Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — Investor Day (September 2019)
89 slides from Johnson Matthey's investor day presentation, Sep 19, 2019
Slide 1: Capital Markets Day: Delivering sustainable growth and value
Capital Markets Day Delivering sustainable growth and value 19th September 2019
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: Agenda
Agenda Start Session Presenters 09:30 Introduction and group strategy Robert MacLeod 10:00 Financial strategy Anna Manz 10:20 Q&A 10:50 Break 11:10 Clean Air John Walker 11:30 Battery Materials Robert MacLeod 11:50 Q&A 12:10 Lunch 13:00 Sector breakout sessions Sector CEOs 14:20 Break 14:35 Sector b
Slide 4: Delivering sustainable growth and value
Delivering sustainable growth and value Robert MacLeod Chief Executive
Slide 5: A world that's cleaner and healthier
A world that’s cleaner and healthier; today and for future generations 5
Slide 6: Sustained growth fuelled by key megatrends
Sustained growth fuelled by key megatrends Climate Energy Population Resource change transition and longevity challenges 6
Slide 7: We contribute to the UN sustainable development goals
We contribute to the UN sustainable development goals 87% of sales from products contributing to the UN SDGs Clean Air Efficient Natural Resources Health New Markets JM UN Sustainable Development Goals A world that’s cleaner and healthier; today and for future generations Note: 2018/19 sales excludi
Slide 8: Making the world cleaner and healthier
Making the world cleaner and healthier 34,500 tonnes 3.4m tonnes Climate change of CO2 saved per annum by our of pollutants removed by new UK renewable energy contract our emission control catalysts Energy transition 11 million gallons of renewable jet fuel produced Population per annum using our te
Slide 9: Addressing megatrends with our science
Addressing megatrends with our science Resource Megatrends Science Customers allocation Climate change Applying our world Creating customised Rigorous, effective resource class science solutions that make allocation to address Energy transition to solve our customers’ a real difference to megatrends
Slide 10: The spine of science running through our sectors
The spine of science running through our sectors Our core capabilities Clever application Material design Characterisation Chemical synthesis Customised solutions and engineering and modelling Process Surface chemistry New and next Electrochemistry optimisation and coatings generation products Pgm c
Slide 11: Solving our customers' complex problems
Solving our customers’ complex problems For example in Battery Materials 1 2 3 Designing the 1 cathode material Material design and engineering Material design Chemical Characterisation and engineering synthesis and modelling Enhancing the 4 5 process through Process Chemical Making the 5 2 optimisa
Slide 12: Our world class science gives us leading positions
Our world class science gives us leading positions in the markets in which we operate Science gives us leading market positions Clean Air Efficient Natural Resources Health One of three global Strong segment shares #1 controlled players in Clean Air substances in Europe #1 Methanol #1 Diesel #1 Pgms
Slide 13: Our business strategy
Our business strategy Sustained growth and value creation from: Applying world class science to solve customers’ complex problems 13
Slide 14: Creating long term value
Creating long term value Delivering attractive growth and returns Mid to high single ROIC to 20% Progressive digit EPS CAGR dividend Delivery of strategy underpinned by fundamental changes across all aspects of the group 14
Slide 15: We are transforming JM
We are transforming JM… • Strengthening our Creating an Embedding platform for growth environment for sustainability our people to People Culture in everything succeed we do • Creating a more sustainable business • Greater standardisation Efficiency and efficiency • Empowering people Driving efficie
Slide 16: We are successfully executing our strategy
We are successfully executing our strategy Delivering on Built platform for Operational Significant expectations in stronger growth in improvements and progress in Clean Air Efficient Natural pipeline development Battery Materials Resources in Health Delivered 5% annualised EPS growth since 2017 des
Slide 17: Delivering sustained growth and value
