Johnson Matthey PLC (LON: JMAT) share price plunged 19.9% after announcing that it will be quitting the battery materials industry despite the high demand witnessed in the sector and the potential future returns.
The multinational chemicals company also said that its current CEO Robert McLeod would be stepping down from his position after leading the firm for six years starting in June 2014.
The company said that after a detailed review of its business operations, it had concluded that the potential returns from its battery metals division did not support the further investments needed to unlock the division’s full potential.
Johnson Matthey reassured investors that it is making progress in other key growth areas such as chemicals decarbonisation, circularity, and hydrogen technologies.
The speciality chemicals company intends to sell its battery metals division with the ultimate goal of exiting the business in its entirety.
This is after it became clear that the firm’s capital intensity was much higher than that of more established large scale producers with lower cost structures.
Despite the increasing demand for battery metals and other alternative technologies, Johnson Matthey decided as the industry has evolved into a commoditised, high volume market.
The company has also appointed Liam Condon as the next CEO to succeed McLeod, who will leave his role in February 2022. Condon is the current head of Bayer’s crop science division, which includes Monsanto.
Bayer had announced earlier this week that Condon would be leaving the company at the end of the year due to disappointing results in his division.
Johnson Matthey manufactures pollution filters for cars and has warned investors that its results would miss consensus estimates due to the global chip shortage and the labour market crunch in the United States.
While investors were disappointed by today’s announcement, i believe that the decision was not an easy one for the company, and it might pay off in the future as the firm now focuses on more profitable sustainable technologies such as hydrogen power.
Today’s massive selloff seems like a market overreaction, but only time will tell if the company can recoup some of its losses.
*This is not investment advice. Always do your due diligence before making investment decisions.
Johnson Matthey share price.
Johnson Matthey share price plunged 19.97% to trade at 2206p, falling from Wednesday’s closing price of 2756.5p.
Should you invest in Johnson Matthey shares?
If you’re a smart investor, you will know that having large-cap stocks in your portfolio is vital. They are more mature companies, considered safer investments, trade with less volatility, have greater analyst coverage, and in most cases, have a steady dividend stream. Due to the current market environment, we think now is the perfect time to add large-cap stocks to your portfolio. But which large-cap shares should you buy? Our stock analysts regularly review the market and share their picks for some of the best large-caps to invest in.