Johnson Matthey Business Report FY2009

Business Highlights

Business Overview

(in million pounds)
  FY2009 FY2008 Rate of change(%) Factors
Net sales 7,839.4 7,847.8 (0.1) -
Underlying operating profit 271.8 298.5 (8.9) -
Environmental Technologies
Net sales 2,056 2,226 (7.6) 1)
Underlying operating profit 120.9 124.3 (2.7) -

Environmental Technologies
-Emission Control Technology-
-Emission Control Technologies' sales excluding precious metals grew by 12% to 974 million pounds. Sales in the first half of the year were 440 million pounds, but sales recovered strongly in the second half to 534 million pounds. At constant exchange rates, sales excluding precious metals were up 7%.

-The Company's light duty catalyst sales excluding precious metals grew by 17% to 754 million pounds and sales volumes of autocatalysts grew by more than 9% in the year, exceeding the growth in global car production as a result of increased fitment of diesel particulate filters (DPFs) in Europe and its strong performance in the growth markets of China and India.

-While the light duty catalyst business grew strongly in the year, sales excluding precious metals of its heavy duty diesel (HDD) catalysts fell by 5% to 173 million pounds, a reduction of 10% on a constant currency basis. The Company's HDD business, which manufactures catalysts for trucks, buses and non-road vehicles, made a small loss in the year because, following its recent investment in HDD catalyst manufacturing infrastructure ahead of new legislation, the Company had surplus capacity given the downturn in truck production.

-Sales of heavy duty trucks were depressed in the year in both Europe and the USA, falling in its financial year by 45% and 28% respectively, although in the year the Company enhanced its leading share of the HDD catalyst market. However its sales started to recover in the autumn and in March 2010 were nearly double those in the same month last year, albeit that the majority of its US sales were for trucks that still utilised pre-US 2010 HDD catalysts.

Recent Developments Outside UK

-The Company has opened new facilities in western Pennsylvania, USA and Macedonia.
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R&D Expenditure

(in million pounds)
  FY2009 FY2008 FY2007
Overall 91.7 87.6 73.0

R&D Structure

-It's group technology centre is a central resource which conducts strategic R&D on behalf of all the Company's businesses. It operates across three sites in the UK (Sonning Common, Billingham and Royston) and employs around 200 people. In addition, the group's businesses also have its own dedicated R&D and technical centres around the world which focus on the delivery of shorter term business specific projects.

Environmental Technologies
-Emission Control Technology-
-Construction of a new research and development facility in Shanghai is now underway and is expected to be operational in the autumn of 2010.

Investment Activities

Capital Expenditure

(in million pounds)
  FY2009 FY2008 FY2007
Environmental Technologies 93.8 160.2 82.4
Precious Metal Products 15.9 14.7 11.2
Fine Chemicals & Catalysts 22.0 23.4 19.8
Eliminations - - -
Capital expenditure on
discontinued operations
N.A. N.A. 4.5
Corporate capital expenditure 2.7 5.2 1.9
Total 134.4 203.5 119.8

Investment Outside UK

Environmental Technologies
-Emission Control Technology-
-During the year the Company completed a significant, over 70 million pounds, investment in new capacity and opened two new facilities, one in western Pennsylvania, USA with capacity to manufacture one million catalysts a year required to meet the new US 2010 HDD legislation in North America that came into effect from 1st January 2010, and the other in Macedonia with initial capacity to manufacture four million catalysts per annum for both light duty and heavy duty vehicles in Europe. Both of these facilities are now fully operational.

-The Company also completed a major expansion of its autocatalyst manufacturing capacity in Shanghai, China. This will enable the Company to meet the demands of the rapidly growing market in China where the Company continues to increase its market share, from around 17% five years ago to approximately 30% today.