Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — H1 2008/09 Earnings Presentation
45 slides from Johnson Matthey's earnings presentation, Nov 26, 2008
Slide 1: Presentation of Results for the half year ended 30th September 2008
Presentation of Results for the half year ended 30th September 2008 26th November 2008
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 Neil Carson Chief Executive
Slide 4: Highlights
Highlights • In the six months to 30th September 2008, sales (ex pms) up 10% and underlying operating profit up 23% • Balance sheet remains strong • Fall in vehicle sales and platinum group metal prices will affect the second half, but exchange rates are favourable • In the longer term the group wil
Slide 5: Financial Review
Financial Review John Sheldrick Group Finance Director
Slide 6: Summary Results
Summary Results 1H 1H 2008 2007 % £m £m change Revenue 4,355 3,512 +24 Sales excluding precious metals 924 840 +10 Profit before tax 140.3 120.1 +17 Total earnings per share 46.8p 41.8p +12 Underlying*: Profit before tax 144.9 120.8 +20 Earnings per share 48.4p 41.2p +17 Dividend per share 11.1p 10.
Slide 7: Operating Profit / Exchange
Operating Profit / Exchange 1H 1H 2007 at 2008 Growth at 2008 2007 exchange constant Change rates rates £m £m % £m % Environmental 77.8* 65.9* +18 67.7* +15 Technologies Precious Metal 64.2 47.2 +36 49.4 +30 Products Fine Chemicals & 32.4 31.0 +5 32.4 - Catalysts Corporate (10.1) (11.0) (11.1) Group
Slide 8: Return on Sales
Return on Sales Excluding Precious Metals Sales ex pms ROS 1H 1H 1H 1H 2008 2007 Growth 2008 2007 £m £m % % % Environmental 596 541 +10 13.1 12.2 Technologies Precious Metal Products 168 151 +12 38.1 31.3 Fine Chemicals & Catalysts 160 148 +9 20.2 21.0 Group 924 840 +10 17.8 15.9 8
Slide 9: Sensitivities
Sensitivities • Platinum group metal prices • Exchange rates • Car production 9
Slide 10: Platinum Price
Platinum Price US$/oz 2,400 2,000 Average $1,655 Average Average 1,600 Average $1,164 $1,293 Average $1,206 $1,795 1,200 800 400 0 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 10
Slide 11: Sensitivity to Pgm Prices
Sensitivity to Pgm Prices June sensitivity • 10% change in the price of our ‘basket’ of pgms (mainly platinum and palladium) can impact commission / distribution income by approx £3m to £4m pa but volatility also a significant factor • Demand for recycling secondary materials (e.g. spent catalysts,
Slide 12: US Dollar Exchange Rates
US Dollar Exchange Rates $/£ 2.2 Average 2.1 $2.00/£ Average Average $2.01/£ $1.94/£ 2.0 Average $1.86/£ 1.9 Average $1.93/£ 1.8 1.7 Each 1 cent change affects operating 1.6 profit by £0.4m in full year 1.5 1.4 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 12
Slide 13: Euro Exchange Rates
Euro Exchange Rates €/£ 1.6 Average Average €1.49/£ Average €1.46/£ €1.47/£ 1.5 Average €1.36/£ 1.4 Average €1.26/£ 1.3 Each 1 cent change affects operating profit by £0.3m in full year 1.2 1.1 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 13
Slide 14: Sensitivity to Car Production
Sensitivity to Car Production • We are assuming global car production will fall by around 11% in our second half compared with same period last year • Environmental Technologies’ sales will fall less than car production • Process Technologies • Powerplants catalysts • Filters • Impact on operating p
Slide 15: Interest and Taxation
Interest and Taxation 1H 1H 2008 2007 £m £m Net finance costs (interest) (19.9) (12.5) Income tax expense (41.3) (32.5) Underlying tax rate 29.4% 28.6% (tax / profit before tax) 15
Slide 16: Net Cash Flow
Net Cash Flow 1H 1H 2008 2007 £m £m Operating profit 160 132 Depreciation and amortisation 49 38 Tax paid (67) (32) Working capital / other 3 (31) Cash flow from operations 145 107 Interest / dividends (73) (62) Net capital investment (69) (57) Acquisitions / disposals (2) (1) Shares bought 1 (48) N
Slide 17: Capital
Capital 30th Sept 08 31st March 08 £m £m Net debt 620 610 Equity 1,211 1,160 Capital employed 1,831 1,770 Gearing (net debt / equity) 51% 53% 17
