Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — H1 2015/16 Earnings Presentation
36 slides from Johnson Matthey's earnings presentation, Nov 19, 2015
Slide 1: Presentation of Results for the half year ended 30th September 2015
Presentation of Results for the half year ended 30th September 2015 19th November 2015 Scan to download our IR app Follow us on Twitter: or visit www.matthey.com/app @johnson_matthey
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: Introduction
Introduction Robert MacLeod Chief Executive
Slide 4: Key Messages
Key Messages Strong growth in ECT and good progress in Challenging conditions in other key markets; New Businesses actions being taken to reduce costs £ £ Sales up 5%, underlying PBT down 4% and Interim dividend up 5%; special dividend of underlying EPS down 3% 150.0 pence per share Expect FY perfor
Slide 5: Health and Safety is Our Priority
Health and Safety is Our Priority LTIIR reduced by 30% to 0.44 Tragic fatal accident in July at Reinforced efforts to achieve Fine Chemicals’ facility in USA world class health and safety culture LTIIR - 12 month rolling year 0.8 0.6 0.4 H&S programme 0.2 introduced 0 Jun-14 Nov-14 Dec-14 Jun-15 Jul
Slide 6: Financial Review
Financial Review Den Jones Group Finance Director
Slide 7: Underlying Results
Underlying Results Half year to 30th September H1 2015 H1 2014 % at constant rates £m £m % change (cr) Revenue 5,755 4,800 +20 +18 Sales excluding precious metals 1,588 1,514 +5 +4 Operating profit 225.0 234.1 -4 -4 Interest and share of JV profit (16.7) (17.7) Profit before tax 208.3 216.4 -4 -4 Ta
Slide 8: Good Business Growth
Good Business Growth Underlying Profit Before Tax Bridge – H1 2014/15 to H1 2015/16 (£m) 220 £4m £1m +4% 210 £4m +3% -2% £7m £6m -2% 200 -3% 190 £216m £208m 180 £201m 170 160 150 Gold & Silver H1 2014/15 Exchange Pension H1 2014/15 Businesses Interest H1 2015/16 Refining uPBT & pgm prices charge uPB
Slide 9: Reconciliation to Reported Results
Reconciliation to Reported Results Half year to 30th September H1 2015 H1 2014 £m £m Underlying profit before tax 208.3 216.4 Amortisation of acquired intangibles (9.0) (8.6) Profit on sale of Research Chemicals 130.9 - Profit before tax 330.2 207.8 Earnings per share 137.9p 85.6p 9
Slide 10: Cash Flow from Operations
Cash Flow from Operations Half year to 30th September H1 2015 H1 2014 £m £m Underlying operating profit 225 234 Depreciation and amortisation 77 74 Tax paid (36) (46) Working capital / other 279 (99) Cash flow from operations 545 163 • Working capital improved by £386m: • Working capital days (excl.
Slide 11: Cash Flow Conversion
Cash Flow Conversion Half year to 30th September H1 2015 H1 2014 £m £m Cash flow from operations 545 163 Add back: Tax paid 36 46 Pension deficit contributions 13 13 Net capital expenditure (119) (80) 475 142 Movement in precious metal working capital (315) (24) Cash flow (excluding precious metals)
Slide 12: Continued Investment to Support Business Growth
Continued Investment to Support Business Growth Capital expenditure £98.1m Capex (H1 2014/15 £71.3m) • Key projects: Corporate 21% • Expansion of UK ECT facilities to meet Emission Control demand from new light duty legislation Technologies 25% • Expansion of PT’s chemical catalyst manufacturing cap
Slide 13: Strong Balance Sheet; Actions to Reduce Costs
Strong Balance Sheet; Actions to Reduce Costs ROIC £ Treasury and Capital Return • Group ROIC 17.7% • Net debt £441.2m, down £553.2m since year • Decline due to higher average levels of end working capital over the last 12 months • Net debt (including post tax pension deficits) / EBITDA 0.7 times •
Slide 14: Operating Review
Operating Review Robert MacLeod Chief Executive
Slide 15: Emission Control Technologies – Continued Strong Growth
