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5. Johnson Matthey Plc Business Report FY ended Mar. 2020

Johnson Matthey Plc Business Report FY ended Mar. 2020

Factors
1) Net Sales
-In the fiscal year ended March 31, 2020, the Company had net sales of GBP 14,577 million, an increase of 35.7% over the previous fiscal year. The increase in sales was primarily driven by higher average precious metal prices.

2) Operating Profit
-The Company’s operating profit in the fiscal year ended March 31, 2020, decreased by 26.9% from the previous year to GBP 388 million. The decrease in profit was caused by a restructuring and impairment charge of GBP 140 million as well as a negative impact of GBP 60 million related to COVID-19.

3) Clean Air
-The Company’s Clean Air sector’s sales totaled GBP 2,618 million in the fiscal year ended March 31, 2020, a decrease of 3.8% from the previous year.

<Light Duty Vehicle (LDV) Catalysts>
-Sales of light duty vehicle catalysts remained approximately level in the fiscal year ended March 31, 2020, increasing from GBP 1,738 million the previous year to GBP 1,742 million. Notably, sales of gasoline catalysts increased in Europe and Asia with the implementation of stricter standards, while sales in the Americas declined due to the ramp down of a diesel platform.

<Heavy Duty Diesel (HDD) Catalysts>
-Sales of heavy duty diesel catalysts totaled GBP 831 million in the fiscal year ended March 31, 2020, a decrease of 11.4% from the previous year. Sales declined throughout all of the Company’s operating regions. Class 8 commercial vehicle sales declined sharply in the second half of the fiscal year in the Americas, while sales generally declined in the segment’s operations in Europe and Asia.

4) Efficient Natural Resources
-In the fiscal year ended March 31, 2020, the Company’s Efficient Natural Resources sector had revenues of GBP 1,079 million, an increase of 8.9% over the previous year.

<Advanced Glass Technologies>
-Sales in the Advanced Glass Technologies business decreased by 6.7% to GBP 70 million primarily due to a slowdown in global car production and the effects of the COVID-19 pandemic.

5) New Markets
-The Company’s New Markets division had sales of GBP 389 million in the fiscal year ended March 31, 2020, an increase of 7.5% over the previous year.

<Alternative Powertrain>
-The Alternative Powertrain business unit had sales of GBP 237 million, an increase of 15.0% from the previous year. The increase in sales was driven by a growth in demand for fuel cells, which grew by 23%, and battery systems for electric bikes.

Recent Developments

-Due to the COVID-19 pandemic, a number of the Company’s automotive customers have announced temporary closures of their manufacturing facilities because of lower consumer demand while some governments are mandating the temporary cessation of non-critical business activities, which includes automotive production. As a result, the Company has taken the decision to temporarily close most of its Clean Air business unit plants. Exceptions include operations in China which are ramping back up as the region starts to recover. However, the Company continues to invest for the future and remain committed to its strategic growth projects, including new Clean Air plants, a Battery Materials business unit commercial plant and upgrades for precious metal refineries. (From a press release on March 30, 2020)

-The Company expects that automotive demand for platinum will rise by 3% in 2019, due to greater platinum use on trucks. In China, platinum consumption on heavy duty vehicles will increase sharply, with strict China VI emissions legislation due to be implemented in some provinces and cities starting in July 2019. The new regulations will apply nationwide in July 2020, while India will also introduce strict emissions regulations for trucks in 2020. Palladium use in autocatalysts is forecast to rise by 9% in 2019. (From a press release on May 13, 2019)

R&D Structure

-As of March 31, 2020, the Company has 1,552 employees working in research and development.

R&D Facilities

-The Company’s Clean Air division has nine technical centers across the world. The Efficient Natural Resources division has six technical centers in the UK.

