Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — H1 2017/18 Earnings Presentation
40 slides from Johnson Matthey's earnings presentation, Nov 21, 2017
Slide 1: Presentation of results for the six months ended 30th September 2017
Presentation of results for the six months ended 30th September 2017 21st November 2017
Slide 2: Cautionary statement
Cautionary statement This presentation contains forward looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which Johnson Matthey operates. It is believed that t
Slide 3: Our strategy to deliver sustained growth and value creation
Our strategy to deliver sustained growth and value creation Sustained leadership Chemistry which Investment Relentless focus in growing, high drives solutions to which accelerates on operational margin, technology complex problems growth excellence driven markets Driving attractive returns: Expandin
Slide 4: H1 in line with expectations, full year outlook confirmed
H1 in line with expectations, full year outlook confirmed Strong operational Continued investment Increased interim ROIC maintained momentum to accelerate growth dividend Driving attractive returns 4
Slide 5: Anna Manz, Chief Financial Officer
Anna Manz Chief Financial Officer
Slide 6: Performance in line with expectations
Performance in line with expectations Underlying results for half year ended 2017 2016 % change, 30th September1 % change constant rates £m £m Sales excluding precious metals 1,853 1,676 +11 +5 Operating profit 250 236 +6 -1 Finance charges (16) (16) - Profit before tax 233 220 +6 - Taxation (42) (3
Slide 7: On track to deliver full year sales growth guidance of around 6%
On track to deliver full year sales1 growth guidance of around 6% Sales growth2 +7% +5% +5% -7% +5% 1900 +£21m +£5m +£82m 1850 -£11m -£6m 1800 £1,853m +£86m 1750 £1,762m 1700 1650 £1,676m 1600 1550 1500 H1 2016/17 Translational FX H1 2016/17 Clean Air Efficient Natural Health New Markets Elimination
Slide 8: Operating profit performance in line with sales growth excluding PRMB
Operating profit1 performance in line with sales growth excluding PRMB2 Growth3 +5% -1% 280 +£9m +£3m 260 +£18m 240 £254m -£16m £250m 220 £236m 200 180 160 140 120 100 H1 2016/17 Translational FX H1 2016/17 rebased Underlying businesses Restructuring cost Lapping PRMB credit H1 2017/18 savings 1. Be
Slide 9: Profit growth impacted by comparison against PRMB last year
Profit growth impacted by comparison against PRMB1 last year Year on year Year on year Year on year sales growth, operating profit growth, margin movement, at constant rates at constant rates excl. PRMB excl. PRMB (%) (%) (ppts) Clean Air +7 +7 +0.2 Efficient Natural Resources +5 -4 -1.1 Health +5 +
Slide 10: Clean Air: Strong sales growth led by double digit growth in HDD
Clean Air: Strong sales growth led by double digit growth in HDD Sales1 Sales up 7% 1300 Double digit growth in HDD in every region +£75m LDV Europe: strong growth in gasoline 1200 +£58m +£20m -£1m offset by lower diesel sales 1100 £1,194m -£12m 1000 £1,054m Operating profit up 3%, 900 up 7% excl. P
Slide 11: Efficient Natural Resources: Improved sales growth but lower margin in Catalyst Technologies
Efficient Natural Resources: Improved sales growth but lower margin in Catalyst Technologies Sales1 Sales up 5% Strong catalyst refill sales 480 Catalyst Technologies Decline in licensing income +£15m and first fill catalysts 460 +£27m -£2m +£17m £458m Strong performance in PGM Services 440 420 Oper
Slide 12: Health: Good performance benefiting from investment to build our pipeline
Health: Good performance benefiting from investment to build our pipeline Sales1 Sales up 5% Strong contribution from dofetilide 140 Expected lower sales of ADHD APIs +£6m 120 +£4m £119m Strong growth in Innovators -£1m £110m 100 Operating profit flat, up 12% 80 excl. PRMB Benefited from improved pr
Slide 13: New Markets: Strong profit performance despite anticipated LFP decline
New Markets: Strong profit performance despite anticipated LFP decline Sales1 Sales down 7% Weaker LFP sales 180 +£10m Strong sales growth in Fuel Cells and 160 +£3m Medical Device Components +£5m 140 £144m -£2m £14… -£17m 120 Operating profit up 55%, up 135% excl. PRMB 100 Improvements in Fuel Cell
Slide 14: Higher tax rate impacted EPS growth
Higher tax rate impacted EPS growth 2017 2016 % change, Half year ended 30th September1 % change constant rates £m £m Sales excluding precious metals 1,853 1,676 +11 +5 Operating profit 250 236 +6 -1 Finance charges (16) (16) - Profit before tax 233 220 +6 - Taxation (42) (35) +18 Tax rate 17.9% 16.
