LUXFER HOLDINGS PLC (LXFR) Risk Factors

Item 1A.    Risk Factors

The risks described below are not the only risks facing us. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. See also "Information Regarding Forward-Looking Statements" for certain warnings regarding forward-looking information contained in this document.

Economic and Industry risks

We depend on certain end-markets, and downturns or regulatory changes in those markets could adversely affect our sales, pricing and margins

We depend on certain end-markets, including automotive, alternative fuels, self-contained breathing apparatus ("SCBA"), aerospace, defense, healthcare and oil. Demand in these end-markets is influenced by macroeconomic conditions, customer inventory cycles, availability of credit, energy costs, government procurement cycles and regulatory change including the trade policy and tariff environment. If any of these end-markets experience a downturn, prolonged weakness, or adverse regulatory developments, our sales volumes, pricing and profit margins could be materially and adversely affected. Dependence of either of our segments on certain end-markets may be more pronounced, and it is possible that multiple end-markets could weaken at the same time.

Our global operations expose us to geopolitical, regulatory, trade and tax risks that could adversely affect our business and financial results

Our global operations expose us to economic conditions, potential tax costs, political risks and specific regulations or restrictions in the countries in which we operate, which could materially and adversely impact our results of operations, financial position and cash flows.

We derive sales and earnings from operations in multiple countries and are subject to risks associated with doing business internationally. We have wholly-owned operations in the U.S., the U.K., Canada and China, as well as a joint venture in Japan. Risks of operating internationally include adverse changes in political, social, financial, economic or regulatory conditions; difficulty in staffing and managing geographically diverse operations; and the costs of complying with local laws and regulations.

Trade policy volatility has already affected our operations. For example, tariffs and other trade measures between the U.S. and China, as well as broader restrictions affecting certain metals, rare earth materials and industrial inputs, have increased input costs and created supply chain uncertainty in recent periods. These measures have also required pricing actions, alternative sourcing strategies and, in some cases, increased working capital to secure supply. Future changes — including additional tariffs, retaliatory measures, quotas, customs enforcement actions, sanctions or export controls — could further increase our costs, disrupt supply chains, reduce demand and/or require operational changes on short notice. Changes in trade measures between major trading regions could materially and adversely affect our results of operations, financial position and cash flows because our supply chains and customer base are global.

We are also subject to taxes in multiple jurisdictions. Our tax burden depends on the interpretation and application of local tax laws, administrative practices and treaties. Changes in tax laws, tax authority interpretations, audit positions, or the geographic mix of earnings could increase our tax expense, cash taxes and/or effective tax rate and could materially and adversely affect our results of operations, financial position and cash flows.

Our reliance on major customers increases exposure to reductions in demand, loss of business and credit risk

Our operations rely on a number of large customers in certain areas of our business, and the loss of any major customer, a reduction in demand by a major customer, or a customer payment default could materially reduce our sales and profitability. Long-term relationships are especially important because we often work closely with customers to develop products to meet particular specifications as part of the design of a product intended for an end-user market. The bespoke nature of many of our products could make it difficult to replace lost customers quickly, and the loss of a significant customer could materially and adversely impact our results of operations, financial position and cash flows.

Our top 10 customers accounted for approximately 38% of our net sales in 2025. Any significant reduction in sales or customer payment default could materially and adversely affect our results of operations, financial position and cash flows.

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We depend upon our larger suppliers for a significant portion of our raw materials, and a loss of one of these suppliers, or a significant supply interruption could negatively impact our financial performance.

We rely to varying degrees on major suppliers for raw materials and components used in our engineered products, including aluminum, zirconium, magnesium, carbon fiber and rare earths. We generally purchase raw materials on a spot basis under standard terms and conditions and also maintain certain supply arrangements for key inputs. Supply disruptions, supplier financial distress, geopolitical events, trade restrictions, export controls, transportation constraints, or natural disasters could limit availability, increase lead times and raise costs. For example, our Elektron segment requires certain rare earth metals and oxides typically sourced from China for use in the manufacture of some magnesium alloys and in zirconium catalysts. The supply of these materials is subject to geopolitical, regulatory and trade risks, including export controls, licensing requirements and other government-imposed restrictions, the combined impact of which since the first half of 2025 has resulted in reduced availability and increased cost.

