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* Annual underlying operating profit down 6%
* Targets up to 600 mln stg in capex in FY22
* Says higher metal prices to hit short-term cash flow
(Recasts throughout, adds, analyst comment, details,
background)
By Yadarisa Shabong
May 27 (Reuters) - 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 (EV)
market, it said on Thursday.
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, decarbonisation of industry and a circular
economy that the world needs to reach net zero," Chief Executive
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% 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 carmakers, however added that higher PGM prices
could hit its free cash flow in the short term.
Shares were marginally lower by 0850 GMT.
($1 = 0.7082 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; editing by
Uttaresh.V and Emelia Sithole-Matarise)
