Precious metals weakness dampens Johnson Matthey's first quarter

Shares in speciality chemicals group Johnson Matthey slipped on Wednesday morning after the firm reported weakness in its precious metals division as a result of lower commodity prices.

The company, whose services include metal joining, fuel cell technology and medical device components, said that group sales excluding precious metals were up 6% to £657m in the first quarter of the 2012/13 fiscal year. Sales in precious metals fell 8% to £139m during the period.

Johnson Matthey said that precious metals prices have fallen "substantially" over the last nine months due to the uncertain macroeconomic environment, particularly in Europe.

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For example, average platinum and palladium prices were down 16% and 17% lower, respectively, in the first three months of the year. As a result of falling prices, intakes for the refining businesses were also down by around 20% in the quarter.

However, operating profit in the division was significantly lower due to the reduction in profit from the higher margins Services businesses. This, combined with good growth in profits from Environmental Technologies and Fine Chemicals, saw underlying pre-tax profits edge slightly higher to £99.9m from £98.2m.

Sales in Environmental Technologies were 12% higher year-on-year to £465m, while Fine Chemicals revenues were flat at £69m.

"Looking ahead, whilst visibility remains low, demand for the group's products is steady with growth in North America and Asia offsetting softer European markets," the group said.

"If market conditions and precious metal prices remain as they are today, the outlook for the group in the second quarter of 2012/13 is expected to be broadly similar to that of the first quarter. For the year as a whole, we expect that growth in Environmental Technologies and Fine Chemicals Divisions will be offset by continued weakness in Precious Metal Products Division."

Shares were down 4.02% at 2,031p by 08:40.

BC