Johnson Matthey Plc · LSE:JMAT
Johnson Matthey — H1 2016/17 Earnings Presentation
37 slides from Johnson Matthey's earnings presentation, Nov 17, 2016
Slide 1: Presentation of results for the half year ended 30th September 2016
Presentation of results for the half year ended 30th September 2016 17th November 2016 Follow us on Twitter: Visit www.matthey.com @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: First Half Trading In-line; Full Year Outlook Confirmed
First Half Trading In-line; Full Year Outlook Confirmed £ Sales up 5%, underlying PBT up 5% and Strong trading in ECT in Europe and Asia, underlying EPS up 12% weaker in North America £ Tough conditions in PT, steady demand in PMP. Interim dividend up 5%; reflecting confidence in Weak H1 in Fine Che
Slide 5: Health and Safety is Our Priority
Health and Safety is Our Priority 1.0 1.8 1.2 TRIIR LTIIR LTIIR 0.5 H&S 0.6 TRIIR programme introduced 0.0 0.0 43% reduction Significant reductions in lost time injury and illness (LTIIR) and total recordable in LTIIR injury and 53% reduction in TRIIR illness (TRIIR) since introduction of Health and
Slide 6: Strategy Update – Well Positioned in Growth Markets
Strategy Update – Well Positioned in Growth Markets JM sector position Current market Opportunity % JM sales today • #1 in emission control Automotive • #1 in LFP battery materials 64% • Developing position in other battery materials Petrochemicals • #1/#2 position in key sectors 11% • Leader in sma
Slide 7: Strategic Focus – Investing for Growth; Driving Efficiencies
Strategic Focus – Investing for Growth; Driving Efficiencies • Expanding global ECT capacity R&D investment Automotive • Improving operational and supply chain efficiencies • ~5% of sales p.a. • ~50% increase in LFP capacity Investment in core business systems • Reduced cost base in PT by £23m Petro
Slide 8: Financial Review
Financial Review Anna Manz Group Finance Director
Slide 9: Underlying Results – In Line With Expectations
Underlying Results1 – In Line With Expectations % at H1 2016 H1 2015 constant rates for £m £m % change continuing business Sales excluding precious 1,676 1,600 +5 -1 metals2 Operating profit 236.1 225.0 +5 -3 Interest and share of JV profit (16.5) (16.7) Profit before tax 219.6 208.3 +5 -3 Taxation
Slide 10: Solid Performance in H1; Benefit from Exchange Rates
Solid Performance in H1; Benefit from Exchange Rates Underlying Profit Before Tax Bridge (£m) 240 230 -£8m -£8m +£1m 220 +£27m £227m £220m 210 200 £208m 190 180 170 160 150 H1 2015/16 Exchange Disposals H1 2015/16 Operating profit Interest H1 2016/17 uPBT rebased 10
Slide 11: Cash Flow from Operations
Cash Flow from Operations H1 2016 H1 2015 £m £m Underlying operating profit 236 225 Depreciation and amortisation 84 77 Tax paid (33) (36) Working capital / other (163) 279 Cash flow from operations 124 545 Operating cash flow impacted by higher working capital 11
Slide 12: Working Capital: Building Inventory Ahead of Stronger H2
Working Capital: Building Inventory Ahead of Stronger H2 Working capital days (excl. pm) • Working capital increased by £237m 70 69 FX • Pm working capital up £111m 66 60 64 • Non-pm working capital up 50-60 56 range £126m, of which £49m FX 50 40 30 H1 FY H1 FYE 2015/16 2016/17 12
Slide 13: Net Debt: Working Capital and Pension Driving Increase
Net Debt: Working Capital and Pension Driving Increase Net debt, including post tax pension deficits (£m) 1100 237 1,002 1000 900 (15) 800 123 700 657 600 500 400 300 200 100 0 Mar-16 Post tax pension Working capital Other Sep-16 deficits 13
Slide 14: Balance Sheet Remains Strong; Capacity to Invest
Balance Sheet Remains Strong; Capacity to Invest £ Treasury ROIC • Net debt (including post tax pension deficits) • Group ROIC 17.6% / EBITDA 1.6 times • In line with last year • Target range 1.5-2.0 times Reward and Benefits Dividend • ~£16m one-off gain in US post-retirement • Interim dividend up
Slide 15: Operating Review
Operating Review Robert MacLeod Chief Executive
Slide 16: ECT – A Solid First Half
ECT – A Solid First Half % of Group sales • Sales up 3%1 • Underlying operating profit flat1 61% • Strong performance in Europe and Asia • Weakness in North America as expected Division sales split Other 4% Outlook: • Continued strength in Europe and Asia On road HDD LDV • Stabilising sales in North
Slide 17: Light Duty – Outpacing the Market
Light Duty – Outpacing the Market JM Light Duty Catalyst Sales £m, % growth at constant rates +9% 800 £670m 700 600 +16% £517m £574m 500 £410m 400 £305m £339m +4% 300 -8% 200 £136m £157m £99m £103m £123m £89m 100 0 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2014/15 2015/16 2016/17 2014/15 2015/16 2016/17 2
Slide 18: On Road HDD – US Class 8 Weak, Growth in Europe and Asia
On Road HDD – US Class 8 Weak, Growth in Europe and Asia JM On Road Heavy Duty Diesel Catalyst Sales -6% £m, % growth at constant rates £341m 350 £323m £298m 300 -20% 250 £209m 200 £180m £189m +22% 150 £121m 100 £94m £93m +23% 50 £24m £21m £31m 0 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2014/15 2015/16 2
Slide 19: US Class 8 Truck Sales – A Cyclical Market
