Ladies and gentlemen, thank you for standing by, and welcome to the full year results call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone keypad. For your information, the conference is being recorded. I would like to hand the conference over to your speaker today, Martin Dunwoodie, Director of Investor Relations. Please go ahead, sir.
Thank you. Good morning, thank you to everyone for joining us for our results today. It's a little later than we'd originally planned, but this was solely due to difficulties our auditors had in completing the year-end audit remotely due to COVID-19. We have today both a webcast and an audio call. The webcast is listen only, so if you want to ask questions following the presentation, please join the audio call. The presentation is available to download from the Johnson Matthey website. On the call today, I'm pleased to welcome our Chief Executive, Robert MacLeod, and our Chief Financial Officer, Anna Manz, who will take you through the presentation and then answer your questions afterwards. With that, I'd like to hand over to Robert.
Thanks, Martin. Good morning, everybody. We're in a very different world today since we last spoke, and I hope that you and all your families are keeping safe and well. I'd love to be doing this face-to-face, but obviously, given the circumstances, we have to do this remotely. Hopefully, it will still be a useful session for you. What we'll do is go through our presentation and then give you the chance to ask any questions you may have. As Martin's already said, it's Anna and me here with the IR team, and you'll be pleased to know we're appropriately social distancing, of course. To start with, the COVID-19 pandemic is one of the biggest challenges that our society and business has faced in recent years.
It is an uncertain time. At JM, we remain focused on the things we can control, and I'm extremely proud of how everyone at JM has collectively worked together to support each other and try to balance the needs of all of our stakeholders. The good news is that we're delivering on our strategy, and you'll hear from me on the progress we've made and how we're doing it. You can see from our results that we delivered operating performance slightly ahead of expectations before, towards the end of the year, we began to see the effects of COVID-19, and that impacted operating profit by around GBP 60 million. Our business is resilient. We have a strong balance sheet and are well-positioned in this uncertain world.
That's not just because of the strong foundation that we've built, but it's also because of our business model and the early and rapid actions that we took. We all know that the automotive market is evolving away from the internal combustion engine, and it's likely that COVID-19 will only accelerate that. No one yet knows how COVID-19 will impact the global economy, but we do expect that it will adversely impact demand across a number of our businesses, probably for quite some time. In order to maintain our competitiveness and our ability to continue to invest in our long-term growth drivers, we have to be more efficient. Therefore, today we're announcing the acceleration of our drive for further efficiency across the business. These new actions will deliver annualized savings of at least GBP 80 million by the end of our fiscal year 2022, 2023.
Looking beyond that, I'm confident in our medium-term growth. Addressing climate change is a priority for all of us, and commitments to net zero are accelerating across the world. These trends aren't going away, and our strategy is all about applying our science to provide solutions to address them. All of this gives me confidence in the strength of our business. In a moment, Anna will talk you through our performance in the year in more detail. First, I wanted to give you some highlights, update you on how we're navigating through COVID-19, and talk more about the actions we're taking to accelerate our strategy. As I mentioned, our underlying operating performance was slightly ahead of market expectations before the impact of COVID-19. In Clean Air, it was obviously a challenging year for global auto production even before COVID-19.
I was pleased that we strongly outperformed in light duty, particularly in Europe and Asia, where we're benefiting from tighter legislation. In Efficient Natural Resources, the year's operating results obviously benefited from the high and volatile metal prices. We also made great progress in reducing our refinery backlogs. In addition, we're also well underway with the development of new technologies, particularly those which will help pave the way to a low-carbon future. In Health, you'll remember that at the half year, we flagged a short-term hiatus in the market for opioid addiction therapies. Given our strong position, we've now agreed multi-year supply agreements for APIs used in these therapies. We also recently had the good news that one of our innovator customers has now received approval for their new cancer drug.
Finally, in Battery Materials, we've continued to make good progress on customer testing and the building of our commercial assets, which I'll talk to you later. Those were some of the performance highlights from the year. Let me now turn to more recent developments. Since COVID-19 started to impact us all, we've tried to balance the needs of all of our stakeholders. Whilst it's difficult, balancing the needs of all of our stakeholder groups is absolutely consistent with our values. Health and safety have to be our priority, and I want to say a heartfelt thank you to all of our people for their efforts and dedication during this challenging time. Thanks to their commitment, we've managed to keep the vast majority of our operations running, and we're still delivering for our customers.
This, of course, hasn't been easy, because we've had to balance keeping our operations open safely or even keeping them open at all. I'm pleased to say that we've managed that well throughout. As markets start to reopen, we're likely to see new and different challenges emerge. For our suppliers, we've maintained our payment terms, and we've even promised to support any smaller suppliers who may be facing difficulties. Across JM, there's been a huge desire to support our communities, whether it's supplying vital drugs to the healthcare industry, producing chemicals for food or energy supply chains, donating PPE to medical and care organizations, or also supporting charities. Of course, we remain absolutely committed to doing the right thing for our shareholders, and we are grateful for the support we've received.
Notwithstanding the strong financial position of the group, but in light of the current uncertainty and recognizing the importance of balancing the needs of all of our stakeholders, the board is proposing a final dividend for the year that is half the level of last year's. Let me now give you a picture of what we're currently seeing across our sectors. In Clean Air, many of our auto OEM customers began to close their plants from the end of January, firstly in China, and then in Europe and the U.S. from the middle of March. In the vast majority of these cases, this was due to a decline in consumer demand rather than any particular government requirement to shut down. What we're seeing now is a gradual recovery. First in China, helped by the Chinese government, which has rolled out incentives to boost the industry.
In Europe and the U.S., our production levels fell sharply in mid-March, with April and May sales down close to 80% compared with last year. Although demand remains in some areas, for example, in agricultural equipment and spare parts. While demand from our customers is starting to recover, visibility remains low, which is making forecasting difficult for us all. The European governments are now starting to follow China's lead with, for example, France announcing an automotive incentive program. In Efficient Natural Resources, the vast majority of our Catalyst Technologies plants have continued to operate close to normally throughout. The same is true for our platinum group metal refineries, although they're doing so at a lower capacity given new ways of working. For Health, our operations have been relatively unaffected, although we did see some small logistical delays around the year-end. Finally, New Markets are on track.
