Sandquist on for Julian Mitchell.

Hi Lee.

Hi, a full recovery in the run rate is not expected until Q2. Can you just touch on the volume and profitability expectations for Q1? Are we likely to see Q1 being in line with Q4 trends or should we see it step-up given the firming orders?

I’m quite confident that we’ll see a significant step-up over Q4. And I’m pretty confident that we’ll see a step-up over Q3 last year. I just don’t think that we’re likely to get back to the run rates that we saw in the first half of last year or the sort of $15 million that would deliver $60 million EBITDA figure. But I’m quite confident we’ll be rationalizing uplift over Q4, either uplift over Q3.

Understood. I think the profitability improvements in alternative fuels has been very strong despite the continued volume headwinds in gas cylinders overall. But in Elektron it seems like the new catalysis products will only partially offset the automotive catalysis volume headwinds. So, would you consider employing any of the restructuring initiatives seen in alternative fuels in Elektron or are you just waiting for the defense market to turn?

Well, I certainly don’t see the need to do that, clearly in the side of the business because on the auto gas side, we are now enrolled. And we have to see lots we believe not just in the catalysis side but essentially in the catalysis side. We know the other product areas that we’re launching new products on [indiscernible] side. I mean, we want to have two plants that produced or producing mechanicals. The cost reduction actions I referred to, the main are a lot of the small actions. And I would prefer really if you think those to be an effort to improve robustness in the results while than in, themselves driving additional profitability at this point in time. But we’re looking at number different actions and there are a couple of things that we’re looking at which are a bit more substantial in terms of individual chunky pieces. But we’re not yet there to make any detailed statements on those ones. But we are very conscious of the fact that we need to deliver a stead change improvement this year and a rising trend. And we will put into the call whatever we can to deliver that.

I’ll pass along. Thanks a lot.

Okay. Thanks Lee.

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

Yes, thanks for taking my question. Good afternoon.

Hi, how are you?

Doing well. Question was on the SCBA market, it sounds like it lost a little bit of steam as 2016 surpassed. But first half was obviously very strong. What’s the outlook for that business heading into ‘17 at this point?

Yes, that sounded true, the second half was not strong as the first. A little bit of just phasing in that because obviously it’s dependent on the underlying contracts that the customer wins. However, I think it’s fair to say that in the first half of the year, there was still an element that drove that backlog being watchful particularly with NSA from the 2014 regulatory problems. If you recall, we only got the approval for their new generation G1 product at the very end of 2014. And we announced several times during the year that we had a very expensive backlog to work through. We think that backlog has long gone. But still there is an element of it being watchful in the first part of the year. And that’s really the main reason why the first half was more buoyant than the second. Having said that the customers seem pretty optimistic about 2017. And even in the absolute self the backlog in 2017 I think we have a reasonable expectation that the market will be no less than flat this year, at levels which historically are still very high. And for even conversations you’ll recall that we felt that the major impact here which is a replacement cycle for the post main level sales, still a little bit of a wager one, probably ‘17 and possibly into ‘18. So, we remain reasonably optimistic about an off the record market between ‘17 based on what the customer body is telling us.

Okay, I appreciate that color. And can you frame up the foreign exchange piece of the equation obviously you’re in a tough spot particularly in the second half of last year and maybe frame up the magnitude of the upside in terms of that turn?

Yes, for the conflict, based on, holistically as you know we hedge forward up two years. So, the benefit will start to progress itself through this year. And as we said before, a range of $2 million to $4 million depending on the actual exchange rates, we only hedge about 60% to 70% of forecast so there is always a variable element. But we’re still in that range. I’m progressive through the year. So, we expect we’ll definitely have better exchange rates and things stable in the second half of the year compared to a year earlier. And therefore at these rates a meaningful improvement in 2018 and we’re hedging into those rates. So, one of the best KPIs is the Euro sterling exchange rates and it’s been averaging as low as 1.15. And we’re hedged at rates at that sort of level. Whereas two years ago, we were at 1.35 and we’re probably hedged for this year around 1.23, 1.22, so you can see there is a big benefit come in 2017. But maybe just as big in 2018.

And virtually all of the exports that we sell in Europe are priced in euros, so it is a direct impact through revenue and margin.

Perfect. And then last one I have is on the CapEx, this year I think $16 million to $17 million. What’s the outlook for ‘17 and what growth initiatives are embedded within that number? Thank you.

Well, Andy can certainly comment on the overall figure for the year. But in reaction to second half results last year I put clamp on new capital expenditure projects. And so, while we don’t cancel projects which are already in trade, they’re hovered in many new projects signed over the last few months. So I think the level of CapEx in the first half of the year will be relatively low than the preserving that we observe, the turnaround that we expect obviously a rising trend will start to lease funds again back into capital expenditure.

So, roughly it’s, it puts thing around the $20 million mark plus or minus 10% depending on what maintenance in the projects. But if it was $20 million, it would be maybe a third in the first half of the year and two thirds in the second half of the year. As Brian said, we’ve come down on current expenditure while we seek to generate cash.

Thanks very much.

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

Hi Garo.

I just wanted to understand if you could help me with the sizing of the chemical decontamination business within magnesium and just how much of a negative impact that there is or could be based on the lack of orders at the point?

