Carmakers' dire straits set to dent Johnson Matthey profits


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Johnson Matthey beat expectations with a 1 per cent rise in full-year pretax profit but warned profit and sales would fall over the coming months as the world car industry continues to struggle.

It said the first two months since the year end have been largely flat against the fourth quarter last year for its automotive catalyst business as declines in the U.S. have been offset by gains in Europe.

Group Finance Director John Sheldrick said that the European improvements were down to the car scrappage scheme, which he said some people saw as distorting the market.

vehicle

Balance: So far, declines in the U.S. have been offset by gains in Europe


'People think well that'll work for a short period of time but the cars available to be scrapped will run out so it might just be slightly distorting the market,' he said.

'Nobody knows what's going to happen in Europe, a lot will depend on the U.S. economy ... turning around and that hasn't happened yet.'

At 0923 GMT shares were down about 4 per cent to 1200 pence per share.

The automotive catalyst specialist reported an adjusted pretax profit of £267.9million  ($436 million) for the year to the end March, up from £265.4million a year earlier.

It was also above the £255.2million consensus forecast of nine analysts provided by the company.

The world's biggest distributor of platinum, which is used to make jewellery, vehicle catalysts and as an ingredient for drugs, said it sees demand for catalysts well down in the first half of 2009/10, pushing down sales and operating profit.

The company points out that the medium term outlook remains encouraging due to new emmissions legislation.

Analysts at Cazenove, who have the company on an 'outperform' rating, said in a note: 'Continued benefits from environmental legislation, new industrial uses for catalysts such as coal power stations and marine, and intimate involvement with new energy saving technologies such as hybrids should ensure that Johnson Matthey remains at the forefront of environmental emissions control.'

The company said in its Platinum 2009 report last month that platinum autocatalyst demand dropped more than 8 per cent to 3.81 million ounces year-on-year in 2008 as ailing U.S. car makers accelerated production cuts in the second half of the year.

Johnson Matthey trades at 15.1 times estimated 2009 earnings, compared with the FTSE speciality chemicals index which trades at a mean of 10 times.

Shares in the company have fallen by about 36 per cent during the past year, underperforming the FTSE 100 index which has fallen by about 27 per cent in the same period.

The company plans a final dividend unchanged at 26.0 pence.

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