An interruption in the supply of essential raw materials or components, or a significant increase in costs due to shortages, quotas or other disruptions, could affect our ability to provide competitively priced products in a timely manner. In the event of supply constraints, we may need to purchase materials from alternative sources (potentially at higher prices), carry additional inventory, increase our prices, reduce margins or fail to meet delivery requirements, which could result in contractual penalties, loss of customer confidence and reduced future demand. We cannot assure that replacement materials would be available quickly on similar terms or at all. A prolonged or material disruption in the availability of raw materials could materially and adversely affect our results of operations, financial position and cash flows.

Volatility in raw material and energy costs, and limitations on passing through cost increases, could adversely affect margins and working capital

We are exposed to fluctuations in raw material and energy costs, including electricity and natural gas used in our manufacturing processes. We may not be able to pass cost increases through to customers immediately or at all due to fixed-price arrangements, competitive pressures or customer resistance. Significant increases in raw material or energy costs could reduce margins and/or increase working capital requirements, and higher input costs could make our products less attractive compared to alternatives (including competing products made from other materials), which could materially and adversely affect our results of operations, financial position and cash flows.

We are not dependent on any one supplier for our primary raw materials, but the business could be impacted by supply constraints. If, in the future, we are unable to obtain sufficient amounts of material on a timely basis, we may not be able to obtain raw materials from alternate sources at competitive prices. In addition, interruptions or reductions in our supply of raw materials could make it difficult to satisfy our customers’ delivery requirements, which could materially and adversely affect our business, financial condition, results of operations and cash flows.

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Fluctuations in foreign exchange rates could adversely affect reported sales, earnings, cash flows and net assets

We conduct commercial transactions in multiple currencies. Changes in exchange rates can reduce reported sales and earnings from non-U.S. operations and can decrease the profits of subsidiaries that incur costs in currencies different from the currencies in which they generate revenue. These transaction risks principally arise as a result of purchases of raw materials in U.S. dollars, coupled with sales of products to customers in euros. This impact is most pronounced in our exports to continental Europe from the U.K. In 2025, our U.K. operations sold approximately €39 million of goods into the Eurozone.

In addition, we have operating subsidiaries located in the U.K., Canada, China and Australia, as well as a joint venture in Japan, each of whose revenue, costs, assets and liabilities are denominated in local currencies. As our consolidated financial statements are reported in U.S. dollars, we are exposed to fluctuations in those currencies when those amounts are translated to U.S. dollars for purposes of reporting our consolidated financial statements, which may cause declines in results of operations. The largest risk is from our operations in the U.K., which, in 2025, generated an operating profit of $4.1 million and sales of $109.7 million. Fluctuations in exchange rates, particularly between the U.S. dollar and GBP sterling can have a material effect on our consolidated income statement and consolidated balance sheet. In 2025, movements in the average U.S. dollar exchange rate had a positive impact on net sales of $4.3 million. In 2024 movements in the average U.S. dollar exchange rate had a positive impact on net sales of $3.7 million. Changes in translation exchange rates increased net assets by $12.6 million in 2025, compared to a decrease of $4.6 million in 2024.

We use forward foreign currency exchange contracts to hedge portions of certain exposures, but hedging may not fully offset currency impacts and exposes us to market and credit risk, including counterparty risk. Currency volatility could materially and adversely affect our results of operations, financial position and cash flows.

For additional information on these risks, and the historical impact on our results, see ITEM 7A.