Slide 15: Restructuring charges impact reported results
Restructuring charges impact reported results Half year ended 30th September 2017 2016 % change £m £m Underlying operating profit 250 236 +6 Amortisation of acquired intangibles (10) (10) Major impairment and restructuring charges (19) - Reported operating profit 222 227 -2 Reported profit before ta
Slide 16: Continued reduction in non precious metal working capital days
Continued reduction in non precious metal working capital days but metal price increases led to higher working capital Free cash flow (£m) Half year ended 30th September 2017 2016 Underlying operating profit 250 236 Depreciation and amortisation1 77 75 pm3 (156) Net working capital outflow2 non pm (
Slide 17: Improved focus is leading to continued reduction in non precious metal working capital days
Improved focus is leading to continued reduction in non precious metal working capital days Working capital days1 70 Non pm working capital increased by £91 million 60 50 5 day reduction in working capital days1 compared to H1 16/17 40 30 6 day average improvement year to date 20 10 0 15 16 17 15 16
Slide 18: The volatility of metal prices impacts working capital
The volatility of metal prices impacts working capital Precious metal (pm) inventory (£m) 350 Pm working capital increased £156 million, mainly in pm inventory Impact from changes in pm market Pm management a key competitive advantage 0 18
Slide 19: Strong balance sheet, net debt to EBITDA 1.4 times
Strong balance sheet, net debt1 to EBITDA 1.4 times £m £m Net debt at the beginning of the year (716) Free cash flow (90) Dividends (105) Other (3) Movement in net debt before FX (198) Net debt before FX (913) FX 22 Net debt at the end of the period (891) 1. Net debt including post tax pension defic
Slide 20: ROIC maintained
ROIC maintained ROIC and cost of capital 24% 20% ROIC 16% 12% Cost of capital 8% 4% 0% FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 H1 2017/18 20
Slide 21: Interim dividend increased 6%
Interim dividend increased 6% Interim dividend per share (pence) • Supported by current performance: • Improved sales growth 21.75 • Delivering cost savings 20.5 19.5 • Impact of lapping PRMB benefit on 18.5 reported results 17.0 • Mitigated level of pension cost increase and reinvested this reducti
Slide 22: Full year guidance confirmed
Full year guidance confirmed Stronger H2 sales growth to deliver full year growth of around 6% at constant rates Restructuring benefit of £10m in the full year with an annualised benefit of £25m Improved operating performance offset by lapping PRMB Working capital days1 between 50 and 60 Capex £285m
Slide 23: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive 23
Slide 24: Sustained growth and value creation through:
Sustained growth and value Sustained leadership in creation through: growing, high margin, technology driven markets Chemistry which drives solutions to complex Relentless focus on problems operational excellence Investment which accelerates growth 24
Slide 25: Our strategy to deliver sustained growth and value creation
Our strategy to deliver sustained growth and value creation Sustained leadership Chemistry which Investment Relentless focus in growing, high drives solutions to which accelerates on operational margin, technology complex problems growth excellence driven markets Driving attractive returns: Expandin
Slide 26: Sustained growth and value creation through:
Sustained growth and value creation through: Sustained Break out growth Market leading Relentless focus growth in in Health and growth in Efficient on driving Clean Air Battery Materials Natural Resources efficiency 26
Slide 27: H1 progress: continued leadership and investing for future growth
H1 progress: continued leadership and Sustained growth investing for future growth in Clean Air Leadership supports growth Continued leadership in HDD across the world European diesel share gains start to come through in H2 Investing for future growth New plant in Poland Early investment in new Chin
