Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — FY2006 Earnings Presentation
39 slides from Johnson Matthey's earnings presentation, Jun 1, 2006
Slide 1: Presentation of Results for the year ended 31st March 2006
E Johnson Matthey Presentation of Results for the year ended 31st March 2006 1st June 2006
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
E Johnson Matthey Introduction Neil Carson Chief Executive
Slide 4: Strategic Developments
Strategic Developments • Focus on delivery of organic growth • Major opportunity in HDD • Growth in catalysed soot filters (CSFs) • Opportunities in PCT • Continue to improve ROA, currently 17% • £200 million to be spent on acquisitions and / or share buy-backs E
Slide 5: Financial Review
E Johnson Matthey Financial Review John Sheldrick Group Finance Director
Slide 6: Summary Results
Summary Results IFRS Basis 2006 2005 £m £m % Revenue 4,756 4,626 +3 Sales excluding precious metals 1,341 1,188 +13 Operating profit 228.7 179.9 +27 Profit before tax 213.8 167.4 +28 Total earnings per share 70.8p 53.2p +33 Before impairment & restructuring costs: Operating profit 234.7 216.6 +8 Pro
Slide 7: Operating Profit
Operating Profit 2006 2005 2006 at 2005 exchange rates £m £m % £m % Catalysts 134.2 122.5 +10 132.1 +8 Precious Metal Products 62.2 52.0 +20 61.2 +18 Pharmaceutical Materials 33.8 39.8 -15 33.5 -16 Ceramics 21.3 18.8 +13 20.8 +11 Corporate (16.8) (16.5) (16.9) 234.7 216.6 +8 230.7 +7 E
Slide 8: Return on Sales
Return on Sales Excluding Precious Metals Sales excl. PMs ROS 2006 2005 Growth 2006 2005 £m £m % % % Catalysts 786 672 +17 17.1 18.2 Precious Metal Products 245 225 +9 25.3 23.1 Pharmaceutical Materials 127 125 +2 26.6 31.9 Ceramics 182 166 +10 11.7 11.3 1,341 1,188 +13 17.5 18.2 E
Slide 9: Interest
Interest 2006 2005 £m £m Interest payable (31.7) (32.2) Interest receivable 17.0 19.2 (14.7) (13.0) E
Slide 10: Taxation
Taxation 2006 2005 £m £m Underlying tax 64.3 59.8 Tax on impairment (1.8) (13.3) & restructuring costs (62.5) (46.5) Underlying tax rate 29.3% 29.3% E
Slide 11: Capital Expenditure to Depreciation
Capital Expenditure to Depreciation Year to 31st March 2006 Capital Capex/ Expenditure Depreciation Depreciation £m £m (times) Catalysts 89.2 39.8 2.2 Precious Metal Products 13.7 13.0 1.1 Pharmaceutical Materials 9.9 10.0 1.0 Ceramics 6.5 6.3 1.0 Other 4.7 1.7 2.8 Total Group 124.0 70.8 1.8 E
Slide 12: Net Cash Flow
Net Cash Flow 2006 2005 £m £m Operating profit 229 180 Depreciation and amortisation 77 66 Working capital / tax / other (94) (62) Cash flow from operations 212 184 Interest / dividends (74) (71) Capital expenditure / asset sales (115) (92) Free cash flow 23 21 Acquisitions / disposals (24) 19 Share
Slide 13: Return on Investment
Return on Investment 2006 2005 £m £m Operating profit 235 217 Average assets: Equity 987 918 Net debt 391 382 Total investment 1,378 1,300 Pre-tax ROA 17.0% 16.7% Return on invested capital 12.0% 11.8% WACC 8% 8% E
Slide 14: Capital
Capital Mar 06 Mar 05 £m £m Net debt 412 370 Equity 1,045 930 Capital employed 1,457 1,300 Gearing 39.4% 39.8% (net debt / equity) E
Slide 15: Operating Review
E Johnson Matthey Operating Review Neil Carson Chief Executive
Slide 16: Catalysts Division
Catalysts Division • Profits up 10% • Both ECT and PCT achieve good growth £m Growth at actual exchange rates £m +28% +10% 150 1,600 1,477 134.2 122.5 120 1,280 1,157 960 90 640 60 320 30 0 0 2005 2006 2005 2006 Sales Operating Profit E
Slide 17: Estimated Light Vehicle Sales and Production
Estimated Light Vehicle Sales and Production Year to 31st March 2006 2005 change North America millions millions % Sales 19.7 19.5 1.0% Production 15.9 15.6 1.9% Europe Sales 18.3 18.0 1.7% Production 19.3 18.9 2.1% Asia Sales 15.2 13.7 10.9% Production 23.0 20.7 11.1% Global Sales 65.6 63.3 3.6% Pr
Slide 18: Environmental Catalysts and Technologies
Environmental Catalysts and Technologies • Strong top line growth • Europe continues to benefit from sales of diesel products • North America slightly down • Good autocatalyst growth in Asia, particularly in China and Japan • Emissions standards continue to tighten worldwide E
Slide 19: Environmental Catalysts and Technologies: NOx Emission Standards
Environmental Catalysts and Technologies NOx Emission Standards (g/mile) 0.75 Current Standards 0.5 0.25 0 1992 1996 2000 2004 2006 2008 2010 California US Federal Japan Europe China E
Slide 20: Environmental Catalysts and Technologies: Light Duty Growth Trends
Environmental Catalysts and Technologies Light Duty Growth Trends • Growth in Europe driven by tighter diesel regulations • Increasing demand for CSFs • Diesels starting in North America • Expansion in China and Japan, construction of new Korean plant underway. New plant announced in Russia E
Slide 21: HDD on-road regulation development
Environmental Catalysts and Technologies HDD on-road regulation development New Models All Models 0.20 Europe Japan 2003 Euro 4 01-Oct-05 01-Oct-06 0.18 Euro 5 01-Oct-08 01-Oct-09 0.16 United States US2007 01-Jan-07 01-Jan-07 0.14 US2010 01-Jan-10 01-Jan-10 US 2002 3/4 PM (g/kW-hr) 0.12 Japan EU III
