Johnson Matthey PLC JMAT Half Yearly Report

  Johnson Matthey PLC (JMAT) - Half Yearly Report

RNS Number : 6353R
Johnson Matthey PLC
21 November 2012




                                                                             

                                                                             



                                      

                                      

                                      

             For Release at 7.00 am Wednesday 21^st November 2012



                  Half year results for the six months ended
                             30^th September 2012

                                      



Summary Results



                                Half Year to 30^th September      %
                                            2012        2011 change
Revenue                                  £4,892m     £5,900m    -17
Sales excluding precious metals          £1,310m     £1,293m     +1
Profit before tax                        £183.4m     £195.1m     -6
Earnings per share                         70.4p       70.3p      -
Underlying*:
Profit before tax                        £191.2m     £203.0m     -6
Earnings per share                         72.9p       72.8p      -
Dividend per share                         15.5p       15.0p     +3

*before amortisation of acquired intangibles, major impairment and
restructuring charges, profit or loss on disposal of businesses and, where
relevant, related tax effects



· Sales excluding precious metals (sales) 1% ahead at £1.3 billion 

· Despite difficult market environment, underlying profit before tax
down 6% and underlying earnings per share were flat 

· Return on invested capital (ROIC) at 21.7%

· Balance sheet remains strong with net debt (including post tax
pension deficits) / EBITDA of 1.4 times 

· Interim dividend up 3% to 15.5 pence



                              Business Overview

· Environmental Technologies Division continued to make good progress
with sales up 3% and underlying operating profit 17% ahead

· Emission Control Technologies' sales grew by 4%, benefiting from
good growth in North America and Asia which was partly offset by weaker market
conditions in Europe

· Steady progress in Process Technologies with sales 1% up in the
first half

· Precious Metal Products Division's sales were down by 5% and
operating profit was down 33%

· Significant decline in our Services businesses principally due to
the impact of lower volumes and lower average precious metal prices

· Sales in our Manufacturing businesses slightly down

· Fine Chemicals Division performed well with sales slightly down but
underlying operating profit well ahead driven by good demand for higher margin
products



Commenting on the results, Neil Carson, Chief Executive of Johnson Matthey
said:



"Against a difficult market environment, particularly the impact of lower
average precious metal prices, Johnson Matthey delivered growth in operating
profit from Environmental Technologies and Fine Chemicals, although this was
more than offset by the weaker performance of Precious Metal Products.
Underlying earnings per share were maintained at 72.9p.



Whilst precious metal prices have improved from their lows during the summer,
largely due to the labour unrest in South Africa, the outlook in some of our
other markets has weakened and visibility remains limited. We therefore
expect that the group's performance in the second half will be similar to the
first half of the year."



Enquiries:



Ian Godwin      Director, IR and Corporate Communications 020 7269 8410
Robert MacLeod  Group Finance Director                    020 7269 8484
Howard Lee      The HeadLand Consultancy                  020 7367 5225
Tom Gough       The HeadLand Consultancy                  020 7367 5228
www.matthey.com





Report to Shareholders



                              Review of Results



Against a difficult market environment, particularly the impact of lower
average precious metal prices, Johnson Matthey delivered growth in operating
profit from Environmental Technologies and Fine Chemicals, although this was
more than offset by the weaker performance of Precious Metal Products.



Sales excluding precious metals (sales) were 1% ahead at £1.3 billion led by
Environmental Technologies which was 3% higher. At constant exchange rates,
the group's sales grew by 2%.



Underlying operating profit was down 6% at £202.8 million. As a result of the
adverse impact of lower average precious metal prices on our Precious Metal
Services businesses, the group's underlying return on sales fell from 16.6% to
15.5%.



The group's ROIC declined to 21.7% (year ended 31^st March 2012 22.3%)
principally as a result of the substantial fall in operating profit in
Precious Metal Products Division in the half year. However, the ROIC in both
Environmental Technologies and Fine Chemicals Divisions increased.



Underlying profit before tax was 6% down at £191.2 million and profit before
tax also decreased by 6% to £183.4 million.



Underlying earnings per share were flat at 72.9 pence. Basic earnings per
share were also flat at 70.4 pence.



Dividend



The Board of Directors has increased the interim dividend by 3% to 15.5 pence
and this will be paid on 5^thFebruary 2013 to ordinary shareholders on the
register as at 30^th November 2012, with an ex-dividend date of 28^th November
2012.



Operations



Environmental Technologies



                         Half Year to 30^th September            % at
                                       2012      2011      % constant
                                  £ million £ million change    rates
Revenue                               1,416     1,533     -8       -6
Sales (excl. precious metals)           918       888     +3       +4
Underlying operating profit           106.6      90.9    +17      +20
Return on sales                       11.6%     10.2%
Return on invested capital (ROIC)     15.5%     12.6%



Environmental Technologies Division, which comprises Emission Control
Technologies (ECT), Process Technologies and Fuel Cells, made further progress
in the first half of 2012/13, particularly in our ECT business which benefited
from good growth in North America and Asia although sales were lower in
Europe. The division's sales were up 3% at £918 million and underlying
operating profit was 17% ahead at £106.6 million. Environmental Technologies'
return on sales increased by 1.4% to 11.6% principally as a result of the
removal of circa £15million of higher rare earth material costs which
impacted ECT's autocatalyst business in the same period last year.



