""In the short term I expect the car market go from petrol/diesel to hybrid to electric, rather than a straight move petrol/diesel to electric, which should be good for JM, as it encompasses best of both worlds.""
HB - To a degree that's true, however, all (or the majority at least) of hybrids will be fitted with a small petrol engine.
60% of the JMAT business is CAT, of which the lion's share of the value is from the diesel contingent. The rapid decline of diesel is the real concern here and JMAT unfortunately is nowhere on the battery scene as far as making any real money.
Not only that, the value of the small petrol engine CAT will also be falling in value (smaller engine = cheaper CAT) -- the whole of this division, which is the big profit generator, is likely to become stretched.
The other issue that JMAT faces is the sheer number of workers and facilities it has for developing and manufacturing CATs, which will slowly become redundant, and will be expensive to offload, decommission.
Toyota - world's biggest, and Subaru are completely scrapping diesel going forward.
This is JMAT's biggest concern and it's not yet reflected in the share price at 3173 as I type.
Thanks for posting that - excellent stuff there. Only had a quick glance at the last years report, but it confirms basically what I said.
JM are producing catalysts for the fuel cell developers. These have been hard at work getting nowhere fast for decades, which presumably is why JM FC have been making a loss; but last year revenues were up over 50%; and if you look at the information flowing from the remaining Fuel cell developers then commercial units are very very close; and the market could explode over the next 5-10 years. And well done JM for believing in it.
To my understanding JM have never been directly involved with developing Fuel Cells. Many, many companies have been - most of them long since gone bust, but those remaining are finally getting near to commercially sellable products. However I believe, JM have always had a near monopoly on supplying catalysts to the Fuel Cell Companies.
Thanks for posting that. I didn't see the bit about pushing fuel cells: maybe I skipped too quickly.
In the short term I expect the car market go from petrol/diesel to hybrid to electric, rather than a straight move petrol/diesel to electric, which should be good for JM, as it encompasses best of both worlds.
My comment: Although a decent PR piece, this business area has Fuel Cells written all over it which is an utter embarrassment for this PLc. The company is far too inward looking and slow to react to changes in the market landscape. This is because it has accountants running the show who are fixated with balance sheets today rather than tomorrow.
Electric vehicles provide spark for Johnson Mattheys next big idea
Battery technology is set to be at the heart of the chemicals groups future, says its chief executive Robert MacLeod
February 9 2018, 5:00pm,
Robert Macleod said that growing demand for electric vehicles would open the market for Johnson Mattheys chemicals and reverse a downward slide in its share price
Robert Macleod said that growing demand for electric vehicles would open the market for Johnson Mattheys chemicals and reverse a downward slide in its share price
Ben Gurr for The Times
Presented with steaming coffee in a Mr Happy mug, Robert MacLeod looked momentarily perturbed. I am happy, the chief executive of Johnson Matthey insisted. I dont have to be reminded Im happy.
The 53-year-old Scot could be forgiven for being a little less than cheerful about the chemicals companys share price. Since his appointment in June 2014, the stock market has risen by 4.32 per cent, but shares in Johnson Matthey have sagged nearly 1.2 per cent lower. It was one of the notable fallers in the FTSE 100 yesterday, down 4.4 per cent at one stage. But Mr MacLeod believes that he has found the formula to pep up the 200-year-old business.
The problem was this: Johnson Matthey, a company with 13,000 staff in 30 countries and sales of £3.5 billion a year, had grown heavily dependent on the chemicals used by the car industry to make catalytic converters, which generate about 60 per cent of its sales. It has become a very strong part of our business in a very consolidated market. Yet investors have grown skittish about the future of this market and Johnson Mattheys heavy exposure to it, as the motor industry prepares for a shift to electric vehicles and as sales of diesel cars in Europe have collapsed amid rising concerns over emissions.
Mr MacLeod believes that its time for a change of strategy and is placing a big bet on electric battery technology, which he believes represents the companys future. We are in a unique transition with the evolution of the [automotive] power train. Its a very exciting and interesting time for the company and the industry.
With billions of dollars being ploughed by the worlds big carmakers, the likes of Ford, Toyota, Tesla and more, into electric vehicle research, a global race is under way to develop the best technology. Mr MacLeod believes that Johnson Mattheys long-established expertise in research and development and its knowhow in chemicals manufacturing can make a unique contribution.
At the centre of his plans is enhanced lithium nickel oxide, which he claims is the best cathode material available for use in electric vehicle batteries, offering superior range, performance and efficiency, as well as safety and reliability. The average electric vehicle needs 50kg to 120kg of this cathode material and Johnson Matthey is making a push to become a leading player in the sector.
