LONDON -- Investors in Johnson Matthey (LSE:JMAT) will wake up on the right side of bed this morning, as the shares soared over 7%, or 185 pence, to 2,771 pence in early trade following the release of preliminary results.
The price move comes despite the global chemicals and precious metals company announcing an 11% drop in revenue, down from £12.02 billion in 2012 to £10.73 billion for the year to March 31, 2013. Pre-tax profit also slipped, down 13% to £354.9 million against £409.3 million last year.
Management blamed a poor performance from its precious metals products division for the slide, with sales down 6% and underlying operating profit plunging 27% after a bad year for the sector all round, while its fine chemicals division saw sales down 3% but operating profit 2% ahead.
Even with total earnings per share falling 9%, to 134.6 pence, Johnson Matthey still raised its ordinary dividend by 2 pence (4%) to 57 pence following a final-year dividend of 41.5 pence.
But the market was cheered by results elsewhere within the company. Johnson Matthey's Environmental Technologies Division boosted the group, though, with sales 2% ahead and underlying operating profit 7% higher.
The company is the world's largest maker of catalysts to control car emissions and, following a recovering U.S. automobile market, it saw a second successive strong year for the division, which is becoming increasingly important for the company, with chief executive Neil Carson commenting:
2013/14 will be a year of transition as on 1 January 2014 new euro VI legislation comes into force for heavy duty diesel vehicles in Europe and on the same date our new arrangements with Anglo Platinum will commence. ...
Overall, we expect that the group will make steady progress in 2013/14 notwithstanding the loss of revenue from Anglo Platinum. In the medium term, growth is expected to accelerate in 2014/15 and beyond, driven particularly by tighter vehicle emissions legislation and demand for Process Technologies' products, especially in China. We are confident that our long term market drivers will enable Johnson Matthey to deliver continued growth which will be further enhanced by our ongoing investment in R&D and new business development.
Further reasons for optimism were provided in the prelims with cash flow conversion at 93% compared to last year's figure of 78%, as well as the acquisitions of Axeon and Formox to the group's portfolio.
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