Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — FY2014 Earnings Presentation
41 slides from Johnson Matthey's earnings presentation, Jun 5, 2014
Slide 1: Presentation of Results for the year ended 31st March 2014
Presentation of Results for the year ended 31st March 2014 5th June 2014 Scan to download our IR app Follow us on Twitter: or visit www.matthey.com/app @johnson_matthey
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 UME Johnson Matthey
Slide 4: Key Messages
Key Messages JM performed well in 2013/14 – sales up 11%; underlying EPS 16% ahead Growth across all five divisions; very strong year for ECT Investment in R&D (up 12%) and manufacturing capacity (1.7x depn) 2014/15 expected to be broadly in line with last year – business growth offset by adverse ef
Slide 5: Financial Review
Financial Review Robert MacLeod
Slide 6: Underlying Results
Underlying Results Year to 31st March 2014 2013 £m £m % change Revenue 11,155 10,729 +4% Sales excluding precious metals 2,981 2,676 +11% Operating profit 468.9 416.1 +13% Interest and share of JV profit (41.6) (33.2) ‐25% Profit before tax 427.3 382.9 +12% Tax (82.7) (80.1) Profit after tax 344.6 3
Slide 7: Underlying Operating Profit
Underlying Operating Profit Fine New Total Year to 31st March 2014 ECT PT PMP Chemicals Businesses Corporate group £m £m £m £m £m £m £m Operating profit 203.6 101.9 130.9 84.1 (18.3) (33.3) 468.9 Including: Pension gain 3.5 1.0 3.5 2.1 0.1 0.6 10.8 Closure cost ‐ ‐ (8.2) ‐ ‐ ‐ (8.2) Operating profit
Slide 8: Cash Flow from Operations
Cash Flow from Operations Year to 31st March 2014 2013 £m £m Operating profit 448 382 Depreciation and amortisation 151 150 Tax paid (49) (61) Working capital / other (73) (74) Cash flow from operations 477 397 • Good performance on managing working capital, • Net debt £729m, down by £106m especiall
Slide 9: Cash Flow Conversion
Cash Flow Conversion Year to 31st March 2014 2013 £m £m Operating cash flow 477 397 Add back: Tax paid 49 61 Pension deficit contributions 27 27 Net capital expenditure (210) (183) 343 302 Add back movement in precious metal working capital 41 53 Cash flow (excluding precious metals) 384 355 Underly
Slide 10: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) 24% 20% 16% 12% Cost of capital 8% 2010 2011 2012 2013 2014 • ROIC increased to 20.8% • Committed to 20% long term target • Driven by good performance in ECT • PMP lower due to higher year end metal inventories 10
Slide 11: Capital Expenditure
Capital Expenditure • Capex £218.3m (2012/13 £191.3m) Divisional Capex New Businesses • Key projects: 4% Fine Chemicals • Extension of ECT’s UK and Macedonia 13% facilities ahead of new legislation Emission Control • Expansion of additives capacity in US Technologies 35% Precious Metal • Capex:depre
Slide 12: Pension Schemes
Pension Schemes Year to 31st March 2014 2013 £m £m UK: Scheme deficit 79 116 Assets in SPV (49) (50) 30 66 US Schemes 14 55 Others 23 23 67 144 • Deficits decreased substantially due to higher • Deficit funding cash contributions totalled £26.9m discount rates and ongoing de‐risking • Ongoing defici
Slide 13: Operating Review
Operating Review Neil Carson
Slide 14: Emission Control Technologies
Emission Control Technologies Year to 31st March % % at £m 2014 2013 change constant rates Sales (excluding precious metals) 1,645 1,461 +13 +14 Underlying operating profit 203.6 163.5 +25 +25 Return on sales 12.4% 11.2% Return on invested capital (ROIC) 21.0% 16.4% • Exceeded our expectations Sales
Slide 15: Emission Control Technologies
Emission Control Technologies Estimated Light Duty Vehicle Sales and Production Year to 31st March 2H 2H 2014 2013 % 2013/14 2012/13 % millions millions change millions millions change Sales 18.3 17.4 +5.2 8.9 8.5 +4.7 North America Production 16.2 15.4 +5.2 8.2 8.0 +2.5 Sales 17.7 17.8 ‐0.6 8.7 8.6
Slide 16: Emission Control Technologies: Light Duty Catalyst Sales
Emission Control Technologies Total sales JM’s Light Duty Catalyst Sales – 2012 ‐ 2014 £1,009m up 8% £ million 1200 £1,009m 1000 £969m £938m +8% 800 600 £588m £543m £571m +5% 400 £255m £180m £181m £183m £201m £214m 200 +19% +1% 0 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 North Amer
Slide 17: Light Duty Vehicle Production Outlook
Emission Control Technologies Light Duty Vehicle Production Outlook – 2012 ‐ 2020 (calendar years) million 120 CAGR 4.6% 112.7 (2012 – 2017) 102.1 100 96.9 95.0 87.6 84.4 81.5 80 CAGR 5.7% (2012 – 2017) 61.2 60 53.8 50.9 47.8 45.2 CAGR 3.0% 40.7 42.8 40 CAGR 3.6% (2012 – 2017) (2012 – 2017) 22.5 24.
