Johnson Matthey PLC · LSE:JMAT
Johnson Matthey — Investor Day (February 2011)
136 slides from Johnson Matthey's investor day presentation, Feb 2, 2011
Slide 1: Presentation to Analysts / Investors: Johnson Matthey Group Strategy
Presentation to Analysts / Investors Johnson Matthey Group Strategy 2nd February 2011
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 Mattheyy operates. p It is believed tha
Slide 3: Introduction and Key Strategic Opportunities
Introduction and Key Strategic Opportunities Neil Carson Chief Executive
Slide 4: JM Executive Board
JM Executive Board Neil Carson Robert MacLeod Chief Executive G Group Finance i Director i Larry Pentz Bill Sandford Executive Director Executive Director Environmental Technologies Precious Metal Products 4
Slide 5: Other Senior Management
Other Senior Management John Fowler Jack Frost Barryy Murrer Division Director Director Director Fine Chemicals Fuel Cells Technology Centre Nick Garner Geoff Otterman John Walker Group Director Division Director Division Director Corporate and Catalysts, y Chemicals Emission Control Strategic Devel
Slide 6: Programme
Programme 13.30 Introduction and Key Strategic Opportunities (Neil Carson) 00 Emissions 14.00 14 Legislation, Energy Security and a Low Carbon Economy (Larry Pentz, Jack Frost) Coffee break in this session 15.50 Global Drivers for Precious Metal Products (Bill Sandford) Coffee break after this sessi
Slide 7: Purpose of the Day
Purpose of the Day Present Highlight Explain Detail the results of the the global drivers key growth how research will group’s ten year for the group opportunities be key in delivering strategic review over the h next f future growth h ten years 7
Slide 8: Evolution of the JM Group
Evolution of the JM Group Sales ex pms Growth in shareholder value from focus on environmental technologies… 2000/01 2009/10 12% 19% 22% 5% £977m £1,886m 45% 31% 66% Environmental Technologies Precious Metal Products Fine Chemicals Other 8
Slide 9: Johnson Matthey Today
Johnson Matthey Today ROIC £2.2bn* sales (ex pms), target >20% underlying PBT £332m* , 1,000 employees 9,000 working people in R&D 7.3% p.a. Global EPS growth in last operations ten years* No.1 or 2 in core segments *Based on Vara consensus estimates for 2010/11 of 17th December 2010 (EPS of 113.7p)
Slide 10: JM Attributes
JM Attributes • Common features of a successful JM business Environmental Significant g barriers focus, • Provides focus for future investment to entry regulatory driven Focus on core • Not N t the th sole l ddeterminant t i t off a good d JM business b i Leading industry chemistry, positions with h
Slide 11: JM's Key Strengths
JM’s Key Strengths Expertise in the fundamental Deep involvement in and Ability to maximise synergies science that underpins our understanding of pgms • E.g. complementary offering of DPT technologies • Expertise spanning refining, pgm technologies and JM’s process chemistry, market dynamics catalys
Slide 12: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry* Population Environmental Growth Natural Factors Health & Nutrition Resource Urbanisation Ageing Population Cli Climate Ch Change Constraints Increasing Wealth Regulation Developing Developed Economies World * Based upon key megatrends identified by Gol
Slide 13: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry Emission Automotive control catalysts Obscuration Population Electronics enamels Growth Urbanisation Construction Pgms Increasing Wealth Petrochemical Bulk catalysts and chemicals processes 13
Slide 14: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry APIs Medical Pharma‐ componentst ceuticals Health & Nutrition Ammonia synthesis and Ageing Population Agricultural nitric it i acid id chemicals catalysts Fine chemicals Pgm catalysts 14
Slide 15: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry Energy security Gas / coal to products technology Resource efficiency Natural Catalysts Resource Constraints Alternative energy Pgm refining Recycling 15
Slide 16: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry Emission Emission Purification control control products catalysts Environmental Factors Abatement Fuel cells Clean fuel technologies Climate Change Regulation Carbon Low carbon Hydrogen capture and catalysts storage 16
Slide 17: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry Pgm catalysts Emission Obscuration APIs Medical control Automotive Electronics enamels components catalysts Pharma‐ Agricultural Petrochemic Population ceuticals Chemicals Ammonia ‐al catalysts Bulk Growth synthesis and Fine Pgms Construction nitric aci
Slide 18: Our Strategy to Deliver Growth in Value
