21st Nov 2018 13:19
LONDON (Alliance News) - Good performance from Johnson Matthey PLC's core Clean Air division led to a "good" first half, the company said Wednesday, with heavy duty catalysts in particular doing well.
The FTSE 100 firm's Clear Air operations make up over half of group sales, and the division's sales rose 10% to GBP1.31 billion for the six months to September. Excluding currency movements, the figure was up 11%.
Within this, total sales of heavy duty vehicle diesel catalysts rose 13%, or 14% constant currency, to GBP462 million. Light duty vehicle catalyst sales climbed 9%, or 10% constant currency, to GBP831 million.
Underlying operating profit in the division rose 14%, or 15% constant currency, to GBP191 million, with the reported figure up 14% to GBP190 million.
Johnson Matthey's light duty catalyst sales were "well ahead" of global vehicle production, with Europe growing sales 16%. This region makes up approximately 85% of light duty catalyst sales.
In September, the world harmonised light duty testing procedure was introduced, but Johnson Matthey did not see a "material" impact from the regulation despite some disruption to European automotive production.
Johnson Matthey said heavy duty catalyst sales were in particular driven by performance in Europe and the Americas, which both were "significantly" ahead of market production.
In the Americas, sales rose 24% compared to market production of 17%, while in Europe sales were up 8%.
Heavy duty catalyst sales in Asia were equal to market production, staying flat year-on-year, with Chinese sales down 10%, again in line with the market, Johnson Matthey said.
For its full year, ending March 2019, Johnson Matthey expects Clean Air to deliver strong sales growth as significant share gains in European light duty diesel come through.
In the second half, Johnson Matthey believes benefits from operational gearing will be offset by lower prices, trade tariffs, as well as further costs on ramping up market share gains. As a result, the full year margin for Clean Air will be flat year-on-year.
Chief Executive Robert MacLeod said: "Clean Air continues to grow strongly driven by our diesel share gains in light duty Europe which are coming through as planned.
"Heavy duty is also performing well, supported by strength in the Class 8 truck market in the US."
Turning to its next biggest unit, Efficient Natural Resources, sales improved by 1%, and 3% at constant currency, to GBP463 million, with strong growth in refill catalysts partly offset by lower first fill catalyst sales.
The division's underlying operating profit surged 25%, and 26% at constant currency, to GBP85 million.
Johnson Matthey said catalyst technologies, which makes up almost half of the division's sales, did well, with growth at constant currency of 3%. However, catalyst first fill sales did fall, though this is a one-off due to the start-up of new plants.
The company expects to report around GBP7 million of savings in the full year in Efficient Natural Resources, and it expects "slight" sales growth with operating profit growth to be ahead of the rise in sales.
The Health division reported a 1% decline in sales to GBP118 million due to an expected reduction in both pricing and volumes of generic active pharmaceutical ingredients for a variety of treatments.
Underlying profit in the division was GBP15 million, 33% lower and 31% down at constant currency, due to cyclical "significant" decline in high margin products, as well as costs in closing its Riverside facility in Pennsylvania and ramping up Annan in the UK.
Looking ahead, Johnson Matthey expects the division to meet full year expectations, with sales to be "broadly" stable year-on-year and operating profit to fall.
In the New Markets segment, sales jumped by 21% to GBP173 million, and by 23% at constant currency, helped by growth in battery systems for e-bikes and continued momentum in fuel cells for non-automotive applications.
New Markets underlying operating profit was GBP3 million, down from GBP9 million, due to increased costs in battery materials.
For the full year, Johnson Matthey expects New Markets sales growth, but operating profit will fall year-on-year.
On a group basis, Johnson Matthey's pretax profit in the six months to the end of September grew 19% to GBP244 million as revenue improved 10% to GBP7.11 billion.
Th firm hiked its interim payout to 23.25 pence, up 7% year-on-year.
"We had a good half, delivering double digit sales and operating profit growth," said MacLeod.
"We now expect full year operating performance towards the upper end of our guidance of mid-to-high single digit growth," he added.
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