Emission Control Technologies' sales grew by 4% to £720 million with sales of
light duty vehicle catalysts up £1 million at £464 million and heavy duty
diesel (HDD) catalyst sales 19% ahead at £234 million. Operating profit
growth in both light duty and HDD catalysts was well above growth in sales.




Light Duty Vehicle (LDV) Catalysts

Sales in our LDV catalyst business, which accounted for 64% of ECT's sales in
the period, were slightly ahead at £464 million.



During our first half, global light duty vehicle sales increased by 7% to
39.8million vehicles. Global production also grew, up 6%, with continued
strong recovery in North America and good growth in Asia partly offset by a
decline in Europe as a result of the continuing economic uncertainty in the
region.



Estimated Light Vehicle Sales and Production

                         Half Year to 30^th September          
                                   2012          2011 % change

                               millions      millions        
North America Sales                 8.7           7.8    +11.5 
              Production            7.4           6.3    +17.5 
Total Europe  Sales                 9.2           9.7     -5.2 
              Production            8.9           9.9    -10.1 
                                                               
Asia          Sales                16.4          14.4    +13.9 
              Production           19.7          17.6    +11.9 
                                                               
Global        Sales                39.8          37.2     +7.0 
              Production           39.3          37.2     +5.6 

Source: IHS Automotive



Johnson Matthey's Light Duty Vehicle Catalyst Sales by Region

                                          % change at constant currency

                 1H 2012    1H 2011 % change

               £ million  £ million
North America         93         78      +18                           +15
Europe               264        289       -9                            -7
Asia                 107         96      +12                           +11
Total                464        463        -                            +1



Our sales in Europe of £264 million, which represented 57% of our total LDV
catalyst sales, were 9% down, 7% down at constant currency, as vehicle markets
in the region remained subdued. Our performance was helped by our strong
market share with some of the more successful car companies in the region and
by an increase in demand for our petrol catalysts, despite the overall decline
in petrol vehicle production, as we gained some new business. The proportion
of diesel vehicles produced in Western Europe fell by 1% during the period,
representing 55% of all vehicles produced, and the number of diesel cars
produced was 12% lower than in the first half of last year. Demand for our
diesel products fell broadly in line with this. 



In North America the light duty vehicle market showed good growth with
production up 18% in response to continued economic recovery in the region.
Our LDV catalyst sales also grew strongly, in line with vehicle production,
and were 18% ahead of last year at £93 million. Our Asian light duty catalyst
business also performed well, broadly in line with regional vehicle
production, with sales 12% ahead in the first half of 2012/13. We continued
to build on our position in China, securing new business and growing sales by
29%, well ahead of the 11% growth in vehicle production in the country. Our
South East Asian business also had a strong first half as a result of the
buoyant vehicle market and through gaining share. However, our sales in Japan
were impacted as Japanese car companies moved production from the country to
North America and as a result of short term government incentives in Japan to
purchase minicars in which we have a lower market share.



Heavy Duty Diesel Catalysts

Our sales of HDD catalysts continued to grow strongly in the first half, up
19% to £234 million.



Johnson Matthey's Heavy Duty Diesel Vehicle Catalyst Sales by Region

                                          % change at constant currency

                 1H 2012    1H 2011 % change

               £ million  £ million
North America        165        129      +28                           +25
Europe                55         56       -2                            +4
Asia                  14         12      +22                           +19
Total                234        197      +19                           +19



Estimated HDD Truck Sales and Production

                         Half Year to 30^th September
                                   2012          2011 % change

                              thousands     thousands        
North America Sales               221.4         192.3    +15.1
              Production          236.3         215.6     +9.6
EU            Sales               137.2         150.2     -8.7
              Production          184.5         205.9    -10.4

Source: LMC Automotive



Our North American HDD business had a strong first half with sales 28% ahead
of last year at £165 million as a result of customers restocking in the first
quarter following supply chain issues last year. In the US, sales and
production of heavy duty diesel trucks increased in the first half of 2012/13
although the rate of growth slowed in the second quarter. Demand for catalyst
systems for non-road applications such as construction, mining and
agricultural equipment also increased, albeit from a low base, and accounted
for around 10% of our North American HDD catalyst sales.



The downturn in the EU truck market which began in the second half of last
year has accelerated during the first six months of this year with truck sales
down 9% and production 10% lower than in the first half of 2011/12. Our HDD
catalyst business in Europe posted a creditable performance, despite the
impact of the slower market and negative exchange rates. Its sales of £55
million were just 2% down on the first half of 2011/12 with export sales to
Brazil of around £5 million and catalyst sales to non-road applications partly
offsetting the impact of the difficult market environment for truck sales.
Whilst HDD catalyst sales to Brazil were ahead of the first half of 2011/12,
growth was held back by the impact of the pre-buying of trucks in advance of
the introduction of Euro V legislation last year.



As legislation requiring the use of catalysts to control emissions from
non-road engines in North America and Europe continues to be phased in up to
2015, our sales of catalysts to non-road original equipment manufacturers
(OEMs), which are included in the HDD numbers above, have doubled to £21
million in the first half of the year.



We have continued to make progress in Asia with sales of HDD catalysts to
customers in Japan. As other countries in the region prepare for the
introduction of Euro IV legislation we continued to see demand for our
products from OEMs in China and India. With China scheduled to introduce Euro
IV in mid 2013 and India from April 2015, the HDD market in Asia will provide
growth opportunities for Johnson Matthey.



