Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — H1 2018/19 Earnings Presentation
37 slides from Johnson Matthey's earnings presentation, Nov 21, 2018
Slide 1: Presentation of results for the six months ended 30th September 2018
Presentation of results for the six months ended 30th September 2018 21st November 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: Delivering on our strategy and confident in our outlook
Delivering on our strategy and confident in our outlook Continued progress on implementing our strategy Sales and Full year operating underlying performance Interim dividend ROIC operating profit towards upper end up 7% of 16.0% up 10% of guidance Note: All growth rates in this presentation are at c
Slide 4: Anna Manz, Chief Financial Officer
Anna Manz Chief Financial Officer
Slide 5: Good first half group performance
Good first half group performance Underlying results for half year ended 2018 2017 % change, 30th September1 % change constant rates £m £m Sales excluding precious metals 2,009 1,853 +8 +10 Operating profit 271 250 +8 +10 Finance charges (20) (16) +24 Profit before tax 251 233 +7 +9 Taxation (41) (4
Slide 6: Strong sales growth driven by Clean Air
Strong sales growth driven by Clean Air +11% +3% - +23% +10% +£33m +£3m +£12m +£1m +£134m £2,009m £1,853m -£27m Half Year 2017/18 Translational FX Clean Air Efficient Natural Health New Markets Eliminations Half Year 2018/19 Resources 6
Slide 7: Strong growth in underlying operating profit
Strong growth in underlying operating profit +10% +£20m £271m +£12m -£7m £250m -£4m Half Year 2017/18 Translational FX Restructuring and Investment in group Underlying business growth Half year 2018/19 procurement cost savings initiatives 1 1. Includes IT and procurement 7
Slide 8: Clean Air: Continued strength with double digit growth in both light and heavy duty
Clean Air: Continued strength with double digit growth in both light and heavy duty Sales up 11% Operating profit up 15% +£58m • Margin improved by 0.5ppts -£2m • Volume leverage +£11m • Tight cost control +£3m +£64m £1,312m -£16m £1,194m Full year outlook • Continued strong sales growth, driven by
Slide 9: Efficient Natural Resources: Sales growth with margin improvement
Efficient Natural Resources: Sales growth with margin improvement Sales up 3% Operating profit up 26% • Margin up 3.2 ppts • Higher average pgm prices (+c.£10m) +£2m +£1m • Efficiency improvements +£21m • Partly offset by increased investment £463m in pgm refineries £458m -£7m -£1m Full year outlook
Slide 10: Health: Stable sales with operating profit down as expected
Health: Stable sales with operating profit down as expected Sales flat Operating profit down 31% • Margin down 5.8 ppts • Decline in high margin products moving through natural lifecycle • Small net cost from manufacturing +£2m footprint optimisation +£3m £119m -£2m £118m -£4m Full year outlook Gene
Slide 11: New Markets: Strong sales growth, operating profit declined
New Markets: Strong sales growth, operating profit declined Sales up 23% Operating profit down 67% • Margin down 4.5 ppts +£34m flat • Investing in strategic relationships for +£1m eLNO -£2m £173m • Strong growth in lower margin Battery Systems sales Full year outlook • Sales growth £143m • Operatin
Slide 12: EPS growth slightly ahead of underlying operating profit growth
EPS growth slightly ahead of underlying operating profit growth Underlying results for half year ended 2018 2017 % change, 30th September1 % change constant rates £m £m Sales excluding precious metals 2,009 1,853 +8 +10 Operating profit 271 250 +8 +10 Finance charges (20) (16) +24 Profit before tax
Slide 13: Free cash flow impacted by working capital
Free cash flow impacted by working capital Free cash flow (£m) Half year ended 30th September 2018 2017 Underlying operating profit 271 250 Depreciation and amortisation1 79 77 Precious metal working capital outflow (283) (156) Non precious metal working capital outflow (76) (91) Other working capit
Slide 14: Pgm refinery downtime impacted precious metal working capital
Pgm refinery downtime impacted precious metal working capital Precious metal (pm) working capital (£m) 800 700 Pm working capital increased £267 million1, mainly in pm inventory 600 500 400 Impact from pgm refinery downtime 300 • Expect a significant reduction in pm working capital by year end 200 1
Slide 15: Improvement in average non precious metal working capital days
Improvement in average non precious metal working capital days Working capital days excluding precious Non pm working capital increased by metals, half year ended 30th September £130 million1 69 Working capital days broadly stable at 65 64 64 65 days compared to H1 17/18 Average working capital days
Slide 16: Strong balance sheet, net debt to EBITDA 1.5 times
Strong balance sheet, net debt to EBITDA 1.5 times1 £m £m Net debt at the beginning of the year (679) Free cash flow (206) Dividends (112) Movement in net debt before FX (318) Net debt before FX (997) FX (39) Net debt at the end of the period (1,036) 1. Net debt including post tax pension deficits 1