Slide 22: Environmental Catalysts and Technologies: Heavy Duty Diesel
Environmental Catalysts and Technologies Heavy Duty Diesel • Currently less than 10% of new HDD vehicle production in Europe fitted with catalysts • Full impact of European legislation from October 2006 • US legislation starts from January 2007 • Now expect market in excess of US$700 million (ex pms
Slide 23: Process Catalysts and Technologies
Process Catalysts and Technologies • Good growth in sales and operating profit • AMOG business well ahead. Strong demand for hydrogen and synthesis gas catalysts and purification products • £4 million investment in steam reforming test plant • Research Chemicals business continues to grow. New globa
Slide 24: Process Catalysts and Technologies: Business Developments
Process Catalysts and Technologies Business Developments • Acquisition of DPT • Strong technology position in oil, gas and petrochemicals • Soaring energy prices and drive towards low carbon technologies to increase catalyst opportunities E
Slide 25: Oil Price Drives Interest in Hydrocarbons to Products Technology
Oil Price Drives Interest in Hydrocarbons Brent Crude to Products Technology Oil Price US$/Barrel 80 70 With oil above $40 per barrel the following 60 technologies become viable: 50 Coal to Chemicals 40 $40 - $50 Biodiesel 30 $35 - $45 Gas to Liquids 20 $25 - $35 10 0 1996 1997 1998 1999 2000 2001 2
Slide 26: Fuel Cells
Fuel Cells • Energy and global warming concerns drive interest in fuel cells • Renewed interest in PAFC fuel cells for medium scale, stationary applications • Increased activity in fuel cell powered buses for low carbon transport demonstrations • Growth in DMFC technology for mobile applications • E
Slide 27: Precious Metal Products
Precious Metal Products • Profits up 20% • Manufacturing businesses perform well and trading strong in second half £m Growth at actual exchange rates £m -7% +20% 75 3,171 3,200 2,962 62.2 60 52.0 2,400 45 1,600 30 800 15 0 0 E 2005 2006 2005 2006 Sales Operating Profit
Slide 28: Platinum and Palladium Prices
Platinum and Palladium Prices US$/oz 1,400 Average Pt price 2005/06 1,200 $942/oz (up 11%) 1,000 800 600 Average Pd price 2005/06 $228/oz (up 4%) 400 200 0 March 2004 March 2005 March 2006 Platinum Palladium E
Slide 29: Rhodium Price
Rhodium Price US$/oz 6,500 6,000 5,500 Average Rh price 2005/06 5,000 $2,544/oz (up 111%) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 March 2004 March 2005 March 2006 Rhodium E
Slide 30: Precious Metal Products
Precious Metal Products • Pgm Refining restructuring successfully completed. More than £20 million in cash released • Colour Technologies benefits from good demand for automotive glass products • Fabricated pgm products businesses perform well, particularly medical parts E
Slide 31: Pharmaceutical Materials
Pharmaceutical Materials • Profits down 15% • US business down, European businesses perform well £m Growth at actual exchange rates £m +2% -15% 150 50 132 134 39.8 120 40 33.8 90 30 60 20 30 10 0 0 2005 2006 2005 2006 Sales Operating Profit E
Slide 32: Pharmaceutical Materials: US Operations
Pharmaceutical Materials US Operations • Impact of expiry of carboplatin patent in October 04 • Contract research market weaker than last year • Expected major generic products delayed by court action. Timing uncertain but launch still expected in 2006/07 • Future prospects for platinum products enc
Slide 33: Pharmaceutical Materials: European Operations
Pharmaceutical Materials European Operations • Sales and profits up at Macfarlan Smith • Good growth in bulk opiates and high potency products • New manufacturing capacity for specialist opiates completed and commissioned E
Slide 34: Ceramics
Ceramics • Profits up 13% • New division benefits from lower cost base and top line growth £m Growth at actual exchange rates £m +10% +13% 200 25 182 21.3 166 18.8 20 150 15 100 10 50 5 0 0 2005 2006 2005 2006 Sales Operating Profit
Slide 35: Ceramics
Ceramics • Global supplier of decorative materials to tile manufacturers • Good growth in demand from Eastern Europe and Asia, particularly China • Strength of euro impacts Western European tile manufacturers • Strong cash generation E
Slide 36: Outlook: Catalysts
Outlook Catalysts • Strong top line growth from introduction of new products • HDD sales in Europe will grow in second half. US sales to start in final quarter • CSF sales expected to grow steadily throughout the year • ECT expected to achieve double digit growth in 2006/07 • PCT to benefit from inc
Slide 37: Outlook: Other Divisions
Outlook Other Divisions • Strong pgm prices and good demand should benefit Precious Metal Products • Pharmaceutical Materials’ growth will depend on timing of customers’ new product launches • Ceramics should be similar to 2005/06 with strong cash generation • US dollar weakness may cause adverse ex
Slide 38: Outlook: Summary
Outlook Summary • Overall we expect good earnings growth in 2006/07, particularly in second half • Longer term growth will be underpinned by strong fundamentals for catalysts E
Slide 39: Johnson Matthey
UME) Johnson Matthey