Luxfer Holdings PLC's Q3 2025: Contradictions Emerge on Gas Cylinders Recovery, Space Exploration, Defense Growth, and Powder Production Efficiency

Date of Call: October 29, 2025

Financials Results

• Revenue: $92.9M, up 1.6% YOY
• EPS: $0.30 adjusted EPS, up 11% YOY

Guidance:

• Raised 2025 adjusted EPS to $1.04–$1.08 (from $0.97–$1.05)
• Adjusted EBITDA refined to $50M–$51M
• Free cash flow maintained at $20M–$25M
• Expect low single-digit sales growth versus 2024
• Guidance reflects defense & aerospace momentum offset by softness in automotive and alternative fuels

Business Commentary:

* Strong Performance in Elektron Segment: - Luxfer's Elektron segment reported sales of $50 million for Q3, up 2.5% year-over-year, with an adjusted EBITDA margin of 19.8%. - This growth was driven by increased demand in defense and aerospace, as well as stronger-than-expected mix of higher-value products.

• Growth in Defense and Aerospace:
• Sales in the defense and aerospace sector were a significant contributor to Luxfer's strong performance, with demand for Elektron's magnesium alloys and Gas Cylinders notably increasing.

• The rise was attributed to elevated defense spending, backlogs in foundries, and ongoing aerospace build rates.

• Impact of Powder Center of Excellence Initiatives:

• Luxfer's upcoming investments in Saxonburg, Pennsylvania, are expected to deliver $2 million in annualized savings.

• This initiative will improve throughput and service for defense and specialty industrial customers, enhancing overall efficiency and profitability.

• Stability and Growth in Gas Cylinders Segment:

• Gas Cylinders sales were $42.9 million, slightly up year-over-year, driven by steady demand in SCBA applications and aerospace inflatables.
• Despite softness in clean energy markets, stability and growth were maintained due to cost control measures and strategic repurposing of cylinder capacity.

Sentiment Analysis:

Overall Tone: Positive

• Management: "third quarter demonstrated strong execution" with adjusted EBITDA $13.6M and adjusted EPS $0.30; CFO: sales $92.9M, up 1.6% YOY and raised full-year guidance, citing defense and aerospace strength, margin expansion and strong cash generation (~$10M free cash flow).

Q&A:

• Question from Steve Ferazani (Sidoti & Company, LLC): Andy, I guess the surprise to me was the strength in Elektron given you were comping to what was by far the strongest quarter of the year last year for Elektron. I know you had some pull forwards in the year ago quarter. I'm trying to figure out how you even top that revenue and the significant margin expansion. Can you sort of walk through what led to that given what was clearly a challenging comp?
  Response: Broad-based aerospace and defense demand drove higher orders and a favorable product mix in Elektron, pushing margins toward ~20%.

• Question from Steve Ferazani (Sidoti & Company, LLC): Can you talk a little bit about pricing and costs and how much that could be reflected in those margins? Or is it purely mix that we're looking at?
  Response: Elektron margin expansion was mainly mix (higher-value aerospace/defense and MRE heaters); pricing improvements primarily benefited Gas Cylinders.

• Question from Steve Ferazani (Sidoti & Company, LLC): Turning to Gas Cylinders a little bit. I mean you've highlighted the weakness in alternative energy that we were expecting, but you've offset a lot of that this year. Can you talk a little bit about commercial space market and what you think the opportunities ahead are, which seems to be really helping out?
  Response: Luxfer has repurposed cylinder capacity into space exploration, which offers strong order visibility, tight tolerances and attractive margins, supporting near-term offset to clean-energy weakness.

• Question from Steve Ferazani (Sidoti & Company, LLC): We know the ongoing trend consolidation on Gas Cylinders with relocation to Riverside you've said $4 million in annual savings. Now if you can provide a little bit more detail on the Powders Center for Excellence. You talked about that being $2 million in annual cost savings. I guess 2 questions here. One, if you could talk a little bit more about what's going on with the powder side because it's the first, I think I'm hearing about it. And then two, what's the timing on this net $6 million in cost savings between those 2 moves?
  Response: Investing >$6M CapEx to expand Saxonburg as a Powders CoE to deliver ~$2M annual savings; Riverside (Pomona move) is underway and is expected to ramp through 2026, delivering up to $4M—combined savings phasing into 2026.

