Precious Metals Division had an outstanding year with operating profit 19% up on 1996/97 at £52.5 million. The division benefited from favourable market conditions, good demand for gold refining and continued growth in its Chemicals business. The Precious Metals Division is organised into three global businesses: Platinum, Gold and Chemicals.
Platinum
Johnson Matthey's Platinum operations had an excellent year with its
recently combined trading, marketing and manufacturing businesses achieving
record profits.
Trading benefited from favourable market conditions resulting from suspension
of Russian platinum and palladium supplies at the beginning of 1997. Russia
supplies around 70% of the world's palladium and 20% of its platinum. The
issue, a bureaucratic wrangle over responsibility for government controlled
sales and distribution of precious metals, was not resolved until mid-year.
In the interim, market stocks were drawn down and platinum and palladium
prices and lease rates rose sharply. The effect was accentuated by strong
demand for platinum for industry and jewellery, and for palladium for autocatalysts and electronics.
The price of platinum rose to a seven year high of $500/oz in June 1997
but receded when Russian shipments resumed. Palladium fixed at an 18 year
high of $245.50/oz in early August before falling back to around $200/oz
for the remainder of the calendar year. Both prices recovered strongly in
early 1998 and remain robust as the market experiences renewed delays in
Russian shipments. The average price of platinum in 1997/98 was $400/oz,
a rise of 4% over the prior year. Palladium, more significantly affected
by the Russian situation, averaged $204/oz, an increase of 59% over 1996/97.
The year saw significant growth in platinum jewellery demand in China
and North America and increasing automotive investment in commercialisation
of platinum-containing fuel cells for transport. In December 1997 Ford Motor
Company announced it would join the Ballard / Daimler Benz alliance to develop
fuel cell engines.
Platinum's manufacturing operations performed well in the year. Demand
for industrial products from European and North American markets was good
and the businesses were only marginally affected by the Asian slowdown.
Gold
Our Gold and Silver businesses had a good year with the financial turmoil
in Asia resulting in a substantial increase in gold refining activity. Trading
conditions were favourable, availability of material for refining was high
and demand for both metals continued the growth of recent years.
Although gold prices eased in 1997 primary mine output grew to around
2,500 tonnes. Secondary supplies were high as a result of selling from the
troubled economies in South East Asia. Demand for gold for fabrication increased to 3,890 tonnes in 1997. Liberalisation of the Indian market added extra stimulus to business.
During the year we further consolidated our position as the world's largest
gold refiner. Our refineries, in Salt Lake City (USA), Brampton (Canada),
Royston (UK), Thomastown (Australia) and Hong Kong, experienced high levels
of activity. We remain the leading gold refiner in all the regions that
we serve.
The outlook is good and we will maintain our market leading position
by continually improving customer service and investing in new and improved
processes.
Chemicals
The Chemicals business achieved very satisfactory revenues and profits
in both its North American and European operations. Product sales were very
healthy and our refining business put in a strong performance. This was
helped by bringing our new UK platinum metals refinery on stream.
Supported catalysts achieved excellent sales in the pharmaceuticals,
agrochemicals and fine chemicals sectors. Homogeneous catalyst sales were
boosted by demand for hydroformylation catalysts and we saw encouraging
growth in other sectors. Our research chemicals and catalogue sales business
continued to do well, particularly in North America. The European catalogue
business will be further enhanced by a marketing agreement signed with E.
Merck during the year. Our gas sensor electrode business, which was embryonic
a year ago, has grown rapidly due to major expansion of the domestic carbon
monoxide detector market.
| RESEARCH AND DEVELOPMENT
During the year PMD established a New Products Team charged with bringing innovative new products to the marketplace. Consisting of representatives from the Johnson Matthey Technology Centre (JMTC) and from divisional development and marketing functions, the team ensures that research and development projects are focused on customer requirements and that they are transferred rapidly from R&D into production. Current projects include the development and scale up of new red absorbing phthalocyanine dyes (for application in more efficient, lower cost solar cells) and applying the techniques of combinatorial chemistry to the rapid screening and evaluation of novel catalysts (in order to select those most effective in customers' processes).
The new pgm refinery at Royston is based on novel solvent extraction processes developed at JMTC and scaled up on the site.
Work continues on gas sensor electrodes, the market for which is burgeoning largely due to strong demand for domestic carbon monoxide sensors. The best technology available for this application is based on a miniature electrochemical cell for which Johnson Matthey is now a major supplier of electrodes. Similar cells are also used in industry for detection of a wide range of other gases. |
