ended 30 th September 2016 17 th November 2016 Follow us on Twitter: - - PowerPoint PPT Presentation

▶
ended 30 th september 2016
SMART_READER_LITE
LIVE PREVIEW

ended 30 th September 2016 17 th November 2016 Follow us on Twitter: - - PowerPoint PPT Presentation

Jan 21, 2023 128 likes •507 views

Presentation of results for the half year ended 30 th September 2016 17 th November 2016 Follow us on Twitter: Visit www.matthey.com @johnson_matthey Cautionary statement This presentation contains forward looking statements that are subject to

slide-1
SLIDE 1

Presentation of results for the half year ended 30th September 2016

17th November 2016

Follow us on Twitter: @johnson_matthey Visit www.matthey.com

slide-2
SLIDE 2

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 the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.

slide-3
SLIDE 3

Introduction

Robert MacLeod Chief Executive

slide-4
SLIDE 4

First Half Trading In-line; Full Year Outlook Confirmed

4

Sales up 5%, underlying PBT up 5% and underlying EPS up 12% Interim dividend up 5%; reflecting confidence in medium term prospects Tough conditions in PT, steady demand in PMP. Weak H1 in Fine Chemicals, expect stronger H2 Full year outlook at constant rates in line with our previous expectations Positive translational impact for full year underlying PBT of ~£65m at 30th Sept 2016 rates

£

£

Strong trading in ECT in Europe and Asia, weaker in North America

slide-5
SLIDE 5

0.0 0.6 1.2 1.8 0.0 0.5 1.0

LTIIR TRIIR

Health and Safety is Our Priority

5

LTIIR (lost time injury and illness rate) = number of lost workday cases per 200,000 hours worked in a rolling year TRIIR (total recordable injury and illness rate) = number of recordable cases per 200,000 hours worked in a rolling year

43% reduction in LTIIR 53% reduction in TRIIR since March 2014

H&S programme introduced

LTIIR TRIIR Significant reductions in lost time injury and illness (LTIIR) and total recordable injury and illness (TRIIR) since introduction of Health and Safety programme in September 2014

slide-6
SLIDE 6

Automotive Petrochemicals Pharma

  • #1 in emission control
  • #1 in LFP battery materials
  • Developing position in other

battery materials

  • Leader in small molecule APIs
  • Building broader API portfolio
  • #1/#2 position in key sectors

JM sector position Current market Opportunity % JM sales today

9% 64% 11%

6

Strategy Update – Well Positioned in Growth Markets

slide-7
SLIDE 7

Automotive Petrochemicals Pharma

  • Expanding global ECT capacity
  • Improving operational and supply chain efficiencies
  • ~50% increase in LFP capacity
  • Investment in new facility in Europe to

expand capacity and improve efficiency

  • R&D investment to expand API portfolio
  • Reduced cost base in PT by £23m
  • Well positioned for future recovery in end

markets and to maintain leading positions

7

R&D investment

  • ~5% of sales p.a.

Investment in core business systems Capital efficiency

  • ROIC target of 20%
  • Net debt / EBITDA 1.5-2.0

times

Strategic Focus – Investing for Growth; Driving Efficiencies

slide-8
SLIDE 8

Financial Review

Anna Manz Group Finance Director

slide-9
SLIDE 9

Underlying Results1 – In Line With Expectations

9

  • 1. All figures are before amortisation of acquired intangibles, major impairment and restructuring charges, profit or loss on disposal of businesses, significant tax rate changes and, where relevant, related tax effects

2 Sales excluding precious metals have been adjusted to include certain non pass through precious metal items

H1 2016 £m H1 2015 £m % change % at constant rates for continuing business

Sales excluding precious metals2 1,676 1,600 +5

  • 1

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 (35.3) (33.7) Profit after tax 184.3 174.6 +6 Earnings per share 96.4p 86.3p +12 Interim dividend per share 20.5p 19.5p +5

slide-10
SLIDE 10

Solid Performance in H1; Benefit from Exchange Rates

10

Exchange Operating profit H1 2015/16 uPBT rebased £208m +£27m

  • £8m

£227m

  • £8m

£220m +£1m 150 160 170 180 190 200 210 220 230 240

Underlying Profit Before Tax Bridge

(£m)