Our Strategy to Deliver Growth in Value Key Elements Unchanged Pt Continued core focus Maintain Strong position in Primary focus is on leading edge differentiation pgms remains an organic growth catalysis driven by: through technology intrinsic part of group • Ever improving air • Enhanced investmen
Slide 19: Our Strategy to Deliver Growth in Value
Our Strategy to Deliver Growth in Value Increased Emphasis on: Developing new JM attributes Manufacturing People and culture opportunities • Provides focus for excellence • Globalisation drives underpinned by our investment and • High technology, high integration of cultures core chemistry growing n
Slide 20: Our Strategy – Looking Forward
Our Strategy – Looking Forward For first fi five fi years: Looking ki further f h ahead: h d • Strength in core segments anticipated to deliver • Good opportunities in existing segments double digit growth in group sales (ex pms) • Step change in development of fuel cell market • Higher growth in ca
Slide 21: Our Strategy – Looking Forward
Our Strategy – Looking Forward Increase total R&D spend: Capital efficiency ff remains embedded: Existing businesses • ROIC target >20% • Up from £100m p.a. p a to £135m p.a. p a to • Net debt (incl. (incl pension) / EBITDA between 1.5 1 5 to extend technology advantage 2.0 times Targeting new oppor
Slide 22: Our Strategy – Sustainability and Manufacturing Excellence
Our Strategy – Sustainability and Manufacturing Excellence By 2017: Achieve a zero ‘greater than three day Achieve carbon neutrality accidents’ safety target accidents Implement ISO 14001 at all manufacturing Achieve zero waste to landfill sites by 2010 Halve key resources consumed per Reduce annual
Slide 23: Group well positioned for long term growth
Summary Strategy review i Major j global l b l trends d Key elements l off Further h focus f on emphasised provide strong strategy unchanged growth through R&D attributes and drivers for growth strengths t th off JM Group well positioned for long term growth 23
Slide 24: JME)
JME) Johnson Matthey
Slide 25: Emissions Legislation, Energy Security and a Low Carbon Economy
Emissions Legislation, Energy Security and a Low Carbon Economy Larry Pentz Executive Director, Environmental Technologies
Slide 26: Key Strategic Opportunities – Emissions, Energy and Low Carbon
Key Strategic Opportunities – Emissions, Energy and Low Carbon A convergence of trends supports an environmental strategy… Global Trends Resulting Focus • Growing population Emissions • Increasing wealth Regulations • Urbanisation • Global warming • Shifting energy sources • Respiratory health conce
Slide 27: Emissions Regulations
Emissions Regulations io) Johnson Matthey
Slide 28: Legislation Drives Growth
Legislation Drives Growth Emission • ~50% JM sales ex pms Emission Purification driven by legislation control control products catalysts Environmental • Tighter legislation still to come Factors Abatement Fuel cells Clean fuel technologies • Substantial growth over Climate Change next five years Reg
Slide 29: Light Duty Vehicle Production Continues to Grow, Shift to Asia
Light Duty Vehicle Production Continues to Grow, Shift to Asia million 120 105.7 100 95.8 92.3 88.5 82.4 80 76.4 73.0 59.4 60 55.8 49 1 49.1 45.6 47.2 39.1 42.3 40 36.7 29.0 23.0 25.0 21.3 22.5 19.1 19.5 20.1 20 16.5 16.3 16.8 4 9 15.6 14.9 56 11.8 12.3 13.7 8.6 0 2009 2010 2011 2012 2013 2014 2015
Slide 30: New and Tighter Regulations Across the World
New and Tighter Regulations Across the World Light Duty 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 EU Euro 4 Euro 5 Euro 6 Russia Euro 2 Euro 3 Euro 4 Euro 5 United States Tier II LEV III United States ‐ Cal. LEV II LEV III Brazil Euro 3 Euro 4 Japan Japan 2005 Japan 2009 South Korea Diesel E
Slide 31: Tighter Regulations Drive Increased Value
Tighter Regulations Drive Increased Value 250 • Lower pollution levels Gasoline Euro 3 200 • Particulate number legislation HC (mg/km) 150 Euro 4 • More stringent in‐use compliance 100 Euro 5/6 • More M d dynamic i ttestt cycle l proposed d 50 0 • Current and future standards for ROW 0 20 40 60 80 1
Slide 32: OEMs have Options to Achieve Regulations
OEMs have Options to Achieve Regulations • Number of catalysts (or volume) / vehicle will vary • Powertrain vs emission control cost trade off • Tighter regulations require improved catalyst technology • Lower L pgm loading l di requires i improved i d catalyst t l t technology t h l • Wide range of
Slide 33: Light Duty Diesel – A European Market
