Johnson Matthey Plc (LON:JMAT)

CMD 2019

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Sep 19, 2019

Right. I a good script? You can hear that. Yep. Right. Good morning, everyone. If we can kind of quiet down the wee bit, we're just about to start. Can I just say good morning, everyone, and a very warm welcome? Sebastian? Behave. Can I say good morning, everyone, and a very warm welcome to Johnson Matthews 2019 Capital Markets Day? And thank you to everyone for coming along today. Before I start, can I ask that you all turn off mobile devices or put them on to silence? As usual, the event is webcast. We're not expecting a fire alarm today. So if you do hear 1, please make your way to the nearest emergency exit they are at either end of the room, there's one behind you and there's one behind the stage over here. So as you can see, We have a full agenda today. We have presentations in the morning, and then in the afternoon, you'll have the chance to meet with our sector CEOs as you rotate around each of the breakouts. So please do get them to answer any questions you might have. Now if you are here for the afternoon, then you will find a colored dot on the back of your name badge and that will indicate which group you should join. We're running 4 breakout sessions in total. So for example, if you have a red dot on the back of your badge, you're part of circuit 1, which begins with clean air, followed by ENR, excuse me, then battery materials and finishing with health. 2nd 2 is blue, begins with ENR, circuit 3 is green, begins with battery materials, and then circuit 4 is yellow and begins with health, and all circuits follow the same pattern All sounds quite complex, but don't worry. There'll be people around to help you beat where you should be, and there are timetables outside and also posted on each of the breakout doors. It should be very obvious once you get to it. Today, overall, is about giving you an insight into how we're executing against the strategy we laid out in 2017. Our long term growth opportunities and why we're confident that the execution of this strategy is going to deliver on our objectives. But before we begin, I just want to introduce a short video and that quite nicely summarizes who we are and what we do What does it take to see the potential for a better world in the nucleus of an atom? Our vision, defining who we are, directing all that we do. We research develop and deliver technologies to help build a cleaner, healthier world for everyone. We use science to create innovative products, solutions to make a positive contribution to our society and the environment. And a real difference to everyone's lives in more ways than you might imagine. Helping create cleaner air by maximizing the performance of emission controls, enhancing health through complex chemistry for engineers active drug molecules, enabling food supply by producing chemical building blocks for fertilizers. As a global leader in sustainable technologies, we work with customers and partners across markets. From pharmaceutical and medical to automotive, industrial and chemical production to energy generation and storage. Optimizing processes, improving efficiency, optimizing the use of the planet's natural resources, towards enhancing business performance day to day while sharpening the competitive edge long term. Our solutions continue to evolve in step with the demands of our changing times. We remain committed to tackling new challenges towards building a cleaner and healthier future for the generations come. We've been in business for more than 200 years. We started out specializing in precious metals, but now we devote our science to rather more valuable assets. Our planet and its people. Johnson Matthew, inspiring science, enhancing life. So, good morning, everybody, and, welcome. As you've heard, J. M. Is about helping to create a world that's cleaner and healthier, not just today, but for future generations. It drives our strategy and is the lens through which we do business. At a business level, this gives JM 2 advantages. Firstly, in a rapidly changing world, the application of our science is more relevant than ever before. And secondly, The need for a cleaner, healthier world is a long term trend. This is not a fashion. It's a necessity. These 4 global megatrends are shaping our business and our strategy. We're all aware that action around these megatrends has increased There is a greater awareness and focus on the need to work together to mitigate and manage the impact of climate change and reduce our global carbon footprint. As you saw from the video, J. M. Is already using our size to tackle climate change. For the future, Our development of new low carbon technologies will continue to make an impact and more of that later. For over a century, the world economies have relied on fossil fuels. The move we are seeing away from that will require a major upheaval in energy markets. What we're seeing is a once in a lifetime energy transition. But the move towards more renewable sources cannot happen overnight The impact on raw materials, prices and volumes and consumer preferences is still unclear. Although there is uncertainty around where we'll end up and how quickly we're already helping our customers to navigate this transition, In the first instance, by using existing natural resources more efficiently, but beyond that by decarbonizing much further. We are well positioned with a range of options across the powertrain from emission control to battery materials and fuel cells. And there are a number of exciting opportunities, for example, within Efficient Natural Resources, where we can use our expertise to shape this new era of clean energy. And of course, population and longevity. Global headcount is still rising and richer populations are living longer and what healthier lies, something which our activities and health support. However, this population increase coupled with the major shifts in key industries such as energy and automotive is having a knock on impact upon our vital resources. The world will require new raw materials and there will be new challenges in accessing, transforming and recycling these efficiently. These megatrends are here to stay but they also unlock significant opportunities for sustained growth as we use our signs to tackle existing and emerging challenges. But we can't tackle these off challenges on our own. Society as a whole must come together to create a better future for people and our planet. The United Nations' sustainable development goals, the SDGs provide the blueprint to achieve a better and more sustainable future for all. And at J. M, we're aligned to this framework and contribute to 9 of them. In fact, last year, almost 90% of our sales came from products and services that positively contributed to these SDGs, as you can see on this chart. Everything we do at JM is designed to make a positive contribution Last year, 181,000 lives were positively impacted by our recently launched drug APIs. Our catalysts removed 3a half 1,000,000 tons of pollutants. That's the same mass as around 10 Empire State buildings. Our technology removed 10,100,000 tons of greenhouse gases and our new U. K. Renewable energy contract saves 34,500 tons of CO2 each year. And thanks to our new Waste To Aviation Fuel Technology, 11,000,000 gallons of renewable jet fuel is being produced each year. That's enough to fuel a plane for 180 return flights between London and New York. To address these key global mega trends, we put our science into action. Our science is at the heart of our business and we use it to solve our customers' complex problems. As I've said many times before, we don't do easy. We focus on the complex and difficult. We build strong relationships with our customers and work in collaboration to provide them with customized solutions that make a real difference in their businesses. And to do this successfully, we allocate our resources effectively too. The megatrends are unlocking new growth opportunities. There are new areas of growth where we can win based on our existing science and areas of growth which require innovative science. We evaluate and assess opportunities rigorously to make sure we compete in areas of the market where our technology can drive the highest returns. And in the last few years, we've created an agile and efficient business. It is the platform for our sustained performance. We categorize our science expertise into 9 core science capabilities. These capabilities are at the heart of what we do and link across our sectors. They support the development of our new products and processes, but they also enhance existing ones too. But it's not just these 9 individual capabilities. It's the combination of these and how we apply them to deliver customized innovative and scalable solutions that is more powerful. In all areas of our work, whether batteries, catalysis, mission control or active pharmaceutical ingredients, we apply our core capabilities to create innovative solutions for our customers. To give you an example, Today, in battery materials, we're using our science to enable the greater adoption of long range pure battery