Luxfer Holdings PLC (LXFR) 2020 Q2 法說會逐字稿

Good morning. My name is Laurie, and I will be your conference operator today. Welcome to Luxfer's 2020 Second Quarter Earnings Conference Call. (Operator Instructions)

Now I will turn the call over to Mary Reed from Luxfer to begin. Mary, please go ahead.

Thank you, Laurie. Welcome to Luxfer's Second Quarter 2020 Earnings Call. We're happy to have you all with us today. I'm Mary Reed from Luxfer. And with me today is Alok Maskara, Chief Executive Officer; and Heather Harding, our Chief Financial Officer.

On today's call, we will provide details on our second quarter 2020 performance, as outlined in the press release issued yesterday. Today's webcast is accompanied by a presentation that can be accessed at luxfer.com. Please note, any references to non-GAAP financials are reconciled in the appendix of this presentation. Before we begin, a friendly reminder that any forward-looking statements made about the company's expected financial results are subject to future risks and uncertainties. Please refer to Slide 2 of today's presentation for further details.

Now let me turn the call over to Alok.

Thanks, Mary, and welcome, everyone. I hope you and your families are staying safe and enjoying the summer months as much as possible. We are operating in unprecedented times, and I want to start by expressing my gratitude to our customers, employees and supplier partners who continue to support Luxfer's operations. The safety of our employees, our customers and the communities in which we work and live remains our #1 priority. With appropriate safeguards, we continue to operate all our facilities to serve the current and evolving needs of our customers.

I am proud of our team's relentless adherence to operating procedures and commitment to being a part of building a high-performance culture during this time of unprecedented chain and uncertainty. This is enabling us to safely operate our facilities, while also aligning our cost structure to demand levels as we contend with the impact of COVID-19 on various end markets. I want to thank our 1,500 employees around the world for their dedication and hard work as we navigate the current landscape.

In today's call, I want to highlight 3 key messages that sum up our quarterly performance and strategic focus: One, while the COVID pandemic created significant challenges during the second quarter, we were able to deliver strong cash flows and further strengthen our balance sheet. Two, we have taken several proactive and aggressive actions to mitigate the impact of COVID-19, including rigorous expense management at every level. And three, while we remain vigilant on maintaining an appropriate cost structure for the current environment, we are making targeted strategic investment in our business to ensure that Luxfer is well positioned to capture growth in certain markets today and in the future as other harder-hit markets recover. I will address these themes in more detail, and then our CFO, Heather Harding, will review our financial performance in greater depth and share guidepost for the remainder of 2020.

Now please turn to Slide 3 for a summary of our second quarter financial results. Luxfer's second quarter 2020 financial results were impacted by the challenging macro caused by the COVID pandemic. Total sales, excluding the impact of noncore Czech recycling divestiture, declined 21.1%. Our second quarter EBITDA declined 49% to $10.4 million, and we were able to partially offset the gross margin impact of lower sales with cost reductions. Our adjusted diluted EPS for the second quarter was $0.17, down 61%.

During the quarter, we sequentially reduced our net debt by $9.1 million to $82.4 million by generating strong operating cash while maintaining our regular quarterly dividend. Our net debt-to-EBITDA ratio was 1.5x at the end of the quarter, which is significantly lower than the level where our covenants become relevant. Our balance sheet remains strong, providing a lot of financial flexibility.

Now please turn to Slide 4 for an overview of how Luxfer is adopting to the new normal. Amidst the changing market environment brought on by the health risk associated with COVID-19 and more recently, racial unrest across our globe, we have made many changes to rapidly react to the market circumstances and maintain business continuity.

Like many others, we have increased the level of transparency and frequency of communication with our customers, employees and shareholders. In addition, we have also retooled our manufacturing operations to ensure social distancing and are investing in our facilities to enhance hygiene, especially in high-traffic common areas.

The company's leadership has come together during this difficult time to lead by example and have voluntarily taken furloughs and temporary pay cuts in solidarity with all our employees and to improve our financial results. We recognize that the current downturn and volatility is likely to impact demand levels and operations over an extended period. Many of the recent procedures implemented are likely to result in more permanent change to our operations.

The way we work in other areas is also changing, and I believe these changes will benefit Luxfer over the long term. For example, we foresee a long-term reduction in certain costs as we learn how to work more efficiently from home and certain travel across the organization becomes obsolete. Also, there will be increased access to talent as location becomes less relevant, and technology will continue to enable connectivity. So while there remain overhang, which we will continue to navigate, we are also embracing the new way of working, which I'm confident will benefit Luxfer.