Our defined benefit pension obligations and related regulatory requirements could require additional funding and adversely affect our financial position and cash flows

We have defined benefit pension arrangements in the U.K. and in the U.S.. In 2023, the Company completed a buyout of the U.S. BA Holdings, Inc. Pension Plan with our remaining U.S. plan being immaterial (see ITEM 8, Note 15). Our largest defined benefit plan, the Luxfer Group Pension Plan, ('the Plan') which closed to new members in 1998, remained open for accrual of future benefits based on career-average salary until April 5, 2016. Following a consultation, it was agreed with the Trustees and plan members to close the Plan to future benefit accrual effective April 5, 2016. In addition, when increasing pension benefit payments, it was agreed to use CPI as the reference index in place of RPI where applicable.

The Plan is funded in accordance with U.K. regulatory requirements and, as of December 31, 2025, and December 31, 2024, had an accounting surplus of $54.9 million and $49.3 million, respectively. There is no guarantee that the surplus funding position will be maintained and adverse market movements could result in a reversion to a deficit funding position. According to the latest triennial actuarial valuation of the Plan as of March 31, 2024, the Plan had a surplus of £20.8 million. No contributions were made to the Plan during 2025 or 2024. Based on the most recent actuarial valuation and the associated funding agreement with the Trustee, the Plan was not subject to deficit recovery contributions during this period. The Trustee may request additional contributions, and the U.K. Pensions Regulator (“TPR”) has the power to require further funding in certain circumstances. We remain legally responsible for ensuring that the Plan has sufficient assets to meet its obligations as they fall due.

Subsequent to year end, in January 2026, the Trustees completed a full buy-in transaction with a U.K. insurer, substantially matching the Plan’s benefit obligations with corresponding cash-flow payments. While this transaction significantly reduces the Plan’s exposure to investment and funding risks, the Company remains legally responsible for the Plan and subject to applicable regulatory requirements. The buy-in is designed to substantially match the Plan’s benefit obligations with corresponding cash flow payments from the insurer, with effect from March 2026, in exchange for an agreed premium. As this transaction occurred after the balance sheet date, the measurement of the Plan’s assets or liabilities as of December 31, 2025 did not account for this event. The buy-in does not constitute a settlement event under ASC 715 which would trigger settlement accounting.

Pension obligations and related cash requirements are sensitive to market conditions, actuarial assumptions (including discount rates, inflation and longevity), asset performance, regulatory developments and trustee decisions. While the buy-in has reduced exposure to many of these risks, adverse developments could still result in increased funding or security requirements and could materially and adversely affect our results of operations, financial position and cash flows.

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Environmental and regulatory risks

The U.K. Pensions Regulator has statutory powers that could impose additional liabilities and restrict corporate activity

The U.K. Pensions Regulator has wide statutory powers that could, in certain circumstances, result in significant additional liabilities for the Group and restrict our ability to undertake corporate transactions.

The Pensions Regulator may issue a contribution notice or a financial support direction to participating employers in the Plan, other Group companies, or persons connected with or associated with those employers. Such action may be taken where an act or omission is considered to have avoided pension liabilities, materially weakened the likelihood of accrued benefits being paid, or where an employer is deemed to be insufficiently resourced. Any resulting liability may be as high as the difference between the pension plan’s assets and the cost of securing members’ benefits on a buy-out basis.

The Pension Schemes Act 2021 further expanded these powers, introducing new criminal and civil penalties (including unlimited fines) and additional notifiable-events requirements for certain corporate transactions. In practice, these powers may limit our ability to restructure the Group, dispose of businesses, or pay dividends, and may require us to provide additional funding or security to the pension plan. Any such requirements could materially and adversely affect our financial position, cash flows and results of operations.

Environmental laws and liabilities could require significant costs and adversely affect our financial position and results

Our operations are subject to environmental laws and regulations in the jurisdictions in which we operate. These regulations impose standards relating to emissions, wastewater discharges, hazardous materials handling, waste disposal, and soil and groundwater conditions, among other matters. Compliance requires ongoing costs, and we may incur liabilities for remediation and other obligations, including relating to historical activities and divested assets. We cannot assure that reserves, insurance or remediation plans will be adequate. Environmental liabilities, compliance failures or adverse regulatory changes could materially and adversely affect our results of operations, financial position and cash flows.

