Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — FY2017/18 Earnings Presentation
38 slides from Johnson Matthey's earnings presentation, May 31, 2018
Slide 1: Presentation of results for the year ended 31st March 2018
Presentation of results for the year ended 31st March 2018 31st May 2018
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: Significant progress against our strategy, performance in line with expectations
Significant progress against our strategy, performance in line with expectations Sales growth 7%1 Significant progress Underlying operating ROIC 16.4% Final dividend up 7% against our strategy profit flat, up 4% excluding PRMB2 1. All growth rates in this presentation are at constant rates unless ot
Slide 4: Anna Manz, Chief Financial Officer
Anna Manz Chief Financial Officer
Slide 5: Performance in line with expectations
Performance in line with expectations Underlying results for year ended 31st 2018 2017 % change, March1 % change constant rates £m £m Sales excluding precious metals (sales) 3,846 3,578 +8 +7 Operating profit 525 513 +2 - Finance charges (including JV) (39) (31) +26 Profit before tax 486 482 +1 -1 T
Slide 6: Sales growth of 7% led by Clean Air
Sales growth of 7% led by Clean Air Sales growth +9% +4% +6% -2% +7% 3900 +£13m £1,762m +£34m +£205m 3800 -£5m -£12m £3,846m 3700 +£33m 3600 £3,578m 3500 3400 3300 3200 Full Year 2016/17 Translational FX Clean Air Efficient Natural Health New Markets Eliminations Full Year 2017/18 Resources 6
Slide 7: Underlying operating profit in line with our expectations
Underlying operating profit in line with our expectations Growth +4% 540 +£9m +£12m 520 +£24m £525m 500 £513m -£17m 480 -£16m 460 440 420 Full Year 2016/17 Translational FX Lapping PRMB credit Costs associated with Underlying businesses Restructuring cost Full Year 2017/18 group initiatives 1 saving
Slide 8: Clean Air: strong sales growth led by double digit growth in HDD
Clean Air: strong sales growth led by double digit growth in HDD Sales up 9% Operating profit up 7%, up 9% excl. PRMB 2500 +£161m +£2m • Margin maintained 2450 £2,454m 2400 2350 +£43m 2300 +£29m +£25m 2250 -£30m £2,224m 2018/19 outlook 2200 • Strong sales growth, driven by light duty diesel share ga
Slide 9: Efficient Natural Resources: good sales growth, margin was lower
Efficient Natural Resources: good sales growth, margin was lower Sales up 4% Operating profit down 4%, down 2% excl. PRMB +£22m 960 • Decline in high margin licensing income 950 -£1m • Actions taken to improve the business £956m • Destocking 940 +£33m • Restructuring 930 +£3m 920 910 £919m 900 2018/
Slide 10: Health: good sales growth, operating profit impacted by costs
Health: good sales growth, operating profit impacted by costs as we optimise our manufacturing footprint Sales up 6% Operating profit down 13%, down 9% excl. PRMB 250 +£12m • Higher pricing and profit shares 240 £247m • Costs from optimising manufacturing footprint +£10m 230 £236m -£2m 230 220 -£9m
Slide 11: New Markets: lower LFP sales led to small sales decline
New Markets: lower LFP sales led to small sales decline Sales down 2% Operating profit up 34%, up 60% excl. PRMB 320 +£9m • Lapping £5 million impairment in 2016/17 315 +£6m • Decline in LFP 310 +£5m • Increased investment in eLNO £312m 305 £308m -£13m -£3m 300 295 290 2018/19 outlook 25 • Sales and
Slide 12: Higher finance charges and tax impacted underlying EPS growth
Higher finance charges and tax impacted underlying EPS growth 2018 2017 % change, Year ended 31st March1 % change constant rates £m £m Sales excluding precious metals 3,846 3,578 +8 +7 Operating profit 525 513 +2 - Finance charges (including JV) (39) (31) +26 Profit before tax 486 482 +1 -1 Taxation
Slide 13: Reported results impacted by one-offs
Reported results impacted by one-offs Year ended 31st March 2018 2017 £m £m Underlying operating profit 525 513 Amortisation of acquired intangibles (19) (20) Major impairment and restructuring charges1 (90) - Loss on disposal of business (7) - Legal settlement2 (50) - Operating profit 359 493 1. As
Slide 14: Free cash flow impacted by working capital
Free cash flow impacted by working capital Free cash flow (£m) Year ended 31st March 2018 2017 Underlying operating profit 525 513 Depreciation and amortisation1 160 157 pm3 (84) Net working capital outflow2 non pm (64) (158) (99) other (10) Net interest paid (42) (37) Tax paid (77) (59) Capex spend
Slide 15: Improvement in non precious metal working capital days
Improvement in non precious metal working capital days Working capital days excluding precious Precious metal working capital (£m) metals, year ended 31st March 70 700 60 66 600 50 56 54 500 50 40 400 30 300 20 200 10 100 0 0 2015 2016 2017 2018 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-1
Slide 16: Disciplined investment to support growth
Disciplined investment to support growth 2017/18 capex £217m • Clean Air Poland plant • Health Annan plant and API product pipeline • Upgrading core IT systems 2018/19 capex up to £390m • Clean Air Poland and China plants • eLNO demonstration plant and commercial plant • Continued API product develo
Slide 17: Strong balance sheet, net debt to EBITDA 1.1 times
Strong balance sheet, net debt1 to EBITDA 1.1 times £m £m Net debt at the beginning of the year (716) Free cash flow 136 Dividends (146) Other 4 Movement in net debt before FX (6) Net debt before FX (722) FX 43 Net debt at the end of the period (679) 1. Net debt including post tax pension deficits 1