Let's now review the related revenue impact by end market on Slide 5. As a reminder, our current sales can be classified into 3 approximately equal end-user segments: defense, first response and health care; transportation; and industrial. Before we review the performance of each end-user segment, let me give you a sense of the shifting demand patterns during the quarter.

Sales in April and May were substantially lower as many of our customers' factories were shut down due to government orders or working at reduced capacity due to supply chain constraints. The sales decline experienced in April and May was better than our worst-case scenarios, and we saw some recovery in June as government restrictions eased. As such, we continue to operate the company with the expectations that the recovery will be long and challenging.

Sales in defense, first response and health care declined 5.9% for the quarter as higher sales of our disaster relief products were more than offset by reductions in magnesium alloys for countermeasure flares as military training exercises were redefined due to COVID. SCBA sales were marginally lower, primarily due to timing and COVID-related supply chain disruptions.

Sales in transportation declined 29.1% in the quarter. Demand from luxury passenger auto manufacturers worsened during the quarter, and we also experienced decline in aerospace application. Alternative fuel sales declined year-over-year due to supply chain disruptions, but demand levels remain strong, and we expect these products to return to growth in the back half of the year. Even with alternative fuel product sales improving, we expect to see continued declines in transportation for the remainder of the year as demand for auto and aerospace is likely to remain weak.

In the industrial segment, sales declined 27.1% in the quarter as COVID further impacted industrial production in April and May as seen by lower ISM PMI index. Sales decline was broad-based and impacted most of our industrial products. As expected, there are virtually no SoluMag sales during the quarter, but we remain optimistic about the long-term potential for this product as the industry recovers.

Now please turn to Slide 6 for an update on some growth investments. 2 of our successes recently highlighted include the growth in our alternative fuel product line and the growth in our decontamination and testing kits supplied to the U.S. military. In the alternative fuel space, while growth in systems and cylinders for compressed natural gas continues, we are experiencing accelerated and meaningful growth in our hydrogen product line. This growth is driven by Luxfer's 20 years of industry-leading experience in hydrogen storage design, prototyping and manufacturing. We are investing in expanded capacity for this product line and expect growth to continue as cities across the world continue to replace their legacy bus fleets with environmentally friendly CNG or hydrogen-based vehicles. Supporting the growth, large fleet companies like UPS, Waste Management and Amazon continue to invest in environmentally friendly alternative fuel delivery trucks.

For chemical response kits, we are enhancing our capabilities at our newly expanded Cincinnati facility, which also manufactures flameless ration heaters and heater meals. While COVID created some limitations in ramping up production in the second quarter, we have overcome most of these challenges and remain confident about delivering incremental sales in 2020 as we fulfill the recent award from the U.S. military.

We have a strong value proposition for these products, and we remain optimistic about the growth of this product line for the remainder of 2020 and beyond. More broadly, we are driving differentiated growth by increasing innovation and pursuing commercial excellence. On innovation, our goal is to increase percentage of revenue from new products to greater than 20% by 2024. On commercial excellence, we are targeting to improve customers' satisfaction as measured by Net Promoter Score to greater than 60% by 2024.

Now please turn to Slide 7 for a review of our multiyear transformation plan, which has benefited us during this environment. Launched in 2018, Luxfer's transformation plan is delivering greater value for our shareholders through simplification, productivity, growth and portfolio optimization. We have completed the simplification phase of the transformation plan, which resulted in our shares being included in Russell small-cap index funds.

Through our productivity efforts, we have delivered significant net cost savings and remain confident in delivering our goal of $24 million. The next phase of our transformation plan will create additional shareholder value through growth, lean continuous improvement and portfolio optimization. While some of the portfolio optimization initiatives have been delayed by the COVID pandemic, we remain confident that we will create significant shareholder value as we execute the next phases of our transformation plan.

In summary, we are facing unprecedented conditions but remain confident that we will continue to strengthen the company for the long-term and emerge stronger through this environment.

Now let me turn the call over to Heather Harding, Luxfer's Chief Financial Officer, for details on the transformation plan results and a detailed summary of our second quarter financials.