Light Duty Diesel – A European Market • Particulate matter is a major concern • Potential of markets outside Europe? • Tightening regulations add additional catalysts: Urea DOC DOC DPF DOC DPF SCR Euro 4: Euro 5: Euro 6: Oxidation catalyst (DOC) DOC plus diesel particulate filter (DPF) DOC + DPF plu
Slide 34: Additional Greenhouse Gas Regulations Provide Further Opportunities
Additional Greenhouse Gas Regulations Provide Further Opportunities • CO2 – a new pollutant Powertrain Additional Development Catalyst Value • A product of combustion • Cannot be catalytically transformed Smaller powered engines X • Can C b be reduced d db by: Hybrid • Consumer decisions – smaller p
Slide 35: Heavy Duty Diesel On Road Vehicle Market Will Grow
Heavy Duty Diesel OE Volumes Heavy Duty Vehicle On O Road R Will d Market MGrow k t But with Annual Volatility No. of Vehicles (>6t) million 4 3 2 1 0 2005 2010 2015 Western Europe USA Japan / Korea India / China / Brazil Rest of World Source: JD Power and IHS Automotive 35
Slide 36: Heavy Duty Diesel On Road Regulation Development
Heavy Duty Diesel On Road O R dR Regulation l ti D Development l t Tighter Regulations – New Countries, Additional Vehicles New Models All Models Europe Euro IV 01‐Oct‐05 01‐Oct‐06 Euro V 01‐Oct‐08 01‐Oct‐09 0.03 Euro VI 31‐Dec‐12 31‐Dec‐13 JP 05 United States 0.025 US 2007 01‐Jan‐07 W‐hr) US 2010 0
Slide 37: Increased Value with Tightening Regulations
Increased Value with Tightening Regulations • Engine management and emission control trade offs • Alternative choices but increasingg catalyst y value p per vehicle DOC SCR CRT®/CCRT® SCRT® US 04 Euro IV US 07 US 2010 Retrofit Euro V Tier 4A Euro VI Tier 4A Tier 4A 37
Slide 38: A $2.5bn Market by the end of 2015
A $2.5bn Market by the end of 2015 2,500 Non‐road, <56kW Non‐road, 56‐130kW Non‐road, 130‐560kW 2,000 Brazil Sales exx pms $ million India 1,500 China Russia Japan & Korea 1 000 1,000 Eastern Europe Western Europe North America 500 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: JD
Slide 39: Technology Investment to Keep Pace with Growth
Technology Investment to Keep Pace with Growth R&D dimensions: Investment in: • 5% sales ex pms • Applied research in materials • Eight R&D facilities • Catalyst formulation design • 50 test cells globally • OEM specific application development • 500 R&D people (11% of ECT) • Manufacturing technique
Slide 40: Emissions Regulations – Further Tightening to Come
Emissions Regulations – Further Tightening to Come \ Cars US LEV III EU 7 ROW Catch Up Trucks Next US HDD EU VII ROW Catch Up Non‐road Tier 4B Non‐road Stage V PM Number Other US Locomotive Tier 4 IMO Tier III Marine 2016 2017 2018 2019 2020 Discussions occurring, Focus on NOx and Secondary pollutan
Slide 41: Emissions Regulations – Opportunities for Process Technologies
Emissions Regulations – Opportunities for Process Technologies H2 O H2 O2 S Global tightening Methanol Alternative fuel Oil refining And for fuel cells – of sulphur levels in substitution in mandates discharge limits zero emission fuels transportation • Biofuels, natural e.g. SOx, NOx, Hg vehicle fu
Slide 42: Tightening Regulations Drives Hydrogen Market
Tightening Regulations Drives Hydrogen Market • Low sulphur fuel, heavier oil, diesel demand drive Share of Market Growth by Region h d hydrogen (72 7 billion (72.7 billi cubic bi meters) t ) • Hydrogen demand increases, particularly in Asia US 10.6% y g installed catalyst • Hydrogen y market of $ $
Slide 43: Emissions Regulations – Summary
Emissions Regulations – Summary • Legislation drives growth • Vehicle volumes expected to be up in both light and heavy duty vehicles • Fuel efficiency requirements offer new opportunities • Tighter Ti ht legislation l i l ti provides id added dd d value l for f JM • Substantial growth over next fiv
Slide 44: Energy Security
Energy Security eo) Johnson Matthey
Slide 45: Opportunities in Energy Drive Growth
Opportunities in Energy Drive Growth Energy security Gas / coal to products • ~10% JM sales driven by technology natural resource utilisation Resource Natural efficiency • Energy security concerns Catalysts result in increased interest Resource in coal / gas to products Constraints Alternative energ
Slide 46: More Value from Coal
More Value from Coal • Coal is an abundant and key strategic resource Proved Reserves at end 2009 (Th (Thousand d million illi tonnes) t ) • Primarily used to produce electricity and for (anthracite and bituminous coal shown in brackets) industrial consumption gy consumption • Energy p ggrowingg in
Slide 47: Increase in Useable Natural Gas Reserves
Increase in Useable Natural Gas Reserves • Rapid deployment of new drilling technique • Projected shale gas will supply 40% of US gas by 2020 • Shale formations found around the world • Improved natural gas transport infrastructure • Gas pricing decoupled from oil • Growth ppotential as a feedstock
