Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — Earnings Presentation (November 2009)
43 slides from Johnson Matthey's earnings presentation, Nov 17, 2009
Slide 1: Platinum 2009 Interim Review
Platinum 2009 Interim Review 17th November 2009 Good morning to everyone, and welcome to the presentation of the numbers and commentary from Johnson Matthey’s new Platinum 2009 Interim Review. This year, due to the very significant changes that we have seen in the markets, we will focus solely on pl
Slide 2: Platinum
Platinum Starting with platinum….. 2
Slide 3: Platinum: Key features
Platinum: Key features • Platinum market in surplus by 140,000 oz in 2009 • Supplies of platinum rise by 1.9 per cent despite lower underlying production • Demand to decrease by 4.4 per cent • Automotive demand to shrink by a third • Jewellery demand to grow by 80 per cent • Physical investment dema
Slide 4: Platinum Supply and Demand
Platinum Supply and Demand ’000 oz 2008 2009 % Supply 5,945 6,055 1.9 Demand 6,185 5,915 (4.4) Movements in stocks (240) 140 www.platinum.matthey.com Putting this in numerical terms, this translates into a forecast rise of 1.9 per cent in supply from 5.945 million ounces to 6.055 million ounces this
Slide 5: Platinum Supply to Rise by 1.9%
Platinum Supply to Rise by 1.9% 5.945 6.055 • South African supplies to increase to 4.725 million ounces despite lower underlying production of metal in concentrate • Russian supplies to fall to 745,000 oz • Supplies from elsewhere to drop from 620,000 oz to 585,000 oz www.platinum.matthey.com In he
Slide 6: South African Platinum Production
South African Platinum Production 4.725 4.540 • Underlying production to fall by 185,000 oz • Safety issues and strikes at Impala • Subsidence at Everest • Some closures of uneconomic shafts and pits www.platinum.matthey.com I think it is worth explaining a bit more about South African production. T
Slide 7: South African Platinum Supplies
South African Platinum Supplies 4.515 4.725 • South African supplies to rise by 210,000 oz due to: • Sales of additional refined metal in 2009 • Additions to pipeline stocks of 2008 not expected to be repeated www.platinum.matthey.com However, supplies from South Africa – sales of metal to the marke
Slide 8: Platinum Demand to Fall by 4.4%
Platinum Demand to Fall by 4.4% • Total demand to decline by 6.185 5.915 270,000 oz to 5.915 million oz • Gross autocatalyst demand to fall by a third • Industrial demand to fall by 530,000 oz to 1.155 million oz • Net jewellery demand to leap by 1.085 million oz to 2.45 million oz • Net physical in
Slide 9: Platinum Demand: Autocatalyst
Platinum Demand: Autocatalyst Figures courtesy of IHS Global Insight www.platinum.matthey.com The struggles of the automotive market have been clear to any market observer this year and, as this chart shows, despite various government incentive schemes, vehicle production will decrease in almost eve
Slide 10: Platinum Demand: Autocatalyst
Platinum Demand: Autocatalyst Figures courtesy of IHS Global Insight www.platinum.matthey.com However, the bigger story for platinum is the short term decline in the market share of the diesel vehicle within Europe. Just over half of all light duty vehicles sold in Europe last year were powered by a
Slide 11: Platinum Demand: Autocatalyst
Platinum Demand: Autocatalyst • Gross auto sector platinum 3.700 2.480 purchases to fall by a third to 2.48 million oz • European demand to drop by 900,000 oz to 1.07 million oz • North American, Japanese and RoW demand set to decline • Chinese demand to rise on economic growth www.platinum.matthey.