-The Company will open a new battery application center at the business and science community of Milton Park in Oxfordshire. The Company has taken 2,123 square meters of area over three floors at 142 Park Drive consisting of a new office and laboratory development. It will work with leading automotive companies to develop tailored solutions for their applications. The Company is developing next-generation battery materials with improved energy density, pulse power for improved acceleration, and safety, while minimizing the use of scarce raw materials such as cobalt. The Company’s family of ultra-high energy density eLNO cathode active materials delivers improvements in all of these critical performance areas. (From a press release on October 15, 2019)

R&D Activities

-The Company joined 41 other global organizations in the Global Battery Alliance in agreeing the principles to help establish a sustainable battery value chain. The Global Battery Alliance designed ten guiding principles for the creation of a sustainable battery chain by 2030. Implementing commitments will be based on existing standards such as the Organization for Economic Co-operation and Development (OECD)’s Due Diligence Guidance and economically viable considerations for a circular and low carbon economy. This alignment among key players in the battery market establishes the basis for a transparent accountability system. It will guide the development of a global digital battery information disclosure system referred to as the Battery Passport, which is designed to enable a transparent value chain, for example, with respect to human rights and the environmental footprint. (From a press release on January 24, 2020)

-The Company acquired the full intellectual property rights to a portfolio of silicon-alloy based anode materials from 3M Company. The acquisition is a further step in the Company’s long term strategy to apply its world class scientific expertise to develop a portfolio of future battery solutions for customers for automotive applications. The Company’s initial focus has been on cathode materials, which have been the limiting factor in battery performance. Adding technology for next-generation battery anodes to its portfolio offers the Company a complementary route to further improve battery performance. (From a press release on November 19, 2019)

Technological Alliance

-Greentown Labs announced the Company as its newest Gigawatt Partner. The partnership will develop ties between the Company and Greentown Labs’ community of more than 100 cleantech startups. The incubator’s community of startups is developing solutions across a variety of cleantech and clean energy sectors. The Company will now have access to strategic, facilitated startup introductions which will ultimately help it to advance solutions in sustainability. (From a press release on February 25, 2020)

Product Development

New small pore zeolites for SCR catalysts
-The Company has recently focused on developing a new generation of SCR catalysts for use in diesel vehicles. SCR catalysts are manufactured using materials called zeolites, which have a cage structure with a metal catalytic site. The small pore nature of zeolites feature differing behavior compared to larger pore SCR zeolite catalysts, specifically in activity, thermal stability and poison tolerance. Company researchers discovered a new, small pore metal zeolite catalyst with high activity even at high temperatures and were able to scale production of the zeolite from laboratory testing to mass production. The new catalyst is being used in the Company’s flow-through SCR catalyst and is also incorporated in a diesel soot filter called the selective catalytic reduction filter (SCRF).

 
-The Company’s capital expenditure of GBP 465 million in the fiscal year ended March 31, 2020 included investments in the following projects:

• Investments in manufacturing plants for the Company’s Clean Air sector in Europe and Asia to increase production capacity. The investments will improve efficiency and flexibility to respond to demand in Europe and Asia.
• Investments for the development and commercialization of eLNO, the Company’s ultra-high energy battery cathode materials. The Company broke ground at its first commercial plant in Konin, Poland, which has the capacity to produce 10,000 metric tonnes annually. The plant can be further expanded to produce up to 100,000 metric tonnes. Production is expected to begin in 2022.
• Improvement in the efficiency and resilience of platinum group metal refineries in the Efficient Natural Resources sector.

-The Company expects to invest up to GBP 400 million in capital expenditure for the fiscal year ending March 31, 2021. Investments during the fiscal year are expected to include the following:

• Continuing investments in Clean Air plants in China and India
• Continuing investments in eLNO

Investments Outside UK

<Poland>
-The Company is focused on battery materials and have made strong progress to commercialize eLNO, its portfolio of next generation, ultra-high energy density cathode materials. Customer feedback from testing remains positive, specifically in its ability to provide customized solutions. The Company has currently moved to full testing with two automotive customers. The Company expects its first commercial plant in Konin, Poland to be on stream in 2022 and to be supplying platforms in production in 2024. The plant is expected to have an annual production capacity of 10,000 metric tonnes when operations begin, which can be expanded to 100,000 metric tonnes in the future. The total investment when it has commercial production from its plant will amount to approximately GBP 350 million. (From a press release on September 19, 2019)