Johnson Matthey (JMAT) shares sink 18%: Should you hold the stock?

2 min read | November 12, 2021 12:43 AM AEDT | By Nidhi Gupta

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Johnson Matthey (JMAT) shares sink 18%: Should you hold the stock? — Image source: ekapol sirachainan, Shutterstock.com

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Highlights

Johnson Matthey warned that the company’s full-year revenues are expected to be on the lower end of market expectations.

The CEO of Johnson Matthey - Robert MacLeod would be exiting the business on 28 February 2022 and be succeeded by Liam Condon.

Shares of Johnson Matthey Plc (LON: JMAT), an FTSE-100 listed international speciality chemicals and sustainable technologies firm, slumped around 18% on Wednesday after it announced its intention to sell the battery materials business for £340 million.

The shares of the company, which is into manufacturing catalytic converters used in car exhaust systems, were trading at GBX 2,281.00, down by 17.45%, as of t 11:40 AM BST on Thursday, 11 November 2021. The market cap of the company stands at £5,347.33 million.

Plans to exit battery materials business

Johnson Matthey has been engaged in the commercialisation of its high nickel cathode materials for the automotive industry. It established the battery division in 2012. Catalytic converters account for about 50% of the company’s business, and the demand for these is expected to decline as petrol and diesel cars get phased out. Post a detailed review, the company decided that the potential returns from its battery materials segment were not sufficient to justify further investments.

While the demand for battery materials is high, it is also facing stiff competition from alternative technologies and other prominent manufacturers. In recent months, JM has been considering several potential strategic partnerships but concluded that the business is highly capital intensive compared with other established low-cost producers who have achieved economies of scale.

Johnson Matthey’s board is therefore pursuing the sale of all parts of the battery materials business, valued at £340 million. The decision was a part of the company’s strategy to expand in more attractive growth areas such as hydrogen technologies, decarbonisation of the chemicals, and circularity.

CEO exits

Johnson Matthey also announced that Robert MacLeod would be exiting the business on 28 February 2022, after serving as the Chief Executive Officer (CEO) for a period of eight years. Liam Condon, formerly a part of Bayer, a Germany-based chemicals giant, will be succeeding MacLeod.

Revenue guidance slashed

Johnson Matthey also warned that the company’s full-year revenues are expected to be on the lower end of market expectations, primarily due to semiconductor and labour shortages, soaring precious metal costs, and supply chain issues in the automotive sector

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