Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — FY2017 Earnings Presentation
43 slides from Johnson Matthey's earnings presentation, Jun 1, 2017
Slide 1: Presentation of preliminary results for the year ended 31st March 2017
Presentation of preliminary results for the year ended 31st March 2017 1st June 2017
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: Progress on further strengthening our business
Progress on further strengthening our business Full year performance in line Strong balance Delivered cost with expectations Investing to deliver sheet and cash savings with further following improved future growth generation actions in 2017/18 second half performance Building a strong platform for
Slide 4: Strong H2 led to full year performance in line with expectations
Strong H2 led to full year performance in line with expectations YoY growth, Year ended 31st March 2017 YoY growth continuing businesses at constant rates LTIIR1 0.49 +32% Sales £3,578m +13% +3% Underlying operating profit £513.3m +14% - Underlying EPS 209.1p +17% Working capital days 54 days -2 day
Slide 5: Driving improving performance
Driving improving performance Carrying Improved forward Cost efficiency functional momentum excellence 5
Slide 6: Anna Manz, Chief Financial Officer
Anna Manz Chief Financial Officer
Slide 7: Full year underlying results in line with expectations following stronger H2
Full year underlying results in line with expectations following stronger H2 % change, Year ended 31st March1 2017 2016 % change constant rates £m £m for continuing businesses Sales excluding precious metals 3,578 3,177 +13 +3 Operating profit 513 451 +14 - Finance charges (32) (33) +2 Profit before
Slide 8: Improving performance with stronger H2 sales growth
Improving performance with stronger H2 sales growth Sales growth for year ended 31st March 2017, %1 H1 H2 FY Emission Control Technologies +3 +5 +4 Process Technologies -12 +13 - Precious Metal Products -2 +14 +6 Fine Chemicals +4 -2 +1 New Businesses +13 +8 +10 Johnson Matthey -1 +6 +3 1. % growth
Slide 9: Delivering cost savings and efficiency gains to underpin operating profit
Delivering cost savings and efficiency gains to underpin operating profit Underlying operating profit 600 550 £26m £17m £69m -£15m £-1m 500 -£8m £512m -£26m £513m 450 £451m 400 350 300 2015/16 Translational FX Disposals 2015/16 rebased PRMB* credit Movt in share- Other Cost savings from Underlying 2
Slide 10: Improving performance with stronger H2 operating profit growth
Improving performance with stronger H2 operating profit growth Operating profit growth for year ended 31st March 2017, %1 H1 H2 FY Emission Control Technologies - +3 +2 Process Technologies -1 +18 +9 Precious Metal Products +4 +31 +17 Fine Chemicals -26 -20 -23 New Businesses +11 +12 +12 Johnson Mat
Slide 11: ECT: technology driven outperformance in the majority of markets
ECT: technology driven outperformance in the majority of markets Sales1 Sales up 4% • LDV catalyst sales ahead of global 2800 production • HDD sales outperformed in every region +£94m +£19m • Benefited from sales of higher value 2300 +£226m +£64m £2,224m catalysts and business wins -£20m -£72m 1800
Slide 12: PT: managing a cyclical market through cost savings
PT: managing a cyclical market through cost savings Sales1 Held sales in the year • Licensing and first fill income affected by 650 cyclical demand +£26m • Business wins in catalysts offset market 600 +£47m weakness £587m -£16m 550 -£10m -£1m Operating profit up 9% £541m 500 • Delivering efficiency
Slide 13: PMP: actions taken accelerated H2 performance
PMP: actions taken accelerated H2 performance Sales1 Sales up 6% • Higher pgm prices and improved intakes 450 • Steady growth in Manufacturing +£10m +£12m 400 Operating profit up 17% +£38m £403m • Improved intakes, pgm prices and operating efficiency 350 • H1 benefited from PRMB2 credit £343m 300 20
Slide 14: Fine Chemicals: building a wider portfolio to deliver consistent growth
Fine Chemicals: building a wider portfolio to deliver consistent growth Sales1 Sales up 1% • Strong contribution from APIs for two 350 newly approved drugs -£3m • Lower sales of ADHD APIs 300 +£24m +£22m £296m £284m Operating profit down 23% 250 -£17m -£38m • Impacted by lower sales of higher margin