I'll get more into that later. Now looking at how we responded to this pandemic. Over the past few months, we've been focused on strengthening our financial position. Of course, in any crisis, it's critical to react quickly, and the JM team did so really, really well, taking immediate and decisive action to maintain our strong balance sheet and strengthen our liquidity. Firstly, we reduced our costs. We rapidly reduced our contractor numbers by more than 600. We restricted all discretionary spending, and as demand slowed, we adjusted shift patterns and froze hiring across the group. Second, we tightly managed our working capital. In Clean Air, we reacted quickly. We anticipated the impact on our customers and that they would shut down, so we ran down our inventory and raw materials purchases.
In our PGM refineries, we controlled our intakes to recognize the fact that our refining capacity was reducing. Finally, we immediately postponed a number of non-strategic capital projects. We continued with, and of course, remain committed to our strategic growth projects, given how important these are in supporting our medium-term growth. It's partly because of all these actions that we're in a strong position today, and I'm confident that we're well-placed to navigate the current uncertainty. The next slide summarizes why. The first thing is that we have a robust balance sheet, and Anna will give you the detail on that shortly. That's not all. The nature of our business model means that when the economic environment weakens, our balance sheet and liquidity strengthens, as we have significant working capital inflow when demand reduces. We also benefit from our flexible cost base.
For example, around 75% of our costs in Clean Air are variable. When demand turns sharply, we can flex things pretty quickly. Of course, this is something we're used to dealing with. For example, as we've managed through the regular peaks and troughs of the U.S. truck cycle. More broadly, the diversity of our portfolio reduces risks because we have exposure across multiple end markets and regions. Also, don't forget, our businesses run on different cycles too, even within the same sector. While Clean Air Europe and Americas are still at low levels of production, China has recovered strongly. Taking a step back from the short-term developments, let's now turn to our strategy and what we're doing to drive this forward.
Our strategy is clear. A key element is continued focus on efficiency. We've already delivered substantial savings from our existing initiatives. Today, we're announcing further efficiencies. The reason we can do this now is because of the investments that we've been making over the last few years. First, we're consolidating our Clean Air footprint. Second, we're driving organizational efficiency across the entire group. What that really means, simplifying the organization and making it easier to get things done. Together, these actions will take run rate cost savings to around GBP 225 million by the end of fiscal year 2022/2023. Over the next couple of slides, I'll take you through what this means. As many of you know, over the last couple of years, we've been investing in our Clean Air manufacturing footprint. Our new world-class plants in Europe and Asia are now almost complete.
The first of these, our plant in Poland, is now on stream. Two lines are operating. We're running validation batches and expect production will ramp up over the rest of the year. China will follow shortly, as we've already started commissioning and validation, and our plant in India will follow in a year or so to take advantage of new tighter legislation. With our new plants nearing completion, we're now able to take action to consolidate our footprint in Europe and remove inefficient capacity. This will save us at least GBP 30 million per year. Our ability to operate efficiently is a key priority in Clean Air, more so as this business moves into the next phase of its maturity. Our new plants will enable us to do just that.
They're very similar to our existing newer plants in North Macedonia and the U.S., and together they will give us an efficient global manufacturing network. In the current environment, and as this market matures, efficiency and agility are absolutely critical. This greater operational efficiency will mean that we can drive out costs. The plants are highly automated, and that's, of course, an added benefit in the current environment, as any social distancing requirements will not materially impact our productivity levels. With our standardized manufacturing assets, we'll be able to move products all over the world. These plants can produce our entire product mix, heavy-duty and light-duty parts. Together, they give us a truly flexible, agile, and efficient manufacturing base, one where our customers know that wherever we manufacture their products, they will receive the same quality and the way their product is manufactured will be identical.
This is critical in helping us deliver for our customers and to enhancing their experience with us. With our investments in Clean Air nearly behind us, we're now focused on maximizing our returns from this business. Our drive for efficiency is broader than just Clean Air footprint. We're reviewing our manufacturing capacity across the whole company. Over the last few years, we've also been investing in the business and building our capability. This includes the setting up of a global procurement function, the centralization of our IT function to drive efficiency, and rolling out our global ERP system, where we're now live in four plants as well as the corporate center. All this is crucial to our long-term success and is now allowing us to further simplify our organization. By having standardized systems and processes, we'll transform and simplify the way we work.
Whenever you add capability, there comes a point at which you need to remove areas of duplication and reduce complexity. We're now removing areas of overlap between the corporate center and our sectors. For example, by consolidating our procurement activities. This will leave us with a simpler organization, enable faster decision-making, and allow more time for our business leaders to focus on serving our customers. In a world that's changing and increasingly challenging, this is more important than ever. Before I hand over to Anna, let me just wrap up. We made good progress this year, and our operating performance was slightly ahead of expectations. Through many of the swift actions we've taken, we are well positioned in an uncertain world, and we're accelerating areas of our strategy to drive further efficiency and set us up for future success. Anna?
Thanks, Robert. Good morning. Today, I'm going to get into the detail of our performance. I'm going to tell you why our strong balance sheet means we're well-positioned, and I'm going to unpack the impact of accelerating our strategy on our financials. Let's begin by looking at our performance in the year, starting with group sales. We had 1% sales growth in the year until the last quarter, when we were impacted by COVID, and that reduced our sales by GBP 105 million. Sales were higher in Efficient Natural Resources and New Markets, although that was offset by declines in Clean Air and Health. It's in Clean Air we saw the majority of the COVID impact. Before the impact of COVID-19, our businesses were doing well and grew 5%.
The slide gives you the drivers by sector, and I won't go through each sector here because I've got a slide coming up on each in a moment. The 5% growth was despite a couple of one-offs, which happened in the first half and are called out in the text boxes. In the last couple of months of the year, COVID-19 impacted profit by about GBP 60 million, and I want to break that down a bit for you.
