INSIGHT: Johnson Matthey - a catalyst for growth

21 March 2006 17:20  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Precious metal catalysts producer Johnson Matthey is likely to continue to woo investors with its green credentials and growth profile.

The company gives a trading update on Wednesday (22 March) near the close of its 2005 financial year at the end of the month. The outlook is expected to be bright.

The autocatalysts and pharmaceuticals maker continues to tell a good story. In the second half analysts believe the company’s catalysts have continued to perform well. Precious metals products will have been lifted by the strong platinum price. Pharmaceuticals profits are estimated to have been higher at least compared with the first six months of the year.

Given the firm’s growth prospects in autocatalysts it is not difficult to see why chemicals giant BASF has made its unsolicited offer for US catalysts maker Engelhard. Johnson Matthey may be different but has already indicated that it expects 10% growth for its vehicles catalysts business in the second half. It is being driven by the growth of products for use in diesel vehicles in Europe and growth in Asia although the situation in the US is less rosy.

Not surprisingly, demand for process catalysts is also growing too. Johnson Matthey is expecting the ammonia, methanol, oil and gas (AMOG) catalyst business to lift growth in its process catalysts and technologies (PCT) division. Sales of catalysts for hydrogen generation and gas purification have been particularly strong.

Riding on the back of developments in the refining and chemicals sectors is one thing but Johnson Matthey can look to ongoing global demand for heavy duty diesel (HDD) catalysts. New European legislation will drive market growth in 2006 and US legislation in 2007. Beyond that, HDD catalysts will be pulled along by growth in India and China and by legislation as it relates to off-road vehicles like tractors.

The precious metals business currently also is attractive given high prices for platinum. Johnson Matthey has developed a niche pharmaceuticals business initially on platinum-based compounds but latterly on opiates that has potential. It is believed that some new products are delayed while customers await US drug regulation authority approvals. The company’s restructured ceramics operation also looks as though it did relatively well in the second half.

The mix of solid current and short term growth prospects are coupled with a definite green or environmentally driven future growth profile. The company is challenged to maintain the momentum in sales and earnings but is well placed. There is talk now of earnings per share (EPS) upgrades through 2006, 2007 and 2008.

By: Nigel Davis
+44 20 8652 3214

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