ECT's major expansion project to double capacity at its plant in Macedonia
continued in the first half and work to increase diesel particulate filter
production capacity at its Royston, UK operations is now underway. Both
projects will provide additional capacity for the high technology products
that will be required to meet the tighter European light and heavy duty diesel
legislation which comes into force from the latter part of 2013.



Process Technologies' sales in the first half of 2012/13 were up 1% at
£196million and operating profit was down.



In the Ammonia, Methanol, Oil and Gas (AMOG) business sales were 5% down at
£114 million where good demand for ammonia catalysts, purification products
and additives was more than offset by a decline in sales of methanol and
hydrogen catalysts. Sales of ammonia catalysts were well ahead of last year
but demand for methanol catalysts was impacted by the phasing of orders by
some of our customers. The market for gas purification products, used to
remove contaminants such as sulphur and mercury from gas streams, recovered in
the first half of the year as activity in the oil and gas industry increased.
This, together with catalyst sales to new gas purification projects, has
benefited AMOG's performance in the first half.



Our sales of catalysts for the production of hydrogen were down in the period
as a result of delays to new plant builds and catalyst change outs. The
hydrogen produced is mostly used in the desulphurisation of transportation
fuels, demand for which has declined as a result of the economic slowdown,
particularly in Europe, and the improved fuel efficiency of vehicles.



The Additives business continued to make a good contribution to AMOG, growing
its sales of speciality products used to reduce emissions from and improve the
performance of petroleum refining. We are continuing to develop and realise
commercial opportunities resulting from the combination of our additives and
refinery catalysts businesses and are investing in the expansion of our plant
in Savannah, USA to increase production capacity for additives.



In the first half of this year Davy Process Technology (DPT) secured licence
and engineering contracts for three new oxo alcohols plants and one methanol
plant, all in China. Economic growth and the subsequent development of the
petrochemical industry in China has been a major driver of DPT's recent strong
performance across its current technology portfolio. However, as predicted,
we have started to see a slowdown in the number of new plants and hence
licences available to DPT and we expect this to level off in the second half
of the year. Nevertheless DPT's sales in the first half were flat at £52
million as we commenced work on these new projects and continued with those
won in previous years.



The outlook for DPT remains positive as global drivers such as increasing
wealth in emerging markets and energy security offer long term opportunities
and support demand for its technologies. The first half of the year saw the
successful start up of Datang Energy Chemical Co. Ltd.'s new substitute
natural gas (SNG) plant in Inner Mongolia which uses DPT's SNG process
technology, the licence for which was announced in early 2010. This plant
also uses Johnson Matthey's catalysts to convert coal derived synthesis gas
into SNG which will be transported via a new gas pipeline to Beijing. The
plant is one of three that Datang is building at the site. The second plant
is in the detailed engineering phase and the third is in the final stages of
government approval and represents a possible future licence for DPT. The
plant brought on stream in the first half is one of six SNG facilities that we
have licensed and supplied catalyst for in China and the first to start up and
produce gas. Another SNG plant based on DPT technology and Johnson Matthey's
catalysts is expected to start up in 2012 with two further plants coming on
stream in 2013.



Energy security concerns in China continue to drive projects to monetise the
country's coal reserves and in other parts of the world, particularly the USA,
there is growing interest in projects utilising shale gas and other
unconventional gas sources as a feedstock. These provide opportunities for
our Process Technologies business and in the first half, work has continued to
expand capacity at our manufacturing plants in Panki, India and Clitheroe, UK
to support future demand for our process catalysts. 



Tracerco performed very well in the first half of 2012/13 with sales 32% ahead
at £30million. Increased activity in oil and gas markets, especially in the
US and the Middle East, boosted demand for Tracerco's specialist measurement
and process diagnostic services which enable our customers to optimise the
performance of their assets and exploit more difficult to recover resources.



The net expense of our Fuel Cells business increased slightly in the first
half of the year.



In October 2012 Johnson Matthey acquired the Axeon Group (Axeon) for
£40.6million in cash. Axeon is a specialist in the design, development and
manufacture of integrated battery modules and systems for customers in the
automotive industry and in high performance non-automotive applications such
as cordless power tools and e-bikes. With the significant trend towards the
increasing electrification of automotive drivetrains, not only via pure
battery electric vehicles but also through a growing range of hybrid vehicles,
there is a growing need for high performance battery systems that can meet the
challenging energy storage demands placed on them.



The acquisition of Axeon marks an important step in our strategy to grow new
business areas that build on our skills in advanced materials. It is the
first significant investment resulting from the work of our new business
development group that was set up following our ten year strategy review
conducted in 2010/11. Axeon brings applications engineering expertise for
battery systems to Johnson Matthey which will complement our materials science
and research and development expertise, providing the base for further
expansion in battery materials and technology into the developing market for
electric vehicles.



Axeon had sales of £47 million in its financial year to 31^st December 2011,
which primarily relate to the design and assembly of battery packs for power
tool applications from its factory in Poland. Axeon made a small operating
loss in that year due to significant investment in development costs,
principally for automotive applications. The business is forecast to make a
small operating loss in the current year.



Further details on the progress of our new business development activities,
including our strategy in battery materials and technologies, will be
presented at our annual Investor Event to be held in Royston, UK in January
2013. The event will also be webcast and all materials posted on the website
for those who are unable to attend.