Firstly, GBP 30 million of this was lost demand in Clean Air. GBP 15 million with higher trade debtor provisions, and that really reflects the greater risk we see in the macroeconomic environment. We've not actually seen much change in our cash payments, and nor have we seen any defaults. Finally, GBP 15 million with delayed sales due to logistical challenges, and those have all since shipped in the month of April.
Operating profit declined 6% for the year. Let's go through the sectors in a bit more detail. Clean Air sales were down 4%, significantly outperforming auto production, which was down 10%. I'm not going to go through the bridge here as that shows performance relative to prior year, and it's our performance relative to auto production that I want to focus on. The outperformance against auto production was in light duty. This was due to tightening gasoline legislation in Europe and China, increasing the value per vehicle, and the annualization of our share gains in diesel in Europe. Elsewhere, our performance broadly followed the market production. Globally, the heavy duty market was down 11%, and we followed the market. In the Americas, the Class 8 truck cycle peaked in September, and as we expected, we saw a sharp decline in the second half.
Operating profit declined significantly more than sales. While 75% of our costs are variable, there's a couple of specific items to call out this year, which meant the decline in profit was bigger than we might have expected. Firstly, we experienced a GBP 40 million impact from COVID. Only GBP 30 million of this was a volume decline, the remainder was the higher trade debtor provisions.
We also had GBP 15 million of one-off costs in the first half from manufacturing inefficiencies, and we've had higher infrastructure costs relating to the start-up costs for our new plants. Looking forward, visibility on the recovery remains low, and external data shows a wide range of production assumptions for the next year. It currently suggests light duty vehicle production declines of about 25% for Europe and the U.S., with Asia stronger. In heavy duty, the declines in Europe and the U.S. are even greater.
Of course, the outcome could be materially different. Irrespective of that outcome, we will adapt our flexible cost base. Efficient Natural Resources performed strongly with sales up 8%. In Catalyst Technologies, we saw good growth in licensing, and we benefited from recent methanol and formaldehyde wins. We saw good growth in first fills as new plants in Asia came on stream. Refill catalysts performed well. Refill additives were weaker. Additives were impacted by the lower oil price, as when refineries are using lighter crude, they use less of our products. copper zeolite sales into Clean Air declined as auto demand was impacted by COVID. PGM Services has all been about precious metal prices. They've been both higher and more volatile throughout the year, driving double-digit sales growth in our refinery and our trading business.
Operating profit was up 40% as those higher precious metal prices benefited us by GBP 47 million. We didn't see all the benefit of price as we had some additional costs associated with working down those backlogs and also associated with the investment that we're making in our refineries to increase their resilience and efficiency. Looking at 2021, the Catalyst Technologies business is later cycle, we're not yet seeing the full COVID impact, but it will come through later on in the year. When it does, the impact of reduced volume will be greater, that's because of the higher operating leverage as this sector operates with a large number of sites and higher fixed costs. In PGM Services, metal prices and volatility will, of course, influence operating profit. We may not see all the price benefit we saw in the last year. In Health, sales declined 15%.
Generics were impacted by the temporary disruption in the opioid addiction therapy market in the second half. We also saw lower sales of ADHD APIs. If you remember, we talked at the half year about Teva's proposal for a global settlement framework in the U.S., which would supply free issue opioid addiction medication. That created temporary uncertainty in the market. We saw our customers stop buying in the second half. We have a strong position in this market. We've got multi-year supply agreements with generic partners for the APIs that go both into tablet and thin film opioid addiction products. That will benefit us next year. Innovators grew slightly. As Robert mentioned, since the year-end, our customer, Immunomedics, got FDA approval for their triple-negative breast cancer therapy. The weaker sales meant that operating profit was down 38%.
Looking to fiscal 2021, Health is relatively unaffected by changes in the macroeconomic environment and will have the benefit of the stronger market in opioid addiction therapies and the ramp of sales to Immunomedics. New Markets, sales grew 7%. That was driven by the alternative powertrain, with strong demand for fuel cells and for non-automotive battery systems, things like e-bikes. Operating profit declined as a result of a GBP 8 million impairment of our eLNO plant, where we decided to go directly to our first eLNO commercial plant. That's because the pace at which we were improving our process meant that our demo plant would rapidly become obsolete. We made significant investment in eLNO this year, we're making good progress towards commercialization. The slide gives you the full P&L, I just want to highlight a couple of lines here, finance charges and tax.
As we flagged, finance charges have increased due to increased interest on our metal borrowings. This is due to the greater average value of our borrowings, driven by higher precious metal prices, and the fact that we pay higher interest on metal borrowings than on the rest of our net debt. The underlying tax charge was similar to last year at 15.7%, and underlying earnings per share was down 13%. Here's the reconciliation to our reported results. The important number here is the GBP 140 million of impairment and restructuring charges. Robert shared with you the actions we're taking to restructure our business, and this is a non-cash impact in the year. I'll get into more detail of the restructuring and its financial implications in a couple of slides' time. I am really pleased with our cash flow over the full year.
We had a free cash flow inflow of GBP 52 million, you can see we had very little precious metal working capital outflow, and that is despite a 75% average increase in PGM prices. That's because we significantly reduced the volume of precious metal working capital we used in our business, which I'll come onto shortly. Cash outflow on CapEx was significant in the year, I'll talk more about this on the next slide. We're investing in our future. Our CapEx spend of GBP 465 million was focused on our strategic growth projects. Our new Clean Air plants in Poland and China are largely complete, they give us the capacity to deliver against the growth coming from new legislation, they're far more flexible and efficient. In Efficient Natural Resources, we're upgrading our PGM refineries for safety, efficiency, and resilience.
That will further help us in managing and reducing levels of precious metal working capital. In Health, we continue to develop our new product pipeline. In Battery Materials, we continue to commercialize eLNO, building our first commercial plant and application centers. We're investing to upgrade our IT systems to make our organization more efficient. Despite the external environment, we will continue to invest to deliver future growth and efficiency. In fiscal 2021, CapEx will be up to GBP 400 million. As Robert told you, we've got a robust balance sheet. We've got good access to liquidity at around GBP 1.3 billion, and that's because we restructured and increased our bank facilities, and we raised an additional $300 million U.S. private placement in the year.
