LUXFER HOLDINGS PLC

Background and business overview

Luxfer Holdings PLC ("Luxfer," "the Company," "we," "our") is a global industrial company innovating niche applications in materials engineering. Luxfer focuses on value creation by using its broad array of technical know-how and proprietary technologies to help create a safe, clean and energy-efficient world. Luxfer's high-performance materials, components and high-pressure gas containment devices are used in defense, first response and healthcare, transportation and general industrial applications.

We focus primarily on product lines related to magnesium alloys, zirconium chemicals, aluminum cylinders and carbon composites. We have a long history of innovation derived from our strong technical expertise, and we work closely with customers to apply solutions to their most demanding product needs. Our proprietary technologies and technical expertise, coupled with strong customer service and global presence, provide competitive advantages and have established us as leaders in the global markets we serve. We believe that we have leading positions in key product areas, including magnesium alloys and powders for aerospace, military, and commercial applications, zirconium chemicals for automotive catalytic converters and industrial catalysis, high-pressure composite cylinders for self-contained breathing apparatus, as well as transport and storage of compressed natural gas ("CNG") and hydrogen, photo-engraving plates, and a wide variety of other uses.

We have a global presence, operating 13 manufacturing plants in the U.S., the U.K., Canada and China, one of which relates to discontinued operations, and we also have a joint venture in Japan. We employ approximately 1,500 people, including temporary staff, of which fewer than 50 support our discontinued operations. In 2024, our net sales from continuing operations were $391.9 million (2023: $405.0 million, 2022: $423.4 million), and our net income from continuing operations was $18.3 million (2023: $2.6 million loss, 2022: $32.0 income).

Luxfer operates in three business segments - Elektron, Gas Cylinders and Graphic Arts.

Elektron Segment

Our Elektron Segment focuses on specialty materials based primarily on magnesium and zirconium. In 2024, sales from our Elektron Segment represented approximately 45% (2023: 46%, 2022: 48%) of our consolidated net sales from continuing operations. Our top ten customers represented 50% of segment sales. No singular customer represented 10% or more of our Elektron Segment sales.

•Advanced lightweight, corrosion-resistant and heat- and flame-resistant magnesium alloys for use in aerospace, automotive and oil and gas applications.

•Magnesium powders used in countermeasure flares that protect aircraft from heat-seeking missiles and also for the manufacture of heating pads for self-heating meals used by the military and emergency-relief agencies.

•High-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advanced ceramics, fiber-optic fuel cells, pharmaceuticals and many other performance products.

Gas Cylinders Segment

Our Gas Cylinders Segment manufactures and markets specialized, highly-engineered cylinders using carbon composites and aluminum alloys. In 2024, sales from our Gas Cylinders Segment represented approximately 47% (2023: 46%, 2022: 43%) of our consolidated net sales. Our top ten customers represented 62% of segment sales. Three customers represented 18%, 14% and 10% respectively, of our Gas Cylinders Segment sales. No other singular customer represented greater than 10% of Gas Cylinders Segment sales.

•Carbon fiber composite cylinders for self-contained breathing apparatus (SCBA), used by firefighters and other emergency-responders. Our products are also used by scuba divers and personnel in potentially hazardous environments, such as mines.

•Carbon fiber composite cylinders for compressed natural gas (CNG) and hydrogen containment and transportation, ultimately used to power alternative fuel (AF) vehicles.

•Cylinders used for the containment of oxygen and other medical gases used by patients, healthcare facilities and laboratories.

Our Superform U.S. business, is expected to be sold within the next twelve months. As a result, the business remains on the balance sheet as held-for-sale at December 31, 2024 and December 31, 2023. Results from Superform U.S. are disclosed as discontinued in the income statement for the corresponding years' of ownership.

Graphic Arts Segment

Our Graphic Arts Segment focuses on magnesium photo-engraving plates, engraving metals and etching chemicals. In 2024, sales from our Graphic Arts Segment represented approximately 8% (2023: 8%, 2022: 9%) of our consolidated net sales. Our top ten customers represented 38% of segment sales. No singular customer represented 10% or more of our Graphic Arts Segment sales.

