Johnson Matthey PLC (LON: JMAT) shares have been doing nothing very much since the announcement of the closure of their battery making materials adventure. There’s a story to this event that leads to wondering about the future of Johnson Matthey as a growth company.
There’s always a problem for any company which is good at what it does. Working out how to do new things then becomes something they might not be all that good at. It’s possible that this applies to Johnson Matthey.
The current news at JMAT is that the company is buying in shares to put into Treasury. The implication of this (announcements are here, here, here and here) is that the company is returning capital to shareholders. The money would be better placed in the owners’ hands than retained within the company.
And yet the world of weird metals (which is what Johnson Matthey does) is full of opportunity at present. This whole move to renewables, green hydrogen, battery-powered EVs, holds myriad opportunities for people who know their weird metals chemistry and engineering. And there’s no doubt that JMAT does know that, especially with the platinum group metals (pgms). But then that might be part of the problem.
For Johnson Matthey runs one of the world’s very few refinery processes for pgms. Just given the chemistry it’s unlikely that there will be grand new competitors against the few such refineries that exist. JMAT is also good at this process.
But this might be exactly why they’re buying in their own shares and returning capital. Because being good at one extant and established system might mean not being all that good at being the scrappy upstart in the next technological development.
Take that close down and disposal of the battery materials work. Gossip from those within the system indicates that there was nothing wrong with the base technology, in fact it was rather good. It’s just that it was all run like a large company would run it, meaning it was slow, late and expensive. Big corporations have terrible problems running projects on the same basis as scrappy little upstarts that is.
This has significant implications for other new techs that JMAT is trying to get into. Say, sustainable jet fuel. There’s no doubt – the chemistry is simple even if the economics is a bit harder – that green hydrogen and CO2 can be made into jet fuel. If green hydrogen is cheap enough then it will also be economic. But is a large company like Johnson Matthey going to be able to run such a program at the hyperspeed that start up techs require?
As they say, the jury’s out on this. The battery materials experience might suggest not. But then one failure doesn’t imply that all will fail.
Perhaps Johnson Matthey is right to be returning capital to shareholders, or maybe internal projects will lead to market leading positions in some new techs. That being what the speculation is about JMAT. Not whether they can do chemistry, we know they can do that, but can they do it fast enough?
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Tim Worstall is a freelance writer specialising in economics and the financial markets.