Slide 15: New Businesses: accessing additional areas of potential growth
New Businesses: accessing additional areas of potential growth Sales1 Sales up 10% • Weak LFP battery material market in H2 250 • Sales growth and improving productivity in Fuel Cells 200 +£7m +£10m +£17m Operating loss reduced £191m • Improved profitability in Battery 150 £157m Technologies • Fuel
Slide 16: 17% EPS growth driven mainly by foreign exchange
17% EPS growth driven mainly by foreign exchange % change, Year ended 31st March1 2017 2016 % change constant rates £m £m for continuing businesses Sales excluding precious metals 3,578 3,177 +13 +3 Operating profit 513 451 +14 flat Finance charges (32) (33) +2 Profit before tax 482 418 +15 +1 Taxat
Slide 17: Focus on consistent delivery of strong cash
Focus on consistent delivery of strong cash Free cash flow Working capital days2 Year ended 31st March 2017 £m 69 Underlying operating profit 513 FX Depreciation and amortisation1 157 54 Increase in inventories (37) FX Increase in receivables (111) Increase in payables 121 64 66 Net working capital
Slide 18: Strong balance sheet
Strong balance sheet £m £m Net debt at the beginning of the year (675) Free cash flow 230 Dividends (139) Acquisitions (25) Other (13) Movement in net debt before FX 53 Net debt before FX (622) FX (94) Net debt at the end of the year (716) 18
Slide 19: ROIC improved in the year
ROIC improved in the year Year ended 31 March 24% Target 20% 16% ROIC 12% 8% Cost of capital 4% 0% 2013 2014 2015 2016 2017 19
Slide 20: Dividend per share up 5%
Dividend per share up 5% Ordinary dividend per share Increase reflects confidence in group’s (pence) medium term prospects Year ended 31st March • Driving stronger top line 71.5 75.0 • Delivering efficiency across the 68.0 business 62.5 55.0 57.0 • Investing for growth • Continuing to deliver strong
Slide 21: Looking forward
Looking forward Improving performance Stronger sales growth in 2017/18 in line with H2 2016/17 Stronger performance in 2017/18 Targeting further cost savings of around £25m in a full year and £10m in 2017/18 Offset by higher non-cash pension charges and no PRMB in 2017/18 21
Slide 22: My three focus areas
My three focus areas Rigorous and transparent resource allocation Disciplined management of working capital to drive continued strong cash Drive increasing business wide efficiency 22
Slide 23: Robert MacLeod, Chief Executive
Robert MacLeod Chief Executive
Slide 24: Changing our organisation to drive performance
Changing our organisation to drive performance Building strong leadership team using external hires and benchmarks Disciplined process management supported by increased investment Retain strong local accountability Standardisation of data and performance metrics to drive synergy Drive functional exc
Slide 25: Better aligned for stronger performance
Better aligned for stronger performance Climate, focus Growing population, Ageing and on emissions fewer resources growing population Efficient Clean Air Natural Health Resources plus New Markets across all these areas 25
Slide 26: Sustainable leading science and technology platforms
Sustainable leading science and technology platforms Materials characterisation PGM chemistry Material design Surface and testing and metallurgy and engineering chemistry Provision of Development of new and Scale-up of complex customised solutions next-generation products manufacturing …applied to s
Slide 27: Clean Air: building a flexible global emissions control business
Clean Air: building a flexible global emissions control business The focus on air quality in Europe will drive growth in medium term, notwithstanding a decline in diesel share Significant growth opportunities in Asia Building a flexible and efficient business 27
Slide 28: Clean Air in Europe & NA: medium term growth, long term value
Clean Air in Europe & NA: medium term growth, long term value Sales % 2016/17 Supported by: • In the short to medium term: 4 4 • New business wins already secured 15 38 • Tighter legislation (Euro 6c and real world driving standards) • Increased focus on tighter emissions from OEMs 18 • Recovery of
Slide 29: Clean Air: significant growth opportunities in Asia
