Johnson Matthey Earnings: EBIT Down 15% After Hit From Metal Prices, but Guidance for 2023 Improves

Narrow-moat Johnson Matthey reported first-half EBIT of GBP 180 million, 6% below Vara consensus and down 15% at constant exchange rates year on year. The decline was due to lower average precious metal prices and reduced refinery volumes hitting the platinum group metals services business, partly offset by transformation benefits of GBP 25 million, strong growth in hydrogen technologies, and further progress in catalyst technologies. Lower average precious metal prices were the main factor weighing on operating profit, with a hit of negative GBP 55 million in the first half. For fiscal 2024, management upgraded its target for operating performance (we assume EBIT) to grow at least by a high single digit (previously at least a midsingle digit). This growth is expected to be driven by transformation benefits of GBP 55 million for the year. We don’t expect to make a material change to our GBX 2,200 fair value estimate. Shares are trading 4% up at the time of writing. At current levels, shares look undervalued.