5 Min Read
* Profit before tax for 2013/14 rises by 12 pct
* End of Amplats contract will cost the company 30 mln pounds
* Not too concerned by S. Africa strike as metal still available (Adds CEO comments on South Africa strike, divisions performance)
By Silvia Antonioli
LONDON, June 5 (Reuters) - Johnson Matthey, the world's biggest maker of catalytic converters used to control car engine emissions, said it expected no annual profit growth this year due to the loss of a supply contract and adverse foreign exchange rates.
The UK-based speciality chemicals company posted a slightly better-than-expected profit for the year ended March 31 on Thursday, helped by stricter EU vehicle emission rules which boosted sales of its catalytic converters.
However, it said it expected results in its current financial year to be unchanged from 2013/14, as growth would be offset by the impact of the loss of commission revenue from Anglo American Platinum (Amplats), and by the strength of Britain's sterling currency.
"The underlying business is strong," said exiting Chief Executive Neil Carson, who is stepping down on Thursday after a decade at the helm of the company. "The thing that will hold us back next year is the loss of the Anglo Platinum contract but also the foreign exchange rate."
A long-standing deal with the world's No.1 platinum producer Amplats - which had involved Johnson Matthey buying the metal at a discount under a marketing arrangement - came to an end last year. The two companies have agreed a new supply contract this year, but it will not involve a discount.
Johnson Matthey said this would hit revenue by about 30 million pounds.
It also said the strength of the sterling exchange rate would cut its underlying profit before tax this year by over 20 million pounds. Most of its costs are in sterling while its sales around the world are in other currencies. A stronger sterling makes that revenue worth less when converted to pounds.
The company, which in addition to its vehicle emission controls business also refines and recycles platinum group metals, said it was not overly concerned about the four-month old South African mining strike which is cutting output from the top three platinum producers.
"It has limited impact on us yet because we are still able to get the metals we need. That's partly because there is plenty of metal around but also we are the largest secondary refinery in the world so we have access to metals ourselves," Carson said.
"There is still a fair amount of mining going on in South Africa and platinum from the ETFs (exchange traded funds) is available. And for palladium, the Russian mines are still producing."
Johnson Matthey reported an underlying pretax profit of 427.3 million pounds ($716 million) for 2013/14, up 12 percent on the year before. Analysts on average had been expecting 417 million pounds, according to Thomson Reuters I/B/E/S Estimates.
Liberum analyst Adam Collins said the company's forecast for this year meant analysts would need to revise down their profit estimates. "That is not because conditions in underlying terms have deteriorated but it's due to a slightly more cautious view on headwinds. Analysts were looking for too high a growth in underlying terms this year."
Johnson Matthey's Emission Control Technology division, which makes catalysts for trucks and cars, was the strongest performer among its five business units, with underlying operating profit up 25 percent.
The division, which accounts for more than half of the company's sales, benefited from stronger demand for its higher-value catalysts for diesel trucks, driven by emission control legislation introduced in Europe this year.
The company expects more legislation of this type due to be implemented on vehicles in Europe and China, and a recovery in car sales in Europe, will continue to boost its sales.
The other divisions also grew but at a more moderate pace.
The weakest performance was in the Precious Metal Products division, which refines, processes and recycles platinum group metals, with underlying operating profits up 5 percent, hit by the Amplats contract change.
Finance director Robert MacLeod will replace Carson after Thursday's results presentation.
$1=0.5969 British Pounds Editing by Pravin Char