Johnson Matthey(US:JMPLY)2020-11-20 01:04Financial Data and Key Metrics Changes - Group sales were materially down, primarily due to COVID-19, with a 27% decline in sales [13] - Operating profit declined by 42%, although mitigated by a focus on cost efficiencies [14] - Free cash inflow improved to £256 million from a £382 million outflow in the previous year [34] - Underlying EPS was down materially, and finance charges were higher due to increased interest rates [24] Business Line Data and Key Metrics Changes - Clean Air: Sales down 27%, operating profit down 56%, but recovery in demand is noted [14][15] - Efficient Natural Resources: Sales down 10%, operating profit down 12%, but PGM Services saw double-digit growth due to higher metal prices [19][21] - Health: Sales grew in both Innovators and Generics, but operating profit declined by 21% due to a weaker business mix [22] - New Markets: Sales declined 8%, but Fuel Cells grew by 30% [23] Market Data and Key Metrics Changes - In Europe and the U.S., light-duty production is expected to decline by about 20%, while heavy-duty declines are around 30% [18] - The Chinese market is stronger and is likely to be above the prior year [18] Company Strategy and Development Direction - The company is focusing on climate change solutions and has made significant changes to create a more efficient organization [5][11] - Plans to scale up in Battery Materials and expand capacity in Fuel Cells are underway [7][8] - The company aims to deliver annualized savings of around £225 million by the end of fiscal year 2022-2023 [9][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating through the challenging period and highlighted a strong recovery in the automotive sector, particularly in China [4][5] - The company expects a materially stronger second half compared to the first half, despite uncertainties [34] Other Important Information - The Board approved an interim dividend of £0.20 per share, with a commitment to return to pre-COVID levels when circumstances permit [25] - The company has maintained a strong balance sheet with access to £1.8 billion of liquidity [33] Q&A Session Summary Question: Details on eLNO capacity and customer engagement - Management expressed confidence in the need for additional capacity based on market opportunity and positive customer testing [62][63] Question: Green hydrogen engagement and CapEx requirements - Management confirmed ongoing engagement with key electrolyzer players and indicated that expansion costs would be in the tens of millions rather than hundreds [65] Question: Clarification on return targets for eLNO - Management clarified that the 10% to 15% return on invested capital is expected for the entire business, with the second plant moving towards that target [66][67] Question: Value uplift in Clean Air and CapEx plans - Management indicated that they are about one-third of the way through value uplift in light-duty vehicles in China and discussed future CapEx plans [72][86]