Our balance sheet is robust with net debt to EBITDA of 1.6x , that's at the bottom end of our target range of 1.5x-2x. It's a significant improvement in the second half, despite the impact of COVID on EBITDA and higher PGM prices. Our debt maturity profile is balanced, the majority of our facilities have covenants of 3.5 x net debt to EBITDA, against which we've got material headroom. Our covenants are tested annually in March. I'm really pleased with the progress we've made on precious metal working capital. We've reduced the volume of precious metal used in our business by GBP 345 million. There's three main drivers here: reducing our refinery backlogs, reducing other precious metal working capital, and managing our business volumes through COVID. Starting with backlogs.
If you remember, we had an outage at one of our refineries, which led to an increase in our backlogs, and we've been working really hard to bring them down. In the year, we took out 162 million of volume, and that was more than we anticipated. We've also worked to reduce volumes across the group. We've optimized metal movements across the supply chain, and we've improved our commercial terms. Lastly, business volumes, we were quick to act and manage cash towards the end of the year. We saw the end market demand slowing, and we acted quickly to reduce metal at every stage in our supply chain, so we weren't sitting on any excess inventory. Metal price increases in the year were huge. Palladium was up 56% and rhodium up 137%.
Higher metal prices increased working capital by GBP 352 million. That is out of our control. Metal prices will continue to be volatile. We're working really hard on what we can control. We are going to accelerate our working capital metal volume reduction. The biggest lever continues to be backlogs. We've already been really successful in reducing them. Because of the work we've done, we now believe we can take out at least another GBP 300 million in volume by the end of this financial year. Now, that's based on metal prices at the end of March. You can't plug that straight into your models, as we would expect it to be offset by the ramp-up in demand in Clean Air, increasing receivables. The timing and pace of that ramp-up is currently hard to predict. We have a strong track record of delivering efficiency.
We've announced a number of initiatives since 2017. We delivered GBP 116 million to date, with GBP 145 million annualized benefit by fiscal 2023. The scale of the numbers here shows we know how to do this. As you heard from Robert, accelerating our strategy will deliver at least a further GBP 80 million. This brings total benefits to GBP 225 million by fiscal 2023. We're not done. We'll go on looking for more opportunities. Let me give you some of the details you need for your modeling. Here are all the numbers. Looking first at the totals, we'll deliver at least GBP 80 million of annualized savings. The total cost of that will be GBP 240 million, and as it says in the footnote, GBP 80 million of that is cash. Of the GBP 240 million cost, GBP 140 million non-cash charge has been recognized this year.
The consolidation of the Clean Air manufacturing footprint in Europe will deliver a GBP 30 million annualized benefit within three years. It will cost GBP 91 million, of which GBP 30 million is cash. The simplification of our business will deliver GBP 50 million. It will cost GBP 70 million overall, of which GBP 50 million is cash. In Battery Materials, we're impairing our lithium iron phosphate, or LFP, business as we focus on the smaller, higher value segment of the market, and that's where our eLNO customers play. In Health, we've done a review of our pipeline and our new product introduction approach, which has led to an impairment. That's because we want greater focus on the most valuable molecules. Given the ongoing uncertainty, we're unable to provide financial guidance for next year.
There will be a diverse impact across our sectors, and I've already taken you through the dynamics of what we expect to see. Savings from our efficiency initiatives will support performance in the year by GBP 30 million, and we expect to see significant benefits from reducing our backlogs on our working capital. We'll continue to invest in our strategic projects, which are critical for our future growth and efficiency. With that, I'll pass back to Robert.
Thanks, Ann a. You've seen our performance and how we're taking action to accelerate our strategy. Now let me talk about some of the exciting opportunities that will drive our future growth. As you know, our strategy is to use our world-class science to solve our customers' complex problems. This ultimately creates long-term value for our shareholders and a cleaner, healthier planet for everyone. I've already covered our established businesses, quickly to recap. In Clean Air, we'll continue to benefit from tightening legislation globally, particularly in Europe and Asia, we've maintained our strong leadership positions in our key markets. As our capital projects are nearing completion, this will allow us to drive greater efficiency and save costs. In Efficient Natural Resources, we're driving growth, targeting our investment and resources into the highest growth segments, this focused approach is starting to deliver results.
In Health, we continue to progress our new product pipeline. When you look at the world around us, it's clear that action around key global trends has increased. We all know that tackling climate change is one of the biggest issues that we face, and during the last year, awareness has grown more than ever. We will all need to work together to develop new solutions that will reduce our global carbon footprint, and we're seeing increasing momentum around net zero commitments, and the pace of change is really accelerating. This trend will only get stronger and may even be accelerated in a post-COVID world. We're already using our science to provide solutions for net zero, and these will drive our medium-term growth. Our Battery Materials business will enable greater adoption of long-range pure battery electric vehicles.
As hydrogen is increasingly recognized as an important part of the solution for cleaner energy, we are well placed there with our leading hydrogen production technologies and, of course, fuel cells. We mentioned the good growth we've seen in our fuel cells business earlier, and this technology will also play a key part in the decarbonization of transportation, particularly in heavy-duty applications. Now let me take you through our progress with each of these. In the last year, the opportunity for our Battery Materials business has improved as the uptake and outlook for electric vehicles has increased. This is principally being driven by the tightening regulatory environment, consumer acceptance, and the development of the technology and infrastructure. We've also confirmed that customers will require customized solutions, each with differing requirements. This plays to our technology strengths and the strengths of eLNO, our family of high nickel cathode materials.
