US Edition Johnson Matthey
£0 -0p
Questor says HOLD
The shares are down 12pc so far this year since they were recommended at £20.38 at the start of January, despite an impressive financial performance as investors continue to worry about the global outlook.
Last week, Matthey, the world's largest supplier of catalytic converters, said that interim pre-tax profits had risen by 35pc to £195.1m. This was on revenues that were 29pc ahead of the equivalent period last year at £5.9bn.
The interim dividend was raised by 20pc to 15p and it will be paid on February 7 next year. This was ahead of expectations.
However, the prospective yield remains relatively uninspiring at 2.9pc.
Matthey also said that it expected to have a stronger second half, boosted by sales of trucks in North America, although it conceded that visibility in the business had reduced.
There is some "fragility" in southern Europe, however European sales of catalysts for diesel vehicles was strong, Matthey said. Sales of these units are higher margin because of the complexity of catalytic converters in these vehicles.
Prices of the rare earth metals used in catalysts have jumped, so margins were hit in the first half. These cost increases caused a hit of about £15m. However, prices have since eased and the rises will be passed on.
The company also has a pharmaceutical ingredients business, which grew sales by 17pc to £102m in the six months to September. Matthey also saw sales at its research chemicals unit rise 14pc to £40m.
The shares are trading on March 2012 earnings multiple of 13.1 times, falling to 12.3 next year. Given the continuing market uncertainty, the shares are a hold for now until we get some clarity on the euro.