Slide 48: Coal, Gas and Biomass to Products
Coal, Gas and Biomass to Products T Transportation i fuel f l Hydrogen Steam Water Gas Traditional markets (refineries) Reforming Shift Traditional markets (formaldehyde etc.) Methanol Gasoline blending Olefins Ammonia Propylene py Gasifier Sour Shift DME Fischer‐ Tropsch Diesel Substitute Pipeline
Slide 49: Alternative to Oil Based Feedstocks
Alternative to Oil Based Feedstocks • Substitute for transportation fuels • Alternative routes to petrochemical products • Trade off between financial cost and reduced imports • Development and growth of process technology and catalysts 49
Slide 50: Methanol Demand Remains Significant in China
Methanol Demand Remains Significant in China • Shift towards energy ‘000 tonnes Demand for Methanol 40,000 2005 – 2015E • Fuel blending – M5, M15, M85, M100 35,000 • Methanol to Olefins now proven (Shenhua) 30,000 • Global Gl b l methanol th l installed i t ll d catalyst t l t market k t off 25 000
Slide 51: Coal to Substitute Natural Gas (SNG)
Coal to Substitute Natural Gas (SNG) • China is short of natural gas • SNG can utilise natural gas pipeline infrastructure • Potential outside of China – US, Korea • Initial licensing and catalyst sales • Catalyst replacement beyond • JM awarded four projects to date (three in 2010/11) 51
Slide 52: Energy Security Drives Growth for Process Technologies
Energy Security Drives Growth for Process Technologies • Coal to substitute natural gas (SNG) • Coal to methanol • Coal / gas to liquids and compact GTL • Increased I d gas processing i and d purification ifi ti • Biomass conversion • Double digit growth over next five years Photo courtesy of Shenhu
Slide 53: Low Carbon Economy
Low Carbon Economy eo) Johnson Matthey
Slide 54: New Opportunities from a Low Carbon Economy
New Opportunities from a Low Carbon Economy Emission • Developing markets – some Emission Purification early commercialisation control control products catalysts • Technologies play to JM’s Environmental strengths Factors Abatement Fuel cells Clean fuel technologies • Potentially large markets Clima
Slide 55: Low Carbon Economy
Low Carbon Economy JM has a range of core technologies which will develop over the next five years… CCS C EEnergy and d resource Carbon C b capture and d Greenhouse G h gas Renewable R bl andd low l efficiency storage abatement carbon energy • Advanced gas heated • Syngas technology for • New market
Slide 56: The Low Carbon Economy – Fuel Cells
The Low Carbon Economy – Fuel Cells Jack Frost Director, Fuel Cells
Slide 57: Fuel Cells
Fuel Cells H2 O H2 O2 Fuel cells JM and fuel cells Fuel cells and cars • A clean efficient electricity • Targeted the key catalytic • Electric cars set to grow in generation technology components of the fuel cell – importance driven by: the membrane electrode • Central to the development of • Zero e
Slide 58: The Nature of Electric Cars
The Nature of Electric Cars H2 Electric cars Batteries are an Consensus1 that electric Hydrogen supply • Quiet, very efficient and important technology vehicle fleet will be a infrastructure non‐polluting at the for electric cars but… combination of… • Cheaper than a battery point of use • Limited r
Slide 59: Power Train Costs Converge Rapidly
Power Train Costs Converge Rapidly Total Cost of Ownership – excluding tax EUR/km 1 C/D SEGMENT FCEV 0.8 BEV PHEV ICE 0.6 0.4 0.2 0 2010 2015 2020 2025 2030 Ranges based on data variance and sensitivities (fossil fuel prices varied by +/‐ 50%; learning rates varied by +/‐ 50%) Source: McKinsey 59
Slide 60: Fuel Cells for Larger Cars and Longer Journeys
Fuel Cells for Larger Cars and Longer Journeys Lowest Cost CO2 Abatement Solution in 2050 Battery electric vehicle <10 Increasing annual driving 10 ‐ 20 distance (1,000km) >20 Fuel cell electric vehicle A/B C/D J Increasing car size Source: McKinsey 60
Slide 61: Fuel Cell Costs – McKinsey 2010
Fuel Cell Costs – McKinsey 2010 Fuel cell stack cost EUR per fuel system EUR/kW C/D segment 800 781 81,362 ~90% MEA (excl. catalyst, 14,274 incl GDLs) incl. 600 Catalyst (incl. 6,296 platinum) 500 Structure 22,228 400 252 18,892 200 Periphery 38 565 38,565 2,970 7 475 7,475 110 98 3,194 -42% 221 3,2
Slide 62: Size of Merchant MEA Car Market
Size of Merchant MEA Car Market Value of Car MEA Market (ex pms) 25 20 ns Euro billion 15 10 Cumulative 5 1m FCEV 2020 0 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 Year Source: McKinsey 62
Slide 63: What is JM doing about this Opportunity?