electric vehicles that meet consumer's performance expectations on range, charge time and safety. On the slide, we've shown how 5 core competencies have have been used in developing our cathode materials, ELONO. We use these capabilities all the time especially as we optimize the performance of the materials following feedback from our customers and the input of our R and D teams. And the development of ELNO was of course supported by our expertise in nickel chemistry gained from over 80 years of work in nickel based catalysis. Looking to the future, where we play will be directed by our science, we want to be in areas where we can have a competitive advantage and create value for our customers. And given and number. Across our sectors, we compete in niche areas of the market where we can apply our science and add the most value. The strength of our science means that we have leading market positions and strong barriers to entry. Take Clean Air, for example, we are one of 3 global players. We have a clear number one position in diesel and have a strong position in gasoline. In efficient natural resources, we have strong segment shares in our key markets. For example, in methanol synthesis, we have a segment share of more than a third of the catalyst market. And with the world's largest re secondary refiner of platinum group metals, with more than 1,000,000,000 of metals flowing through our refineries each year. And in health, we have a leading position within the controlled substance space in Europe. Across our sectors, our competitive advantage is the combination of our understanding of science with an ability to design and develop scalable solutions for our customers. Each year, we invest around 5% of sales in research and development to ensure we stay at the cutting edge and maintain our advantage. It is this cutting edge size, which allows us to deliver high returns and we are and this should be in markets that have that capacity. However, things move on and so we keep reviewing our businesses to ensure that their end markets still deliver higher returns we seek, which appropriately value our science. And if a market no longer requires our cutting edge science, to solve their problems, then we will exit. Ultimately, our science underpins everything that we do and is vital to our future success. So bringing this all together, let me summarize our strategy that we set out on a Capital Markets Day 2 years ago. It is to deliver sustained growth and value creation by applying our world class science to solve our customers' complex problems. We deliver our strategy through our 4 sectors. And over the medium term, each sector will contribute to the delivery of shareholder value, which we define as mid to high single digit earnings per share growth per annum, return on invested capital to 20% and a progressive dividend. Our ability to keep delivering as planned is underpinned by the fundamental changes that we've been making across all aspects of our business. JAM is a business that is being transformed. He is a very, very different business today compared with 5 years ago. We've instigated a substantial change across many aspects of the group to create a high performance culture. So what does this mean? We brought new people into JM who know what good looks like and can share that with our existing teams, and we're also investing more than ever before in the development better able to operate and interact with our customers who are in many instances already organized in a similarly global way. And of course, we need to operate more efficiently than our competitors. A drive for efficiency in everything that we do is paramount and Anna will talk more about the progress that we've made and the further opportunities that we have in the next presentation. So we've come a long way since 2017. And as I talk through the sectors, I'll give examples of this agility and how we've course corrected to consistently deliver on our expectations. We've had fantastic performance in this business with 11% annualized profit growth since 2017. Efficient natural resources has turned around. Were outperforming in our key markets and we've seen good profit growth over the last 2 years supported by efficiencies. In Health, we've made huge strides in fixing the operational aspects of the business. And in battery materials, we've made significant progress as I'll come on to later. So for the group, since 2017, we've delivered mid single digit annualized earnings per share growth at 5%. Return on invested capital of around 16% and a progressive dividend with growth of 7% per annum. This is against a tough economic background with the automotive market in particular going through a period of substantial volatility. I'm very pleased with what we've delivered as it clearly demonstrates JM's resilience and agility. Of course, Everything hasn't got exactly as we planned, but we continue to deliver performance in line with our guidance, while still investing in improving our business. The CEOs will take you through the sector detail later this morning and in the breakout sessions, but I'll start by giving you high level summary of our future growth drivers in each of the sectors. We're also delighted to have Joan Bracker and Christian Gunther in the audio who will soon be joining us as sector chief executives of Clean Air And Battery Materials respectively. They'll be joining us in some of the breakout sessions too, so you'll have the chance to meet them there, if you wish. In Clean Air, we have visibility of sustained growth for at least the next decade. Although there have been some changes to our expectations that we laid out in 2017, The endpoint is broadly the same, which demonstrates the agility we have in our business. In John's sessions later this morning, He will talk through these changes and go through each of the segments in detail to give you a sense of the phasing of growth. But to summarize our 2025 outcomes, We now expect Asia to more than double. Europe will be maintained in size and Americas will continue to be driven by GDP growth. In Asia, we're seeing tightening legislation with the advent of China 6 in both light and heavy duty, which will drive additional content and a significant value uplift. And the doubling in the size of our business will come even though this is the region with the highest assumed battery electric vehicle penetration. In Europe, our light duty business will slightly decline given the dynamics in the diesel market and increasing battery electric vehicle penetration, but this will be offset by growth in heavy duty. Performance in the Americas will largely be driven by GDP growth, but we successfully managed the recent Class 8 upcycle effectively without additional investment, and we will continue to do so in the future through the peaks and troughs. And of course, will remain focused on maintaining our margin and return on capital. And bringing this all together, we expect mid single digit growth in operating performance to 20 5. And John will go into why we then expect steady growth for the rest of the decade. In Efficient Natural Resources, Jane and the team have made significant progress in refreshing the strategy for this sector. And as such, we now expect mid to high single digit growth and operating performance to 20 25 and upgrade compared to last time. We are already well positioned in high growth segments. And over the last couple of years, through a rigorous program to improve efficiency, we have stabilized the business. Driving value from our existing core business and at the same time investing in technology. Using our technology, As markets evolve, we're already leveraging our position to provide new solutions. These utilize our existing strengths to enable our customers to adapt to changing feedstocks trends and environmental matters. This will provide a steady stream of opportunities. We have a pipeline transform household waste to aviation fuel and 1 to more efficiently produce mono ethylene glycol. And there are more new technologies that we're working on now that will give us growth on a longer time scale. This includes the investments we're making in our refineries to improve their safety resilience and output. Have to say I'm really pleased with the progress that the team has made over the last couple of years. Jason and the team in the last couple of years also have done a huge out to set up the Health business for growth. As you know, this was a business where performance was under pressure. High margin products were maturing and moving through their natural lifecycle and the business was suffering from under investment from a decade ago. However, over the last 5 years, we've invested in our product pipeline, and more recently, taken important steps to optimize our manufacturing footprint and increase our efficiency through the closure of Riverside and opening of Annan. With these changes now behind us, the business is better structured. We have passed an inflection point and are now focusing on leveraging the opportunity we have. Overall, our goal remains to deliver an additional million of operating profit by 2025, from our pipeline of generic and