REG - Johnson Matthey PLC - Pre-close trading update

Johnson MattheyAnnouncement

08/04/2022 07:00

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RNS Number : 7210H  Johnson Matthey PLC  08 April 2022

News release
8 April 2022, 07:00 BST

 

 

 Johnson Matthey expects to report full year results in line with market expectations
 Johnson Matthey releases a pre-close trading update for the financial year
 ended

31(st) March 2022, ahead of its full year results scheduled for 26(th) 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 26(th) May.

 Robust performance in 2021/22 in a challenging environment(1)
 In 2021/22, group underlying operating performance is expected to be in line
 with current market expectations(2).

 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 decade(3), 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 31(st) March 2022, average Rhodium, Platinum and Palladium
 prices were up 29%, 11% and 6% year on year respectively.

 Other Markets
 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.(4)

 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 31(st) 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 17(th) 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

31(st) 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 7(th) 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 31(st) March 2023
 Looking forward to the year ending 31(st) 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 31(st) March 2022
 on

26(th) May 2022. Our strategy review is ongoing, and we will provide an update
 alongside our full year results.

 

 ENDS

 

 Enquiries:
 Investor Relations
 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
 Media
 Surinder Sian       Group Head of External Communications  +44 7435 971402

 Harry Cameron       Tulchan Communications                 +44 7799 152148

 

 

 Notes:
 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 7(th) April 2022. 2020/21 group
       underlying operating profit was

£504 million.
 3.    At least £4 billion of cash under our range of scenarios from 1(st) April
       2021 to 31(st) 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.

 Johnson Matthey Plc is listed on the London Stock Exchange (JMAT)
 Registered in England & Wales number: 00033774
 Legal Entity Identifier number: 2138001AVBSD1HSC6Z10

 

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