Slide 18: Borrowing Facilities
Borrowing Facilities • €125m five year loan from EIB drawn down in July 2008 • Total long term US Bonds / EIB loans at 30th September 2008 were £514m, of which only £19m matures before 2011 • £360m of committed bilateral bank facilities which are regularly extended. Most are currently committed beyo
Slide 19: Operating Review
Operating Review Neil Carson Chief Executive
Slide 20: Environmental Technologies Division
Environmental Technologies Division
Slide 21: Environmental Technologies Division
Environmental Technologies Division 1H 1H £m 2008 2007 % Revenue 1,316 1,055 +25 Sales excluding precious metals 596 541 +10 Operating profit* 77.8 65.9 +18 * Before amortisation of acquired intangibles PT + • Emission Control Technologies’ Fuel Cells sales excluding precious metals up 21% 10% • Pro
Slide 22: Sales Excluding Precious Metals
Sales Excluding Precious Metals Environmental Technologies £m 800 700 596 541 +27 +7 +9 +12 600 500 400 300 200 100 0 1H 2007 Light Duty / HDD Process Exchange 1H 2008 Stationary Technologies / Fuel Cells 22
Slide 23: Estimated Light Vehicle Sales and Production
Estimated Light Vehicle Sales and Production Half year to 30th September 2008 2007 Change millions millions % Sales 8.7 10.0 -13.0 North America Production 6.4 7.6 -15.8 Sales 11.4 11.2 +1.8 Total Europe Production 11.1 10.8 +2.8 Sales 8.5 8.1 +4.9 Asia Production 13.4 12.9 +3.9 Sales 33.0 33.5 -1.5
Slide 24: Emission Control Technologies
Emission Control Technologies Light Duty • Good sales growth in Asia, JM gaining share • Increased DPF sales in Europe • Volumes down in North America, costs reduced Heavy Duty • Overall sales up on last year • European sales held up well in the first half, useful contribution from Argillon • US sal
Slide 25: Emission Control Technologies: Light Duty Vehicle Production Outlook
Emission Control Technologies Light Duty Vehicle Production Outlook Light Duty Vehicle Production Forecasts million 80 75.5 71.0 70.3 70.7 70 • These are recent industry 60 50 forecasts 40 30.6 32.6 28.3 29.3 30 22.3 22.2 21.4 22.5 • Our assumption for the six 20 15.0 13.0 12.5 13.2 months to 31st M
Slide 26: Heavy Duty Diesel Vehicle Sales Outlook (June 2008)
Emission Control Technologies Heavy Duty Diesel Vehicle Sales Outlook (June 2008) Western European Truck Sales US Class 4-8 Truck Sales (Thousands of units) (Thousands of units) 450 600 400 500 350 300 400 250 300 200 150 200 100 100 50 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004 2005 2006
Slide 27: Heavy Duty Diesel Vehicle Sales Outlook (November 2008)
Emission Control Technologies Heavy Duty Diesel Vehicle Sales Outlook (November 2008) Western European Truck Sales US Class 4-8 Truck Sales (Thousands of units) (Thousands of units) 450 600 400 500 350 300 400 250 300 200 150 200 100 100 50 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004 2005
Slide 28: Emission Control Technologies Legislation Timeline
Emission Control Technologies Legislation Timeline 28
Slide 29: Emission Control Technologies: Future Growth Prospects
Emission Control Technologies Future Growth Prospects • Catalyst sales will fall in second half as a result of the decline in global vehicle sales • Fitment of DPFs will double by January 2011 • HDD market for 2008 estimated to be $620m (ex pms), JM share higher • In 2010 legislation in North Americ
Slide 30: Process Technologies
Process Technologies Ammonia, Methanol, Oil and Gas (AMOG) • Strong demand for hydrogen US$/MT Methanol catalysts as fuel specifications 900 tighten worldwide and refineries 800 700 process dirtier crudes 600 500 • Environmental regulations 400 supported good demand for 300 200 purification products
Slide 31: Process Technologies: Davy Process Technology
Process Technologies Davy Process Technology • Continued good growth • Two new methanol plants licensed in China • Further licences for oxo alcohol and butanediol plants, both in China • New biodiesel technology collaboration with Endicott Biofuels. First plant licensed in USA • Purified terephthali
