(adds finance director comments, analysts, details, shares)
By Santosh Menon
LONDON, Nov 27 (Reuters) - British metals and chemicals firm Johnson Matthey Plc reported half year profits towards the top end of expectations on Thursday and forecast growth in annual earnings, helped by the growing quest for cleaner air.
The world's largest distributor of platinum and related metals, as well as a producer of catalysts used to cut vehicle exhaust emissions, was mildly positive about the outlook for the rest of the year while exuding optimism about future prospects.
"In the short term, we're relatively confident... But it's the medium to long term (that) is particularly attractive," Group Finance Director John Sheldrick told Reuters in an interview.
The firm said the outlook for the second half was similar to the first, with further growth expected in the catalysts and pharmaceutical materials divisions, where profits grew by 28 percent and eight percent respectively at the interim stage.
"Despite adverse currency movements, we are confident that the group will achieve growth in earnings per share (before exceptional items and goodwill amortisation) and dividends for the full year," the company added.
Profit before tax and goodwill for the half year to September 30 rose to 97.5 million pounds ($166 million) from a restated 93.7 million last year. Analyst forecasts had ranged between 92.1 million and 98.7 million pounds.
"The pre-tax profit and EPS have come in ahead of expectations and the outlook is encouraging," said BNP Paribas analyst Hans Zayed.
"They're doing very well in their catalysts business, which is offsetting the downturn in car production in the U.S. and Europe," added Sreejith Banerji at ETrade Securities.
The firm's shares were down 2.2 percent at 1,032 pence at 0940 GMT, valuing it around 2.33 billion pounds. The shares, up some 32 percent so far this year, have outperformed its UK chemical sector peers by around 33 percent this year.
Johnson Matthey said the profit would have been 2.8 million pounds higher had the dollar stayed stable.
Sales fell four percent to 2.17 billion pounds, reflecting lower prices and trading in platinum group metals such as palladium and rhodium. The firm said sales excluding the value of precious metals rose by 11 percent to 625 million pounds.
Johnson Matthey said strong Asian sales and increasing turnover in heavy duty diesel products more than made up for sluggish car sales in the United States and Europe.
Sheldrick said sales of emission control products for heavy duty diesel vehicles grew strongly, particularly in Japan, and this area was a big future business opportunity.
"There's legislation coming up in the U.S. in 2007 and in 2008 in Europe, which will require significant new fitment (in diesel vehicles)... We reckon the market will be about $600 million and we hope to get a good share of it," he said.
Other areas of strong potential included supplying catalysts to new refineries being built to convert natural gas to sulphur-free diesel fuel, and fuel cells, he said.
The firm proposed an interim dividend of 8.2 pence a share, up five percent on last year.
(Editing by Anthony Barker,
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