Standard Industries, a US conglomerate, said that ‘decisive action must be taken’ after a prolonged slump in Johnson Matthey’s share price in recent years
The largest shareholder of UK industrial giant Johnson Matthey, Standard Industries, a US conglomerate, has called for a major shake-up of the company’s board and a new business strategy, which could potentially involve selling the company.
In a statement on Monday, Standard Industries’ bosses, David Millstone and David Winter, sharply criticized Johnson Matthey’s directors, labeling them as “complacent and incapable of correcting a misguided strategy”. This comes after a significant decline in Johnson Matthey’s share price over the past few years.
Johnson Matthey responded by saying its board “welcomes constructive input from all shareholders” and acknowledged the need to improve shareholder returns. The company stated it is “making progress in a challenging market environment” through its transformation strategy.
As a 200-year-old industrials and chemicals firm listed in London, Johnson Matthey primarily generates revenue from producing catalytic converters for cars. These devices, fitted to car exhausts, aim to reduce carbon emissions and other pollutants.
Despite being a leading manufacturer, with approximately one-third of UK cars equipped with their converters, Johnson Matthey’s share price has plummeted 55% in the last five years. Investors’ concerns about the potential obsolescence of these converters with the rise of electric cars have contributed to this decline.
Sales at Johnson Matthey’s clean air business, which manufactures converters, have fallen by 9% year-on-year for the six months leading up to September. The company also has several other business units experiencing even steeper declines, such as its hydrogen technologies business.
Standard Industries has urged Johnson Matthey to sell this business, which reported sales of £20m in the first half of the financial year, a drop of 46% compared to the same period in 2023. The investor also called for a “refresh” of Johnson Matthey’s board, noting that only one new director had been appointed since November 2021.
Standard Industries’ Mr Millstone and Mr Winter wrote that the current team of top executives “lacks the sense of urgency and strategic capabilities required to improve the company’s performance”. They suggested that selling the entire company could be an option and that Johnson Matthey bosses should hire advisers to explore their options.
They stated: “We strongly urge the board to hire advisers and publicly launch a formal strategic review process exploring all potential paths for maximising shareholder value, including, but not limited to, a sale of part or all of the company.”
Johnson Matthey employs 11,600 people across more than 30 countries, including a large manufacturing plant in Royston, Hertfordshire. Following the publication of the letter, shares in the company rose by 4.3% on Monday.
Russ Mould, an analyst at AJ Bell, commented on recent criticisms, noting they were “lent credibility by the poor performance of the share price and weak and inconsistent earnings over several years”. He observed: “The market seems to welcome Standard Investments’ intervention and that may hint at the potential for success in its efforts to secure new voices on the board and radically shake up the business.”
