Transcript Slide 1

Presentation of Results for the half year ended
30th September 2010
24th November 2010
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 the expectations reflected in these statements are
reasonable but they may be affected by a wide range of variables
which could cause actual results to differ materially from those
currently anticipated.
Introduction
Neil Carson
Chief Executive
Key Messages
• Strong recovery
• Record first half
• Seeing benefits of management actions taken during downturn
• Continued investment in R&D
• Long term drivers firmly in place
4
Financial Review
Robert MacLeod
Group Finance Director
Summary Results
1H
2010
1H
2009
£m
£m
Change
%
Revenue
4,562
3,577
+28
Sales excluding precious metals
1,104
883
+25
Profit before tax
144.1
109.5
+32
Total earnings per share
49.2p
37.4p
+32
Profit before tax
164.3
114.4
+44
Earnings per share
56.3p
39.1p
+44
Dividend per share
12.5p
11.1p
+13
Underlying*:
* Before amortisation of acquired intangibles, major impairment and restructuring charges and profit or loss on disposal of businesses
6
Net Cash Flow
Underlying operating profit
Depreciation and amortisation
Tax (paid) / received
Working capital / other
Cash flow from operations
1H 2010
£m
1H 2009
£m
174
124
71
61
(38)
5
(159)
(112)
48
•
Strong growth impacted cash flow, but good working capital management
•
Working capital:
•
•
•
78
Excl. pgms up by £6m - 55 days (57 at 31st March 2010)
Pgms up by £122m due to higher prices and increased activity
Net debt at 30th September 2010 - £525.9m
•
Net debt (inc. post tax pension deficit) / EBITDA of 1.5
7
Capital Expenditure
203.5
£ million
Capex / depn (times)
2.0
200
150
145.0
1.5
134.4
1.0
100
53.3
50
0.5
0
0.0
2007/08
2008/09
Environmental Technologies
2009/10
Precious Metal Products
1H 2010/11
Fine Chemicals
•
Capex / depreciation in first half 0.9x. Full year likely to be 1.2x
•
Going forward, capex likely to be between 1.0 and 1.2x depreciation
8
Results Benefited from Management Actions (1)
Environmental Technologies
Emission Control Technologies
• Continued to invest in efficient capacity to meet future demand
• e.g. Macedonia, Smithfield
• Improved production costs by >5% - circa £8m p.a.
• Manufacturing reject rates reduced by 33% - £4m p.a.
Process Technologies
• Catalyst manufacturing capacity increased by 28% to date
• Combination of new plant and debottlenecking
• R&D investment resulted in five new licensed processes for DPT
9
Results Benefited from Management Actions (2)
Precious Metal Products
• Significant improvement in metal management, working capital £100m
lower
• Fixed production costs at pgm refineries down by ~£2m p.a.
Fine Chemicals
• US plant capacity up by ~50%, cost per tonne produced ~20% lower $5m p.a.
• Restructuring of pharma services business reduced costs by $2m p.a.
R&D
• Investment has continued to grow. Will be over £100m this year
10
Operating Review
Neil Carson
Chief Executive
Environmental Technologies Division
Environmental Technologies Division
1H
1H
%
% at
£m
2010
2009
change
constant rates
Revenue
1,261
919
+37
+34
Sales excluding precious metals
724
564
+29
+26
Underlying operating profit
76.6
54.5
+41
+37
10.6%
9.7%
Return on sales (ex pms)
•
ECT’s sales up 29% to £567m
•
Process Technologies’ sales up 25% to £153m
PT +
Fuel
Cells
22%
ECT
78%
Sales ex pms
13
Estimated Light Duty Vehicle Sales and Production
North
America
1H
2010/11
millions
1H
2009/10
millions
Change
%
1H
2010/11
millions
2H
2009/10
millions
Change
%
Sales
7.3
6.8
+7.4
7.3
6.2
+17.7
Production
6.0
4.1
+46.3
6.0
5.6
+7.1
Sales
9.1
9.4
-3.2
9.1
9.1
-
Production
9.5
8.6
+10.5
9.5
9.5
-
Sales
14.4
12.1
+19.0
14.4
14.7
-2.0
Production
17.7
14.5
+22.1
17.7
17.8
-0.6
Sales
35.5
32.6
+8.9
35.5
34.6
+2.6
Production
36.3
30.1
+20.6
36.3
35.9
+1.1
Europe
Asia
Global
Source: IHS Global Insight
14
Emission Control Technologies
Light Duty
• Light duty catalyst sales up 22% to £419m
•
74% of ECT’s sales
• Sales in Europe benefited from increased fitment of filters
and recovery in diesel’s market share
•
•
•
Diesel share of European car market 52%, up from 44%
Around 90% filter fitment by end of our first half
100% filter fitment from 1st January 2011
• JM’s sales in Asia strongly ahead of growth in production
•
Continue to improve market share, particularly in China
15
Emission Control Technologies
Europe Light Duty Sales Growth 1H 2010
