Johnson Matthey, the world's biggest producer of automotive catalytic converters, posted an 11-percent fall in first-quarter underlying profit and said it expected a worse-than-expected impact from a stronger British sterling.
The UK-based specialty chemicals company said on Wednesday the strength of the sterling exchange rate would cut its underlying profit before tax this year by over 25 million pounds ($42.66 million), more than the 20 million pounds it had estimated in June.
While the bulk of its costs are in sterling, Johnson Matthey sells its products internationally, in several currencies.
The company also expects 30 million pounds in lost commission revenue this year from a contract with platinum producer Anglo American Platinum (Amplats) which came to an end last year.
However, it maintained its flat profit growth guidance for the year.
“Our guidance for the year as a whole remains unchanged, despite the further strengthening of sterling,” Johnson Matthey said in a statement.
“We currently expect that the group's performance in 2014/15 will be broadly in line with 2013/14, as continued growth across the group will be offset by the adverse impact of both the loss of commission revenue from Anglo Platinum ...and by the effect of foreign currency translation.”
First-quarter underlying operating profit fell by 11 percent from the same period last year to 103.6 million pounds.
Excluding the negative impact of currency exchange and the lost revenue from the Amplats contract, group sales grew 9 percent.
“They have maintained the guidance, but they have done it despite the fact that the currency exchange is costing them more than they previously thought, so there has been a sort of underlying upgrade, although modest, for the guidance to be sustained in that way,” said Numis Securities analyst Charles Pick.
“If you dig down below the raw numbers, there is underlying growth.”
Johnson Matthey's Emission Control Technology division, which makes catalytic converters for trucks and cars, grew its sales by 10 percent to 444 million pounds, boosted by higher sales of trucks in the US and higher demand stemming from stricter emission control legislation, particularly in Europe.
Sales from the process technology division, which manufactures specialty catalysts for the chemicals and energy industries shrank by 17 percent to 119 million pounds.
Shares in Johnson Matthey were down more than 2 percent by 09:50 SA time against a 0.1 percent rise in the FTSE 100. - Reuters