It also means that the high nickel market will not become a commodity play anytime soon. As a result of both trends, we remain convinced that this is an attractive market for us. In the last year, we've made significant progress in building our Battery Materials business. We've moved forward with our customer testing, our commercial plant, and our application centers. In the year, we have achieved an important milestone as four of our customers moved into full cell testing, two global automotive OEMs and two non-automotive customers. Full cell testing essentially means that our customers have reduced their number of potential suppliers to around three to four. It's also a more intensive and collaborative phase of testing where we work together to optimize eLNO within a specific application. Of course, it means that our customers are putting in more investment from their side.
I'm very pleased to have two automotive OEMs in full cell testing, as well as a number of other OEMs and cell manufacturers in the earlier validation phase. Of course, this sector remains our priority. However, the shorter qualification path for the non-automotive sector will give us additional detailed knowledge about eLNO's performance and very valuable learnings, especially as we start to produce commercial volumes. While we've continued to develop our technology and enhance eLNO for our customers, we've also been investing in building the infrastructure that is required to bring eLNO to market at scale. This is a substantial endeavor, but I'm pleased with the progress that we've made in the last 12 months. We've broken ground on our first commercial plant in Poland, our application centers are up and running, as you can see from the photo.
These application centers will play an important role in the success of our Battery Materials business because customization is critical to our customers. Our new plant will start production in 2022, and eLNO will be on automotive platforms in 2024. As the world moves towards net zero, the opportunity in hydrogen is significant. Today, hydrogen is a critical feedstock for chemical processes, but there is increasing recognition that it can play a much bigger picture of the clean energy solution. This is recognized in many countries, and we expect substantial investment in the rapid upscaling of clean hydrogen production and its use across Europe and the world. We span the hydrogen value chain and have strong established positions in both hydrogen production and fuel cells. We have the leading technology for blue hydrogen production.
It uses natural gas as a feedstock. We've developed a process that gives a high yield and makes decarbonization through carbon capture and storage both easier and cheaper. Blue hydrogen is already starting to commercialize. Our technology is being used in a number of high-profile projects, including HyNet's low carbon hydrogen project here in the U.K. This will use our blue hydrogen technology in a refinery for the first time. This is a really exciting opportunity for us. With our established technology, we are well positioned to succeed. It's also clear that fuel cells will play a key role in the decarbonization of transportation as the powertrain evolves. In the near term, this will be in trucks and delivery vehicles. In fact, we've already supplied fuel cell components to several hundred commercial vehicles and buses in China.
The picture on the slide shows you a truck in China that's using our fuel cell system. It's a growing market and a large opportunity for us. We're already an established player here and are investing GBP 15 million to double our manufacturing capacity across the U.K. and China. It's also our unique position across the value chain that really differentiates us. Not only do we manufacture the PGM catalyst, but also the membrane too, and it's our ability to optimize the interaction of these components across the whole fuel cell system that gives us a strong competitive advantage. As you can hear, there are a number of exciting opportunities to drive our medium-term growth, and we hope to talk more about the broader hydrogen opportunity in the near future as we look to reschedule our hydrogen seminar. Let me now summarize for you.
Overall, I'm pleased with the resilience of our performance and what we've delivered in the short term. We took rapid, decisive action and are balancing the priorities of all of our stakeholders in some of the most challenging conditions that we've ever seen. Now that the right foundations are in place, we're taking the opportunity to accelerate this, driving further efficiency. Whilst the environment is tough at the moment, science remains at the heart of JM, and we're well positioned for future success with our science-led solutions as the world drives towards net zero. That concludes our presentation. Let's take a quick break, and we'll be happy to take your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be taken by an operator. If you wish to cancel your request, please press the hash key. We are taking our first question from the line of Tom Wrigglesworth from Citi. Please ask your question.
Hi, Tom. We can't hear you. Tom there?
We are taking our next question from the line of Alex Stewart. Please ask your question.
Hi, Alex.
Hi there. I had a slightly longer-term question. The PGM review that Johnson Matthey pushes out changed your assessment of the China VI rollout. I think previously, people had expected roughly half the cars to move to China VI in 2019 and then the other half in 2020. It now looks like the China VI rollout was pulled forward and the majority of China VI platforms were actually launched in 2019 rather than 2020. Does that change your plans regarding growth in the Asian business? Do you think possibly it dilutes some of the value of having brought on a brand new catalyst plant in China this year with the next phase not until 2023? I'd be really interested to know if that makes a difference to the way that you think about the business. Thanks.
Thanks, Alex, for your question. No, it doesn't change anything about our prospects and excitement about the China opportunity. People are already switching to China VI. Whilst light duty was delayed a little bit to starting in January 2021, that was a light duty thing only. Heavy duty hasn't changed. We absolutely need our new plant in China, and it's coming on at absolutely the right time to enable us to take advantage of this growth over the next few years.
Okay. That's easy. Thank you.
Thanks.
Thank you. We are taking our next question from the line of Adam Collins. Please ask your question.
Hi, Adam.
Good morning.
Morning.
Can you hear me okay?
Yeah. We can hear you loud and clear.
Okay, good stuff. Couple of things from me, please. First of all, on the increase in ENR profits in the second half, very healthy jump there. How significant was PGM Services to that? A couple of related questions on that. Are you hedging any of your price exposure? Secondly, what was the significance of PGM broking profits because of higher volatility in that area? That's my first question.
I don't know. I thought that was three questions in one. Well done.
A three-parter.
A three-parter. I think, actually, those are probably all, if Anna doesn't mind, probably all best handled. Anna, are you up for it?
You might need to remind me of the last one when I get there. Do you want me to do those, Adam, and then you ask your next question? Do you want to
No, just maybe answer that first because it's a different area.
Super. Yes, we quoted that we had a GBP 47 million benefit from price in our profitability in Efficient Natural Resources. Yes, a lot of the strength and growth in Efficient Natural Resources was driven by PGM Services. Are we hedging PGM prices? That's a complicated question. Our fundamental philosophy is we don't try and take price risk across the group. If we have a position, we close it out. The way our refining business works is that we effectively make a percentage of the volume. As metal prices go up, that becomes a higher number. That business does better. It's not a price exposure as such. It's more that the business becomes more valuable at higher precious metal prices. Your last one-
How important is trading? I think it was trading profit, wasn't it, Adam?