What is JM doing about this Opportunity? • Fuel cell technology investment • Provides revenue and learning by doing • Catalysis l technology h l is critical • In the h next decade many off these h • Participation in early fuel cell markets markets are as large as cars 63
Slide 64: Today's Markets – Stationary CHP
Today’s Markets – Stationary CHP • Hydrogen generated in‐situ using a range of fuels: natural gas, renewable gas etc. • Enables clean, quiet, pollution free power generation on a scale from 1kW to MWs • Large units for combined heat and power for hospitals hospitals, hotels and banks. Commercial sal
Slide 65: Markets – Direct Methanol (DMFC)
Markets – Direct Methanol (DMFC) Readily available fuel, especially at small scale enabling commercial portable devices now Leisure Military Electronics • Recreational vehicles, leisure craft, • Infantry men, unmanned craft • Near term – stand alone chargers remote t cabins bi offering ff i mainsi a
Slide 66: The Fuel Cell MEA business in 2020
The Fuel Cell MEA business in 2020 £ million 1,800 MEA market size >£1 billion 1,600 excluding pgm 1,400 1,200 Cars are important… important but so are other 1,000 markets 800 600 All markets k t growing i rapidly idl supported by global trends and 400 advancing technology 200 0 2018 2019 2020 2021
Slide 67: JME
JME Johnson Matthey
Slide 68: Key Strategic Opportunities – Emissions, Energy and Low Carbon
Key Strategic Opportunities – Emissions, Energy and Low Carbon • Emissions regulations – a growing global vehicle market with tightening regulations • Energy security – strong interest to get more value Emissions Regulations from coal and natural gas • Low L carbon b – desire d i to stablise bli CO2
Slide 69: JME)
JME) Johnson Matthey
Slide 70: Global Drivers for Precious Metal Products
Global Drivers for Precious Metal Products Bill Sandford Executive Director, Precious Metal Products
Slide 71: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry Pgm catalysts Emission Obscuration APIs Medical control enamels Automotive Electronics components catalysts Pharma‐ Agricultural Petrochemic Population ceuticals Chemicals Ammonia ‐al catalysts Bulk Growth synthesis and Fine Pgms Construction and chemic
Slide 72: Sales Excluding Precious Metals
Sales Excluding Precious Metals Manufacturing Precious Metal Services 2009/10 • Noble Metals • Pgm trading and marketing • Colour Technologies 35% • Precious metal • Catalysts and refining Chemicals £420m 65% Manufacturing Services 72
Slide 73: Our Manufacturing Businesses
Our Manufacturing Businesses Account for 65% or ~£270m of division’s sales ex pms • A wide range of products / applications • 19 manufacturing sites worldwide • Investing in manufacturing excellence / product innovation • All businesses have good ROIC • Some mature products with limited growth poten
Slide 74: Global Drivers – Manufacturing Businesses
Global Drivers Manufacturing Businesses Global Drivers End Uses Automotive Ageing g g Population p Climate Change Nutrition Nutrition Growing Wealth Healthcare 74
Slide 75: Automotive
Automotive Products End Uses Sales by Product Group 8% • Glass obscuration enamels • Auto glass protection • Conductive tracks • Heated rear glass • Pgm alloys • Spark plug tips 33% £85m 53% • Pgm wire / powder • Engine sensors • Pgm salts • Autocatalysts 6% Enamels and Conductive Tracks • Base meta
Slide 76: Automotive Accounts for £85m (31%) sales ex pms
Automotive Accounts for £85m ((31%)) sales ex p pms Pgm salts P lt sold ld to t All other th products d t Asia A i bi biggestt growth th CAGR 10% sales l ex internal (ECT) and sold to external area pms external customers customers 76
Slide 77: Nutrition Accounts for £30m (11%) sales ex pms
Nutrition Products End Uses Sales by Product Group • Pgm catalysts • Fertilisers • Base metal catalysts • N2O abatement 43% • Nickel catalysts • Edible oils / sweetners £30m • Pgm scavenger • Food spoilage inhibitor 57% Accounts for £30m (11%) sales ex pms Fertilisers Catalysts / Scavengers >10% CAG
Slide 78: Nutrition
Nutrition Fertiliser use driven by population growth • Growingg wealth drives meat consumption • Fertiliser demand expected to grow g y in Asia strongly • By‐product N2O, powerful GHG (310 times CO2) • Strong growth for N2O abatement but depends on Kyoto replacement, cap and trade etc. Johnson Matth
Slide 79: Nutrition – e+TM Ethylene Scavenger
Nutrition e+TM Ethylene Scavenger • Recentlyy developed p in collaboration with Anglo g Platinum • Huge amount of fruit destroyed due to over ripening • Climacteric fruit emit ethylene on ripening • e+TM postpones ripening process 79
Slide 80: Health and Personal Care Accounts for £65m (24%) sales ex pms
Health and Personal Care Products End Uses Sales by Product Group • Pt alloys • Medical device components 19% • Pgm catalysts • Eyecare 46% • Pharma APIs £65m • Base metal catalysts • Personal care items 35% Pt Alloys Accounts for £65m (24%) sales ex pms Pgm Catalysts B Base M Metal t lCCatalysts t
Slide 81: Health and Personal Care
Health and Personal Care Demand for medical products driven by growing population… • …and also ageing population in wealthy countries • Largest market for medical devices is USA • Other markets growing quickly • Demand for APIs largely in West • Demand and manufacturing moving East • CAGR 9% sales e
Slide 82: Precious Metal Services