And the potential prizes on offer could be huge. Last year the number of electric cars exceeded two million. The International Energy Agency predicts that this figure could reach 140 million by 2030 which is why this summer Mr MacLeod expects to approve a £200 million investment in a manufacturing plant for the material, probably located in Asia, where increasingly tough Chinese emissions rules are driving robust demand for electric vehicles. The modular plant could be increased in size to m
I think it is a bit difficult to say at this point whether this is a good deal because :-
- No price indicated
- It seems a little odd to sell after acquiring companies and making great play of the potential in the field. There has been little commercial success to show for it, the sale might imply some lack of confidence in JM about the ability to develop and market profitable commercial products. There is no clarity on whether JMs Lithium Nickle Oxide products will compete with some of the alternative materials.
- Cummings? As an engine manufacturer (mainly diesel), they are right in the firing line for substitution by BEVs, they recently bought Brammo, a low voltage battery supplier but they don't seem to be bringing much to the business in terms of specialist capability or market access, just a pressing need to be in the battery/EV market. (Cummings press release on the purchase below). The logic looks right for them, not sure what it does for JM, unless of course they paid a whopping price.
This looks like a really great deal. JMAT are not ending their development of high performance batteries. From RNS: 'Johnson Matthey is able to focus on developing high energy battery materials, including its class-leading enhanced lithium nickel oxide (eLNO) product, for transport applications within its overall technology portfolio.'
In March last year I sold 60% of my JMAT because I was overweight in them and SP had not moved up for some time. I first bought JMAT in 2001 so am a long time fan of this very solid company.
Although no commercial details are given presumably JM will get some ackers for the sale and it sounds like a sensible arrangement. JM concentrate on what they do well - developing metal based products and Cummins do what they do well. It keeps JM in the electric car business but as a supplier to battery makers.
"I think the uptick in their share price recently was largely due to the announcement of a couple hundred million investment in battery development. It was a very late announcement in my view, given the years their management have been beaten up to do something more serious. I get the distinct impression that they have picked the wrong horse for the battery methodology, compared to the likes of Umicore with NMC technology.
The switch also to hybrid's doesn't really help JMAT, given the petrol engine emmissions control (via CAT) is a lot less valuable than Diesel. The petrol engines in a hybrid are tiny and are solely for battery recharge purposes. JMAT's fuel cell division has yielded very little, the battery division is still loss making and the investment falls well short competition -- JMAT may have picked the wrong battery technology"
All good points Games.
Being late to developing technology is not always a bad thing: joining the game when the rules are a lot clearer saves a lot of wasted time & effort. It's still developing and the final most popular battery type is still not clear; but it's potentially a huge market and there is scope for JMAT to pick up a fair chunk of it.
Take your point about diesel, but diesel engines for larger vehicles is not going anywhere for a few more years. The point about hybrids is they potentially have business on both sides of the technology.
Fuel Cell markets is minute at the moment, but a lot of companies have done a lot of development work over the last 10-20 years, and the results are finally beginning to look as if commercial units are now a realistic reality. Last time I studied that market in detail (some time ago) J MAT had a monopoly on catalysts. And I still think there is a real possibility that it will be fuel cells rather than batteries which drive most electric vehicles 20 years hence.
My choice of JMAT was more because there is a sound business in place which isn't going to disappear; but there are some areas of potential which could be massive. So it's more of a downside risk limited, upside potential considerably larger; rather than being a share I've got utmost confidence in.
But, businesses can change in an instance, though no fault of anyone directly involved - as Compass shows today. Tragic news.
Some interesting comment on the recent Tesla Semi and Roadster announcements and claims for range, charging times etc. suggesting the claims make significant allowance for battery development before sales in 2020, but I don't think that is a great surprise.
Some data about battery cost trends and weight/kWh which are at the core of the questions of EV viability and market penetration.
I have no clarity on how/if JMAT will participate in the EV story. Currently not holding, not surprised to see the SP heading back to levels before September's EV exuberance took hold, but not sure we have not seen the last of it, especially if JMAT start making some real progress and sales.
Falling profits and EPS, despite growth in revenue :-
Profit 2016 -- £226M ---->>>> 2017 = £221.9M ---- (2%)
Revenue up 15%
EPS down 5%
Divi up 6%
£176M of the revenue growth was due to currency
Revenue reported at £6,478 compared to 2016 at £5,625
"""Significant progress in the development of our high energy battery material, enhanced lithium nickel oxide (eLNO). Our material is in qualification cycles with six customers and investment in a pilot plant is ongoing""
Doesn't actually mean any revenue or profit (loss) is attributable to battery -- this has been going for years now.
Share price down 3.7% which is consistent when anyone reports anything these days, good bad or indifferet.
LKH, "it's [sic] battery business has been around a long time now and they haven't made a dime out of it."
