Johnson Matthey the manufacture of autocatalysts

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Johnson Matthey is a speciality chemicals company focused on its core skills in catalysis, precious metals, fine chemicals and process technology.

Johnson Matthey's principal activities are the manufacture of autocatalysts, heavy duty diesel catalysts and pollution control systems, catalysts and components for fuel cells, catalysts and technologies for chemical processes, fine chemicals, chemical catalysts and active pharmaceutical ingredients and the marketing, refining, and fabrication of precious metals.

Johnson Matthey has continued to develop its technology for almost 200 years, demonstrating the company's ability to maintain world leadership by adapting constantly to rapidly changing customer needs. Rigorous in its own environmental policies, many of Johnson Matthey's products have a major beneficial impact on the environment and enhance the quality of life for millions of people around the world.

Johnson Matthey has operations in over 30 countries and employs around 8,500 people. Its products are sold across the world to a wide range of advanced technology industries.(web 1)

Ratio analysis

The only reason a company prepares financial statements is to provide information to interested users. These users include potential investors, stockholders, bankers and credit using companies and government offices. how the outside parties use the information depends on their role and the questions they are trying to answer.

As part of the analysis process the financial statements are commonly used to prepare ratios. These ratio analyses involve taking some of the numbers on the statements and relating them to other numbers, then making comparisons. Ratios are very useful because they relate different elements of financial information. These relationships provide a tremendous amount of information and allow for both easy tracking of trends over time and simple comparisons among companies. Ratios also have the ability to making the data for smaller companies comparable to that for larger companies.( Wendy 2003)

Here are some of the most important ratios used in business:

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Profitability Ratios

1.Gross Margin Ratio

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.:

Gross profit % = (Gross profit / Sales) x 100%

2009 2008

=6.67% =6.56%

%

In 2009 Johnson Matthey gross profit increased by 1.67% than 2008.

2.Net Profit Margin Ratio

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage.

Net profit %= (Net Profit Before Tax/sales)

2009 2008

=

=3.177% = 3.497%

In 2009 Johnson Matthey net profit decreased by 9.14% than 2008.

3. Operating Ratio:

Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage.

Operating profit % = (Operating profit / Sales) x 100%

2009 2008

3.56% 3.91%

= -8.95

In 2009 Johnson Matthey operating ratio decreased by 8.95% than 2008.

4. Return on capital employed ratio:

ROCE is tells us what returns management has made on the resources made available to them before making any distribution of those returns.

Return on capital employed = (Operating profit / Average capital employed) x 100%

=

=16.086%

Liquidity Ratios

These ratios indicate the ease of turning assets into cash. They include the Current Ratio, Quick Ratio, and Working Capital.

Current Ratios. 

The Current Ratio is one of the best known measures of financial strength. It is figured as shown below:

Current Ratio = Total Current Assets/ Total Current Liabilities

2009 2008

=

=1.606:1 =1.645:1

In 2009 entity has downgrade the level of liquidity decrease by 2.42%

So is in the bad conditions when meeting in the financial obligations.

Quick Ratios.

The Quick Ratio is sometimes called the "acid-test" ratio and is one of the best measures of liquidity. It is figured as shown below:

Acid or quick test ratio = (Current assets - stock) / Current Liabilities

2009 2008

= =

=1.03 =1.111

In 2009 Johnson Matthey have bad liquidity position than 2008 and liquidity position in 2009 decrease by 7.20

Working Capital.

Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. It is calculated as shown below:

Working Capital = Total Current Assets - Total Current Liabilities

2009 2008

=1042.2-648.7 =1172.2-712.3

=393.5 =459.9

In 2009 Johnson Matthey working capital decreased by 14.43% than 2008.

Investment ratios:

PRICES

Date

Open

High

Low

Close

Volume

Adj Close*

14-Apr-10

1,756.00

1,763.00

1,743.00

1,755.00

322,000

1,755.00

13-Apr-10

1,752.00

1,761.00

1,736.00

1,748.00

466,600

1,748.00

12-Apr-10

1,779.00

1,779.00

1,751.00

1,756.00

471,800

1,756.00

9-Apr-10

1,761.00

1,778.00

1,754.00

1,773.00

272,000

1,773.00

8-Apr-10

1,787.00

1,788.00

1,743.00

1,750.00

601,800

1,750.00

7-Apr-10

1,804.00

1,808.00

1,793.00

1,795.00

421,400

1,795.00

6-Apr-10

1,791.00

1,814.00

1,789.00

1,807.00

374,900

1,807.00

1-Apr-10

1,755.00

1,789.00

1,754.00

1,786.00

439,400

1,786.00

31-Mar-10

1,743.00

1,760.00

1,731.00

1,746.00

790,100

1,746.00

30-Mar-10

1,765.00

1,765.00

1,735.00

1,740.00

588,500

1,740.00

29-Mar-10

1,762.00

1,765.00

1,738.00

1,757.00

555,700

1,757.00

26-Mar-10

1,748.00

1,756.00

1,736.00

1,754.00

501,600

1,754.00

25-Mar-10

1,725.00

1,754.00

1,721.00

1,750.00

420,900

1,750.00

24-Mar-10

1,730.00

1,733.00

1,683.00

1,720.00

1,380,300

1,720.00

23-Mar-10

1,747.00

1,754.00

1,737.00

1,748.00

715,700

1,748.00

22-Mar-10

1,736.00

1,745.00

1,716.00

1,745.00

736,200

1,745.00

19-Mar-10

1,761.00

1,780.00

1,735.00

1,747.00

1,318,700

1,747.00

18-Mar-10

1,755.00

1,776.00

1,751.00

1,754.00

598,200

1,754.00

17-Mar-10

1,745.00

1,765.00

1,742.00

1,761.00

481,000

1,761.00

16-Mar-10

1,729.00

1,744.00

1,712.00

1,738.00

659,500

1,738.00

15-Mar-10

1,731.00

1,743.00

1,717.00

1,722.00

342,000

1,722.00

12-Mar-10

1,707.00

1,742.00

1,702.00

1,736.00

565,700

1,736.00

Earning per share

The earnings per share is a good measure of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not the earning power of the company has increased

Earnings per share = Net profit (after tax and preference dividend) / Number of ordinary shares

2009 2008

=

=0.81 =0.86

Earnings yield = (Earnings per share / Share Price) x 100%

2009 2008

= %

=81% =86%

Price/earnings ratio = Market price of share / Earnings per share

=21.66

Dividend yield = (Dividend per share / Market price of share) x 100%

Dividend cover = Net profit / Dividend

2009 2008

=

=2.23 =2.57

=-13.22

 Rate of Return

Return of total assets = debt + current liabilities / Total assets

2009 2008

=43.9% =51.0%

Debtor turn over = average debtors / sales

2009 2008

=

=125.3 days =126.2days

Stock turn over = average stock/ cost of good sold

2009 2008

days =19.81

Return on ordinary shareholders funds = (Net profit before tax / Average Equity) x 100%

=

=138.44

Leverage Ratio

This Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on debt financing (creditor money versus owner's equity):

Debt/Worth Ratio= Total Liabilities/ Net Worth

2009 2008

=

                         =1.29 =1.23

Conclusion

In the financial year to 31st March 2009, Johnson Matthey's revenue rose by 5% to£7.8 billion and sales excluding the value of precious metals increased by 3% to£1.8 billion. Underlying profit before tax was up 1% at £267.9 million. Underlying earnings per shareincreased by 0.1 pence to 89.6 pence. Market conditions changed significantly during the year.

How ever Johnson Matthey's 2009 financial performance less than 2008 financial performance.

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