Delivering sustained growth and value Sustained growth in Clean Air over the next decade Mid to high single digit growth in Efficient Natural Resources Passed the point of inflection for breakout growth in Health Strong progress in Battery Materials to build a leading position Efficiencies remain a
Slide 18: Clean Air: sustained growth for the next decade
Clean Air: sustained growth for the next decade 2025 outcomes Asia more than doubles in size Europe maintains size despite diesel decline Americas driven by GDP growth Margins maintained through focus on efficiency Mid single digit growth in operating performance to 2025 18
Slide 19: Efficient Natural Resources: market leading growth
Efficient Natural Resources: market leading growth 2025 outcomes Positioned in higher growth segments Continue to evolve our existing strengths New technologies Increased efficiency of operations Mid to high single digit growth in operating performance to 2025 19
Slide 20: Health: passed inflection for breakout growth
Health: passed inflection for breakout growth 2025 outcomes Enhancing the performance of our base business Delivering growth from our new product pipeline Building capabilities to support our customers Delivering c.£100m additional operating profit by 2025 20
Slide 21: Battery Materials: breakout growth
Battery Materials: breakout growth 2025 outcomes Maintained our technology leadership Qualified on customer platforms Commercial scale capacity Well positioned for breakout growth 21
Slide 22: Megatrends drive growth opportunities for science-led solutions
Megatrends drive growth opportunities for science-led solutions Long term Medium term Short term Catalyst technologies including new licensing Clean Air Asia Health Catalyst technologies including new licensing Battery Materials Growth in Clean Air and recycling Europe and Asia Health Hydrogen econo
Slide 23: Sustained growth and value
Sustained growth and value Successfully executing our strategy Mid to high single digit EPS CAGR Addressing megatrends with our science Expanding ROIC to 20% Spine of science running through our sectors Progressive A more agile and efficient business dividend 23
Slide 24: Driving shareholder value
Driving shareholder value Anna Manz Chief Financial Officer
Slide 25: 2019/20 guidance unchanged for first half and full year
2019/20 guidance unchanged for first half and full year Operating performance to be slightly below the prior year in Clean Air Mid to high single digit Better performance and continue to anticipate growth in operating sales growth with operating performance growth performance with ahead of sales in
Slide 26: Delivery of strategy underpinned by three focus areas
Delivery of strategy underpinned by my three focus areas Drive increasing business wide efficiency Disciplined management of working capital Rigorous resource allocation 26
Slide 27: Building a more efficient business for the long term
Building a more efficient business for the long term Annualised benefits from group programmes (£m) £145m £105m previously announced group programmes Extra £40m savings taking total procurement savings to £100m Around two thirds to benefit the income statement; one third capex Most being reinvested
Slide 28: Building a better business for the long term
Building a better business for the long term 01 02 03 04 Standardised systems Manufacturing Procurement Working capital and processes 28
Slide 29: Disciplined management of working capital – non precious metal
Disciplined management of working capital – non precious metal Average working capital days excluding precious metals High performance culture 70 69 62 59 Procurement excellence 50 Manufacturing excellence 2016 2017 2018 2019 Medium term Commercial excellence target • 11 day improvement in average w
Slide 30: Precious metal working capital to improve by c.£350m
Precious metal working capital to improve by c.£350m Reducing refining backlogs Investing to improve refineries Progress on track £100m investment over 3 years Complex process Improving resilience and efficiency of refineries Refineries sized to support Clean Air Neutral impact on ROIC Expect reduct
Slide 31: Investing for growth, efficiency and returns
Investing for growth, efficiency and returns FY19/20 FY20/21 FY21/22 Up to £500m Maintenance Maintenance capex of 0.8-0.9 depreciation includes capex maintenance capex plus smaller growth projects Clean Air plants in Poland, China and India Clean Air (£200m remaining) High ROIC business Efficient Na
Slide 32: Clear path to deliver 20% ROIC target
