JMAT Johnson Matthey Plc

TIDMJMAT

RNS Number : 9555H

Johnson Matthey PLC

30 March 2020

Pre-close trading update

 
Johnson Matthey releases a pre-close trading update for the financial 
 year ending 31(st) March 2020, ahead of its full year results scheduled 
 for 28(th) May 2020. The company also provides an update on the impact 
 of the COVID-19 pandemic on its business, along with the measures it 
 is taking to actively manage the risks to its people, operations and 
 customers. 
 
Robert MacLeod, Chief Executive, commented: 
In these unprecedented times, our priority is to ensure the health 
 and safety of our people, customers and suppliers as well as the communities 
 in which we operate. I am extremely grateful to our employees around 
 the world for their dedication to our business in the face of COVID-19. 
 Whilst there is significant ongoing uncertainty around the full impact 
 of COVID-19 we are taking steps to manage our costs and cash flow. 
 We have a high quality, resilient and diverse business portfolio; a 
 strong balance sheet and good access to liquidity, and are further 
 strengthening our financial position. 
 
In 2019/20, we have made good strategic progress and were on track 
 to deliver results in line with market expectations this year, prior 
 to developments with COVID-19. The ongoing pandemic has led to a deterioration 
 in some of our end markets and consequently we now expect to deliver 
 group operating performance below market expectations. Looking beyond 
 the current environment, given our leading market positions, strong 
 technology offering, and operational and investment discipline, we 
 remain confident in our medium term strategy. 
 
Results for the year ended 31(st) March 2020 impacted by COVID-19 
Strategic progress in the year has been good. Prior to the ongoing 
 uncertainty around COVID-19, the business was on track to deliver group 
 operating performance in line with market expectations for the year 
 ended 31(st) March 2020. We currently expect an impact of around GBP50 
 million on our trading performance from COVID-19. This was due to a 
 combination of reduced demand in Clean Air and around GBP20 million 
 of delayed shipments caused by logistics challenges across our other 
 businesses. As a result, we now expect to deliver group operating performance 
 below current market expectations. 
 
Operational update and actions to protect our business 
We have a high quality, resilient and diverse business portfolio which 
 is exposed to a range of end markets and geographies. We are closely 
 monitoring the ongoing developments in relation to 
 COVID-19 and taking rapid and decisive action to maintain the health 
 and safety of our people and to ensure business continuity. 
 
Recently, a number of our automotive customers globally have announced 
 temporary closures of their manufacturing facilities because of lower 
 consumer demand and some governments are mandating the temporary cessation 
 of non-critical business activities, which includes automotive production. 
 As a result, we have taken the decision to temporarily close most of 
 our Clean Air plants across the world. This is with the exception of 
 our operations in China which are ramping back up as the region starts 
 to recover from COVID-19. 
 
In Efficient Natural Resources, currently we have not seen a material 
 fall in demand, although some customers in Catalyst Technologies have 
 delayed orders due to supply chain challenges. In China we are seeing 
 demand starting to improve. The vast majority of our Catalyst Technologies 
 plants are running, although we are monitoring events closely and are 
 ready to take action if demand changes. Our pgm refineries continue 
 to operate, albeit at lower capacity due to reduced availability of 
 our people. 
 
A number of our other businesses provide critical products and services 
 into the health, pharmaceutical and agricultural sectors and are relatively 
 resilient to macroeconomic weakness. They are therefore maintaining 
 operations but we have experienced some delays to shipment of orders 
 following increased border controls. This includes operations in our 
 Health and Medical Device Components businesses. 
 
We have a flexible cost base, especially in Clean Air where c.75% of 
 costs are variable. Given the considerable uncertainty around demand 
 and the duration of our site closures, we are tightly managing our 
 cash position and costs, with a focus on lowering our inventory, collecting 
 accounts receivable and reducing our cost base. We will give more detail 
 on the cost reduction actions we are taking with our full year results 
 planned for 28(th) May 2020. 
 
Outlook for the year ending 31(st) March 2021 
For the year ending 31(st) March 2021, given the high levels of uncertainty 
 we are not able to reasonably forecast the impact on our operations 
 and financial performance. We will provide a further update at our 
 full year results. 
 
Strong balance sheet and good access to liquidity 
The group has a strong balance sheet and good access to liquidity with 
 substantial cash resources and significant undrawn bank facilities. 
 
We have c.GBP250 million of unrestricted cash and a GBP1 billion Revolving 
 Credit Facility in place to March 2025 and extendable on its first 
 and second anniversary by a further one year, of which 
 GBP400 million is currently drawn. We also have around GBP130 million 
 available under other committed facilities. This means our overall 
 liquidity is c.GBP1 billion. Committed facilities are renewed regularly 
 to maintain a balanced maturity profile across different lenders. There 
 is no material refinancing due in 2020 or 2021. 
 
Our leverage ratio (net debt to EBITDA) is well within our covenant 
 level. In the second half of our financial year, we have made substantial 
 progress in managing our precious metal working capital against a backdrop 
 of rising pgm (platinum group metal) prices, with volume reductions 
 of 
 c.GBP200 million. At 30(th) September 2019, net debt to EBITDA was 
 2.1x and we anticipate being at a similar level at 31(st) March 2020, 
 despite the impact of COVID-19 on EBITDA. 
 
Confident in our strategy 
The world is facing unprecedented challenges but we are taking steps 
 to ensure we are in the best possible position to navigate this period. 
 We remain focused on protecting our people and our financial position, 
 so that we are able to meet demand and serve our customers when conditions 
 normalise. 
 
We continue to invest for the future and remain committed to our strategic 
 growth projects, including our new world class Clean Air plants, our 
 Battery Materials commercial plant and upgrading our precious metal 
 refineries. As we manage cash, we will postpone a number of discretionary 
 capex projects. 
 
With our leading positions in high margin, technology driven growth 
 markets, we remain confident in our strategy. We will continue to apply 
 our world class science to address the challenges posed by key global 
 megatrends and in doing so we will drive value for our shareholders 
 and society. 
 
Full year results: We currently plan to announce our full year results 
 for the year ended 31(st) March 2020 as scheduled on Thursday 28(th) 
 May. 
 
                                     Ends 
 
 
Enquiries: 
Investor Relations    Director of Investor Relations        020 7269 8241 
 Martin Dunwoodie      Senior Investor Relations Manager     020 7269 8235 
 Louise Curran         Investor Relations Manager            020 7269 8242 
 Jane Crosby 
 
 Media                                                      020 7269 8407 
  Sally Jones         Director of Corporate Relations        020 7353 4200 
  Simon Pilkington     Tulchan Communications 
 
 
Notes: 
1.  Precious metal working capital volume reduction at 30(th) September 
     2019 metal prices 
2.  Vara consensus for full year underlying operating profit in 2019/20 
     is GBP581 million (range: GBP562 million to GBP593 million) 
 

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