•Magnesium, copper, and zinc photo-engraving plates for graphic arts and luxury packaging.

•Developer solutions to aide the engraving process.

•Solid wrought magnesium slab and sheet used in various industrial and aerospace applications.

A conclusion of the strategic review announced in October 2023 determined that the Graphic Arts business no longer aligns with Luxfer's value proposition, hence we are executing a sales process with the intention of divesting this business in 2025. It is therefore classified as held-for-sale as at December 31,2024.

All information included within this section relates to continuing operations, unless otherwise stated.

Financial Information about Segments and Geographic Areas

See Note 18 ("Segment Information") to our consolidated financial statements for further information regarding our operating segments and our geographic areas.

Elektron Segment

Key raw materials used by our Elektron Segment are magnesium, zircon sand and rare earths.

The world demand for magnesium is around between 1,000,000 and 1,500,000 metric tons per year. China provides about 85% of the world supply. Production outside of China, however, is significant, including, Dead Sea Magnesium in Israel, RIMA Industrial in Brazil, and smaller producers in Turkey and Russia. We historically used only U.S.-sourced materials for our products sold to the U.S. military, for which U.S. sourcing is mandatory. However, in recent years we have qualified non-U.S.-sourced material for sale to the U.S. military.

Given the force majeure previously declared by U.S. Magnesium LLC, and the current idling of the plant, we do not know when or if we will be able to recommence the magnesium ingot purchases with this supplier. We generally purchase raw materials from suppliers on a spot basis under previously contracted terms and conditions and have been able to source magnesium from alternate suppliers.

We purchase and process zircon sand, which is found in heavy-minerals sand, titanium dioxide and other products. Global production of zircon sand is estimated between 1,000,000 and 1,500,000 metric tons per year. We source premium-grade zircon sand from suppliers in South Africa, Senegal, Indonesia and Australia. We also purchase intermediate zirconium chemicals from suppliers in China. The level of these purchases is based on a number of factors, including required properties and relative market prices.

There are 17 rare earth metals that are commonly found in nature. Usually mixed together with other mineral deposits, these rare earths exhibit magnetic and light-emitting properties that make them invaluable to high-technology manufacturers. These rare earth metals are used as ingredients in our zirconium chemical and magnesium alloy products. Our largest rare earth requirement is cerium, which we use in automotive catalysis compounds because of its unique oxygen-storage capabilities.

Gas Cylinders Segment

Key raw materials used in the Gas Cylinders Segment include high-strength carbon fiber and aluminum. Our main carbon fiber suppliers include Toray, Hyosung and Mitsubishi. In recent years, the carbon fiber has experienced periods of tight supply conditions due to increased demand for commercial aerospace, military and clean energy applications. Over time, we have built relationships with our suppliers, providing them predictable requirements and annual contracts that help to ensure procurement of our required volume of carbon fiber.

In 2024, aluminum represented approximately 25% of Gas Cylinders Segment's raw material costs in 2024. The price of aluminum, and carbon fiber, has been volatile in the past and increased substantially in 2022, continued through 2023 and has remained throughout 2024. We generally have passed through changes in input costs to our customers, however, due to some of our Gas Cylinders Segment contracts containing look-back provisions, and other customers ordering from quarterly price lists, it can result in a lag versus input costs.

Graphic Arts Segment

The key raw material used in the Graphic Arts segment is magnesium. Magnesium purchases have been impacted by the volatility in its prices, as detailed above, which has contributed to the loss in market share outside of the U.S. and reduced performance of the segment. Consistent with our Elektron segment, magnesium used in U.S. production was previously purchased exclusively from the U.S. but since the previous force majeure declared by our U.S. supplier, purchases have been sourced from a number of non-U.S. sources. Magnesium prices for U.S. production peaked in 2022 at approximately four times the historical price before falling back to around one-and-a-half times in 2023 and has continued to fall in 2024. Due to the nature of the production process, the purchase price of magnesium can take up to 12 months to be fully recognized in the income statement and the business has benefited from these lower costs throughout 2024.

