Johnson Matthey (JMAT) post strong revenues but profits are mixed

Foreign currency movements could also impact sales and profits, adding to the reasons for the share price drop.

Article updated: 30 May 2019 11:00am Author: Helal Miah

  • Sales from each of its divisions beat analysts’ expectations.
  • Falling operating profits in New Markets and expected foreign currency movements weigh on shares.
  • The group has struggled to make headway in recent years so we recommend shares at a hold for medium risk investors.

Precious metals and chemicals specialist Johnson Matthey has reported a strong set of full year results, with group revenues rising by 5% to £10.745bn. The Clean Air division’s sales continued with strong growth despite global vehicle manufacturing slowing. Higher precious metals prices helped the Efficient Natural Resources division while its Health division had a more modest performance. Its smaller New Markets division, which includes the development of new materials for battery technologies, grew sales by 16%.

However, while sales performance was good, the operating profit figures were a little more mixed, with profits at the New Markets division falling to just £2m, an 85% fall. Foreign currency movements are also expected to impact sales and underlying operating profits by £6m and £2m respectively for the upcoming year. These factors may help to explain the 4% fall in the share price this morning even though they are keeping their overall guidance for 2020 unchanged.

Our View on Johnson Matthey - Hold

The slow transition away from petrol and diesel vehicles is in theory not good news for the group. However, its focus is on selling technologies for cleaner, more fuel efficient vehicles as well as being at the forefront of developing higher energy density battery materials makes Johnson Matthey one to watch for the future. Currently it is more a precious metals refiner and chemicals group rather than a new battery specialist. Its share price has struggled to make any headway in recent years, much like its sector peers. Therefore we continue with our ‘medium risk hold recommendation’ for investors seeking a balanced return.

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Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment.