Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — FY2016 Earnings Presentation
44 slides from Johnson Matthey's earnings presentation, Jun 2, 2016
Slide 1: Presentation of Results for the year ended 31st March 2016
Presentation of Results for the year ended 31st March 2016 2nd June 2016 Follow us on Twitter: @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 Robert MacLeod Chief Executive
Slide 4: Key Messages
Key Messages Robust performance overall in challenging Actions taken to reduce costs provide benefits markets, supported by strong growth in ECT in 2016/17 £ £ Ongoing investment in R&D and capex to Strong cash generation and balance sheet support medium term growth opportunities provide the resourc
Slide 5: Health and Safety is Our Priority
Health and Safety is Our Priority 17th July 2015 Tragic accident in Riverside resulted in loss of 43% reduction in LTIIR life for one of our colleagues 53% reduction in TRIIR since March 2014 1.0 1.8 1.2 LTIIR Continued focus on TRIIR LTIIR 0.5 H&S programme 0.6 TRIIR embedding health and introduced
Slide 6: Financial Review
Financial Review Den Jones Group Finance Director
Slide 7: Underlying Results
Underlying Results1 Year to 31st March 2016 2015 % at £m £m % change constant rates (cr) Revenue 10,714 10,060 +7 +6 Sales excluding precious metals2 3,177 3,164 – – Operating profit 451 477 -6 -6 Interest and share of JV profit (33) (37) +12 Profit before tax 418 440 -5 -5 Tax (67) (75) Profit afte
Slide 8: Robust Performance with Significant Headwinds
Robust Performance with Significant Headwinds Underlying Profit Before Tax Bridge – 2014/15 to 2015/16 £m 500 450 £6m £13m £12m 400 £20m £9m 350 300 £440m £418m £399m 250 200 150 2014/15 Pension 2014/15 Businesses Interest and 2015/16 uPBT Exchange uPBT Disposals charge uPBT rebased Corporate & pgm
Slide 9: Reconciliation to Reported Results
Reconciliation to Reported Results Year to 31st March 2016 2015 £m £m Underlying profit before tax 418 440 Amortisation of acquired intangibles (21) (17) Profit on sale of businesses 130 70 Major impairment and restructuring charges (141) – Exchange on liquidation of businesses - 3 Profit before tax
Slide 10: Restructuring and Impairment Charges
Restructuring and Impairment Charges Process Technologies New Businesses ECT Market conditions expected to Fuel Cells - expected market Actions to cease manufacturing remain challenging penetration pushed out to at in Korea to optimise supply • Charge of £62m least 2025 chain • Impairment of SNG and
Slide 11: Cash Flow from Operations
Cash Flow from Operations Year to 31st March 2016 2015 £m £m Operating profit 419 533 Impairment, depreciation and amortisation 252 153 Tax paid (66) (82) Profit on disposal of businesses (130) (70) Working capital / other 392 (408) Cash flow from operations 867 126 • Working capital days (excl. pm)
Slide 12: Cash Flow Conversion
Cash Flow Conversion Year to 31st March 2016 2015 £m £m Cash flow from operations 867 126 Add back: Tax paid 66 82 Pension deficit contributions 26 30 Net capital expenditure (250) (208) 709 30 Movement in precious metal working capital (342) 180 Cash flow (excluding precious metals) 367 210 Underly
Slide 13: Continued Investment to Support Business Growth
Continued Investment to Support Business Growth Capital expenditure £257m £m Capex / depn (times) 300 1.8 (2014/15 £212m) 1.7 • Key projects: 250 • Extension of ECT facilities in Europe and 1.6 China to meet demand from new legislation 200 1.5 • Expansion of pgm refining capacity in China 150 1.4 •
Slide 14: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) 23% Target 19% 15% 11% Cost of capital 7% 2012 2013 2014 2015 2016 Down due to lower profit and higher capex £ Group ROIC 17.3% Well ahead of pre-tax cost of capital of 8.1% Remain committed to 20% target 14
Slide 15: Balance Sheet Provides Resources For Investment
Balance Sheet Provides Resources For Investment £ Treasury Post-employment Benefits • Net debt reduced to £675m • Number of actions over last few years to (2014/15 £994m) reduce deficits • Net debt (including post tax pension • UK scheme now in surplus of £101m deficits) / EBITDA 1.1 times under IAS
Slide 16: Operating Review
Operating Review Robert MacLeod Chief Executive
Slide 17: Emission Control Technologies – Another Strong Year
Emission Control Technologies – Another Strong Year Year to 31st March % at constant £m 2016 2015 % change rates (cr) Sales (excluding precious metals) 1,913 1,782 +7 +7 Underlying operating profit 272 237 +15 +16 Return on sales 14.2% 13.3% Return on invested capital (ROIC) 28.3% 24.1% Another stro