Precious Metal Products



                         Half Year to 30^th September            % at
                                       2012      2011      % constant
                                  £ million £ million change    rates
Revenue                               3,795     4,858    -22      -22
Sales (excl. precious metals)           282       298     -5       -4
Underlying operating profit            71.8     107.1    -33      -32
Return on sales                       25.5%     35.9%
Return on invested capital (ROIC)     42.2%     59.2%



Precious Metal Products Division (PMPD) had a poor first half with sales down
5% at £282 million. Underlying operating profit was however 33% down at
£71.8million. Whilst the division's Manufacturing businesses held up
relatively well, its Services businesses were impacted by the effect of lower
average precious metal prices, lower volumes across all of its activities
compared to the same period last year and by some operational issues in our
gold and silver refining business. 



Sales in our Services businesses, which comprise the division's Platinum
Marketing and Distribution and Refining activities, fell by 12% to £87
million, representing 31% of PMPD's total sales in the first half. These
businesses have a high level of fixed costs and a significant proportion of
their sales is influenced by precious metal prices. Operating profit from
these businesses fell significantly.



Platinum Marketing and Distribution

The price of platinum fell in the first half until the middle of August due to
generally weak demand, poor investor sentiment and little adjustment by
producers in the face of expected oversupply. The tragic events that followed
industrial action at Lonmin's Marikana mine and the ensuing turmoil in South
Africa's platinum belt caused an immediate reversal, with platinum regaining
its losses from earlier in the reporting period. The average price of
platinum in our first half was $1,500/oz, down 16% on the same period last
year.



The platinum market is expected to move into deficit in the calendar year
2012, with global demand broadly flat but supply expected to fall sharply due
to labour disruption in South Africa. Industrial demand is forecast to fall,
although demand from the vehicle emission control catalyst sector will be down
by only 1% as demand for HDD catalysts in North America outstrips the decline
in demand from light duty diesel vehicle production in Europe. Demand from the
jewellery sector remains robust and is expected to reach a three year high.
The key Chinese market is expected to grow by around 10%, supported by lower
platinum prices compared with the prior year. Physical investment demand is
expected to be slightly higher than in 2011.



The palladium price has been relatively subdued in the first half with little
sustained upside from the South African supply concerns. The average price
for the first six months of 2012/13 was $622/oz, 18% lower than last year.



The palladium market is expected to move from a substantial surplus in 2011 to
an equally substantial deficit in 2012. Supplies will fall significantly due
to reduced mine output from South Africa and much lower sales of Russian state
stocks. Demand has shown good growth in spite of economic headwinds felt
particularly in Europe. Demand from the vehicle emission control catalyst
sector is forecast to increase by 7% to record levels and investment demand
from Exchange Traded Funds is expected to turn positive after a period of net
disinvestment in 2011.



The rhodium market is forecast to be in a modest deficit in 2012 for the first
time in five years. Supplies are expected to fall in line with lower South
African production whereas demand will grow, benefiting in particular from the
recovery of car production in Japan. However, the price has not reflected
these slightly improved fundamentals with the average price falling by 38% to
$1,250/oz in the first half of 2012/13 compared with the same period last
year. 



These lower precious metal prices and the impact of lower production volumes
at Anglo American Platinum have adversely affected our Platinum Marketing and
Distribution business. A continued lack of market volatility also impacted
our trading margins in the period.



Refining

Our Refining businesses had a poor start to the year with lower intakes
resulting from the significantly lower average precious metal prices in the
period.



In our Platinum Group Metal (Pgm) Refining business, intake volumes in the
first six months were well down on last year with key feeds such as
autocatalyst scrap impacted as collector networks and part processors retained
material awaiting improved metal prices. Spent catalyst feeds from the global
petrochemicals industry were also well down on the first half of last year as
were the volumes of material received from other refiners. 



Our Gold and Silver Refining business also had a difficult first half with
lower demand for refining services and bullion products impacting both our
Canadian and US refineries. Sales were down 12% and margins fell as the gold
price stagnated and average silver prices fell. The average price of gold was
1% up at $1,630/oz in our first half and silver was 23% lower at $30/oz.
Whilst the decline in feeds of primary material from mining operations was
relatively small, volumes of secondary material, mostly jewellery scrap, where
our margins are higher, were well down in the first half of the year as was
demand for gold and silver bar products. Our Salt Lake City refinery was also
impacted by some operational issues during the period. 



Sales in our Manufacturing businesses, which consist of PMPD's Noble Metals,
Colour Technologies and Catalysts and Chemicals activities, were 2% down on
those in the first half of last year at £195 million. Weaker sales in Noble
Metals and Colour Technologies were partially offset by some growth in
Catalysts and Chemicals. Underlying operating profit fell in line with the
reduction in sales. 



Noble Metals

Our Noble Metals business experienced weaker demand in most of its major
product areas. Sales declined by 4% to £62 million and operating profit was
lower. Sales of industrial products such as thermocouple wire, iridium
crucibles and other fabricated pgm products were down, mainly due to reduced
demand from European customers. However, sales of products for the nitric
acid manufacturing industry were ahead and our medical device components
business grew slightly in the first half with progress in Europe and North
America. 