Precious Metal Services Accounts for 35% or Provides service to Volume growth will Profitability £150m of division’s Johnson Matthey (largely) reflect influenced by pgm sales ex pms group and its growth in market / prices • Pgm trading and customers t J h Johnson M Matthey tth marketing • 65% of gro
Slide 83: Global Drivers – Precious Metal Services
Global Drivers Precious Metal Services Global Drivers Growing Need for Pgms and Refining Jewellery and industrial uses of pgms Population Growth Emission control Growing Wealth Environmental Factors Fuel cells and low carbon technologies Natural Resource Constraints Refining 83
Slide 84: Gross Pgm Demand
Gross Pgm Demand 1996 ‐ 2010 ‘000 oz 20,000 , 18,000 Auto largest sector (51%) 16,000 14,000 Future growth driven by: 12,000 • Population growth 10,000 • Wealth growth 8,000 Heavy • Environmental factors 6,000 D t Duty Off Road • Engine exhaust catalysis Diesel 4,000 • Fuel cells 2,000 0 1996 1997 1
Slide 85: Engine Catalysis
Engine Catalysis 97% catalysed 33% y catalysed 9% catalysed Heavy Non‐road Duty Diesel Light Duty Cars Total Number of Engines 75m 3.5m 2.2m 85
Slide 86: Pgm Trading and Marketing – Platinum Demand in Fuel Cells
Pgm Trading and Marketing Platinum Demand in Fuel Cells 2001 ‐ 2010 Pt ozs ‘000 20 18 16 14 12 10 Non‐auto 8 Auto 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Early signs of market Fuel cell loadings* significantly Pt demand sensitive to fuel traction higher than ICE (4‐5g): cell car pe
Slide 87: Pgm Trading and Marketing – Platinum Supply-Demand
Pgm Trading and Marketing Platinum Supply‐Demand Pt ozs ‘000 7 000 7,000 6,000 RSA main producer 5,000 Significant reserves 4,000 RSA mines having to deal with: 3,000 • Higher capex • Rising operating costs 2,000 • New mining legislation 1,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 88: Pgm Trading and Marketing – Palladium Supply-Demand
Pgm Trading and Marketing Palladium Supply‐Demand Pd ozs ‘000 10 000 10,000 9,000 8,000 Russia is largest producer 7,000 6,000 90% of world production is 5,000 by‐product 4,000 3,000 Supplies supplemented by Russian 2,000 1,000 stock sales… close to exhaustion? 0‐ 2000 2001 2002 2003 2004 2005 2006
Slide 89: Pgm Refining
Pgm Refining “High grade” refineries in UK and USA Other O h • Two key sectors 8% • JM product customers Primary 25% • Autocat recycling JM Product • Profitability strongly influenced by pgm price Customers movements 32% Autocat Scrap 35% Outputs: Pt 45t p.a. Pd 50t p.a. 89
Slide 90: Conclusions
Conclusions Manufactured f d Products d Precious i Metall Services S i • Key products with strong drivers • Global drivers support growing demand for pgms • Double digit growth in sales • Volume growth to reflect Johnson Matthey sales / total market • Some mature products with limited growth potenti
Slide 91: JME)
JME) Johnson Matthey
Slide 92: Global Drivers for Fine Chemicals
Global Drivers for Fine Chemicals John Fowler Division Director, Fine Chemicals
Slide 93: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry APIs Medical Pharma‐ componentst ceuticals Health & Nutrition Ammonia synthesis and Ageing Population Agricultural nitric it i acid id chemicals catalysts Fine chemicals Pgm catalysts 93
Slide 94: Global Trends Driving Fine Chemicals' Strategy
Global Trends Driving Fine Chemicals’ Strategy Global Trends Resulting In • Ageing population • Generics will continue to grow double digit over the next ten years • Longer life expectancies • Emerging markets will see strong growth in • Economic development (BRIC) pharmaceuticals • Expanded access
Slide 95: Key Business Strengths in Fine Chemicals
Key Business Strengths in Fine Chemicals Advantage through Investment in R&D Leading market share in Highly regulated broad skills in and technology key therapeutic areas markets with significant chemistry • Critical mass in API • Pain therapy barriers to entry development through • Attention Defici
Slide 96: The Global Pharma Market
The Global Pharma Market Market $800bn $530bn $30bn Pharmaceuticals Small Molecule Small Molecule Pharmaceuticals API Source: IMS, Datamonitor, Business Insights, Pollak, Kalorama, LCM M&I 96
Slide 97: Strategic Focus – Niche APIs
Strategic Focus – Niche APIs Currently compete in circa 10% of global small molecule API market Delivering API sales growth of 9% p.a. over the last five years vs global pharma market growth of 6% JM API Sales byy Market 2010/11 / ((e)) JM API Sales byy Region g 2010/11 / (e) ( ) 16% 3% 3% 2% 1% ~$3
Slide 98: Strategic Focus – Global Pain Therapy
Strategic Focus – Global Pain Therapy Significant barriers to entry Opiates Consumption 2008 by Region • Highly Hi hl regulated l t d markets k t Percentages in parentheses refer to share of global population • Tight control over import / export of narcotics ROW North America 19% (43%) ( ) 3 % (5%)
Slide 99: Global API Market Share by Volume – Opiates
Global API Market Share by Volume – Opiates Alcaliber l lb Rhodes 1% 12% Covidien 18% Weifa‐Norway 3% Chattem JM Regional Market Shares 1% USA 5% Others 4% T fi Top five EU 34% Johnson Matthey 25% Rest of EU 41% Latin America 16% Noramco ROW 4% 18% HSK 1% FCC Siegfried 2% Francopia 2% 13% Source: NR
Slide 100: Strategic Focus – Generics
Strategic Focus – Generics • Leadership in terms of volume Total Prescriptions Dispensed (USA) and growth % 100% • Government healthcare reforms 90% 80% 46 50 • Insurance bias towards generic usage 70% 54 58 Marrket Share 63 66 69 60% 75 80 • Current market forecast to ggrow in 50% 11 10 excess of 1