Slide 28: Our strategy will deliver consistent value creation from a global leader in Clean Air
Our strategy will deliver consistent value Sustained growth creation from a global leader in Clean Air Europe Light Duty - In short term, we grow strongly from substantial share gains - Broadly flat over 10 years absorbing decline in diesel share of market and BEV penetration Americas Light Duty del
Slide 29: H1 progress: Strengthening our platform
H1 progress: Strengthening our platform Market leading growth in Efficient Natural Resources Outperformance in some market segments Refill catalysts and PGM Services outperforming market Improving operational efficiency Continued investment in our refineries More to do in other areas of our business
Slide 30: Our strategy will deliver outperformance in targeted, growth segments
Our strategy will deliver outperformance Market leading in targeted, growth segments growth in Efficient Natural Resources #1 or #2 market positions in almost all our segments Differentiated investment by segment and region to maximise growth Margin retention in lower growth markets Focused investme
Slide 31: H1 progress: development in line with our plans
H1 progress: development in line with our Break out growth plans in Health Expanding our product portfolio £8m spend in H1 to continue Generic pipeline build Additional regulatory filings made, in line with our plans Improving existing facilities Development of Annan site Reorganisation of our busin
Slide 32: Our strategy will deliver break out growth in Health
Our strategy will deliver break out growth Break out growth in Health Operate in a growing, $40bn segment Expertise for both Innovator and Generics companies Portfolio of successful products but that portfolio is not yet at scale Ramped up our investment to broaden pipeline from 2014 Generic pipelin
Slide 33: H1 progress: significant progress in development of our eLNO battery material
H1 progress: significant progress in Break out growth in development of our eLNO battery material Battery Materials eLNO has market leading performance characteristics Step change in energy density Efficient thrifting of cobalt Building manufacturing capability Started investment in pilot plant Earl
Slide 34: Our strategy will deliver break out growth in Battery Materials
Our strategy will deliver break out growth Break out growth in Battery Materials Wide portfolio of battery materials Strong position in the value chain Developed best-in-class high energy battery materials with our eLNO material eLNO delivers a step change in performance Investment of c.£200m from m
Slide 35: Efficiency will drive further improvements across the group
Efficiency will drive further improvements Relentless focus on across the group driving efficiency Started restructuring programme to deliver £25m savings Releasing £50m of cost over the next 3 years for reinvestment and margin expansion • Upgrading core IT systems • Building out procurement functio
Slide 36: Sustained growth and value creation
Sustained growth and value creation Sustained leadership Chemistry which Investment Relentless focus in growing, high drives solutions to which accelerates on operational margin, technology complex problems growth excellence driven markets Be one of the best performing, most trusted and admired spec
Slide 37: Appendix
Appendix 37
Slide 38: Light duty emissions control legislation roadmap
Light duty emissions control legislation roadmap 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Euro 6d final / Europe EU 6b EU 6c / Euro 6d temp EU 7? 95 g/km CO2 North America EPA Tier 2 Tier 3 Phase In: NMOG + NOx, PM Tightening North America CARB LEV III Phase In: NMOG + NOx, PM Tighteni
Slide 39: Heavy duty diesel emissions control legislation roadmap
Heavy duty diesel emissions control legislation roadmap On Road 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Europe EU VI EU VII? North America GHG Phase 1 GHG Phase 2 North America (CARB) GHG Phase 1 GHG Phase 2 CARB Ultra Low NOx Japan JP09 JP16 South Korea EU VI EU VII? Brazil EU IV EU
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