Colour Technologies

Colour Technologies' sales were down 8% in the first half at £40 million and
operating profit was lower. Demand for its obscuration enamels for automotive
glass fell, mostly due to the slowdown in car manufacturing in Southern
Europe. However, sales of silver pastes used mainly for heated rear
windscreens, which is currently a small part of the business, increased
chiefly due to growth in China and South Korea. In August we purchased a
silver paste manufacturing facility in China to further develop our market
position in the country. Sales of products for decorative applications
continued to decline.



Catalysts and Chemicals

Catalysts and Chemicals' sales grew by 3% to £93 million in the first half and
operating profit was strongly ahead. Sales of catalysts for chemical
manufacturing applications were well up on the first half of last year.
However, despite robust demand, catalyst sales to the edible oils and
oleochemicals sector were impacted by lower nickel prices in the period;
nickel is a pass through raw material which is included in our sales. Sales
of products to fine chemical and pharmaceutical manufacturers were
significantly ahead and demand for pgm chemicals from both internal and
external autocatalyst producers also increased in the period.



Fine Chemicals



                         Half Year to 30^th September            % at
                                       2012      2011      % constant
                                  £ million £ million change    rates
Revenue                                 143       146     -2       -3
Sales (excl. precious metals)           138       142     -2       -3
Underlying operating profit            37.2      32.5    +14      +14
Return on sales                       26.9%     23.0%
Return on invested capital (ROIC)     17.4%     14.6%



Fine Chemicals Division performed well in the first half. Whilst sales were
2% down at £138 million, underlying operating profit was 14% ahead at £37.2
million. The division's return on sales in the half year increased from 23.0%
to 26.9% due to an improvement in product mix.



Sales from the division's Active Pharmaceutical Ingredient (API) Manufacturing
businesses, which comprise Macfarlan Smith based in the UK and Pharmaceutical
Materials and Services in the US, fell 3% to £99 million. However, operating
profit grew strongly in the first half. Lower margin legacy business
associated with the November 2010 purchase of the Conshohocken, USA plant from
Lonza came to an end during the period. This was offset by sales of higher
margin speciality products such as those used for pain management and
attention deficit hyperactivity disorder (ADHD) treatment, where the business
also benefited from some drug shortage issues in the US and inventory building
by a major customer.



The business was, however, impacted by lower sales of buprenorphine, used in
drug addiction treatments, due to price pressure in Europe and delays to the
launch of the generic product in the United States. Sales of chiral
methylphenidate used in a specialist ADHD treatment, where we gained market
share last year due to a competitor's inability to supply, also declined in
the first half as the competitor returned to the market. Whilst good progress
has been made in the US, changes in the competitive landscape in the UK have
impacted Macfarlan Smith's performance and a review to optimise resources
across our API Manufacturing businesses is underway.



Sales in our Research Chemicals business were broadly flat across all regions.
However, underlying operating profit was slightly ahead due to an improvement
in product mix.



Financial Review



Exchange Rates



The group's results in the first half were principally impacted by the
weakness of the euro against sterling. In the period the euro averaged
€1.25/£ compared with €1.14/£ last year. This reduced reported underlying
operating profit by £3.6 million.



Interest



The group's net finance cost was £11.6 million, broadly the same as last
year.



Taxation



The underlying tax rate for the group reduced from 24% to 21% (23.5% for the
year ended 31^st March 2012). The decrease was due to the further reduction
in the main rate of UK corporation tax from 26% to 24% with effect from 1^st
April 2012 and from the resolution of certain open tax years' positions.



Cash Flow



In the six months to 30^th September 2012 the group generated net cash flow
from operating activities of £143 million (six months to 30^th September 2011
£172 million). The group's working capital (excluding the component that
relates to precious metals) increased by £23 million compared with the year
end. The working capital balance of £468 million at 30^th September 2012
represents 65 days' sales. This compares with 69 days at the same time last
year and 54 days at the year end. The increase in working capital since the
year end was principally due to higher inventories in Fine Chemicals Division
which grew on the back of increased demand in North America. 



Working capital in relation to precious metals increased by £35 million since
the year end to £359 million. An increase in our precious metal inventories,
as customer metal balances decreased, was offset partly by lower metal related
balances within receivables. 



During the period capital expenditure was £57.1 million (£60.3 million cash
spent in the period) which represents 0.9 times depreciation. Major ongoing
projects include the expansion of our ECT manufacturing plants in the UK and
Macedonia and the completion of the expansion of our Process Technologies
capacity in India and the UK.



Pensions



The group's total pension charge for the period to 30^th September 2012 was
£18.9million, up from £13.8 million in the same period last year, due to the
effect of lower discount rates.



The latest actuarial valuation of the group's principal UK pension scheme at
1^stApril2012 has been agreed with the Trustees at £217million (1^stApril
2009 £173million). This increase of £44 million is after taking account of
deficit funding contributions since 1^st April 2009 of approximately £50
million. As a result of the increase in the actuarial deficit, the company
has agreed:



· to establish an asset backed special purpose vehicle (SPV) which will
primarily hold £50 million of third party corporate bonds financed by a
one-off cash payment that is expected to be made in the second half of this
year. The annual income generated by this SPV will be paid to the UK pension
scheme while it remains in deficit. In addition, cash deficit contributions
payable directly to the scheme will be maintained at £23.1 million per annum
until 2020; 



· with effect from 1^st October 2012, to close the career average defined
benefit section of the pension scheme to new entrants. From that date new
employees will be enrolled in a new contributory cash balance defined benefit
scheme; and



· to require, from 1^st April 2013, an increase in employee contributions
for those who remain in the career average defined benefit section to help
fund the increase in cost of providing these benefits.