JMAT was my largest single shareholding, but I lost faith in JMAT's future prospects, because dependant on cats for most of profits, so in March sold 60% which still leaves me a holding worth, at Fridays close 2.79% of my total share portfolio, including cash element. Currently cash element 6.57% (another story there). I too have been disappointed with battery and fuel cell divisions. The latter I had high hopes for over many years. I feel the £200 million investment in developing high end batteries shows the commitment they previously lacked. Now regret reducing my stake. Will consider topping up on weakness. They have the tools, skills and now the finance to be a successful leader in high value batteries.
Very good long investment IMO and a strong buy on significant dips.
Rumble Seat: Frankfurt 2017: China, EVs, and Dieselgate -- WSJ
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Daimler AG (USOTC:DMLRY)
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Today : Saturday 23 September 2017
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By Dan Neil
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 23, 2017).
Two weeks ago (Sept. 11), the night before the IAA Frankfurt International Motor Show opened to the press, I strolled through the doors of Daimler Mercedes-Benz' vast, lighter-than-air pavilion thinking I knew the story. I even had a headline: Daimler AG's Stuck Throttle.
The oldest of the German automaking giants, Daimler's recent financials have rocked. Group revenue was up 3% (153.3 billion euro) in 2016, with record profits (8.8 billion). Mercedes-Benz Cars in particular has come roaring back to retake the title of world's number-one premium luxury brand. Sales were up 9% in Q2 2017 alone. Product design is killing it.
Even the Formula One team is winning. Lounging on stage, an Amazonian creature in a windswept carbon-fiber negligee: the Mercedes-AMG Project ONE, a street-legal hypercar built around the +1,000-hp hybrid powertrain of a Formula One car. Each of 275 copies costs $2.7 million euros. The engine revs to over 11 grand. That should be lively.
But Daimler's solemn commitment to eternally high returns, what it calls a "sustainable" 10% net profit to shareholders, means it can't let off the throttle, ever. And it's heading for a wall. A Great Wall. In China.
See? I even had catchy phrases at the ready.
Two days before Daimler's pep rally, on Sept. 9, industry ministers in China confirmed that, like France, the U.K., Norway and the Netherlands, the world's largest vehicle market (24.4 million in 2016) would phase out fossil-fuel vehicle sales in favor of widespread, state-sponsored vehicle electrification.
Because of climate change? Sort of, sure. But with its cities shrouded with deadly tailpipe smog, China's air-quality concerns are more regional than global. The nation of 1.37 billion souls is also trying to kick the imported-oil habit. China has already outlined tough electrification mandates for automakers, with costly penalties behind them, that have left the German automakers crying for mercy. With German Chancellor Angela Merkel's help, they got the start date pushed back to 2019.
Though not unexpected, China's announcement brings two things to the EV battery industry it sorely needs: certainty of demand (albeit compulsory) and scale. Global battery production is expected to double in the next five years. As down-payment on its plan to lead the world in energy storage devices, China will add 120 gigawatt-hours of annual battery production capacity by 2021. That's three times the output of Tesla's Gigafactory. VW Group board member for research and development Ulrich Eichhorn told Automotive News the company will need more than 200 gigawatt-hours worth of batteries by 2025 to meet its goals.
Now sooner than later, China's mandates will push the market price of batteries below the $100/kWh threshold at which -- thereabouts, all things equal -- an EV design attains cost-parity with an internal-combustion vehicle. After that, Katy bar the door.
The other skunk at Daimler's picnic was Dieselgate. Two years after clean-air investigators discovered emissions-cheating software in VW Group products, affecting 11 million vehicles world-wide, the scandal and public ire has become general. In remarks from the stage, Daimler AG chairman Dr. Dieter Zetsche pushed back on growing sentiment in Europe to restrict diesel vehicles if not ban them altogether. "It's a fact that it's worthwhile to improve modern diesel engines rather than to ban them," Mr. Zetsche said. "That is why Daimler has invested 3 billion euros in the further development of our diesel engines."
"After Johnson Matthey set out financial guidance at a capital markets day focused on growth opportunities ahead, analysts at Deutsche Bank and Credit Suisse were among those to hike their expectations for the chemicals group.
As well as highlighted its ability to grow earnings ahead of the market in the face of the changing nature of the global automotive industry, the announcement that caught investors and analysts' eye was a big investment in its battery material technology business and launch into battery cathode materials with a proprietary cathode material 'eLNO'.
"We acknowledge the earnings opportunity is still 4-5 years away. However, launching a viable cathode materials technology (potentially more cost efficient than NMC [nickel manganese cobalt], positive early feedback from customers) should improve investor sentiment towards JMAT," said Credit Suisse, ascribing zero value for this business in our valuation.
Credit Suisse increase its earnings forecasts by an average 1%, increase its target to 3,700p and retain its 'outperform' rating.
Deutsche Bank, which reiterated its 'buy' with a target of 3,600p, was impressed with management predictions that autocatalysts will grow for at least the next ten years driven by market share gains and growth in Asia, more than offsetting the decline in diesel market share in Europe and increasing electrification."