Slide 101: Strategic Focus – Emerging Markets
Strategic Focus – Emerging Markets • Current CAGR of 15% is forecast to continue Global Sales’ Trends at similar rates through to 2014 1,000 20.0 • Economic development will drive use of 900 18.0 pharmaceuticals 800 16.0 Growth rate at const $ (linees) 700 14.0 Sales US $bn (bars) • Pain therapy is
Slide 102: China – Significantly Underserved Narcotics Pain Market
China – Significantly Underserved Narcotics Pain Market • Only 22 narcotic drugs available in China Illustrative Morphine Per Capita Consumption Between vs 123 in the West China and Other Countries (grams / million population) • Narcotic consumption has more than 70,000 66,000 tripled over the last
Slide 103: Growth Opportunities
Growth Opportunities Global market share of Economic development Continued generic opiate APIs will drive pharma growth underpins new • Ageing population will drive growth in emerging API product pipeline steady growth in established markets • Several first to file generic markets • Established E t
Slide 104: Conclusions
Conclusions Drivers i and d strategy in i place l to d deliver li f future Critical C i i l mass iin R&D & through h h our Pharma h growth Services business to support new products Cost effective manufacturing and capacity in Key business strengths aligned with core place to meet future demand p JM
Slide 105: JME)
JME) Johnson Matthey
Slide 106: Further Growth – R&D Focus
Further Growth – R&D Focus Robert MacLeod Group Finance Director
Slide 107: Role of M&A
Role of M&A M&A remains an Will constantly review Focus is on organic element of our strategy and refine existing growth • Bolt‐on acquisitions portfolio as necessary • Scarcity of large acquisition likely – <£100m candidates • Leading d marketk shares h l limit our opportunities • M&A will be used
Slide 108: Balance Sheet Structure
Balance Sheet Structure • Target net debt (inc. post tax pension deficit) / EBITDA: 1.5 to 2.0 times • Large working capital swings possible • As business grows, requires substantial working capital • In good times, high working capital exacerbated by higher pgm prices • Requires relatively conserva
Slide 109: Further Growth – R&D Driven
Further Growth – R&D Driven • Organic growth prospects in existing businesses are very good • Strategy process has reconfirmed that R&D is a key component of our strategy evidenced by: • ECT market shares • Apico • Identified opportunity to further leverage group’s R&D expertise • Increasing focus u
Slide 110: Research and Development
Research and Development Barry Murrer Director, Technology Centre
Slide 111: Overview
Overview Research gives options for A key competence is our Key abilities strengthened f t future growth th ability bilit to t arrange, control t l b acquisitions by i iti and anchor metals on a • E.g. Synetix on base metals nanometre scale • Intercat for refineries • Arises from our catalysis techn
Slide 112: Key Competence – Controlling Materials on a Nanometre Scale
Key Competence Controlling Materials on a Nanometre Scale A typical heterogeneous Control of particle size Control of particle shape catalyst Pd/C 2 nm Pd particles ti l 2 nm 50 nm Small anchored particles, Control of particle size, tunes New shapes can take us highly dispersed, very active, activit
Slide 113: Markets from Nanoscale Materials Chemistry
Markets from Nanoscale Materials Chemistry Catalysts broad,, existingg JM business Sensors Photovoltaics JM competence Displays Thermoelectrics Printed Batteries Electronics Core competence allows us to grow in existing business but to develop new opportunities 113
Slide 114: Modelling and Synthesis
Modelling and Synthesis Expertise in modelling and synthesis helps us develop materials with better performance Developing models for core Synthesis of Au/Pd and Pd/Au Alternating layers of Pt/Co shell nanoparticle activity core shell particles 2 nm 2 nm 2 nm 114
Slide 115: Research Projects Nearing Commercialisation
Research Projects Nearing Commercialisation Biomass to Bi t ffuell and d SSyngas and d Fischer‐ Fi h Advanced Ad d fuel f l cellll chemicals Tropsch (FT) catalysts catalysis – enabling technology for clean and secure fuels 115
Slide 116: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry Pgm catalysts Emission Obscuration APIs Medical control enamels Automotive Electronics components catalysts Pharma‐ Agricultural Petrochemic Population ceuticals Chemicals Ammonia ‐al catalysts Bulk Growth synthesis and Fine Pgms Construction and chemic
Slide 117: Biomass to Fuels
Biomass to Fuels Feedstocks for Next Generation Biofuels Waste Cellulose Pyrolysis Oil Algae • E.g. wood processing, • Versatile option for biomass • High yield, non‐food energy agricultural residues processing source JM Opportunity Syngas purification f and d Purification f Triglyceride l d convers
Slide 118: Algae to Fuels
Algae to Fuels Conversion of Triglycerides Further develops JM technology developed in US Department of Energy Advanced Research DARPA project Projects Agency (ARPA‐E) funding awarded • Multifunctional catalysts developed for conversion of • Microbial conversion of hydrogen and carbon dioxide methyl
Slide 119: Syngas and FT Catalysis
Syngas and FT Catalysis Clean and Cl d Secure S Purification + FT Catalysis C t l i Catalysts + Process Fuels Technology + Diagnostics + Services Chemicals Fuels 119
Slide 120: Syngas and FT Catalysis – Large or Small Scale?