Yeah. PGM broking volatility.
Yeah. The biggest driver is precious metal prices and you see that come across everything and refining. Our trading profits were up some in the period. We don't disclose that breakout, I'm afraid.
Yeah. On the hedging thing, what I meant there was using forward contracts to lock into three PGM prices on a forwards basis. Historically, you haven't done that, and I think what you're saying there is that you've remained without policy. You haven't done any forwards hedging of the P&L.
No.
Yeah. Okay.
Right.
Yeah. Second a rea, which is different, is on LFP, where you're saying that you're making some asset write-downs. A couple of battery OEMs have been making some positive noises about LFP for the car market, claiming that they've found a higher energy recipe in LFP. I just wanted to get your thoughts on why you don't think that's a market with potential in the EV market, whether that's bus or car.
Thank you, Adam, for that question. No, look, we do still think that LFP has a role to play. We are well aware of some of those comments from other OEMs or some OEMs. The market is broken down into a sort of fairly commoditized element and a high-end part of the market. That higher-end part of the market is quite small. Some of the things you're talking about haven't yet been launched yet, or haven't yet been committed. When we look at the accounting and how we actually have to look at these assets, we've had to take an accounting impairment at the moment. We are still in this business, particularly for the high-end market of LFP and for our customers that also will sell the eLNO to them as well.
Okay. Thank you very much.
Thanks, Adam.
Thank you. We are taking the next question from the line of Andrew Stott. Please ask your question.
Yeah. Morning, Robert. Morning, Anna.
Morning.
Thanks for the opportunity. First one's around production on two fronts. Start with autocatalysts. I think am I thinking you've got 18 sites now globally? Is that right? Once you've brought on the Poland, China and India plants. Is that correct?
I don't recognize it's quite as high as that number. I thought it was 13 or 14.
13 or 14, okay. Let me ask it another way. Whatever the absolute number is, what's the % increase in production volume? In the strategic appraisal you just outlined, you're obviously taking some action on your existing production base. I couldn't tell whether that includes production contraction, so an offset to some of the growth. Is that clear as a question?
I'm not sure it is clear. Could you try it again, Andrew? Sorry. I think we're both missing maybe a little bit.
You're bringing on new production, which means you've got additional volume. Are you actually reducing production in the rest of your autocatalyst sites?
Well, production is dependent upon the number of actual car production available, demand out there. I think your comment is more about capacity than actual production. What we've said is, as part of this piece of work we're doing, we're going to be consolidating our footprint in Clean Air, which will mean that we'll reduce capacity in our more inefficient plants and move that capacity into these newer, highly efficient plants.
Have you communicated the net number? The plus and the minus is what?
It'll be a net increase, but no, we haven't given the net numbers. What we can say is the new plants are very efficient.
Okay. Obviously the GBP 80 million captures the imprint from that lower production, correct?
Yes.
Okay. Secondly, on LFP, following on from Adam's question, a slightly different question. Is there a chance to, in effect, retrofit some of the LFP production to eLNO or other chemistries if you get to that point?
No, there isn't.
Okay.
Not from these plants.
Sure. Okay. Sorry, final question, one for Anna, actually. Anna, you made the point that you've got more positive imprints to come on inventory, on the working capital, maybe offset a bit by receivables. You didn't mention payables and the number on the balance sheet is dramatically different from last year. I'm just wondering how you've managed to improve payables by GBP 700 million in cash flow terms, GBP 1 billion on the balance sheet. How much of that's timing, how much of that's structural? Thank you.
This, Andrew, is a bit of an accounting complexity.
Andrew, you should see the smile on her face. You've asked the question and she's desperate to give you the answer here.
I like the accounting complexities. If you go to the notes at the bottom of the balance sheet page, what it references is the impact of our metal funding swaps. If you remember, we had the accounting restatement a year ago. It changed the impact of those swaps on our receivables and payables, and effectively they gross them up and distort them. What I would suggest you do is you back out the impact that's noted at the bottom, and you'll see our underlying receivables and payables position, and it's not materially moved. If you want one of the IR team or myself to just take you through that, we can do.
Probably. Okay, I'll follow up offline. Thank you.
Yeah. Judging by Martin's face, you probably better phone Anna rather than Martin, or give Martin a chance to get to swot it up.
Thanks a lot.
Okay.
Thank you. We are taking our next question from the line of Sebastian Bray. Please ask your question.
Good morning, thank you for taking my questions. I would have two, please. The first is on the opportunity to Johnson Matthey from hydrogen. Most of the EU government's directives and intentions seem to be directed at green hydrogen. Is Johnson Matthey involved in any way in the water electrolysis chain and the production of membranes for this, i.e., is there any play on green hydrogen at the company? My second question is on restructuring costs. As far as the distribution on a P&L and/or cash basis is concerned, how do these fall into fiscal year 2021 and 2022? Thank you.
Thanks, Sebastian, good morning to you. I'll answer the first one, then Anna will give you the information on the second one. Look, on hydrogen, I think you're right. Everybody wants to go to green hydrogen using electrolysis, I still do believe, and we believe, and many of the governments we're talking to believe that blue hydrogen has a role. It actually has a very significant role as a transitional technology as the hydrogen market develops. Specifically to answer your question about green hydrogen, it is, in a way, the reverse of fuel cells.
It's the reverse of how a fuel cell works. There are technologies which use a PGM catalyst to enable the electrolysis to occur, to generate green hydrogen, and we do have a role to play in some technology there, albeit it's at a little bit earlier stage than our existing fuel cell business, which is more advanced. Anna, do you want to?
On restructuring. Yeah, look, I haven't given you all of the breakdown of benefit and cost by year, because if I'm honest, in the context of our current outlook, that would be false precision, but I can give you some color to think about it. As we said, the saving is GBP 80 million, and the cash cost of that is about GBP 80 million over a three-year window. In year one, so in the year we're in, we will see a GBP 30 million benefit. You would think to realize the GBP 30 million benefit, you probably would expect a good chunk of that cash cost at least half to be hitting at the year we're in. I'm not going to give you the phasing for the subsequent two years because it depends how fast we can really move through this change.
