Precious metal price falls hit UK's Johnson Matthey H1 profits

21 November 2012 12:21  [Source: ICIS news]

LONDON (ICIS)--Weakening prices for precious metals drove down Johnson Matthey’s underlying pre-tax profits during the six months to 30 September, despite strong performances by its Fine Chemicals and Environmental Technologies divisions, the UK company said on Wednesday.

Operating profit for the company’s Precious Metals unit fell 33% year on year during the period, to £71.8m (€89m, $114.2m), despite a smaller 5% drop in sales. The platinum market is flat, the company said, while palladium prices remain subdued, and an uptick in rhodium demand has yet to buoy sales prices for the material.

Operating profit for the company’s Environmental Technologies division – comprising emission control technologies (ECT), process technologies and fuel cells – was up 17% year on year for the period at £106.6m, with strong ECT growth in North America and Asia helping to offset softening demand in Europe.

Johnson Matthey’s Fine Chemicals division also posted a 14% rise in operating profits for the period to £37.2m, despite a 2% year-on-year decline in sales to £138m.

The company’s overall underlying profit before tax slipped by 6% year on year to £191.2m in the six months to 30 September this year.

Johnson Matthey chief executive Neil Carson said: “Whilst precious metal prices have improved from their lows during the summer, largely due to the labour unrest in South Africa, the outlook in some of our other markets has weakened and visibility remains limited. We therefore expect that the group’s performance in the second half will be similar to the first half of the year.”

Analyst JP Morgan Cazenove downgraded its outlook for the company from overweight to neutral, cutting its target share price for the company from 2,620p to 2,350p.

“Precious Metals is the key volatile division that could prove the swing factor for the year overall,” the company said. JP Morgan noted that it did not expect Johnson Matthey’s performance in the second half of the fiscal year was unlikely to be much stronger than in the first.

“Historically JM benefits from a slightly stronger second than first half, as in the case of last year. [For full-year 2013,] this now appears unlikely to be the case, given the impact of the sharp decline in profitability in the Precious Metal Products division,” JP Morgan added.

(£1 = €1.24, £1 = $1.59)


By: Tom Brown
+44 208 652 3214



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