"Catalytic convertor giant LSE:JMAT:Johnson Matthey's Capital Markets Day statement had "something for the bulls and something for the bears", according to one leading analyst â and so it proved. So far, in the short-term at least, the bulls have ..."
JMAT is still late to the market, have given no indication in this announcement that they plan to adopt NMC technology which is likely to be the mass market demand - and this could mean losing the race to Umicore.
Also the £200M announced is below the competitors earlier announcements this year and JMAT is only planning to role this out next year, which makes it look like they are pushing out a message to appease the investment community.
I could regret this if JMAT changes course, but it's battery business has been around a long time now and they haven't made a dime out of it.
My plan is to watch the direction over the next days. Prepared to sell if profit taking drives it down but you know what the market is like sometimes with momentum. I have concerns about the lack of progress too on the electric battery side. It is only a matter of timing as I will be selling and happy to not be too greedy and leave some in for others.
At least you have secured the kids funds!
A lot of expectations set (5 counted in RNS) and the market has responded positively, let's see them walk the walk. This is objectives setting for senior management for 2018 and a stick to beat them with if not delivering. It needs a bit more than words and name changes for the businesses that have not delivered such as Fuel Cells. I remain sceptical.
Well at least I kept it for the kids, but surely this is a good time to sell given the size of the investment in battery technology -- is there some mileage in the announcement euphoria, as JMAT has to deliver on it's investment and it's already significantly behind the methods adopted in China.
The trend is still down and I'll take the profit I have, as it's not a share I want long term, and it reduces my number of shares to a little more manageble lot and increases my cash pile to now 23.43%
Brokers have an uprating on it and they might be right, but I've since stopped taking any of their judgements.
Games -- Onward and upwards with Abcam, that's two sold this week. Circassia next?
These only make up 1.27% of my stack which I have held on to. Like you it is still at a profit, around 40% but the general direction is for them to drift downwards as they fail to keep up in the R&D stakes I will have to think hard about the timing to fully exit. Up a bit today!
At the end of the day, this company has had a very reliable cash cow and a very good one at that for many years and probably years to come. The said, the sad news is that as there is only one of these babies which itself is now under threat from the imminent revolution in the auto industry. The company has been very slow to act and position itself longer term. There is no batteries business worthy of note and fuel cells developments should be an embarrassment to the board. The company is in the midst of a restructure recognising it has strategic failings and a disconnect with the markets where it is lagging behind its competitors. I've always maintained that the problem with this company is in the senior management/boardroom which hitherto has hardly changed.
I had a test drive of a BMW I3 recently. Although not quite the babe magnet for twentysomethings from the outside the drive was remarkably quiet and extremely rapid. At £32k retail (with government subsidies) and 120 miles between recharges makes this revolution in the auto-industry a reality, and one that JM does not seem part of.
"You selling out in tranches or plan to clear the decks this week?"
I sold the biggest tranche some months ago whenever I posted that I'd sold some. There's not much left now and it'll all go in one (fairly small) final tranche. I shall be sorry to see it go because I've always admired JMAT and I shall be sorry to leave the share register for good, but I feel it's the right thing to do.
"it's had the battery (new business) division up and running for a long time and it's going nowhere as far as I can see."
I tend to agree. It's had its fuel cell division up and running for a lot longer and that's not going anywhere either.
Yeah, JMAT is heavily dependent on its exhaust pipe widgets and, although the demand may not fall away quite as quickly as the recent share price weakness suggests, I'm in the process of selling every JMAT share I own.
It's a fine company with some fascinating products unrelated to exhaust pipes ... such as Bitrex and various powerful opiates ... but it's hard to see much in the way of growth so long as exhaust catalysts are such a large part of its biznay.
It's also a company ... a bit like QinetiQ ... that gives the impression that its white-coated scientists are much keener on spending their days hunched over a tray of chemical juices with a pipette in one hand than on working to maximise the only thing that matters namely
Marcher - I must have rushed out the post - or was having a flat day (iron).
But it's interesting not to dismiss either approach. For the China market, it seems that JMAT is not that well positioned, and that's where more than half the sales are.
I'm thinking that if this recovery in JMAT runs and the upgrade has legs I will exit at a higher point, as I think there isn't a good long term future for JMAT as it's so dependent on internal combustion. JMAT doesn't seem to be making any real progress in battery technology and electric vehicles are going to take off a lot faster than people assume, in my view.
Electric vehicles seem to be the iPhone to Nokia moment for JMAT -- and it's no good waiting until Electric vehicles hit 10% or more of all new vehicles sold, as the damage will be done by then and you'll be too late to get out I suspect.
Games - could be wrong and JMAT has something up it's sleeve, but it's had the battery (new business) division up and running for a long time and it's going nowhere as far as I can see.
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