--- title: "Morgan Advanced Materials Signals Steady Progress Amid Headwinds" type: "News" locale: "en" url: "https://longbridge.com/en/news/296972647.md" description: "Morgan Advanced Materials reported H1 2026 revenue of £518.0m, driven by a £8.9m one-off take-or-pay payment. Excluding this item, organic growth was 3.0%. Adjusted operating margin reached 11.2% with the boost, or 9.6% without it, as management targets 12% by 2028. Technical Ceramics led performance, while turnarounds at Augusta and Hayward improved efficiency. Free cash flow was £3.5m, with net debt at £253m." datetime: "2026-08-26T00:28:29.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296972647.md) - [en](https://longbridge.com/en/news/296972647.md) - [zh-HK](https://longbridge.com/zh-HK/news/296972647.md) generator: "portal-rs" --- # Morgan Advanced Materials Signals Steady Progress Amid Headwinds Morgan Advanced Materials ((GB:MGAM)) has held its Q2 earnings call. Read on for the main highlights of the call. Morgan Advanced Materials’ latest earnings call struck a cautiously upbeat tone as management highlighted improving operations, solid end-market demand in key segments, and clear margin expansion plans toward 12% by 2028. While a one-off take-or-pay payment flattered first-half numbers and several regional and segment headwinds persist, execution on turnarounds and efficiency measures is starting to show through in underlying performance. ## Revenue Growth Supported by One-Off Boost Group revenue reached £518.0m in H1 2026, translating into 4.8% organic constant-currency growth, including an £8.9m take-or-pay benefit from a semiconductor customer. Excluding this non-recurring item, organic growth was a more modest 3.0%, indicating steady but not spectacular demand across Morgan Advanced Materials’ diverse industrial and technology markets. ## Margins Improve but Underlying Headroom Remains Headline adjusted operating profit came in at £57.8m, delivering an 11.2% adjusted operating margin when the take-or-pay gain is included. Stripping out that benefit, the margin stands at 9.6%, still an improvement on prior periods but underscoring that part of the uplift is non-recurring and that meaningful work remains to reach the 12% margin target by 2028. ## Technical Ceramics Drives Quality Growth Technical Ceramics was a standout, with revenue up 7.8% on a constant-currency basis and operating margin expanding 130 basis points to 13.0%. The division is increasingly leveraged to Aerospace & Defense, which now represents 39% of divisional sales, supported by strong demand for ceramic cores used in jet engine turbine blades and other high-specification applications. ## Performance Carbon Shows Mixed Picture Performance Carbon posted 4.0% revenue growth, helped by the £8.9m take-or-pay payment and solid demand from Energy and Aerospace customers. However, excluding the phasing benefit, divisional revenue declined 1.8% year-on-year, reflecting weaker demand for body armour and softer industrial equipment orders that partially offset strength in wind and power markets. ## Thermal Products Return to Positive Territory Thermal Products returned to growth with a 2.5% increase in constant-currency revenue as Asia and North America picked up. Growth was fuelled by metals processing in India and China, as well as CPI-related projects and energy storage demand in North America, though regional performance across Europe remained more subdued due to industrial caution. ## Big Ticket Site Turnarounds Gain Traction Management highlighted substantial progress on two large operational turnarounds, at Augusta, Georgia and with the closure and relocation of Hayward, California. At Augusta, a finished-inventory approach is 70% implemented, cutting lead times by more than half and supporting 12% sales growth on impacted lines, with these sites together representing about 20% of group revenue. ## Efficiency and Procurement Fuel Margin Ambitions Efficiency and simplification actions delivered roughly 250 basis points of margin improvement, pointing to tangible gains from operational tightening. A new group procurement function is starting to provide clearer spend visibility and is expected to drive visible savings from H2 2026, with management targeting at least £20m of margin improvement from site turnarounds and procurement by 2028. ## Disciplined Capital Structure and Cash Management Free cash flow was a modest £3.5m in H1, broadly flat year-on-year, as seasonal working capital outflows and investment weighed on cash generation. Net debt stood at £253m excluding leases, around 2.0x EBITDA, with management guiding to year-end leverage of about 1.7x and a medium-term target range of 1.0–1.5x as CapEx holds around £50m annually. ## Portfolio Moves Aim to Unlock Hidden Value A strategic review of the Thermal Products division is ongoing, exploring a range of options including a possible disposal to crystallize value and refocus the portfolio. The group also recorded a £2.5m fair value gain on its stake in Foseco India, now valued at £49m, and expects to complete a disposal process in the second half with notable institutional investor interest. ## Technology Investments Yield Commercial Wins Incremental capital deployed into ion implantation components for semiconductor fabs is already generating around 15% sales growth in that niche, underlining the payoff from targeted technology investments. Increased