A mixed bag...

1st Apr '09 by Stocktaculous

2 comments 2356 reads

World's biggest platinum refiner and fabricator
Latest trading results mixed. http://www.stockopedia.com/news/announcement/JMAT/090401jmat8745p.htm. Despite favourable currency tailwinds, the company reported weaker sales in the final quarter of its financial year, largely due to lower demand for autocatalysts as car companies continued to reduce production and soft platinum group metals prices.
However, its process technologies division achieved good growth in the three months to end-March as environmental concerns supported demand for purification products.
The firm said it would close its fine chemical facility in Ireland and consolidate manufacturing of biochemical prostaglandin products at its facility in the US. The move would cost 9 million pounds in restructuring charges.
EPS will be well within the guidance range of 85p to 90p given in the company's third quarter Interim Management Statement.
Cash flow said to be strong in the second half of 2008/09 with net debt estimated to be around £70 million lower than at 31st March 2008, despite the effect of adverse exchange translation on foreign currency borrowings.

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Gradders73

1st Apr '09

I know this company well - worked with them over the years and I hold the management in high regard. The main thing I know is they have loyal lenders (private placements etc rather than bank syndicates, so the banks don't have reason to call every few days) and investors and they don't like giving them surprises, so you won't have any earth-shattering announcements.

Platinum is a bit confusing at times as it's an industrial and precious metal, but I am not sure what the split in usage is. I would have though the auto sector only requires minute amounts per car, but if the basis between gold and platinum stays the same, I would imagine the Indians will increase proportion of platinum jewellery?

Anyway, I plan to buy into JMAT if I see some clarity around demand. This is one of my favourite names in the FTSE-100 and it's not a name you would lie in bed worrying about them doing something stupid. When the world pulls out of its tailspin, this should do fine.

9th Apr '09

Seems to be holding on to the higher levels ok, and platinum prices are picking up quite well. Obvious concerns about the high p/e ratio given the issues with autos. However, I don't think it's all doom and gloom in the auto sector. In the longer term, global demand for cars is on a steep upward trend (all they've got to do is build the roads to put them on), but govt stimulus packages all seem to have environmental aspects, which should be good for newer, cleaner technologies and appearing to supporting autos is a political must. Interesting thing here in Germany - the govt is doubling the payment for scrapping cars to 5,000 Euros. The reason for this is at the lower level, people were only scrapping old heaps and buying cheaper models (i.e. French and Japanese cars) so it wasn't helping the German producers - Audi, BMW, Mercedes etc. Obviously, they can't impose tariffs so they decided to increase the payment to change the target demographics.

I suppose it's easy to confuse things here. Firstly, if everyone is talking about the collapse of the global economy, you are likely to wait a few months before buying a new car, but as long as the world doesn't end, you'll still buy one and secondly, the US auto sector is a basket case partly because they made terrible cars but mainly the wages and benefits costs. I remember reading that for each car Ford sells, $1,400 of the revenue covers healthcare cost of its employees. None of this means the end of the car...

Anyway, I had a target price on this stock of about 1400p, but think the price could take a hit on the back of bad US news, so not very excited about buying in at this level.

A mixed bag...

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Stocktaculous

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