By Silvia Antonioli and Clara Denina
LONDON (Reuters) - Johnson Matthey (L:JMAT), the world's biggest auto catalysts maker, pledged on Wednesday to return cash from the sale of two businesses to shareholders in the absence of major acquisitions.
The UK-based speciality chemicals company, which makes most of its profits from the sale of platinum-rich catalysts, has benefited in recent years from tighter European regulation on emissions, boosting demand for more value-added catalysts.
Its market dominance however is being challenged by competitors such as Umicore (BR:UMI) and its precious metals products division is suffering from a plunge in metal prices.
The group expects to receive up to 380 million pounds from the sale of its Gold and Silver Refining and Research Chemicals businesses.
"I'd expect a reasonable proportion of that to be returned but this depends on whether we enter any material M&A," Finance Director Den Jones said in an interview, adding the firm would look at opportunities in fine chemicals and new businesses.
"Even if we do return some cash from the two sales, the balance sheet remains in the position to support an acquisition of around 200 to 300 million pounds. But with material M&A, of around 500 million pounds, we would not have the ability to return capital," Jones said.
The company posted underlying profit before tax of 94 million pounds ($146.7 million) for the quarter to the end of June versus 95 million a year ago.
It was hurt by plunge of about 10 percent in the price of the white metal, as well as by weakness in its Process Technology division, which sells catalysts and technologies to the oil and petrochemical sector.
The group had forecast in June that this year's performance would be ahead of last, but said on Wednesday that although it still expected "good growth", a further fall in platinum prices since the end of the first quarter and a negative impact of foreign exchange rates could impact results by a further 10 million pounds.
(This version corrects spelling of "absence" in headline)