Umicore Lowers Profit Forecast As Chip Shortage Bites

Belgian materials technology and recycling group Umicore made a downward revision revised to its profit outlook on Monday to reflect a stronger than previously expected impact from the global semiconductor shortage and lower prices for platinum group metals (PGMs).

The maker of catalytic converters and battery materials for carmakers had increased its guidance in July, saying the company was ready to capitalise on the acceleration of electrification in the automotive industry.

"In automotive catalysts, the impact of the semiconductor shortage on car production is proving more severe than was anticipated at the end of July," the company said on Monday, sending its shares down 3.9% in early trade.

Umicore now expects its full-year adjusted earnings before interest and tax (EBIT) to approach 1 billion euros ($1.16 billion), having previously expected adjusted EBIT to exceed 1 billion euros.

Umicore has postponed the start of commercial production at its Polish greenfield cathode materials plant in Nysa

The company has also lowered its sales expectations for cathode materials and postponed the start of commercial production at its Polish greenfield cathode materials plant in Nysa, citing demand adjustments in electric vehicle production.

JP Morgan said the cut to EV cathode expectations was something of a surprise.

"This is unexpected and, in fact, we believe bulls had been hoping for a raise in the guidance for this division," the broker said.

"This will likely be taken negatively as we believe it indicates Umicore is continuing to lose a substantial share in the competitive EV cathode material market, even in Europe."

Umicore said the impact of lower sales volumes is expected to be offset by a stronger than expected second half performance in cobalt and speciality materials, benefiting from high demand and attractive premiums.