Johnson Matthey upbeat as annual profits rise 16 pct UPDATE

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LONDON (Thomson Financial) - Johnson Matthey Plc, the UK specialty chemicals and precious metals group, said its prospects remained 'very encouraging' despite the slowdown in the U.S. market after it reported a 16 percent growth in annual profits, buoyed by strong platinum prices and increased demand for its car emission control devices.

Underlying pretax profit in the year to March 2008 rose to 265.4 million pounds from 229.3 million previously, ahead of the consensus forecast of 258.7 million pounds. Revenue grew 22 percent to 7.5 billion pounds, while sales -- excluding precious metals -- rose 20 percent to 1.7 billion pounds.

The group is paying a final dividend of 26.0 pence a share, raising the total for the year by 9 percent to 36.6 pence, in line with estimates.

Looking ahead, Johnson Matthey said that overall, it should 'achieve good growth in 2008/09 and future prospects are very encouraging'.

'We expect that the group will perform strongly again in 2008/09 despite concerns about the state of the world economy and the slowdown in the U.S. We are increasing our investment in both research & development and new production facilities to meet the growth in demand for new products which is being driven by global concerns about the environment and high energy prices,' said chief executive Neil Carson.

At the environmental technologies division, sales -- excluding precious metals -- rose 27 percent to 1.1 billion pounds, while operating profit grew 20 percent to 147.3 million pounds. The emission control technologies' (ECT) sales increased 32 percent to 903 million pounds, driven mainly by higher orders for heavy duty diesel catalysts, diesel particulate filters (DPF), and autocatalysts in Asia.

ECT is expected to sustain double digit growth in sales and profits in the current year despite the weakness in the U.S. car market, which will be partly offset by a continued rise in DPF orders in Europe and autocatalysts sales in Asia. The precious metal products division will benefit from the favourable trading conditions in the platinum group metals markets, while the fine chemicals and catalysts' growth in the year should be similar to that in the previous year, the company said.

John Sheldrick, the finance director, told Thomson Financial News in a phone interview that the car markets in Europe, South America and Asia, particularly China and India are expected to keep on growing this year, more than making up for the slowdown in North America.

This, along with the tightening pollution regulations, will underpin the demand growth for the group's car emission control products, he said, noting that despite the decline in the domestic car market, the company's North American business achieved growth, reflecting increased orders of heavy duty diesel (HDD) and light duty diesel catalyst products for trucks.

Johnson Matthey expects the global market for HDD catalysts to surge from around $700 million this year to $3 billion by 2014 as tighter emission rules are introduced in Europe in October next year and North America and Japan in 2010. Similar legislation is also planned in South Korea, China, India and Brazil.

To meet rapid demand growth and further expansion in the light duty diesel market, the group is constructing new factories in Macedonia and Pennsylvania in the U.S. which should start running by end-2009. It just finished new plants in South Korea, Russia and Royston in the UK.

Sheldrick said acquisitions remained part of the group's growth strategy. In February, it bought Argillion Group, which has the technology for controlling emissions of nitrogen oxide, for 214 million euros in cash.

'We're considering bolt-on deals of around 50 million pounds to 100 million pounds. Nothing very large,' he said. Argillon contributed 11.4 million pounds and 2.9 million pounds to the group's overall sales and operating profit in the year.

Johnson Matthey will continue to invest heavily on R&D where spending is likely to rise by 20 percent this year, he said, adding that it hopes to expand the market for its catalyst products to include the energy and petrochemical industries.

At 10.12 am, Johnson Matthey shares were down less than 1 percent at 2,022 pence.

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