Join our community of smart investors

Progress halted at Johnson Matthey

RESULTS: Johnson Matthey's long-term potential remains attractive, but recession in Europe and weak metal prices are likely to weigh on sentiment
November 21, 2012

Speciality chemicals company Johnson Matthey (JMAT) blames the slump in precious metal prices for these below-par results. But storm clouds are gathering elsewhere and, given that the second half is unlikely to be any better, earnings downgrades look inevitable.

IC TIP: Hold at 2175p

Underlying operating profit at the precious metals division plunged by a third to £71.8m, far worse than expected. Weaker prices did the damage - platinum fell 16 per cent despite a boost from unrest in South Africa, palladium was down 18 per cent and rhodium 38 per cent. Few were willing to sell at those prices, which meant less for Matthey to refine and, with high fixed costs, a lot of the fall in revenue dropped straight through to the bottom line. Management admits a recovery here can only come with higher prices. There was more to cheer at the environmental technologies division where profit rose 17 per cent. Sales of catalytic convertors for both cars and trucks grew sharply in the US and Asia, but mirrored a decline in production across Europe and any significant impact from tighter legislation is at least a year away. Still, high-margin ingredients for painkillers and hyperactivity drugs swelled profits at the smaller fine chemicals unit by 14 per cent.

Deutsche Bank forecasts full-year adjusted pre-tax profit to £414m, giving adjusted EPS of 156p (from £426m and 153.7p in 2012).

JOHNSON MATTHEY (JMAT)

ORD PRICE:2,175pMARKET VALUE:£4.46bn
TOUCH:2,175-2,176p12-MONTH HIGH:2,579pLow: 1,691p 
DIVIDEND YIELD†:2.6%PE RATIO:15
NET ASSET VALUE:657p*NET DEBT:52%

Half-year to 30 SepTurnover (£bnPre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20115.9019570.315.0
20124.8918370.415.5
% change-17-6-+3

Ex-div: 28 Nov

Payment: 5 Feb

*Includes intangible assets of £628m, or 307p a share

†Excludes 2012's special dividend of 100p