More on Johnson Matthey
Johnson Matthey: 2005/6 results
Despite low total sales growth (3%) performance during the year was good with EPS growth of 9%. The catalysts (53% of operating profit) and precious metals (25% of operating profit) divisions did particularly well driven by both volume growth and higher precious metal prices.
The only area of significant under-performance was the pharmaceutical division (13.4% of operating profit), as expected following the expiry of a key patent.
The remaining business, ceramics (which supplies materials to ceramics manufacturers and generates 8.5% of operating profit) also produced strong growth with sales up 10% and operating profit up 11% at CER.
Growth in the market for catalysts continues to be driven by tighter regulations (for example the approaching European requirement for diesel particulate filters) and growth in car sales in Asia. There are many years of growth left in both these.
There is little change in the outlook for the next few years. In the short term cyclical growth will slow but the decline in the pharmaceutical division is now behind Johnson Matthey.
At 1264p Johnson Matthey is trading on a prospective PE of 16× with a 2.4% yield. With EPS growth of around 10% sustainable for at least the next few years, this is in line with market ratings for this level of growth. While it is somewhat Johnson Matthey also has some strong fundamental growth drivers.
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