Slide 18: Estimated HDD Truck Sales and Production
Emission Control Technologies Estimated HDD Truck Sales and Production Year to 31st March 2H 2H 2014 2013 % 2013/14 2012/13 % thousands thousands change thousands thousands change Sales 452.4 426.2 +6.1 227.6 202.9 +12.2 North America Production 468.4 438.1 +6.9 231.7 203.3 +14.0 Sales 299.0 263.1 +
Slide 19: Emission Control Technologies: Heavy Duty Diesel Sales
Emission Control Technologies Total sales JM’s Heavy Duty Diesel Sales – 2012 ‐ 2014 £573m up 20% £ million 600 £573m 500 £477m +20% £438m 400 £331m £355m £295m +7% 300 200 £173m £116m £118m +47% 100 £45m £27m £28m +61% 0 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 North America Euro
Slide 20: Emission Control Technologies: Looking Ahead
Emission Control Technologies Looking Ahead Light Duty Heavy Duty • European car market more positive • Developed markets: • Tightening legislation • Full year of Euro VI legislation in the EU • Euro 6b and Euro 6c • Continued roll out of non‐road legislation • Legislation and CO2 limits provide str
Slide 21: Process Technologies
Process Technologies Year to 31st March % % at £m 2014 2013 change constant rates Sales (excluding precious metals) 565 509 +11 +12 Underlying operating profit 101.9 92.4 +10 +11 Return on sales 18.0% 18.2% Return on invested capital (ROIC) 15.3% 15.9% Sales • Sales up 11% benefiting from • Contribu
Slide 22: Process Technologies: Chemicals Businesses
Process Technologies Chemicals Businesses Sales (£339m) Petrochemicals • Sales up 13% to £339m 32% Ammonia 13% Syngas • Syngas (up 50% to £166m) 49% Methanol • Good sales of formaldehyde catalysts and 19% technology (Formox) Formaldehyde • Demand for methanol catalysts up 14% • 3 new SNG licences in
Slide 23: Process Technologies: Oil and Gas Businesses
Process Technologies Oil and Gas Businesses • Sales grew 9% to £226m Sales (£226m) • Refineries (up 5% to £124m) • Additives demand good – new plant completed Diagnostic Services • Demand for hydrogen catalysts stimulated by 30% Hydrogen increased refining activity in US 26% Refineries • Gas process
Slide 24: Process Technologies: Looking Ahead
Process Technologies Looking Ahead Chemicals Oil and Gas • Progress expected in 2014/15 • Robust performance expected • Timing of orders / new projects uncertain • Stronger demand from North American refinery customers • Continued development of new technologies • Opportunities from increased use of
Slide 25: Precious Metal Products
Precious Metal Products Year to 31st March % % at £m 2014 2013 change constant rates Sales (excluding precious metals) 430 424 +1 +2 Underlying operating profit 130.9 124.4 +5 +5 Return on sales 30.5% 29.4% Return on invested capital (ROIC) 36.6% 44.3% • Sales in line with last year Sales • Performa
Slide 26: Precious Metal Products: Services Businesses
Precious Metal Products Services Businesses Precious Metals Management (PMM) Refining Businesses • Sales down 12% to £51m • Sales down 12% to £111m • Higher production volumes at Anglo in first nine months • Pgm Refining and Recycling (sales down 12%) more than offset by change in contracts from Q4
Slide 27: Precious Metal Products: Manufacturing Businesses
Precious Metal Products Manufacturing Businesses • Sales up 11% to £268m Sales (£268m) • Noble Metals (up 14% to £138m) Chemical Noble Metals – Products Industrial Products • Industrial products 17% higher at £95m 16% 36% • Small business transferred in from ECT – sales of £24m • Lower demand for ni
Slide 28: Precious Metal Products: Looking Ahead
Precious Metal Products Looking Ahead • ~£30m impact in 2014/15 from change in • Mixed outlook for Manufacturing businesses contracts with Anglo Platinum • Growth in medical business expected to • Pgm Refining and Recycling offset weaker industrial market • Currently benefiting from slightly higher
Slide 29: Fine Chemicals