Clear path to deliver 20% ROIC target 20% ROIC Clean Air High ROIC and investing in flexible and Clean Air efficient plants to maintain returns Efficient Natural Resources Efficient Natural Resources Reduction in backlogs; investment in refineries; licensing and new technologies Health Health Launch
Slide 33: How we think about ROIC strategically
How we think about ROIC strategically Growth Sustain and grow Portfolio of businesses World class science Scale up Leading positions in our key markets Managing portfolio through lifecycles Allocate resources appropriately through Invest lifecycles 20% ROIC businesses at scale Time JM is a 20% ROIC
Slide 34: Clean Air: sustained growth for the next decade
Clean Air: sustained growth for the next decade John Walker – Sector Chief Executive, Clean Air 34
Slide 35: Clean Air leadership team
Clean Air leadership team John Walker Joan Braca John joined in 1984 and appointed Executive Joan joins on 1 October 2019 as Sector Chief Director in 2013 Executive, Clean Air 35 years’ experience and held a series of positions 20 years’ experience in speciality chemicals with within the sector in t
Slide 36: Clean Air: strongly positioned for sustained growth
Clean Air: strongly positioned for sustained growth Sales 2018/19 by sub-business 2% 38% 5% Leadership in catalysts to reduce emissions from vehicles £2.7bn 12% Growth driven by consumer desire for cleaner air and legislation Europe LDV 13% Asia LDV 2018/19 ROIC of 30% Americas LDV 17% Americas HDV
Slide 37: Delivering on our expectations, executing our strategy
Delivering on our expectations Progress since 2017 Strong growth in European light duty achieved, driven by 20ppt share gain in diesel On track with strategy in Asia and winning our share of China 6 business and in India winning BS 6 Executing our strategy Class 8 up-cycle in North America successfu
Slide 38: Growth for the next decade driven mainly by legislation
Growth for the next decade driven mainly by legislation 2019/20 2020/21 to 2024/25 2025/26 to 2028/29 GPF fitment increases Diesel decline and continued BEV Further value expected Europe Diesel share of the market penetration from Euro 7 continues to fall New legislation Class 8 heavy duty cycle Dec
Slide 39: Europe maintains size to 2025 despite light duty diesel decline
Europe maintains size to 2025 despite light duty diesel decline Light duty small decline Share in light duty gasoline and diesel remain stable Decline in light duty diesel share of the market Increasing fitment of gasoline particulate filters Heavy duty to grow European heavy duty will grow steadily
Slide 40: Western Europe light duty diesel share
Western Europe light duty diesel share Western Europe light duty fuel mix % Vehicles sold (diesel and diesel hybrid) 45% 40% Diesel share of light duty Western 35% Europe assumed to decline to 25% by 2025¹ and 10% by 2030 30% 25% 20% 15% 1ppt shift from diesel to gasoline 10% impacts gross profit by
Slide 41: Europe: key assumptions
Europe: key assumptions Key assumptions Vehicle production • <1% light duty vehicle production growth Diesel share of market • Diesel share of light duty vehicles in Western Europe declines to c.25% by 2025¹ • Up to 2x value per light duty gasoline vehicle Value uplift • Up to 1.5x value per light d
Slide 42: Americas: driven by GDP growth in absence of legislation changes
Americas: driven by GDP growth in absence of legislation changes Overall growth in Americas in line with GDP to 2025 Without major legislation changes, no significant movement in key value drivers 42
Slide 43: Americas: key assumptions
Americas: key assumptions Key assumptions Vehicle production • <1% light duty vehicle production growth • Up to 1.2x value uplift per heavy duty vehicle (CARB 2024) Value uplift • Small value uplift across light duty vehicles from 2025/26 (LEV III) BEV penetration • 3% by 2025 • Stable market share
Slide 44: Asia to more than double in size by 2025
Asia to more than double in size by 2025 Heavy duty Tripling of value per vehicle in China and India • China VIa nationwide from 2021 and China VIb from 2023 • India BSVI from 2020 Light duty Doubling of value in China and India • China VIa nationwide from 2021 and China VIb from 2023 • India BSVI f
Slide 45: Asia: key assumptions
Asia: key assumptions Key assumptions Vehicle production • <3% light duty vehicle production growth • Up to 2x value per light duty vehicle (China 6) Value uplift • Up to 3x value per heavy duty vehicle (China VI and India 6) BEV penetration • 13% by 2025 JM market share • Slight share gains in both
Slide 46: Global BEV penetration is accelerating
