Johnson Matthey(US:JMPLY)2023-11-22 20:21Financial Data and Key Metrics Changes - Sales decreased by 1% to just under GBP2 billion, while operating profit decreased by 15% due to significant reductions in average metal prices [17][18] - Underlying operating profit increased by 10% to GBP244 million, excluding the impact of foreign exchange and metal prices [21] - Earnings per share decreased due to higher taxes and increased finance charges [18][19] Business Line Data and Key Metrics Changes - Clean Air sales grew by 4%, supported by increased pricing and slightly higher volumes [20][28] - Catalyst Technologies sales increased by 5%, with improved pricing and good growth in formaldehyde [33] - Hydrogen Technologies sales surged by 61% as the business scales [35] - PGM Services sales decreased by 16% to GBP230 million, driven by lower average metal prices and reduced recycling volumes [31] Market Data and Key Metrics Changes - The average price of rhodium has declined significantly, impacting the PGM services [31] - Clean Air outperformed in Asia but underperformed in Europe due to a weaker product mix [29] - The company expects limited growth in vehicle production this year, affecting margins [38] Company Strategy and Development Direction - The company is focused on a transformation journey aimed at sustainable growth and value creation [8][15] - Strategic milestones are on track, with a particular emphasis on improving operational efficiencies and commercial capabilities [12][14] - The company is committed to divesting non-core value businesses, with total cash proceeds from divestments expected to reach at least GBP300 million by the end of '23/'24 [25] Management's Comments on Operating Environment and Future Outlook - The management highlighted a volatile operating environment due to geopolitical conflicts and inflation [5][6] - The company expects at least high single-digit growth in operating performance, assuming constant currency and metal prices [37] - Management remains optimistic about the growth potential in Clean Air and Catalyst Technologies, while acknowledging challenges in PGM services [38][39] Other Important Information - The company maintained a strong balance sheet with net debt around GBP1 billion and a net debt-to-EBITDA ratio of 1.7 times [19] - Capital expenditure for the three years to '24/'25 is now expected to be GBP1 billion, a reduction of 10% [41] - The company is on track to generate at least GBP4 billion of cash through 2031 [30] Q&A Session Summary Question: Impact of Global Business Services on Cost Structure - Management explained that Global Business Services aims to improve processes and reduce costs significantly, with expected savings of GBP15 million this year [81][84] Question: Value Proposition and Pricing Strategy - The company is enhancing its commercial capabilities, focusing on cross-selling and value-based pricing to improve customer relationships and margins [82][89] Question: Volume and Pricing Outlook - Management indicated that overall performance is not dependent on volume increases but rather on pricing and transformation benefits, with expectations for volume growth in the second half [94][96] Question: EV Penetration Impact on Business - Management noted differing expectations for EV penetration across regions, with a positive outlook for China but caution regarding other markets [99][100]