Catalytic Systems Division achieved operating profits of £45.4 million, 33% up on last year. All three of the division's businesses, Autocatalysts, Environmental Products and Pharmaceutical Materials, performed well. With effect from April 1998, CSD assumed responsibility for the commercialisation of Fuel Cells. Many of the division's major automotive customers now have active fuel cell development programmes.
Autocatalysts
The Autocatalyst business is organised into two major regions, Europe and North America, with a technical centre in Japan dedicated to supporting Japanese customers worldwide. The European Region includes operations in Australia and South Africa, which primarily supply the European market, and is also responsible for our fledgling businesses in Argentina and Malaysia.
In Europe, vehicle sales grew 5% in 1997, largely due to government incentives in Italy. Elsewhere in Europe vehicle sales were very similar to 1996 levels. Unit sales advanced 7% a little ahead of the market but price pressure and the impact of the strong pound on materials costs, which are passed to customers, restricted turnover growth to 2%. Profitability benefited from rigorous cost control, assisted by the strength of sterling against the currencies of our main manufacturing operations in Belgium and South Africa.
Our new autocatalyst plant in Argentina commenced production in February 1998. We have also established a sales and logistics infrastructure in Brazil to give the new factory access to the whole Mercosur trading bloc. In December the company increased to 80% its shareholding in Johnson Matthey HICOM Sdn. Bhd., its autocatalyst manufacturing joint venture in Malaysia. During the year work started on a catalyst coating plant in India which will serve the rapidly growing local market for car and motorcycle catalysts.
The North American Region benefited from another strong year as US vehicle sales in 1997 again exceeded 15 million units. Sales of light duty trucks, where we have a high market share, grew by 6%, mainly at the expense of car sales which declined by 2%. In response to the powerful effect that tighter emissions limits are having on the US market we developed high technology products, often with reduced precious metal loadings, that provide cost effective solutions for customers. This has enabled growth in market share whilst protecting margins.
Environmental Products
Major contracts for stationary source catalysts together with continuing success in heavy duty diesel catalysts in both the US and Europe resulted in an excellent year. In the UK, sales of our Continuously Regenerating Trap have benefited from the government's budget measures to support clean diesel fuel
and the retrofitting of particulate control technology for heavy duty diesels. In the USA the Environmental Protection Agency certified our Cam Converter Technology for the urban bus retrofit market.
Pharmaceutical Materials
Pharmaceutical Materials manufactures a broad range of high value active ingredients for the pharmaceutical industry. These include generic and branded drugs highly regulated by the US Food and Drug Administration (FDA).
1997/98 saw strong growth in organic pharmaceuticals, including controlled substances such as the narcotic analgesics fentanyl, sufentanil and hydromorphone. Leading this growth was an important new product, methylphenidate, which is used for treating Attention Deficit Disorder (ADD) particularly in hyperactive children. Johnson Matthey has had a long collaboration with Schein
Pharmaceutical, Inc., a major US generic drug company, in the development of this product. Schein received FDA approval to manufacture and market their generic form of methylphenidate, containing the active ingredient supplied by Johnson Matthey, in August 1997. Sales commenced in the fourth quarter of calendar 1997 and made a significant contribution to revenues in 1997/98. Overall sales of organic pharmaceuticals were 79% up on last year.
Growth in fabrication business has been matched by a programme of investment in manufacturing capacity which has increased by 200% over the last two years. Pharmaceutical Materials continues investing to support its healthy product development pipeline. Sales and royalty income from carboplatin and cisplatin, the major platinum based anti-cancer drugs, remain strong, although legal
challenges to the extension of the US cisplatin patent have been filed and may impact future royalties.
| RESEARCH AND DEVELOPMENT
Research in Catalytic Systems Division is focused on providing customers with world leading technology at competitive prices. The division's worldwide network of technology centres works closely with the Johnson Matthey Technology Centre. (JMTC) to develop novel catalysts with improved performance and durability that are capable of meeting ULEV standards, and beyond.
One of the most exciting developments in the year was the demonstration to customers of Johnson Matthey's innovative ATLAS (Ambient Temperature Light-Off Aftertreatment System), designed to remove emissions at cold start. ATLAS is the culmination of an 18 month collaboration between scientists based at Devon in the USA and at JMTC. Several car companies are now testing this novel system.
Lean burn engine technology is being introduced by the car companies to meet the twin objectives of improved fuel economy and reduced CO2 emissions. Catalysts for this type of engine are problematic because they are required to remove NOx under lean conditions.
Johnson Matthey is examining various technology options for lean NOx catalysts including NOx traps and selective reduction. This year we have made significant
progress in the development of platinum-based catalysts to meet Stage 4
European legislation for emissions from gasoline engines. |
