Johnson Matthey positive on profit for battery division

UK group targets decade of rising sales of emissions-control equipment sales

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Johnson Matthey expects its battery division to make a profit for the first time this year, as the biggest manufacturer of catalytic converters jockeys for position in the race to supply components for cars of the future.

The FTSE 100 chemicals group makes materials used in cells for the automotive industry, as well as batteries for electric bicycles and power tools.

So far it has focused on lithium iron phosphate cathodes, typically used for hybrid electric vehicles and buses.

But in the past few months it has expanded into other cathode materials, such as those containing nickel that can store more energy for a given weight, for lithium-ion batteries found more in all-electric passenger cars.

“I’m pretty confident within the next year or so we can get the [battery] business to break-even or small profitability,” said chief executive Robert MacLeod. “We aim to be a serious player in this market.”

The company’s ambition reflects the rapid developments in the domain of electric-powered vehicles.

Battery-only and plug-in hybrid cars represent less than 1 per cent of global car sales at present, but analysts expect they will overtake traditional internal combustion engine cars during the 2020s.

Tesla, with its partner Panasonic, is investing up to $5bn in a battery “giga-factory” in Nevada, which it says will bring down costs sharply, as it gears up to start production of its Model 3 sedan in 2018.

Johnson Matthey, which has a market value of £6.7bn, has spent more than £100m on battery technology acquisitions since 2012. Turnover at the division increased by more than half to £130m last year, largely as a result of acquisitions, though underlying growth was in the double digits. Its main competitors in this area are Umicore, BASF and Nichia.

While the unit makes up only a small fraction of overall adjusted revenues of £3.2bn, it shows how the company, established in 1817 as a gold assayer, is preparing for an eventual shift in its principal end-market. With a portfolio spanning precious metals, active pharmaceutical ingredients and licences for chemicals plants, Johnson Matthey’s biggest source of earnings is catalytic converters.

Even so, Mr MacLeod said he expected at least another decade of rising emissions-control equipment sales because of more stringent regulations.

“If I look forward 10 years we are going to see a greater proportion of our emission control business in China . . . because tighter [pollution] legislation’s coming there,” he said.

Investors will be hoping the battery venture yields better results than the group’s quest to commercialise fuel cells. Despite improved sales, with demand from non-automotive sectors, that business suffered a writedown last year.

Tim Grejtak, an energy storage expert at Lux Research, said costs for automotive batteries — one of the main hurdles to adoption, together with driving range — had fallen quickly in the last couple of years as supply chains matured.

He added: “As a cathode materials developer [Johnson Matthey] have a very strong materials background [and] are in a unique position to develop new lines of products for manufacturing lines.”

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