Health and safety regulations expose us to compliance costs and potential liabilities from workplace incidents

The health and safety of our employees and the safe operation of our business is subject to various health and safety regulations in each of the jurisdictions in which we operate. These regulations impose various obligations on us, including the provision of safe working environments and employee training on health and safety matters. Complying with these regulations involves recurring costs.

Regulatory approvals, certifications and export controls could limit our ability to sell products, enter markets or expand operations

Certain aspects of our operations are in highly regulated industries requiring product approvals, certifications and ongoing compliance. Requirements may vary across jurisdictions and can change over time. Delays in obtaining approvals, loss of certifications, changes in standards, or non-compliance could prevent us from selling products, entering markets, or expanding product lines and could subject us to penalties or other sanctions. We are also subject to export and import regulations with respect to certain products and materials.

Our customers are also often subject to similar regulations and risks. We therefore face the risk that our customers may have the demand for their products reduced as a result of regulatory matters that fall outside our direct control.

Any of these factors could materially and adversely affect our results of operations, financial position and cash flows.

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Climate change regulation and evolving disclosure requirements could increase costs and expose us to legal, operational and reputational risks

Our manufacturing processes, and those of many of our suppliers and customers, are energy-intensive and may generate greenhouse gas emissions directly or indirectly. We are subject to existing and evolving climate-related laws, emissions reporting obligations, and market-based mechanisms in the jurisdictions where we operate and sell products. Compliance may require capital investment and ongoing costs, including for monitoring, reporting and verification of emissions data and for emissions allowances or other charges where applicable.

Climate-related disclosure expectations also continue to evolve and may develop inconsistently across jurisdictions. In the U.S., the SEC adopted climate-related disclosure rules in 2024, pending judicial review, and the SEC subsequently voted to end its defense of those rules, contributing to uncertainty regarding the scope and timing of any U.S. federal climate disclosure requirements. Regardless of U.S. federal outcomes, customers, investors, lenders and non-U.S. regulatory regimes may continue to drive increased climate-related reporting requirements and expectations. These developments could increase compliance costs, create legal and reputational risk, and materially and adversely affect our results of operations, financial position and cash flows.

Product liability, warranty and recall risks could result in significant costs, litigation and reputational harm

Because of the nature and use of certain of our products, we may face product liability, warranty or other claims for personal injury, death or property damage, including from failures of products manufactured by us or by third parties incorporating our components. Even where claims lack merit, defense costs and management distraction can be significant. Claims could result in decreased demand, loss of existing business, reputational harm, regulatory scrutiny, fines, litigation costs, product recalls and a decline in our stock price. We do not carry insurance to cover the full potential expense of product recalls, and liabilities in excess of insurance coverage could materially and adversely affect our results of operations, financial position and cash flows.

Cybersecurity threats, data breaches and evolving disclosure obligations could disrupt operations and expose us to legal and financial risk

We increasingly rely on information technology systems and third-party service providers and have access to in the course of our business operations confidential information and personally identifiable information. We have experienced, and expect to continue to be subject to, cybersecurity threats and incidents, including employee error or misuse and sophisticated targeted attacks. While we devote resources to security measures, no system can be guaranteed secure, and incidents affecting us or our third-party providers could result in business disruption, data loss, reputational harm, litigation, regulatory investigations or fines, and increased remediation and protection costs.

In addition, enhanced public company cybersecurity disclosure requirements may increase legal and reputational risk and may require accelerated public disclosure following a materiality determination, even while an incident is still being investigated. This could increase the likelihood of securities litigation and regulatory scrutiny and could create competitive sensitivity and increased costs. Failure to comply with applicable data protection laws, including the GDPR and U.K. GDPR, could result in significant fines and claims for compensation and could materially and adversely affect our results of operations, financial position and cash flows.