Slide 18: ROIC declined, impacted by precious metal working capital
ROIC declined, impacted by precious metal working capital ROIC and cost of capital 24% 20% 16% ROIC 12% Cost of capital 8% 4% 0% FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 18
Slide 19: Good progress on my three focus areas
Good progress on my three focus areas Focus areas Status • ROIC lower this year Rigorous and transparent resource allocation • On track to expand ROIC to 20% over the medium term Disciplined management of working capital • Average non precious metal working to drive continued strong cash capital day
Slide 20: Outlook for 2018/19
Outlook for 2018/19 Mid to high single digit growth in operating performance Growth led by Clean Air as diesel share gains in Light Duty Europe come through Stronger second half: normal seasonality across businesses; H2 weighting in Health Improvement in average working capital days (excluding preci
Slide 21: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive 21
Slide 22: 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 in R&D which accelerates growth 22
Slide 23: Sustained growth and value creation through:
Sustained growth and value creation through: Sustained Market leading Break out growth Break out growth growth in growth in Efficient in Health in Battery Clean Air Natural Resources Materials Relentless focus on driving efficiency 23
Slide 24: Sustained growth in Clean Air
Sustained growth in Clean Air How we will deliver Milestone Status 20ppt share gain in LDV Europe • On track to reach by end 2018/19 diesel Global leader 5ppt share gain in LDV Europe • On track to reach by end 2020/21 gasoline Help customers meet tighter legislation Serve customers to meet China 6/
Slide 25: Market leading growth in Efficient Natural Resources
Market leading growth in Efficient Natural Resources How we will deliver Milestone Status • Slight sales growth expected in Sales growth ahead of our markets 2018/19 #1 or #2 market positions in almost all our segments Operating profit growth 1ppt above • On track sales growth Differentiated investm
Slide 26: Break out growth in Health
Break out growth in Health How we will deliver Milestone Status Drive value from our Rationalise manufacturing footprint • Ongoing – Riverside site closing, existing business commissioning Annan Deliver growth from new Deliver growth from existing • Lower sales of ADHD APIs and bulk API pipeline bus
Slide 27: Pipeline on track to deliver an additional c.£100m operating profit
Pipeline on track to deliver an additional c.£100m operating profit per year by 2025 £150m Pipeline operating profit1 High range Expected pipeline performance £100m Low range £50m £0m 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Pipeline as of 31st March 2018 and progression in the year E
Slide 28: Break out growth in Battery Materials: progressing eLNO
Break out growth in Battery Materials: progressing eLNOTM How we will deliver Milestone Status Build demo plant • On track, plans doubled to 1kt Leading material Focus on Build commercial plant, in production ultra high energy density • On track from 2021/22 market Scale up and Expand capacity beyon
Slide 29: eLNO will compete with other next generation materials
eLNO will compete with other next generation materials Energy density and commercial introduction Wh/kg (not to scale) eLNO not competing with current technologies Expected ultra high energy density eLNO market by 2030: NMC 811 Advanced • 500kt to 1,800kt NCA (total market of 1,700kt to 2,700kt) NMC
Slide 30: eLNO has superior performance
eLNO has superior performance $ per kWh per cycle to end of useful life1 (chart to scale, indexed with eLNO = 100) Current materials Step change in energy density 200 from current materials Next generation materials 150 Lower cobalt content than current materials 100 Lower $ per kWh per cycle than c
Slide 31: Commercialisation on track
Commercialisation on track Battery Model in Stage Validation A sample B sample C sample cell in production production Summary Early testing Basic Extended Full-scale performance performance: functionality basic plus safety, life performance Volume kgs < 10t c.200t c.300t Required Commercial JM Suppl
Slide 32: eLNO summary
eLNO summary Focus on Customer Demo plant Commercial ultra high Developing validation on track, plant on energy further plans progressing plans doubled track, Europe density beyond 10kt well to 1kt location market 32
Slide 33: Conclusion: delivering sustained growth and value creation
Conclusion: delivering sustained growth and value creation 2018/19 Medium term Mid to high single digit Mid to high single digit EPS CAGR growth Further progress on Expanding ROIC to 20% operational excellence Stepped up capex Progressive dividend investment 33
Slide 34: Appendix
Appendix 34
Slide 35: 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 36: Global growth in vehicle production
Global growth in vehicle production Light duty vehicle production outlook (million) Calendar years CAGR 2.4% 104.7 102.5 99.7 95.0 97.0 92.9 CAGR 2.7% 54.1 55.6 50.6 52.5 48.6 49.9 CAGR -0.4% CAGR 2.2% 22.1 22.6 23.1 23.7 23.9 21.5 17.8 17.0 17.3 17.0 17.2 17.4 2016 2017 2018 2019 2020 2021 2016 201
Slide 37: 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 38: 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 3.3% 3,251 3,111 3,081 3,098 3,028 2,761 CAGR 3.0% 1,829 1,801 1,824 1,713 1,750 1,574 CAGR 4.1% CAGR 3.4% 683.7 694.1 678.9 734.3 693 632.6 620.7