Slide 12: Platinum Demand: Autocatalyst Recycling
Platinum Demand: Autocatalyst Recycling 1.120 0.800 • Recovery of platinum from spent catalysts expected to fall to 800,000 oz • H1 2009 very weak • H2 2009 showing steady improvement, supported to some extent by scrappage schemes www.platinum.matthey.com The changes in the platinum price also had a
Slide 13: Platinum Demand: Industrial
Platinum Demand: Industrial 1.685 1.155 • Industrial demand falls by 31.5 % to 1.155 million oz • Impact of economic slowdown relatively limited in 2008 but felt in 2009 • Cyclical slowdown in many sectors • Weak demand for end products • Substantial destocking in early 2009 www.platinum.matthey.com
Slide 14: Platinum Demand: Glass
Platinum Demand: Glass 1.685 1.155 • Fibreglass expansion slows with lower Chinese exports • LCD plant construction enters cyclical downturn • Closure of CRT glass plants in China returns metal to the market www.platinum.matthey.com The largest contributor to the fall in industrial demand has been w
Slide 15: Platinum Demand: Jewellery
Platinum Demand: Jewellery • Net demand for platinum to rise 1.365 2.450 by 79.5% to 2.45 million oz • European and North American demand to decrease •Fall in recycling to drive Japanese demand from 55,000 oz to 310,000 oz • Chinese demand forecast to rise to record level of 1.75 million oz www.plat
Slide 16: Platinum Demand: China Jewellery
Platinum Demand: China Jewellery RMB/g 2008 2009 www.platinum.matthey.com This stellar performance by the Chinese jewellery market has been composed of two distinct parts: consumer purchasing and restocking. Firstly, we have seen very strong consumer purchasing as the platinum price fell. The higher
Slide 17: Platinum Demand: China Jewellery
Platinum Demand: China Jewellery www.platinum.matthey.com 2008 2009 And the effects of this can be seen in this graph which shows monthly purchases by the platinum jewellery industry in China. You can see when the prices fell at the end of last year, we saw very strong purchasing to replenish stocks
Slide 18: Platinum Demand: Investment
Platinum Demand: Investment • Physical platinum investment demand likely to rise by 75,000 oz to 630,000 oz • Net Japanese investment decreases as economic worries diminish • ETF purchasing rekindled following redemptions of metal in H2 2008 www.platinum.matthey.com And, finally on the demand side,
Slide 19: Platinum Outlook
Platinum Outlook • Autocatalyst demand still weak but expected to recover somewhat in 2010 • Diesel market share to rebound in Europe • Industrial destocking essentially complete • Jewellery demand likely to soften as restocking and stock building in China slow • US ETF could boost physical investme
Slide 20: Forecast Platinum Price for the Next 6 Months
Forecast Platinum Price for the Next 6 Months www.platinum.matthey.com These positive fundamentals might be expected to support the platinum price. However, with much of the price rise from September 2008 to September 2009 having been driven by a weak US Dollar, a strong gold price and by growing in
Slide 21: Forecast Platinum Price for the Next 6 Months
Forecast Platinum Price for the Next 6 Months $1280 – $1,550 www.platinum.matthey.com The prospects for the dollar are somewhat unclear but it currently seems that, despite very large long positions in the gold market, the price of that metal should gain support either from the threat of inflation o
Slide 22: Palladium
Palladium Moving on to palladium 22
Slide 23: Palladium: Key features
Palladium: Key features • Palladium to be in surplus by 655,000 oz in 2009 • Total supplies set to fall by 1.8 per cent to 7.18 million oz including forecast Russian stock sales of 960,000 oz • Demand set to decline by 3.8 per cent to 6.52 million oz • Autocatalyst demand robust in Europe and China
Slide 24: Palladium Supply and Demand
Palladium Supply and Demand ’000 oz 2008 2009 % Supply 7,310 7,175 (1.8) Demand 6,775 6,520 (3.8) Movements in stocks 535 655 www.platinum.matthey.com And, in numerical terms, this equates to a fall in supplies of 135,000 oz or 1.8 per cent to 7.175 million ounces. And a decrease of 255,000 oz or 3.