Future cybersecurity breaches, general information security incidents, further increases in data protection costs or failure to comply with relevant legal obligations regarding protection of data could thereforematerially and adversely affect our results of operations, financial position and cash flows. See ITEM 1C for further information regarding disclosed our Cybersecurity procedures.

Legacy liabilities from previously owned or divested businesses could result in future claims and financial exposure

We have sold or closed businesses over time. Products and services provided during prior periods may still give rise to claims, including product liability, environmental or other liabilities. Such claims could be costly and could materially and adversely affect our operations, financial position and cash flows.

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Risks associated with products, technology and intellectual property

Our ability to protect intellectual property and proprietary information affects our competitive position and profitability

Our profitability depends in part on our ability to protect proprietary information and intellectual property rights. We rely on patents, trade secrets, trademarks and confidentiality agreements. Our intellectual property rights may be challenged, invalidated, circumvented or may not provide meaningful protection in all jurisdictions. Some key patents have expired or will expire in coming years, potentially reducing barriers to entry and increasing pricing pressure. If we cannot protect or enforce our rights, or if we are forced to rebrand products due to trademark challenges, our competitive position could suffer and our results of operations, financial position and cash flows could be materially and adversely affected.

Dependence on third-party intellectual property and potential infringement claims could disrupt operations and increase costs

We license certain technologies from third parties and may be exposed to risks if licenses expire, terminate, are non-exclusive, or become unavailable on acceptable terms. We may also be subject to claims that our products or processes infringe third-party intellectual property. If such claims are successful, we could be required to pay damages, cease manufacturing certain products, redesign products, obtain costly licenses, or be prevented from entering certain markets. Defense costs and diversion of management attention could be significant and could materially and adversely affect our results.

Our performance depends on continued research, development and successful innovation

Our products are highly technical. To maintain and improve our market position, we depend on continued research and development and timely innovation. We may experience delays in development, or innovations may not achieve market acceptance or profitability. Competitive products and substitute materials may reduce demand for our offerings, and without timely improvements or new products, our existing products could become less competitive or obsolete, materially and adversely affecting our results of operations, financial position and cash flows.

We collaborate research with universities, and in addition spent $4.3 million, $4.4 million and $4.6 million in 2025, 2024 and 2023, respectively, on our own research and development activities. We expect to fund our future research and development expenditure requirements through operating cash flows and restricted levels of indebtedness, but if operating profit decreases, we may not be able to invest in research and development or continue to develop new products or enhancements.

Operational Risks

We may pursue acquisitions, which involve integration challenges, financial risks and uncertainty regarding expected benefits

We may pursue acquisitions as part of our strategy. Acquisitions and integrations involve risks, including unidentified liabilities, integration challenges, increased indebtedness, impairment charges, loss of key personnel, and distraction of management. We cannot assure that acquisitions will achieve anticipated benefits, and any adverse outcome could materially and adversely affect our results.

Failures to perform under supplier or customer contracts could result in penalties, loss of business and reputational harm

Failures to perform under supplier or customer contracts could result in penalties, damages, loss of business, or reputational harm. Certain supplier contracts may include minimum purchase commitments, and certain customer contracts may include firm delivery requirements. Demand weakness or operational disruptions could increase exposure under such provisions and could materially and adversely affect our results.

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We rely on key personnel and skilled employees, and failure to attract or retain talent could adversely affect our operations

We rely on key executives and technical personnel. Loss of key personnel or inability to attract and retain qualified employees could harm our ability to execute strategy and maintain technical capabilities and could materially and adversely affect our results. We do not carry key person insurance covering the loss of any of our executives or employees.

Fraud, control failures or errors in finance processes could result in financial loss, misstatement and regulatory exposure

Our business relies on the accurate and timely processing of financial transactions and the proper operation of finance and accounting processes across the Group. These processes involve the use of manual inputs, judgment and reliance on information provided by employees and third parties. There is a risk that fraudulent transactions, unauthorized activities, misappropriation of assets or deliberate circumvention of controls could occur, as well as a risk of errors arising from human error, inadequate segregation of duties, system limitations or process failures. Such incidents could result in financial losses, misstatement of our financial results, regulatory scrutiny, litigation, reputational harm and a loss of investor and stakeholder confidence. Any material failure to prevent, detect or correct fraudulent activity or significant errors within the finance process could materially and adversely affect our results of operations, financial position and cash flows.

