Johnson Matthey shares jump after trading update, strategic review of Health unit

By Samuel Indyk

Investing.com – Shares in Johnson Matthey were trading at the top of the FTSE 100 on Thursday morning after the company announced plans to conduct a strategic review of its Health business and provided a trading update for the year ending 31^st March 2021.

In 2020/21 the company expects group operating performance to be around the top end of the market expectations. Despite the pandemic-related disruption, the company said the second half of the year was materially stronger, reflecting increased activity in autos and other key end markets.

“I am very pleased with the progress we made, particularly in the second half,” said Chief Executive Robert MacLeod. “As a result, group operating performance for the year is expected to be around the top end of market expectations, alongside continued strong management of working capital.”

Strategic review of Health business

The company said it continues to review its portfolio to focus on areas of greatest opportunity ad maximise value for shareholders. As a result of this, Johnson Matthey PLC (LON:JMAT) said it will be undertaking a strategic review of its Health business.

Strategic shift?

One of the company’s major revenue drivers is catalytic converters but as markets shift towards more electric vehicles and fewer vehicles with internal combustion engines, the company has had to shift towards newer technologies.

“Johnson Matthey is pivoting its business toward supplying materials for batteries and hydrogen fuel cells, an expensive, but necessary transition,” said Laura Hoy, equity analyst at {0|Hargreaves Lansdown }}. “As it stands, New Markets, the division that houses these segments, makes up only a fraction of the group’s overall revenue. But the group has been investing heavily on increased manufacturing capacity for both fuel cell and battery components.”

Some have suggested that a potential sale of the Health business could help fund the company’s move towards electric vehicles.

“We wonder if potential sale proceeds would be used to ramp up its EV transition, or if management is hoping to unearth a new growth opportunity outside autos,” Hoy added. “The former makes sense, considering JMAT’s entrenchment in the auto industry.”

At 10:30BST, Johnson Matthey shares were trading 3.3% higher at 3,200p