collaboration with original equipment manufacturers in Energy, rail, and fuel cells is also translating into aftermarket pull-through and market share gains for Morgan Advanced Materials. ## One-Off Take-or-Pay Boost Skews Comparisons The £8.9m take-or-pay payment from a semiconductor customer provided a material uplift to H1 revenue and contributed roughly 160 basis points to the group’s adjusted operating margin. With no repeat expected in the second half, investors will see tougher comparatives and a clearer picture of underlying profitability, emphasizing the need to look beyond headline H1 numbers. ## Underlying Margin Still Below Ambitious Target Excluding the one-off take-or-pay gain, the adjusted operating margin of 9.6% shows progress but also highlights the distance to the 12% margin goal set for 2028. Management acknowledged that a portion of the first-half margin improvement was non-recurring, reinforcing the importance of continued execution on structural cost savings, procurement benefits, and site optimization. ## Operational Hiccups Hit Thermal in North America Margins in the North American Thermal Products business were dragged down earlier in the year by equipment failures at its main facility, disrupting production and efficiency. Management said these issues have now been resolved, but the interruption weighed on first-half profitability and remains a reminder of operational risk during the broader site improvement program. ## End-Market Weakness in Performance Carbon Beyond the phasing benefit, Performance Carbon faced softer end-market conditions, with a notable drop in body armour orders and weaker industrial equipment demand. This ex-phasing revenue decline of 1.8% indicates that not all segments are benefitting from the same momentum and that the division is more exposed to cyclical and government-related spending swings. ## European Industrial and Geopolitical Pressures European Thermal Products sales suffered as customers deferred or reduced investment in process industries amid geopolitical uncertainty and weaker confidence. Management flagged cautious spending across European industrial markets and warned that these pressures could persist into the second half, limiting regional growth despite healthier trends elsewhere. ## Heavy Adjusting Items Reflect Transformation Costs Specific adjusting charges reached £18.4m in H1, driven by ERP implementation and restructuring as the company pushes through its simplification program. Restructuring alone cost £9.4m, including a U.S. Technical Ceramics site closure, while ERP expenditure was £11.5m in the half with total 2026 ERP spend guided at £22–24m within a £45m program aimed at delivering £27m of annual savings. ## Working Capital Drags on Limited Free Cash Flow Working capital outflow totalled £23.5m in the period, reflecting normal seasonality but leaving free cash flow at just £3.5m despite some benefit from supplier financing and factoring. These working capital dynamics, combined with ongoing investment, contributed to leverage remaining around 2.0x EBITDA, though management continues to stress improving free cash flow over the coming years. ## Semiconductor Demand Rebalances Across Regions A shift in semiconductor sourcing toward China has reduced some anticipated western supply opportunities, leaving certain newly commissioned capacities underutilised. While there are signs of rebound in pockets of the semiconductor value chain, management noted that some expected revenue has effectively been deferred or redirected, complicating near-term capacity planning. ## Guidance and Outlook: Modest Growth, Margin Stability For 2026, management reiterated guidance for about 2% organic constant-currency revenue growth and expects second-half adjusted operating margin to be broadly in line with H1, excluding the one-off take-or-pay benefit. The group plans around £50m of CapEx, ERP spend of £22–24m, and simplification costs of roughly £10m this year, targeting leverage of about 1.7x by year-end and positive free cash flow on a sustainable basis by 2027. Morgan Advanced Materials’ earnings call painted a picture of a business in disciplined transition, trading through mixed end markets while structurally improving its operations and portfolio. Investors will need to look past one-off boosts and elevated transformation costs, but if management delivers on its margin and cash flow targets, the current groundwork could set up a more profitable and resilient group over the medium term. ### Related Stocks - [MGAM.UK](https://longbridge.com/en/quote/MGAM.UK.md) - [MGAM.US](https://longbridge.com/en/quote/MGAM.US.md) ## Related News & Research - [Morgan Advanced Materials sees FY organic constant-currency revenue growth around 2%](https://longbridge.com/en/news/295202741.md) - [Deutsche Bank Sticks to Its Hold Rating for Morgan Advanced Materials (MGAM)](https://longbridge.com/en/news/296497260.md) - [08:51 ETBaltimore Children & Youth Fund Announces 2026 Grant Slate, Awarding Nearly $4.76 Million in Grants Serving Youth Across the City](https://longbridge.com/en/news/297789389.md) - [Morocco Strategic Minerals sells 51% stake in Sakami property to Visible Gold Mines for 1,000,000 shares](https://longbridge.com/en/news/297906292.md) - [REG - Talisman Metals PLC - Fougnar License Renewal](https://longbridge.com/en/news/297623402.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**