Thanks, Alok, and good morning, everyone. Thanks for joining us. Following Alok's review of the strategic elements of our multiyear transformation, I wanted to summarize the financial impacts of the plan on Slide 8. Our focus on cost reductions and waste elimination has added $16 million of net cost savings to our profitability through the second quarter. The continuous improvement mindset in our workforce positions us well to maintain our cost initiatives during the back half of the year and realign operations as conditions evolve.

In summary, we remain on track to deliver our committed $24 million of net cost reductions by the end of next year.

Now let's walk through the second quarter financial results summary on Slide 9. Second quarter reported sales of $89.5 million declined 23.2%, primarily due to COVID-related impacts in our transportation and industrial segments. Excluding the impact of the Czech recycling divestiture in June 2019, core sales declined 21.1%, including a 1.3% impact of foreign exchange. As a reminder, this will be the last quarterly comparison impacted by the Czech divestiture.

Consolidated adjusted EBITDA for the quarter of $10.4 million was down 49% versus the prior year. Despite the volume decline, the company executed on the transformation plan and delivered approximately $700,000 of net cost reductions. While the organization executed cost actions worth $1.6 million, these reductions were partially offset by $500,000 of fire remediation at our Madison, Illinois graphic arts location and approximately $400,000 incremental COVID-related expenses to ensure a safe operating environment for all our employees.

Through a deeper dive into the 2 product segment results, let's turn to Slide 10. Elektron sales of $39.1 million declined 29.3% from the prior year. The sales decline is primarily due to weakness in catalysis, magnesium aerospace and transportation products, partially offset by strength in heater meals and chemical response kits.

Lower sales performance was the primary contributor to a 60% decline in EBITDA to $5.3 million. Gas cylinder segment sales declined 13.3% to $50.4 million as COVID impacted transportation and industrial end markets. Resulting EBITDA of $5.1 million declined 28%.

Now let's review our key balance sheet and cash flow metrics on Slide 11. We ended the second quarter with a strong balance sheet. Our net debt improved by $9.1 million to $82.4 million by the end of the quarter, leading to a net debt-to-EBITDA ratio of 1.5x. Second quarter operating working capital remained flat to prior year. This reflects the initial results of our working capital initiatives, primarily focused on aligning inventory to current demand levels. We expect these working capital initiatives to drive additional cash flow in the second half of the year.

We generated $12.1 million in free cash flow for the quarter using approximately $1.6 million in cash for restructuring activities. This compares favorably to our prior year's second quarter performance of consuming $11.7 million in cash.

On a trailing 12-month basis, we delivered 12.7% ROIC from adjusted earnings. Our balance sheet remains solid. We have returned to generating positive free cash flow, and we remain well positioned for strong cash conversion in 2020.

In the interest of providing transparency as we will not be reinstating formal 2020 guidance, let me provide our views on some of the key assumptions for the remainder of the year on Slide 12. The challenging current market environment continues to have a significant impact on our business. For the full year, we expect our defense, first response and health care product sales to be flat to slightly down. This implies a modest improvement from our Q2 run rate.

Continued growth in MRE and chemical response kits will be partially offset by weakness in fire extinguisher, countermeasure flares and SCBA sales. Softness in transportation and industrial is expected to continue. For the full year, we expect transportation and industrial to be down 20% to 25%, which is similar to first half performance. We'd expect alternative fuel product to return to growth in the second half. However, passenger auto, aerospace and general industrial softness will likely continue.

We remain focused on cash preservation and cash generation for the year. We continue to ensure working capital and capital expenditure plans are aligned to current conditions without sacrificing investment in future growth and productivity opportunities. The resulting free cash flow, excluding cash needed for restructuring, would convert at approximately 100% for the year.

Now I'll turn the call back over to Alok for a wrap-up.

Thank you, Heather. I wanted to wrap up with a brief review of our downturn playbook on Slide 13. We have been driving success by implementing our downturn playbook that we shared during the Q1 earnings call. Recent actions have resulted in approximately 10% lower headcount as compared to last year and a 30% reduction in executive compensation. By maintaining a strict freeze on discretionary expenses, we remain on track to deliver incremental savings to offset COVID-related operating costs.

An important part of our playbook is how we deploy capital during this downturn. As our cash flow generation remains strong, we have chosen to maintain our regular dividend. We are maintaining the decision made last quarter to temporarily suspend share repurchases to provide flexibility, should the environment take a dramatic turn for the worse. We are funding our transformation cost savings initiatives while investing in important growth opportunities that will strengthen the company for future success.