The IAS 19 post tax pension deficit of the group's pension schemes at
30^thSeptember 2012 is estimated at £82.6 million (30^th September 2011
£140.2million; 31^st March 2012 £97.0 million). A decrease in the IAS 19
deficit of the UK scheme of £37.4 million was mainly offset by an increase in
the US pension schemes' deficit.



Net Debt



Net debt at 30^th September 2012 increased by £240.9 million since the year
end and was £695.1 million. The principal reason for this increase was the
payment of the special dividend to shareholders of £212 million in August
2012.



The group's net debt (including post tax pension deficits) to EBITDA for the
12months to 30^th September 2012 was 1.4 times, compared with 1.0 times at
31^stMarch 2012.



Going Concern



The directors have assessed the future funding requirements of the group and
are of the opinion that the group has adequate resources to fund its
operations for the foreseeable future. Therefore they believe that it is
appropriate to prepare the half year accounts on a going concern basis.



Outlook



In the first half of the year the group's results were substantially impacted
by lower average precious metal prices. Whilst metal prices have improved
from their lows during the summer, largely due to the labour unrest in South
Africa, the outlook in some of our other markets has weakened and visibility
remains limited. We therefore expect that the group's performance in the
second half will be similar to the first half of the year.



Environmental Technologies

Our sales of light duty vehicle catalysts held up well in the first six months
of the year. The outlook in Europe has, however, weakened in recent months
but the prospects for growth in Asia remain. Whilst our heavy duty diesel
catalyst business grew in the first half, the potential for continued growth
in the second half is less clear.



In our Process Technologies business we expect that continued growth in Davy
Process Technology and other areas will offset the impact of reduced demand
for hydrogen catalysts.



Precious Metal Products

Although precious metal prices have increased slightly from their lows, we
have yet to see a substantial improvement in volumes across our Precious Metal
Services businesses and the short term outlook in South Africa is difficult to
assess. Our Manufacturing businesses are trading in line with last year.



Fine Chemicals

The outlook for the business remains relatively stable and we anticipate a
return to sales growth in the second half.



Risks and Uncertainties



The principal risks and uncertainties to which the group is exposed are
unchanged from those identified in our 2012 annual report. The principal
risks and uncertainties, together with the group's strategies to manage them,
are set out on pages 20 to 23 of the annual report. They are:



STRATEGIC                                   OPERATIONAL
· Failure to grow in the longer       · Changes to health, safety,
term, to take advantage of new              environmental and other
opportunities or to have sufficient         regulations and standards
capacity to meet demand
· Changes to future environmental     · Employees and the
legislation                                 recruitment and retention of high
                                            quality staff
· Technological change                · Availability of raw
                                            materials
· Inability to deliver anticipated    · Security
benefits from acquisitions, capital
projects and other initiatives              · Intellectual property

MARKET                                      FINANCIAL
· Commercial relationships and        · Pension scheme funding
reputation
· Global political and economic
conditions



Responsibility Statement of the Directors in respect of the Half-Yearly
Report



The Half-Yearly Report is the responsibility of the directors. Each of the
directors as at the date of this responsibility statement, whose names and
functions are set out below, confirms that to the best of their knowledge:

•  the condensed consolidated accounts have been prepared in accordance
with International Accounting Standard (IAS) 34 - 'Interim Financial
Reporting'; and

•  the interim management report included in the Half-Yearly Report
includes a fair review of the information required by:

a) DTR 4.2.7R of the United Kingdom Listing Authority Disclosure Rules and
Transparency Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed consolidated accounts; and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and

b) DTR 4.2.8R of the United Kingdom Disclosure Rules and Transparency Rules,
being related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the financial
position or performance of the company during that period; and any changes in
the related party transactions described in the last annual report that could
do so.



The names and functions of the directors of Johnson Matthey Plc are as
follows:

Tim Stevenson    Chairman
Neil Carson      Chief Executive
Alan Ferguson    Non-executive Director, Chairman of the Audit Committee
Robert MacLeod   Group Finance Director
Colin Matthews   Non-executive Director
Larry Pentz      Executive Director, Environmental Technologies
Michael Roney    Non-executive Director, Senior Independent Director and
                 Chairman of the Management Development and Remuneration
                 Committee
Bill Sandford    Executive Director, Precious Metal Products
Dorothy Thompson Non-executive Director



The responsibility statement was approved by the Board of Directors on
20^thNovember 2012 and is signed on its behalf by:



T E P Stevenson

Chairman



INDEPENDENT REVIEW REPORT

to Johnson Matthey Plc

Introduction

We have been engaged by the company to review the condensed consolidated
accounts in the Half-Yearly Report for the six months ended 30^th September
2012 which comprise the Condensed Consolidated Income Statement, the Condensed
Consolidated Statement of Total Comprehensive Income, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement,
the Condensed Consolidated Statement of Changes in Equity and the related
explanatory notes. We have read the other information contained in the
Half-Yearly Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed consolidated accounts.



This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules (DTR) of the UK's Financial Services Authority (UK
FSA). Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.