Business interruptions at our production facilities could disrupt operations and adversely affect results and cash flows

Our production facilities could experience interruptions due to severe weather, natural disasters, fires, explosions, equipment failure, utility outages, terrorism, pandemics or labor disruptions. Some products and processes involve materials that are flammable or potentially explosive if mishandled. Such events could cause injuries, property damage, environmental harm, operational disruptions and reputational damage. Insurance may not cover all losses, and interruptions could materially and adversely affect our results and cash flows.

Labor relations and reliance on unionized workforces could disrupt operations and increase costs

Some facilities rely on unionized labor. Strikes, lock-outs, labor disputes or other work stoppages could disrupt operations and materially and adversely affect our results.

We depend on distributions from subsidiaries to meet obligations, and restrictions could limit our ability to fund operations or dividends

Luxfer Holdings PLC operates through subsidiaries and depends on distributions from those subsidiaries to fund obligations, dividends and corporate activities. Subsidiary distributions may be restricted by law, contractual arrangements, and operating needs. If subsidiaries are unable to make distributions, our ability to fund operations, service debt or pay dividends may be adversely affected.

Our indebtedness and financing arrangements could limit flexibility and expose us to refinancing and interest rate risk

Our indebtedness could affect our ability to fund working capital, capital expenditures, acquisitions and dividends. Debt agreements contain restrictive covenants that may limit strategic flexibility. Rising interest rates could increase interest expense on floating-rate debt. If we cannot generate sufficient cash to service debt or refinance maturities on acceptable terms, we may need to refinance, sell assets, reduce investment, or raise equity, any of which could materially and adversely affect our business and results.

As of December 31, 2025, we had $25.0 million of indebtedness under our senior notes (the "Loan Notes") due in 2026. There was also a $15.3 million drawn balance on the revolving credit facility ("RCF"), with $109.7 million of headroom remaining as of December 31, 2025. In July 2025 we completed a refinance of our shelf facility, the terms of this remaining the same, with expiry now in July 2030 as opposed to October 2026.

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General risks

Future dividends are at the discretion of our Board and may be reduced or suspended based on financial and legal constraints

Future dividends are at the discretion of our Board and depend on many factors, including results of operations, cash requirements, debt facilities, financial position, contractual restrictions and applicable laws. Under English law, dividends may be paid only from profits available for distribution. Any change in dividend levels, or suspension of dividends, could adversely affect the market price of our ordinary shares.

Compliance with U.S. securities laws and internal control requirements could result in increased costs and expose us to reporting and control risks

As a U.S. public company, we are subject to extensive U.S. securities law reporting requirements, including obligations to design, maintain, and assess the effectiveness of internal control over financial reporting. These controls provide reasonable, not absolute, assurance that financial information is reliable and that fraud is prevented or detected. Failure to maintain effective internal controls could result in inaccurate financial reporting, inability to prevent or detect fraud, loss of investor confidence, regulatory scrutiny, and a decline in the market price of our ordinary shares. In addition, compliance with these reporting and control requirements places a significant and ongoing strain on management's time and operational, and financial resources, as management must evaluate and report on the effectiveness of internal controls annually under Section 404(a) and quarterly under Section 302 of the Sarbanes-Oxley Act, which includes ongoing system and process evaluation and testing.

Our incorporation outside the United States and the location of certain directors, officers and assets may make it difficult to enforce U.S. judgments

Luxfer is incorporated in England and Wales, and certain directors and officers reside outside the U.S. A substantial portion of our assets and the assets of such persons are located outside the U.S. As a result, it may be difficult to effect service of process within the U.S. or to enforce U.S. judgments against the Company or such persons based on U.S. federal securities laws.

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