Johnson Matthey – Battery Exit Sees Shares Hit The Skids

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Johnson Matthey PLC (LON:JMAT) will exit its battery materials business, concluding that the returns are not sufficient to justify the necessary investment.

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The group plans to put that part of the business up for sale and instead focus on other potential growth avenues like hydrogen technology.

Management also said that supply chain issues and rising precious metals prices mean the group’s half-year results are likely to come in at the lower end of market expectations. That suggests revenue around £4bn and operating profits near £475m.

CEO Robert MacLeod also announced his intention to retire in July 2022. He will be replaced by Bayer executive Liam Condon.

The shares were down 14.7% following the announcement.

Johnson Matthey Sells Off Its eLNO Business

Laura Hoy, Equity Analyst at Hargreaves Lansdown:

“Johnson Matthey shocked the market this morning with news that it would abandon plans to become a battery supplier by selling off its eLNO business. This was JMAT’s answer to the shift towards electric vehicles and away from combustion engines, for which it makes catalytic converters.

Management says it will focus on other potential growth avenues, but ultimately the group will be starting over from square one as it looks for ways to change alongside the new greener auto industry. The good news is that JMAT has time—catalytic converters won’t go the way of the dodo immediately. But the transition to electric is gathering pace and as JMAT’s just proven, it’s difficult to embark on an entirely new business and there are no guarantees it will pan out.

JMAT’s got the cash to support a transition, and the sale of its battery components business will pad its coffers further. But without a clear strategy, the group’s long-term investment case looks very thin.

CEO Robert MacLeod announced his retirement alongside today’s news, clearing the way for Bayer’s Liam Condon to take the helm. Condon’s got his work cut out as the group scrambles for a new strategic direction.”

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