Directors' responsibilities

The Half-Yearly Report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Half-Yearly Report
in accordance with the DTR of the UK FSA.



The annual accounts of the group are prepared in accordance with International
Financial Reporting Standards as adopted by the European Union (EU). The
condensed consolidated accounts included in this Half-Yearly Report have been
prepared in accordance with IAS 34 - 'Interim Financial Reporting' as adopted
by the EU.



Our responsibility

Our responsibility is to express to the company a conclusion on the condensed
consolidated accounts in the Half-Yearly Report based on our review.



Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 -'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit performed in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant mattersthat might be identified in an audit. Accordingly, we do
not express an audit opinion.



Conclusion

Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated accounts in the Half-Yearly Report for
the six months ended 30^th September 2012 are not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK
FSA.



D V Matthews

for and on behalf of KPMG Audit Plc

Chartered Accountants

15 Canada Square, London E14 5GL



20^th November 2012



CONDENSED CONSOLIDATED INCOME STATEMENT

for the six months ended 30^th September 2012

                                             Six months ended      Year ended
                                             30.9.12     30.9.11      31.3.12
                                  Notes    £ million   £ million    £ million
Revenue                               2    4,892.2   5,900.2   12,023.2
Cost of sales                             (4,553.8)  (5,545.4)  (11,270.2)
Gross profit                                 338.4     354.8      753.0
Operating expenses                          (135.6)    (140.1)     (302.9)
Amortisation of acquired
intangibles                           4       (7.8)      (7.9)      (16.7)
Operating profit                   2, 3      195.0     206.8      433.4
Finance costs                                (15.8)     (17.8)      (35.4)
Finance income                                 4.2       6.1       11.3
Profit before tax                            183.4     195.1      409.3
Income tax expense                           (37.7)     (46.1)      (93.9)
Profit for the period                        145.7     149.0      315.4
Attributable to:
Owners of the parent company                 146.3     149.4      315.9
Non-controlling interests                     (0.6)      (0.4)       (0.5)
                                             145.7     149.0      315.4
                                              pence      pence       pence
Earnings per ordinary share attributable to the
equity holders of the parent company
            Basic                     6       70.4      70.3      148.7
            Diluted                   6       69.8      69.6      146.9





CONDENSED CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

for the six months ended 30^th September 2012

                                               Six months ended    Year ended
                                               30.9.12    30.9.11     31.3.12
                                      Notes  £ million  £ million   £ million
Profit for the period                          145.7    149.0     315.4
Other comprehensive income:
 Currency translation differences              (29.1)    (17.6)     (53.7)
 Cash flow hedges                                0.6     (2.0)       6.1
 Fair value gains on net investment
 hedges                                         13.0      8.0      23.7
 Actuarial gain / (loss) on
 post-employment benefits assets and
 liabilities                             10      4.6   (103.3)     (70.6)
 Tax on above items taken directly to
 or transferred from equity                     (4.6)     24.6      18.7
Other comprehensive expense for the
period                                         (15.5)    (90.3)     (75.8)
Total comprehensive income for the
period                                         130.2     58.7     239.6
Attributable to:
Owners of the parent company                   130.8     59.1     240.1
Non-controlling interests                       (0.6)     (0.4)      (0.5)
                                               130.2     58.7     239.6

CONDENSED CONSOLIDATED BALANCE SHEET

as at 30^th September 2012

                                              30.9.12     30.9.11     31.3.12
                                    Notes   £ million   £ million   £ million
Assets
Non-current assets
Property, plant and equipment                 897.2     890.1     909.5
Goodwill                                      513.7     526.4     519.5
Other intangible assets                       114.5     141.5     127.8
Deferred income tax assets                     16.9      52.8      25.4
Investments and other receivables              11.6      11.2      11.0
Interest rate swaps                     7      28.0      33.1      29.3
Post-employment benefits net assets    10       2.0       3.7       2.0
Total non-current assets                    1,583.9   1,658.8   1,624.5
Current assets
Inventories                                   715.7     613.2     630.8
Current income tax assets                      16.8      12.9      11.5
Trade and other receivables                   774.2     884.5     847.1
Cash and cash equivalents - cash
and deposits                            7      83.1      96.3     139.1
Other financial assets                         12.4      14.1      11.6
Non-current assets classified as
held for sale                                     -       7.7         -
Total current assets                        1,602.2   1,628.7   1,640.1
Total assets                                3,186.1   3,287.5   3,264.6
Liabilities
Current liabilities
Trade and other payables                     (665.2)    (678.5)    (710.7)
Current income tax liabilities               (100.5)    (108.3)    (103.1)
Cash and cash equivalents - bank
overdrafts                              7     (48.8)     (57.6)     (35.8)
Other borrowings and finance leases     7    (182.1)    (100.7)     (56.4)
Other financial liabilities                    (4.5)      (9.4)      (4.5)
Provisions                                    (23.9)     (42.7)     (34.0)
Total current liabilities                  (1,025.0)    (997.2)    (944.5)
Non-current liabilities
Borrowings, finance leases and
related swaps                           7    (575.3)    (588.2)    (530.4)
Deferred income tax liabilities               (50.6)     (55.8)     (53.4)
Employee benefits obligations          10    (156.7)    (227.0)    (171.4)
Provisions                                    (29.0)     (28.8)     (28.8)
Other payables                                 (4.3)      (5.3)      (4.3)
Total non-current liabilities                (815.9)    (905.1)    (788.3)
Total liabilities                          (1,840.9)  (1,902.3)  (1,732.8)
Net assets                                  1,345.2   1,385.2   1,531.8
Equity
Share capital                                 220.7     220.7     220.7
Share premium account                         148.3     148.3     148.3
Shares held in employee share
ownership trust (ESOT)                        (52.3)     (40.1)     (50.2)
Other reserves                                 27.4      57.4      43.0
Retained earnings                           1,001.4     998.3   1,169.6
Total equity attributable to owners
of the parent company                       1,345.5   1,384.6   1,531.4
Non-controlling interests                      (0.3)       0.6       0.4
Total equity                                1,345.2   1,385.2   1,531.8

