Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — FY2021 Earnings Presentation
42 slides from Johnson Matthey's earnings presentation, May 27, 2021
Slide 1: Presentation of results for the full year ended 31st March 2021
Presentation of results for the full year ended 31st March 2021 27th May 2021
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: Robust performance and growth opportunities driven by sustainable solutions
Robust performance and growth opportunities driven by sustainable solutions Robust performance with strong second half recovery Investing at pace into sustainable technologies to drive growth Promoting a focused, high performance culture New and ambitious sustainability goals 4
Slide 5: Ambitious sustainability goals and net zero by 2040
Ambitious sustainability goals and net zero by 2040 01. A cleaner healthier world; today and for future generations 02. Net zero by 2040 03. Science based targets • Absolute reduction in Scope 1 and Scope 2 GHG emissions of at least 33% by 2030¹ • Absolute reduction of Scope 3 GHG emissions of at le
Slide 6: Stephen Oxley, Chief Financial Officer
Stephen Oxley Chief Financial Officer 6
Slide 7: My priorities
My priorities 01 02 03 Execution Growth Capital allocation 7
Slide 8: Performance highlights
Performance highlights Robust performance with Tightly managed working strong recovery capital and cash flow • 2H operating profit up 30% • Free cash flow of £305m year-on-year • Net debt of £775m • Good momentum into 2021/22 Delivered £66m Full year dividend of efficiency savings 70.0p per share 8
Slide 9: Group sales robust and grew strongly in the second half
Group sales robust and grew strongly in the second half Full year (5%) Second half 11% £4,170m (£50m) £35m £9m £17m £194m (£10m) (£5m) £2,243m (£178m) (£12m) (£24m) (£1m) £3,922m (7%) (1%) (6%) 8% £2,046m (£26m) (5%) 16% 6% 8% Full year Translational Clean Air Efficient Health New Eliminations Full
Slide 10: Group underlying operating profit
Group underlying operating profit Full year (5%) Second half 30% £11m £7m (£2m) £539m £4m £27m (£6m) £15m £76m (£26m) £353m (£24m) (£35m) £504m (8%) 6% 15% £274m (£3m) 66% 17% 78% Full year Translational Clean Air Efficient Health New Corporate Full year 2H Translational Clean Air Efficient Health N
Slide 11: Clean Air: strong recovery in demand through the second half
Clean Air: strong recovery in demand through the second half Full year sales moderately down Quarterly sales growth Performance highlights year-on-year (7%) Strong recovery in demand Q1 20/21 Q2 20/21 Q3 20/21 Q4 20/21 2H sales up 16% year-on-year 16% £153m 14% £2,618m (£28m) Asia benefited from tig
Slide 12: Efficient Natural Resources: operating profit and margin expansion
Efficient Natural Resources: operating profit and margin expansion Sales broadly flat Performance highlights (1%) Higher average pgm prices (c.+£80m) £95m Strength in PGMS trading business from elevated volatility in pgm prices Weaker demand and phasing of customer changeouts in Catalyst £1,079m (£8
Slide 13: Health: sales growth driven by new product pipeline
Health: sales growth driven by new product pipeline Sales up 8% Performance highlights 8% Sales and operating profit growth Benefiting from new customer contracts £3m £14m in opioid addiction therapies £237m Good progress with innovators, notably Gilead £223m (£3m) Margin expanded 1.0ppts to 13.1% F
Slide 14: New Markets: strong growth in Fuel Cells
New Markets: strong growth in Fuel Cells Sales down Performance highlights (6%) Fuel Cells grew strongly to £41m, up 24% £8m £4m • Auto sales c.50% of fuel cells £389m (£9m) Battery Systems and Medical Device (£15m) Components affected by COVID-19 (£9m) (£12m) £356m Continue to invest in the commerc
Slide 15: Operating performance
Operating performance % change, Underlying results for 2021 2020 % change constant year ended 31st March¹ £m £m rates Sales excluding precious metals (sales) 3,922 4,170 -6 -5 Operating profit 504 539 -6 -5 Finance charges (85) (86) Share of profits of joint ventures and associates - 3 Profit before
Slide 16: Reported results impacted by exceptional items
Reported results impacted by exceptional items Year ended 31st March 2021 2020 £m £m Underlying operating profit 504 539 Profit on disposal of businesses - 2 Amortisation of acquired intangibles (10) (13) Major impairment and restructuring charges1 (171) (140) Reported operating profit 323 388 Repor
