Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — Earnings Presentation (November 2007)
31 slides from Johnson Matthey's earnings presentation, Nov 13, 2007
Slide 1: Platinum 2007 Interim Review
Platinum 2007 Interim Review 13th November 2007 1
Slide 2: Platinum
Platinum I will start with a review of platinum supply and demand in 2007 before turning to the outlook for platinum and our price forecast for the next six months. I will then do the same for palladium before closing with some remarks about rhodium and ruthenium. 2
Slide 3: Platinum: Key features
Platinum: Key features • Platinum market to return to deficit in 2007 • Autocatalyst demand growth outweighs effects of thrifting and substitution • Jewellery demand not significantly affected by price • South African supply well below expectations • Limited impact of ETFs • Record price due to weak
Slide 4: Platinum Supply and Demand
Platinum Supply and Demand ’000 oz 2006 2007 % Demand 6,730 6,925 +2.9 Supply 6,795 6,660 -2.0 Movements in stocks 65 (265) www.platinum.matthey.com In summary, we have seen a 2.9% increase in platinum demand to 6.925m ozs An a 2.0% reduction in supply to 6.660m ozs. This will result in a deficit of
Slide 5: Platinum Demand Rises 195,000 oz
Platinum Demand Rises 195,000 oz million oz 8 • Total demand climbs 2.9% to 7 6.730 6.925 6.93 million oz 6 • Autocatalyst demand (net of 5 recovery) rises by 65,000 oz 4 • Jewellery demand falls by only 3 25,000 oz to 1.60 million oz 2 • Growth in other sectors 1 including investment 0 2006 2007 Au
Slide 6: Platinum Demand: Autocatalyst
Platinum Demand: Autocatalyst million oz 5.0 • Auto industry purchases increase 4.5 4.140 4.235 by 2.3% to 4.24 million oz 4.0 • Increasing fitment of DPFs 3.5 3.0 • Further growth in heavy duty 2.5 diesel aftertreatment 2.0 • Strong demand for platinum from 1.5 rising Asian vehicle production 1.0 0
Slide 7: Platinum Demand: Autocatalyst
Platinum Demand: Autocatalyst million oz 5.0 4.0 3.0 2.0 1.0 0.0 2003 2004 2005 2006 2007 Gasoline www.platinum.matthey.com We can see from this chart that consumption of platinum for gasoline engines has declined in the last few years. This is due in part to the substitution of platinum by palladiu
Slide 8: Platinum Demand: Autocatalyst
Platinum Demand: Autocatalyst million oz 5.0 4.0 3.0 2.0 1.0 0.0 2003 2004 2005 2006 2007 Gasoline Diesel www.platinum.matthey.com But we can see that the decline in platinum consumption for gasoline engines has been more than offset by the increase in its use in cleaning up the emissions from diese
Slide 9: Platinum Demand: Jewellery
Platinum Demand: Jewellery million oz 2.0 1.620 1.595 • Jewellery demand steady, despite high prices 1.5 • Global demand for new metal falls by 1.5% to 1.595 million oz 1.0 • Demand expected to grow in China and Europe 0.5 • Recycled metal again a 0.0 significant input to Asian 2006 2007 manufacturi
Slide 10: Platinum: Chinese Jewellery Manufacture
Platinum: Chinese Jewellery Manufacture million oz 1.2 • Chinese demand for new 1.0 metal climbs 20,000 oz to 780,000 oz 0.8 • Strong consumer 0.6 purchasing helped by 0.4 economic growth 0.2 • High prices have little 0.0 further effect on 2005 2006 2007 recycling rates Demand Recycling www.platinum
Slide 11: Platinum Supply
Platinum Supply million oz 8 6.795 6.660 • 2007 South African output 7 falls to 5.22 million oz due to strikes, safety issues and 6 processing problems 5 4 • Challenges of finding and retaining staff remain key 3 2 • Russian primary production 1 to fall but export licence issues will have no effect
Slide 12: Platinum Outlook
Platinum Outlook • Increasing use of light duty diesel filters and heavy duty catalysts to support demand growth • Consumer interest in Pt jewellery still strong but effects of high price uncertain • Limited price sensitivity in industrial sectors • Supply to grow but challenges remain • Market like
Slide 13: Forecast Platinum Price for the Next 6 Months
Forecast Platinum Price for the Next 6 Months $ per oz 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 J A J O J A J O J A 2006 2007 2008 www.platinum.matthey.com Looking at the platinum price in 2007 we can see that the strong fundamentals we have reported and the rising gold price have supported a v
Slide 14: Forecast Platinum Price for the Next 6 Months
Forecast Platinum Price for the Next 6 Months $ per oz 1,600 1,500 $1,350 – $1,575 1,400 1,300 1,200 1,100 1,000 900 J A J O J A J O J A 2006 2007 2008 www.platinum.matthey.com In the next six months we anticipate that platinum’s stronger than expected fundamentals will continue to support the price
Slide 15: Palladium
Palladium I would now like to turn to palladium 15
Slide 16: Palladium: Key features