Thank you. If I may squeeze in a follow-up, the press release makes reference to the, quote, "upwards pressure or potential upwards pressure on the CapEx budget for the eLNO facility in Poland." What are the main drivers behind this?
The main driver behind that is twofold. Firstly, we continue to see, as we talked about, our customers asking for more customization of their products and to enable us to make those particular products. Each individual product is requiring us to increase the flexibility of our plant, and that's putting a little bit more cost onto it. Also, COVID-19 might have a bit of an impact on the overall cost too. It's those two factors.
Right. Thank you very much.
Thanks, Sebastian.
Thank you. We are taking our next question from the line of Charlie Webb. Please ask your question.
Morning, Anna, Robert, Martin. Thank you very much for your time this morning. Just a couple from me, I guess following up a little bit on the last couple of questions. Just firstly on the GBP 80 million additional saving measures, should we see this as a net saving or like in the past, will some of that be used to invest in growth? Firstly, is that a net saving or will some of that be diluted down? Secondly, coming back to the hydrogen opportunity, can you help us just in terms of what kind of growth rates you saw in FY 2020 and try and help us a little bit understand the scale of this business today would be very helpful. Your thoughts in terms of do you expect further hydrogen support, subsidies, incentives in the U.K. and in China?
In relation to that, are you having increased discussions with customers and how does that kind of backlog pipeline look for you in blue hydrogen and fuel cells, et cetera, would be just helpful. A bit more color.
I'll give you the color on hydrogen. Anna, do you want to go first?
The GBP 80 million.
GBP 80 million.
Yeah. That is a net saving. There are a couple of system enablement factors which you've already got in your forecast around SAP. That capital cost continues, but the GBP 80 million is a net saving on our current plant base.
Okay. Is that all right, Charlie?
Yep. No, that's great. Thank you.
Okay. On fuel cells, look, it still currently is a relatively small business, but in the whole grand scheme of JM, it is profitable, as we've said before, and our sales in the last year went up nearly 25% in the year. Of course, on the hydrogen side, that's the fuel cell side, the hydrogen production side, it's a bit more of an early stage on some of these projects. I talked about the HyNet project here in the U.K. There's also another one called Acorn in the U.K., around hydrogen generation using, well, use the technical term, it's steam methane reforming and an ATR process, which is an autothermal reacting process. I won't go through all the details with you, but that's where we've got some great technology on blue hydrogen generation.
That I think is going to scale up over the next few years. These first plants that they're looking at are sort of quite big scale, but they're still not the massive scale that's needed for the adoption of hydrogen production more generally. On the how we're seeing the market evolve, our fuel cell business, going back to fuel cells, is talking to a number of OEMs about their plans for the future. We're doubling our capacity in fuel cells at the moment, and we are looking to the future about how we would be able to scale that business up further as this market evolves.
That's helpful. Just in terms of thinking about Europe is obviously also looking at hydrogen as a technology, sorry, blue hydrogen as an intermediate technology towards a kind of greater involvement for hydrogen more broadly. With Brexit and other things, is that still an opportunity given your position today, your technologies today, that you are engaged in, that you have access to and that you think you can grow into, a market you can grow into?
Oh, absolutely. For sure. We're part of the Hydrogen Council. In fact, we're a board member of the Hydrogen Council. They have a key participant in that. I think technologies know no boundaries. If you've got the best technology, by the way, we do, have the best technology to enable blue hydrogen, that people will want that regardless of what geography they're based in.
Okay. Thank you very much.
Thanks, Charlie.
Thank you. We are taking our next question from the line of Jean-Baptiste Rolland. Please ask your question.
Good morning, Robert. Good morning, Anna. Thank you for taking my questions.
Good morning.
Good morning. I would have three, please. The first one on regulations and your anticipated impact on your catalysis business. Regulations or let's say the incentive stimulus package in Germany, was making the choice not to offer scrappage incentives for internal combustion engines, which sounds like quite a strong political message sent to OEMs. I am just curious to know if at your end, you are expecting any strategic responses or whether you had already initial conversations with OEMs on this. That's point number one. Question number two is, I heard your comment about shorter qualification time for non-auto applications for eLNO. I was just wondering, given your timeline for commercialization is fiscal year 2024, I was just wondering, should we expect both applications to be commercialized in the same year, or will there be a delay or any gap between the two?
I'm just wondering if you could clarify that. Final question on fuel cells. Could you give us an indication on how profitability is evolving in fuel cells? I remember last November there had been a headline or a small article on Bloomberg saying that you had turned positive or at least profitable again in fuel cells, and you hadn't been before for a couple of years, if I'm not wrong. Just interested in knowing how this has evolved since then. Thank you.
Baptiste, thank you for your questions. Look, on the stimulus packages, they're all starting to evolve, they're all starting to come out. What is absolutely clear is in Europe, where they're wanting to incentivize cleaner air and the move towards electrification, and lower emissions. The support in France is scrapping. It's partly a scrappage scheme to scrap old vehicles and replace them with lower emission models. That gives a certain amount of incentive, if you go and buy a battery electric car, you get an additional incentive. In Germany as well, as you referred to, there's a scrappage scheme, the benefits partly go into hybrid cars as well as pure electric cars. We're all emerging, what is absolutely critical, what is absolutely clear is they're trying to encourage a move into lower emitting vehicles.
Of course, hybrids still remain a good opportunity for JM with the catalyst on, as you know. On the qualification timelines of the non-automotive customers, you're absolutely right. As we said, they're shorter. I don't think that means you should assume that any commercial production from non-auto will start in 2024. We'd anticipate that happening sooner than that, because the qualification timelines are quicker, and that will give us good learnings on how to run the plant effectively ahead of full scale commercial production for automotive customers. We would anticipate having the non-automotive commercial volumes a year or so earlier than automotive. Finally, on fuel cells, I'm afraid we're not going to break down the New Markets business into detail. I've given you the top line number. Well, I didn't give you the number. I gave you the sales growth.