Our end-markets

Key end-markets for Luxfer products fall into three categories:

Defense, First Response & Healthcare (44% of 2024 sales): Luxfer offers many products that help to protect people, equipment and property in hazardous conditions, conflicts and emergencies. These products include magnesium powders used for countermeasure flares that defend aircraft against heat-seeking missiles, flameless ration heaters used in meals Ready-to-Eat, cylinders used in SCBA equipment for firefighters and other emergency service personnel, and chemical detection and decontamination products. Other products include lightweight gas cylinders for containment of medical and laboratory gases, zirconium powders for pharmaceutical products, and zirconium materials for biomedical applications and dental implants.

Transportation (29% of 2024 sales): Many Luxfer products serve a growing need to improve and safeguard the environment in the field of transportation, including our (i) lightweight, high-pressure carbon composite cylinders that contain compressed natural gas and hydrogen; (ii) zirconium-based products that reduce automotive and other emissions; and (iii) lightweight magnesium alloys used in fuel-efficient aerospace and automotive designs.

General industrial (27% of 2024 sales): Our core technologies serve various industrial markets and applications. These products include zirconium-based compounds to purify drinking water and clean industrial exhausts; magnesium alloys shaped for use in various general engineering applications; and high-pressure gas cylinders used for high-purity specialty gases, beverage dispensing, scuba diving and performance racing. Our metal foil-stamping and embossing dies are used primarily for luxury packaging, labels and greeting cards. Our high-quality magnesium, copper, brass and zinc plates are ideal for these and other graphic applications.

Our competitive advantages

Focus on innovation and product development for growing specialized end-markets. We continue to produce a steady stream of new products, including those developed in close collaboration with our customers.

Strong technical expertise and know-how. Using our expertise in metallurgy and material science, we specialize in advanced materials, developing products with superior performance to satisfy the most demanding requirements in the most extreme environments. Further, we benefit from the growth in the number of our patented products, including many of our alloys and compounds.

Diversified customer base with long-standing relationships. We put the customer at the heart of our strategy, and we have long-standing relationships with many of our customers, including global leaders in our key markets.

Luxfer Business System. The Luxfer Business System serves as a tool to realize growth potential embedded in our business. The system places emphasis on serving the customer, enabling sustainable profitable growth and value creation, consisting of the following key themes:

•Commercial Excellence

•Lean Operations

•Innovation

•Sustainability

•People Excellence

•Strategy Deployment

Seasonality

Historically, we have shutdown periods at most of our manufacturing sites, during which we carry out maintenance work. Shutdowns typically last two weeks in the summer and one to two weeks around the year-end holidays, resulting in reduced levels of activity in the second half of the year compared to the first half. Third quarter and fourth quarter sales and operating profit can be affected by our own manufacturing site shutdowns and by shutdowns of various industrial customers. We also operate in various geographic areas that are susceptible to bad weather during winter months, such as Calgary, Canada, and various U.S. states. Bad weather can unexpectedly disrupt production and shipments from our manufacturing facilities, which can lead to reduced revenue and operating profit. Additionally, we manufacture products that are used in graphic arts and premium packaging, seasonal demand for which increases ahead of the year-end holidays.

Research and Development

Luxfer recognizes the importance of research in materials science and the need to develop innovative new products to meet future needs of customers and to grow sales and operating profit. Each year, we invest in the development of new products and processes directed towards our end-markets. Our product development projects also include utilizing skills of our wider commercial technical sales staff, manufacturing engineers and general management, many of whom are highly qualified scientists and engineers. A large proportion of senior sales and management time is spent overseeing development of products and working with customers on integrating our products and solutions into their product designs.