Palladium: Key features • Palladium market to be in fundamental surplus • Substitution for platinum in gasoline catalysts and further use in diesel catalysts • Chinese jewellery demand drops – manufacturing levels down and recycling up • Supplies rise, boosted by Russian stock sales • Price supporte
Slide 17: Palladium Supply and Demand
Palladium Supply and Demand ’000 oz 2006 2007 % Demand 6,470 6,605 +2.1 Supply 8,060 8,320 +3.2 Movements in stocks 1,590 1,715 www.platinum.matthey.com Palladium demand will increase by just over 2% to 6.605m ozs. And palladium supply will increase by just over 3% to 8.320m ozs. The results is an i
Slide 18: Palladium Demand Climbs 135,000 oz
Palladium Demand Climbs 135,000 oz million oz • Total demand grows by 2.1% 8 6.470 6.605 to 6.605 million oz 7 6 • Rising Asian car production 5 and substitution for platinum 4 drive autocatalyst growth 3 • Decline in demand for new 2 palladium for jewellery to 1 745,000 oz 0 2006 2007 • ETFs boost
Slide 19: Palladium Demand: Autocatalyst
Palladium Demand: Autocatalyst million oz 5.0 • Asian palladium demand 4.5 4.040 4.380 grows due to rising vehicle 4.0 production 3.5 3.0 2.5 • Palladium continues to 2.0 replace platinum 1.5 1.0 – Approaching limit in gasoline 0.5 sector 0.0 2006 2007 China Japan N. Am. – Still potential growth in
Slide 20: Pgm choice in Autocatalysts
Pgm choice in Autocatalysts Gasoline percentage of pgm used (Pt/Pd) 100.0 75.0 50.0 25.0 0.0 2005 2006 2007 Palladium Platinum www.platinum.matthey.com You can see clearly from this chart that the proportion of palladium used in gasoline catalysts now exceeds 75%. 20
Slide 21: Pgm choice in Autocatalysts
Pgm choice in Autocatalysts Gasoline Diesel percentage of pgm used (Pt/Pd) percentage of pgm used (Pt/Pd) 100.0 100.0 75.0 75.0 50.0 50.0 25.0 25.0 0.0 0.0 2005 2006 2007 2005 2006 2007 Palladium Platinum Palladium Platinum www.platinum.matthey.com This contrasts sharply with diesel, where palladium
Slide 22: Palladium Demand: Jewellery
Palladium Demand: Jewellery '000 oz 1,500 • Chinese new metal 1,250 purchases drop 260,000 oz 1,000 to 500,000 oz 750 • Manufacturing demand falls 500 • Significant use of recycled 250 palladium 0 2003 2004 2005 2006 2007 • Retail sales picture mixed China RoW www.platinum.matthey.com Looking at jew
Slide 23: Palladium Supply
Palladium Supply million oz 9 8.060 8.320 • Supply grows 260,000 oz to 8 7 8.32 million oz 6 • Russian supplies boosted by 5 4 sales of Dec. 2006 shipments 3 • South African production falls 2 1 to 2.795 million oz 0 2006 2007 S.Africa Russia N.Am. Other www.platinum.matthey.com Turning now to the s
Slide 24: Palladium Supply: Russia
Palladium Supply: Russia million oz 5 3.900 4.240 • Norilsk primary production 4 from Russia expected to fall 3 • All Stillwater/Norilsk metal now sold 2 • Forecast does not include any 1 potential 2007 shipments of 0 state stocks 2006 2007 Primary State sales Stillwater www.platinum.matthey.com Loo
Slide 25: Palladium Outlook
Palladium Outlook • Palladium to continue to take share from platinum in autocatalysts • Growth in Chinese jewellery demand possible if recycling slows and marketing is extended • Timing of Russian stock sales unknown • Market to remain in surplus - fund and investor interest remain vital to the pri
Slide 26: Forecast Palladium Price for the Next 6 Months
Forecast Palladium Price for the Next 6 Months $ per oz 450 400 350 300 250 J A J O J A J O J A 2006 2007 2008 www.platinum.matthey.com Turning to our six month price forecast. . . We can see that palladium has been largely untroubled by the weak supply and demand fundamentals which have persisted i
Slide 27: Forecast Palladium Price for the Next 6 Months
Forecast Palladium Price for the Next 6 Months $ per oz 450 400 $320 – $420 350 300 250 J A J O J A J O J A 2006 2007 2008 www.platinum.matthey.com In the coming six months we expect the sentiment of investors will continue to determine the direction of the palladium price. Many investors continue t
Slide 28: Other pgm
Other pgm I’d like to add some comments about the rhodium and ruthenium markets 28
Slide 29: Rhodium
Rhodium $ per oz Rhodium price • Market to be in small deficit 7,000 again in 2007 6,500 6,000 • Supplies to fall 20,000 oz to 5,500 804,000 oz due to lower 5,000 Russian shipments 4,500 4,000 • Demand falls to 808,000 oz 3,500 3,000 on lower glass sector 2,500 demand J A J O J A J O • Price support
Slide 30: Ruthenium
Ruthenium $ per oz Ruthenium price • Demand to rise 53,000 oz 900 800 to record 1.344 million 700 oz 600 500 • PMR hard disk market 400 share increases 300 200 • Expansion of refining 100 capacity and 0 concentration on J A J O J A J O reduction of inventory 2006 2007 limits increase in demand www.p
Slide 31: Platinum 2007 Interim Review
Platinum 2007 Interim Review 13th November 2007 31
Johnson Matthey — Earnings Presentation (November 2007) on 6ix