Clean Air: significant growth opportunities in Asia Sales % 2016/17 • Well-positioned in China and India • Winning business with local manufacturers 4 15 • Significant vehicle growth expected 18 4 • Move to Euro 6 equivalents in China and India for both light and heavy duty 10 • Significant value up
Slide 30: Efficient Natural Resources: investing for growth through the cycle
Efficient Natural Resources: investing for growth through the cycle Positioned for recovery in chemicals Improved management of our PGM refineries Cost efficiency improved 30
Slide 31: Efficient Natural Resources: positioned for chemicals market recovery
Efficient Natural Resources: positioned for chemicals market recovery Sales % 2016/17 • Demand for licences and first fills linked to 12 • Level of plant builds 25 • Capacity in many markets • High levels of demand not expected to return for a few years 12 45 • Well-positioned for future recovery 6
Slide 32: Health: investing in an attractive market with long term growth
Health: investing in an attractive market with long term growth Strong set of core capabilities Investing to expand our business and API product portfolio Improving operational efficiency 32
Slide 33: Health: investing to expand our business and API product portfolio
Health: investing to expand our business and API product portfolio Sales % 2016/17 • $650bn global pharmaceutical market growing mid to high single digits 10 • Expanding our capacity in Europe 38 • Building our future API product portfolio: 34 • Over 40 new projects in our pipeline • Sales will buil
Slide 34: New Markets: accessing additional areas of potential growth
New Markets: accessing additional areas of potential growth in… Clean Air: Alternative powertrains • Developing high energy battery materials, incl. high nickel • Improved performance in Fuel Cells business Agrochemicals and Medical Device Components Maintaining strict capital discipline 34
Slide 35: Rigorous approach to capital allocation
Rigorous approach to capital allocation Focused R&D1 High levels of capex £m £m, excluding development costs 250.0 300.0 250.0 6 18 200.0 16 15 5 44 29 200.0 44 17 22 150.0 10 30 43 44 77 57 43 150.0 100.0 81 100.0 75 80 68 87 71 50.0 50.0 68 29 33 33 49 40 19 0.0 0.0 2014/15 2015/16 2016/17 2014/15
Slide 36: Conclusion
Conclusion Strategy aligned Stronger sales growth in 2017/18 to global growth drivers Cost efficiency and Margin expansion beyond improved functional excellence next year 36
Slide 37: Appendix
Appendix JM
Slide 38: 17% EPS growth driven mainly by foreign exchange
17% EPS growth driven mainly by foreign exchange EPS pence (4) (8) (2) 36 (8) 8 209 5 201 8 179 166 2015/16 Amortisation of Other 2015/16 Movement in Foreign Disposal Tax Other incl. NCI 2016/17 Amortisation of 2016/17 reported EPS acquired underlying EPS number of exchange underlying EPS acquired r
Slide 39: Global growth in vehicle production
Global growth in vehicle production Light duty vehicle production outlook (million) Calendar years CAGR 2.4% 104.7 102.0 99.5 94.8 96.7 93.0 CAGR 2.8% 53.8 55.7 50.6 52.5 48.6 49.6 CAGR 0.9% CAGR 1.9% 21.9 22.3 22.7 23.3 23.6 21.5 17.9 17.9 18.1 18.2 18.5 18.7 2016 2017 2018 2019 2020 2021 2016 2017
Slide 40: Light duty emissions control legislation roadmap
Light duty emissions control legislation roadmap 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 RDE Phase 2 / Europe EU 6b EU 6c / RDE Phase 1 EU 7? 95 g/km CO2 North America EPA Tier 2 Tier 3 Phase In: NMOG + NOx, PM Tightening North America CARB LEV III Phase In: NMOG + NOx, PM Tightening
Slide 41: Heavy duty diesel vehicle production (regulated engines)
Heavy duty diesel vehicle production (regulated engines) Heavy duty diesel vehicle (regulated engines) production outlook (thousands) Calendar years CAGR 5.7% 3,062 3,106 2,913 2,784 2,748 2,355 CAGR 7.6% 1,916 1,832 1,755 1,733 1,646 1,328 CAGR 1.0% CAGR 4.6% 663 695 574 599 632 548 567 556 471 455
Slide 42: Heavy duty diesel emissions control legislation roadmap
Heavy duty diesel emissions control legislation roadmap On Road 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Europe EU VI EU VII? North America GHG Phase 1 GHG Phase 2 North America (CARB) GHG Phase 1 GHG Phase 2 CARB Ultra Low NOx Japan JP09 JP16 South Korea EU VI EU VI? Brazil EU IV EU V
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