innovative products. We've already launched 1 new product from our original generic pipeline 10 molecules have been submitted for regulatory approval and the pipeline of new products remains strong as ever. When we talked about the pipeline in 2017, we saw the 1,000,000 coming entirely from our generics pipeline. Since then, Jason has reviewed our portfolio and adjusted resources accordingly to put more effort on our Innovator business where we see higher potential returns and value and still deliver the million of operating profit by 2025. And the long term growth potential of the entire generic portfolio is, though, as broadly as it was before. In terms of our strategy, the main drivers of growth are, we will enhance the performance of our base business and continue to drive operational efficiencies We will aggressively drive growth from our new product pipeline and finally we will broaden and build on our existing capabilities to better support our customers as their product portfolios evolve. Overall, this will on average deliver double digit growth in annual operating performance through 2025. In batteries, we've and are working hard to put the building blocks in place for breakout growth. This is a market that is enabled by technology We've developed a high performing range of cathode materials, ELN O, which will enable the development of long range pure battery electric vehicles. But our leadership comes from our ability to further customize them for our particular customer's needs. And we're investing in research and development to make sure we maintain this leadership. Today, we've announced that we've progressed the full cell testing with 2 of our customers, which demonstrates the value of customization and confirms our confidence in means that they've down selected to do only a few potential suppliers and they are now starting to put more investment in on their side to further develop and test these materials. Of course, it does not mean that we've won the business yet, but it increases our confidence in ELNO and puts us in a good place as we position ourselves for platforms coming to the market in 2024. Support our growth ambitions we're investing today in commercial capacity in Poland and our scale up plans are well underway. Before I conclude, I wanted to wrap up giving you a snapshot of how our future growth will evolve over time. Globally, the megatrends affecting us all are bringing opportunities for science led solutions, and this is where JM can really add value. In the short term, we'll outperformance in Catalyst Technologies and you'll start to see value from our health portfolio coming through. Looking to the medium term, growth will accelerate in Clean Air Asia as the China and India light and heavy duty regulation kicks in. And also in Catalyst Technologies as new licensed technologies come to market and health as the pipeline develops further. In battery materials, we will have commercialized ELNO and O and be scaling up further. I also believe that we will start to see the development of our fuel cell business, which we've held for a number of years, but the market is now finally beginning to come towards us and we have just approved further investment in this business. In the longer term, as I've already described, and I will describe in more detail after the break, Our ambition is to have a battery materials business of scale, and there may be an opportunity in a battery materials recycling as well, where a closed loop offering has the potential to be a key part of our customer proposition. We know we have the chemistry expertise to succeed in this space and we're currently exploring where and how we might play in the value chain. In everything we do, we look for the bottleneck and use our science to solve it. In addition, with the energy transition underway and rapidly growing, society will inevitably move towards a low carbon, more sustainable future. There is a growing need for a secure supply of clean, affordable, and accessible energy and hydrogen could be part of the answer here. We're already the world's number one supplier of catalysts for the efficient production of hydrogen and we have leading technology that could further enable the efficient scale up of hydrogen generation, and we're already working with a number of potential long term customers. So I hope this gives you a sense of where we're headed and why we're excited about our future growth. Over the last few years, we've successfully executed on our strategy and we've delivered as planned, notwithstanding the ever changing market backdrop. We are well positioned to address the world's most complex and challenging megatrends and in doing so, we will help to make the world cleaner and healthier. Our science remains absolutely the heart of our business and we will continue to invest in it. It is fundamental as it enables us to develop the innovative solutions required for the future but it is also the fundamental driver that enables JM to deliver such attractive returns. Alongside a strong strategy, we have transformed our business to create an agile and efficient platform for growth. These changes are critical and they have given us greater capability to adapt to the fast changing world around us and deliver sustained performance. What also makes me really excited is that the choices that we've made over the last couple of years are starting to come to fruition. We've continued to improve our Clean Air business, managing through the increasingly challenging mark automotive market environment. The upside in efficient natural resources is starting to come through. Health is passed an inflection point. We've made excellent progress with the development of our Battery Materials business and there are several new opportunities in which we've been investing for a number of years which will drive growth I'll now hand over to Anna to talk you through the financial strategy and then there will be a time for Q And A with both of us. Anna? Thanks, Robert. Good morning. I'm going to take you through our financial strategy, but before I did so, I just wanted to stop for a minute and look at the short term and our guidance for this year. You probably saw from our announcement this morning that our guidance for the first half and for the full year is unchanged with what we said at the Q1 AGM statement. This year, however, we expect cleaner financial performance to be slightly weaker. This is because we're incurring some one off expense in Macedonia ahead of our Polish plant coming online due to some capacity constraints. It will particularly affect the first half of the year. Full year, we will deliver mid to high single digit growth, and that demonstrates the strength we have in our portfolio as we execute our strategy. Now let me tell you what I'm doing and how that underpins our strategy overall for the group. As you know, I have 3 focus areas: increasing business wide efficiency, disciplined management of working capital, and rigorous resource allocation. I'll describe how I think about our portfolio, and how I apply these focus areas to how we manage our business. We have a portfolio of businesses that use science to solve our customer's complex problems. All of our businesses should deliver at least a 20% return on invested capital. When they're operating efficiently and at scale. Focusing on efficiency and disciplined management of working capital enhances turns and gives us the capacity to invest. Together, these areas underpin our strategy and drive shareholder value. Starting with efficiency. At the last Capital Markets Day, We announced our global procurement strategy that would unlock million of savings to invest and to enhance our margin and a 25,000,000 of cost cutting benefits to give a group total of 75,000,000. Since then, we've progressively identified further benefits, including the closure of the Riverside plant, and additional procurement savings, which we're on track to deliver. Today, we've announced a further 40,000,000 of procurement savings which takes the total benefits for the group to a 145,000,000. Of the incremental 40,000,000, around 2 thirds will benefit the income statement and 1 third will benefit capital expenditure. At least half of these savings will be reinvested. You see the benefits in the income statement and in CapEx, but much, much more importantly in a more able agile, and resilience JM. Let me give you some examples of what I mean by this. We're a business built on science, and that's our competitive advantage, and I'm hugely proud of that. However, Growing through science, JN's not historically operated in a standardized manner, and this shows up across our business processes. In how we manufacture, how we procure, and how we manage our cash cycle. We're standardizing the way we work. We're globalizing pockets of best practice. We're making our business more agile and we're reducing costs. There's a huge amount for us to go for here. While staying true to our science core. For instance, we're investing in a more simplified and robust IT function. 