Report of the Directors
Business Review

Chief Executive’s Statement

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Outlook

2012/13 was a challenging year for Johnson Matthey, but nevertheless we remain very well positioned to grow our business over the medium and long term. However, 2013/14 will be a year of transition as on 1st January 2014 new Euro VI legislation comes into force for heavy duty diesel vehicles in Europe and on the same date our new arrangements with Anglo Platinum will commence.

Although the medium term outlook for our Environmental Technologies Division is positive, growth in our Emission Control Technologies business in the short term will be strongly influenced by the European economic environment. In the last few months light duty vehicle sales data has been mixed. Sales in our European heavy duty diesel business have, however, exceeded our expectations, which may suggest some pre-buy ahead of the new Euro VI legislation. Our North American business continues to make progress and the advent of heavy duty diesel Euro IV legislation in China, which commences on 1st July 2013, will drive further growth.

Process Technologies is well placed for another year of growth, benefiting from the acquisition of Formox. Underlying demand for our chemical catalysts and technologies remains strong, although we expect that normal cyclicality will impact demand for ammonia catalysts but benefit that for methanol catalysts. The oil and gas market remains robust which will enable continued strong demand for our products.

In its first full year, we anticipate that Battery Technologies will grow sales substantially.

Overall we expect that Precious Metal Products Division will make progress in 2013/14 albeit from a relatively low base. Our refining businesses have started the year well as higher intake volumes in the fourth quarter of 2012/13 are processed. Precious metal prices have fallen in recent months and if maintained these lower prices will likely lead to a reduction in our refining volumes. Our Manufacturing businesses are expected to continue to make steady progress during 2013/14.

The performance of Fine Chemicals Division in 2012/13 was impacted by competition issues at our UK API manufacturing business. The restructuring in the fourth quarter positions the business for the future but its UK business is unlikely to fully recover within the next two years. We expect continued growth in the US API manufacturing business in 2013/14 and overall the long term drivers for the division remain sound. We therefore expect that, after some modest retrenchment in the first half, the division should return to growth in the second half of 2013/14.

Overall, we expect that the group will make steady progress in 2013/14 notwithstanding the loss of revenue from Anglo Platinum. In the medium term, growth is expected to accelerate in 2014/15 and beyond, driven particularly by tighter vehicle emissions legislation and demand for Process Technologies’ products, especially in China. In addition, we are confident that our long term market drivers will enable Johnson Matthey to deliver continued growth which will be further enhanced by our ongoing investment in R&D and new business development.

Reorganisation

With effect from 1st April 2013 we have reorganised our reporting divisions to reflect our new management structure and improve transparency for our stakeholders. Consequently, for the year ending 31st March 2014 the group will report the results of five divisions: Emission Control Technologies, Process Technologies, Precious Metal Products, Fine Chemicals and New Businesses.

Neil Carson
Chief Executive

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