Johnson Matthey releases a pre-close trading update for the financial year ended 31st March 2022, ahead of its full year results scheduled for 26th May 2022.
- Group underlying operating performance expected to be in line with current market expectations
- Good performances in Clean Air and Efficient Natural Resources
- Continued investment into Hydrogen Technologies to drive future growth
- Strategy review ongoing and update to be provided alongside full year results
- Simplifying portfolio with exit from Advanced Glass Technologies completed; Battery Materials and Health expected shortly, as planned
Liam Condon, Chief Executive, commented:
"I am excited to have joined Johnson Matthey, and in my first month as Chief Executive I have been deeply impressed with the people and the quality of our technology. Looking at our full year results, it is pleasing that despite significant market uncertainty these are expected to be in line with current market expectations, with good performances in our core businesses giving a solid base from which to build further.
Together with my team, we are reviewing our strategy and focused on providing a clear pathway to demonstrate how the group will create value from the many exciting opportunities we face as the world transitions to net zero. I look forward to moving at pace and sharing our conclusions with you at our preliminary results on 26th May."
Robust performance in 2021/22 in a challenging environment
In 2021/22, group underlying operating performance is expected to be in line with current market expectations2.
Growth was driven by improved performance in Clean Air, where we saw increased activity in autos as end markets partially recovered and support from the continued delivery of our transformation programme. Efficient Natural Resources benefited from higher average precious metal prices. In Hydrogen Technologies, performance reflected our investment and scale up of this business. Health was below expectations and, as previously announced, we have agreed the disposal of this business which is expected to complete in mid-2022.
Clean Air experienced a partial recovery in demand
Clean Air full year operating performance is expected to be above the prior year reflecting a recovery in demand in the first half. However, volumes remain constrained by supply chain disruption across the industry, principally due to the continued shortage of semi-conductor chips which is impacting production across the global automotive market.
We continued to make good progress on our Clean Air transformation programme, moving production into newer, more efficient plants. We remain focused on driving efficiency and cash generation across our operations with a clear plan to deliver at least £4 billion of cash over the next decade3, with significant profitability and cash generation expected beyond this.
Strong growth in Efficient Natural Resources
Efficient Natural Resources had a strong year with operating performance expected to be materially above the prior year, driven by PGM Services which benefited from higher average precious metal prices.
Catalyst Technologies sales are expected to be above the prior year. In industrial and consumer, we saw higher demand and good growth across key catalyst segments. We saw weaker performance in traditional fuels, notably refinery catalysts following a particularly strong prior year.
Across our exciting growth opportunities in blue hydrogen, sustainable fuels and low carbon solutions, we have a strong and growing pipeline with more than 70 potential projects.
PGM Services delivered strong sales and operating performance, benefiting from higher average precious metal prices and good performance in our refineries. For the year ended 31st March 2022, average Rhodium, Platinum and Palladium prices were up 29%, 11% and 6% year on year respectively.
Hydrogen Technologies is expected to report an operating loss, due to increased investment to support growth and manufacturing constraints as we scale up the business and utilised capacity to qualify new customer products. Work is ongoing to expand our manufacturing capacity in the UK and China with the first phase expected to commence production in early 2023.
For our Battery Materials business, as expected we will report an operating loss in the year. As previously announced, we have fully impaired the carrying value of our battery materials assets and communicated associated exit costs, which together will result in an exceptional item outside of underlying operating profit of up to £465 million in our full year results.
In Value Businesses overall performance was strong. Medical Devices and Diagnostic Services were stronger as we benefited from actions taken to drive improved business performance and as demand improved following COVID-19. The sale of Advanced Glass Technologies was completed on 31st January 2022 for a consideration of £178 million, resulting in a profit on sale in excess of £100 million.
Health weaker due to labour shortages and supply chain disruption
On 17th December 2021, we announced the sale of our Health business to Altaris Capital Partners. We expect the transaction to close in mid-2022. For our results ending 31st March 2022, Health will be accounted for as a discontinued operation.
In the year, performance in Health was disappointing and we expect a small operating loss for the period.
Strong balance sheet
We maintained a strong balance sheet. Our net debt at the year end is expected to be c.£0.9 billion, with our net debt to EBITDA ratio below our target range of 1.5 to 2.0 times. Our £200 million share buyback is progressing well and as at 6th April 2022 we had completed £167 million.
In March 2022 we refinanced to extend the maturities of our debt. We signed €315 million of Private Placement Notes (PP), the company’s first sustainability-linked PP and also raised a further £400 million of sustainable financing through the UK’s Export Finance’s Export Development Guarantee scheme. Both are linked to our commitment to reduce greenhouse gas emissions. We extended our £1 billion sustainability-linked revolving credit facility by another year to March 2027.
Update on Russia and Ukraine
As announced on 7th March 2022, we discontinued with immediate effect all new commercial activities in Russia and Belarus in light of the ongoing conflict in Ukraine. Our operations in Russia include one small Clean Air manufacturing plant, and a small Catalyst Technologies office. In terms of pgm (platinum group metal) supply, we are the world’s leading secondary recycler of pgms and are well diversified in our supply with little exposure to Russia. Overall for the group around one per cent of 2021/22 sales related to Russia, with a slightly higher proportion of operating profit given the mix effect in Catalyst Technologies.
Outlook for the year ending 31st March 2023
Looking forward to the year ending 31st March 2023, we are entering a period of greater political and economic uncertainty with both the ongoing disruptive effects of COVID-19 and the impacts of the conflict in Ukraine.
We expect continued supply chain disruption for our automotive customers, increased cost inflation which we will seek to recover through pricing and efficiencies, and continued near-term market volatility. We are navigating this challenging period with a strong focus on enhancing our overall efficiency and disciplined execution of our strategic priorities. Longer term we expect the current geopolitical situation to drive a significant acceleration towards a net zero carbon economy, with corresponding investment to position us for the significant growth opportunities from our sustainable technology portfolio.
Full year results
We plan to announce our full year results for the year ended 31st March 2022 on 26th May 2022. Our strategy review is ongoing, and we will provide an update alongside our full year results.
Martin Dunwoodie, Director of Investor Relations, +44 20 7269 8241
Louise Curran, Senior Investor Relations Manager, +44 20 7269 8235
Carla Fabiano, Senior Investor Relations Manager, +44 20 7269 8004
Surinder Sian, Group Head of External Communications, +44 7435 971402
Harry Cameron, Tulchan Communications, +44 7799 152148
1. Unless otherwise stated, sales and operating profit commentary refers to performance at constant exchange rates. Growth at constant rates excludes the translation impact of foreign exchange movements, with 2020/21 results converted at 2021/22 average rates.
2. Vara consensus for full year group underlying operating profit in 2021/22 was £549 million (range: £528 million to £572 million) as at 7th April 2022. 2020/21 group underlying operating profit was £504 million.
3. At least £4 billion of cash under our range of scenarios from 1st April 2021 to 31st March 2031. Cash target pre-tax and post restructuring costs.
4. Includes an impairment of £314 million and estimated cash costs of up to £150 million.