Interest Disposals H1 2015/16 H1 2016/17

slide-11
SLIDE 11

Cash Flow from Operations

11

H1 2016 £m H1 2015 £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

slide-12
SLIDE 12

Working Capital: Building Inventory Ahead of Stronger H2

12

64 56 66

30 40 50 60 70 H1 FY H1 FYE

Working capital days (excl. pm)

69 50-60 range

  • Working capital increased by

£237m

  • Pm working capital up £111m
  • Non-pm working capital up

£126m, of which £49m FX

FX

2015/16 2016/17

slide-13
SLIDE 13

Net Debt: Working Capital and Pension Driving Increase

13

100 200 300 400 500 600 700 800 900 1000 1100 Mar-16 Post tax pension deficits Working capital Other Sep-16

(15) 1,002 Net debt, including post tax pension deficits

(£m)

123 657 237

slide-14
SLIDE 14

Dividend

Balance Sheet Remains Strong; Capacity to Invest

  • Net debt (including post tax pension deficits)

/ EBITDA 1.6 times

  • Target range 1.5-2.0 times
  • Group ROIC 17.6%
  • In line with last year

Treasury ROIC

  • ~£16m one-off gain in US post-retirement

medical plan in H1

  • ~£16m increase in group-wide LTIP over the

full year

  • ~£9m net benefit in H1, £ nil for full year

Reward and Benefits

  • Interim dividend up 5% at 20.5p per share
  • Confidence in future prospects

£

14

slide-15
SLIDE 15

Operating Review

Robert MacLeod Chief Executive

slide-16
SLIDE 16

ECT – A Solid First Half

16

  • Sales up 3%1
  • Underlying operating profit flat1
  • Strong performance in Europe and Asia
  • Weakness in North America as expected

Outlook:

  • Continued strength in Europe and Asia
  • Stabilising sales in North America

On road HDD 32% LDV 64%

Division sales split

61%

% of Group sales

Other 4%

  • 1. At constant rates
slide-17
SLIDE 17

Light Duty – Outpacing the Market

£89m £99m £103m £305m £339m £410m £123m £136m £157m £517m £574m £670m 100 200 300 400 500 600 700 800 H1 2014/15 H1 2015/16 H1 2016/17 H1 2014/15 H1 2015/16 H1 2016/17 H1 2014/15 H1 2015/16 H1 2016/17 H1 2014/15 H1 2015/16 H1 2016/17

JM Light Duty Catalyst Sales

£m, % growth at constant rates

+9% +4% +16%

  • 8%
  • Outperformance in Europe, benefiting from increased focus on emissions
  • Growth in Asia in line with vehicle production

North America Europe Global Asia

17

slide-18
SLIDE 18

On Road HDD – US Class 8 Weak, Growth in Europe and Asia

£180m £209m £189m £94m £93m £121m £24m £21m £31m £298m £323m £341m 50 100 150 200 250 300 350 H1 2014/15 H1 2015/16 H1 2016/17 H1 2014/15 H1 2015/16 H1 2016/17 H1 2014/15 H1 2015/16 H1 2016/17 H1 2014/15 H1 2015/16 H1 2016/17

JM On Road Heavy Duty Diesel Catalyst Sales

£m, % growth at constant rates

  • Significant increase in Europe and Asia sales – strong vehicle production and

improved product mix

  • Tough trading in North America due to Class 8 production cycle
  • 6%

+23% +22%

  • 20%

North America Europe Global Asia

18

slide-19
SLIDE 19

US Class 8 Truck Sales – A Cyclical Market

19

100,000 125,000 150,000 175,000 200,000 225,000 250,000 275,000 300,000 325,000 350,000 375,000 Actual LMC Forecast Linear (Actual)

Source - LMC Automotive, October 2016

slide-20
SLIDE 20

PT – Strong Position Maintained in Challenging Markets

20

  • Sales down 12%1
  • Underlying operating profit down 1%1
  • No new licences signed
  • Customers lengthening catalyst replacement

cycles

  • Benefit from cost saving actions last year

Outlook:

  • Stronger second half expected

Oil and Gas 43% Chemicals 57%

Division sales split

15%

% of Group sales

  • 1. At constant rates
slide-21
SLIDE 21

50 100 150 200 H1 2013/14 H1 2014/15 H1 2015/16 H1 2016/17

Chemicals – Licensing Weak and Lower Catalyst Demand

  • Sales down 11%1
  • Longer replacement cycles in Syngas
  • New product boosted Petrochemicals’

sales

  • Licensing sales £22m, down 36%1

21

5 10 2012/13 2013/14 2014/15 2015/16 H1 2016/17

Technology Licensing – Projects Awarded, 2013 – 2016

Syngas

Methanol SNG Oxo alcohols Butanediol Other

Petrochemicals

PT Chemicals – Sales by End Use £m

Syngas Petrochemicals Oleo/biochemicals

  • 1. At constant rates
slide-22
SLIDE 22

Oil and Gas – Performance Mixed, Impacted by Oil Price

  • Sales down 14%1
  • Weaker sales in hydrogen catalysts
  • Refineries processing sweeter crudes
  • Good demand for refinery additives
  • Sustained low oil price impacted

Diagnostic Services

  • Reduced cost base; business broke

even in H1

22

50 100 150 H1 2013/14 H1 2014/15 H1 2015/16 H1 2016/17

PT Oil and Gas – Sales by End Use £m

Refineries Gas Processing Diagnostic Services

  • 1. At constant rates
slide-23
SLIDE 23

Precious Metal Products – Performance Stabilised

23

  • Sales down 2%1
  • Underlying operating profit up 4%1
  • Steady performance in Manufacturing
  • Continued weakness in Pgm Refining and

Recycling Outlook:

  • Steady performance expected to continue

Manufacturing 72% Services 28%

Division sales split

11%

% of Group sales

  • 1. At constant rates
slide-24
SLIDE 24

PMP – Progress in H1 Despite Weak Pgm Prices

24

Services – sales down 3%1

  • Lower average pgm prices (Pt -1%, Pd -9%)
  • Refining intake volumes steady but at low

levels

  • Reduced end of life autocatalyst recycling
  • Outlook for intakes remains subdued for H2
  • Opened new refinery in China

Manufacturing – sales down 1%1

  • Noble Metals mixed
  • Stable sales of medical components
  • Weaker demand for pgm alloy catalysts

used in fertiliser production

  • Strong sales in AGT
  • Demand up for black obscuration

enamels for auto glass

  • 1. At constant rates
slide-25
SLIDE 25

Fine Chemicals – Stronger Second Half Ahead

25

  • Sales up 4%1
  • Underlying operating profit down 26%1
  • Unfavourable product mix impacted H1
  • Continued development of new products

Outlook:

  • H2 expected to be well ahead of H1

CCT 17% API Manufacturing 83%

Division sales split

8%

% of Group sales

  • 1. For continuing businesses at constant rates
slide-26
SLIDE 26

Fine Chemicals – Investing in Future API Portfolio

26

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 Dofetilide API
  • DEA reducing manufacturing quotas – increased

focus on controlled substance abuse in US

Catalysis and Chiral Technologies – sales up 1%1

  • Supported by demand for heterogeneous catalysts
  • 1. At constant rates
slide-27
SLIDE 27

New Businesses – Continued Progress

27

  • Sales up 13%1
  • Underlying operating loss reduced by 11%1
  • Strong sales growth in Battery Materials
  • Broadening technology portfolio into nickel

rich battery materials Outlook:

  • Second half to improve
  • Expect break even in 2017/18

Other 18% Battery Technologies 82%

Division sales split

5%

% of Group sales

  • 1. At constant rates
slide-28
SLIDE 28

Outlook 2016/17 – Guidance Confirmed

28

Guidance for 2016/17 confirmed FX guidance: at 30th Sept 2016 rates, positive translational impact to uOP of ~£65m (up from £15m impact at 2nd June 2016 rates) JM remains well positioned in growth markets. Continued investment in R&D, infrastructure and people to deliver growth At constant rates, expect group performance for continuing businesses to be slightly ahead of last year

£

slide-29
SLIDE 29

Q & A

slide-30
SLIDE 30

30

slide-31
SLIDE 31

Estimated Light Duty Vehicle Sales and Production

31

Source: LMC Automotive

1H 1H 1H 2H 2016/17 millions 2015/16 millions % change 2016/17 millions 2015/16 millions % change North America Sales 11.0 10.8 +1 11.0 10.2 +8 Production 9.1 8.9 +2 9.1 8.8 +4 Europe Sales 9.8 9.3 +5 9.8 9.5 +4 Production 10.7 10.3 +3 10.7 10.7 Asia Sales 19.6 18.1 +9 19.6 21.7