Slide 17: Strong cash flow and improved net debt despite higher metal prices
Strong cash flow and improved net debt despite higher metal prices Net debt Performance Net Benefited from continued strong debt to focus on reducing working capital EBITDA 1.6x • Further backlog reduction £1,094m Net • Mitigated high pgm prices debt to Precious metal £99m EBITDA • Good progress on
Slide 18: Outlook for year ended 31st March 2022
Outlook for year ended 31st March 2022 Group Low to mid teens growth in underlying operating performance1 Foreign exchange £25m adverse effect on underlying operating profit at current FX rates² In addition, net metal price benefit of up to £120m to underlying operating profit Metal if precious meta
Slide 19: Capex spend in 2021/22 up to £600m
Investing for growth Major projects include: Continued investment into battery materials as planned Capex spend in 2021/22 Increased resilience, efficiency up to £600m and capacity of pgm refineries Hydrogen expansion 19
Slide 20: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive
Slide 21: A global leader in climate change solutions
A global leader in climate change solutions A cleaner, healthier world today and for future generations Clean Air Efficient Natural Battery Materials Health Medium term profit growth and Resources and Hydrogen Confident in sustained cash generation to Decarbonisation Exciting, high delivering pipeli
Slide 22: Clean Air strategy is differentiated by segment
Clean Air strategy is differentiated by segment 2020/21 sales by product HDD LDG 27% 31% Maintain segment shares Play selectively for and technology leadership highest return business LDD 42% Drive efficiency and maintain leadership position Clean Air is JM’s ambassador to the auto industry Note: LD
Slide 23: Various market scenarios for powertrain evolution
Various market scenarios for powertrain evolution Faster Slower METRIC Base electrification electrification Size of auto 01 industry globally c.90m c.100m c.110m (million vehicles)¹ LDD share 02 c.5% c.10% c.15% Europe in 2030¹ % BEV penetration 03 c.40% c.30% c.20% globally in 2030¹ 04 Legislation²
Slide 24: Driving medium term growth and managing levers dynamically to generate sustainable cash
Driving medium term growth and managing levers dynamically to generate sustainable cash Value uplift Efficiency Cashflow • Value uplift coming from: • Excellence programmes • Final strategic investments – China VI 2022 to offset inflation and substantially complete – Euro 7 2026/27 pricing – US EPA
Slide 25: Efficient Natural Resources: strongly positioned to win in net zero world
Efficient Natural Resources: strongly positioned to win in net zero world Acceleration of the drive towards sustainable solutions post COVID-19 Strong foundations today Near-term growth Growth in a net zero world Leading positions, established customer Growth driven by Decarbonisation and relationsh
Slide 26: Growth from decarbonisation of chemical value chains
Growth from decarbonisation of chemical value chains Growth driven by decarbonisation of syngas and production of green Syngas is at the chemicals heart of many chemical value Targeting high single digit growth in Catalyst chains Surplus Technologies over the medium term CO2 Waste Syngas building bl
Slide 27: A net zero world requires circularity of scarce critical materials
A net zero world requires circularity of scarce critical materials Growth driven by the needs Enabling circularity of tomorrow World leader in recycling of scarce pgms Expertise in designing new materials Twice the size of next largest player Design to recycle solutions Deep metals expertise Applyin
Slide 28: Well positioned today and in a net zero world
Well positioned today and in a net zero world Already launched Actively developing further solutions Commercialising our Fuel cells recycling blue hydrogen technology Pipeline of c.15 projects Battery materials recycling e-methanol project with Stena Recycling with Siemens and Porsche Further commer
Slide 29: Battery Materials: creating a leading, sustainable ecosystem
