Specialty chemicals firm Johnson Matthey (JMAT) is the FTSE 100's biggest gainer, adding 3.6% to £32.06 after the platinum refining, catalytic converter producer posted a strong upturn in revenue and profits.

The £6.3 billion cap says underlying profit before tax rose 13% to £202.1 million in the six months to September. Revenues in the period jumped 31% to £6.4 billion with a very strong first half in the group's lucrative Emission Control Technologies division leading the charge.

Earnings before interest and tax (EBIT) in this division rose 16% year on year and has been supported by growth in both light duty and heavy duty catalysts. Light duty vehicle sales (LDV) benefitted from higher vehicle sales in North America and China and this went a long way towards offsetting a slight decline in Europe. Heavy duty diesel (HDD) catalyst sales saw good growth both North America and Europe.

In process technologies, Johnson Matthey is showing a 15% increase in sales excluding precious metals. Improvement in this segment has been bolstered by a 34% increase in catalyst sales as the integration of the Formox acquisition, completed in March 2013, continues to exceed management expectations.

The group's precious metals product division continues to register revenues in line with expectations at £214 million (excluding precious metal sales). The outlook for the second half however may be tempered somewhat by the expiry of Anglo Platinum contracts at the end of the calendar year. The precious metals manufacturing business was also hit when soft demand for global fertilisers impacted on the group's nitric acid catalyst business.

Fine chemicals continues to show steady growth with API Manufacturing accounting for 65% of revenues and boosting divisonal growth with the launch of new product lines.

Johnson Matthey's new businesses division is also showing encouraging sales growth, rising to £35million from £2 million in the same period a year earlier. This is largely underpinned by the performance of the battery technologies business with sales of £32 million. Underlying losses in the division widened slightly to £9.2 million but the group expects a break-even figure for the full year.

Cash flow remains strong and the group's free cash flow in the period was well ahead at £127.3 million compared with £70.6 million in the first half of last year. Capital expenditure in the period was £96.8 million and saw allocation to ongoing projects including the expansion of the group's ECT manufacturing plants in the UK and Macedonia, as well as expansion process technologies capacity in the US.

There has been a slight uptick in the group's pension deficit which stands at £22.7 million compared to £22.2 million due, says the company, to the effect of lower discount rates. Net debt has decreased by some £43 million and now stands at £792.6 million.The group's net debt (including post tax pension deficits) to EBITDA for the 12 months to 30th September 2013 is 1.5 times, compared with 1.7 times at 31 March 2013.

Income investors should also note that Johnson Matthey also increased the interim dividend by 10% to 17p.


Issue Date: 21 Nov 2013