We continue reviewing our portfolio for divestiture opportunities as well as maintaining a pipeline of potential acquisition targets, although there is greater uncertainty around the timing of any activity, given the market environment.

Overall, I am pleased with our execution during these difficult times and feel confident that Luxfer will be a stronger company when the macro conditions improve.

Please turn to Slide 14 for a wrap-up. Let me wrap up by recapping that we serve attractive niche markets with proprietary products and technology. Our transformation plan has delivered results and will continue to make a positive impact for the next few years. After the transformation plan is complete, we have plenty of runway to create even more shareholder value by deploying the Luxfer business excellence standard toolkit to drive operational excellence and improvement in growth and productivity.

Once again, I want to thank all our employees around the world for safely operating our facilities while maintaining our steadfast commitment to serving our customers first. Thank you for listening. We will now take questions.

(Operator Instructions) Your first question comes from the line of Chris Moore of CJS Securities.

So it sounds like June showed some sequential improvement. From what you've seen so far, is that trend continuing in July?

Yes. I mean July is turning out similar to where June was, maybe a shade better. But there's no massive V-shaped strong recovery. But yes, we see the June cut trend kind of continuing into July.

Got it. So it sounds like right now, kind of a 10% workforce reduction. Can you maybe just split that between layoffs and furloughs and then talk about which plants still having the biggest issues? And are those more demand driven or more production related?

Sure. So the 10% number that I mentioned, that's kind of permanent layoffs. In addition, we have kind of -- depending on the week, 15% to 25% of our workforce on furlough. So that's in addition to the 10%, so the 10% is more permanent reduction. And that's consistent with, I think, just how we manage. We would rather take the actions to bring the cost down sooner and then add it back when the demand comes.

From a facility perspective, Chris, majority of the facilities, when they're working at reduced capacity, it's demand driven. And as you know, we do have significant capacity and quite a bit of leeway to serve our customers in a manner at which they need to be served.

There are pockets like in Cincinnati, where we are having challenges attracting the right kind of labor force as we try and ramp up production. So there will be a few cases where reduced capacity is driven by operational challenges or labor challenges. But majority of the factories are at reduced capacity because of demand.

Got it. Very helpful. And last one for me, just on specialty chemical kits side. I know you don't give specifics, but I'm trying to get a sense as -- from a revenue standpoint. Has more than half of what you expected in fiscal '20 already been booked? Or -- just in terms of kind of the cadence there.

Sure. So when we started the year on that, Chris, we -- that's how I mentioned that this would be more back-half loaded, but we were expecting Q2 be at a similar level as Q3 and Q4, with Q1 being just start up. In reality, Q2 turned out to be weaker, and that's where some of the production or demand -- labor challenges that I had mentioned came in. So no, I would say less than half is kind of in the sales side.

Now orders are on the books already, so just a matter of fulfilling those orders. That will be more back-half loaded.

Your next question comes from the line of Craig Irwin of ROTH Capital Partners.

So look, in your prepared remarks, you talked about Waste Management and Amazon and what they're doing in alternative fuels. But one of the very big opportunities is also in hydrogen for you, I believe. Jo Bamford, the CEO of Wrightbus, is out there talking about doing 3,000 fuel cell buses before 2025. If I'm remembering correctly, it's 20,000 to 60,000 per bus for you. So that's a huge opportunity. So it's as big as $180 million on the high end.

What should we be looking for to see the rate at which this revenue opportunity is likely to materialize? And how well do you see Luxfer as positioned to continue to serve this business opportunity?

Great question, Craig, and thank you. So first of all, I mean I'll start from your last question. We are very well positioned to serve this opportunity from our technology perspective, both on type 3 and type 4 cylinders. We are providing customers with manufacturing, prototype, design and all sorts of collaboration. And frankly, I mean we work with Jo Bamford and Wrightbus very, very closely. The first hydrogen buses in the city of London to Wrightbus, they have all been supplied with our products. And that's one reason we made the comments in my prepared remarks.

So very excited about the opportunities. We are clearly very focused only on buses and trucks. So unlike some of our competition, we're not going after passenger auto or smaller vehicles. We're much focused on the larger vehicles. And demand there is, right now, I think, very good, and the projections are even better, as you pointed out.

So when you say what you should look for, I think we are looking forward to continued success from companies like Wrightbus, companies like Nikola. Hydrogen fuel cells are a game changer for the industry, and we are definitely part of the ecosystem, in fact, a major part of that ecosystem.