Slide 32: Process Technologies: Future Growth Prospects
Process Technologies Future Growth Prospects • Oil price has fallen dramatically US$/BBL Crude Oil - WTI from peak in July 2008 160 140 • Energy security remains a priority 120 for many countries. Increased 100 80 interest in utilising coal reserves 60 supports continued project activity 40 20 • Sec
Slide 33: Fuel Cells
Fuel Cells • Continued growth in sales to a wider range of customers • Good order books for natural gas powered fuel cells for CHP applications • Demand for DMFC products remains encouraging • US Government Green Vehicles initiative receiving increased interest 33
Slide 34: Precious Metal Products Division
Precious Metal Products Division
Slide 35: Precious Metals Products Division
Precious Metals Products Division 1H 1H £m 2008 2007 % Revenue 2,719 2,201 +24 Sales excluding precious metals 168 151 +12 Operating profit 64.2 47.2 +36 • High pgm prices in first quarter and volatility provided favourable trading conditions for our Platinum Marketing and Distribution business • Ma
Slide 36: Precious Metals Products Division: Platinum Metal Prices
Precious Metals Products Division Metal Prices • Pt demand expected to fall by 2% US$/oz Platinum in calendar 2008. Good growth in 2,400 European automotive (especially in 2,000 1,600 first six months) offset by lower 1,200 sales to jewellery in China and 800 Japan. Supply also expected to fall 400
Slide 37: Precious Metals Products Division: Palladium and Rhodium Prices
Precious Metals Products Division Metal Prices US$/oz Palladium 700 • Pd demand up 4%. Autocatalyst 600 demand grows in China and Europe 500 400 but falls in North America. Jewellery 300 demand ahead. Supply falls by 200 12.5% with large decrease in sales of 100 Russian State stocks. Average price 0
Slide 38: Precious Metal Products Division: Manufacturing Businesses
Precious Metal Products Division Manufacturing Businesses • Noble Metals achieved good sales of industrial products and medical components • Pgm Refining and Recycling well ahead on strong demand • Colour Technologies’ profit ahead of last year with weaker sales of automotive glass enamels offset by
Slide 39: Fine Chemicals & Catalysts Division
Fine Chemicals & Catalysts Division 39
Slide 40: Fine Chemicals & Catalysts Division
Fine Chemicals & Catalysts Division 1H 1H £m 2008 2007 % Revenue 320 256 +25 Sales excluding precious metals 160 148 +9 Operating profit 32.4 31.0 +5 • Revenue growth boosted by good sales of platinum products • Division benefits from exchange translation with a significant proportion of its operati
Slide 41: Fine Chemicals & Catalysts Division
Fine Chemicals & Catalysts Division • Catalysts and Chemicals achieved good growth in catalyst sales to pharmaceuticals, speciality chemicals and edible oils • Macfarlan Smith performed well with good growth in specialist opiates • Pharmaceutical Materials and Services’ profit was down as a result o
Slide 42: Fine Chemicals & Catalysts Division: Future Growth Prospects
Fine Chemicals & Catalysts Division Future Growth Prospects • Division is expected to deliver steady growth in the second half • New catalysts and chemicals manufacturing capacity in Asia to support future growth in the region • Pharmaceutical Materials and Services should benefit from launch of the
Slide 43: Outlook: Divisions
Outlook Divisions • Global car sales are expected to fall in second half of our financial year compared with the equivalent period last year. ECT will benefit from lower costs. Process Technologies has good order book • Precious Metal Products’ profit will be lower in the second half if pgm prices r
Slide 44: Outlook: Group
Outlook Group • Our forecast assumes pgm prices and exchange rates remain at current levels and global car production falls by around 11% in the second half compared with last year. On that basis we estimate second half underlying profit before tax would be around 5% - 15% below last year • Our expe
Slide 45: Johnson Matthey
JME) Johnson Matthey 45