Johnson Matthey shares fall 3.35% despite profit surge: What’s dragging LSE: JMAT now?

Johnson Matthey Plc (LSE: JMAT) closed at GBX 2,018 on November 20, marking a 3.35 percent decline from the previous session as investors appeared to overlook the company’s 38 percent surge in pro forma underlying operating profit for the first half of FY2025/26. Despite the strong operational performance, market participants focused on the headline loss after tax of GBP 16 million and the significant decline in reported earnings per share, which swung from 247 pence in the previous year to negative 9.5 pence in the latest reporting period. These reported figures were affected by the absence of one-time disposal gains recorded last year. The latest downturn pulls the stock further back from its October–early November rally, which saw the shares touch GBX 2,200 levels.

Investors may also be positioning defensively ahead of the GBP 1.4 billion capital return that is contingent upon the completion of Johnson Matthey Plc’s sale of its Catalyst Technologies business to Honeywell International Inc. Analysts have noted that while the operational trajectory is strengthening, the macro environment, particularly within platinum group metals markets and automotive catalysts, continues to present medium-term uncertainties.

What were the key operational highlights across Johnson Matthey Plc’s core business segments?

Johnson Matthey Plc delivered broad-based improvements across all three of its continuing business segments during the six-month period ending 30 September 2025. Clean Air, which contributes the largest share of group revenue, reported an 11 percent increase in underlying operating profit, supported by ongoing transformation initiatives. The division’s operating margin rose by 200 basis points year-on-year to reach 12.4 percent, putting it firmly on track to meet full-year guidance of 14 to 15 percent.

The margin improvement in Clean Air was driven by a series of internal actions including workforce reductions, the consolidation of manufacturing operations, and efficiency gains across research and development, sales, general and administrative functions. Johnson Matthey Plc confirmed it had closed an additional production line in India and now operates 11 plants and 21 lines, compared to 16 plants and 50 lines in FY2021/22. Despite a 7 percent decline in Clean Air sales due to lower demand in global internal combustion engine vehicle production, particularly in diesel segments across Europe and North America, operating leverage held firm due to cost control.

PGM Services, which includes the company’s platinum group metal refining and trading activities, delivered a 33 percent year-on-year increase in underlying operating profit. This growth was supported by a GBP 10 million benefit from higher average prices across platinum, palladium and rhodium, alongside stronger trading performance and operational efficiencies. The segment reported an operating margin of 29.2 percent, an increase from 23.7 percent in the previous year. Johnson Matthey Plc also confirmed progress on its new state-of-the-art PGM refinery, which remains on schedule for commissioning in the second half of FY2025/26 and full commercial operation by calendar year 2027.

Hydrogen Technologies saw revenue increase by 15 percent, though it remained in an operating loss of GBP 18 million. The segment’s performance was buoyed by order flow in electrolyser components and revised volume commitments from existing fuel cell customers. Johnson Matthey Plc continues to target breakeven at the operating profit level in this segment by the end of FY2025/26 and aims for positive cash flow in FY2026/27.

How is the Catalyst Technologies divestiture shaping Johnson Matthey Plc’s capital strategy?

The sale of Catalyst Technologies to Honeywell International Inc. for an enterprise value of GBP 1.8 billion remains the most significant restructuring event in Johnson Matthey Plc’s current transformation phase. As of November 2025, the transaction has received the majority of required competition authority approvals and is expected to complete by the first half of calendar year 2026. Once the deal closes, Johnson Matthey Plc will return GBP 1.4 billion in net proceeds to shareholders. This return will be split between a GBP 1.15 billion special dividend paired with a share consolidation and a GBP 250 million on-market share buyback.

This divestment will allow Johnson Matthey Plc to focus exclusively on its remaining core businesses—Clean Air, PGM Services and Hydrogen Technologies—and implement a capital allocation framework aimed at boosting shareholder returns while maintaining balance sheet strength. The company is targeting a net debt to EBITDA ratio of 1.0 to 1.5 times and intends to increase recurring annual shareholder returns from GBP 130 million in FY2025/26 to at least GBP 200 million from FY2026/27 onward.

What operational improvements and cash initiatives is Johnson Matthey Plc pursuing?

Johnson Matthey Plc’s transformation into a leaner, cash-focused industrial player is being implemented through a trio of strategic levers. First, the company has initiated significant cost reduction actions, including a 10 percent cut in corporate headcount across finance, IT, HR and procurement. Second, it has reprioritized capital expenditure, projecting group capex to fall to approximately GBP 120 million per year by FY2027/28, below the depreciation and amortisation threshold. Third, it has targeted a reduction in working capital by GBP 250 million through better supplier payment terms and process optimisation.

These measures are already showing tangible results. In the first half of FY2025/26, Johnson Matthey Plc reported GBP 4 million in free cash flow, reversing the GBP 165 million outflow recorded during the same period last year. Operating cash flow stood at GBP 188 million, compared to a deficit of GBP 44 million in the previous year. The company continues to embed cash-focused performance metrics into executive compensation structures, with 75 percent of annual bonus criteria now linked to free cash flow and underlying profit.

