LONDON (Reuters) - Johnson Matthey (>> Johnson Matthey PLC) expects higher earnings this year after the speciality chemicals company increased first-half profits due to stronger sales of its products that help to make cars more environmentally friendly.
The company said tighter environmental legislation was mainly responsible for boosting sales in Europe and Asia of its autocatalysts, which control car emissions. Growth in car production and truck sales also helped.
"Our growth is going to be driven by car production growth in certain areas such as Asia and North America," finance director Den Jones said. "And our customers in Europe are doing better than others so we are benefiting from that," he said. "Truck sales in North America are also doing well."
Johnson Matthey, the world's largest autocatalyst maker, said it expected its performance in the current financial year would be slightly ahead of last year.
In June, the company had expected flat profits, due to the impact of a stronger pound and the end of a long-standing purchasing deal with platinum producer Anglo American Platinum (>> Anglo American Platinum Ltd).
The strength of sterling against other currencies cut its first-half profit by 16 million pounds.
Bank of America said Johnson Matthey was well-positioned to benefit from likely above GDP growth in the catalysts business. "We re-iterate our Buy rating, seeing premium earnings per share growth against the sector as a function of a continuing strong secular growth trajectory in emission regulations."
The London-listed company, which also refines and recycles platinum group metals, reported an underlying pretax profit of 216.4 million pounds ($338.6 million) for the half year to the end of September, up 2 percent from last year and ahead of a company-provided analyst consensus of 206.7 million.
Although the largest chunk of the company's revenue comes from autocatalysts currently, Johnson Matthey is looking to grow other areas such as batteries technology.
It has agreed to buy two battery materials businesses in the last two months, betting on an increase in demand for batteries in hybrid and electric vehicles.
Its shares, up about 4 percent by 0909 GMT, were among the biggest gainers in the FTSE-100 index which was down 0.4 percent.
Johnson Matthey had average return on equity of 23 percent in the last 12 months, more than double that of its peers.
(Editing by Mark Potter, Clara Ferreira Marques and Jane Merriman)
By Silvia Antonioli