4 years ago, IT at JM was fragmented. Each site had its own autonomous IT function. That was not only hugely inefficient, but it carried risk, and it meant that not all of our people had the tools that they needed to do their jobs. We spent the last 4 years centralizing and professionalizing the function and improving the user experience. For example, we've migrated around 20 percent of users now onto our single global ERP system, And by mid-twenty 20, that will be 40%. This supports and accelerates our work on operational efficiency. Allowing us to unlock further savings. We're also making good progress in manufacturing. The improvements we've made amongst other things have resulted in a 30% increase in our capacity in our clean air plant in North America. That's allowed us to weather the peak of the heavy duty truck cycle without any need to invest in additional capacity. We've also increased the capacity in our Clean Air Macedonia plant by 20% in the last year. The creation of a procurement function 2 years ago is delivering significant value as you've seen on the previous slide but it's also driven consistency in how we manage our suppliers, giving us a much more resilient approach to us sourcing our raw materials. And working capital. Reducing working reducing average working capital days requires an understanding of the entire working capital cycle. So, how we pay our customers and why, how much inventory we hold and why, and how we pay our suppliers and why. Shininging a light on this creates discipline through which we run our business better every day in many different ways. Measuring our speed to invoice, removing duplicative safety stock, improving our planning In Clean Air, we're working with the OEMs on optimizing working capital management, and we're able to share those benefits. We've applied this discipline to non precious metalworking capital, We measure success as maintaining non precious metal working capital days between 5060. Throughout the year, not just at points in the cycle. Since the last Capital Markets Day, We've improved our non precious metal working capital by 11 days. That's a significant reduction. It takes about a 120,000,000 out of our working capital every month. We continue to target 50 days in the medium term. And remain confident of achieving this. That would be the equivalent equivalent of taking out a further 100,000,000 each month. You'll remember that last year, we saw an increase in precious metal working capital due to an outage in one of our UK refineries, which led to an abnormally high level of backlogs. This and an increase in metal prices drove a significant increase in precious metal working capital during the 2018, 2019 financial year. Metal prices have continued to increase, and that continues to negatively impact our working capital. However, we're working hard to reduce the volume of metal that we hold, and there's 2 levers that we have to do this. Firstly, reducing refining backlogs. It's a highly complex process that takes time and are refineries are sized primarily to support clean air, and therefore, there's little spare capacity to process excess metal. That said, we're making good progress, and we still expect to be at normalized levels by the end of financial year 2020, 2021. Once we return to these levels, we expect an overall reduction in precious metal working capital of around 250,000,000 against the full year 18 19. Secondly, we're investing to improve our refineries. Our refineries have been under invested for several years. We started investing, and it will total about 100,000,000 over 3 years. The benefit will be a further reduction in precious metal working capital of 100,000,000. Meaning that this investment at a minimum will be returns neutral. Of course, precious metalworking capital is not entirely under our role, and it will continue to fluctuate sometimes significantly as metal prices change. And of course, as our customers change their requirements. Moving to resource allocation. At our full year results, we said CapEx in 1920 would be up to 500,000,000. This slide describes the makeup of that CapEx and how we're seeing it evolve over the next couple of years. We think that CapEx in two parts. Firstly, maintenance CapEx, which also includes smaller growth projects. On an ongoing basis, We foresee this to be at around 0.8to0.9 times depreciation annually. Secondly, we currently have a number of strategic projects, which I'll take you through individually. In all cases, I'm going to describe our CapEx spend from fiscal 1920 onwards although some of these projects started last year. In Clean Air, a mature business, we're investing in 3 new plants to scale up to support the growth. All three will come on stream in 2020 and inclusive of this year, we're investing a further 200,000,000. As we've won the volumes, the platforms that align to this capacity Returns will be similar to the rest of clean air, which is at a 30% return on invested capital. That will come through once these plants have ramped up. In efficient natural resources, As I've mentioned, we're investing a total of 100,000,000 to improve our precious metal working capital as we upgrade our refineries, improving their safety, efficiency, and resilience. That will be returns neutral, and there's a further 70,000,000 of investment to completion. In battery materials, we're investing against our strong technology in a market. As we commercialize the LNO, we'll invest a further 300,000,000 of which 280 is CapEx across R and D application centers, and our commercial plant. This will get us to the point of commercialization. This investment won't meet our returns criteria. However, at scale, this business should have a 20% return on invested capital. As I've already described, we're upgrading our IT systems and investing in our global ERP system. Our ERP rollout is in line with plan. We're also investing in other global processes infrastructure and cybersecurity. These projects are included within the 100,000,000 remaining investment and will deliver further efficiencies. Looking further out, we will continue to have a normalized level We do not foresee further strategic projects in clean air and in the short to medium term and efficient natural resources or health. However, we do foresee the scale up of battery materials. We only invest in strategic projects if they meet our disciplined investment criteria. Even though we're investing in our business, we have a clear path to achieve a return on invested capital of 20%. Clean Air is a mature business that already generates returns of around 30% well above the group target. Here, growth is driven by legislation, and the investment will deliver the capacity to support that growth. We've won the business and we expect to maintain these returns. In efficient natural resources, there's several moving parts that expand our returns. I've outlined how we'll take 350,000,000 out of precious metal working capital. And in returns, There's several new technologies that are driving an acceleration of our growth. Jane will take you through these in the breakout session this afternoon. And in health, over the last 5 years, we've invested in the manufacturing assets and in building our pipeline. But we're not yet benefiting from the full value of this investment. Jason will share how we've passed the inflection point and will deliver significant returns. So we're confident in our path of 20%, including the commercialization of battery materials, which To the point of commercialization is a cumulative 350,000,000 investment. Robert will take you through this later. I mentioned earlier that we're well placed to manage our portfolio of businesses, all of which are at different stages in their life cycles. The return on investment target of 20 percent is an extremely useful strategic frame that provides discipline and rigor when making capital allocation decisions. All of our businesses should have the potential to have 20% returns when at scale. We allocate resource dependent on the stage of the life cycle a business is at, and we have different expectations from each. Whilst the business is in its infancy and as we scale up, returns would be below our target for that period as has been the case in health. For a mature business like Clean Air, we're maximizing returns. The 20% is not a hard annual target. It's a strategic target. And therefore, you won't see us constrain investment in an opportunity which delivers on our strategy and our medium term return criteria even if it causes us to drift off from our target for a short period. So that should explain how we're using return on invested capital to in greater rigor and discipline to the group. To deeply understand our businesses, where they stand in their life cycle, how we allocate capital and how we increase efficiency. So with that, Robert and I are very happy to take your questions. Okay. So happy to take any questions that anybody might have. We've got some people with, roving mics. And in the front row here, the sector, chief executives, so if to answer any more detailed questions. So, any questions? Where's Mike's? Hi, Andrew. Nancy's coming. Andrew Stott from UBS. It's a question for Anna. You mentioned issue with Macedonia. I just didn't quite understand what's going