ii view: Johnson Matthey beats forecasts but faces headwinds

First-half results to 30 September

• Revenues up 1% to £5.35 billion
• Adjusted operating profit from continuing operations up 34% to £142 million
• Interim dividend unchanged at 22p per share
• Net debt of £971 million, up from £815 million as of late March 

Guidance:

• Continues to expect to adjusted operating profit at the higher end of a mid-single digit percentage range

Chief executive Liam Condon said:

“Our focus on increased efficiency has driven a strong first half performance with significant growth in pro forma underlying operating profit. The carve out of Catalyst Technologies is progressing well and we remain on track to complete the transaction by the first half of calendar year 2026.

“Looking ahead, with momentum building in efficiency and cash generation, we are on track to achieve our medium-term targets and deliver materially enhanced shareholder returns.”

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ii round-up:

Johnson Matthey (LSE:JMAT) detailed profits that beat City forecasts, driven by an ongoing efficiency gains, with the maker of pollution reduction products also announcing plans to streamline the management team.

First-half profits to late September excluding the now sold Catalyst Technologies business, rose by a third to £142 million, beating analyst hopes of £132 million. The leadership team will reduce from nine to six executives. A new facility in Royston, Hertfordshire, aimed at increasing efficiency will now open in 2027 rather than 2026. 

Shares in the FTSE 250 company fell 3% in post results trading. JMAT shares came into these latest results up by more than half so far in 2025. The FTSE 250 index is up 3% year-to-date. 

Johnson’s continuing operations are now focused on Clean Air, making vehicle exhaust catalytic converter pollution reduction units; Platinum Group Metals (PGMs), recycling scrapped exhausts for their platinum to resupply; and Hydrogen Technologies making components for fuel cells and electrolysers.  

Management’s push for a more focused, lean and cash generative business underpinned a 2% increase in profit margin at the Clean Air division to 12.4%. A full-year margin of 14% to 15% continues to be pursued. 

Higher platinum group metal prices aided performance for the PGM division, although the delay in the new processing plant leaves the company facing increased maintenance costs for the current aged refinery as well as lower metal recoveries.

An £18 million loss for the Hydrogen Technologies business improved from a loss of £26 million during the first half of last year, with management continuing to forecast a breakeven position by the end of this financial year. 

Group guidance for the full year is unchanged. A declared interim dividend of 22p per share, payable to eligible shareholders on 3 February, is unchanged from last year.

Annual results to 31 March are scheduled for 28 May.  

ii view:

Started in 1817, Johnson Matthey today employs more than 10,000 people. Clean Air generated most profits over its last financial year at £273 million. That was followed by PGM at £151 million, with Hydrogen Technologies making a loss of £39 million. The now discontinued catalyst technologies business made a profit of £90 million. Geographically, major group markets include the UK, the USA, China and Germany. 

For investors, the sale of the catalyst technologies business along with previous sales of battery materials and medical devices divisions now leaves Johnson Matthey less product diverse. A broad move towards electric vehicles will reduce demand for catalytic converters. The hydrogen business has been loss-making, with group investment reduced given slower demand, while a forecast price/earnings (PE) ratio in line with the three-year average may suggest the shares are not obviously cheap.  

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More favourably, cost savings and efficiencies continue to be pursued. A previously announced reduction in capital expenditure is expected to boost group cash generation, and shareholder returns. The sale price achieved for the catalyst technologies business was above City hopes, with proceeds being returned to shareholders, while a global energy transition could yet benefit the Hydrogen business.

In all, a portfolio of fewer energy transition businesses reduces excitement about growth potential. That said, a need for pollution reduction products is unlikely to vanish anytime soon, with a forward dividend yield of close to 4% potentially keeping income investors interested.  

Positives: 

• Reduced capital expenditure
• Hydrogen technology opportunities 

Negatives:

• Expected demand fall for catalytic converters 
• Subject to currency headwinds

The average rating of stock market analysts:

Strong hold