Johnson Matthey flags FX, metal price risks after lower profit

By Eva Mathews

(Reuters) -Johnson Matthey warned volatile precious metal prices and currency headwinds could weigh on its profits this financial year, as the British autocatalyst maker posted a drop in annual earnings on higher costs and lower precious metal prices.

The centuries-old firm, which traces its roots back to testing the purity of precious metals, has grappled with supply-chain snarls caused by China's lockdowns and the Ukraine war which led it to cease operations in Russia last year.

That, and volatile precious metal prices, have impacted the company's results, although Johnson Matthey (JM) has tried to pass some of the impact onto customers via price increases.

Shares in the London-headquartered firm were down 3.2% to 1,804 pence by 0815 GMT.

"Recovery in China is still in its early days," Chief Executive Liam Condon said in an interview.

"It's coming back slower-than-anticipated."

JM's underlying operating profit fell 21% to 465 million pounds ($587 million) in the year ended March 31, on revenue of 14.93 billion pounds, which was down 7% year-on-year.

The firm's Clean Air business, which is its largest and makes catalysts for emission control in vehicles, posted a revenue rise of 8% to 2.64 billion pounds, while underlying profit in the unit sank 24%.

JM's key automotive customers are switching to cheaper metal platinum instead of palladium, which is used in vehicle exhausts to neutralise harmful engine emissions.

"Although semiconductor shortages have gradually eased, other supply chain disruptions such as labour availability and logistic bottlenecks have continued to affect vehicle production," JM said in a statement.

At current precious metal prices, the company said it expected a hit of about 50 million pounds to operating performance for 2023-24.

If exchange rates stay the same, there would also be a 10 million pound hit to underlying operating profit, it added, although overall it expects "at least mid-single digit growth in operating performance", helped by around 55 million pounds of efficiency savings.

($1 = 0.7923 pounds)

(Reporting by Eva Mathews in Bengaluru; Editing by Subhranshu Sahu and Mark Potter)