Today, Johnson Matthey will hold a capital markets day in which it will outline its strategy for growth and value creation, at a group level and across its sectors.
20 Sep 2017
This growth is underpinned by its leading positions in high margin, technology driven growth markets. The company expects to deliver sustained growth in Clean Air, break out growth in Battery Materials and Health, and above market growth in Efficient Natural Resources. In the medium term, this will generate attractive returns:
- Expanding group ROIC to 20%
- Delivering mid to high single digit EPS CAGR
- And continuing a progressive dividend policy
Overall our Clean Air business will deliver growth in the next ten years. It is expected to achieve strong single digit sales growth in the next two to three years from share gains already achieved in Europe light duty and from upcoming tighter legislation. In subsequent years, sales growth is expected to moderate as expansion in Asia, together with maintaining JM's strong position in heavy duty in North America, is partially offset by the move away from light duty diesel engines in Europe and by the increasing penetration globally of battery electric light duty vehicles.
The strategy for Efficient Natural Resources outlines how JM's technology leadership in the sector can deliver above market sales growth and improving operating margins from a focus on efficiency.
The programme of increased investment in the Health sector, which began in 2014, continues to build a deeper, broader pipeline of new products based on JM's expertise in active pharmaceutical ingredients. Building scale in this way will drive double digit sales growth and substantial margin expansion in this attractive sector beginning in 2019/20.
In New Markets, JM is focused on battery material technology and has plans to make an initial investment of up to £200 million, starting in 2018, to build capacity to drive growth in a market which could be more than $30 billion sales when battery electric vehicle penetration increases to around 10%.
Guidance is confirmed for the year ending 31st March 2018 and at constant currency with sales growth expected to be c6% with improving operating performance offset by non-cash items. Guidance on foreign exchange is unchanged; it is expected to benefit operating profit by £13 million with estimated restructuring benefits in this financial year unchanged at £10 million.
The group presentation will describe a further £50 million of savings, mainly from procurement, over the three years beginning in financial year 2018/19. Most of the savings will be reinvested with the balance for margin expansion. This is in addition to the £25 million of cost savings announced in June 2017.
Commenting on the capital markets day, Robert MacLeod, Chief Executive, said:
"Johnson Matthey has strong market leading businesses capable of sustained growth and value creation over the short, medium and long term.
"We will enhance our leadership in the high margin, technology driven growth markets we operate in through focused investment and efficiency throughout the group. We are world class chemists. We have the expertise to solve our customers' complex and increasingly challenging problems by scaling up fundamental chemistry to provide commercial solutions which drive our growth.
"This will create value and a cleaner and healthier world. Through the strategy we will describe at our capital markets day today, we aim to be one of the best performing, most trusted and admired specialty chemical companies in the world."