Slide 18: Strong Light Duty Sales Across all Regions
Strong Light Duty Sales Across all Regions Total sales £1,182m up 12% Johnson Matthey’s Light Duty Catalyst Sales £m +14% at cr 1,400 £1,182m 1,200 £1,009m £1,058m +12% 1,000 +18% at cr 800 £698m £571m £622m 600 +12% +10% at cr +6% at cr 400 £255m £257m £282m £183m £179m £202m 200 +10% +13% 0 2013/1
Slide 19: Growth in On Road HDD Catalysts
Growth in On Road HDD Catalysts Total sales £645m up 5% Johnson Matthey’s On Road Heavy Duty Diesel Catalyst Sales £m +2% at cr 700 £645m £616m 600 -2% at cr +5% £512m 500 £387m £405m 400 £321m +14% at cr +5% 300 £182m £196m -10% at cr 200 £150m +8% 100 £41m £47m £44m 0 -8% 2013/14 2014/15 2015/16 2
Slide 20: Looking Ahead – Emissions Remain a Major Global Issue
Looking Ahead – Emissions Remain a Major Global Issue Light duty – good structural growth in Heavy duty – longer term growth in China medium term and India • Euro 6c and RDE legislation begins to take • Production of Class 8 trucks in North America effect from late 2017 onwards. Continued has contin
Slide 21: Process Technologies – Challenging Trading Conditions
Process Technologies – Challenging Trading Conditions Year to 31st March % at constant £m 2016 2015 % change rates (cr) Sales (excluding precious metals) 541 591 -8 -9 Underlying operating profit 74 106 -31 -31 Return on sales 13.6% 17.9% Return on invested capital (ROIC) 9.6% 14.6% Challenging mark
Slide 22: PT Chemicals – Weaker Sales in Licensing and Catalysts
PT Chemicals – Weaker Sales in Licensing and Catalysts Sales 10% down at £309m Sales Ammonia 14% • Lower demand in ammonia after strong Petrochemicals 33% 2014/15 Methanol Syngas 18% • Steady sales of methanol catalysts 51% Oleo/ • Licensing sales reduced biochemicals Formaldehyde 15% 16% (£56 milli
Slide 23: PT Oil and Gas – Mixed Year Overall
PT Oil and Gas – Mixed Year Overall Sales down 7% to £232m Sales • Reduced demand for hydrogen catalysts after strong year in 2014/15 Diagnostic Hydrogen • Refinery additives sales ahead Services 24% • Good progress in gas processing 27% Refineries 55% Gas Additives • Diagnostic Services sales down
Slide 24: Looking Ahead – Limited Short Term Growth Opportunities, Long Term Drivers Remain
Looking Ahead – Limited Short Term Growth Opportunities, Long Term Drivers Remain Actions taken to reduce costs but limited Long term drivers remain in place short term growth opportunities • Tighter emissions regulations and energy • Catalyst demand stable security concerns support future demand •
Slide 25: Precious Metal Products – Headwinds in Refining
Precious Metal Products – Headwinds in Refining Year to 31st March % at constant £m 2016 2015 % change rates (cr) Sales (excluding precious metals)1 343 417 -18 -19 Underlying operating profit 66 102 -35 -35 Return on sales1 19.4% 24.3% Return on invested capital (ROIC) 16.5% 21.6% Continuing busine
Slide 26: PMP Services – Adversely Impacted by Lower Pgm Prices
PMP Services – Adversely Impacted by Lower Pgm Prices Sales down 17% at £94m Platinum and Palladium Prices $/oz (continuing businesses) 1,200 • Substantially lower average pgm prices impacted performance in Refining 800 • Pt $991/oz (down 26%) • Pd $631/oz (down 23%) 400 Mar-15 Sep-15 Mar-16 • Intak
Slide 27: PMP Manufacturing – Steady Overall
PMP Manufacturing – Steady Overall Sales down 4% to £249m Sales Benefiting from: Chemical • Steady demand in Europe and North America for Products Noble Metals products used in automotive glass applications 19% - Industrial • Strong sales of chemical products due to good Products demand from pharma
Slide 28: Looking Ahead – Short Term Tough but Investing for Growth
Looking Ahead – Short Term Tough but Investing for Growth Pgm Refining and Recycling Manufacturing businesses • Performance will continue to be adversely • Stable outlook for 2016/17 impacted at current pgm prices • Focus on accessing higher growth markets • Continued focus on improvement projects •
Slide 29: Fine Chemicals – Steady Progress
Fine Chemicals – Steady Progress Year to 31st March % at constant £m 2016 2015 % change rates (cr) Sales (excluding precious metals)1 296 328 -10 -13 Underlying operating profit 82 89 -7 -11 Return on sales 27.8% 27.1% Return on invested capital (ROIC) 16.9% 18.4% • Steady sales growth in API Manufa
Slide 30: Expanding API Capabilities to Drive Future Growth
Expanding API Capabilities to Drive Future Growth API Manufacturing Catalysis and Chiral Technologies (CCT) • Sales up 1% to £217m (-3% at cr) • Sales up 16% to £41m • Demand for APIs mixed across our portfolio • Strong demand for catalysts and other with steady sales overall specialty products • Ac
