The British chemicals group Johnson Matthey has launched a £ 200 million share buyback in an effort to win back investor support, as CEO Robert MacLeod defended. the “painful” decision to abandon the electric battery business the company has pinned its future.
The FTSE 100 company revealed on Wednesday that a £ 314 million write-off arising from its cathode materials division, which supplied parts used in electric batteries, wiped out the first half’s profits.
MacLeod, who has been managing Johnson Matthey since 2014 and leaving the group, said the company found that she battery material business was too capital intensive given the expected level of returns.
“What has become clear over the past year or so has been that our capital intensity has been too high in a rapidly commodifying market,” said Macleod, who announced his departure last month along with the decision to leave the business. “I admit it was painful for shareholders.”
Excluding the impairment charge, the group’s profit, which produces catalytic converters that reduce car emissions, doubled to £ 293 million in the six months to September.
Johnson Matthey’s exit from battery material leaves Germany’s BASF and Belgium’s Umicore as the only large – scale European manufacturers of cathode material, the most expensive part of an electric battery.
MacLeod said that “there is still an opportunity for the industry to develop in Europe, but it must be people who are used to dealing with large-scale chemical manufacturing”.
Johnson Matthey shifts his focus to supplying components to hydrogen fuel cells and electrolysers. The group is set to generate £ 4 billion in cash flow over the next 10 years from the supply of catalytic converters to fossil fuel-powered cars – a company in structural deterioration – to help finance its expansion into hydrogen.
Analysts say incoming CEO Liam Condon will have to decide whether to keep the group intact or to separate the hydrogen division.
Johnson Matthey also agreed to sell his advanced glass technology business to Italy’s Fenzi for £ 178 million, the proceeds of which will help finance the share buyback.
Meanwhile, the prospects for his health business, which he is selling, have been dampened by acute labor shortages in the US. Rob Hales, an analyst at Morningstar, said those issues are likely to result in a lower selling price.