Global BEV penetration is accelerating Expected global BEV penetration (%) JM assumes 7% global BEV penetration by 2025: 25% 20% JM assumption 13% China 17% 15% 10% JM assumption 7% 9% Europe 5% 0% 2018 2020 2025 2030 Low range JM assumption High range 3% US Source: Various external industry sources
Slide 47: Customer focused and positioned for success
Customer focused and positioned for success Science to drive Efficient, flexible Procurement leadership manufacturing 47
Slide 48: Investing in science to drive leadership
Investing in science to drive leadership Research and development (£m) Growth driven by legislation Clean Air: c.£85m R&D Technology driven leadership 44% £190m Leading diesel technology driving share gains Clean Air Efficient Natural Resources Health Positioning in gasoline for leadership New Marke
Slide 49: Global, efficient and flexible manufacturing to maximise returns
Global, efficient and flexible manufacturing to maximise returns Global, efficient footprint 3 new world class plants in Poland, China and India Identical customer experiences Fully flexible manufacturing Standard plant operating model Optimise production between locations Standardised manufacturing
Slide 50: Clean Air Poland: a world class manufacturing facility
Clean Air Poland: a world class manufacturing facility Poland plant Automated end to end process Successful customer audit Flexible, efficient manufacturing Commissioning underway 50
Slide 51: Procurement integral to the strategy
Procurement integral to the strategy Involved in new product introduction Integral part of strategic decision making Better solutions for the customer Strategic partnering with vendors Delivers better service and quality to customers Capacity to invest or improve margin Creating agility in the organ
Slide 52: Consistent value creation from a global leader
Consistent value creation from a global leader Europe maintains Margins Asia more than size to 2025 Americas driven maintained doubles in size despite diesel by GDP growth through focus decline on efficiency Flexible and agile business positioned for the future Mid single digit growth in operating p
Slide 53: Battery Materials: breakout growth
Battery Materials: breakout growth Robert MacLeod Chief Executive
Slide 54: Battery Materials leadership
Battery Materials leadership Christian Günther, Chief Executive, Battery Materials Christian joins on 4th November as Sector Chief Executive, Battery Materials Strong background in science and successful track record in the development and leadership of large, global technology businesses Most recen
Slide 55: The external environment continues to drive towards electrification
The external environment continues to drive towards electrification Energy Consumer Tightening Government transition behaviour legislation incentives 55
Slide 56: Solving our customers' complex problems
Solving our customers’ complex problems Total cost of Need to develop high OEMs demanding Range anxiety ownership nickel materials greater customisation 56
Slide 57: Cathode materials: complexity gives opportunity to capture value
Cathode materials: complexity gives opportunity to capture value… Technology is a key differentiator Customised solutions ...which plays to our strengths Reliability of supply chain Long lead time to qualification 57
Slide 58: eLNO: a next generation material to enable long range, pure BEV
eLNO: a next generation material to enable long range, pure BEV Energy density and commercial introduction Wh/kg (not to scale) eLNO, our portfolio of next generation, leading, ultra high energy density cathode material eLNO NMC 811 Advanced NCA NMC 532 NMC 622 NCA Expected ultra high energy density
Slide 59: eLNO can solve many of the current challenges for BEV penetration
eLNO can solve many of the current challenges for BEV penetration Properties OEMs optimise on eLNO enables Energy density eLNO is structurally Power more customisable than other materials, Long range, enabling customers to pure BEV Stability deliver leading performance Cobalt content A portfolio of
Slide 60: Customisation is key to capturing value
Customisation is key to capturing value Tailoring eLNO to meet customer requirements 110% Technology expertise enables rapid development and customisation Committed to customisation with positive customer feedback: “JM is a preferred cathode material company to work with due to fast response, willin
Slide 61: World class application and testing facilities
