(JMAT) £28.74


Loss to date: 6.3% Orig­i­nal en­try point: Buy at £30.66, 21 De­cem­ber 2017

SHARES IN CHEM­I­CALS group John­son Matthey (JMAT) have plum­meted af­ter Volvo de­tected prob­lems in its trucks that may cause en­gines to ex­ceed emis­sion lim­its.

John­son Matthey has an ap­prox­i­mate 60% mar­ket share for heavy-duty cat­alytic con­vert­ers, so the re­cent share price de­cline is the mar­ket bet­ting that Volvo is one of its clients.

UBS an­a­lyst An­drew Stott says the li­a­bil­ity of third party sup­pli­ers to Volvo may be ‘im­pos­si­ble to es­tab­lish’. He com­ments: ‘What is not clear is the ex­tent to which harm­ful ni­tro­gen ox­ide (NOX) emis­sions are be­ing re­leased beyond reg­u­la­tory tar­gets, if at all.

‘Volvo stated that faulty equip­ment “could cause emis­sion lim­its to be breached”, and that the full anal­y­sis is not com­pleted. For John­son Matthey, how­ever, this could flag fu­ture risk as the lead­ing sup­plier of truck cat­a­lysts (an es­ti­mated c20% of group earn­ings be­fore in­ter­est and tax).

Stott ar­gues a best case sce­nario for John­son Matthey is that the prob­lem is found not to be with its prod­uct, but rather re­lated to other fac­tors.

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