Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — H1 2019/20 Earnings Presentation
37 slides from Johnson Matthey's earnings presentation, Nov 21, 2019
Slide 1: Presentation of results for the six months ended 30th September 2019
Presentation of results for the six months ended 30th September 2019 21st November 2019
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: Good sales growth and confident in delivering our strategy
Good sales growth and confident in delivering our strategy Underlying Delivered in line ROIC Dividend operating profit with expectations of 15.0% up 5% down 5% Expect to deliver full year group operating performance in line with market expectations Note: All growth rates in this presentation are at
Slide 4: Anna Manz, Chief Financial Officer
Anna Manz Chief Financial Officer 4
Slide 5: Sales growth driven by Clean Air
Sales growth driven by Clean Air +3% £21m £10m £51m (£11m) (£3m) £2,124m £47m (9%) +4% +4% +5% £2,009m Half year 2018/19 Translational FX Clean Air Efficient Natural Health New Markets Eliminations Half year 2019/20 Resources 5
Slide 6: Underlying operating profit slightly down
Underlying operating profit slightly down (5%) £8m £3m £6m £271m £5m £265m (£17m) (£11m) Includes c.£15m Includes c.£8m one-off costs due to impairment on demo as manufacturing we proceed directly to inefficiencies eLNO commercial plant Half year 2018/19 Translational FX Clean Air Efficient Natural
Slide 7: Clean Air: good sales growth; margin impacted by one-off costs
Clean Air: good sales growth; margin impacted by one-off costs Sales up 4% Operating profit down 9% +4% Impacted by c.£15m one-off costs due to manufacturing inefficiencies £26m £6m £35m Margin declined 1.7ppt to 12.9% (£2m) (£14m) £1,392m £29m £1,312m Full year outlook Full year operating performan
Slide 8: Efficient Natural Resources: sales and operating profit growth
Efficient Natural Resources: sales and operating profit growth Sales up 4% Operating profit up 6% +4% Higher average pgm prices (+c.£14m) £17m flat Margin improved 0.3ppt to 18.8% £496m £13m flat (£2m) £12m (£7m) £463m Full year outlook Catalyst Technologies Sales growth Operating profit growth ahea
Slide 9: Health: sales down although operating profit grew double digit
Health: sales down although operating profit grew double digit Sales down 9% Operating profit up 21% (9%) Net benefits from footprint optimisation £4m £118m £5m £111m (£16m) Full year outlook Second half operating performance broadly in line with the first half Lower demand for one API due to opioid
Slide 10: New Markets: good sales growth; progressing eLNO commercialisation
New Markets: good sales growth; progressing eLNO commercialisation Sales up 5% Operating profit down +5% Increased costs as we invest in eLNO £12m Flat Includes £8m impairment of demo plant (£1m) (£1m) £186m £3m Full year outlook £173m Sales growth Operating profit growth Half year Translational Alt
Slide 11: Delivered operating performance in line with expectations
Delivered operating performance in line with expectations Underlying results for 2019 2018 % change, half year ended 30th September1 % change constant rates £m £m Sales excluding precious metals (sales) 2,124 2,009 +6 +3 Operating profit 265 271 -2 -5 Finance charges (36) (20) +75 Share of profit of
Slide 12: Progressing my three focus areas
Progressing my three focus areas Drive increasing business wide efficiency Disciplined management of working capital Rigorous and transparent resource allocation 12
Slide 13: Good progress against efficiency initiatives
Good progress against efficiency initiatives Cumulative Annualised Achieved in £m achieved benefits to the half to date 2022/23 Procurement 15 43 100 Restructuring 1 25 25 Riverside closure 5 20 20 Total 211 88 145 Three quarters of Around two thirds being procurement initiatives will reinvested in
Slide 14: Free cash flow impacted by working capital
Free cash flow impacted by working capital Free cash flow (£m) Half year ended 30th September 2019 2018 Underlying operating profit 265 271 Depreciation and amortisation1 85 79 Precious metal working capital outflow (352) (283) Non precious metal working capital (115) (76) outflow Net working capita
Slide 15: Precious metal working capital impacted by prices and volumes
Precious metal working capital impacted by prices and volumes Precious metal working capital movement (£m) Precious metal working capital to £271m improve by £350m • £250m backlog £81m • £100m refinery investment Full year 2018/19 Volume Backlogs Price Half year 2019/20 Note: Precious metal working
Slide 16: Stable average non precious metal working capital days
Stable average non precious metal working capital days Average working capital days excluding precious metals, half year ended 30th September Average working capital days were stable at 61 days 68 63 61 61 Targeting average non precious metal working capital of 50 to 60 days Continue to drive improv
Slide 17: Investing for growth, efficiency and returns
Investing for growth, efficiency and returns FY19/20 FY20/21 FY21/22 Up to £500m Maintenance Maintenance capex of 0.8-0.9 depreciation includes capex maintenance capex plus smaller growth projects Clean Air plants in Poland, China and India Clean Air (£200m remaining) High ROIC business Efficient Na
Slide 18: Net debt to EBITDA 2.1 times
