ii view: refocused green play Johnson Matthey off to good start

First-half trading update to 30 September

ii round-up:

Pollution reduction product maker Johnson Matthey (LSE:JMAT) today flagged an expected strong first-half profit performance driven by continuing efficiency measures and robust trading for its Platinum Group Metals (PGMs) recycling business.

As such, and aided by higher precious metal prices and currency moves, full-year adjusted operating profit is now expected to come in at the higher end of management’s prior mid-single digit growth forecast. The performance now excludes its previously sold catalyst technologies business.

Shares in the FTSE 250 company rose 1% in early UK trading having come into this latest news up by just over a half so far in 2025. The FTSE 250 index is up almost 7% year-to-date. Platinum miner Anglo American (LSE:AAL) is up by more than 40% over that time. 

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Johnson Matthey’s remaining operations are now focused on Clean Air, making vehicle exhaust catalytic converter pollution reduction units, PGM, recycling scrapped exhausts for their platinum to resupply, and Hydrogen Technologies making components for fuel cells and electrolysers.  

The group, which is present in more than 20 countries globally, now expects a significant year-on-year improvement in first-half free cash flow, pushing a material improvement in the full year performance for the metric. 

The catalyst technologies business, sold for £1.8 billion to Honeywell International, is expected to report materially lower first-half profits, hindered by weaker demand and the timing of licensing wins.

First-half results are scheduled for 20 November.

ii view:

Began 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 discounted 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 disposals of Battery Materials and Medical devices divisions now leaves Johnson Matthey less product diverse. A broad move towards electric vehicles will reduce demand for emission reducing clean air or catalytic converters. The hydrogen business has been loss-making, with group investment reduced given slower demand, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap.  

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On the upside, cost savings of £200 million were achieved over the group’s last financial year with the efficiency drive ongoing. A previously announced reduction in capital expenditure was 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 see the Hydrogen business benefitting.  

On balance, a portfolio of fewer energy transition businesses offers lower potential future growth excitement. That said, a need for pollution reduction products is unlikely to vanish anytime soon, with a forward dividend yield of close to 4% likely to keep 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