Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — Investor Presentation (May 2006)
42 slides from Johnson Matthey's investor presentation, May 15, 2006
Slide 1: Platinum 2006
Platinum 2006 15th May 2006 Mike Steel . . . Welcome everybody. I am going to go through the usual presentation procedure with some comments about platinum first, and then we shall move onto palladium. So let’s get straight into it and talk about platinum and what we think happened last year. Then w
Slide 2: Platinum Demand
Platinum Demand million oz 7 6.54 6.70 • Total demand up 2% to 6 6.70 million oz 5 • Record demand from the 4 autocatalyst sector 3 • Jewellery purchases fall to 2 less than 2 million oz 1 • Glass and electrical uses push 0 industrial demand to new high 2004 2005 Auto (net) Jlry Ind. www.platinum.ma
Slide 3: Platinum Demand: Autocatalyst
Platinum Demand: Autocatalyst Up 9% to 3.82 million oz million oz 4.0 3.82 3.49 3.5 RoW 3.0 N.America 2.5 2.0 Japan 1.5 1.0 Europe 0.5 0.0 2004 2005 www.platinum.matthey.com Let us talk first about the autocatalyst sector, where demand was up 9% at 3.82 million oz. Chart 3 shows that this was very m
Slide 4: Platinum Demand: Autocatalyst – Europe
Platinum Demand: Autocatalyst Europe: up 17% to 1.96 million oz Euro IV regulations Increasing fitment of CSF Sales of diesels continue to grow www.platinum.matthey.com Demand in Europe was up 17% to 1.96 million oz and this is really all about diesels. The diesel story was driven to a certain exten
Slide 5: Demand: Autocatalyst Europe 1997-2005
Platinum Demand: Autocatalyst Europe: 1997-2005 1997 = 100 '000 oz Euro IV 300 2,000 250 1,500 200 Euro III 150 1,000 100 500 50 0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Diesel demand for Pt Av LDD loading www.platinum.matthey.com This chart summarises the growth of platinum demand for autoc
Slide 6: Demand: Autocatalyst by region
Platinum Demand: Autocatalyst North America: up 2.5% to 820,000 oz HDD retrofit, changes in market share Japan: down 3% to 595,000 oz Higher HDD demand and increased vehicle output but no stock build China + RoW: up 13% to 445,000 oz Vehicle production up, tighter emissions limits www.platinum.matth
Slide 7: Platinum Demand: Jewellery
Platinum Demand: Jewellery Down 9% to 1.96 million oz million oz 2.16 1.96 2.0 RoW 1.5 Europe N.America 1.0 Japan 0.5 China 0.0 2004 2005 www.platinum.matthey.com That was the positive side of the platinum story for last year. The more negative side was jewellery, where we saw demand dropping by 9%
Slide 8: Jewellery Demand: China
Jewellery Demand: China Down 13% to 875,000 oz • High metal financing costs, price volatile • Destocking & recycling by the trade increases • Lower costs, greater margins on palladium & WG • Retail sales affected by less choice, higher prices • Inauspicious year for weddings: total bridal jewellery
Slide 9: Jewellery Demand: Elsewhere
Jewellery Demand: Elsewhere Platinum price affects demand Japan: down 9% to 510,000 oz Recycling up, stocks down Consumers trading in old jewellery North America: down 5% to 275,000 oz Europe: unchanged at 195,000 oz www.platinum.matthey.com The high price of platinum also had an impact elsewhere. D
Slide 10: Platinum Demand: Industrial
Platinum Demand: Industrial Up 9% to 1.675 million oz million oz 1.8 1.675 1.6 1.535 Petroleum 1.4 1.2 Glass 1.0 Electrical 0.8 0.6 Chemical 0.4 0.2 Other 0.0 2004 2005 www.platinum.matthey.com The third of our main sectors is industrial demand. Demand in 2005 was up 9% to 1.675 million oz. This is
