LONDON (Alliance News) - Platinum and chemicals company Johnson Matthey PLC on Thursday pointed to a better year ahead, as pretax profit fell amid tough market conditions in the financial year that ended in March, underlining that optimism with a raised dividend.
Shares in the company were up 1.2% to 2,858.00 pence on Thursday morning, one of the top gainers in the FTSE 100 index.
Johnson Matthey, which makes emission control systems, catalysts and fine chemicals, said the structural drivers for its key operations remain robust for the current financial year, despite challenging macroeconomic conditions which weighed on its performance in financial 2016 continuing.
The group expects its Emission Control Technologies business to be slightly ahead year-on-year in the 2017 financial year, benefiting from vehicle production growth in Europe and Asia and good demand for trucks in Western Europe. This will be slightly held back by lower demand for heavy-duty diesel catalysts for large trucks in North America, which will hit the first half performance of the division.
Johnson Matthey anticipates its Fine Chemicals business will continue to perform well, driven by its active pharmaceutical ingredients manufacturing business in the US and increased capacity coming on line in Europe. It also anticipates more progress in its New Businesses unit, including profitable contributions to performance from its battery technologies and advanced coatings technology businesses, plus lower costs in its fuel cells arm after restructuring actions taken in the 2016 financial year.
One of the divisions which weighed on profit in the 2016 financial year, Process Technologies, should deliver a better performance thanks to cost cuts the group has made feeding through, helping to offset continued softness in its markets. Precious Metals Products, however, is likely to deliver a weaker performance due to continued problems facing the group's platinum group metals refining and recycling operations.
Overall, Johnson Matthey said its results in the 2017 financial year should be ahead of the recently-ended year, in line with market expectations.
The group said pretax profit was GBP386.3 million in the year that ended March 31, down from GBP495.8 million a year earlier, despite revenue rising to GBP10.71 billion from GBP10.06 billion.
Underlying pretax profit, stripping out one-offs, was GBP418.2 million, down from GBP440.1 million the year earlier but ahead of the market consensus estimate of GBP414.8 million.
Johnson Matthey was hit by challenging conditions for its Process Technologies and Precious Metal Products businesses, which offset a strong performance in its Emission Control Technologies arm and a solid year in its Fine Chemicals division. Profit also took a hit from restructuring costs related to the Process Technologies unit and the company's fuel cells business.
Emission Control Technologies sales grew in the year, helped by a recovery in Western European truck production and the full implementation of emissions legislation in Europe on light-duty diesel vehicles. The division also saw good demand in its Asian light-duty business, with growth in catalyst sales across major Asian markets, while North American sales were supported by light-duty catalyst sales.
This strength was offset by a tough year for the Process Technologies unit, which suffered from lower licensing income and weaker catalyst sales in the chemicals arm, while the oil-and-gas-facing business was hurt by the lower oil price. Precious Metals Products also struggled, amid lower platinum prices.
Johnson Matthey declared a final dividend of 52.0 pence, taking its total dividend payout up 5.0% year-on-year to 71.5p, reflecting confidence in an improved performance to come.
"Johnson Matthey has delivered a robust performance overall in a year where conditions have been particularly tough in some of our markets," said Chief Executive Robert MacLeod.
Turning to the current year, however, MacLeod said the group "remains well positioned in markets with strong growth drivers".
"Our strong cash generation and balance sheet provide the resources for investment, and we continue to increase R&D and capital expenditure to drive future growth," he added.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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Johnson Matthey (JMAT)