By Muhammed Husain
(Reuters) - Johnson Matthey (LON:JMAT) reported a 30% drop in half-year profit on Wednesday as supply chain disruption slowed production by automakers and precious metals prices eased.
The company, which makes catalytic converters for vehicles and refines platinum group of metals (PGMs) used chiefly by automakers, said earnings were also hurt by a lag in recovering higher costs in contracts with clients.
The British firm, which raised prices this year to counter rising costs, has also faced supply disruptions due to lockdowns in China and challenges in sourcing components from Ukraine.
Johnson Matthey forecast an improved performance in the second half on higher automotive production and easing supply chain pressures.
CEO Liam Condon said the company has given many employees additional one-off payments in the year to cope with inflation but said the company did want to give "massive" salary increases.
"What we didn't want to do is give massive salary increases, and then when inflation goes back to normal, we're stuck with an absurdly high kind of cost base," Condon told Reuters.
Johnson Matthey, which is exiting its battery materials and health businesses to shift focus on hydrogen technologies and emission control catalysts, earlier this year started a programme to save 150 million pounds in annual costs by 2024-25.
The group is also planning to cut about 15% of its senior management jobs as part of its efforts to reduce costs.
It projected underlying operating profit for the full year to be within the market's range of expectations of 458 million to 516 million pounds.
Shares of the London-listed group were down 2.2 % as of 1054 GMT having slid as much as 7% in morning trade.
J.P. Morgan analysts said investors may be disappointed that the company did not specifically anchor its expectations to the mean of the company-compiled consensus range.
The group's underlying operating profit for the six months ended Sept. 30 was 222 million pounds ($263.89 million) down from 297 million a year earlier.
($1 = 0.8413 pounds)