What are the full-year outlook and medium-term goals communicated by Johnson Matthey Plc?

Johnson Matthey Plc has reiterated its full-year FY2025/26 guidance, forecasting pro forma underlying operating profit to grow at the higher end of a mid-single-digit percentage range. This projection assumes constant precious metal prices and currency levels. Clean Air is expected to achieve 14 to 15 percent margins for the full year, and Hydrogen Technologies is expected to reach operating profit breakeven by March 2026. The company also noted that its performance will remain second-half weighted, although earnings from PGM Services are expected to be lower year-on-year due to declining metal recoveries and volumes.

Looking ahead to FY2027/28, Johnson Matthey Plc expects to achieve a mid-single-digit compound annual growth rate in pro forma underlying operating profit. Clean Air is targeted to deliver sales exceeding GBP 2 billion with operating margins between 16 to 18 percent. PGM Services is forecast to generate sales of approximately GBP 450 million with operating margins around 30 percent. Hydrogen Technologies is projected to contribute positively to cash flow by that stage. Overall, sustainable free cash flow is expected to exceed GBP 250 million annually by the end of FY2027/28.

How are institutional investors reacting to Johnson Matthey’s transformation and cash return strategy in 2025?

Despite management’s consistent delivery against stated transformation milestones, Johnson Matthey Plc’s stock has struggled to sustain momentum. Over the past five trading sessions, the share price has dropped over 8 percent, and the latest close at GBX 2,018 represents a steep retreat from recent highs. With a 52-week high just above GBX 2,200, market watchers will be monitoring whether the upcoming dividend payout, share buyback, and refinery commissioning can re-anchor valuation.

Net debt as of 30 September 2025 stood at GBP 971 million, compared to GBP 810 million at the end of March 2025. The increase is largely attributed to working capital swings and capex related to the ongoing refinery project. Leverage, measured as net debt to EBITDA, stood at 2.0 times. However, Johnson Matthey Plc maintains GBP 1.5 billion in available cash and credit lines, which management believes is sufficient to execute strategic plans without breaching debt covenants.

Key investor watchpoints include execution risk surrounding the new refinery buildout, Hydrogen Technologies’ breakeven timeline, the realisation of working capital improvements, and the actual return profile of the GBP 1.4 billion distribution following the Catalyst Technologies deal. Additionally, sensitivity to platinum group metal pricing and foreign exchange fluctuations remain critical drivers of earnings volatility.

How Johnson Matthey’s post-divestment strategy is shaping investor sentiment in 2025

Johnson Matthey Plc is navigating a pivotal moment in its corporate evolution. With the Catalyst Technologies divestiture close to completion and a leaner, more focused business model taking shape, the company is doubling down on its role in emissions control, precious metals, and green hydrogen components. Financially, Johnson Matthey Plc is beginning to see the benefits of its restructuring actions reflected in higher margins and positive free cash flow. Operational targets are clear and increasingly supported by performance data. Yet market scepticism persists, likely due to the hangover from reported profit declines, sensitivity to commodity pricing, and the long lead time on refinery payback.

The coming quarters will be critical for Johnson Matthey Plc as it seeks to deliver consistency across growth, margin expansion and capital returns while weathering the external noise of macroeconomic and industrial cyclicality. Long-term investors will be watching for smooth execution across these fronts, especially as cash visibility improves and shareholder returns accelerate.

What are the key takeaways from Johnson Matthey’s FY2025/26 half-year results?

• Pro forma underlying operating profit rose 38 percent year-on-year at constant currency, driven by cost efficiencies and higher PGM prices.

• Clean Air margins improved by 200 basis points to 12.4 percent, supported by footprint consolidation and reduced R&D and SG&A overheads.

• PGM Services delivered a 33 percent surge in operating profit with strong performance in refining and trading; platinum, palladium, and rhodium prices rose 27, 11, and 30 percent, respectively.

• Hydrogen Technologies cut operating losses to GBP 18 million, benefitting from order timing and restructuring; breakeven is still targeted by March 2026.

• Free cash flow turned positive at GBP 4 million, compared to a GBP 165 million outflow a year ago; operating cash flow hit GBP 188 million.

• The GBP 1.8 billion Catalyst Technologies sale to Honeywell is progressing toward H1 2026 close, unlocking GBP 1.4 billion in capital returns via dividend and share buybacks.

• Capex is expected to fall to GBP 120 million per year by FY2027/28 as the new PGM refinery comes online; sustainable free cash flow is targeted at GBP 250 million annually.

• Full-year guidance is maintained, with operating profit expected to grow at the higher end of a mid-single-digit range, assuming stable PGM prices and FX.

• Net debt rose to GBP 971 million with leverage at 2.0x EBITDA, but Johnson Matthey Plc retains GBP 1.5 billion in liquidity and undrawn facilities.

• Despite operational gains, shares fell 3.35 percent on the day of results release, reflecting investor focus on reported EPS loss, macro risks, and execution watchpoints for FY2026.