Johnson Matthey PLC (JMAT) reported its earnings for the second half of fiscal year 2026, highlighting significant operational improvements and restructuring efforts. Despite these advancements, the stock price dipped by 0.55% following the announcement to $29.09, giving the company a market capitalization of $4.86 billion. According to InvestingPro analysis, the stock appears undervalued at current levels, placing it among opportunities on the platform’s most undervalued stocks list. The company has been actively streamlining operations and focusing on efficiency, which is expected to drive future growth.
Johnson Matthey’s performance in the second half of 2026 was marked by a strategic focus on operational efficiency and cost reduction. The company implemented significant organizational changes, including a reduction in executive leadership and headcount, aimed at making the organization leaner and more responsive. These efforts, alongside technology deployments, are designed to enhance efficiency and cash generation.
The company has projected an increase in capital expenditure for FY 2026/2027 to GBP 230 million, up from a previous guidance of GBP 140 million, driven by accelerated completion efforts for a new PGM refinery. For FY 2027/2028, capital expenditure is expected to normalize to GBP 120 million, below depreciation levels, reflecting the completion of major projects. While the company was not profitable over the last twelve months, InvestingPro Tips indicate analysts predict profitability this year, aligning with management’s restructuring efforts. Investors seeking deeper insights can access 5 additional ProTips, along with comprehensive Fair Value analysis and financial health metrics that earned Johnson Matthey a "GOOD" overall score.
Executives emphasized the alignment of incentives with shareholder value, with 80% of executive incentives tied to operating profit or cash generation metrics. They also highlighted the unusual positive outcome of improved employee engagement scores during a period of substantial organizational change.
During the earnings call, analysts were keen to understand the implications of the operational losses in the PGM services and the anticipated timeline for normalization. Executives reassured that remediation efforts are underway and expect improvement over time.
The focus on operational excellence and strategic restructuring positions Johnson Matthey for potential growth, albeit with immediate challenges that need addressing. For investors seeking comprehensive analysis, Johnson Matthey is one of the 1,400+ US equities covered by InvestingPro’s detailed Pro Research Reports, which transform complex financial data into clear, actionable intelligence through intuitive visuals and expert analysis.
Louise Curran, Head of Investor Relations, Johnson Matthey: Good morning, everyone. Very nice to see you here. I’m Louise Curran, Head of Investor Relations at Johnson Matthey, and a very warm welcome this morning. Just a little bit of admin before we start. If you could turn your mobiles off or onto silent. I’ll first point you to our cautionary statement at the presentation. I’m very pleased to welcome our CEO, Liam Condon, and Alastair Judge, our CFO. In terms of the agenda this morning, we’ll take the usual format. Liam will talk through an overview. Alastair will run you through the financial results before Liam gives a strategic update on the progress this year and also the acquisition of Cormetech this morning. We’ll, of course, leave plenty of time for Q&A, both in the room and then from the webcast as well. With that, I’ll hand over to Liam.
Liam Condon, Chief Executive Officer, Johnson Matthey: Great. Thanks a lot, Louise, and a warm welcome, everybody, from my side and of course, to everybody online who’s watching and listening in today. A year ago, we presented our new strategy to you about JM becoming a more focused, a more lean, and a more cash-generative company. I’m very pleased today to be able to present the progress that we’re making. As usual, we’ll be pretty open as well about where we’re facing challenges. First, let’s come to some of the highlights of what we’ve announced today. I know there’s a lot of moving parts, not easy to digest everything. There’s a lot of progress in here. First thing, the underlying growth at 6% is in line with our previously upgraded guidance. I think that was very important.
