Report of the Directors
Business Review

Our Strategy

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Progress in 2012/13 and Future Developments

Johnson Matthey has continued to focus on delivering its strategy and 2012/13 has seen the further development of high technology products across the group which has enabled us to differentiate ourselves in our markets. During the year, all our businesses reviewed and reported on their long term strategic plans and key developments were discussed.

The group completed two important bolt-on acquisitions this year, both of which strongly support our strategic aims. In October 2012, as part of our new business development efforts, we acquired Axeon, a company that specialises in the design, development and manufacture of integrated battery systems, to complement our existing R&D programmes to develop battery materials. We subsequently formed a Battery Technologies business, further details of which are provided in the update on new business development below and in the Financial Review of Operations.

At the end of the year we also added Formox to our portfolio. Formox is a leading global provider of catalysts, plant designs and licences for the manufacture of formaldehyde from methanol. We are integrating Formox into our Process Technologies business where there are strong synergies and opportunities to add value for the customers of both businesses, as described further in the Financial Review of Operations.

2012/13 saw the first full year of our Manufacturing Excellence programme and we have successfully established a robust framework that focuses on developing our people, technology and engineering expertise and improving the efficiency of our manufacturing operations. Our aim is to significantly reduce waste from our operations while growing the profitability of our company. During the year all manufacturing sites reported their performance monthly against four key metrics and this has been used internally to track progress and direct actions. Of these metrics, the ratio of our production costs to our sales excluding precious metals has the most direct impact on our profitability. It is an efficiency metric that we believe offers opportunities for us to improve our performance.

Sustainability remains a strong underlying enabler of our strategy and is well embedded across our businesses. We have continued to make good progress towards achieving our Sustainability 2017 targets, as detailed in the Group Performance Review, and we remain on track to meet our goals. Our target to reduce the incidence of occupational illness cases to 3.7 per 1,000 employees by 2013/14 was exceeded again in 2012/13. The health and wellbeing of our people is a key priority for us and we are keen to drive further improvement. As a result, from 1st April 2013 we have introduced a new, more challenging target in this area – to achieve zero occupational illness cases by 2017.

During the year we have continued to focus on how we engage, develop and motivate our people and further details are provided in the Social section.

We have made good progress in trying to capture the essence of our culture in a way that can be used to support the growth and international diversity of our business over the years ahead. In 2013/14 we will start to increase awareness of our culture and company values through integrating and reinforcing them where appropriate in our communications, development programmes and recruitment activities.

As outlined in the Chief Executive’s Statement and in the Financial Review of Operations, in February 2013 we announced that from 1st January 2014 there will be a change to our arrangements with Anglo American Platinum Limited. This change marks an important milestone for Johnson Matthey and our strategy review later this year provides a timely opportunity to look more pragmatically at how we use our chemistry and materials science expertise to deliver high technology products, in the context of these new arrangements.

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