£ million
300
250
+25
256
+15
230
-12
-2
200
150
100
50
0
1H 2009
Flowthrough
Catalyst Volumes
DPF Volumes
DPF Substrate
Costs
Other
1H 2010
16
Emission Control Technologies
Light Duty – Asia
• China largest market in Asia
•
•
•
54% of region’s light duty vehicle sales in 1H
Virtually all production is for domestic market
Vehicle sales in China up 18% to 7.8 million
million
Quarterly Vehicle Sales and Production
in Asia
10
9
8
7
6
5
• Asia (particularly Japan and Korea) large
exporter to North America and Europe
4
3
2
1
0
• JM plants in China, Japan, India, Malaysia
and Korea
Q1 09/10 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11
Production (China)
Production (Rest of Asia)
Sales China
Sales Asia
Source: IHS Global Insight (October 2010)
• Asia accounted for 19% of our 1H sales
17
Emission Control Technologies
Light Duty Vehicle Production Outlook
million
90
80.8
80
74.7
70.8
70
67.4
59.3
60
50
38.0
40
40.6
35.5
28.7
30
21.2
20
12.6
8.6
10
11.5
12.3
16.8
14.0
18.5 18.9
•
29.0
19.9
Source: IHS Global Insight (October 2010)
Europe
Asia
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
0
North America
• Most recent industry
forecasts show
increase in global
estimates for 2010
and 2011. Growth
particularly in Asia
Despite the effect of
scrappage schemes
ending, all markets
expected to grow
with Asia leading
the way
Global
Production outlook March 2010
18
Estimated HDD Truck Sales and Production
North
America
1H
2010/11
thousands
1H
2009/10
thousands
Change
%
1H
2010/11
thousands
2H
2009/10
thousands
Change
%
Sales
137.6
117.2
+17.4
137.6
133.8
+2.8
Production
132.4
105.9
+25.0
132.4
129.9
+1.9
Sales
110.5
104.9
+5.3
110.5
92.8
+19.1
Production
151.1
89.6
+68.6
151.1
112.0
+34.9
EU
Source: J D Power
19
Emission Control Technologies
Heavy Duty Diesel
• Unit sales almost double those of 1H 2009
•
US 2010 HDD standards require more catalysts per vehicle
• JM’s sales up 72% on first half of last year at £128m
•
•
North America £83m
Europe £41m
• Modest profit in 1H 2010
•
Driven by improving markets and operational leverage
20
Emission Control Technologies
Heavy Duty Sales Growth 1H 2010
£ million
150
+24
128
N America
Other
1H 2010
+7
+25
100
+5
-7
74
50
0
1H 2009
Europe
Volumes
Europe Other
N America
Volumes
N America
Legislation
21
Emission Control Technologies
Heavy Duty Diesel – Dynamics
Steady increase in US truck sales
Europe saw better growth in truck production
Circa 75% of costs are variable
Market size today approx US $600m sales. JM has >65% share
Market grows to US $2.5bn by end 2014/15
Sales
10
/1
1
Q
2
10
/1
1
1
09
/1
0
Q
4
09
/1
0
Q
3
09
/1
0
Q
2
09
/1
0
Production
Q
1
08
/0
9
Q
4
08
/0
9
Q
08
/0
9
3
3
Q
Q
3
Production
Q
0
2
0
08
/0
9
20
Q
40
20
1
40
Q
60
80
60
07
/0
8
100
07
/0
8
4
07
Q /08
1
08
Q /09
2
08
Q /09
3
08
Q /09
4
08
Q /09
1
09
Q /10
2
09
Q /10
3
09
Q /10
4
09
Q /10
1
10
Q /11
2
10
/1
1
80
07
/0
8
100
140
120
Source: J D Power
Quarterly US Truck Sales
and Production
thousands
4
Quarterly Western European Truck Sales
and Production
Q
thousands
160
Q
•
•
•
•
•
Sales
22
Emission Control Technologies
Heavy Duty Diesel Vehicle Sales Outlook (November 2010)
thousands
Western European Truck Sales
thousands
400
600
350
500
300
US Class 4-8 Truck Sales
400
250
200
300
150
200
100
100
50
0
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: JD Power, ACT Research and Johnson Matthey
No catalyst fitted
DOC fitted
Euro IV / US 07
Euro V / US 2010 regulations
Euro VI regulations
Sales outlook at March 2010
23
Process Technologies
• AMOG – good first half
•
•
•
Sales up 28%
Strong demand for methanol catalysts, sales more than
doubled
Ammonia and hydrogen catalyst sales also ahead
• First commercial sales of APICO
1H 2010
sales
£153m
Other
22%
DPT
22%
AMOG
56%
• Sale of Vertec to Dorf Ketal – agreement terminated
•
Production site to close at end of financial year
24
Process Technologies
Davy Process Technology (DPT)
Market Size for Technologies Currently
Licensed by DPT
• Another strong performance from DPT
•
•
•
Good licensing and engineering income
Nine new plants being commissioned in the year
World’s largest methanol plant commissioned
successfully at Shenhua Baotou
£ million
100
90
80
70
60
50
40
30
• A further three new licences agreed in first half
•
•
SNG plant and speciality chemicals plant in China
NDA plant in Indonesia
20
10
0
2005
2010
2015