Battery Materials: creating a leading, sustainable ecosystem Significant and growing global market reaching 1,800kT by 2030¹ European supply of cathode materials forecast to be in deficit over the medium term European market focused on sustainability eLNO commercialisation timeline 2022 2023 2024 20
Slide 30: Advancing customer testing towards contract wins
Advancing customer testing towards contract wins Second battery technology Further confidence in eLNO centre open Customers moving through development funnel Enables closer customer collaboration Auto OEM moving to next stage of full cell testing More advanced eLNO testing to support customer valida
Slide 31: Advancing commercialisation through partnerships
Advancing commercialisation through partnerships Evaluating strategic Poland plant to commence partnerships as commissioning in 2022 we scale up Finland plant Using renewable energy beginning construction and developing innovative later this year effluent solution eLNO production New long term suppl
Slide 32: Hydrogen: profitable and fast growing
Hydrogen: profitable and fast growing Fuel Cells Green hydrogen Blue hydrogen Grey hydrogen Hydrogen sales of c.£100m in the year¹ 1. Includes c.£40m sales in Fuel Cells and c.£60m sales in hydrogen production. 32
Slide 33: Fuel cells: strong technology and customer wins
Fuel cells: strong technology and customer wins Customers include Doosan, Growing at pace: SFC Energy, REFIRE/Unilia, 35% 5 year CAGR SinoHytech/Sino Fuel Cell Pipeline of c.10 major truck Strong technology enabling and auto OEM platforms due high performance fuel cells to launch from 2022 to 2025 P
Slide 34: Blue and green hydrogen are critical in the transition to net zero
Blue and green hydrogen are critical in the transition to net zero Green hydrogen Blue hydrogen Positive test results with leading electrolyser First engineering revenues from HyNet and Acorn manufacturers and recent MoU with Plug Power Existing capacity today Global pipeline of c.15 projects Abilit
Slide 35: Exciting growth opportunities driven by demand for sustainable solutions
Exciting growth opportunities driven by demand for sustainable solutions Enabling the Focusing our Delivered a Strong momentum transition to portfolio and robust into current year net zero investing at pace performance 35
Slide 36: Appendix
Appendix 36
Slide 37: Average non precious metal working capital days
Average non precious metal working capital days Average working capital days excluding precious metals, year ended 31st March 69 Average working capital 62 63 days reduced to 57 days 59 57 Targeting average non precious metal working capital of 50 to 60 days 2017 2018 2019 2020 2021 37
Slide 38: Improved free cash flow
Improved free cash flow Free cash flow (£m) Year ended 31st March 2021 2020 Underlying operating profit 504 539 Depreciation and amortisation1 184 171 Precious metal working capital inflow / - (5) (outflow) Non precious metal working capital 196 4 inflow Net working capital inflow / (outflow) 196 (1
Slide 39: Net debt to EBITDA 1.2 times
Net debt to EBITDA 1.2 times1 £m £m Net debt at the beginning of the year (1,094) Free cash flow 305 Dividends 99 Movement in net debt 206 Lease adjustments² 12 Net debt before FX and other movements (876) FX and other movements³ 101 Net debt at the end of the period (775) 1. Net debt including post
Slide 40: Light duty emissions control legislation roadmap
Light duty emissions control legislation roadmap 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 → Euro 6d Europe EU6d EU7 (2025-27 estimated start) temp North America EPA Tier 3 Phase In: NMOG + NOx, PM Tightening ‘Tier 4’ (est.) North America CARB LEV III Phase In: NMOG + NOx, PM Tightening PM =
Slide 41: Heavy duty emissions control legislation roadmap
Heavy duty emissions control legislation roadmap On Road 2020 2021 2022 2023 2024 2025 2026 2027 2028+ Europe EU VI EU VII (2025-27 est start) North America US 2010 US 2027 (est) North America (CARB) US 2010 CARB 2024 CARB 2027 Japan JP 16 South Korea EU VI EU VII (est) Brazil P7 P8 Russia EE 5 EE 6
Slide 42: Average pgm prices
Average pgm prices US$ per troy oz 30,000 Rhodium Platinum Palladium 4000 (left hand axis) (right hand axis) (right hand axis) 3000 20,000 2000 10,000 1000 0 0 01 April 2019 01 April 2020 01 April 2021 Price (US$ per troy oz) 2019/20 average 2020/21 average Current (25th May 2021) Platinum 890 958 1