It’s, of course, 14% on a reported basis because we’re benefiting from the increase in precious metal prices. Very strong margin improvement in Clean Air, up to 14.5%. This is great progress. Some of you will remember a few years ago, we were in single digits. Now at 14.5%, plenty more room to go here. We achieved run rate breakeven in Hydrogen Technologies. We told you this is really important for us, that we want to run this business in a manner that it’s not a drag on the rest of the business. We think there’s great growth opportunity in the future here, but it’s important for us to run at that breakeven, and we got to run rate breakeven in the final quarter. That was very important as well. We said we’re going to generate more cash, over 160% more cash year-on-year.
That’s quite an outcome overall. That, we have to say, is despite the fact that, of course, we have faced some challenges. We told you last year, and we told you at the half-year results that PGMS would be in transition for a while as we upgrade our refineries. We have had some issues in our refineries, and we’re going to talk about those. Alastair is going to talk about those a little bit later. What’s really important is we’re managing those issues, and they do not come at the expense of our guidance. They do not come at the expense of cash.
You can see we’ve delivered on our guidance this year, we’re completely committed to delivering on our guidance for 2027, 2028, which, as we’ll talk to later, is excluding some of the movements on the portfolio side that we will be talking about as we go through. What’s really important for us as we manage that transition with platinum group metals is our single biggest CapEx investment ever in our new refinery. We’re pretty far advanced now with this. It’s been ongoing for quite a while. It is going to cost more CapEx. Alastair is going to talk about this as well. We’re very confident now in the timeline will be operational next year. This is really important from an efficiency, from a working capital point of view, from a sustainability point of view. This is on track to be operational next year.
Really important for us. Catalyst Technologies, I know there’s great interest in this. Catalyst Technologies, we are in the final stage now of approval. We only have the Chinese regulatory outstanding. There are no more questions. There are no more requests for information. The market assessment has been done. There’s no complaints out there. This is just going through the process, and we are very confident that this will be wrapped up along the timelines that we’ve indicated, and then we will be returning GBP 1 billion to shareholders as promised. The final piece, bigger news today, was the acquisition of Cormetech, which is a market leader in SCR catalysts in the U.S. for stationary emission control.
Like we are a global market leader in automotive emission control, Cormetech is a market leader in stationary emission control and is benefiting tremendously from the rapid growth of data centers because that’s where all their growth is coming from. They’re doing emission control for data centers, in essence, cleaning the cloud. We’ll talk about this today in a bit more detail, particularly also because it’s breaking news. Before I hand over to Alastair to take us through the financial details today, just a couple of points about how we’re reshaping the group because there is a lot going on. Overall, we’ve had a strong focus on what we call controlling the controllables. A lot of this is about managing cost. We have reduced the executive leadership team from 9 to 6. That’s a one-third reduction. You can see replications of this throughout the organization.
Makes us leaner, makes us faster, very honestly, and I personally think it makes us a lot better. We’ve had a significant reduction in corporate function headcount as well. We’re just getting much more efficient. Using technology to automate a lot more. We’re seeing strong benefits here. We’ve aligned our incentives to our targets very tightly. 80% of our incentives are OP or cash focused, 80%. Basically what we’re saying, what we’re committing to is what we’re being incentivized on. I think in times like this, there could be concerns that maybe some of these efforts are maybe not going to reflect well from a customer point of view or from an employee point of view. Actually, quite to the contrary, we have seen a very significant increase in our net promoter score. Our net promoter score was already very strong.
Anything above 40 is a strong net promoter score. It’s increased to 47, and the reason for that is we’re doing a better job with our customers and helping them tap into value. A lot of our customers are struggling on the margin side, and we’re taking a full cost approach and helping them manage their business better. That’s reflecting better back to us than in a perception of how we’re doing, and that’s why this score is going up. We spoke in the past a lot about improving commercial muscle. That’s a reflection of what you can see here. On the employee side, when you have a lot of change, it is demanding. It’s tough, and you need very resilient employees to get through this. Normally, your engagement scores come down when you’re going through lots of change.
You can see our engagement score has actually gone up and gone up quite significantly. This is really a shout-out to our employees doing an absolute fantastic job, super resilient and highly committed to delivering on the strateg