INSIGHT: Umicore shows there’s more to metals

06 January 2006 17:54  [Source: ICIS news]

By Nigel Davis

Auto catalysts a growth driverLONDON (ICIS news)--Not surprisingly BASF’s $4.9bn (Euro4.0bn) bid for Engelhard drew focus towards the other major players in precious metal catalysts, relative newcomer Umicore among them.

Umicore is a much changed group and a newly recognised entrant to the specialty chemicals sector. The metals company has re-positioned significantly in a short period. Acquisition of the precious metals business of the OM group for $643m in 2003 was a turning point and the catalyst franchise has been developed further since.

The attractiveness of auto catalysts particularly to any precious metals company is not surprising. The segment offers steady and currently strong growth potential, particular as new regulations are brought into force controlling emissions from diesel vehicles. Growth through 2007 has been projected at 5% plus as Europe implements new diesel emissions control legislation. Demand for emissions control catalysts from China and the US is expected to drive growth out to 2010.

Back in 2001, Umicore was a copper and precious metals, zinc and advanced materials group with a turnover of Euro3.8bn that employed 8,000 people. In 2004, it turned over Euro5.7bn with 13,000 employees.

Over the period it developed its specialty chemicals and materials franchise and opened itself up to independent shareholders. Belgian group Suez earlier owned a significant stake in the firm. The share price story tells the tale and since the Suez exit in 2004, the shares have healthily outperformed the basket of the top 20 Belgian companies.

Umicore as it stands has a balanced advanced materials, precious metals products & catalysts and precious metals services businesses. It is a world leader in zinc chemicals, alloys and building materials. Zinc chemicals are a growth area but its high tech materials and catalysts offer most growth potential As with Engelhard currently, the world wants to focus on auto catalysts. Umicore says is provides automotive catalysts for almost one in four cars produced globally. Its catalysts business is not as broadly developed as Engelhard’s however or indeed Johnson Matthey. It has, however, carved out enviable niches in germanium semiconductor substrate and lithium based rechargeable battery materials. From its precious metals base – the company extracts something like 20 different metals from complex materials in its recycling facilities – Umicore taps into fast growing consumer demand for mobile phones and laptops. The company says it has supplied the semiconductor substrate for more than 60% of all satellite solar cells in the past two years.

Developing the specialty nature of the products used in these technologies is key to growth. Umicore is researching palladium based diesel exhaust catalysts, night vision systems – already in use in some automobiles – and new products for rechargeable batteries. Understandably, it is continuing to invest in fuel cell technology which could prove to be a winner.

Unsurprisingly, however, analysts know that over the next year or maybe two the company will benefit from high zinc prices and its precious metals recycling and reining capability. The company has locked in the zinc price for its zinc specialties division for 2006 and the first half of 2007. As with all metals-based catalyst firms with metals extraction and/or trading activities, a significant proportion of profitability and performance is driven by the metals side.

Catalysts are attractive, as the BASF bid for Engelhard has underlined. But in the good times the metals on which they are based can be even more so.

By: Nigel Davis
+44 20 8652 3214

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