Johnson Matthey H2 Earnings Call Highlights

Johnson Matthey LON: JMAT reported higher underlying profit, improved margins and stronger cash generation for fiscal 2025/2026, while management outlined progress on a restructuring strategy, the pending sale of Catalyst Technologies and a new acquisition aimed at expanding its emissions-control business.

Chief Executive Officer Liam Condon said the company’s underlying growth of 6%, excluding the impact of precious metal prices, was in line with previously upgraded guidance. Reported underlying operating profit growth was 14%, helped by higher precious metal prices.

Condon said Johnson Matthey is becoming “a more focused, a more lean, and a more cash-generative company,” adding that management remains committed to its 2027/2028 targets despite operational challenges in its platinum group metals refining operations.

Profit Rises Despite Lower Sales

Chief Financial Officer Alastair Judge said results were presented on a continuing basis, excluding Catalyst Technologies. Group sales fell 7%, mainly due to softer market conditions in Clean Air, but underlying operating profit rose 14% to GBP 340 million. Excluding metal prices, underlying operating profit increased 6%.

Earnings per share rose 16% to GBP 1.285, reflecting higher profit and a lower share count following the prior year’s buyback program. Free cash flow increased to GBP 168 million from GBP 64 million a year earlier, which Judge described as a “material step-up.” Net debt increased to GBP 880 million, remaining at 1.8 times EBITDA.

The company announced a final dividend of GBP 0.55 per share, bringing the total dividend to GBP 0.77, unchanged from the previous year.

On a reported basis, Johnson Matthey recognized impairment and restructuring charges of GBP 192 million. Judge said the impairments largely reflected a slowdown in fuel cell and electrolyser markets, leading to a full impairment of the remaining GBP 88 million of fixed assets in Hydrogen Technologies and GBP 33 million of related assets in PGM Services. Restructuring charges were GBP 57 million.

Clean Air Margins Improve

Clean Air sales declined 7%, with light-duty diesel sales down 5% and heavy-duty diesel sales down 6%. Judge said light-duty gasoline performance was affected by market share losses tied to platform phase-outs in Europe and a weaker platform mix in China.

Despite the lower sales, Clean Air operating profit rose 12%, and margins improved to 14.5% from 11.8%, supported by cost reductions, operational excellence and footprint consolidation. Management said it remains confident in reaching 16% to 18% margins by 2027/2028.

Condon said Johnson Matthey has won nine hybrid platforms in Europe over the past year, representing 25% of the projected 2028/2029 European hybrid market. He said the company had previously de-emphasized light-duty gasoline but has refocused on higher-growth and more attractive segments such as hybrids.

PGM Services Hit by Metal Loss

PGM Services sales fell 11% and operating profit declined 20%. Judge said the refining business was affected by a GBP 48 million operational metal loss identified during a stock take at the company’s U.S. refinery in the second half. The stock takes occur every two years, meaning the loss related to the full period since the prior count.

Judge said some losses are normal in the process, but this time they were “significantly higher,” with about half of the increase driven by higher metal prices. He said Johnson Matthey expects losses to decline as it accelerates operational excellence initiatives and transforms refining operations, although the company is still recognizing higher provisions for the current year.

The company is continuing work on a new PGM refinery, which management described as its largest single capital investment. Judge said fiscal 2026/2027 capital expenditure is now expected to be about GBP 230 million, up from prior guidance of GBP 140 million, due to increased spending on the refinery. Condon said the facility remains on track to be operational next year, with about 70% of equipment installed and early-stage commissioning started in March.

Hydrogen Reaches Run-Rate Breakeven

Hydrogen Technologies sales rose 18% to GBP 71 million, largely driven by fuel cells, while electrolyser sales doubled from a low base. The operating loss narrowed to GBP 19 million after restructuring actions, including headcount reductions and cost cuts.

Condon said the business achieved run-rate breakeven in the fourth quarter, which management had identified as an important milestone. He said Johnson Matthey still sees long-term opportunity in green hydrogen but is managing the business in line with the pace of market development.

Cormetech Acquisition Targets Data Center Emissions

Johnson Matthey also announced the acquisition of Cormetech, which Condon described as a U.S. market leader in selective catalytic reduction catalysts for stationary emissions control. He said the business is benefiting from rapid growth in data centers, where operators are increasingly using on-site power generation because electricity grids cannot meet demand quickly enough.

The company is paying $360 million for Cormetech, approximately 10 times expected 2026 calendar-year EBITDA, with an additional earn-out of up to GBP 100 million tied to ambitious 2027 and 2028 revenue targets. The transaction is subject to customary regulatory approval in the U.S., and management said it expects a quick process.

Condon said Cormetech generated GBP 104 million in sales and GBP 16 million of EBITDA over the last 12 months, with projections of GBP 180 million in sales and GBP 35 million of EBITDA in 2026. He also said the business has a contracted order book of GBP 300 million through 2027 and a visible pipeline of GBP 1 billion, with about 85% of that pipeline tied to returning customers.

Judge said the acquisition is expected to be earnings accretive before synergies from year one. Condon said Johnson Matthey expects GBP 20 million of run-rate synergies by 2030, split 70% from revenue and 30% from costs.

For fiscal 2026/2027, Johnson Matthey expects low- to mid-single-digit operating profit growth, excluding Catalyst Technologies and Cormetech and assuming constant currency and metal prices. Management also reiterated plans to return GBP 1 billion of net proceeds from the Catalyst Technologies sale to shareholders, including GBP 800 million through a special dividend with share consolidation and GBP 200 million via share buyback.

About Johnson Matthey LON: JMAT

Johnson Matthey is a global leader in science that enables a cleaner and healthier world. With over 200 years of sustained commitment to innovation and technological breakthroughs, they improve the function, performance and safety of their customers' products. Their science has a global impact in areas such as low emission transport, pharmaceuticals, chemical processing and making the most efficient use of the planet's natural resources. Today more than 13,000 Johnson Matthey professionals collaborate with their network of customers and partners to make a real difference to the world around us.

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