To provide customers with improving products and services, we invest in new technology and research and employ some of the world's leading specialists in materials science and metallurgy. Our engineers and metallurgists collaborate closely with our customers to design, develop and manufacture our products. We also co-sponsor ongoing research programs at major universities in the U.S., Canada and Europe. Thanks to the ingenuity of our own research and development teams, Luxfer has developed a steady stream of new products, most recently including:

•Soluble magnesium alloys, branded SoluMag®, for down-well oil and gas applications;

•Wrought magnesium base alloys, branded RotaMag®, for high strength part applications;

•Ultra-lightweight large composite cylinders, branded G-Stor®, for containment of CNG, hydrogen, helium and other gases;

•AF systems solutions for buses, trucks and bulk gas transportation, including the new G-Stor® Hydrosphere multiple element gas container;

•Zirconium catalysts for automotive end-use, including advances in gasoline particulate filtration used in hybrid vehicles;

•L7X® high-strength aluminum alloy and carbon composite gas cylinders;

•Unitized Group Ration - Express (UGR-E) heater meals developed to deliver hot meals to multiple soldiers in a combat or training environment; and

•Improved performance magnesium photoengraving plates including the recently-launched OptiMag®

We believe that our commitment to research and new product development, through dedicated resources and significant use of management's time, forms the core of Luxfer's growth potential. This commitment reflects our strategy of focusing on high-performance, value-added products and markets as well as leveraging our collaboration with universities. We invest in developing products for end-markets that we believe hold long-term growth potential.

Intellectual Property

Luxfer relies on a combination of patents, trade secrets, copyrights, trademarks, and proprietary manufacturing processes and design rights, together with non-disclosure agreements and technical measures, to establish and protect proprietary rights in our products. Our Elektron Segment holds key patents related to protected applications, including numerous aerospace alloys and magnesium-gadolinium alloys, as well as patents related to environmental applications, including water-treatment products and our specialized G4 process used to manufacture zirconium-cerium oxides for emissions-control catalysts. The Elektron Segment also has patented technology for magnesium-based flameless heater pads used to heat meals and beverages. Key patents held by our Gas Cylinders Segment relate to composites and alloys for pressurized hollow bodies. No individual patent or such intellectual property is considered material to any of our reporting segments.

In certain areas, we rely more heavily upon trade secrets and unpatented proprietary know-how than patent protection in order to establish and maintain our competitive advantage. We generally enter into non-disclosure and invention assignment agreements with our employees and subcontractors, as well as our customers and vendors.

Human Capital Management

The Company employed approximately 1,500 people as of December 31, 2024, fewer than 50 of whom relate to discontinued operations. Of the approximately 1,450 employees associated with continuing operations, approximately 900 are employed in the United States and 550 are employed internationally.

Attracting and retaining talent is key to Luxfer's business system. To succeed in today’s competitive labor market, Luxfer takes a proactive approach to human capital management by pursuing several priorities that we believe are critical in recruiting, retaining, motivating, and developing top talent. Such priorities include: (i) ensuring occupational health and safety; (ii) providing opportunities for professional growth and development; (iii) maintaining diverse and inclusive workplaces; and (iv) promoting financial, physical, and emotional well-being while trying to enhance the employee experience.

Our Board of Directors and Executive Leadership Team play a key role in setting our human capital management strategy and driving accountability for meaningful progress. Informed by data, our human capital management initiatives are supported by local leadership, with significant functional oversight by our local human resource teams. All Luxfer facilities collect data on employee retention, talent acquisition, training, and safety. Metrics are recorded quarterly on our internal scorecard and are reported to executive management regularly.

Occupational Health and Safety

Luxfer is committed to safeguarding the health and safety of our employees at work. We have well-defined health and safety policies and procedures that are reinforced by ongoing employee training. We conduct annual site audits to identify and mitigate environmental health and safety risks, as well as evaluate for compliance with all regulatory requirements and Luxfer policies. All functional business units report a mixture of leading and lagging metrics to assess health and safety performance, which are reviewed regularly by executive leadership and management. In fiscal year 2024, the Company had 8 Lost Time Accidents and an Incident Frequency Rate of 2.44 per year with no work-related fatalities.