on there. So if you can explain the cost overrun, I think, was the phraseology? And then how that might change in the second half? And then further out. Also staying with clean air on on the guidance you're giving for the year, when you say a slight down, what's the assumption you're making for the second half on both light duty production and on trucks? Versus where we are today. And then the second question is, sorry, is CapEx. I was trying this was more straightforward. I was trying to get to the CapEx number for 2021. From the various numbers in there, but it's it's not possible. I wonder if you could help me. Do you want me to go for it? So the first one, m Macedonia. So what's happened in the first half? We had some capacity constraints in Macedonia because a number of the platforms that we had in that plant have done very well. And actually has pushed the plant, you know, created more capacity than we were able to easily deliver at that plant. And so to ensure that we were meeting our customer's needs, We've incurred all kinds of emergency freight and additional costs to ensure that we still delivered on the customer requirement. Now with the Somerset OEM summer shutdowns having just occurred, we've got our safety stock built back up. We've moved some of those platforms into other plants takes a little while because you have to have OEM agreement. So as I look at H2, I don't expect to see those costs. And because I know that you're going to ask me the question, it's about 20,000,000 that impacted the 1st year first half, sorry. So how do I feel about H2? I think the other thing to say about Clean Air is growth is solid. We're seeing good sales So our issue around H1 is actually about not having enough capacity because we are seeing good sales. So, you know, as you know, our growth is driven by legislation. The weakness in the auto market is very much a secondary factor for us and is not something we see in influencing performance, and we don't particularly see that influencing performance versus our expectations as we look at H2. And in terms of CapEx, I purposefully wasn't guiding, as you can guess year by year because It's very hard to know exactly when spends will be incurred as you're building a plant and which side of the fiscal year it will fall. But we've got elevated CapEx this year. As you see from those strategic projects, there is ongoing elevated CapEx. I would expect next year to remain high and the year after to be a little lower. Okay. So we move over to, Neil, the front. Thank you. Neil Tyler Redburn. 2 from me as well, please. Firstly, In the medium term growth, trajectory, you you call out a new licensing income. Is that assuming just a sort of normal upturn in the CapEx cycle in the projects for which you you offer licensed technologies, or is there something more specific on on the horizon there, the distant horizon you can see? And then secondly, on clean air, You talk about stable margins over the medium term. Is there a sort of upward attribution from a lower unit cost production of these new plants, Poland, China, India offsetting downward pressure elsewhere or is are you assuming that unit cost production numbers don't alter a great deal? Okay. So I'll take the first, do you mind if I do it the other way around? I'll take the second question first. So it's really about, you know, we said years ago, we would expect fairly stable margins in Kiena, and we expect that to continue over time. As you probably know, every year, automotive OEMs expect price down. And so the efficiency we're driving through, the efficiencies of the new plants will, in some ways, offset some of that price down that we have coming through. That's the normal cycle. We'd expect that to continue, but we're very confident that we can obtain those stable margins because of the balance we've got coming through. Course, we still see and John will talk through later on after the after the break about some of the legislation coming through, which gives you a bit of an uptick. But absolutely, we would expect margins to stay because of all these factors moving up and down. When I look at efficient natural resources, we've got licenses are fairly steady at the moment at a relatively low ish level. We'd expect them to stay on existing technologies there or thereabouts, but of the new technologies are coming through, in the medium term. And Jane and the breakout sessions will talk about things like waste to aviation fuel, MEG, But Jane, is there anything else you'd like to add? I think there's a there's a you said it. Okay. So there's nothing more to add there. But, yes, you'll go into more of the details later on. And then obviously, in the longer term, there are other opportunities as well for further licensing, but, you know, as I said, Jane will explain a little bit about that in the breakout group. All right. Lots of hands going up now. Shall we I think Andrew was had his hand up the last time. Too kind. Andrew Benson from ambient center now. Robert, you mentioned in your battery materials, 2024 as a year of, I was a little bit confused. You mentioned perhaps it's commercialization. Can you just flesh out what you meant that was going to happen whether you were going to be achieving substantial sales. That was the earliest, perhaps if you just clarify the reference 2024. On hydrogen technology, did you mean sort of traditional gas steam reforming, or you or do you mean other technologies? And Can you just, I would say when you think the earliest year, it is you're going to get to 20% Good try, Andrew, on that one. So let me come on. My mind's going very quickly. What was the first 24 and the 2024 on batteries. So what we're expecting is in 2024, we'll be on commercial production. So we'll have our commercial assets producing on platforms in 2024. A little bit later than we said when we were together 2 years ago, but that's, you know, not a big deal for us as we understand much greater. The, much better, the way that the, OEMs are going through all their validation processes, etcetera. But nothing we're particularly underward and particularly worried about. The second one was about hydrogen and gas steam reforming. Look, I think we are, as already mentioned, a lot of the hydrogen well, I didn't mention, a lot of the hydrogen generation in the short run I think is going to come from steam methane reforming. We already are the leading player in the catalyst market for hydrogen generation, but we have got new technology, which we think can further enhance the performance of hydrogen generation, not just from a cost point of view, but also potentially from a CO2 point of view as a greater enable carbon capture and storage, for example, to happen, going forward. That those projects will start to come through. We'd expect in the medium term, medium to long term, I wouldn't expect any big impact on that in the next few years. On the return on capital target, I know the answer is going to be we're not going to tell you, but do you want to say anything different? Well, I'm not going to tell you, but at the Capital Markets Day a couple of years ago, I said that we should be at a 20% return within the medium term. You know, medium term is around 5 years, and, you know, we feel good about that, but I'm not telling you It could be a steady improvement. You know, it's not going to be a sort of 1 one giant leap. That sounds like somebody else said, not going to do one giant leap to get there. It'll be a steady, improvement over time. Should we keep the mic front. I don't know, I tell you what, we'll move to the sorry guys, we'll move to I think you had your hand up there before. Yep. Thank you. Good morning. Sebastian Bray of Berenberg Bank. I would have a question about the returns target of 20%. This has been around for quite some time from memory since prior to 2015, but my guess is that the expectations of future business mix change quite substantially. Can I ask what the basis is for this target where does it come from? And the second question is more on the long term returns profile and batteries relative to the current returns in auto catalysis, which are higher than 20% Is the idea for batteries when I talk afterwards? I should say that you hit the 20% target and that's fine. Or do you view the potential returns as broadly similar to what is currently achieved in auto catalysis in the long term? Okay. I've been around JM now a wee while, and I can assure you that the 20% return on capital targets been there for a lot longer than 20 15. In fact, when I joined in 2009, the, target of 20% return on capital was there. And I think it absolutely goes to what Anna talked about in a presentation around our science is what enables our growth, our competitive advantage and the markets in which we operate and the value that we get from our technology, enables that 20% return on capital. It's a discipline we use to assess the markets in which we play and the markets in which we operate and the potential that we have. We absolutely think it's a strategic target rather than a tactical target and it very much framed the sort of markets in which we want to operate. Is there anything like, else you'd add? On