Johnson Matthey H1 operating performance to be 'materially below' last year

(Sharecast News) - Johnson Matthey said on Thursday that its first-half operating performance is set to be "materially below" last year as demand in its clear air division was hit by the Covid-19 pandemic.
In a statement ahead of its annual meeting, the company said its operating performance will be heavily-weighted to the second half.

Johnson Matthey said group sales were down "materially" in the first quarter at constant currency, as expected due to the impact of the pandemic, with the clean air segment accounting for much of the decline as aggregate sales in other divisions were flat.

Sales in Clean Air fell around 50% in Q1, mostly due to weaker consumer demand and temporary customer shutdowns in Europe and the Americas. However, there was an improvement in April, May and June sales.

The company expects sales in July to be down around 20%, with improvement through the remainder of the second quarter.

"That said, the market remains volatile with consumer demand, inventory through the chain and the extent of automotive OEM summer shutdowns hard to forecast," it added.

"External data continue to suggest automotive production in Europe and the US will be down circa 25% in our fiscal year, better in China, but down slightly more in heavy duty. However, visibility on the path of recovery remains low and the outcome could be materially different."

William Ryder, equity analyst at Hargreaves Lansdown, said: "The bulk of Johnson Matthey's business is making catalytic converters, and demand for these is tied directly to car manufacturing. When car makers downed tools earlier this year demand for JMAT's converters fell too.

"Demand has recovered from a 75% fall in April to 20% in June, but is still down heavily on last year. Our biggest worry at the moment is the economy. Car sales tend to be very pro-cyclical so a sustained economic downturn would likely supress demand for catalytic converters.

"There are some other exciting developments at Johnson Matthey, especially in batteries, and it's good to see progress here. But the group is still reliant on its catalytic converters business at the moment, and that will likely go as the economy does."