Slide 31: Looking Ahead – Good Medium Term Growth Potential
Looking Ahead – Good Medium Term Growth Potential Positive outlook for API Manufacturing Strong global drivers support future and CCT growth • Expect growth in API Manufacturing in • Focus on complex, smaller volume APIs North America • Working with customers / partners to • Annan site will support
Slide 32: New Businesses – Good Progress in 2015/16
New Businesses – Good Progress in 2015/16 Year to 31st March % at constant £m 2016 2015 % change rates (cr) Sales (excluding precious metals) 157 91 +73 +83 Underlying operating profit / (loss) (18) (22) +19 +20 Other • Battery Technologies (sales 56% ahead at £130m) Sales 1% • Break even excluding
Slide 33: Looking Ahead – Deepening Portfolio for Long Term Growth
Looking Ahead – Deepening Portfolio for Long Term Growth Battery Technologies Water Technologies • Licence agreed since year end for high energy • Acquisition of MIOX and Finex since year end nickel rich cathode materials • Expect sales of ~£15m in 2016/17 with small • Investment in R&D to develop n
Slide 34: Key Messages
Key Messages Robust performance overall in challenging Actions taken to reduce costs provide benefits markets, supported by strong growth in ECT in 2016/17 £ £ Ongoing investment in R&D and capex to Strong cash generation and balance sheet support medium term growth opportunities provide the resourc
Slide 35: Sustainability Drivers Provide Superior Growth for JM
Sustainability Drivers Provide Superior Growth for JM Global Drivers Population Growth • Provide opportunities across all businesses Urbanisation Increasing • JM well positioned in emerging markets Wealth Population Growth Health & Nutrition Natural • Energy security a major Urbanisation driver for
Slide 36: In Summary
In Summary Attractive business fundamentals Investing for the future Underpinned by innovation In R&D, capex and new businesses Leading, defendable market positions Disciplined capital efficiency Well placed for growth Strategy to achieve superior growth Strong global structural drivers over medium
Slide 37: Questions and Answers
Questions and Answers Robert MacLeod Den Jones John Walker Chief Executive Group Finance Director Executive Director, Emission Control Technologies John Fowler Nick Garner Geoff Otterman Jane Toogood Division Director, Division Director, Division Director, Division Director, Fine Chemicals New Busin
Slide 38: Appendix
JME) Johnson Matthey
Slide 39: Estimated Light Duty Vehicle Sales and Production
Estimated Light Duty Vehicle Sales and Production Year to 31st March 2H 2H 2016 2015 % 2015/16 2014/15 % millions millions change millions millions change North Sales 21.0 19.7 +6 10.3 9.5 +8 America Production 17.8 17.0 +4 8.8 8.6 +2 Sales 18.8 18.1 +4 9.5 9.2 +3 Europe Production 20.7 20.3 +2 10.7
Slide 40: Global Growth in Vehicle Production Drives ECT
Global Growth in Vehicle Production Drives ECT Light Duty Vehicle Production Outlook – 2015 - 2020 (calendar years) million CAGR 3.3% 120 (2015 – 2020) 104.1 100.9 100 97.0 91.4 93.6 88.7 CAGR 3.7% 80 (2015 – 2020) 60 CAGR 2.4% CAGR 2.2% 52.1 54.3 (2015 – 2020) 49.5 (2015 – 2020) 45.2 46.8 47.6 40 2
Slide 41: Legislation Continues to Tighten Around the World
Legislation Continues to Tighten Around the World Light Duty Emissions Control Legislative Roadmap 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Europe EU 6b EU 6c / RDE Phase 1 RDE Phase 2 / 95 g/km CO2 EU 7? North America EPA Tier 2 Tier 3 Phase In: NMOG + NOx, PM Tightening North America
Slide 42: Estimated HDD Truck Sales and Production
Estimated HDD Truck Sales and Production Year to 31st March 2H 2H 2016 2015 % 2015/16 2014/15 % thousands thousands change thousands thousands change North Sales 546.1 512.8 +6 262.8 255.4 +7 America Production 545.7 543.7 - 261.7 271.8 -4 Sales 321.2 276.6 +16 172.9 146.9 +18 EU Production 442.8 38
Slide 43: Heavy Duty Vehicle Production Regulated Engines Outlook
Heavy Duty Vehicle Production Regulated Engines Outlook Heavy Duty Vehicle Regulated Engines Production outlook 2015 - 2020 (calendar years) thousands CAGR 9.2% 3,500 (2015 – 2020) 3,341 3,093 3,000 2,812 2,585 CAGR 13.9% 2,500 (2015 – 2020) 2,154 2,147 2,038 2,000 1,879 1,671 1,518 1,500 CAGR 1.3%
Slide 44: Further Tightening of Heavy Duty Regulation
Further Tightening of Heavy Duty Regulation Heavy Duty Diesel Emission Control Legislative 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 and CARB Ultra Low NOx Japan JP09