Johnson Matthey’s profits decline by 25% amid supply chain troubles
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Johnson Matthey’s profits fall by a quarter as a chemical company is hit by supply problems and China Covid rules
- Underlying operating profit fell to £222m in the six months ended September
- Johnson Matthey’s decision to leave Russia caused a major loss in catalyst sales
- On a reported basis, the FTSE 250 chemicals maker recovered to a profit of £150m
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Johnson Matthey’s profits have plummeted amid falling prices of platinum group metals and supply chain difficulties.
The specialty chemicals maker revealed that underlying operating income fell by a quarter to £222 million in the six months ended September, compared to the same period last year.
It said demand for catalytic converters had been impacted by China’s Covid lockdown policies and the global shortage of semiconductors hitting diesel vehicle production.
Share buyback: Johnson Matthey originally announced its intention to run the £200m buyback program when publishing its first half results in November
Further disruption was caused by the intensifying war in Ukraine, which led the company to exit the Russian market, resulting in a significant loss of catalyst sales and higher license revenues.
Johnson Matthey also lost sales in its PGM Services division after a roughly 30 percent drop in rhodium prices and a brisk used car market, which reduced auto scrap volumes at its refineries.
Excluding precious metals, total sales were still up 10 per cent to £2.04 billion as price increases offset a decline in emissions control catalyst volumes and the company saw increased demand for e-bike batteries and components for medical devices.
And on a reported basis, the FTSE 250 company bounced back to a profit of £150m after making an interim loss of £24m last year following a hefty suit for exiting the battery materials market.
For the current financial year, Johnson Matthey forecasts operating profit to be in the consensus range of £458m to £516m despite ‘ongoing political and economic uncertainty’.
The group expects better performance from its clean air division in the second half of the period as car production volumes recover, as well as a stronger performance from PGM Services.
“We are focused on effectively navigating the near-term macroeconomic challenges impacting our business, including significant cost inflation, which we have partially recovered in half,” said CEO Liam Condon.
Condon, who joined in May after a long stint with pharmaceutical giant Bayer, added that the company will benefit from the “growing need” for renewable energy in Europe and the Inflation Reduction Act (IRA) in the United States.
US President Joe Biden’s groundbreaking climate change legislation has earmarked $369 billion for energy security and climate change programs over the next decade.
Johnson Matthey believes the law will boost its hydrogen technologies business, which produces catalyst-coated membranes for use in electrolysers and fuel cells.
But it warned of a bigger operating loss in this business due to investment in the division’s growth, including the construction of a new factory in Royston, Hertfordshire.
Johnson Matthew shares were down 1 per cent by mid-morning Wednesday to £20.13, meaning their value has fallen by around 10 per cent over the past six months.