"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.
just seen your informative post from 11 August.
I wasn't aware of Umicore. They could be a candidate for my portfolio!
I hope you won't accuse me of nit-picking but there were a couple of typos in your post.
NMC is Nickel Manganese Cobalt (not Cadmium)
LFP is Lithium Iron (not ion) Phosphate.
There is a good comparison of these technologies on the JMAT site.
Whilst NMC has greater energy density (capacity) it has lower power density (current) than LFP.
Also it appears that the LFP type is less susceptible to thermal runaway.
It seems that there may be more than one horse to back!
Agree that raw material cost will increase but guess that this is small compared with JMAT processing costs.
Also the increased demand should hopefully mean higher turnover/profits for JMAT.
Gamesinvestor, I have looked and cannot find anything. Volumes a little above average so not much steer there. Moving away from ex div date? Another special div possible? Your guess please because that's all mine are.
Continental will still need catalysts from JMAT so this is good news.
CATs have had heaters for many years.
The higher voltage used by Continental improves the warm-up time.
The downside is that the ceramic core does not withstand thermal shocks well.
It would be interesting to know how they have overcome this.
"With such an increasingly uncertain macro backdrop - rising inflation, stagnant wages, political uncertainty and Brexit - the UK market has fallen out of favour with asset allocators at the big investment management firms.The UK has been ..."
It looks like JMAT is losing the race to transition to battery driven EVs.
Umicore (Belgians FERCRYINOUTLOUD) seems to be well ahead of JMAT and BASF who are investing less in battery material development.
There is also the question of the technology, JMAT has picked the wrong horse by not selecting the NMC approach (Nickel Manganese Cadmium) - NMC has a longer time between charge and allows EVs (especially in the light vehicle mass volume) to travel further between charges.
Umicore are well ahead in NMC.
So are we looking at a VHS v Betamax moment?
JMAT the chumps are developing the wrong technology and are underinvested with only a modest R&D budget applied to battery materials. JMAT have selected LFP (Lithium Ion Phospate) which doesn't have the range, although probably has a longer life for the battery and the batteries are much bigger.
That's not too helpful, as the Chinee - 40% of the EV market so far, have specified for the lighter and longer range NMC technology.
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