Net debt to EBITDA 2.1 times1 £m £m Net debt at the beginning of the year (866) Free cash flow (382) Dividends (120) Movement in net debt (502) Lease adjustments2 1 Net debt before FX and IFRS 16 transition (1,367) FX and IFRS 16 transition adjustment3 (121) Net debt at the end of the period (1,488)
Slide 19: Return on invested capital
Return on invested capital Return on invested capital 0.4% ROIC is 15.0%, down 1.7ppt £2,720m 16.7% from the prior year (0.7%) (0.5%) 15.9% Investing for growth in near term (0.9%) 15.0% Precious metal working capital increased Clear path to achieve 20% ROIC in medium term Half year Operating Capita
Slide 20: 2019/20 outlook
2019/20 outlook Expect to deliver full year group operating performance in line with market expectations Second half benefiting from absence of one-off costs, seasonality in Catalyst Technologies and efficiency gains in Pgm Services Targeting average working capital days (excluding precious metals)
Slide 21: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive 21
Slide 22: Delivering sustained growth and value
Delivering sustained growth and value Sustained growth in Clean Air over the next decade Mid to high single digit growth in Efficient Natural Resources Breakout growth in Health Strong progress in Battery Materials to build a leading position Efficiencies remain a strong focus A world that’s cleaner
Slide 23: Building our senior team
Building our senior team Joan Braca, Christian Günther, Maurits van Tol, Chief Executive, Clean Air Chief Executive, Battery Materials Chief Technology Officer 23
Slide 24: Clean Air: growth for the next decade driven mainly by legislation
Clean Air: growth for the next decade driven mainly by legislation 2025 outcomes Asia more than doubles in size Early benefits from China 6 New gasoline platform wins Europe maintains size despite diesel decline R&D investment increased Americas driven by GDP growth Managing Class 8 truck cycle Glob
Slide 25: Efficient Natural Resources: market leading growth
Efficient Natural Resources: market leading growth 2025 outcomes Our markets growing in line Positioned in higher growth segments with expectations Good growth in formaldehyde, Continue to evolve our existing strengths particularly in China Won three new licenses New technologies Advancing new techn
Slide 26: Health: breakout growth
Health: breakout growth 2025 outcomes Enhancing performance of our base business Developments in opioid addiction therapy market impacting second half performance Focused on delivering growth from 75 Delivering growth from new product pipeline molecules in new product pipeline • 3 launched • 10 gene
Slide 27: Battery Materials: breakout growth
Battery Materials: breakout growth 2025 outcomes Maintained our technology leadership Fitting out second UK application centre Progressed to full cell testing with two customers Qualified on customer platforms First commercial plant on track Commercial scale capacity Further expansion likely to be p
Slide 28: Confident in our future
Confident in our future Delivered in line with expectations Mid to high single digit EPS CAGR Fundamentally changing the organisation as we execute our strategy Expanding ROIC to 20% Strengthening our platform for growth Progressive Creating a cleaner, healthier world dividend 28
Slide 29: Appendix
Appendix 29
Slide 30: Financial guidance
Financial guidance Net interest expense – significantly higher in 2019/20 due to higher average net debt as we invest for future growth, higher precious metal funding costs and the impact of IFRS 16 Underlying tax rate – tax rate on underlying profit for the year ending 31st March 2020 expected to b
Slide 31: Clean Air: Growth for the next decade driven mainly by legislation
Clean Air: Growth for the next decade driven mainly by legislation 2019/20 2020/21 to 2024/25 2025/26 to 2028/29 GPF fitment increases Diesel decline and continued Further value expected Europe Diesel share of the market BEV penetration from Euro 7 continues to fall New legislation Class 8 heavy dut
Slide 32: 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 33: Global growth in vehicle production
Global growth in vehicle production Light duty vehicle production outlook (million) Calendar years CAGR 1.4% 100.9 97.6 94.1 94.1 89.7 91.6 CAGR 1.3% 50.7 52.4 49.1 47.2 48.7 46.3 CAGR 0.9% CAGR 1.3% 22.1 21.5 21.9 22.4 22.8 23.6 16.9 16.3 16.7 16.8 17.3 17.7 2018 2019 2020 2021 2022 2023 2018 2019
Slide 34: 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
Slide 35: Heavy duty diesel vehicle production (regulated engines)
Heavy duty diesel vehicle production (regulated engines) Heavy duty diesel vehicle (regulated engines) production outlook (thousands) Calendar years CAGR 4.1% 3,644 3,469 3,527 3,375 3,221 2,986 CAGR 5.5% 2,232 2,266 2,182 2,153 2,062 1,733 CAGR 0.6 CAGR 3.1% 697 728 753 606 635 625 648 651 657 502
Slide 36: Health: generics and innovators pipeline to deliver additional c.£100m
Health: generics and innovators pipeline to deliver an additional c.£100m operating profit per year by 2025 Number of generic and innovator products by expected launch date and value¹ (Total products: 75) Expected time until launch Already launched 2019/20 to 2021/22 2022/23 to 2024/25 2025/26+ >£5m
Slide 37: Battery Materials: bringing a viable product to market
Battery Materials: bringing a viable product to market Achievements On track to deliver Today 2020 2022 2024 Pilot plant operational Further application Commercial plant, Supplying platforms and testing capacity up to 10kt First UK application centre operational Sufficient for c.100k pure battery el