Slide 11: Demand: Industrial – Glass and Electrical
Platinum Demand: Industrial Driven by LCD glass and hard disks Glass demand up 22% to 355,000 oz Construction of LCD glass furnaces in Asia continued at rapid pace Electrical demand up 20% to 360,000 oz Soaring sales of consumer products containing hard disks www.platinum.matthey.com There were two
Slide 12: Demand: 1996 vs. 2005
Platinum Demand: 1996 vs. 2005 Autocatalyst demand doubled million oz 7.0 6.70 Other 6.0 4.96 Glass 5.0 4.0 Electrical 3.0 Jewellery 2.0 1.0 Autocat (net) 0.0 1996 2005 www.platinum.matthey.com We give 10 years of historical data in Johnson Matthey’s reviews and this chart shows what I think is an i
Slide 13: Platinum Supply
Platinum Supply Up 2% to 6.63 million oz million oz 7 6.63 6.49 Other 6 5 N.America 4 Russia 3 2 S.Africa 1 0 www.platinum.matthey.com 2004 2005 Turning now to the supply side, supplies of platinum in 2005 were 2% up at 6.63 million oz. As this chart shows, South Africa is the key element of the pla
Slide 14: Supply: South Africa
Platinum Supply: South Africa Up 2% to 5.11 million oz • Pipeline stocks increase at Anglo Platinum • More difficult conditions at some older Western Bushveld mines • Progress on Eastern Bushveld still slow www.platinum.matthey.com Supply from South Africa was also up 2%, at 5.11 million oz. This co
Slide 15: Supply Elsewhere
Platinum Supply Elsewhere net change: +40,000 oz Russia: up 8% to 890,000 oz Pipeline release at Norilsk Nickel in H2 North America: down 6% to 360,000 oz Minor changes at Falco, NaPd, Inco Zimbabwe: up 6% to 155,000 oz Political/economic uncertainties increase www.platinum.matthey.com Looking elsew
Slide 16: Platinum Supply and Demand
Platinum Supply and Demand ’000 oz 2004 2005 % Demand 6,540 6,700 +2 Supply 6,490 6,630 +2 Movements in stocks (50) (70) www.platinum.matthey.com To summarise, total demand for platinum was up 2% and as supply was also up by 2% there was, therefore, very little change in the balance. We were still i
Slide 17: Outlook: Jewellery
Platinum Outlook: Jewellery Trade discomfort growing as price rises million oz Jewellery Demand Av. Price $ per oz 3.0 1,100 1,000 2.5 900 800 2.0 700 ? 600 1.5 500 400 1.0 300 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 www.platinum.matthey.com Let us now turn to the outlook for platinum. Certainly, as
Slide 18: Outlook: Jewellery – Chinese purchases lagging
Platinum Outlook: Jewellery Chinese purchases lagging last year '000 kg Cumulative year-to-date platinum sales on the SGE 8 7 6 5 4 3 2 1 0 Week Week 1 2005 2006 17 www.platinum.matthey.com If we look at the Chinese situation in more detail, this chart shows purchases of platinum through the Shangha
Slide 19: Outlook: Autocatalyst
Platinum Outlook: Autocatalyst Further growth certain • Diesels Euro IV plus CSF in Europe HDD regulations in North America • Asia Rising light vehicle output Tightening emissions limits www.platinum.matthey.com Moving on to the outlook for autocatalyst, we certainly see further growth here and this
Slide 20: Outlook: Supply
Platinum Outlook: Supply South Africa remains key to growth • Pipeline release due from Anglo Platinum • Higher output expected from both new and established mines • Only minor increases from Zimbabwe and N. America www.platinum.matthey.com If we look now at the outlook for supply, South Africa rema
Slide 21: Outlook: Price
Platinum Outlook: Price Swimming with the commodities tide 4th Jan 2005 = 100 Indexed US$ commodity prices, Jan '05-May '06 300 Brent crude Zn Cu Au Pt 275 250 225 200 175 150 125 100 75 Jan Mar May Jul Sep Nov Jan Mar May www.platinum.matthey.com What can we say about the outlook for the price of p
