Johnson Matthey(JMPLY) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Overall operating performance was in line with market expectations, with underlying sales up 6% to £4.2 billion, operating profit down 21% to £465 million, and earnings per share at 179p compared to 213p last year [9][10][27] - Net debt stood at £1 billion, with a net debt-to-EBITDA ratio of 1.6x, at the lower end of the target range of 1.5x to 2x [10][12] - Proposed total dividend remained at 77p, consistent with the previous year [10] Business Line Data and Key Metrics Changes - Clean Air sales grew 2%, driven by increased pricing that offset a decline in volumes due to supply chain disruptions [11][16] - PGMS sales decreased 8% to £570 million, impacted by lower average metal prices and reduced refinery intakes [18] - Catalyst Technologies saw a 17% increase in sales to £560 million, primarily due to strong growth in licensing and refills [19] - Hydrogen Technologies revenues more than doubled to £55 million, mainly from fuel cells [20] Market Data and Key Metrics Changes - Clean Air experienced a 4% increase in light-duty diesel sales in Europe, while heavy-duty diesel sales were up 3% [16][17] - The market for Platinum Group Metals (PGMs) remains volatile, with significant price fluctuations affecting overall performance [26][68] Company Strategy and Development Direction - The company is focused on driving growth through its Catalyst Technologies and Hydrogen Technologies businesses, which are key to the net-zero transition [29][30] - Plans to divest non-core parts of the portfolio within the next 12 months to concentrate on growth areas [29] - The company aims to generate at least £4 billion in cash by 2031, supported by tighter emissions legislation and significant contract wins [55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing the net-zero transition as a significant growth driver due to increased regulatory pressure and incentives globally [4][32] - The company anticipates mid-single-digit growth in operating performance for the next year, assuming stable precious metal prices [25][26] - Management highlighted the importance of improving commercial capabilities and operational efficiencies to enhance margins [40][59] Other Important Information - The company has made progress in its cost transformation program, achieving £45 million in savings towards a target of at least £150 million by 2024 [21][27] - Significant investments are being made in Hydrogen Technologies to meet customer demand and scale up production [49][54] Q&A Session Summary Question: Guidance for next year regarding operating profit and cash generation from Clean Air - Management acknowledged high inflation and the need for cost savings, emphasizing that cash generation from Clean Air is expected to be lumpy but on track for long-term targets [64][66] Question: Explanation of metal price impacts and margin increase actions - Management noted the volatility of metal prices, particularly rhodium, and outlined strategies to mitigate risks through pricing and cost management [67][68]