TIDMJMAT

RNS Number : 7478U

Johnson Matthey PLC

08 April 2021

Pre-close trading update and strategic review of Health business

 
Johnson Matthey releases a pre-close trading update for the financial 
 year ended 31(st) March 2021, ahead of its full year results scheduled 
 for 27(th) May 2021. 
 
Robert MacLeod, Chief Executive commented: 
In what has been an extraordinary year, I would like to thank all of 
 our employees for their dedication and efforts throughout this time. 
 I am very pleased with the progress we made, particularly in the second 
 half. As a result, group operating performance for the year is expected 
 to be around the top end of market expectations, alongside continued 
 strong management of working capital. In the year, we continued to 
 execute our growth strategy at pace. We are driving cashflow from our 
 more established businesses to invest in our suite of exciting sustainable 
 technologies that will enable decarbonisation and enhance circularity, 
 including our portfolio of eLNO battery materials and hydrogen technologies. 
 We have commenced a strategic review of Health, as we continue to focus 
 resources to maximise value for our shareholders. As the world builds 
 back greener following the pandemic, we have an important role to play 
 in helping society address climate change through our sustainable technologies, 
 and we remain focused on commercialising these and delivering our growth 
 ambitions. 
 
Update for the year ended 31(st) March 2021 
In 2020/21, group operating performance is expected to be around the 
 top end of market expectations(1)(,) (2). Following the disruption 
 from COVID-19 earlier in the year, our second half was materially stronger. 
 This reflected increased activity in autos and other key end markets, 
 and the actions taken to transform our business including tight cost 
 management. Our strong operational performance has enabled us to continue 
 to invest at pace into our strategic growth projects. 
 
Strategic review of Health business 
We continue to review our portfolio to focus on areas of greatest opportunity 
 to maximise value for our shareholders. As part of that ongoing process, 
 we are undertaking a strategic review of our Health business. 
 
Clean Air saw a strong recovery in demand 
Following the disruption from the pandemic at the start of the year, 
 we saw a strong recovery in demand across all regions towards the end 
 of our first half. This strength continued through the second half, 
 with global auto production better than previous expectations. As a 
 result, Clean Air full year operating performance is expected to be 
 only moderately below the prior year. We expect a significant improvement 
 in margin in the second half to above 13% and approaching pre-COVID-19 
 levels, driven by an improvement in volumes and early benefits from 
 our transformation programme. In our final quarter, there was limited 
 impact on automotive OEM customer production levels from the shortage 
 of semi-conductor chips. As we transform Clean Air and ramp up our 
 new highly efficient plants in Europe and Asia, we remain focused on 
 driving efficiency and cash generation across our business. 
 
 
Notes: 
Unless otherwise stated, commentary refers to performance at constant 
 rates. Growth at constant rates excludes the translation impact of foreign 
 exchange movements, with 2019/20 results converted at 2020/21 average 
 exchange rates. 
1.                                                         In 2020/21, the translation impact of exchange rates on 
                                                           group underlying 
                                                           operating profit is expected to be negative 
                                                           c.GBP6 million. 
2.                                                         Vara consensus for full year underlying operating profit in 
                                                           2020/21 
                                                           is GBP469 million (range: GBP405 million to GBP502 
                                                           million). 2019/20 
                                                           underlying operating profit was GBP539 million. 
By region, Asia was strong - particularly China - driven 
mainly by 
increased volumes from higher consumer demand supported by 
government 
stimulus, and inventory rebuild, as well as some benefits 
from China 
6 legislation. In Europe and Americas, following the 
temporary disruption 
in the first quarter, there was a steady improvement in 
demand. We 
expect to see the benefits of the rebound in the US Class 8 
truck cycle 
in 2021/22, given the recent strength of orders in that 
market. 
 
Efficient Natural Resources performed strongly 
Efficient Natural Resources' performed strongly with full 
year operating 
performance expected to be broadly in line with the prior 
year, despite 
challenges from COVID-19. Catalyst Technologies was lower 
driven by 
weaker demand due to COVID-19 and the comparison to a 
strong performance 
in the prior year from methanol and ammonia catalyst 
refills. We continue 
to see positive momentum in licensing. During the year we 
won 10 new 
licences across various segments and we have a strong 
pipeline of future 
projects. We also made good progress on commercialising our 
new technologies 
which enable decarbonisation, including our low carbon 
hydrogen offering 
(blue hydrogen) where we are currently working on a 
growing, global 
pipeline of around 15 projects in a market with significant 
growth 
opportunity. 
 