Syngas and FT Catalysis Large or Small Scale? Opportunities are emerging New process technologies JM optimises the catalyst across all scales => new catalyst solutions form to suit the application • Market drivers are complex • Advanced reforming / and geographical, but real combustion products for
Slide 121: FT Catalysis Timelines
FT Catalysis Timelines DPT acquisition brings JMTC restarts FT reactor design and catalyst research process technology 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Synetix acquisition brings Projects with customers ‐ FT base metal expertise in FT catalysts for variety of scales,
Slide 122: Gas to Liquids (GTL)
Gas to Liquids (GTL) Fischer‐Tropsch Catalyst R&D Franz Fischer at work in 1918 Micro reactors used to simulate large scale FT operating conditions • High throughput catalyst screening with fully integrated analysis 122
Slide 123: FT Catalyst Progress
FT Catalyst Progress FT Conditions: P = 20 bar, H2/CO = 2, Temperature = 210C 100.0 Excellent selectivity Good activity and selectivity 90.0 + Selectivity 80.0 %C5+ 70.0 60.0 50.0 0 0.5 1 1.5 2 2.5 3 3.5 4 Relative Activity (to Internal Standard) 123
Slide 124: Advanced Fuel Cell Catalysts
Advanced Fuel Cell Catalysts Catalyst Layer and Catalyst Structure 124
Slide 125: Cost-Down and Market Evolution for DMFC Products
Cost‐Down and Market Evolution for DMFC Products In Product 10 9 Development Next? 8 • Bicycles 7 • Scooters wer per Cost High 6 More current 5 durable Improved p catalyst MEA • Micro‐CHP 4 Pow catalyst 3 Metal • Laptops 2 thrifting 2005 • Tablet PCs 1 0 Time Leisure Fork lifts Chargers Military Han
Slide 126: JME)
JME) Johnson Matthey
Slide 127: Conclusions
Conclusions Many opportunities i i ini adjacent dj markets k JM attributes ib provide id focus f f R&D for & effort ff Increase emphasis on commercialisation New structure in place and investment budgeted g New business in ten years, years sales target circa £200m p.a. 127
Slide 128: JME)
JME) Johnson Matthey
Slide 129: Summary and Conclusions
Summary and Conclusions Neil Carson Chief Executive
Slide 130: Global Drivers Impacting the Chemical Industry
Global Drivers Impacting the Chemical Industry Pgm catalysts Emission Obscuration APIs Medical control Automotive Electronics enamels components catalysts Pharma‐ Agricultural Petrochemic Population ceuticals Chemicals Ammonia ‐al catalysts Bulk Growth synthesis and Fine Pgms Construction nitric aci
Slide 131: Our Strategy in Summary
Our Strategy in Summary Key elements unchanged: Increased emphasis on: Continued focus on leading edge Developing new opportunities underpinned catalysis by core chemistry Maintain differentiation through JM attributes provide focus for investment technology Strong position in pgms remains an Manufa
Slide 132: Conclusions
Conclusions We believe that the strategy is right Group well positioned for growth in next Group well positioned for future growth in five years five years + • Strongg positions p in core markets • Global drivers show ggood fit for JM technology gy • Group anticipated to grow at double digit rates •
Slide 133: JME)
JME) Johnson Matthey
Slide 134: Glossary
Glossary ADHD Attention deficit and hyperactivity disorder CTL Coal to liquids API Active pharmaceutical ingredient DARPA Defense Advanced Research Projects Agency Apico Johnson Matthey’s new methanol synthesis DME Dimethyl ether catalyst DMFC Direct methanol fuel cell ARPA‐E Advanced Research Proje
Slide 135: Glossary
Glossary GTL Gas to liquids PBT Profit before tax H2 Hydrogen Pd Palladium HC Hydrocarbon Pgm Platinum group metal Hg Mercury PHEV Plug in hybrid electric vehicle IC Internal combustion PM Particulate matter ICE Internal combustion engine Pms Precious metals INCB International Narcotics Control Boar
Slide 136: JME)
JME) Johnson Matthey