Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — H1 2020/21 Earnings Presentation
36 slides from Johnson Matthey's earnings presentation, Nov 19, 2020
Slide 1: Presentation of results for the six months ended 30th September 2020
Presentation of results for the six months ended 30th September 2020 19th November 2020
Slide 2: Cautionary statement
Cautionary statement This presentation contains forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which Johnson Matthey operates. It is believed that t
Slide 3: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive 3
Slide 4: Successfully navigating a challenging period and well positioned for the future
Successfully navigating a challenging period and well positioned for the future Recovering strongly and performance ahead of market expectations Creating a more simple, agile and efficient group Investing in climate change solutions to drive medium term growth Note: All growth rates in this presenta
Slide 5: Highlights
Highlights Good performance in a challenging period Structural improvements to our operating model • Delivering on efficiencies • Reducing precious metal working capital Executing on growth opportunities • Battery Materials progress with customers • Fuel Cells progress with customers and capacity 5
Slide 6: Creating a more simple, agile and efficient group
Creating a more simple, agile and efficient group Driving cost efficiency Transforming Driving balance sheet efficiency the group Focusing our portfolio Structurally improving our business 6
Slide 7: Anna Manz, Chief Financial Officer
Anna Manz Chief Financial Officer 7
Slide 8: Group sales down in a challenging environment
Group sales down in a challenging environment (20%) £2,124m (£24m) 8% £8m £5m (£372m) (£48m) (£14m) £1,679m (27%) (10%) (8%) Half year 2019/20 Translational FX Clean Air Efficient Natural Health New Markets Eliminations Half year 2020/21 Resources 8
Slide 9: Group underlying operating profit largely driven by Clean Air
Group underlying operating profit largely driven by Clean Air (42%) £265m (£3m) £13m (£100m) (£12m) (£3m) (£9m) £151m (56%) (12%) (21%) Half year 2019/20 Translational FX Clean Air Efficient Natural Health New Markets Corporate Half year 2020/21 Resources Note: In 1H 2019/20 there was a £10m pension
Slide 10: Clean Air: recovering strongly
Clean Air: recovering strongly Sales down 27% Sales impacted by COVID-19 Apr May Jun Jul Aug Sep Oct • Strong recovery in demand £1,392m (£17m) 17% 14% £32m • China above prior year (75%)(60%) (20%) (£213m) (1%) (2%) • OEMs rebuilding inventory (£179m) (£12m) £1,003m Operating profit down 56% • Flex
Slide 11: Efficient Natural Resources: weaker demand in Catalyst Technologies
Efficient Natural Resources: weaker demand in Catalyst Technologies Sales down 10% (10%) Sales down 10% • Weaker demand and usual cyclicality of orders in Catalyst Technologies £496m (£3m) 26% • Licensing down but strong pipeline £40m (£22m) • PGM Services benefited from higher (£65m) £446m and more
Slide 12: Health: benefiting from new supply agreements
Health: benefiting from new supply agreements Sales up 8% Sales up 8% 8% • Immunomedics developing well £4m £5m • Benefits from customer contracts in £119m opioid addiction therapies £111m (£1m) • Loss of innovator drug in prior year • New generic and innovator supply agreements drive future growth
Slide 13: New Markets: strong Fuel Cells sales growth of 30%
New Markets: strong Fuel Cells sales growth of 30% Sales down 8% Sales down 8% (8%) • Fuel Cells grew strongly, up 30% £4m • Battery Systems and Medical Device £2m £186m (£4m) Components affected by COVID-19 (£10m) (£8m) (£2m) £168m Operating profit of £5 million • Better mix in Life Science Technol
Slide 14: Operating performance
Operating performance % change, Underlying results for 2020 2019 % change constant half year ended 30th September1 £m £m rates Sales excluding precious metals (sales) 1,679 2,124 -21 -20 Operating profit 151 265 -43 -42 Finance charges (41) (36) Share of profit of joint venture and associate (1) 2 P
Slide 15: Reported results impacted by one-offs
Reported results impacted by one-offs Half year ended 30th September 2020 2019 £m £m Underlying operating profit 151 265 Amortisation of acquired intangibles (5) (6) Major impairment and restructuring charges1 (78) - Reported operating profit 68 259 1. £78m major impairment and restructuring charges
Slide 16: Delivering on efficiency initiatives
Delivering on efficiency initiatives Annualised Delivered £m benefits by to date 2022/23 Restructuring (2017) 25 25 Health footprint optimisation 20 20 Procurement¹ 84 100 Clean Air footprint 3 30 Group wide organisational efficiency 8 50 Total 140 225 On track to deliver total annualised cost savin
Slide 17: Fundamentally changing our metal operating model
Fundamentally changing our metal operating model Structural improvements to reduce Precious metal working capital precious metal working capital: • Optimising metal across our businesses £959m c.£300m • Contracting more effectively with customers reduction • Improving refinery efficiency £597m £313m
Slide 18: Strong balance sheet maintained
Strong balance sheet maintained Good access to liquidity of c.£1.8bn Net debt improved to £878m from £1.1bn in March 2020 Robust balance sheet with net debt to EBITDA of 1.6 times Net debt to EBITDA at bottom end of target range • Despite impact of COVID-19 on EBITDA and Clean Air recovery 18