Emission Control Technologies – Continued Strong Growth Half year to 30th September % at constant £m 2015 2014 % change rates (cr) Sales (excluding precious metals) 939 869 +8 +8 Underlying operating profit 136.0 118.1 +15 +16 Return on sales (ROS) 14.5% 13.6% Return on invested capital (ROIC) 25.2%
Slide 16: Growth Well Ahead of Global Light Duty Market
Growth Well Ahead of Global Light Duty Market Total sales H1 2015/16 £574m up 11% Johnson Matthey’s Light Duty Catalyst Sales £m +12% at cr 700 £574m 600 £503m £517m 500 +17% at cr +11% 400 £339m £287m £305m 300 +9% at cr +2% at cr +11% 200 £123m £136m £96m £99m £120m £89m 100 +11% +11% 0 2013/14 20
Slide 17: Strong Growth in On Road HDD Catalysts
Strong Growth in On Road HDD Catalysts Total on road sales H1 2015/16 £323m up 8% Johnson Matthey’s On Road Heavy Duty Diesel Catalyst Sales £m +5% at cr 350 £323m £298m 300 +7% at cr £250m +8% 250 £209m 200 £180m £166m +16% +7% at cr 150 £94m £93m -11% at cr 100 £68m -1% £21m 50 £16m £24m 0 -10% 20
Slide 18: Increasing Focus on Emission Control
Increasing Focus on Emission Control Recent Developments Real World Driving • Air quality, especially emissions of • Introduction from September 2017 NOx from diesel cars, remains a hot • Testing over urban, rural and highway topic cycle • No major shift in diesel share to date • Conformity factor f
Slide 19: Johnson Matthey Technology is Part of the Solution
Johnson Matthey Technology is Part of the Solution Technologies to control NOx UREA UREA CSF CSF SCR® SCRF® NOx Adsorber Catalysts (NAC) Selective Catalytic Reduction (SCR) Advanced SCR • Pgm based catalyst • Metal-zeolite based catalyst • Allows improved thermal management • Requires fuel addition,
Slide 20: Process Technologies – Challenging Trading Conditions
Process Technologies – Challenging Trading Conditions Half year to 30th September % at constant £m 2015 2014 % change rates (cr) Sales (excluding precious metals) 283 283 - -1 Underlying operating profit 35.9 49.7 -28 -28 Return on sales (ROS) 12.7% 17.6% Return on invested capital (ROIC) 12.3% 15.0
Slide 21: PT Chemicals – Steady Sales But Less Favourable Mix
PT Chemicals – Steady Sales But Less Favourable Mix Sales stable at £159m Sales Ammonia Petrochemicals 16% • Good catalyst sales in Syngas but less 29% favourable product mix Methanol 16% Syngas 54% Oleo/ • Strong demand from formaldehyde biochemicals customers but lower margin 17% Formaldehyde 18%
Slide 22: PT Oil and Gas – Mixed Performance in First Half
PT Oil and Gas – Mixed Performance in First Half Sales steady at £124m (down 2% at cr) Sales • Good growth in catalysts • Strong demand for purification products • Slower in hydrogen catalysts following strong Diagnostic Hydrogen new plant activity last year Services 22% • Refill customers postponin
Slide 23: Precious Metal Products – Headwinds in Refining
Precious Metal Products – Headwinds in Refining Half year to 30th September % at constant £m 2015 2014 % change rates (cr) Sales (excluding precious metals) 165 193 -15 -15 Underlying operating profit 36.1 52.0 -31 -31 Return on sales 21.9% 26.9% Return on invested capital (ROIC) 19.3% 32.9% Continu
Slide 24: PMP Services – Substantially Lower Pgm Prices
PMP Services – Substantially Lower Pgm Prices Sales down 5% at £40m (7% down at cr) Platinum and Palladium Prices $/oz in the continuing businesses 1,500 • Substantially lower average pgm prices impacted performance in Refining 1,000 • Pt $1,064/oz (down 26%) 500 • Pd $691/oz (down 19%) Mar-14 Sep-1
Slide 25: PMP Manufacturing – Mixed First Half
PMP Manufacturing – Mixed First Half Sales down 5% to £125m Sales Benefiting from: Chemical • Good sales of medical components in the US Products Noble Metals - Industrial • Steady demand for black obscuration enamels for 20% Products automotive glass applications 32% • Strong sales of chemical prod
