UK Johnson Matthey’s Q3 sales down 1% on slowing trucks sector

LONDON (ICIS)–Johnson Matthey’s sales for its fiscal third quarter (October-December 2015) stood at £736m (€972m), down 1% year on year, as three of the five company’s divisions posted double-digit decreases, the UK chemicals and catalysts producer said on Wednesday.

Emissions Control Technologies (ECT) was the best performing division during the third quarter with revenue at £459m, up 6% year on year, benefiting from sales in the light duty vehicle catalyst business, which totalled £285m, an increase of 7% year on year.

“The business saw good growth across all regions and continued to benefit from the full implementation of Euro 6b legislation in Europe [concerning diesel emissions]. Our heavy duty diesel catalyst business grew its sales by 3% to £174m, supported by good growth in western European truck production,” said Johnson Matthey.

However, the company conceded a decrease in the trucks markets in the US had already being noted, as Swiss investment bank UBS warned on 29 January, adding the heavy duty diesel catalysts business had posted reduced demand in the US as sales for Class 8 trucks had decreased and for which outlook “has reduced substantially,” for 2016 and 2017.

Process Technologies posted sales during the third quarter down 11% to £119m as sales of catalysts refills were down, especially in China on the back of the country’s slowing economy.

“Our chemicals businesses’ sales were down, despite strong demand from formaldehyde customers. Sales of methanol catalysts decreased in China and licensing activity remained subdued with two new licences signed in the period,” said Johnson Matthey.

“In our Oil and Gas businesses, sales decreased slightly as the low oil price continued to adversely impact demand in diagnostic services. However, this was partly offset by good growth in hydrogen catalysts and refinery additives.”

Precious Metal Products’ sales decreased by 17% to £76m as the division posted lower average platinum groups metals (PGM) prices and following the divestment of the Gold and Silver Refining business.

Fine Chemicals post sales during the third quarter at £57m, down 23% year on year, due to the divestment of Research Chemicals, sold in September 2015.

“This, together with a less favourable product mix, also adversely impacted operating profit which was lower in the quarter. Sales in our Active Pharmaceutical Ingredient (API) manufacturing business increased slightly as good demand for speciality opiates was partly offset by lower sales of bulk opiates,” said Johnson Matthey.

It added sales of catalysis and Chiral Technologies’ had risen “strongly” during the period on the back of good demand for catalysts.

The company’s New Businesses division doubled sales to £46m as the division reported new revenue after the acquisition of the battery materials and atmosphere control technologies businesses.

The firm’s outlook is cautious as the persistent low crude oil price and the slowdown in China, as well as lower PGM prices, would continue to make challenging the performance of the Process Technologies and Precious Metal Products units.

“Looking ahead, the challenging macroeconomic conditions, which have worsened slightly since our half year results in November, are expected to limit the group’s short term growth opportunities. The long term structural growth drivers for the group’s technologies remain robust and Johnson Matthey is well placed to create value as they develop,” it concluded.

(£1 = €1.32)