| Half Year to 30th September | ||||
|---|---|---|---|---|
| 2011 £ million |
2010 £ million |
% change |
% at constant rates |
|
| Revenue | 1,533 | 1,264 | +21 | +22 |
| Sales (excl. precious metals) | 888 | 727 | +22 | +24 |
| Underlying operating profit | 90.9 | 76.6 | +19 | +20 |
| Return on sales | 10.2% | 10.5% | ||
Environmental Technologies Division, which comprises Emission Control Technologies (ECT), Process Technologies and Fuel Cells, made further good progress in the first half of 2011/12, especially in our heavy duty diesel (HDD) catalyst business and Davy Process Technology (DPT). The division’s revenue grew 21% to £1,533 million; sales were 22% ahead at £888 million and underlying operating profit was 19% ahead at £90.9 million. A very strong performance from our DPT business and the ramp up in HDD failed to fully compensate for the impact of higher rare earth prices on our light duty gasoline autocatalyst business and consequently the division’s return on sales fell slightly from 10.5% to 10.2%.
Emission Control Technologies’ sales grew by 22% to £690 million.
ECT’s Sales
| 1H 2011 £ million |
1H 2010 £ million |
% change |
|||
|---|---|---|---|---|---|
| LDV Catalysts | 463 | 419 | +11 | ||
| HDD Catalysts | 197 | 128 | +54 | ||
| SEC | 30 | 20 | +45 | ||
| Total ECT | 690 | 567 | +22 |
Light Duty Vehicle (LDV) Catalysts – Sales in our LDV catalyst business, which accounted for 67% of ECT’s sales in the period, grew by 11% to £463 million.
Estimated Light Vehicle Sales and Production
| Half year to 30th September | ||||||
|---|---|---|---|---|---|---|
| 2011 millions |
2010 millions |
change % |
||||
| North America | Sales | 7.8 | 7.4 | +5.4 | ||
| Production | 6.3 | 6.1 | +3.3 | |||
| Total Europe | Sales | 9.6 | 9.1 | +5.5 | ||
| Production | 9.8 | 9.3 | +5.4 | |||
| Asia | Sales | 14.2 | 14.4 | -1.4 | ||
| Production | 17.6 | 17.8 | -1.1 | |||
| Global | Sales | 36.4 | 35.7 | +2.0 | ||
| Production | 37.2 | 36.3 | +2.5 | |||
Source: IHS Global Insight
Global light duty vehicle sales increased by 2.0% to 36.4 million with steady growth in both North America and Europe. Sales in Asia were slightly down, almost entirely due to a 24% drop in sales in Japan following the earthquake and tsunami in March this year. Excluding Japan, vehicle sales in the region grew by 3.4%. Global production was 2.5% up, reflecting a similar regional profile.
Johnson Matthey’s Light Duty Vehicle Catalyst Sales by Region
| 1H 2011 £ million |
1H 2010 £ million |
% change |
|||
|---|---|---|---|---|---|
| North America | 78 | 84 | -6 | ||
| Europe | 289 | 256 | +13 | ||
| Asia | 96 | 79 | +22 | ||
| Total | 463 | 419 | +11 |
Our sales in Europe, which represented 62% of our total LDV catalyst sales, were 13% higher and well ahead of the growth in European vehicle production. This was mainly as a result of our strong position in light duty diesel catalysts. Around 3.5 million diesel cars were sold in Western Europe in the first half of our year. These represent some 55% of total car sales, up from 49% last year, all of which were fitted with diesel particulate filters (DPFs). Complex systems are required to meet current diesel emissions standards and therefore our sales value for a diesel car represents approximately five times that of an equivalent gasoline vehicle.
In North America vehicle production was 3% up in the first half, however our sales were down 6%. This was mainly as a result of our Japanese transplant customers losing market share due to supply chain disruption in the aftermath of the earthquake and tsunami. We expect this situation to reverse in the second half as these customers resume full production. In Asia, our business grew strongly with sales up 22% to £96 million as a result of new business, won in the second half of last year, with a local Chinese car company and contract wins with several customers in South East Asia. Vehicle production in Asia was significantly impacted by the effect of reduced production in Japan, however total LDV production in China continued to grow, up 3%, with production of cars 10% ahead. Production in India, where we have a high market share, also grew by 9% in the period. Our business in Japan was significantly impacted in the first three months of the year but has recovered well in the second quarter.
As anticipated rare earth prices have had a significant impact on our light duty gasoline autocatalyst business in the first half, reducing operating profit by approximately £15 million. The business has made good progress in addressing this issue. We expect that the process of concluding rare earth price surcharge agreements with all our customers will be completed during the second half. The main rare earth material that we use is cerium oxide, which is used to provide oxygen storage capabilities in catalysts for gasoline vehicles.
As reported in our first quarter interim management statement, we closed our manufacturing facility in Brussels in July this year which has resulted in a significant improvement in plant utilisation across our European autocatalyst business.
Looking ahead, tighter emissions legislation in Europe, Euro 6 light duty, will become effective from September 2014 and will force increased catalyst fitment on light duty diesel vehicles. These selective catalytic reduction (SCR) and NOx absorber systems will add approximately an additional 15% to 20% to catalyst value per vehicle.
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