• Question from Steve Ferazani (Sidoti & Company, LLC): I know we won't hear from you again until the next conference call will be the 4Q when you're going to -- and I know it's way too early to start guiding for 2026. But are you seeing pockets for growth in 2026? Or is that going to be more of a margin story as you see things right now?
  Response: Too early to provide 2026 guidance; management expects some pockets of growth alongside margin improvement from ongoing cost-reduction programs.

Contradiction Point 1

Gas Cylinders Market Recovery

It involves differing perspectives on the sustainability of the recovery in the gas cylinders market, which impacts expectations for future revenue and growth.

Regarding Gas Cylinders, you've offset the expected weakness in alternative energy this year. Can you discuss the commercial space market opportunities and their impact on the business? - Steve Ferazani (Sidoti & Company, LLC)

2025Q3: The market for clean energy is down at the moment, not too much demand for CNG and hydrogen. - Andrew William Butcher(CEO)

What factors drove the rebound in gas cylinder sales, and is the trend sustainable into the second half? - Stephen Michael Ferazani (Sidoti & Company, LLC)

2025Q2: The bounce back in gas cylinders was driven by sustained demand for first response products, good sales in the specialty gas market, and a notable increase in space exploration. - Andrew William Butcher(CEO)

Contradiction Point 2

Space Exploration Market Opportunity

It involves differing assessments of the growth opportunities and market potential in the space exploration sector, which impacts expectations for future revenue and market penetration.

Regarding Gas Cylinders, you've offset the expected weakness in alternative energy this year. Can you discuss the commercial space market opportunities and their impact? - Steve Ferazani (Sidoti & Company, LLC)

2025Q3: And although Q3 was lower, that was expected, and we're now ramped up again with strong order visibility for Q4. - Andrew William Butcher(CEO)

What drove the increase in gas cylinder sales, and is this trend sustainable into the second half? - Stephen Michael Ferazani (Sidoti & Company, LLC)

2025Q2: The strong sales in space exploration, which offer high margins, are expected to continue into the second half, sustaining the growth. - Andrew William Butcher(CEO)

Contradiction Point 3

Defense Market Outlook and Growth

It involves differing perspectives on the future growth and outlook of the defense market, which is a significant segment for the company, impacting revenue expectations and strategic planning.

How did Elektron exceed last year’s strong performance, considering prior quarter pull-forwards, and how did you achieve higher revenue and significant margin expansion? - Steve Ferazani (Sidoti & Company, LLC)

2025Q3: We're optimistic about the demand for defense products and services across our end markets, driven by applications in defense, aerospace, and energy. - Andrew William Butcher(CEO)

Regarding the $10 million increase in buybacks for opportunistic purchases, can you discuss capital allocation and M&A potential? - Steve Ferazani (Sidoti)

2025Q1: We're positive on the defense sector for 2025. - Andy Butcher(CEO)

Contradiction Point 4

Impact of Alternative Energy Market Demand

It highlights differing views on the impact of alternative energy market demand on the company's operations, which could affect revenue and strategic focus.

Can you discuss the commercial space market and its potential opportunities? - Steve Ferazani (Sidoti & Company, LLC)

2025Q3: The market for clean energy is down at the moment, not too much demand for CNG and hydrogen. Still winning some nice orders. - Andrew William Butcher(CEO)

What is driving the strength in the specialty industrial gas cylinder segment? - Steve Ferazani (Sidoti)

2025Q1: The clean energy market is down as well. We've been able to repurpose and win orders for a range of new applications. - Andy Butcher(CEO)

Contradiction Point 5

Powder Production Efficiency and Cost Savings

It involves differing statements about the company's plans and progress in improving powder production efficiency and cost savings, which could impact operational performance and financial forecasts.

1. Could you provide more details on the $2 million annual cost savings from the Powders Center for Excellence, as this appears to be the first mention of it? 2. What is the timeline for realizing the combined $6 million in annual savings from both the Gas Cylinders consolidation and the Powders Center for Excellence? - Steve Ferazani (Sidoti & Company, LLC)

2025Q3: Talking about the Powders Center of Excellence first. We currently operate two manufacturing locations in the U.S. for production of our magnesium powder. So as part of continuing our Centers of Excellence program, we've identified and we're actioning an opportunity to invest significantly in our Saxonburg site. - Andrew William Butcher(CEO)

Why has the defense business seen strong performance for three consecutive quarters? Is the UGR-E launch the reason, or are there other factors? - Steve Ferazani (Sidoti)

2025Q1: We continue to make progress in our programs to rationalize our magnesium powder production. - Andy Butcher(CEO)