ii view: Johnson Matthey sticks with full-year guidance

Catalytic converter maker Johnson Matthey has rejigged divisional expectations.

First-quarter period trading update 

Guidance: 

Management expectations for the full-year  on a constant currency basis remain unchanged. Performance to be more heavily weighted to the second half.

ii round-up:

Employing over 14,000 people, Johnson Matthey's (LSE:JMAT) Clean Air and Efficient Natural Resources divisions make emissions catalysts which reduce air pollution. Its products cater for both the car and truck sectors along with heavy industries such as chemicals and oil and gas. 

It also operates two further divisions. New Markets seeks to use the company's core scientific basis to innovate and develop new products. Battery Materials and the commercialisation of eLNO®, its ultra-high energy density cathode material, currently provide its focus. Finally, its Health business helps get more effective treatments to the consumer faster. 

Alongside an update on divisional trading during its first quarter, management has left annual results forecasts unchanged.  

Quarterly sales growth in Clean Air was offset by lower sales in Efficient Natural Resources and Health, while New Markets was broadly flat.

Looking out over the 12 months, marginally lower operating profit at its Clean Air automotive division, thanks to new manufacturing plant costs, will be offset by efficiency improvements being made at Efficient Natural Resources. 

JMAT also announced a change of head for its Clean Air business. Joan Braca, president of Tate & Lyle's food and beverage solutions, will replace the retiring John Walker. 

ii view:

Johnson Matthey has built itself into a key global player in the clean air arena. One in every three new cars carries one of its emission control exhaust units. Increasing legislation to improve the environment plays into its hands, while its move into battery materials and high energy materials offers scope for growth. 

Investors should keep a very close eye on current difficulties being reported across the global automobile industry. A forward price earnings (PE) ratio of around 14 and below the 10-year average of nearer 17 potentially offers some compensation. A prospective dividend yield of around 2.5% (not guaranteed), is at least some small reward for longer term investor patience. 

Positives: 

• Strong position in the clean air market
• Full-year expectations unchanged
• Cost cutting programme in progress 

Negatives:

• Car manufacturers report reduced consumer demand 
• Last year's profits were reduced due to a charge to settle a US automotive lawsuit
• Currency movements can impact both sales and profits

The average rating of stock market analysts:

Strong hold