Professional Growth and Development

Providing opportunities for professional growth and development is key to Luxfer’s retention strategy. Luxfer proactively maintains talent and succession planning processes, including regular review by the Executive Leadership Team and reports to the Board of Directors. We operate leadership and management development programs, which provide a consistent approach to the development to the Company’s future leaders and managers. With a multi-faceted curriculum, these programs assist with developing core competencies which include critical problem-solving, communication, management, and leadership skills. Luxfer also maintains training and development programs for employees at the workforce level, in addition to regular coaching and support from their supervisor and performance evaluations. To further support their career aspirations, employees can access Luxfer’s online learning platform which offers over 180,000 courses, videos, and books designed to strengthen critical business, leadership, productivity, and computer software skills.

Diverse and Inclusive Workplaces

The professional conduct of our employees furthers the Company’s mission, promotes productivity, minimizes disputes, and enhances our reputation. As such, the Company is committed to creating and maintaining a diverse, global workforce that provides fair and equitable opportunities, thereby advancing Luxfer’s innovation culture and customer first values. With continued focus on diversity and equity, Luxfer’s diversity initiatives include, but are not limited to, practices and policies on recruitment and selection, including sourcing of personnel from diverse backgrounds; compensation and benefits; professional development and training; advancement opportunities; and the ongoing development of a diverse and inclusive work environment.

To ensure effective teamwork and achievement of common business goals, all Luxfer personnel are required to complete a variety of anti-harassment, non-discrimination, diversity, and unconscious bias trainings annually. Luxfer’s talent acquisition teams and hiring managers undergo additional training to ensure that a diverse slate of candidates is considered for job openings.

Financial, Physical, and Emotional Well-Being

Fair Wages and Competitive Benefits: Luxfer offers competitive base pay and, depending on position, variable incentive pay associated with both individual and Company performance. Full-time employees and, in some cases, part-time employees who have met the minimum hours of service requirement are eligible to participate in various retirement savings plans, such as the Company’s 401(k) defined contribution plan in the U.S. and various pension plans available to U.K. employees. We also offer paid time off, group medical, dental, and vision plans, in addition to various life, disability and paid family and sick leave options, which vary by jurisdiction.

Employee Share Plans: Luxfer encourages participation in its U.S. Employee Stock Purchase Plan (ESPP) and U.K. Share Incentive Plan (SIP), which provide employees an opportunity to become Luxfer shareholders at a reduced price. Under the ESPP, U.S. employees can purchase Company stock at a 15% discount through payroll deductions. Under the SIP, U.K. employees can purchase company stock through payroll deductions, and, in turn, the Company matches one free share per every two shares purchased.

Fitness and Wellness Programs: Luxfer is proud to offer several optional fitness and wellness programs and healthy living incentives to our employees. Our Employee Healthy Lifestyle Program is available to U.S. employees and offers partial reimbursement for certain gym and fitness center memberships, weight loss programs, and group exercise classes. U.S. employees are also eligible to participate in a smoking cessation program through which employees who complete a 90-day program are rewarded with lower insurance rates.

Emotional Well-Being: We support the social and emotional health of our employees by providing access to wellness clinics and funded mental health counseling services. As a part of Luxfer’s group medical insurance plan, U.S. employees have convenient access to live video visits with a board-certified doctors or licensed therapists. Luxfer also offers access to the Employee Assistance Program, which connects employees and their families with credentialed counselors, free of charge, to provide a variety of work-life services and resources for family matters, including legal assistance, financial budgeting, and more.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q , Current Reports on Form 8-K and any exhibits or amendments to such are made available, free of charge, on our website at http://www.luxfer.com as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the Securities and Exchange Commission ("SEC"). Information on our website is not incorporated by reference herein and is not made a part of this report.

Financial and other material information regarding the Company is routinely posted and accessible on our website at http://www.luxfer.com/investors.