battery materials, look, I think the capital intensity of battery materials will be slightly different from the capital intensity of clean air. As you know, and I think the first instance for us is at scaling up the business and getting to that 20% return on capital target. And I think you know, it's far, far too early today to suggest what the long term return on capital target or, also, return on capital potential might be for that business. But we absolutely believe that where we're playing, the value that we're going to deliver for our customers can deliver a 20% return on capital. And that's area that we're going to play to enable that. But look, whether it will go beyond that or not or fall shy of that, we don't know at this stage, but we think the potential of the market is there. Go on, you can have a quick follow-up since you still got the mic. Just as a quick follow-up, if you are able to set a return on invested capital target for the battery business or the cathode business, does that mean that you have enough preliminary indication on pricing of this material at this stage to start feel comfortable on that front? Or do you just have a baseline assumption at this stage on what pricing would be we've got, we've got, over the last couple of years, we've been working a lot with customers. We've been learning a lot more about our business. So absolutely, this is not a shot in the dark. This is absolutely our belief about where we can play and what we can deliver from this business. So we'd bring I think we've now got to well, come to the front. I think Adam was first, sorry, Martin, and we'll then come to you, after the mic's behind you. Good morning. Adam Collins from Liberum. A couple of questions, please. Maybe one for Andrew to start with. We haven't talked about this year's cash flow today. Obviously, there's been a big move in PGM prices in the last few months, which normally has an upward pressure on the PGM component working capital. Could you just comment a little bit about how you're seeing that in the business right now? And then going back to the battery side, just a clarification on some of the points you made, think you talked about a million investment. Could you split that between CapEx and working capital? Previously, you talked about 10,000 metric tons per annum of install capacity to start with, is that still the plan? And you talked about 2 OEMs being at the cell testing stage, and you've had more until now. If you talk a little bit about what the overall customer interest is, how many EMs are are working with you. What's the status of the others? Okay. Should we I've read the you you go first, and I you've asked a lot of questions. So so Kacheco, you're absolutely right, Adam. We've seen a significant move in precious metal prices, and that is not helpful for our working capital. So this year, we've got heavy CapEx and you know, quite a significant move in metal prices and that will not be great from a cash flow perspective, but I'm not going to guide on what it will be because it sort of depends on where those prices go. And on batteries, the £350,000,000 of investment we talked about is really from inception to commercialization. So that includes all the costs we've incurred to date in R&D, development, the application centers, the pilot plant, and, getting to 1st commercial production. So essentially, in a way, it's the sort of risk capital to some extent, because we're giving we've absolutely confident in this business and the opportunity that it can have but that's the investment we have we'll be making in this business before we get to 1st commercial production. It doesn't include working capital because it's a capital number we were talking about rather than anything else. Full cell testing, absolutely. We've gone to gone forward with 2 customers at this stage. We are working with a number of other customers who aren't quite as well advanced with us as those other 2 are. And I mentioned that full cell testing is very much where we talked before about coin cells, which is essentially us providing samples to them, them being our customers. When you go to full cell testing, it's them they start investing more in the development of the material rather than it just being down to us. So it's a validation of that next stage in the development of the business and gives us confidence in how we're progressing. Clearly, we're talking to other OEMs and other cell manufacturers. And I'm not going to go through exactly how many they are, but we are talking to some others. So it's not just these 2 and that's it. I think it's very much a range of customers we're talking to. And look, if I told you who they were, you would recognize the names. They are serious world scale OEMs that we're talking to. I think that's. Oh, sorry, the 10 KT. Absolutely, our our intention is to put 10 KT. The first investment is 10,000 tons. In, in, in Poland, I mentioned, I'll talk later on about our scale up strategy and how we'll do that, talk about that after the break. And the first into 1st commercial production, we won't have all the 10,000 tons, available because it will be done a little bit over time, but absolutely that the intention is for the first investment gets 10,000 tons. I think Martin was next, and then we'll come over to Nancy if he can be ready for, over there after Martin. Sorry. I took you a bit of paper. Thanks, Martin Evans, HSBC. Anna, just going back to your, your sort of, your focus and the things you're looking at procurement, manufacturing, systems, ERP, and so on. I think you joined in October 16 and fairly identified a lot of efficiencies that you could work on. I guess the question is to protect profits. In the short term, do you think the the low hanging fruit has largely been taken, then how much more is there to to go on? I I appreciate it's an evolving strategy. And also I guess from Robert's perspective, when Anna came in and identified these things that could be improved, what what was your feeling when you were doing that job as to how or why they could also be changed. And I guess why they weren't changed before Anna arrived. Look, I think, I think, yeah. Look, I mentioned earlier on about how we're transforming JM. And it's that transformation that's happening and has started to happen over the last 5 years. And it's accelerating as we bring in the people that know what good looks like and are very clearly being 1, but it's not just Anna. It's a range of people across the organization, and that's accelerating that growth and that opportunity. I think it was there, but it's all very well-being there, but you've got to have the people with the capability and the skills to go after it and deliver it. And that's what Anna's brought in and, and, and I think you'll talk a little bit more about what the further opportunities are. I think it was just about making sure we have the capability and capacity in the organization to deliver it. I think, Martin, the The really important thing is that we deliver this change, the standardization in a way where we don't lose our core competitive advantage of science at the heart of everything because in some ways, our lack of standard a standardization has come from that We've grown scientist out, plant up, and that's why, you know, sitting here today, there remains a big opportunity in terms of moving everybody to a standard way of doing things. But I think Robert and I are very cognizant of, implementing that change, which will deliver savings, but at a pace that doesn't get in the way of our growth or you know, hurt anything that's at the the heart of what we do. I think sitting here today, the opportunity is big. Not just in procurement, but more generally as we continue to look at standardizing how we do things. It was had a question over there. Good morning. Tom Rodersworth from Citi. So first question, you could you could I ask you to kind of, give a bit more color about the passing of the inflection point in health? How are you defining that inflection point and maybe, you know, should we see going forward as that inflection point has passed? Is there more clarity now about the near term earnings potential for for health? And secondly, on the procurement savings, are these net of, fixed asset cost inflation, or are they gross, I and if not, what is the fixed cost inflation that the business should experience? Thank you. So I'll go with first and talk about the health inflection point. I mean, we talked before about you'll have seen how the business has been suffering from the underinvestment for many, many years before and the declines as as product life cycles evolve and the the rich, the older high margin, products come off cycle, But now we are starting to see the new pipeline coming through, the new products coming through, the improvements in efficiency, the Jason and the team are driving through. What we've been by inflection point is essentially about operating performance inflection point. We've passed it, so we're now going in the upward trajectory. And as I said, we'd expect to see, well, A) we've got the 1,000,000 by 2025, we're still confident in delivering that. But it's not one lump at the