Slide 25: Palladium Supply to Fall by 1.8%
Palladium Supply to Fall by 1.8% • Supply to shrink by 135,000 oz 7.310 7.175 • South African supply to rise by 100,000 oz to 2.53 million oz • North American supplies set to drop to750,000 oz • Russian production expected to fall to 2.60 million oz • Sales of Russian state stocks expected to be 960
Slide 26: Russian Palladium Supply
Russian Palladium Supply • Russian primary production 3.660 3.560 expected to fall due to lower grades at Norilsk • Little evidence of further shipments of Russian state stocks • We expect sales of 960,000 oz from state stocks previously shipped www.platinum.matthey.com Looking at Russia a little mo
Slide 27: Palladium Demand to Fall by 3.8%
Palladium Demand to Fall by 3.8% • Global demand to drop by 6.775 6.520 255,000 oz to 6.52 million oz • Autocatalyst demand to fall in every region except China • Jewellery demand to rise in each region • Industrial demand depressed by economic slowdown • Investment demand to rise by half due to wea
Slide 28: Palladium Demand: Autocatalyst
Palladium Demand: Autocatalyst Figures courtesy of IHS Global Insight www.platinum.matthey.com And looking at this chart of automotive production once again, you can see why gross autocatalyst demand has fallen. The number of vehicles manufactured in each of Japan, North America and the Rest of the
Slide 29: Pgm choice in European Autocatalysts
Pgm choice in European Autocatalysts Gasoline Diesel % % www.platinum.matthey.com Palladium has a dominant position as the metal of choice in the gasoline sector and, although European vehicle sales have decreased, the light duty gasoline sector has done well. Consumers have bought small gasoline-fu
Slide 30: Palladium Demand: Autocatalyst
Palladium Demand: Autocatalyst • Palladium autocatalyst 4.460 3.895 demand to fall by 565,000 oz to 3.895 million ounces • North American demand to fall by a further 355,000 oz • Japanese demand to shrink by 205,000 oz • Chinese demand to show strong growth to 520,000 oz • European demand robust www
Slide 31: Palladium Demand: Autocatalyst Recycling
Palladium Demand: Autocatalyst Recycling 1.115 0.950 • Palladium recovery from spent autocatalysts to decrease to 950,000 oz • Lower metal prices and slow vehicle sales hit recycling volumes • Scrappage schemes benefit palladium recycling in Europe www.platinum.matthey.com The picture for the recove
Slide 32: Palladium Demand: Industrial and Dental
Palladium Demand: Industrial and Dental • Global dental demand to 2.155 2.020 decline by 20,000 oz to 605,000 oz • Electronics demand to drop to 1.0 million ounces • Chemical demand to fall by 10,000 oz to 345,000 oz on destocking and cyclical slowdown www.platinum.matthey.com There have been few un
Slide 33: Palladium Demand: Jewellery
Palladium Demand: Jewellery 0.855 0.920 • Net demand to rise by 65,000 oz to 920,000 oz • Lower recycling of white gold and platinum jewellery in Japan to boost net palladium demand • Continued growth in demand seen in Europe and North America • Chinese demand to rise by 30,000 oz to 680,000 oz www.
Slide 34: Palladium Jewellery: Europe and North America
Palladium Jewellery: Europe and North America • Jewellery industry becoming more familiar with palladium as a material in both regions • Palladium benefits from economic slowdown in North America • Increased market share of men’s wedding bands • Hallmark introduced in UK to increase acceptance of pa
Slide 35: Palladium Jewellery: China
Palladium Jewellery: China • Net Chinese demand expected to rise by 30,000 oz to 680,000 oz • Some manufacturers abandon Pd for Pt but others capture market share • Sales firm where palladium is sold but availability remains patchy • Market appears to have reached a plateau where palladium is on sal
Slide 36: Palladium Demand: Investment
Palladium Demand: Investment • Physical palladium investment demand to grow by half to new record of 635,000 oz • ETF purchases to rise from 370,000 oz to 540,000 oz • Demand from coins and bars benefits from lack of availability of other precious metal products www.platinum.matthey.com The story fo
Slide 37: Palladium Outlook
Palladium Outlook • Palladium autocatalyst demand to strengthen in 2010 as some recovery is seen • Industrial demand set to rise slowly • Jewellery demand likely to show only organic growth • Primary production to rise modestly from 2009 levels • Further sales of Russian state stocks expected. Witho
Slide 38: Palladium: Market Balance
Palladium: Market Balance ‘000 oz www.platinum.matthey.com One particularly important issue is therefore the size and fate of Russian state stocks. This chart shows the market position over the last five years as it has been and as it would have been without any sales of this additional material. Th
Slide 39: Forecast Palladium Price for the Next 6 Months
Forecast Palladium Price for the Next 6 Months www.platinum.matthey.com At the end of September 2009, investors held very large net long positions in palladium. If these funds maintain their buying activities, the palladium price is likely to perform well and could rise as high as $390 over the next
Slide 40: Forecast Palladium Price for the Next 6 Months
Forecast Palladium Price for the Next 6 Months $290-$390 www.platinum.matthey.com . 40
Slide 41: Rhodium
Rhodium And finally, rhodium… 41
Slide 42: The Rhodium Market
The Rhodium Market ‘000 oz www.platinum.matthey.com And finally, we will take a very brief look at the rhodium market. The most obvious issue is the price which reached historic high levels of $10,100 in the first half of last year before plummeting in the second half of the year as automotive deman
Slide 43: Platinum 2009 Interim Review
Platinum 2009 Interim Review 17th November 2009 Good morning to everyone, and welcome to the presentation of the numbers and commentary from Johnson Matthey’s new Platinum 2009 Interim Review. This year, due to the very significant changes that we have seen in the markets, we will focus solely on pl
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