Investing.com — Shares of Johnson Matthey (LON:) were down 4.5% on Wednesday after the company reported weaker-than-expected results for the first half of fiscal 2025, with underlying EBIT falling short of both market expectations and year-ago levels.
The company’s underlying EBIT came in at £156 million, a 13% year-over-year decline and 13% below the Visible Alpha and company website consensus of £179 million.
Sales, excluding metal, were reported at £1,722 million, down 3% organically year-over-year and 7% below consensus estimates of £1,860 million.
The earnings miss was primarily driven by underperformance in the PGM Services and Value Businesses divisions. PGM Services, in particular, saw a 35% year-over-year drop in EBIT to £51 million, which was a steep 31% below consensus estimates of £74 million.
The division was impacted by lower auto scrap volumes and weaker metal recovery. Value Businesses also struggled, delivering EBIT of just £2 million, a sharp 86% year-over-year decline, reflecting the impact of the disposal of the Medical (TASE:) Device Components business.
The Clean Air division reported EBIT of £121 million, down 2% year-over-year but only slightly below expectations of £122 million, as cost-saving measures helped mitigate broader headwinds.
Catalyst Technologies stood out as a bright spot, with EBIT surging 43% to £50 million, well above the consensus of £40 million.
This was driven by higher average prices, strong demand in China, and licensing income, including new projects in low-carbon hydrogen and green methanol since April 2024.
Elsewhere, the Hydrogen Technologies division reported an EBIT loss of £26 million, in line with 2H24 but wider than the consensus loss of £21 million.
The company reiterated its expectation for this business to break even by FY26, signaling confidence in its long-term potential despite current challenges.
The company’s cash flow position also came under scrutiny. Free cash flow registered an outflow of £149 million, compared to an outflow of £97 million in the same period last year.
The increase was driven by lower profitability, a working capital outflow of £148 million, and higher capital expenditures of £150 million, up from £125 million in first half of the year 2024.
Net debt stood at £783 million, higher than consensus expectations of £703 million, despite proceeds from the disposal of the Medical Device Components business. An interim dividend of 22p per share was announced, flat year-over-year.
Crucially, Johnson Matthey reiterated its full-year guidance for fiscal 2025, projecting at least mid-single-digit EBIT growth excluding the Value Businesses.
However, the company acknowledged headwinds from foreign exchange and metal prices, which are expected to weigh on results by approximately £13 million.
The company emphasized that its cost-saving program remains on track, with £155 million of the targeted £200 million achieved to date.
This should contribute to stronger profitability in the second half of the year, with management pointing to anticipated benefits from higher volumes, improved metal recoveries in PGM Services, and ongoing transformation efforts.
For the second half of FY25, the company implied an EBIT of approximately £255 million, representing a 12% year-over-year increase and 9% above pre-results consensus of £235 million.
UBS analysts noted that while this outlook underlines management’s confidence, achieving it will hinge on a recovery in PGM Services and the realization of cost-saving and transformation benefits.
