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Johnson Matthey reports half year results

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Hydrocarbon Engineering,

Johnson Matthey has reported half year results for the six months ended 30 September 2016. Highlights include:
  • First half sales up 5% and underlying PBT2 up 5%.
  • Performance of the group at constant rates on track and in line with previous expectations.
  • Continuing businesses at constant rates: sales down 1% and underlying PBT down 3%.
  • Full year outlook for continuing businesses at constant rates unchanged – expect performance to be slightly ahead of last year.
  • Interim dividend up 5% to 20.5 pence, reflecting confidence in group’s medium term prospects.
  • At 30 September 2016 rates, ~£65 million translational benefit to full year underlying operating profit.

Commenting on the results, Robert MacLeod, Chief Executive of Johnson Matthey said:

“Johnson Matthey had a solid first half, supported by favourable exchange rates, and our health and safety performance improved. Trading for the group during the period was in line with our expectations in our continuing businesses on a constant currency basis. We have increased our interim dividend by 5% reflecting our confidence in the medium term.

I am pleased with the performance of Emission Control Technologies (ECT), where strong growth in Europe and Asia offset the expected cyclical weakness in North America. New Businesses made good progress and Process Technologies has maintained its strong position in tough markets. In Fine Chemicals, first half performance was held back by an unfavourable product mix in our Active Pharmaceutical Ingredient (API) Manufacturing business.

Our guidance for the full year remains unchanged for our continuing businesses on a constant currency basis; that we expect the group’s performance to be slightly ahead of last year. In addition, the group will benefit from favourable exchange rates if current rates are maintained.

Johnson Matthey remains well positioned in growth markets. Through continued investment in R&D, our infrastructure and our people, we will continue to deliver both long term growth for shareholders and sustainable technologies that make the world around us cleaner and healthier.”

As the weakening of sterling versus other major currencies in the first half had a material impact on the reported performance of the business, the company has focused commentary on performance at constant rates. Unless otherwise stated, commentary refers to performance at constant rates.

ECT: strong performance in Europe and Asia offset by expected weakness in North America

  • Outperformance across Europe with Light Duty benefiting from increased focus on emissions and Heavy Duty Diesel (HDD) benefiting from strong vehicle production levels and improved product mix.
  • Strong growth in Asia supported by high vehicle production in China and good progress on HDD.
  • Tough trading in North America, principally from lower large (Class 8) truck production.
  • Expect ECT to continue to perform well, with continued strength in Europe and Asia and stabilising HDD catalyst sales in North America.

Process Technologies: maintained strong position in challenging market

  • Sales lower in tough market conditions: no new licences and customers lengthening catalyst replacement cycles.
  • Return on sales boosted by actions taken last year to reduce cost base.
  • Business remains well placed for future recovery in end markets.
  • Stronger second half expected with a robust order book and continued benefit of cost savings.

Precious Metal Products: performance stabilised

  • Steady performance in Manufacturing, subdued market in pgm recycling.
  • Expect steady performance to continue in the second half.

Fine Chemicals: stronger second half expected

  • Sales growth with increased demand for APIs.
  • Operating profit performance adversely impacted by product mix.
  • Performance in second half expected to be well ahead of the first, supported by an improved mix and customers’ new product approvals.

New Businesses: continued progress, particularly in Battery Technologies

  • Strong sales growth for battery materials and good progress in broadening the technology portfolio into nickel rich battery materials.
  • Investment of £30 million approved to increase lithium iron phosphate (LFP) capacity by 50%.
  • Expect performance in the second half to improve on the first half as the company moves to break even in 2017/18.

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