Sector News

Johnson Matthey to exit battery business as it warns on auto production slump impact

November 14, 2021
Chemical Value Chain

UK specialty chemicals group Johnson Matthey has revealed plans to exit its battery materials business while guiding that full fiscal year profits will be hit by the slump in automotive production around the world.

The company said the potential returns from its battery materials business do not justify further investment because the sector is rapidly turning into a high volume, commoditised market. The group will focus instead on other growth areas such as hydrogen technologies, the circular economy and decarbonisation of the chemicals value chain.

According to Johnson Matthey’s analysis, its own capital intensity is too high compared with other more established large scale, low cost producers. This led the management board to pursue the sale of the business.

CEO Robert MacLeod said: “While the testing of our eLNO battery materials with customers is going well, the marketplace is rapidly evolving with increasing commoditisation and lower returns. We have concluded that we will not achieve the returns necessary to justify further investment.”

The battery materials business had net assets worth around £340m on 31 October with 430 employees based mainly in the UK. There are no production facilities yet in operation, but a battery materials plant is under construction in Poland with start-up expected in 2024.

PROFITS HIT BY AUTO SLUMP
Johnson Matthey also guided today that full fiscal year profits are expected to fall within the lower range of market expectations, assuming current precious metal prices and foreign exchange rates.

It quoted an operating profit range of £550m-£636m for the year ending 31 March 2022, based on estimates by investor relations group Vara Research.

The company is a major producer of catalysts and other materials which rely heavily on the automotive sector. A global shortage of semiconductors, and other supply chain constraints, have hit automotive production hard in all key regions. Many chemical markets are also suffering from the automotive slump.

It said the poorer performance: “is primarily due to the wide-spread supply chain shortages affecting the automotive industry and the consequential impact on precious metals prices, together with acute labour shortages in the US that are adversely impacting our Health business, which is subject to strategic review.”

The company announced the review of its health business in April 2021.

By: Will Beacham

Source: icis.com

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