Slide 26: Fine Chemicals – Sale of Research Chemicals Completed
Fine Chemicals – Sale of Research Chemicals Completed Half year to 30th September % at constant £m 2015 2014 % change rates (cr) Sales (excluding precious metals) 157 155 +1 -3 Underlying operating profit 40.6 41.8 -3 -8 Return on sales 25.9% 26.9% Return on invested capital (ROIC) 17.6% 18.4% Stead
Slide 27: Expanding API Capabilities
Expanding API Capabilities API Manufacturing Catalysis and Chiral Technologies (CCT) • Sales down 2% to £98m (7% lower at cr) • Sales up 18% to £21m • Performance affected by safety shutdown • Good demand for homogeneous catalysts • Lower volumes of bulk opiates and ADHD and other speciality product
Slide 28: New Businesses – Good Progress in First Half
New Businesses – Good Progress in First Half Half year to 30th September % at constant £m 2015 2014 % change rates (cr) Sales (excluding precious metals) 72 37 +98 +116 Underlying operating profit / (loss) (9.9) (12.0) +18 +19 Excluding acquisitions, sales up 16% Sales • Battery Technologies: Sales
Slide 29: Outlook 2015/16
Outlook 2015/16 Strong performance in ECT and good Difficult conditions expected to continue; progress in New Businesses; challenging taking action to reduce costs conditions in other markets Good underlying growth in Expect FY performance to be in line with continuing* businesses in H2 vs H1; curre
Slide 30: Appendix
JME) Johnson Matthey
Slide 31: Estimated Light Duty Vehicle Sales and Production
Estimated Light Duty Vehicle Sales and Production H1 H1 H1 H2 2015/16 2014/15 % 2015/16 2014/15 % millions millions change millions millions change North Sales 10.7 10.3 +5 10.7 9.4 +14 America Production 9.0 8.4 +6 9.0 8.4 +7 Sales 9.3 8.9 +4 9.3 9.1 +2 Europe Production 10.0 10.3 -3 10.0 10.1 -1 S
Slide 32: Global Growth in Vehicle Production Drives ECT
Global Growth in Vehicle Production Drives ECT Light Duty Vehicle Production Outlook – 2014 - 2020 (calendar years) million CAGR 3.3% 120 (2014 – 2020) 106.2 98.5 100 95.0 91.5 87.2 87.9 CAGR 3.9% 80 (2014 – 2020) 60 CAGR 3.0% 56.0 CAGR 2.0% (2014 – 2020) 48.9 50.9 (2014 – 2020) 44.6 44.4 47.0 40 22
Slide 33: Emission Control Technologies – Light Duty Vehicle Legislation
Emission Control Technologies Light Duty Vehicle Legislation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 USA Tier II Tier III USA (CARB) LEV II LEV III EU Euro 5 Euro 6b Euro 6c Russia Euro 3 Euro 4 Euro 5 (proposed) Japan Japan 2009 China - National Euro 4 Euro 5 China - Beijing Euro 4 E
Slide 34: Estimated HDD Truck Sales and Production
Estimated HDD Truck Sales and Production H1 H1 H1 H2 2015/16 2014/15 % 2015/16 2014/15 % thousands thousands change thousands thousands change North Sales 283.3 257.4 +10 283.3 255.4 +11 America Production 284.0 271.9 +4 284.0 271.8 +4 Sales 148.3 129.7 +14 148.3 147.3 +1 EU Production 206.0 185.4 +
Slide 35: Heavy Duty Vehicle Production Regulated Engines Outlook
Heavy Duty Vehicle Production Regulated Engines Outlook 2014 - 2020 (calendar years) thousands CAGR 11.3% 4,000 (2014 – 2020) 3,574 3,500 3,109 3,000 CAGR 17.3% 2,760 (2014 – 2020) 2,500 2,242 2,165 1,970 2,029 2,000 1,875 1,686 1,500 CAGR 2.3% CAGR 6.9% 1,115 (2014 – 2020) (2014 – 2020) 962 1,000 8
Slide 36: Emission Control Technologies – Heavy Duty Diesel Legislation
Emission Control Technologies Heavy Duty Diesel Legislation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ON ROAD Europe EU V EU VI North America EPA10 EPA10 + Greenhouse Gas Regulation Japan JP 09 JP 16 South Korea EU V EU VI Brazil EU III EU V EU VI? Russia EU III EU IV EU V India (Main C