Johnson Matthey(US:JMPLY)2021-11-24 17:10Financial Data and Key Metrics Changes - The company reported a 21% increase in group sales to £1.9 billion compared to £1.7 billion in the same period last year [71] - Underlying operating profit doubled to £293 million, driven by higher sales and efficiency improvements [67][72] - Underlying earnings per share increased from £0.48 to £1.15 [91] Business Line Data and Key Metrics Changes - Clean Air sales increased by 24% to £1.2 billion, with operating profit doubling to £150 million [73][76] - Efficient Natural Resources saw sales grow by 33% to £523 million, with underlying operating profit more than doubling to £197 million [78][81] - Health segment sales decreased by 26% due to labor shortages and pricing pressures [82] Market Data and Key Metrics Changes - The Clean Air business is expected to generate over £4 billion in cash over the next 10 years, driven by regulatory changes [29] - The company is experiencing challenges in the automotive market due to supply chain shortages, particularly in microchips [75] - Precious metal prices remain high, contributing approximately £70 million to profits, although prices have declined from year-end levels [72] Company Strategy and Development Direction - The company announced its intention to exit the Battery Materials business to focus on higher-return growth opportunities [6][20] - A new CEO, Liam Condon, will join in March 2022, tasked with reviewing the company's strategy [12][16] - The company aims to leverage its scientific expertise in metals chemistry to focus on three growth areas: circularity, hydrogen technologies, and decarbonization of chemical processes [63] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging operating environment but emphasized strong foundations in Clean Air and Efficient Natural Resources [18][63] - The outlook for full-year underlying operating performance has been adjusted to low-single-digit growth due to supply chain issues and a decline in global auto production [101] - The company is committed to returning £200 million to shareholders through a buyback process [8][105] Other Important Information - The company has fully impaired its Battery Materials assets pending the sale process [21][88] - A share buyback of £200 million will commence in the new year following the sale of Advanced Glass Technologies [8][24] - The company is in discussions regarding the potential sale of its Health business [23] Q&A Session All Questions and Answers Question: Is the £200 million revenue target from hydrogen by 2025 still valid? - Yes, the company remains confident in achieving the £200 million target for fuel cells, supported by recent contracts and market acceleration [110] Question: Is the company being selective in Euro VII business? - Yes, the company is focusing on high-return customers and is being selective to maximize cash flow generation [111] Question: What is the annualized EBIT impact of the new markets? - The new markets are currently running at a negative EBIT, but this will improve as the Battery Materials costs are removed upon exit [114] Question: What is the target for working capital days? - The target for working capital days remains 50 to 60, and the company expects to return to this range [113] Question: What is the expected CapEx breakdown? - The expected CapEx is £400 million, with £200 million for sustaining and the remainder for growth, particularly in hydrogen technologies and refinery upgrades [121] Question: Will cash from disposals be used for shareholder returns? - Yes, cash from disposals will be considered for shareholder returns, but the focus remains on investing in growth [129] Question: What is the approach to succession planning? - The existing team will continue executing the current strategy, and succession planning will involve both internal and external candidates [130] Question: Are there plans for further disposals beyond Health and Battery Materials? - The company will consider further disposals of non-core operations as part of its portfolio simplification strategy [131]