Slide 17: Progressing on my three focus areas
Progressing on my three focus areas Focus areas Progress • ROIC lower due to UK pension asset1 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 capital to drive continued
Slide 18: Confident in our outlook
Confident in our outlook Operating performance towards upper end of previous guidance of mid to high single digit growth Growth led by Clean Air as diesel share gains in Light Duty Europe continue to ramp Improvement in average working capital days (excluding precious metals) Capex up to £350 millio
Slide 19: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive 19
Slide 20: Sustained growth and value creation through:
Sustained growth and value creation through: Science Invest in our world class science and technology Customers Solving our customers’ complex problems; lead in high margin, technology driven markets Operations Operate as a safer, more connected, agile and efficient global business People Deliver th
Slide 21: Delivering long term shareholder value
Delivering long term shareholder value through: Sustained growth Mid to high single in Clean Air digit EPS CAGR Market leading growth in Efficient Natural Resources Expanding ROIC to 20% Break out growth in Health Progressive Break out growth in Battery Materials dividend 21
Slide 22: Confident of delivery in a changing world
Confident of delivery in a changing world Economic Market Political 22
Slide 23: Delivering on our strategy: Clean Air
Delivering on our strategy: Clean Air Global Tightening Efficient manufacturing leader legislation footprint Legislation tightening Regional market Expanding capacity in Europe and accelerating shares largely on track in Europe and Asia in Asia Delivering a mid single digit CAGR sales growth over th
Slide 24: Delivering on our strategy: Efficient Natural Resources
Delivering on our strategy: Efficient Natural Resources Differentiated investment Focused Focus on Extend our by segment and region investment in R&D efficiency capabilities Targeted Commercialising investment in Simplified product Investing in our newly developed higher growth portfolio pgm refiner
Slide 25: Delivering on our strategy: Health
Delivering on our strategy: Health Build capabilities Enhance performance Expand new product to better support of existing business pipeline and portfolio customers Actions being taken Closure of Riverside and Progressing new to improve efficiency Annan ramp up product pipeline Delivering break out
Slide 26: Health: Generic pipeline on track to deliver additional c.£100m operating profit by 2025
Health: Generic pipeline on track to deliver an additional c.£100m operating profit per year by 2025 Number of products¹ by expected launch date and value (Total products: 46) >£5m 6 9 operating profit p.a. Potential product £2.5-5m 5 2 £0-2.5m 7 14 3 0-2 years 2-5 years 5+ years Expected time until
Slide 27: Delivering on our strategy: Battery Materials
Delivering on our strategy: Battery Materials Focus on Technology Successful scale up ultra high energy leadership and commercialisation density market Customer sampling of Commercialisation Increased R&D in eLNO eLNO progressing well plans on track Delivering break out growth 27
Slide 28: Battery materials: Differentiating in our production
Battery materials: Differentiating in our production Recycling Raw material Cathode Cell Battery pack mining and material OEM production production trading production Wet End Dry End Metal salts Precipitation Drying Precursor Precursor Lithiation eLNO Tailored solutions for our customers 28
Slide 29: Battery materials: Commercialisation plans on track
Battery materials: Commercialisation plans on track Progress to date Next 12 months Developed best-in-class next generation Expand R&D team battery material (eLNO) Progressing through qualification process Positive feedback from customers with customers Pilot plant operational Start construction of
Slide 30: Confident in the delivery of our strategy
Confident in the delivery of our strategy Good first half performance Mid to high single digit EPS CAGR Delivering on our promises Expanding ROIC to 20% Building the platform for the future Progressive Successfully executing on our strategy dividend 30
Slide 31: Appendix
Appendix 31
Slide 32: 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 33: Global growth in vehicle production
Global growth in vehicle production Light duty vehicle production outlook (million) Calendar years CAGR 2.5% 100.1 96.0 97.4 95.0 92.9 88.6 CAGR 3.3% 51.8 53.1 48.6 49.8 50.3 45.2 CAGR -0.2% CAGR 2.1% 21.5 22.2 22.3 22.4 23.2 20.9 17.4 17.8 17.0 17.2 17.1 17.2 2016 2017 2018 2019 2020 2021 2016 2017
Slide 34: 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 35: 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 4.2% 3,275 3,170 3,207 3,155 3,183 2,661 CAGR 4.1% 1,981 1,930 1,918 1,900 1,829 1,579 CAGR 5.2% CAGR 3.7% 692 718 685 659 600 649 589 597 608 633
Slide 36: 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 37: eLNO: Commercialisation on track
eLNO: 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