World class application and testing facilities Enabling customised development Building best in class application and testing facilities Enables development of tailored solutions Supports new process and material development Capability to fabricate and test large format cells Designed with customers
Slide 62: Breakout growth: making significant progress
Breakout growth: making significant progress Progress Positive customer feedback and progressed to full cell testing with two parties Investing for commercialisation • Pilot plant operational • FEED work well advanced on first commercial plant Progress on sourcing key raw materials Evaluating best o
Slide 63: Commercialisation: bringing a viable product to market
Commercialisation: bringing a viable product to market Achievements On track to deliver Today 2020 2022 2024 Pilot plant operational Further application and Commercial plant, Supplying platforms testing capacity up to 10kt First UK application centre operational • Sufficient for c.100k pure battery
Slide 64: Building a scalable business
Building a scalable business Scale up beyond our first commercial plant likely to be phased Matching capacity to market demand Enables the use of the most modern process technology to improve returns profile Resources to be allocated in a disciplined manner and in line with our capital allocation fr
Slide 65: Conclusion
Conclusion Maintained Customer testing Commercialisation Progressing scale technology and customisation progressing as up plans leadership continues planned Well positioned for breakout growth 65
Slide 66: Efficient Natural Resources
Efficient Natural Resources Jane Toogood Sector Chief Executive, Efficient Natural Resources
Slide 67: Efficient Natural Resources leadership
Efficient Natural Resources leadership Jane Toogood, Sector Chief Executive Joined in February 2016 as Divisional Director, Precious Metal Products Sector Chief Executive, Efficient Natural Resources from April 2017 Efficient Natural Resources formed from Process Technologies and Precious Metal Prod
Slide 68: Upgrading our guidance
Upgrading our guidance Took over a declining business Confident in Stabilised and delivering on strategy mid to high single digit growth in operating Our technologies accelerate growth performance to 2025 Future growth driven by megatrends 68
Slide 69: We create value from the efficient transformation and use of natural resources
We create value from the efficient transformation and use of natural resources: Demand and consumer concern for the planet is increasing Efficient Natural Resources allows our customers to use those resources both efficiently and cleanly Using our core chemistry and technology expertise to solve com
Slide 70: Efficient Natural Resources
Efficient Natural Resources Catalyst Technologies Chemical and refinery catalysts and process technology Sales 2018/19 by sub-business Platinum Group Metal Services 7% Strategic service to the group and the world’s leading secondary refiner of pgms; precious metal products 8% and business solutions
Slide 71: Our strategy to deliver sustained market outperformance
Our strategy to deliver sustained market outperformance 01 02 03 04 Maximise growth Focused investment Explore step change through differentiated Deliver value through in R&D to maintain & growth opportunities investment by segment focus on efficiency extend technology by extending our and region le
Slide 72: Significant strategic progress
Significant strategic progress Focus Delivered Stabilised performance Creating a robust and sustainable business with operating profit 2 year An agile CAGR of 5% and efficient Restructuring programme completed business well Focus on efficiencies Product portfolio rationalisation positioned Investing
Slide 73: Drivers of near term growth – evolving our existing strengths
Drivers of near term growth – continuing to evolve our existing strengths Examples Technology leadership positions Formaldehyde Methanol #1 Cleaner, more efficient process JM has leading technology Hydrogen #1 Evolving existing technology in line Additives Gas processing #1 with customer Debottlenec
Slide 74: Extending our technologies to accelerate near term growth
Extending our technologies to accelerate near term growth Mono ethylene glycol (MEG) technology Fischer Tropsch (FT cans) technology MEG is a key industrial chemical Waste to aviation fuel • Used in production of polyesters and • License FT cans technology to Fulcrum fibre applications BioEnergy Inc