Slide 22: Outlook: Price – Forecast For The Next Months
Platinum Outlook: Price Forecast For The Next 6 Months $ per oz 1,400 1,300 Forecast set 1,200 $1,025–$1,250 1,100 1,000 900 800 J M M J S N J M M J S N 2005 2006 www.platinum.matthey.com www.platinum.matthey.com There is no doubt that the excitement surrounding commodities, and the huge amount of m
Slide 23: Outlook: Price – Forecast For The Next Months
Platinum Outlook: Price Forecast For The Next 6 Months $ per oz 1,400 1,300 Forecast set 1,200 $1,025–$1,250 1,100 1,000 900 800 J M M J S N J M M J S N 2005 2006 www.platinum.matthey.com www.platinum.matthey.com This chart shows the way the platinum price has moved recently, with a tremendous incre
Slide 24: Palladium Demand
Palladium Demand million oz 7.04 7 6.56 • Total demand grows 7% 6 to 7.04 million oz 5 • Autocatalyst demand mixed – up 4 in Asia, down in USA & Europe 3 • Jewellery becomes the 2 second largest application 1 • Industrial & investment 0 demand increases 2004 2005 Auto (net) Jlry Elec. Other www.plat
Slide 25: Palladium Demand: Autocatalyst
Palladium Demand: Autocatalyst Up marginally to 3.81 million oz million oz 4.0 3.79 3.81 3.5 RoW 3.0 2.5 Japan 2.0 1.5 N.America 1.0 0.5 Europe 0.0 2004 2005 www.platinum.matthey.com Autocatalyst demand was only marginally up for the year. This may surprise some people who may have been expecting a
Slide 26: Autocatalyst Demand for Palladium
Autocatalyst Demand for Palladium North America: down 1% to 1.43 million oz Thrifting, lower production of SUVs / light trucks Europe: down 10% to 990,000 oz Thrifting plus lower gasoline vehicle output Japan: up 4% to 660,000 oz Higher vehicle output, lower emissions China + RoW: up 21% to 705,000
Slide 27: Palladium Demand: Jewellery
Palladium Demand: Jewellery Up 54% to 1.43 million oz Pd jewellery in China WG & Pt Pd jewellery alloys elsewhere www.platinum.matthey.com Jewellery is now the second largest demand sector for palladium and demand was up by 54% in 2005 to 1.43 million oz. Although this sector is essentially a story
Slide 28: Demand: Jewellery – Chinese purchases
Palladium Demand: Jewellery Chinese purchases jump to 1.2 million oz • Wholesale and retail stocks continue to grow as Pd market penetration spreads • Pd 990 increasingly stocked alongside Pd 950 • Manufacturers like: – low metal funding costs, less volatile price – lower density = higher productivi
Slide 29: Demand: Jewellery – Chinese retail sales
Palladium Demand: Jewellery Chinese retail sales develop RMB / gram 400 • Consumers like: Typical Retail Price 350 Gross Margin –Purity: Pd 990 300 250 –Affordability 200 –Whiteness 150 –Association with Pt 100 50 –Good investment? 0 Pt Pd www.platinum.matthey.com Consumers of course are the key to
Slide 30: Palladium Demand: Other
Palladium Demand: Other Up 2.5% to 2.43 million oz million oz 2.43 2.5 2.37 Other 2.0 Chemical 1.5 1.0 Dental 0.5 Electronics 0.0 2004 2005 www.platinum.matthey.com Briefly covering the other elements of palladium demand, up in total by 2.5% to 2.43 million oz. One thing to mention is that the ‘Othe
Slide 31: Demand: 1996 vs. 2005
Palladium Demand: 1996 vs. 2005 A market transformed million oz 7.04 Chemicals 7.0 6.15 & Other 6.0 Dental 5.0 4.0 Jewellery 3.0 Electronics 2.0 1.0 Autocat (net) 0.0 1996 2005 www.platinum.matthey.com As we did for platinum, we show in this chart how demand for palladium has changed over the past 1
