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LONDON (Reuters) - Johnson Matthey (JMAT.L) expects increased efforts to curb vehicle pollution to boost demand for its catalysts in the medium to long term, it said on Thursday, after reporting an 18 percent rise in annual operating profit and boosting its dividend.
The British company, which this year divided into four sectors -- clean air, efficient natural resources, health and new markets -- said sales of catalysts rose 16 percent in the year to March 31.
It said the quest for cleaner air, with many cities clamping down on transport pollution, would spur demand for catalysts, while it is also increasing its focus on batteries using nickel and lithium and on pharmaceutical ingredients.
"Over a five-year period that market (catalysts) is going to grow almost irrespective of electric vehicles given the size of the base," Johnson Matthey Chief Financial Officer Anna Manz told Reuters, referring to the still small percentage of the market that has gone electric.
"After that, it’s harder to predict."
The company is also re-focusing to ensure it is strong in technologies for gasoline and diesel vehicles and in the Asian market, which is catching up with European pollution standards, Manz said.
Doubts about diesel cars have grown as Volkswagen's dieselgate scandal has spread to other automakers and research has shown the health damage caused by diesel emissions.
Some analysts are also predicting a quicker-than-expected uptake in electric vehicles, which do not use catalytic converters.
The company reported an 18 percent rise in annual operating profit to 493 million pounds on revenue up 12 percent at 12.03 billion.
It recommended a final dividend of 54.5 pence per share, up 5 percent.
It said sales this year would be probably in line with the 6 percent growth delivered in the six months to March 31.
Shares in Johnson Matthey were down 0.6 percent at 3,091 pence, lagging an FTSE-100 Index .FTSE up 0.29 percent at 0945 GMT.
"Today’s results do not flag any immediate problems. Nonetheless, guidance still implies at least no upgrade potential," analysts at Morgan Stanley said in a note.
It rates Johnson Matthey "equal weight" or hold citing "a lack of near-term earnings impetus".
Additional reporting by Justin George Varghese; editing by Alexander Smith and Jason Neely