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Johnson Matthey shares sink 20% on plans to sell battery business, weak trading, and CEO exit

·2-min read
Johnson Matthey had hoped to develop tech that could be used in electric vehicles  (PA Archive)
Johnson Matthey had hoped to develop tech that could be used in electric vehicles (PA Archive)

FTSE 100 chemicals business Johnson Matthey lost a fifth of its value today after throwing in the towel on its battery business, cutting revenue guidance, and waving goodbye to its CEO.

Johnson Matthey, known for making catalytic converters that clean up car exhaust fumes, said it would sell its battery materials business after concluding it could not compete with rivals.

The company said returns “will not be adequate to justify further investment” as the market was “rapidly turning into a high volume, commoditised market.”

The company had once hoped battery technology for electric vehicles could replace its reliance on catalytic converters. Johnson Matthey set up the battery division in 2012.

It said today: “Whilst demand for battery materials is accelerating, so is competition from alternative technologies and other manufacturers.”

Johnson Matthey will now look for a buyer for the division, which has been valued at £340 million. Charlie Bentley, an analyst at Jefferies, said Johnson Matthey may struggle to find a buyer at that price.

The decision to exit batteries “demonstrates the challenges in replacing earnings in the automotive catalysts as these fade mid-term,” he wrote in a note

Catalytic converters account for around half of the company’s business but this will decline as diesel and petrol cars are phased out.

Bentley said: “The key issue is JM has an overweight EU diesel car catalyst franchise that is going to zero.”

Johnson Matthey is investing in other sustainable businesses like hydrogen fuel and CEO Robert MacLeod said the sale would “allow us to accelerate our investment” in these areas.

In the same update, Johnson Matthey warned full year revenues would be “towards the lower end of market expectations”. The company blamed semiconductor shortages and other supply chain issues in the automotive sector, sky-high precious metal prices, and “acute” labour shortages in the US that are hitting its health business.

Bentley said the update suggested a 5% cut to forecasts. Hargreaves Lansdown said Johnson Matthey’s revenue was now likely to be around £4 billion next year, with operating profits near £475 million.

Finally, the business today also said MacLeod will leave the business next year after eight years as CEO. He will be succeeded by Liam Condon who joins from German chemicals giant Bayer.

Johnson Matthey shares sunk 522p or 18.9% to 2241p.

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