  • 9

Production 22.5 21.1 +6 22.5 24.4

  • 8

Global Sales 44.6 42.6 +5 44.6 47.4

  • 6

Production 44.7 42.9 +4 44.7 46.2

  • 3
slide-32
SLIDE 32

Global Growth in Vehicle Production Drives ECT

17.5 18.0 18.2 18.3 18.9 19.1 20.9 21.4 21.8 22.4 22.9 23.4 45.3 46.9 47.3 49.6 52.1 53.7 88.7 91.2 92.7 96.3 100.3 102.9 20 40 60 80 100 120 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020

CAGR 1.8% (2015 – 2020) CAGR 2.3% (2015 – 2020) CAGR 3.5% (2015 – 2020) CAGR 3% (2015 – 2020)

32

Source: LMC Automotive (April 2016)

Light Duty Vehicle Production Outlook – 2015 - 2020 (calendar years)

million

North America Europe Asia Global

slide-33
SLIDE 33

Legislation Continues to Tighten Around the World

33

Light Duty Emissions Control Legislative Roadmap

Europe North America EPA North America CARB Japan South Korea (Gasoline) South Korea (Diesel) China (Beijing) China (Nationwide) India Indonesia Thailand 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 K-ULEV JP09 JP18 K-ULEV 70 LEV III / / 97g/km CO2 EU 6b

EU 6c/ RDE Phase 1

China 4 (EU 4) China 5 (EU 5) China 6a BJ5 (EU 5) BJ6 China 6b / RDE EU 6b EU 6c / RDE Phase 1

RDE Phase 2 / 95 g/km CO2

EU 7? Tier 2 Tier 3 Phase In: NMOG + NOx, PM Tightening LEV III Phase In: NMOG + NOx, PM Tightening LEV III Further Tightening BS4 (EU 4) BS6 (EU 6) EU 2 EU 4 EU 4 EU5 EU6 China 6b

RDE Phase 2 / 97g/km CO2

EU 7? BS6 / RDE

slide-34
SLIDE 34

Estimated HDD Truck Sales and Production

34

Source: LMC Automotive

1H 1H 1H 2H 2016/17 thousands 2015/16 thousands % change 2016/17 thousands 2015/16 thousands % change North America Sales 254 284

  • 11

254 266

  • 4

Production 235 293

  • 20

235 265

  • 11

EU Sales 209 194 +8 209 215

  • 3

Production 267 259 +3 267 275

  • 3
slide-35
SLIDE 35

563 474 441 488 542 596 527 542 559 592 631 669 1,063 1,142 1,532 1,642 1,820 1,976 2,153 2,158 2,531 2,721 2,993 3,241 500 1,000 1,500 2,000 2,500 3,000 3,500 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020

Heavy Duty Vehicle Production Regulated Engines Outlook

35

Source: LMC (April 2016); JM estimates for proportion regulated

CAGR 1.1% (2015 – 2020) CAGR 4.9% (2015 – 2020) CAGR 13.2% (2015 – 2020) CAGR 8.5% (2015 – 2020)

Heavy Duty Vehicle Regulated Engines Production outlook 2015 - 2020 (calendar years)

thousands

North America Total Europe Asia and South America Global

slide-36
SLIDE 36

Further Tightening of Heavy Duty Regulation

36

Heavy Duty Diesel Emission Control Legislative Roadmap

BS VI / PEMS BS VI / PEMS Tier 4b? 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Europe North America

North America (CARB)

Japan South Korea Brazil Russia India (Main Cities) India (Nationwide) China (Beijing) China (Nationwide) On Road Europe North America Japan South Korea Brazil China (Beijing) China (Nationwide) Non-road EU VI EU VII? GHG Phase 1 GHG Phase 2 GHG Phase 1

GHG Phase 2 and CARB Ultra Low NOx

JP09 JP16 EU VI EU VII? EU V EU VI? EU VI? EU V? EU IV BS IV BS VI BS VI BS III BS IV China V China VI China IV China V China VI Tier 4b Stage V CARB/EPA Reduced NOx/PM? Tier 4b Tier 4b Stage V? Tier 4b Tier 3 Tier 4a? Tier 3 Tier 4a Tier 4b?

Tier 4b?

Tier 4a Tier 3

slide-37
SLIDE 37

Reconciliation to Reported Results

37

H1 2016 £m H1 2015 £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 Research Chemicals