We make a small profit, a small single digit profit number, millions.
Thank you. Thank you very much.
Thank you.
Thank you. We are taking our next question from the line of Tom Wrigglesworth. Please ask your question.
Good morning, everybody. Hopefully this is working this time.
Yeah, we can hear you. Yay.
Thanks. Thanks for your patience. First question is, the Asian light duty market performance from JMAT seems to outstrip the underlying market very strongly. My understanding of our initial conversations with John Walker was that will likely to occur more in the 2022/ 2023 period. Is that just a platform development, or are we actually seeing early adoption come through in the Asian business for light duty? First question. Second question, just on the dividend, you've highlighted this is not a new dividend policy today, but could you just help us understand what the gateposts are at the board level that would lead us back to the previous level of dividend payout? Thank you.
Okay. Thank you, Tom. I'm glad we finally got your questions. On the agent light duty side, it is principally China, and you're right, it's early adoption with some models. Some customers have gone early. We would expect that they'll obviously, once you've adopted it, they'll keep going. You'll see greater adoption across the customers. It'll be a gradual ramp up over the next few years as more and more OEMs adopt the new technology. On the dividend, yeah, absolutely, this is not intended at all to be a rebasing of the dividend, and we remain committed to our progressive dividend. It's hard to judge with an uncertain outlook exactly when our dividend will recover to pre-COVID times, but it's the board intention to get there, but that will depend on how the market evolves and the economy evolves.
Okay. No, it's it. Thank you.
Thanks, Tom.
Thank you. We are taking our next question from the line of Chetan Udeshi. Please ask your question.
Yeah. Hi, morning.
Morning.
Three questions. Can you maybe just help us understand what is the impact of mild hybrid in general on the value of catalysts that you guys sell into the internal combustion? I'm talking about essentially 48V technology. Does that have any impact on the value of the catalyst? It seems you've de-emphasized 21 generic molecules in the Health business, but that doesn't seem to be impacting the GBP 100 million incremental profit contribution that is expected over the next five years. Why have we not seen that number being adjusted downwards? That's the second question. The third question was just around, if I look at the numbers for fiscal year that has just ended, it seems there are significant write-downs across most of the businesses.
In terms of how to evaluate investing for growth, in other words, is there more scrutiny in terms of investment than in the past? Thank you.
Thanks, Chetan. Thanks for your questions. Look, just on the first one for the mild hybrid, what's the catalyst value for a mild hybrid rather than a regular internal combustion engine car? It's very similar. There's not much value difference between a mild hybrid and a regular car because, of course, when the internal combustion engine is running, it needs to meet the emission standards that are required with a regular car. That's why the catalyst system needs to be pretty much the same. Anna, do you want to have a go at the other two?
Yeah, sure. On the Health business, we had 75 molecules in our pipeline. What we've done is a review of our pipeline focus, we've removed 21 molecules from our pipeline that were impacting further out, but that were reducing focus on the delivery of nearer in models. Really we've just sort of honed in the focus on how to deliver the value. That's the impairment there. Your last question about write-downs. There's two big areas of write-down in our numbers. One is around Clean Air and the other is around LFP.
With respect to Clean Air, when we went to invest in those big new efficient plants, we said to you at the time that we needed the incremental capacity, but that we also were putting in additional capacity to allow us to consolidate what was an aging plant footprint and in some areas quite inefficient into these new, more efficient plants. That was absolutely always our strategy. What you've seen with COVID is volumes have, in the short term, fallen a little bit. That's allowing us to go faster to realize some of that cost and in going faster, therefore, the impairment's slightly larger. With respect, the other big area that we've had a write-down is around LFP. Again, we went into LFP, I don't know what, eight years or nine years ago now, as part of our entry into Battery Materials.
We're pleased with our entry into Battery Materials, and we're pleased with our position in eLNO. However, while we've learned a lot from LFP and we're staying focused on the higher-end piece, we're not delivering value from all of those assets because the lower-end part of the market is not delivering the value that we would have thought. There we are making the write-down as a result.
Can I follow up on?
The value that it's creating. Sorry, Chetan.
No, I just wanted to follow up, sorry, on LFP point. Are you at the moment, or are you working with any of the OEMs car or battery OEMs on any of the higher-end cars? Maybe not the mass market, but somewhat higher-end cars including any of your LFP material in the batteries? Is that not in the pipeline at the moment?
On our LFP business, we continue to have sales that go into high-end vehicles, premium vehicles, and that's the high-end value of the market that we're still remaining in. It's all gone very quiet. Have we got another question?
Yes, we have another question coming from the line of Alex Stewart. Please ask your question.
Hello again, Alex.
Hi. Sorry. Thanks for taking another question. I know it's quite late, so I'll keep it very short.
It's all right.
In Health, you have taken effectively 30% of the pipeline molecules out and maintained your EBIT guidance for 2025/ 2026, as you just discussed. Which implies that either those 21 molecules, the future value you had perceived was gradually declining over time, or that the value for the remaining 55 odd molecules has been going up. Which of the two scenarios was it? Can you now see more value in the remaining pipeline, or were you actually seeing negligible value in that 21 molecules?
I think it was neither. I think we always saw more value in our pipeline than the GBP 100 million that we described externally. Some of these molecules have launch dates that are beyond 2025, some of the molecules that we are taking out of the pipeline. I guess that's a long way of saying we're confident in the GBP 100 million. The molecules that we're taking out, many of them would have benefited beyond 2025, so would have been subsequent growth. They're not particularly large molecules in the first place, which was why they were a bit of a distraction to us, and we focused on the higher value piece.
That's really clear. Thank you.
Thank you. There are no more questions on the line. Please continue.
Okay. Well, look, I think if there are no more questions, thank you very much indeed for your time. Thank you very much for accommodating us in this way of doing the results presentation. I hope you are all well. Your families are well. Your work colleagues are well. Do please take care. We look forward to seeing you as we go around seeing shareholders. Thanks very much indeed.
This concludes the conference for today. Thank you for participating. You may all disconnect.