Excellent. So just on the same line of question. So Ballard talks about having supplied stacks and modules for 760 fuel cell buses. And just this week, I heard one of the industry consultants talk about 5,000 buses out there, obviously, including China, which would be more than half -- or well over half of that 4,000.

But can you maybe talk about the experience at Luxfer in this fuel cell bus and fuel cell truck opportunity? Is this -- do you feel that you've supplied more than a 25% share or more than a 20% share of the industry?

I wouldn't want to give numbers, but I mean, I would say, we have supplied our fair share or more than our fair share. Now some of the markets like China, which are not -- don't have the stringent DOT-type regulations, we don't supply as much right now. But I think as regulations improve in those markets and they adopt more of their universal DOT standards, then I think our value proposition there increases. But even in China, we are ramping up capacity right now for composite cylinders.

Beyond that, if you look at from where we have supplied, whether that's Wrightbus buses or even trains in U.K. or are making fuel cell-based trucks here in U.S. that are still mostly on the experimental side, we have our fair share of -- definitely more than our fair share in those markets.

But as you know, the market is evolving pretty rapidly. It's going to be a question of success in terms of an option. We remain very confident in our technology and our value proposition there.

So my next question is about the preservation of earnings power. So obviously, this was, again, another great quarter where you did preserve that earnings power to give us EPS ahead on the bottom line. But as we look into 2021, 2022, which is where most investors are focused these days, if we assume that the automotive catalysis demand is back up to where it has been and our sales are similar to what they were not too long ago, what are the other key items that you think investors should be most focused on to understand where the rebounding earnings leverage is going to come from in 2021 and beyond?

Sure. So I think it's going to be all around market recovery that you mentioned. I mean auto cat is a small portion of our business, but yes, that's going to be critical for us to look at. The biggest factor for us is going to be on the industrial recovery, which, as you know, is 1/3 of our sales and quite profitable sales when it compared to transportation or auto catalyst type business. So I think we're closely monitoring the ISM PMI index, just general industrial recovery both in Europe and in U.S. That's going to be the key driver of our earnings recovery.

And you are right, I mean, because of our exposure to defense and first response and the aggressive cost measures we have taken in the past and continue to take, we do feel confident that our earnings power at minimum would be at the Q2 levels, unless things really take a turn for dramatic worse. So from that perspective, we feel confident on a going-forward basis. And industrial recovery would essentially change the current status and get us back to being a more normal operating environment.

Okay. And then last question, if I may. So the durable goods orders yesterday were encouraging with a nice rebound. Does that have you increasingly optimistic about potential for strengthening it looks for in the second half? And do you feel that high-frequency data sets like this are a good metric for external observers to have a feel for where things are heading for Luxfer?

From our perspective, we are definitely prepared for a recovery. But at the same time, data is pretty confusing, whether it's durable good orders or even the PMI index for June. I mean they are showing signs of bullishness. So I'm hoping the worst is behind us. But at the same time, we also have to be prepared that things could remain stagnant, especially with the number of COVID cases going up.

But yes, I mean those are encouraging signs. But some of it also, as you look at sequentially, there is a pent-up demand level because of the April-May shutdown. So I look for those numbers to hold for 2 to 3 reporting cycle before we get too bullish on those because I do feel that June, July, some is just going to be pent-up demand because of factory shutdown or supply chain disruptions. And then we've got to watch out what happens after that.

(Operator Instructions) Your next question comes from the line of Sarkis Sherbetchyan of B. Riley.

Just wanted to kick off the question with the free cash. So it looked like for the quarter, receivables collections was fairly strong, and that's surprising kind of given the environment, so kudos on that. And then just kind of looking at the working capital items, right, do you expect inventory to be a more significant source of kind of cash for the second half of the year?

Yes. Sarkis, I'll take that one. So when you look at our inventory profile, and we could talk a little bit about working capital, obviously, in our last Q1 call, we do expect to have additional improvement in working capital, primarily inventory in the back half. As we look -- as we sat here, I guess, roughly 90 days ago and we're closing Q1 and communicating that, we certainly -- there was a lot of uncertainty, right? We were making sure we had the right raw materials to keep key products going, et cetera. So in addition to the safety of our employees, business continuity was something that we were very focused on.

So when we look at inventory, we spent the last 90 days realigning some of our working capital initiatives around inventory to make sure that we can meet our customer needs. And yes, as you've alluded to, we do expect inventory to continue to really have improvement in the back half that will drive additional working capital and free cash flow.

