The Luxfer Group has recently issued its unaudited financial results for fourth quarter (Q4) and full year 2013, both periods ending 31st December 2013, and reported mixed market conditions throughout the year.
Group revenue for Q4 2013 was $116m and net revenue (revenue before rare earth surcharges) was $115m, a decrease of $11.4m over Q4 2012 at constant translation exchange rates.
Revenue in the Gas Cylinders Division was down in Q4, compared to the equivalent period in 2012, with sales of industrial gas cylinders and composite life support cylinders lower in both Europe and the US.
Despite lower sales in the quarter for the Gas Cylinders Division, the sales mix led to a favourable operating margin compared to Q4 2012. Overall, the group’s Q4 2013 revenue at $116m is lower than the $130m for Q4 2012. Gross profit margin, however, was 25.9% compared to 24.5% for Q4 2012, reflecting not only the change in sales mix between divisions but also a stronger quarter for product margins.
Gas Cylinders Division revenue of $64.1m in Q4 2013 was $6.6m lower than in Q4 2012. The quarter saw tougher trading conditions in both the US and European gas containment markets. While Luxfer Group generated year-on-year sales growth in composite alternative fuel (AF) cylinders for containment of compressed natural gas (CNG), sales in other markets, in particular composite life-support (air) cylinders used in self-contained breathing apparatus (SCBA) for emergency services and aluminium cylinders used for industrial gas containment, were down.
In terms of its full year 2013 results, Luxfer noted that its European markets, especially automotive, were generally soft throughout 2013. North America was generally stronger, though defence sales in the region were even more depressed than expected.
The main impact of this softness was felt by the company’s Elektron Division, although its aluminium cylinder business was also affected in Europe.
Overall, the Gas Cylinders business saw substantial growth in demand for ultra-lightweight composite cylinders, mainly driven by alternative fuels, but sales of composite cylinders for SCBA kits were also stronger. The company improved the trading margin of the Gas Cylinders Division from 6.4% in 2012 to 7.3% in 2013.
Reflecting on the dynamics in raw materials, the company added, “Although not a deliverable, it is comforting to see rare earth prices stabilising back at sensible levels, removing the threat to the cost-competitiveness of our rare-earth-containing materials.”
“We expect the alternative fuel and SCBA markets to grow further in North America during 2014, which we expect would have a positive influence on our Gas Cylinders Division”
Looking ahead Luxfer Group expects growth in certain markets in 2014, notably the alternative fuel and SCBA markets in North America, but also notes that there are ‘a few unexpected headwinds’ to be faced in the first half of the year.
The introduction of Type 4 (polymer-lined) composite cylinders is seen as a particular highlight for the year.
“We expect the alternative fuel and SCBA markets to grow further in North America during 2014, which we expect would have a positive influence on our Gas Cylinders Division. Our objective is to increase our presence in the alternative fuel market, and to that end we are in the process of developing a range of Type 4 (polymer-lined) composite cylinders for applications where larger-diameter cylinders are required.”
“We have just committed to the acquisition of additional CNG cylinder manufacturing assets, which we expect to facilitate our entry into that product sector. We expect to begin offering these products in Q2, with the full range taking a few months to roll out.”
Reflecting on ‘unexpected headwinds’ the company concluded, “Overall, while these issues and the continuing weakness of European markets are likely to hold us back in Q1 2014 and possibly Q2 2014, we remain optimistic that, over the whole year, both divisions will improve on 2013. The introduction of Type 4 (polymer-lined) composite cylinders around the middle of the year will be an exciting addition to our product range.”