Johnson Matthey(US:JMPLY)2024-11-27 19:19Financial Data and Key Metrics Changes - The company reported a 3% decrease in sales on a continuing basis, amounting to GBP1.7 billion, and a 4% decline in underlying operating profit [20][23] - Free cash flow was GBP347 million, driven by proceeds from the disposal of Medical Device Components [21] - Net debt closed at GBP783 million, lower than year-end, with a net debt to EBITDA ratio of 1.4 times [22][36] Business Line Data and Key Metrics Changes - Clean Air sales decreased by 7% to GBP1.2 billion, impacted by weak end markets and platform losses [23][30] - PGM Services sales fell by 9% to GBP207 million, primarily due to lower refining volumes and trading business performance [24][31] - Catalyst Technologies experienced a 20% increase in sales to GBP336 million, with operating profit rising by 43% to GBP50 million [24][33] - Hydrogen Technologies saw sales decline to GBP20 million, resulting in an operating loss of GBP26 million [35] Market Data and Key Metrics Changes - The automotive environment remains challenging, with global vehicle production declining across both light and heavy-duty segments [30] - The company expects a strong second half for PGM Services, driven by higher volumes and increased metal recoveries [39] Company Strategy and Development Direction - The company is focused on transformation and efficiency improvements, with a target of GBP200 million in cost savings for the year [26][60] - Strategic milestones are on track, with a focus on Clean Air and Catalyst Technologies as key growth drivers [44][45] - The company is pursuing opportunities in sustainable technologies, with a strong pipeline of projects [49][50] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a challenging macroeconomic backdrop but emphasizes control over internal transformation efforts [7][8] - Confidence in a strong second half is based on expected improvements in PGM Services and ongoing transformation benefits [6][39] - The company maintains its full-year guidance, expecting at least mid-single-digit growth in operating performance [41] Other Important Information - The company is in the midst of a GBP250 million share buyback program, with half completed by September [22][18] - The new PGM refinery is on budget and on schedule to start commissioning by the end of '25-'26, expected to improve efficiency and reduce working capital [59][95] Q&A Session Summary Question: Visibility on auto markets and guidance for H2 - Management indicated that the decline in Clean Air sales was roughly half due to market conditions and half due to platform losses, with no significant volume recovery expected in the auto market [69][70] Question: Level of R&D in Clean Air and regulatory backdrop - R&D spend for Clean Air is around GBP100 million, primarily focused on new emissions regulations, with expectations for a significant decline in R&D costs post-regulation updates [77][78] Question: Ranking of recovery elements in PGM Services - Management identified refining volumes, life science technology volumes, metal recoveries, and efficiencies as key elements for recovery, with low risk associated with these factors [81][82] Question: Context on US tariffs and localized production - The company has a diversified manufacturing footprint in the US, minimizing the impact of potential tariffs, with only about 5% of sales affected by Canada and Mexico [86][88]