Johnson Matthey, a global leader in sustainable technologies, has announced that it would exit its battery materials business and put it up for sale amid intense competition - effectively concluding it can’t compete in the electric vehicle battery market.
JM makes a significant proportion of its revenue from producing catalytic converters to clean exhaust emissions from petrol and diesel cars. However, the impending bans on internal combustion engines in the UK and around the world have forced the company and many other suppliers to find new ways of making money.
The company has been working to commercialise its range of high nickel cathode materials, principally for the automotive industry. But, following a detailed review and ahead of reaching several critical investment milestones, it has come to the conclusion that the potential returns from the Battery Materials business will not be adequate to justify further investment.
In recent months, JM has been exploring strategic partnerships for the battery division it set up in 2012 - it recently opened a Battery Technology Centre at Milton Park in Oxfordshire. The Battery Materials business consists of 430 permanent employees, of whom the majority are in the UK. The net assets of the business as of 31 October 2021 were approximately £340 million.
The company acknowledged that its capital intensity was too high compared with other more established large-scale low-cost producers. Whilst demand for battery materials is accelerating, so is competition from alternative technologies and other manufacturers. Consequently, this is rapidly turning into a high volume, commoditised market.
It is to this end that the Board of Johnson Matthey has decided to put all or parts of the battery business up for sale with the ultimate intention to exit the battery business. The company intends to move swiftly to determine the best outcome for all of its stakeholders and will make a further announcement as soon as possible.
In a statement, JM says it is making good progress in its other growth areas, such as hydrogen technologies, circularity and the decarbonisation of the chemicals value chain. It sees these as attractive opportunities, which it will now accelerate with greater focus and investment.
It goes further to say, “In addition, in a world that increasingly needs solutions to address the challenges faced by climate change, we will continue to pursue opportunities across other areas that are closely aligned to our core capabilities.”
Robert MacLeod, Chief Executive, 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.
“This decision will allow us to accelerate our investment and focus on more attractive growth areas, especially where we have leadership positions such as in hydrogen technologies, circularity and the decarbonisation of the chemicals value chain.”
Johnson Matthey will announce its first-half results on 24 November, which will be in line with market expectations. The trading outlook for the full year ending 31st March 2022, assuming current precious metal prices and foreign exchange rates, is towards the lower end of market expectations.
This is primarily due to the wider 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 its Health business, which is subject to a strategic review.