Johnson Matthey: Leading the Charge in Precious Metals for a Decarbonized Future

As global decarbonization efforts accelerate, the demand for advanced emission-control technologies and sustainable industrial processes is creating unprecedented opportunities for companies positioned at the intersection of clean energy and critical materials. Johnson Matthey (JM) has emerged as a pivotal player in this transition, leveraging its leadership in platinum group metals (PGMs) and catalyst recycling to capitalize on a $1.5 trillion market for decarbonization solutions. Let’s dissect why investors should take note of JM’s FY2025 results and its strategic pivot to dominate this space.

FY2025 Results: A Foundation for Growth

JM’s fiscal year 2025 (ended March 31, 2025) underscored its resilience amid macroeconomic and geopolitical headwinds. While total revenue dipped 9% to £11.67 billion due to declining automotive catalyst demand, the company’s Clean Air and PGM Services divisions delivered a 6% rise in underlying operating profit to £388 million. The sale of its Catalyst Technologies (CT) division to Honeywell for £1.8 billion—a 13.3x multiple of its £136 million adjusted EBITDA—freed up £1.4 billion in net proceeds to fuel shareholder returns and strategic reinvestment.

This move was no accident. By divesting CT, JM has sharpened its focus on its core strengths: PGM recycling, emission-control catalysts for non-electric vehicles, and clean hydrogen technologies. These segments are perfectly aligned with the twin megatrends of industrial decarbonization and critical mineral scarcity, positioning JM to profit from both rising demand and supply-side bottlenecks.

PGM Supply Dynamics: A Structural Tailwind

The PGM market is in the midst of a seismic shift. Let’s break down the key metals:

• Platinum: Despite a 3% drop in primary supply from South Africa, JM’s recycling efforts (97% lower carbon footprint than mined platinum) are mitigating shortages. China’s scrappage incentives—boosting recycled platinum by 15%—are a game-changer.
• Palladium: After 13 years of deficits, palladium transitions to balance in 2025, thanks to robust Chinese automotive recycling. Yet, industrial demand for hydrogen electrolyzers (which use palladium) is rising, creating a new growth vector.
• Rhodium: Still in deficit, but JM’s design-for-recycling partnerships with automakers ensure 85% recovery rates from spent catalytic converters, easing supply risks.

The ruthenium market, meanwhile, faces a 2% deficit driven by surging demand for data center hard disks and nylon production. JM’s dominance in PGM recycling gives it first-mover access to these critical supplies.

Recycling as a Competitive Moat

JM’s claim as the world’s largest PGM recycler by volume isn’t hyperbole. Its advanced recycling processes recover PGMs at 99.95% purity, enabling a closed-loop system that reduces reliance on mined metals. This is no minor detail: recycling costs are 40% lower than mining, and JM’s partnerships with automakers and industrial clients lock in long-term supply chains.

The circular economy dividend is clear: every ton of recycled platinum avoids 20 tons of mining waste and cuts CO₂ emissions by 90%. This not only aligns with ESG mandates but also shields JM from geopolitical disruptions (e.g., South Africa’s labor strikes, Russian palladium exports).

Strategic Focus on High-Growth Sectors

Post-CT sale, JM is doubling down on three areas critical to decarbonization:

1. Clean Hydrogen: JM’s iridium-based electrolysers are essential for green hydrogen production, a $300 billion market by 2030.
2. Industrial Emission Control: Catalysts for glass, cement, and steel plants—sectors under EU carbon border tax pressure—are seeing 8% annual demand growth.
3. EV-Adjacent Markets: While EVs reduce platinum in catalytic converters, they drive demand for PGMs in fuel cell vehicles and industrial batteries.

The company’s target of £250 million free cash flow by FY2027/28 signals confidence in these opportunities.

Risks? Yes. But Mitigated by Diversification

Critics might point to risks like lower automotive demand or trade wars disrupting supply chains. However, JM’s strategy offsets these:
- Defense spending: Rising budgets for aerospace and military hardware (using iridium in jet engines) are a hidden tailwind.
- Diversified PGM exposure: No single metal accounts for >20% of earnings.
- Recycling scalability: JM’s ability to ramp up secondary supply in China and Europe buffers against primary mine disruptions.

Investment Thesis: Buy the Transition

JM is a play on the inevitable: governments and corporations are pouring trillions into decarbonization, and PGMs are the unsung heroes of this shift. With a strong balance sheet, a streamlined portfolio, and a recycling-driven moat, JM is primed to outperform as PGM supply tightens and demand surges.

Act now: The stock trades at 12x FY2026E EBITDA, a discount to its growth profile. With £1.4 billion in proceeds to deploy and a shareholder-friendly strategy (targeting £200m+ annual returns by 2026), JM is setting the stage for multiyear outperformance.

Final Call: Decarbonization isn’t a trend—it’s a mandate. Johnson Matthey isn’t just along for the ride; it’s driving the bus.

This analysis is for informational purposes only. Investors should conduct their own due diligence.