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30^th September 2012

                                               Six months ended    Year ended
                                               30.9.12    30.9.11     31.3.12
                                      Notes  £ million  £ million   £ million
Cash flows from operating activities
Profit before tax                              183.4    195.1     409.3
Adjustments for:
 Depreciation, amortisation,
impairment losses and profit on sale
  of non-current assets and
investments                                      69.8      73.6      146.8
 Share-based payments                             4.2       6.2       12.8
 Changes in working capital and
provisions                                      (83.9)     (65.8)      (59.1)
 Changes in fair value of financial
instruments                                      (0.3)      (6.2)       (0.7)
 Net finance costs                              11.6     11.7      24.1
Income tax paid                                (41.5)     (42.5)      (68.8)
Net cash inflow from operating
activities                                     143.3    172.1     464.4
Cash flows from investing activities
Purchases of non-current assets and
investments                                    (60.3)     (54.6)     (150.7)
Proceeds from sale of non-current
assets and investments                           0.7       0.2        8.3
Purchases of businesses                         (2.3)       1.1        0.6
Net cash outflow from investing
activities                                     (61.9)    (53.3)    (141.8)
Cash flows from financing activities
Net cost of ESOT transactions in own
shares                                          (23.6)     (11.0)      (25.7)
Proceeds from / (repayment of)
borrowings and finance leases                  182.0     (81.9)     (166.4)
Dividends paid to owners of the
parent company                            5   (297.0)     (71.2)     (103.1)
Settlement of currency swaps for net
investment hedging                               3.5       1.6        8.8
Interest paid                                  (17.6)     (18.0)      (34.0)
Interest received                                4.2       6.0       11.4
Net cash outflow from financing
activities                                    (148.5)   (174.5)    (309.0)
(Decrease) / increase in cash and
cash equivalents in period                     (67.1)    (55.7)      13.6
Exchange differences on cash and cash
equivalents                                     (1.9)        -        (4.7)
Cash and cash equivalents at
beginning of period                            103.3     94.4      94.4
Cash and cash equivalents at end of
period                                    7     34.3     38.7     103.3
Reconciliation to net debt
(Decrease) / increase in cash and
cash equivalents in period                     (67.1)    (55.7)      13.6
(Proceeds from) / repayment of
borrowings and finance leases                 (182.0)     81.9     166.4
Change in net debt resulting from
cash flows                                    (249.1)     26.2     180.0
Borrowings acquired with subsidiaries           (0.5)        -         -
Exchange differences on net debt                 8.7      (3.9)        5.2
Movement in net debt in period                (240.9)     22.3     185.2
Net debt at beginning of period               (454.2)   (639.4)    (639.4)
Net debt at end of period                 7   (695.1)   (617.1)    (454.2)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30^th September 2012

                         Share   Shares                                        Non-
                Share  premium  held in     Other             Retained  controlling      Total
              capital  account     ESOT  reserves             earnings    interests     equity
                    £        £        £         £
              million  million  million   million            £ million    £ million  £ million
At 1^st April
2011          220.7  148.3  (35.8)    68.3            1,001.2        1.1  1,403.8
Total
comprehensive
income for
the period        -      -      -   (10.9)               70.0       (0.4)     58.7
Dividends
paid (note 5)     -      -      -       -              (71.2)       (0.1)    (71.3)
Purchase of
shares by
ESOT              -      -  (13.4)       -                  -          -    (13.4)
Share-based
payments          -      -      -       -                9.0          -      9.0
Cost of
shares
transferred
to employees      -      -    9.1       -               (9.4)          -     (0.3)
Tax on
share-based
payments          -      -      -       -               (1.3)          -     (1.3)
At 30^th
September
2011          220.7  148.3  (40.1)    57.4              998.3        0.6  1,385.2
Total
comprehensive
income for
the period        -      -      -   (14.4)              195.4       (0.1)    180.9
Dividends
paid (note 5)     -      -      -       -              (31.9)       (0.1)    (32.0)
Purchase of
shares by
ESOT              -      -  (23.6)       -                  -          -    (23.6)
Share-based
payments          -      -      -       -                9.8          -      9.8
Cost of
shares
transferred
to employees      -      -   13.5       -               (8.0)          -      5.5
Tax on
share-based
payments          -      -      -       -                6.0          -      6.0
At 31^st
March 2012    220.7  148.3  (50.2)    43.0            1,169.6        0.4  1,531.8
Total
comprehensive
income for
the period        -      -      -   (15.6)              146.4       (0.6)    130.2
Dividends
paid (note 5)     -      -      -       -             (297.0)       (0.1)   (297.1)
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