Slide 19: Improved free cash flow
Improved free cash flow Free cash flow (£m) Half year ended 30th September 2020 2019 Underlying operating profit 151 265 Depreciation and amortisation1 85 85 Impairments - 8 Precious metal working capital 297 (352) inflow / (outflow) Non precious metal working capital 19 (115) inflow (outflow) Net w
Slide 20: Outlook for year ended 31st March 2021
Outlook for year ended 31st March 2021 Group Not providing quantitative guidance although expect materially stronger second half Efficiencies Efficiency initiatives will deliver £59m by 31st March 2021¹ Capex Committed to strategic growth investments; capex expected to be up to £400m 1. £59m include
Slide 21: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive
Slide 22: Driving growth from our established businesses
Driving growth from our established businesses • Legislation driving value uplift, especially in Asia Clean Air • Driving efficiency with new operating model and global manufacturing footprint • Accelerating development of new products focused on the energy transition Efficient Natural • Positive mo
Slide 23: New operating model in Clean Air
Gliwice, Poland New operating model in Clean Air Poland and China ramping up Global manufacturing footprint focused on 5 standardised world class plants Zhangjiagang, China Transforming our model from local to global with greater agility and efficiency Delivering a better service to our customers 23
Slide 24: Executing now to capture medium term growth
Executing now to capture medium term growth Move to net zero is accelerating JM is enabling the move with our portfolio of sustainable technologies Investing in areas where we have a competitive advantage Battery Blue Green Fuel Cells Materials hydrogen hydrogen 24
Slide 25: Battery Materials: substantial customer progress
Battery Materials: substantial customer progress Significant market – c.1.7m tonnes by 2030¹ Demand for highly customised product Progressing customers through development pipeline Two non-auto customers in cell prototyping Second UK application centre open and supporting customer testing 1. Automot
Slide 26: Battery Materials: accelerating scale up plans
Battery Materials: accelerating scale up plans Commercialisation Commercial plant in Poland • First plant on track to be operational in 2022; commercial auto production in 2024 • All in cost to commercial production expected to be c.£550m • Cost increase allows for flexibility and speed to market Sc
Slide 27: We are strongly positioned in hydrogen
We are strongly positioned in hydrogen 01 02 03 Fuel cell Blue Green technologies hydrogen production hydrogen production Use of hydrogen Hydrogen production technologies 27
Slide 28: Fuel cells: strong growth supported by customers and new capacity
Fuel cells: strong growth supported by customers and new capacity Performance Capacity Customers Development projects Sales grew strongly, Expanding capacity Progress with Development projects up 30% to £19m • China complete leading Chinese with major global OEMs truck and auto OEMs • UK online by e
Slide 29: A significant opportunity in hydrogen production
A significant opportunity in hydrogen production Blue hydrogen Green hydrogen JM has leading technology PEM (proton exchange membrane) technology is comparable to fuel cells Already being commercialised in world scale HyNet and Acorn projects Strong competitive advantage in pgm catalysis Working wit
Slide 30: Well positioned for the future
Well positioned for the future Strong recovery in performance through the half Creating a more simple, agile and efficient group Driving growth from our established businesses Climate change solutions driving medium term growth 30
Slide 31: Appendix
Appendix 31
Slide 32: Net debt to EBITDA 1.6 times
Net debt to EBITDA 1.6 times1 £m £m Net debt at the beginning of the year (1,094) Free cash flow 256 Dividends (60) Movement in net debt 196 Lease adjustments 6 Net debt before FX (892) FX2 14 Net debt at the end of the period (878) 1. Net debt including post tax pension deficits. 2. £19m FX and (£5
Slide 33: Average non precious metal working capital days
Average non precious metal working capital days Average working capital days excluding precious metals, Average working capital days half year ended 30th September increased to 70 days 70 Targeting average non precious metal working capital of 50 to 60 days 63 61 61 2017 2018 2019 2020 33
Slide 34: Return on invested capital
Return on invested capital ROIC of 10.4%, down 4.6ppt 15.0% Primarily driven by lower group operating profit (3.4%) (0.9%) (0.3%) 10.4% Half year 2019/20 Operating profit Capital expenditure Precious metal Half year 2020/21 working capital 34
Slide 35: Light duty emissions control legislation roadmap
Light duty emissions control legislation roadmap 2017 2018 2019 2020 2021 2022 2023 2024 2025 → Europe EU6c / Euro 6d temp EU6d (95 g/km CO2, 2021) EU7 (est.) North America EPA Tier 3 Phase In: NMOG + NOx, PM Tightening PM = North America CARB LEV III Phase In: NMOG + NOx, PM Tightening LEV III Furt
Slide 36: Heavy duty emissions control legislation roadmap
Heavy duty emissions control legislation roadmap On road 2017 2018 2019 2020 2021 2022 2023 2024 2025 → Europe EU VI EU VII (est.) North America GHG Phase 1 GHG Phase 2 North America (CARB) GHG Phase 1 GHG Phase 2 CARB 24 (est.) Japan JP 16 South Korea EU VI EU VII (est.) Brazil P7 (EU V) P8 Russia