Report of the Directors
Business Review

Chairman’s Statement

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“After two years of strong growth, 2012/13 saw Johnson Matthey facing a number of headwinds. However, I am pleased to report that your company is making excellent progress in building a sustainable, innovative business that delivers high technology products and services to our customers around the world.”

Tim Stevenson
Chairman

After two years of strong growth, 2012/13 saw Johnson Matthey facing a number of headwinds, particularly as a result of a weak European automotive market and lower platinum group metal prices and volumes. Operational issues at our Salt Lake City refinery and a changing competitive landscape for our UK active pharmaceutical ingredient manufacturing business also impacted our results. As a consequence, underlying earnings per share were 2% down on last year at 150.0 pence. However, I am pleased to report that we continued to invest in research and development, in new manufacturing facilities and in developing new businesses. As a result, your company is making excellent progress in building a sustainable, innovative business that delivers high technology products and services to our customers around the world.

Last year we produced our first integrated annual report covering all aspects of our financial and non-financial performance. This was very well received by our stakeholders and underpinned the vital role that sustainability plays in the management and growth of our business. This year we are building on this and are including a section on our business model, which explains how we create value from innovating world leading, high technology products that enhance quality of life. Throughout this year’s report we demonstrate how the key enablers of our strategy – R&D; our people and culture; manufacturing excellence; sustainability and the global drivers of the chemical industry – are supporting the development and growth of our business. We are also seeking to provide you with an understanding of how we monitor and respond to the risks and opportunities that come from major global drivers, such as the need to improve air quality, as well as to changes in the business environment.

Good governance plays a critical role in ensuring that Johnson Matthey remains a successful and sustainable company. We are reporting against the 2010 UK Corporate Governance Code (the Code) but in addition have chosen to report in accordance with certain aspects of the new edition of the Code, published by the Financial Reporting Council in September 2012, before we are required to do so next year. During the year I have particularly focused on ensuring that the Code’s principles on leadership and board effectiveness have been applied. A key element of this is ensuring that the board has the right mix of individual non-executive directors with the experience and expertise, and who are provided with the right information and support, to constructively challenge and support the executive team. I am therefore pleased to report that the board’s balance of skills, expertise and attributes, including its diversity of perspective, is enhanced by the addition of two new non-executive directors. On 4th October 2012 Colin Matthews joined the board. Colin, who is currently Chief Executive Officer of Heathrow Airport Holdings Limited, brings a wealth of international industrial experience and knowledge to our company. On 20th May 2013 we announced that Odile Desforges will join the board with effect from 1st July 2013. Madame Desforges brings many years of experience and knowledge of the automotive industry to the board.

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