Johnson Matthey Plc

Johnson Matthey reported an 38% increase in underlying operating performance, with Clean Air up 11% and Platinum Group Metals Services up 33%. Clean Air margin rose by 200 basis points to 12.4%. Management said sales were modestly down, mainly because of Clean Air volume decline, while free cash flow improved from a significant outflow in the prior first half to a small inflow this half. Net debt increased, mainly due to Catalyst Technologies cash outflow in the first half, the dividend, and a stock build of circa GBP 200 million related to the U.S. refinery maintenance shut. The dividend is being maintained at 22p per share. For the outlook, management reaffirmed Clean Air margin guidance of 14% to 15% for the full year and 16% to 18% for 2027-28, reiterated run-rate breakeven for Hydrogen Technologies by March 2026, and said the new PGM refinery remains on track for commissioning by March 2026 despite a small delay. The company also reiterated its expectation to generate GBP 250 million of sustainable free cash flow going forward and to return GBP 1.4 billion to shareholders when the Catalyst Technologies deal closes.

Liam Condon emphasized that the half-year showed strong progress against the new strategy, especially in profitability, cash generation, and simplification of the group. He highlighted the focus on core PGM capabilities, stronger Clean Air execution, and the importance of the Catalyst Technologies divestment as part of creating a more streamlined JM. His tone was confident and upbeat, while acknowledging a few execution issues such as the refinery schedule slip and the need for more work on cash conversion.

Richard Pike focused on the financial turnaround and the mechanics behind it. He said the business is now excluding Catalyst Technologies from the reported numbers, noted the higher interest charge was due to prior-year one-offs, and stressed that the free cash flow improvement is being driven by better working capital discipline, with payables, receivables, and inventory all still offering further upside. He also said non-underlying costs will continue in the second half and into next year as JM reduces overheads and consolidates the Clean Air footprint, while CapEx remains elevated because of the new refinery and related infrastructure.

Analysts pressed on the refinery ramp-up cost, working capital execution, PGMS second-half weakness, exceptionals, customer behavior in PGM Services, autocat recycling volumes, and whether Clean Air saw any prebuild ahead of tariffs. Management said refinery ramp-up costs are still expected to be in the GBP 20 million to GBP 30 million range, that working capital gains are only the start because JM has been paying suppliers too quickly, collecting receivables too slowly, and carrying too much inventory, and that PGMS should be down in the second half because of lower volumes, higher maintenance, lower recoveries, and weaker prior-year comparables. They also said Clean Air had not seen any unusual tariff-related prebuild, and that the Catalyst Technologies sale is not dependent on operating performance, only regulatory approvals and carve-out work.