Slide 75: Opportunities for our science in the future
Opportunities for our science in the future Driven by megatrends Building on existing expertise Climate change Advanced technology in Hydrogen Energy transition gas heated reforming Battery materials Climate change Pgm recycling recycling Energy transition 75
Slide 76: Conclusion
Conclusion Opportunities for our Delivering Accelerating science today and in our strategy growth the future Mid to high single digit growth in operating performance to 2025 76
Slide 77: Health: delivering breakout growth
Health: delivering breakout growth Jason Apter Chief Executive, Health
Slide 78: Health leadership
Health leadership Jason Apter, Sector Chief Executive Joined JM in March 2018 as Sector Chief Executive Over 20 years’ experience working across a variety of industry segments, including 9 years in life sciences Extensive experience in driving innovation, growth and operational effectiveness 78
Slide 79: Applying science and innovation to provide solutions to our customers
Applying science and innovation to provide solutions to our customers Population and longevity driving increased demand for more effective and affordable treatments Advances in novel drugs driving growth in highly potent drug substances and more complex small molecule solutions Continued pressure on
Slide 80: Our business at a glance
Our business at a glance Sales 2018/19 by sub-business Generic Controlled substances (84%) Non controlled substances (16%) 33% Innovators £257m Clinical development (24%) Commercial API (76%) 67% Generics 2018/19 ROIC of 9% Innovators Note: 2018/19 sales excluding precious metals 80
Slide 81: Strong position in attractive market niches
Strong position in attractive market niches Generics Innovators Complex and high potency Market position Leader in controlled substances small molecules Barriers to entry High High New applications Clinical development services Growth drivers New product pipeline New product pipeline Served through
Slide 82: Our strategy for breakout growth
Our strategy for breakout growth 01 02 03 04 Expanding our new Building our product pipeline, Expanding our new Enhancing performance capabilities to better including new product pipeline in our of base business support our customers applications, in our innovators business for future growth generic
Slide 83: Significant progress against our strategy
Significant progress against our strategy Focus Delivered Footprint rationalisation Optimise base business Productivity improvements Procurement initiatives Well positioned 2 new applications to deliver Expand new 1 new generic launch breakout product pipeline 10 generics in regulatory approval 4 la
Slide 84: Driving operational improvements to optimise our base business
Driving operational improvements to optimise our base business Footprint Productivity Procurement Riverside closure Process simplification Narcotic raw material Annan ramp up Capacity optimisation Indirect spending New leadership team with relentless focus on execution 84
Slide 85: Delivering on our product pipeline
Delivering on our product pipeline New application New generic launch Late stage innovator New drug approval using Developed non-controlled Development and manufacturing existing controlled molecule for partner for submitted new drug substance new generic launch drug approval New ADHD treatment with
Slide 86: Generics and innovators pipeline to deliver additional c.£100m operating profit
Generics and innovators pipeline to deliver an additional c.£100m operating profit per year by 2025 Number of generic and innovator products by expected launch date and value¹ (Total products: 75) Expected time until launch Already launched 2019/20 to 2021/22 2022/23 to 2024/25 2025/26+ >£5m 1 2 1 2
Slide 87: Expanding our science capabilities to solve our customers' problems
Expanding our science capabilities to solve our customers’ problems Our core capabilities Expanding capabilities Material design Characterisation Chemical synthesis Particle technology and engineering and modelling Process Surface chemistry High potent Electrochemistry optimisation and coatings manu
Slide 88: Conclusion
Conclusion Population and World class longevity driving Opportunity Passed inflexion science to solve more complex, to expand our point and now our customers’ high potency, capabilities delivering growth complex problems targeted APIs Generic and innovator pipeline to deliver c.£100m additional oper
Slide 89: www.matthey.com/investors
www.matthey.com/investors