Well, about a third of Luxfer Magtech’s revenues come from the chemical agent, detection and decontamination. So that’s a region of $10 million or maybe just slightly $10 million. And there are probably we actually make from scratch, they’re relatively high margin products. And the contracts that are awarded tend to be for quite a long period, maybe for two or three years applied. So we walk through those after they’re awarded. And we still have contracts in place which we’ll be working through this year. The issue is that we have come to the end of a couple of them and they just happen to be renewed to date. So we’re running risk probably at the something of the order of a couple of million dollars’ worth of profitability. We don’t have the audit of the day or items that we would expect to be producing on a fairly regular basis. And we can accommodate if that’s helpful for you, we can accommodate it. But that level of risk we still haven’t seen any order cover for these contracts which were then inspired.

Got it. And if I think about the Superform business on an annual basis, is ‘17 expected to be up down or flat versus ‘16?

We expect it to be quite substantially up in ‘17, and obviously it’s a $40 million business but it’s only a roughly small proportion of the group in the DOD division. But we do expect quite a substantial uplift. Unfortunately it’s going to come in the second half. And that will result as we makes you a little bit concerned but it’s not just tomorrow. However, a lot of it is based on these new pronged tracks that we have one, with no parts being to be supplied. And as long as the customers kept their reduction on queues, in the planned skill then we should start to see a significant uplift in their returns, in the latter part of the year. It’s really watch down to give a suite of more production out of the existing facilities because we have been doing lot of works, and we’ve not just increased the view on the products that we sell that we mentioned earlier, but also reduce the cycle times on the products that we operate. And so, we’re squeezing additional volumes of revenue out of the existing facilities where we should restart to fairly significantly improve the, transform that business. I would say its small parts of the group and we expect it to be a much bigger contributor as a run rate in the second half of this year but it has been it will be whole really.

Okay. So if I understand things correctly, and appreciating much of the improvement is likely to come in the second half of the year across several of the different business lines, it seems like other than the chemical contamination, you’re likely to see improvement in most of the areas that have been problematic in ‘16 and then some of the other areas seemed like you had been talking with sales should be maybe flattish in the SCBA? And then you’re going to get the benefit as well from the currency. I guess what I’m struggling a little bit with is why wouldn’t things ultimately turn out to be little bit better than the 10% that you’re talking about?

Well, I would in fact - absolutely they could be Garo. You’re correct in going through these areas. We haven’t yet identified any significant areas which we expect to go back-clawed against prior year. Having said that we’ve been knocked last year, it was a bit of a surprise that the defense demand fell very dramatically as it did last year. So, we have to be conscious of the fact that although we are projecting improvements in central to key markets, that we had problems in, it’s only two months into the year. And maybe there are other markets that we are thinking of find that we’ll have problems with them. So, it’s really one specific slide shy. We want to see a lot more €21 through its markets coming back and growing before we get any more confident than we are at the moment. So, we’re going to settle for at least 10% uplift. Could it be a lot better than that? Yes, it could. But we just have to be a bit careful given that things can either hit few than hitters over the last couple of years and that could happen again.

And probably appreciate that Q1 last year from the profitability point of view was the best quarter we’ve had for quite a few quarters. So, we’re proud to point there which has to work its way through.

Understood, thank you. And one last thing, the tax rate expectation for the full-year?

Yes, around the 25% underlying.

Okay. Thanks so much.

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

Yes, thanks for the follow-up. I just had a quick follow-up here on the zirconium automotive business. And how the litigation right now that you have outstanding against your competitors, are factoring in your thoughts or expectations on the adoptability of the G6 lines in 2018? And what you’re thinking right now the potential could be in general from an upside standpoint for the auto business over the next couple of years versus where you are today?

Well, as you know, our auto catalysis business today is very, very much smaller than that ought to be had we maintained the market share that we had four years ago, if we watch what’s been going through the market. And you could escrow most of that to the competition which we believe on clear competition. So, we do have, we can have this court action as you will be aware, court actions can be very slow and long drawn-out. And one particular complication of this one is that there are trainees participant and have taken over long time to get that trainees’ companies with the action which is being held in U.K. However, that has now happened. And we do expect that there will be some progress on that court case this year. We are not counting on that generating any direct benefit in 2017. The G6 product that we’ve mentioned was usually going to be 2018 revenue, it’s something that we believe will win business because it’s a technological investment product and the products which we have today and which have been copied. So, we think that will win business with that off the back of that technology loop. And hopefully that, new technology it will take at least take several years for I think one to copy. And we will obviously be making double our efforts to protect intellectual property in that regard. There is of course indirect pressure in the sense that we’ve made it known to the marketplace what we believe in terms of the unfair competition. And we are out there trying to regain market share on the existing technology with G4 technology with products which are essentially identical to those which the competition has been selling. So, it’s a relatively easy process for the customer to switch from them back to us. And we have made sure that the offering that we put on the table gives a little potential financial disadvantage doing that because what we really need in our plant, it’s additional volume. If we have to price much to do that then that’s what we will do. So, we still have an aspiration and a hope that we can win back some of that market share over the course of this year on the G4 product. And we’re winning couple of hundred tons of that would be a big boost for us because the chemical business is a high fixed cost, high-margin business. And that would find us way through to the bottom line with a very nice kicker. However, we don’t yet have that additional market share so it does fall into the category what we said earlier on. That’s what we’re working through odds but we’re not factoring that into projections as to this model.

Thank you.

Okay.

And that was our final question. I would like to turn the floor back over to Mr. Brian Purves for any additional or closing remarks.

All right. Thank you ladies and gentlemen. And thank you for the interesting questions. We will report again to you on quarter one in early May. And I very much hopefully expect that we will have a better set of results to present to you then. Thank you again.

An Encore recording of this conference call will be available in about two hours. Telephone numbers to access the recording will be available on the Luxfer Group website at www.luxfer.com. Thank you.