In PGM Services performance was exceptionally strong in our 
refinery 
and trading businesses, benefiting from more volatile and 
higher average 
precious metal prices. We made excellent progress in 
reducing our refinery 
backlogs and we expect to end the year at historically low 
levels, 
representing a significant improvement in precious metal 
working capital 
volumes. 
 
Health benefited from new customer contracts 
In Health, we expect full year operating performance to be 
above the 
prior year. This reflects continued progress with our new 
customer 
contracts for active pharmaceutical ingredients used in 
generic opioid 
addiction therapies and our work with innovator customers, 
particularly 
the supply of an immuno-oncology drug linker to Gilead 
(formerly Immunomedics). 
 
New Markets - further progress with eLNO, fuel cells and 
green hydrogen 
In New Markets, we expect full year operating performance 
to be above 
the prior year. In Battery Materials, commercialisation of 
our high 
nickel cathode material, eLNO, remains on track. The 
construction of 
our first commercial plant is on schedule and we are making 
progress 
with our plans for a second commercial plant with 30kt 
capacity. We 
continue to carefully evaluate a range of scale up models 
for our battery 
materials business, including strategic partnerships. 
 
Fuel Cells continued its rapid growth, with sales expected 
to be up 
over 20% for the full year. We are supplying key fuel cell 
components 
for a range of automotive, non-automotive and stationary 
applications. 
Most recently, we signed a memorandum of understanding with 
a major 
European automotive supplier for the long term supply of 
components 
for automotive applications. In addition, we have existing 
supply contracts 
with fuel cell players including Doosan, SFC, Unilia and 
Sino Fuel 
Cell plus a number of joint development programmes in place 
with automotive 
and truck OEMs, stack and system manufacturers. We have 
completed the 
doubling of our manufacturing capacity in the UK and China 
to give 
an overall capacity of 2GW and, given the sizeable 
opportunity, we 
are already working on major capacity expansion plans. 
 
Our green hydrogen business builds on our fuel cells 
technology, leading 
pgm expertise and circularity offering. We are making fast 
progress 
and have received positive feedback from testing with 
leading electrolyser 
manufacturers. We recently announced new manufacturing 
capacity for 
products used in green hydrogen production, with the 
ability to scale 
to multi-GW capacity as the market continues its 
anticipated growth. 
 
Maintained strong balance sheet 
As part of our continued focus on balance sheet efficiency, 
our leverage 
ratio (net debt to EBITDA) is expected to be below our 
target range 
of 1.5 to 2.0 times, with net debt under GBP850 million. 
This is despite 
a backdrop of higher average precious metal prices and 
increased activity 
within the Clean Air business, reflecting the significant 
improvement 
we have made across the group through our ongoing programme 
of precious 
metal working capital management. 
 
Efficiency initiatives on track 
We remain focused on driving efficiency and are making good 
progress 
against our targeted annualised savings of c.GBP225 million 
by 2022/23. 
For the year ended 31(st) March 2021, we expect to deliver 
benefits 
of c.GBP60 million(3) as planned. 
 
Foreign exchange 
In 2020/21, the translation impact of exchange rates on 
group underlying 
operating profit is expected to be negative c.GBP6 million 
based on 
average exchange rates of GBP:$ 1.31, GBP:EUR 1.12, GBP:RMB 
8.85. A 
one cent change in the average US dollar exchange rate has 
an impact 
of approximately GBP1 million on full year underlying 
operating profit, 
a one cent change in the average euro exchange rate has an 
impact of 
approximately GBP2 million and a ten fen change in the 
average rate 
of the Chinese renminbi has an impact of approximately GBP1 
million. 
 
Full year results: We plan to announce our full year 
results for the 
year ended 31(st) March 2021 as scheduled on Thursday 
27(th) May 2021.

Ends

 
Enquiries: 
Investor Relations    Director of Investor Relations        020 7269 8241 
 Martin Dunwoodie      Senior Investor Relations Manager     020 7269 8235 
 Louise Curran         Investor Relations Manager            020 7269 8242 
 Jane Crosby 
 
 Media                                                      020 7269 8407 
  Sally Jones         Director of Corporate Relations        020 7353 4200 
  Simon Pilkington     Tulchan Communications 
 
 
Notes: 
eLNO is a trademark of Johnson Matthey Public Limited Company. 
3.  c.GBP60 million includes GBP30 million relating to Clean Air footprint 
     and driving group organisational efficiency, and GBP29 million of 
     procurement savings.

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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