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LONDON (Alliance News) - Johnson Matthey PLC Thursday reported a large rise in pretax profit and its dividend that both comfortably beat market expectations after most of its divisions reported strong sales growth, partially offset by a weaker performance from the precious metals business.
However, the FTSE 100-listed speciality chemicals and metals company gave a mixed outlook for its businesses in the current year, and its shares were down 3.8% to 3,381.00 pence per share early Thursday, the second worst blue-chip performer.
Johnson Matthey reported a pretax profit of GBP495.8 million in the year ended March 31, rising from a GBP406.6 million profit a year earlier. That easily beat analysts' forecasts of GBP437.3 million.
Revenue for the year fell to GBP10.05 billion from GBP11.15 billion, but Johnson Matthey's margin improved as it produced a higher gross profit of GBP817.7 million from GBP799.1 million.
The rise in pretax profit was mainly attributable to a GBP73.0 million gain from the sale of the Precious Metal Products division's gold and silver refining business to Asahi Holdings, which included the sale of a collector, refiner and recycler of precious and rare metals from waste materials.
Earnings per share rose 26% to 211.2 pence from 167.7 pence. Pretax profit before tax, amortisation, and the gain from the sale of the refinery came in at GBP440.1 million, rising from GBP427.3 million.
Administrative costs rose to GBP207.3 million from GBP192.9 million, partially offset by falls in distribution costs to GBP133.3 million from GBP137.3 million and amortisation of GBP17.3 million from GBP20.7 million. Finance costs fell to GBP47 million from GBP50.4 million and finance income rose to GBP9.5 million from GBP8.3 million.
Johnson Matthey also raised its dividend by more than expected to 68.0 pence per share for the year, representing a 9% rise and ahead of analysts' expectations of 67.5 pence.
The Emission Control Technology division, which manufactures catalyst for the automotive industry, saw sales rise 12% with revenue increasing 19% to GBP3.5 billion from GBP2.99 billion. The Process Technologies division, which supplies catalysts, absorbents and technology to the oil and gas industry, saw sales increased by 7% with revenue up 3% to GBP600 million from GBP580 million.
The Fine Chemicals business, supplier of pharmaceutical ingredients and chemicals, said sales went up 3% but revenue remained flat at GBP370 million. The New Businesses division which focuses on areas adjacent to Matthey's current interests saw sales rise by 27%, with revenue up 18% to GBP93 million from GBP79 million.
The Precious Metals Product division, which manages, distributes, refines and recycles precious metals experienced the only sales fall of 9% in the period as revenue dropped to GBP7.17 billion from GBP8.42 billion.
"In 2015/16, Johnson Matthey's continuing businesses are expected to deliver good underlying growth. A strong performance in Emission Control Technologies and good progress in Fine Chemicals is likely to be partially offset by a weaker year for Precious Metal Products. We anticipate that Process Technologies' performance will be broadly stable and that the operating loss in New Businesses will reduce modestly," said Chief Executive Robert MacLeod.
Looking forward, Johnson Matthey said the Emmission Control Technologies division should continue with single-digit growth and hit its medium-term targets, benefiting from growth in vehicle production in China and continued "good demand" for HDD catalysts for large trucks in North America.
The Process Technologies division is likely to have a "more challenging" time in the year to end March 2016, particularly in the first half of the year. The division's performance will be held back by lower income from licensing, particularly in China, but the long-term fundamentals remain "in place", Johnson Matthey said.
Precious Metal Products results will be "significantly down" in the current financial year as a result of the sale of its gold and silver refining business, as costs are expected to rise and prices to fall. But the manufacturing element of the division, which generates around two thirds of the division's sales will remain "broadly stable".
Fine Chemicals is expected to make "good progress" in the current year whilst the New Businesses division will benefit from the two acquisitions made in 2015 in its Battery Technologies business. Johnson Matthey expects to invest around GBP5 to GBP7 million per year in new opportunities. The division is expected to reach breakeven in the year to end March 2018.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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