Broker snap: Credit Suisse wary of cash-flow at Johnson Matthey

6th Jun 2011 12:25

Credit Suisse keeps its 'neutral' rating and 2,200p target price on speciality chemicals group Johnson Matthey, as positivity in short-term drivers is met with the broker's cautious stance on the group's balance sheet.Research analyst Rhian Tucker notes that "Car production growth remains good with little sign of slowdown in China. Japan is having a small impact but this should be over post first half 2011/12 (cost circa £5m)."Also, growth in the heavy duty diesel (HDD) market should be impressive with 15-20% growth in both US and Europe forecast for 2011-13. "In addition global energy trends favour the process technologies business."However, cash-flow has been limited by heavy working capital build, planned capital expenditure and restructuring costs, and Credit Suisse does not see this improving in the near-term.The broker's 2011 earnings per share forecast are scaled back by 2%.---BC