Chemicals (natural detergent alcohols, esters, ethyl acetate, amines)
Gas conversion (reforming, methanol, synthetic natural gas)
Petrochemicals (butanediol, oxo alcohols, tetrahydrofuran)
• Five new processes launched over last two years
Source: Johnson Matthey estimates
25
Process Technologies
Acquisition of Intercat
• Intercat acquisition completed on 1st November
•
•
•
Leader in FCC additives and addition systems
2009 sales of US $58m
Normalised operating profit US $8.4m in 2009
• Strengthens JM’s position in refinery catalysts
• Growth driven by demand for transportation
fuels and processing of dirtier feedstocks
• Integration process underway
26
Precious Metal Products Division
Precious Metal Products Division
1H
1H
%
% at
£m
2010
2009
change
constant rates
Revenue
3,175
2,544
+25
+22
Sales excluding precious metals
258
206
+25
+22
Underlying operating profit
81.2
49.2
+65
+63
31.5%
23.9%
Return on sales (ex pms)
•
Strong growth in sales across all businesses
•
Operating profit recovered well following weak
first half last year
Catalysts and
Chemicals
26%
Platinum Marketing and
Distribution, Noble
Metals, Colour
Technologies
55%
Refining
19%
Sales ex pms
28
Precious Metal Products Division
Platinum Marketing and Distribution
US$/oz
Platinum
2,400
•
Pt market expected to be in small surplus
in calendar year 2010
2,000
1,600
1,200
•
Average Pt price in 1H 2010/11 $1,595/oz,
up 32% on same period last year
800
400
0
Mar-08
•
Pd market expected to be close to balance
in 2010
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Palladium
US$/oz
700
600
•
Average Pd price in 1H 2010/11 $497/oz,
up 95% on last year
500
400
300
•
200
Business achieved strong growth in first
half, in line with improvement in pgm prices
100
0
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
29
Precious Metal Products Division
Manufacturing Businesses
• Good sales and profit growth
•
Continued recovery in industrial demand
• Noble Metals’ sales up 20%
•
Particularly good growth in agrochemical and industrial sectors
• Strong performance in refining businesses, sales well
ahead
• Catalysts and Chemicals’ sales up 15%
•
Mainly driven by increased demand from automotive sector
• Colour Technologies’ sales up 19%
•
Good demand from both automotive and decorative sectors
30
Fine Chemicals Division
Fine Chemicals Division
1H
1H
%
% at
2010
2009
change
constant rates
Revenue*
126
107
+18
+16
Sales excluding precious metals*
122
106
+15
+13
Underlying operating profit*
28.8
23.1
+25
+22
23.7%
21.9%
£m
Return on sales (ex pms)*
* Excluding one-off benefit from launch of generic ADDERALL XR® in 1H 2009
•
Good first half, sales* up 15%
•
Underlying operating profit* up 25%
Research
Chemicals
28%
APIs
Manufacturing
72%
Sales ex pms
32
Fine Chemicals Division
• Good first half for APIs manufacturing businesses with
sales* up 15%
•
•
•
Strong sales of bulk opiates and other controlled APIs at
Macfarlan Smith
Pharmaceutical Materials and Services saw good growth in
specialist opiates, amphetamines and platinum anticancer APIs
Good recovery in contract research business following
restructuring actions taken last year
• Acquisition of APIs manufacturing facility provides
additional capacity at low cost
• Research Chemicals’ sales and operating profit both
well up on 1H last year
* Excluding one-off benefit from launch of generic ADDERALL XR® in 1H 2009
33
Outlook
Second Half (1)
Environmental Technologies
• Short term visibility continues to be limited
• European car sales expected to continue slight downward trend,
balanced by growth in emerging markets
• Continued steady improvement in HDD business
• Process Technologies well placed for further growth
• Benefit from APICO and inclusion of Intercat business
• Second half performance expected to be broadly in line with first half
34
Outlook
Second Half (2)
Precious Metal Products
• All businesses should continue to perform well
• Second half results expected to be slightly ahead of first half
Fine Chemicals
• Delays to customers’ launch of new products will impact 2H
• However, division expected to be ahead of 2009/10
Group
• Outlook is good
• Second half comparatives tougher than those in first half
• Expect 2H performance to be broadly in line with 1H
35
36
Emission Control Technologies
Light Duty Vehicle Legislation
37
Emission Control Technologies
Heavy Duty Diesel Legislation
38