Shares in manufacturer Johnson Matthey (JMAT) dropped 2.3% to £21.40 after the company halved its dividend, its first cut since the 1980s.
Blaming current uncertainty due to the coronavirus pandemic, Johnson Matthey has proposed a final dividend of 31.125p per share for its 2019/20 financial year, which is half the payout of its 2018/19 final dividend.
The decision, ending a streak of increases that dates back to the late 1980s, means Johnson Matthey becomes the 48th FTSE 100 firm to announce a reduction or suspension of payment to shareholders, compared to 47 that have kept or increased them since the start of the year.
It comes as the company targets an additional £80m of cost savings on top of the £120m it announced previously, which is expected to lead to around 2,500 job losses - one sixth of its workforce - over the next three years.
‘WE WANTED TO PAY SOMETHING’
Speaking to Shares, Johnson Matthey’s chief financial officer Anna Manz said that having watched many other firms cancel or defer dividends, the company wanted to commit to its shareholder payout, while also taking into account the ‘very uncertain’ outlook as a result of the coronavirus pandemic.
She said, ‘The right way to balance the situation was to pay shareholders something. This is not a rebasing, we are committed to paying a progressive dividend but it depends on when we return to pre-Covid 19 levels, particularly in terms of auto demand.’
In its preliminary results for the year to 31 March, the firm took a £60m hit related to Covid-19, which led underlying operating profit 6% lower to £539m.
Underlying sales, excluding precious metals, declined 2% to £4.17bn while underlying pre-tax profit dropped 13% to £455m and underlying earnings per share also dropped 13% to 199.2p.
eLNO ON TRACK, CHINA BACK TO PRE-COVID LEVELS
Commercialisation of its enhanced lithium nickel oxide (eLNO) material, which it hopes will disrupt the electric vehicle battery market and appears to be the area most of interest to investors, remains on track for 2021/22.
The company has been testing the material with four customers, two auto manufacturers and two big household electronic manufacturers.
Manz said the primary market for eLNO remains electric vehicle batteries, but testing it in household appliances has helped the firm improve the product.
Going forward Johnson Matthey has unsurprisingly withdrawn guidance for its current financial year, but Manz said production is starting to recover, particularly in China.
She said, ‘In our plant in China we’re starting to get back to pre-Covid 19 levels. In Europe and the US, in April we were down 85%, then in May it was 70% and now June it’s 40%, so we’re on a good trajectory in terms of recovery.’