end in 2025. It's on average double digit growth year after year, for through that period of time. Now that doesn't mean every year it's going to be double digit. It means on average, it's double digit, but it's not sort of up flat and then wait for 4 years before it goes up again. It's a much more sort of gradual, steady trajectory. And on procurement, that was a quite a detailed question. Do you want to answer that, procurement? Yeah. Sure. So, you know, when we cut procurement savings, we are very rigorous about it because it is very easy to count all kinds of cost avoidance as a saving. We need to be seeing a tangible saving versus our plan. Now there is an element of, raw material inflation in in some of our raw materials, and some of that actually the nature of our raw materials we won't be able to mitigate, but these are absolutely clear, realizable, see it in the bottom line and can therefore reinvest it savings that are achieved versus where we thought we would have been. Okay. I think we had, chatting at the front here. Sorry, Nancy. Hi, Chethan from JPMorgan. Just on health, Robert, you referred to moving resources away from generics into more innovation based products. Is that a reflection of some risk building with existing pipeline that is making or foreseeing that change to some extent. And second question was on the next stage of testing on battery materials, has that given you guys more clarity on the competitive landscape out there in the market, especially given that there is, philly some concern that Chinese have been able to catch up in this business, faster than many might have thought say 12 to 18 months back. And so, last question, we are coming to an end of first half. So, to the extent you can provide some sort of color on how to think about the split of first half, second half? Thank you. Yes. So on the, the pipeline of new products, Look, I think it was a resource allocation decision by us. It was absolutely not a reflection of the pipeline. It was a reflection of the fact that we saw innovator products which have a lower risk, better return profile, and we and Jason and the team took affirmative positive action to say we would rather invest in the innovator. They came quicker than we were expecting maybe a couple of years ago. And so we positively decided to reallocate resources we've only got scarce resources, development resource and manufacturing resources. We couldn't just add them all up because then we couldn't deliver it all. So it's a positive reallocation of resource into the Innovator business. And it's a better business, better returning type business. On the second question, which was on, on the, on the full cell testing, has it given us greater clarity? Well, not really because what OEMs, in some ways because we don't know exactly who the competitors are. What OEMs are very good at is they give you the data, which says how you're performing relative to others. So that has given us real confidence about our materials, but they don't tell us who the others are. They would say company A or, 1, 2, 3, 4, they don't say who they are and what's, who's who's which one's which, but you do see your performance. You do get data, which says how you are relatively doing relatively speaking. And this has given not only is it a good set forward for us and validation of what we're doing, but also the the data that we're getting is very positive as well, which give us, you know, adding to our confidence. And on the first half, I know the answer of it. You know what I'm going to switch it on, which is I can't tell you the answer, but usually our our first half, 2nd half phasing historically would have been kind of 4852. I wouldn't be guiding to a weaker first half if I wasn't wanting you to understand that it would be significant, well, different than that and different enough for for me to be standing up here saying the first half will be weaker for the reasons we understand incremental cost in clean air associated with those Macedonia challenges, which go away in H2, And the fact that both our E and R And Health businesses for different reasons are naturally 2nd half weighted. Health because some of our APIs take 6 months to make. Therefore, we only sell them in certain windows of the year. And in efficient natural resources, what you see is people, particularly in Catalyst Technologies, purchasing catalyst ahead of plant summer shutdown, so there's a natural SKU. We see our order pattern it's going to be 2nd half weighted. There seems to be a sort of a lack questions now, which is fine. So why don't we break now? And when do we get back Martin? We have a break until 10 past 11. So if you can be back in the room for 10 past 11 for, the next set of presentations, there's coffee outside. I think it's outside to the left. Yes. Outside to the left. But, yeah, if you can be back for 10 past 11, thank you. There? Right. Thank you very much, everyone. Back pretty much on time. Thank you to Robert Ananda for the presentation earlier. And next up, we have 2 presentations coming and then Q and A on both. First off, we're gonna have John Walker, our sector, Chief Executive on Clean Air, and then we will have Robin McLeod, our group chief executive, talking about Battery Materials that I'll hand over to John. Thank you, Martin Still morning, I guess. So good morning, everyone. I'm John Walker, chief executive for our clean air sector. I'll be updating you on progress on strategies since our last Capital Markets Day in 2017 and how we are confident in growth for the next decade. As we announced over the summer, I will be retiring at the end of March after a 35 year career with Johnson Mathew. It's been a privilege to work with so many talented and dedicated people over the years to transform clean air into a world renowned substantial sector for Johnson Methhey. Clean Air remains well positioned for sustained growth, and I'm pleased to be handing over to Joan, who with her strong background, and supported by her competent and able clean air team who will ensure the business continues to drive value for Johnson Methhey and improve air quality for millions of people. Around the world. Joan will join us on the 1st October, and we'll have full responsibility for the sector from that date. And I'll offer my support as needed because I'll be around through March. We look forward to welcoming Joan to Johnson Matthew. Let's start by looking at clean air today, a sector that represents around 65% of group sales and underlying operating profit and delivers a high return on invested capital of around 30%. Our growth has been driven by legislation But with the energy transition towards low carbon, sustainable, and cleaner transportation, we're seeing a greater consumer behavior demanding clean air. Whilst the internal combustion engine is a major part of the powertrain, we will continue to develop our mission control science to make the air cleaner and healthier. Our catalyst stop around 3,400,000 tons of pollutants every year improving air quality, helping to make the world a cleaner healthier healthier place. In fact, in some polluted cities, often the air coming out of one of our catalysts can be cleaner than the air going in. So with 9 technical centers, 14 global manufacturing facilities, and 3 further plants in construction. We have strong and leading positions in many of the markets we operate. As well as strong relationships with almost every major car 1 in every 3 new cars and 6 out of every 10 new trucks carries 1 of our mission control catalysts. So since the last Capital Markets Day in 2017, we've made good progress in our strategy. We've grown our operating profit by compound annual growth rate of 11%, and we're on track to deliver our medium term guidance. So some of the highlights since we met in 2017, We saw a huge uptick in market shares in Europe, light duty diesel, an impressive 20 percentage points, leaving us with around 65% of the market at And we are all set to win our share of both the China and the India 6 legislation. In North America, we've successfully managed an extent, an extended upcycle in heavy duty in the heavy duty business, And crucially, we've done this without having to add any additional capacity or assets. So we've made progress adding new capacity in Europe and Asia to support growth. 