So with that line of thought, I mean would you expect kind of to have some of those key raw materials on hand despite maybe kind of working down the inventory in the back half? I mean how have you planned for that?

Yes. As we looked at some of the key raw materials, especially those that have longer lead times or from a supply chain perspective, we certainly wanted to ensure that we had those on hand. And by and large, the organization has done a great job of identifying those and coming up with solutions. So as Alok has talked about from a production perspective, some locations, the issue has been more around that retaining of talent, skilled labor that will continue to run our production. Inventory availability has not been a major concern for us so far.

Great. That's helpful. And if we kind of step back, and I know it's maybe too soon to talk about recovery. But given just kind of the significant cost actions, especially as it relates to headcount, should recovery materialize a bit quicker than maybe what most folks are planning for? How would you respond to maybe bringing back the workforce or the talent? Can you maybe give us some insight on your plans around that?

Sure. I'll take that, Sarkis. So as I mentioned, we do have about 20% of our workforce on furlough. And they've been very understanding and very supportive. And those are obviously folks we like to bring back first, and I'm sure we'll be very successful in bringing those back quickly. So I'm not too worried about that. And that should take care of any recovery projections.

In addition, we obviously want to drive productivity through this process. So the 10% reduction that we have done, I don't see us bringing those back as full time. We obviously may need to bring some more temporary workers as we ramp up production, depends on the facility trends. So from my perspective, no, that's not a concern at this moment, especially given the level of high unemployment that's going out, both in the U.S. and the U.K.

Yes. Understood. And just finally, I noticed on Slide 4, under Recent Actions, you kind of highlight how you're enhancing customer communication to support the kind of the supply chain requirements and gain some insight on demand trends. Can you maybe dive a little bit deeper into that? What does that mean for the organization today? And then potentially on a go-forward basis, how does that improve your process or workflow?

Sure. So multiple pieces, right? So there's our salespeople are more working from home versus being on the road. Salesforce.com is being used a lot more. We implemented it last year. And I think during this period, we are seeing huge usage because it's become the only tool that we use to communicate internally regarding sales matters, opportunities and pipeline.

But we take it a step forward as we have fully adopted Microsoft Teams and so have many of our new customers or like many of our existing customers. So they've gone to new virtual. So worst, in the previous time, a salesperson may be getting there once every month, maybe once every 2 weeks. Now they have Microsoft Teams session maybe every week for sure and sometimes twice a week, just because we want to understand their demand patterns and customers want to ensure their supplier base and get there, understanding on the supplier base health. And those have become way more efficient than somebody driving 6 hours for a 1-hour meeting.

So we have put more cadence, more like large customer weekly updates on demand, supply planning. And we think that's going to continue, and that's going to lead us to much closer collaboration and make it harder for customers to switch if there was a reason to.

Good. That's helpful. And then just one final one, if I may. As far as the end market color and commentary, that's super helpful. I guess, any areas where you see kind of stability or kind of consistent opportunity or kind of more weakness to follow aside from what you've mentioned on the earnings commentary?

Yes. I think from a stability perspective, the military sales remained stable. I mentioned some lower training exercises impacting in the short term. But beyond that, I see that remaining stable. So that's kind of 1/3 of our business, and we are forecasting that to be flat to down for the year, which means it will be slightly up for the second half. So we don't expect many changes there, so that's stable.

Hard to imagine a situation where demand will get worse in any of the areas. In some places like automotive, the customers' factories were shut for 6 to 10 weeks during Q2. So I would be surprised if something gets much worse, but hey, never say never. If it does, we will be prepared for it. But I think we saw a worst of the demand pattern in Q2.

We don't have that much exposure to commercial aerospace, but that's one space where I do feel that if things could get worse, that might be the one where people are still flushing through long-term orders and demand patterns. And maybe there will be more weakness there as we are further down in the supply chain, and we don't experience changes there as quickly by some of the other product lines.

That will be the only call out I would leave with, but in other places, I do think a lot of the -- what we experienced in Q2 was the low point.

Thank you. An encore recording of this conference call will be available in about 2 hours. Telephone numbers to access the recording will be available on the Luxfer website at www.luxfer.com.

Thank you for joining us today. The next regularly scheduled call will be in October of 2020 when the company discusses its 2020 third quarter financial results. This ends the Luxfer conference call.