Johnson Matthey plans to close battery materials business

British specialty chemicals company Johnson Matthey plans to close its battery materials business and sell its individual assets following the failure in talks over the sale of the entire battery business, the company said Jan. 12.

On Nov. 11, Johnson Matthey, or JM, said it had decided to pursue the sale of all or parts of its battery materials business with the ultimate intention of exiting, as the potential returns from the unit was not going to be adequate to justify further investment.

"Further to that announcement, we have held discussions with a number of parties about a sale of the entire business. These discussions have not resulted in an agreement to sell the entire business as a going concern," JM said in a statement.

"Consequently, we are announcing today that we are commencing consultation with our employees about our proposed closure of the Battery Materials business, and we are pursuing the sale of its individual assets," the company sad.

In the company's interim results, it fully impaired, the carrying value of its battery materials assets as at September 30 2021, resulting in a charge of GBP314 million ($430 million), JM said.

The company said while the outcome of the sales process was uncertain, full or partial closure is expected to result in additional impairment charges, the settlement of contractual liabilities, redundancy, closure and abandonment costs as indicated in November 2021.

"After anticipated asset disposal proceeds, we currently estimate these cash costs will be in the order of GBP150 million, which will be recorded as an exceptional item outside of underlying operating profit in our full year results," the company said.

Analysts at investment bank Jefferies Group said in a research note that the cash costs are not expected to be covered by asset sales.

"This presumably draws a line under its foray into Battery Materials, which has cost around GBP500 million in investment and subsequent closure costs," Jefferies analysts said. "Key focus shifts to the priorities under the incoming CEO (Liam Condon). It appears challenging to identify a way to offset the earnings decline across Clean Air (50% of group EBIT), in the absence of a material pivot in the business," they added.