Fine Chemicals Year to 31st March % % at £m 2014 2013 change constant rates Sales (excluding precious metals) 322 308 +5 +5 Underlying operating profit 84.1 76.6 +10 +10 Return on sales 26.1% 24.9% Return on invested capital (ROIC) 18.8% 17.5% • Steady performance Sales Catalysis and Chiral Technolo
Slide 30: Fine Chemicals: Business Performance
Fine Chemicals Business Performance API Manufacturing Businesses Research Chemicals • Sales 6% higher at £211m • Sales in line at £79m • Growth in speciality opiates – boosted by • Growth in Europe and Asia offset by decline in US launch of new generic in US • New facilities opened in China and west
Slide 31: Fine Chemicals: Looking Ahead
Fine Chemicals Looking Ahead • Expect steady progress in API Manufacturing • New warehouses will benefit Research business, especially in the US Chemicals • Continue to invest in development of complex • Opportunity to further leverage synergies across APIs the division • Working with customers to d
Slide 32: New Businesses
New Businesses Year to 31st March £m 2014 2013 Sales (excluding precious metals) 76 37 Underlying operating profit / (loss) (18.3) (16.0) • Battery Technologies (sales of £69m) Sales • Robust demand for battery systems for Fuel Cells e‐bikes and powertools 10% • Broke even (excluding acquisition cos
Slide 33: New Businesses: Looking Ahead
New Businesses Looking Ahead Battery Technologies Overall • Acquisition of certain battery material • Continued investment in R&D to support manufacturing assets from A123 will benefit sales development of long term new business areas • Investment in R&D to develop next generation of battery materia
Slide 34: Non-Financial Performance
Non‐Financial Performance Year to 31st March 2014 2013 % change Energy use (GJ / £m sales) 1,649 1,737 ‐5 Global warming potential (tonnes CO2 equivalent / £m sales) 149.0 154.3 ‐3 Annual rate of >3 day accidents per 1,000 employees 2.68 2.98 ‐10 Annual incidence of occupational illness per 1,000 em
Slide 35: Outlook (1)
Outlook (1) Pt Emission Control Technologies: Process Technologies: Precious Metal Products: • Some further progress in • Expect progress in 2014/15 • Expect steady progress 2014/15 excluding Anglo • Chemicals • European car market more • Pgm refining volumes positive • Good long term outlook stable
Slide 36: Outlook (2)
Outlook (2) Fine Chemicals: New Businesses: Group: • Steady growth in API • Expect similar investment in • Continued business growth Manufacturing 2014/15 • Offset by adverse effect of: • CCT and Research Chemicals • A123 will benefit sales • Anglo ~£30m also expect some growth • Some time before di
Slide 37: Key Messages
Key Messages JM performed well in 2013/14 – sales up 11%; underlying EPS 16% ahead Growth across all five divisions; very strong year for ECT Investment in R&D (up 12%) and manufacturing capacity (1.7x depn) 2014/15 expected to be broadly in line with last year – business growth offset by adverse ef
Slide 38: Questions and Answers
Questions and Answers Neil Carson Robert MacLeod Larry Pentz Executive Director John Walker John Fowler Nick Garner Executive Director, Emission Division Director, Fine Chemicals Division Director, New Businesses Control Technologies and Corporate Development Alan Myers Geoff Otterman Division Direc
Slide 39: JME
JME Johnson Matthey
Slide 40: Light Duty Vehicle Legislation
Emission Control Technologies Light Duty Vehicle Legislation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 USA Tier II Tier III (expected) USA (CARB) LEV II LEV III EU Euro 5 Euro 6b Euro 6c Russia Euro 3 Euro 4 Euro 5 (proposed) Japan Japan 2009 China Euro 4 Euro 5 India ‐ National BS II B
Slide 41: Heavy Duty Diesel Legislation
Emission Control Technologies Heavy Duty Diesel Legislation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ON ROAD Europe EU V EU VI North America EPA10 EPA10 + Greenhouse Gas Regulation Japan JP 09 JP 16 South Korea EU V EU VI Brazil EU III EU V EU VI? Russia EU III EU IV EU V India (Main C