Morgan Advanced Materials LON: MGAM reported first-half 2026 revenue growth and sequential margin improvement, while maintaining its full-year outlook amid softer conditions in European industrial markets.
Chief Executive Damien Caby said performance for the first six months was in line with expectations, supported by growth in energy and aerospace markets. He said the company was making progress on its strategy to improve operational effectiveness, pursue higher-quality growth and maximize portfolio value.
Revenue for the six months ended June 30 was £518 million, up 4.8% organically at constant currency. The result included an £8.9 million benefit from the timing of a take-or-pay payment from a semiconductor customer. Excluding that payment, organic constant-currency revenue growth was 3%.
Headline adjusted operating profit was £57.8 million, producing an adjusted operating margin of 11.2%. Excluding the take-or-pay benefit, the margin was 9.6%. Adjusted earnings per share were £0.107, while the interim dividend was held at £0.054 per share.
Segment performance
Performance Carbon revenue rose 4% at constant currency, including the take-or-pay payment. Excluding that item, revenue declined 1.8% from the prior year. Growth in energy, particularly wind-related demand, was offset by lower sales of body armor and industrial equipment.
Chief Financial Officer Richard Armitage said the semiconductor payment related to products that had been expected to be supplied in the second half, but which the customer no longer required. The customer settled its contractual take-or-pay obligation in full during the first half, and the benefit will not recur in the second half.
Performance Carbon margin improved by 70 basis points including the payment, though Armitage said margin declined excluding the item, primarily because of lower armor sales. The company expects demand for body armor to increase heading into 2027 as new products are launched, although procurement patterns remain uneven.
Technical Ceramics revenue increased 7.8% at constant currency, led by aerospace and defense demand for ceramic cores used in manufacturing jet engine turbine blades. Aerospace and defense represented 39% of the division’s revenue following several years of growth. Energy demand also increased, including demand for industrial gas turbines serving data centers. Operating margin improved 130 basis points to 13% on stronger revenue drop-through.
Thermal Products returned to growth, with revenue up 2.5% at constant currency. Growth in metals processing in India and China, North American CPI project revenue, and energy-storage demand supported the division. However, European revenue was affected by lower investment in process industries. Operational challenges, mainly equipment failures at its principal North American facility, affected margins earlier in the year but have been addressed, management said.
European caution and energy opportunities
During the question-and-answer session, Caby said Morgan was seeing customer caution in European industrial markets, particularly in Thermal Products and increasingly in parts of Performance Carbon. He attributed the trend to reluctance to undertake major plant turnarounds or capacity expansions amid the geopolitical environment, and said the company expects similar conditions in the second half.
Energy growth was spread across several applications, according to Caby. He cited increased demand for industrial gas turbines linked to AI and data centers, along with growth in wind and battery storage. The company said it is gaining market share in some applications through differentiated materials and closer engagement with original equipment manufacturers.
Morgan also said sales in a semiconductor-related business tied to memory-chip manufacturing had rebounded. Meanwhile, demand for certain materials used in silicon carbide semiconductors has shifted substantially toward China, leaving utilization of recently added capacity lower than originally anticipated. The company is progressively commissioning that capacity as demand returns.
Strategy, costs and cash flow
The company is pursuing turnarounds at major sites representing roughly 20% of group revenue. At its Augusta, Georgia Thermal Products site, a new finished-inventory approach is 70% implemented, contributing to a reduction of more than 50% in lead times and 12% sales growth, Caby said. Morgan expects material and sustainable margin benefits from the turnaround beginning in 2027.
It is also closing its Hayward, California ceramics site and transferring production to other U.S. and European locations. Benefits from that relocation are expected to begin contributing from 2028.
Restructuring costs totaled £9.4 million in the first half, including costs associated with the Hayward closure. Morgan expects simplification costs of around £10 million for 2026, concluding a program expected to deliver £27 million of annual run-rate cost benefits for £45 million of implementation costs.
Specific adjusting items were £18.4 million, including £11.5 million related to implementation of a group-wide ERP system. Total ERP expenditure is expected to be £22 million to £24 million in 2026, with the program winding down toward the end of 2027.
Free cash flow was an inflow of £3.5 million, compared with a working-capital outflow of £23.5 million reflecting usual first-half seasonality. Net debt was £253 million, excluding lease liabilities, equal to two times EBITDA. The company expects year-end leverage of around 1.7 times, helped by second-half cash flow and the planned sale of its Foseco India stake.
Outlook and portfolio review
Morgan maintained its 2026 outlook for organic constant-currency revenue growth of around 2%. It expects second-half adjusted operating margin to be broadly in line with the first-half margin excluding the £8.9 million take-or-pay benefit, while noting a foreign-exchange headwind.
The company continues to target a 12% operating margin by 2028. It said site turnarounds and procurement initiatives are expected to provide at least £20 million of margin improvement by that year.
Morgan is also continuing a strategic review of its Thermal Products division. Caby said the group has assessed the division’s growth prospects and is preparing for several alternatives, including a potential sale, though no decision has been made.
About Morgan Advanced Materials (LON:MGAM)
Morgan Advanced Materials plc operates as a materials science and application engineering company primarily the United Kingdom. It serves customers in the industrial, transportation, petrochemical and chemical, energy, semiconductor and electronics, healthcare, and security and defense markets. The company was formerly known as The Morgan Crucible Company plc and changed its name to Morgan Advanced Materials plc in March 2013. Morgan Advanced Materials plc was founded in 1856 and is headquartered in Windsor, the United Kingdom.
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