US Class 8 Truck Sales – A Cyclical Market 375,000 350,000 325,000 300,000 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 Actual LMC Forecast Linear (Actual) Source - LMC Automotive, October 2016 19
Slide 20: PT – Strong Position Maintained in Challenging Markets
PT – Strong Position Maintained in Challenging Markets % of Group sales • Sales down 12%1 15% • Underlying operating profit down 1%1 • No new licences signed • Customers lengthening catalyst replacement cycles Division sales split • Benefit from cost saving actions last year Oil and Gas 43% Chemical
Slide 21: Chemicals – Licensing Weak and Lower Catalyst Demand
Chemicals – Licensing Weak and Lower Catalyst Demand • Sales down 11%1 • Licensing sales £22m, down 36%1 • Longer replacement cycles in Syngas • New product boosted Petrochemicals’ sales PT Chemicals – Sales by End Use Technology Licensing – Projects Awarded, 2013 – 2016 200 £m 10 150 100 5 50 0 0 H
Slide 22: Oil and Gas – Performance Mixed, Impacted by Oil Price
Oil and Gas – Performance Mixed, Impacted by Oil Price • Sales down 14%1 PT Oil and Gas – Sales by End Use £m • Weaker sales in hydrogen catalysts 150 • Refineries processing sweeter crudes • Good demand for refinery additives 100 • Sustained low oil price impacted Diagnostic Services 50 • Reduced c
Slide 23: Precious Metal Products – Performance Stabilised
Precious Metal Products – Performance Stabilised % of Group sales • Sales down 2%1 11% • Underlying operating profit up 4%1 • Steady performance in Manufacturing • Continued weakness in Pgm Refining and Recycling Division sales split Outlook: Services 28% • Steady performance expected to continue Ma
Slide 24: PMP – Progress in H1 Despite Weak Pgm Prices
PMP – Progress in H1 Despite Weak Pgm Prices Services – sales down 3%1 Manufacturing – sales down 1%1 • Lower average pgm prices (Pt -1%, Pd -9%) • Noble Metals mixed • Refining intake volumes steady but at low • Stable sales of medical components levels • Weaker demand for pgm alloy catalysts • Red
Slide 25: Fine Chemicals – Stronger Second Half Ahead
Fine Chemicals – Stronger Second Half Ahead % of Group sales • Sales up 4%1 8% • Underlying operating profit down 26%1 • Unfavourable product mix impacted H1 • Continued development of new products Division sales split Outlook: CCT 17% • H2 expected to be well ahead of H1 API Manufacturing 83% 1. Fo
Slide 26: Fine Chemicals – Investing in Future API Portfolio
Fine Chemicals – Investing in Future API Portfolio API Manufacturing – sales up 4%1 • Sales ahead but less favourable product mix impacted operating profit • Timing of customers’ product approvals versus maturing products weighted to H2 • Bulk opiates and ADHD APIs ahead • Contribution from Dofetili
Slide 27: New Businesses – Continued Progress
New Businesses – Continued Progress % of Group sales 5% • Sales up 13%1 • Underlying operating loss reduced by 11%1 • Strong sales growth in Battery Materials • Broadening technology portfolio into nickel Division sales split rich battery materials Other Outlook: 18% • Second half to improve Battery
Slide 28: Outlook 2016/17 – Guidance Confirmed
Outlook 2016/17 – Guidance Confirmed Guidance for 2016/17 confirmed At constant rates, expect group performance for continuing businesses to be slightly ahead of last year FX guidance: at 30th Sept 2016 rates, positive translational impact to uOP of £ ~£65m (up from £15m impact at 2nd June 2016 rate
Slide 29: Q&A
Q&A (MYER) Johnson Matthey
Slide 30: JME)
JME) Johnson Matthey
Slide 31: Estimated Light Duty Vehicle Sales and Production
Estimated Light Duty Vehicle Sales and Production 1H 1H 1H 2H 2016/17 2015/16 % 2016/17 2015/16 % millions millions change millions millions change North Sales 11.0 10.8 +1 11.0 10.2 +8 America Production 9.1 8.9 +2 9.1 8.8 +4 Sales 9.8 9.3 +5 9.8 9.5 +4 Europe Production 10.7 10.3 +3 10.7 10.7 0 Sa
Slide 32: 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% 120 (2015 – 2020) 102.9 100.3 100 96.3 92.7 88.7 91.2 CAGR 3.5% 80 (2015 – 2020) 60 CAGR 2.3% CAGR 1.8% 52.1 53.7 (2015 – 2020) 49.6 (2015 – 2020) 45.3 46.9 47.3 40 20.
Slide 33: 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 34: Estimated HDD Truck Sales and Production
Estimated HDD Truck Sales and Production 1H 1H 1H 2H 2016/17 2015/16 % 2016/17 2015/16 % thousands thousands change thousands thousands change North Sales 254 284 -11 254 266 -4 America Production 235 293 -20 235 265 -11 Sales 209 194 +8 209 215 -3 EU Production 267 259 +3 267 275 -3 Source: LMC Aut
Slide 35: 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 8.5% 3,500 (2015 – 2020) 3,241 2,993 3,000 2,721 CAGR 13.2% 2,531 2,500 (2015 – 2020) 2,153 2,158 1,976 2,000 1,820 1,642 1,532 1,500 CAGR 1.1%
Slide 36: 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
Slide 37: Reconciliation to Reported Results
Reconciliation to Reported Results H1 2016 H1 2015 £m £m Underlying profit before tax 219.6 208.3 Amortisation of acquired intangibles (9.6) (9.0) Profit on sale of Research Chemicals - 130.9 Profit before tax 210.0 330.2 Earnings per share 92.7p 137.9p Last year had benefit of profit on sale of Res