(Edited from: 2009 annual report)
Johnson Matthey states that fiscal year 2008/09 was a year of two halves. A record first half performance was followed by very difficult market conditions in the second half of the year, especially for its emission control technologies business which was impacted by the effects of the credit crunch and collapse in consumer confidence on automotive markets, particularly in North America and Europe.
From 1 April 2009, the company has transferred its Catalysts and Chemicals business, which makes precious metal and some base metal catalysts and precious metal chemicals, into its Precious Metal Products Division. Going forward, the Fine
Chemicals businesses, comprising of its Macfarlan Smith, Pharmaceutical Materials and Services and Research Chemicals businesses, will be reported as the Fine Chemicals Division.
Johnson Matthey says that a key element of its strategy has been to maintain a strong balance sheet to ensure that it has sufficient funds to support its investment in R&D and fund organic growth. This it says has put it in a good position to face the current economic downturn.
Its investment in R&D is the foundation of its high technology business and it will continue to increase this investment to ensure that it has the products to maintain and grow its market positions. At the same time it is taking continued action to cut costs in all of its businesses and is maintaining a focus on generating cash.
In 2009/10 the company plans to reduce its capital expenditure. It will however, continue to pursue opportunities for growth, for example in manufacturing catalysts for NOx control on coal fired power stations in China.
“Despite the difficult market conditions that we currently face, the medium to long term prospects for our businesses continue to hold a great deal of promise. The legislative drivers of our business remain firmly in place and the world continues to focus on protecting the environment, improving efficiency and on enhancing energy security, all areas where we have key enabling technologies”, says chief executive officer, Neil Carson.
“We are also well positioned to grow in Asia, the one part of the world where national economies are expected to be least impacted by the current global downturn”, continues Carson.
Johnson Matthey says that it has been investing in infrastructure and building its market shares in Asia. Its businesses in the region, particularly in China, have achieved good growth. All of its divisions are said to have a well established presence in the key Chinese and Indian markets to serve growing local demand for its high technology products.
In addition, sustainability is also a key element of its strategy for the future growth of its business. A significant proportion of its profits is generated from products that benefit the environment. The company will follow its “Sustainability 2017” plan, a long term vision for the whole company which sets its direction and aspirations to become a more sustainable business in the future.
“We have set challenging targets to at least double our earnings per share, achieve carbon neutrality, eliminate waste to landfill and halve the key resources we use per unit of output by 2017. We have now established our benchmark position and have started to measure our progress. We have also been working hard to embed sustainability into the company’s culture and all of our businesses have set their own annual sustainability plans which align with the group goals”, says Carson.
Outlook
The company believes that the credit crunch and global recession has significantly reduced demand in a number of Johnson Matthey’s markets. Demand for automotive products has been particularly badly affected. Prices of platinum group metals are also well down on their peaks reached in the early part of 2008/09.
Against this background the company expects profit in the first half of 2009/10 will be lower than in the same period in 2008/09, when the group achieved strong growth and record profits.
Looking beyond 2009/10, prospects for Johnson Matthey’s businesses remain encouraging with emissions legislation already in place which will drive demand for new catalysts. New regulations for heavy duty diesel emissions in North America will come into force from 1 January 2010, which will increase the number of catalysts sold per vehicle.
In the European Union, new regulations will apply from January 2011 which will mean that all new diesel cars sold will need to be fitted with diesel particulate filters to reduce particulate emissions.
In China, regulations on reducing harmful NOx emissions from power stations are anticipated to start in 2011, while energy security and environmental concerns continue to underpin demand for syngas catalysts and purification materials.
Despite the economic slowdown, it is continuing to increase its investment in R&D to develop new catalyst products and technologies for the future. Johnson Matthey has a strong balance sheet and is well placed to benefit from any recovery in global activity.
Key strategy
Johnson Matthey’s strategic intent is to achieve consistent growth in earnings by concentrating on the development of high added value products and services in areas where its expertise provides a competitive edge, particularly in catalysis, precious metals, fine chemicals and process technology.
(1) Achieve consistent and above average growth in earnings per share;
(2) Grow dividends in line with earnings;
(3) Deliver a return on investment (ROI) above the group's cost of capital; and
(4) Set a pre-tax target of 20% for return on assets (ROA) for all of its divisions.
To achieve the above mentioned financial objectives, the company has listed its strategy:
(1) Focus the business on the group's core skills in catalysis, precious metals and fine chemicals;
(2) Position the group in growth markets where its core skills are applicable;
(3) Differentiate itself through technology;
(4) Continue to invest in R&D to develop new products and manufacturing processes;
(5) Continue to invest in training its employees; and
(6) Maintain strong relationships with major customers, suppliers, government bodies and other
stakeholders by investing resources on joint projects to ensure the group is well positioned
for future market development.
ICIS Chemical Business magazine has unveiled the ICIS Top 100 Chemical Companies, with rankings based on 2008 sales.
A PDF of the ICIS Top 100 Chemical Companies is available for download on ICIS connect.
See the article and analysis of the ICIS Top 100 on ICIS news.
Financial highlights: Johnson Matthey, year ended 31 March
|
|
2009 |
2008 |
2007 |
2006 |
2005 |
|
Sales (£ m) |
7,848 |
7,499 |
6,152 |
4,756 |
4,626 |
|
Operating Profit (£ m) |
280 |
294 |
252 |
229 |
180 |
|
Total Assets (£ m) |
2,694 |
2,593 |
2,089 |
2,166 |
1,809 |
|
Diluted earnings per share (£) |
82.10 |
87.10 |
95.40 |
72.70 |
67.00 |
|
Number of Employees |
8,500 |
8,700 |
7,000 |
7,718 |
7,354 |
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