Johnson Matthey expects to spend up to 600 million pounds ($847 million) this financial year as it boosts investment in battery materials and hydrogen technology to serve Europe's growing electric vehicle market, the company said.
The British chemicals company has made inroads into the battery materials sector recently, agreeing to build a plant producing cathode materials in Finland with state investor Finnish Minerals Group and securing long-term supplies of nickel and cobalt to beat an expected deficit in those metals.
The capital expenditure targeted for the year ending March 2022 tops the 486 million pounds mean of 16 analysts' estimates in a company-compiled poll.
"Our investment in sustainable technologies builds on our existing expertise and will enable the transformations in transport, energy, decarbonization of industry and a circular economy that the world needs to reach net zero," CEO Robert MacLeod said.
Third Bridge analyst Ben Nuttall said the company's key challenge is managing the transition from internal combustion engines to battery- and hydrogen-powered vehicles as diesel catalytic converters, a focus for the group, are likely to be the first to decline.
While Johnson Matthey has hedged that risk with high-nickel battery material, Nuttall said it could find it hard to gain market share given Belgian materials technology and recycling group Umicore's lead in the sector.
Johnson Matthey forecast growth in earnings this new financial year after initial lockdowns last year hit car demand and sent underlying annual operating profit 6 percent lower to 504 million pounds.
The result still beat average market expectations thanks to a strong recovery in the auto sector and higher precious metal prices.
Johnson Matthey, which refines platinum group metals (PGM) used chiefly by automakers, however added that higher PGM prices could hit its free cash flow in the short term.