Half-year figures from platinum catalyst and process chemicals specialist Johnson Matthey unsurprisingly revealed revenues and profits falling in the face of the global economic slowdown, which has hit its major customers in the automotive industry particularly hard. Matthey had warned as much last June, yet the shares still dropped on these results - perhaps because there are yet some more unpleasant surprises.
One was that, despite the obvious one-off boost that various government-backed 'cash for clunkers' schemes gave to consumer automotive demand through the half-year, in Western Europe sales of diesel cars - the major market for platinum catalysts - actually dropped below petrol cars for the first time since 2005. The scrappage schemes favoured smaller-engined cars, where diesel economy is less noticeable, and it turned out that manufacturers were keen to work off high stocks of petrol-engined cars and therefore offered better deals on them. Despite stimulus efforts, Matthey reports that light duty vehicle sales dropped 16 per cent globally, with North America down 36 per cent, Europe down 23 per cent and even Asia down two per cent. In the latter region, fantastic growth in China and India could still not offset a Japanese pullback.
Also surprising, as well as deleterious to Heavy Duty Diesel catalyst sales, was the fact that the recession has seen trucking enterprises in the US break their habit of 'pre-buying' new vehicles to meet tougher environmental legislation coming into force from January, despite the fact that continuing with current vehicles will cost them extra after this date. Nevertheless, the company claims to have seen some improvement on this front from October.
Matthey's pronouncements on the state of the global platinum market are always keenly scrutinised, so its confirmation that the white metal will be in surplus through 2009, with net demand forecast as down four per cent for the year, will feed into mining analyst prognostications. The company also noted that it is speculative investment demand, rather than fundamentals, that has seen the platinum price rising from its October lows.
| JOHNSON MATTHEY (JMAT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,553p | MARKET VALUE: | £ 3.33bn | |
| TOUCH: | 1,552-1,555p | 12-MONTH HIGH: | 1,641p | LOW: 695p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 570p * | NET DEBT: | 48% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 4.36 | 140 | 47.0 | 11.1 |
| 2009 | 3.58 | 110 | 37.4 | 11.1 |
| % change | -18 | -22 | -20 | - |
Ex-div:02 Dec Payment:02 Feb *Includes intangible assets of £638m or 297p per share | ||||