Slide 32: Palladium Supply
Palladium Supply Down 2% to 8.39 million oz million oz 9 8.58 8.39 Other 8 7 N. America 6 5 4 Russia 3 2 South Africa 1 0 2004 2005 www.platinum.matthey.com Palladium supply was down by 2% in 2005 to 8.39 million oz. Palladium supply is very much a Russian story, as that country dominates supply of
Slide 33: Supply: Russia
Palladium Supply: Russia Down 4% to 4.62 million oz • Norilsk Nickel releases data: production of 3.13 million oz • Substantial sales from State stocks at the end of the year • Stillwater sells 439,000 oz of Russian metal www.platinum.matthey.com As mentioned earlier, Norilsk Nickel has released its
Slide 34: Supply Elsewhere
Palladium Supply Elsewhere South Africa: up 4% to 2.59 million oz • Production increasing in line with platinum output North America: down 13% to 905,000 oz • Difficult year for North American Palladium: low grades, mill problems, recoveries drop www.platinum.matthey.com Elsewhere on palladium suppl
Slide 35: Palladium Supply and Demand
Palladium Supply and Demand ’000 oz 2004 2005 % Demand 6,560 7,040 +7 Supply 8,580 8,390 -2 Movements in stocks 2,020 1,350 www.platinum.matthey.com To summarise for palladium, total demand was 7% up at 7.04 million oz, while supply was 2% down at 8.39 million oz. This led to another extremely large
Slide 36: Outlook: Autocatalyst
Palladium Outlook: Autocatalyst Stronger growth forecast • Thrifting to have less impact • Further switching from Pt to Pd in gasoline vehicle catalysts • Rising light vehicle production and tightening emissions limits in Asia • Pd in diesel after-treatment to make a small contribution www.platinum.
Slide 37: Outlook: Jewellery
Palladium Outlook: Jewellery Retail sales vs. metal purchases • Potential for good retail sales growth in China: – first marketing campaign planned – price advantage over platinum widening • But existing inventories may restrain growth in metal demand • Several US & European manufacturers now lookin
Slide 38: Outlook: Supply
Palladium Outlook: Supply • Growth expected in South African & North American mine production • Substantial shipments from Russian state stocks in Q1 • Stillwater sales of Russian metal completed www.platinum.matthey.com On the supply side there will be some growth in output from South Africa this y
Slide 39: Outlook: Price – Don't look down
Palladium Outlook: Price Don’t look down… $ per oz '000 oz 400 1,200 NYMEX Net Spec. Average Price 350 1,000 300 800 250 600 200 400 150 200 J F M A M J J A S O N D J F M A 2005 2006 www.platinum.matthey.com This chart shows the price of palladium since January 2005 and, as anybody on a tightrope or
Slide 40: Outlook: Price – Forecast For The Next Months
Palladium Outlook: Price Forecast For The Next 6 Months $ per oz 450 Forecast set 400 350 $260 – $420 300 250 200 150 J M M J S N J M M J S N 2005 2006 www.platinum.matthey.com www.platinum.matthey.com At the time we made our price forecast palladium stood at $360 and we felt a range of $260 at the
Slide 41: Outlook: Price – Forecast For The Next Months
Palladium Outlook: Price Forecast For The Next 6 Months $ per oz 450 Forecast set 400 350 $260 – $420 300 250 200 150 J M M J S N J M M J S N 2005 2006 www.platinum.matthey.com www.platinum.matthey.com Although the price has come close to that top end in recent days, we still feel happy with our ran
Slide 42: Platinum 2006
Platinum 2006 15th May 2006 Ladies and gentlemen, thank you very much for your attention; my colleagues and I will now try and answer any questions you may have. 42