2 world class plants will be coming on stream in 2020, Poland in the Q1 calendar year of 2020, followed by China in Q2, and then the 3rd plan, India in Q3. Of 2020 calendar year. And as Anna said, each of these factories will take about 6 months to ramp up the full capacity. Our new plants will be highly flexible and efficient and will deliver both the capacity and capabilities to support OEM platforms that we've already won. However, We've seen some unexpected challenges, and we've had to demonstrate our resilience and agility to navigate these. The two main issues have been rebalancing our supply lines for the new business won in 2018 'nineteen, and this has put significant pressure on our existing footprint from a capacity and capability perspective, particularly in Macedonia, and has resulted in short term one off cost inefficiencies. We have now rebalanced the new business across second issue is gasoline market share in Europe, where we've seen some share losses, mainly driven by the business we have with OEMs slightly under underperforming the market. So we talked about winning with the winners. Well, now some of some of our, our customers are losing in the market. We're refocusing our investment in gasoline to ensure that we're in a position to gain market share in the future. So as a result, we expect a slightly softer 2020, as already mentioned by Anna before returning to normal margins in 2021. Overall, we're on track to deliver mid single digit growth and operating performance 2025 and sustained growth over the next decade. So let me explain those growth drivers over the next decade. So this summary shows our growth profile over the next decade and the key drivers. I'm not going to go into detail on this now as we'll cover this region by region in the following slides. But to give you a summary, I already talked about the softness in the 1st part of the current year, and the fact that we've now rebalanced our plant loadings and have 2 to ensure that the one time costs do not repeat. In the following years, to 2025, we expect mid single digit growth and operating performance, driven by new legislation in Asia, which more than doubles the size of the business We see low single digit growth in operating performance. The Euro 7 discussions in Europe are much more advanced now, And there's also the possibility of new legislation in other parts of the world. The legislation in in other parts of the world is not confirmed yet, but discussions are progressing and we're confident that new legislation will be introduced in all regions in the period. We have longer term growth opportunities, but we can't really define the benefits case until there's more clarity on some of this new legislation. We're also targeting the market share growth opportunity for Johnson Matthew And Light Duty Gasoline, by refocusing our R and D spend in these areas. So starting with Europe. We expect by 2025, Our overall European clean air business will generate the same profit as it does today. Within this, light duty is expected to show here, but the key ones driving light duty are our market shares in light duty gasoline and diesel will remain stable. We'd previously assumed some normalization of our 65 percent share of the light duty diesel market, but we're now confident of retaining this for longer. And the confidence, I guess, is that we have platforms that we are bidding on and are winning that are now entering 2024 model year. So that's what gives us that confidence. Diesel share, the powertrain mix will decline, and we continue to expect 25% of light duty vehicle sales, including commercial vehicles, to be diesel by 2025. And legislation will continue to drive greater fitment of gasoline particulate filters. In heavy duty, We expect growth to be broadly in line with GDP, given that there is no material new legislation. And our new plant in Poland comes on stream in 2020, and this is a key driver of value for the segment, not only because it's a world class facility, but also because it relieves the supply pressures in our existing plants that were mentioned earlier. So as governments and consumers look to reduce emissions, we see consumer behavior move through a range of choices. From diesel to gasoline, that's from diesel and gasoline hybrids to pure battery electric vehicles and hydrogen fuel cell vehicles. Diesel, as you all know, has been in the news over the past few years, and that has led to a change in consumer behavior. And a decline in about how this will develop in the coming years. So now looking out to 2030, we've been prudent and assumed the ratio of diesel to gasoline falls to 10%. So you can see this at the lower end. This is at the lower end of the estimates. But even with this pessimistic assumption, we still forecast growth in clean air over the next decade. The assumption still holds that for every 1% decline in diesel to gasoline below our assumptions, it impacts gross profit by £4,000,000. And a move to hybrid to neutral, move to hybrid is neutral to us as they require broadly similar after treatment solutions. So here, you can see the key assumptions for Europe. Vehicle production remains low. Diesel share of the powertrain mix I've already mentioned. We're getting value uplifts in both gasoline and diesel from legislation. Up to two times in gasoline and up to one and a half times in diesel, and hybrids are are neutral to us, as as I said. Battery Electric Vehicle penetration, we continue to assume 9% by 2025, and we'll maintain our share in light duty diesel and gasoline vehicles. Moving now to the Americas put simply Without material new legislation in the next few years, we don't see significant growth drivers in this region and expect growth to be in line with GDP. Heavy duty, which represents 17% of the sector, moves in line with the US truck cycle in the absence of legislation. The challenge here is to satisfy the demand at the peak of the cycle without adding extra capacity and history has shown that we're very able to do this. Looking at our assumptions for the Americas, you can see that there's not many moving parts. With low vehicle production, modest legislation, and little by way of better electric vehicle penetration, or market share moves. Now to Asia. Our light duty Asia business currently makes up 13% of sector sales. And more than doubling in size by 2025 that I mentioned is being driven by legislation, particularly in in China. Near term growth will be driven by China 6 legislation in heavy duty, which will see up to a tripling of the value to us phasing in from 2020 with the full value by the end of 2021. I think I've said earlier, there are 2 phases to both the China and India legislation. So I'm talking about this in two stages. Further on, we expect growth to be driven by China 6 in light duty. This is the 2nd phase of the legislation. Where we'll see up to double the value on cars for us from July of 2023. That additional value comes through the fitment of gasoline particulate filters and compliance with real world driving standards. We're seeing some GPS fitment to light duty vehicles already, and this will accelerate as the legislation comes into force. In India, BS 6 legislation, we'll see up to tripling the value In heavy duty, starting in April of 2020, with the full effects being seen by 2023 when trucks will require the full mission control system, to meet real world driving standards. So the Indian legislation comes in two parts as well. And we'll support our growth in Asia from our new world class plants in China and India. Key assumptions in Asia. Here you see the key assumptions that we've used in our planning. The biggest value drivers are the value uplifts in heavy and light duty. These more than outweigh moves in the others given their size. Although for completeness, you can see that we've assumed for auto production, BEV penetration, and our market shares. I've talked to you about a number of legislative drivers on our business, but there's also changes in consumer behavior That means the landscape is changing, and also changes in consumer behavior mean that the, like I said, that the landscape is changing. All the time in ways that are hard to predict. It's particularly evident when you look at the power train, and you can see the range of outcomes the people model. We've already shared with you the penetration levels of better electric vehicles that we assume, and this hasn't changed in 20 17. The sensitivity to 1 percentage point change is £5,000,000 on gross profit before mitigation. But what this means for us is that the with the uncertainties, we need to be able to manage our business in a flexible and agile way so that we can deliver results irrespective of the level of battery electric vehicle penetration or the pace of change. So our drive for efficiency and building an agile business is critical moving forward to help us support our customers. We don't do these things for the sake of efficiency alone, but in being able to help our customers, we enhance our competitive position. In the next few minutes, I'll take you through how we use our science, manufacturing, and procurement to help us solve the challenges our customers face that arise from the fast changing world So we use our science to solve our customer's complex problems, and we're increasing our investment to around 95,000,000 in R and D each from this year. Which is about 3% of sales. To ensure that we're well positioned to win business from 2025 as the new Euro 7 legislation is enacted. And we're making good progress in identifying new technological solutions for the future needs of our customers. As they face tightening legislation on gasoline and diesel platforms. We've directed some R and D spend to gasoline where we see an opportunity to improve our technology. We already have a pipeline of technologies that address Euro7 legislation, and we are focused on increasing these solutions and efficiently scaling them up well before the legislation requires compliance. This is what we did with Diesel back in 2015, 16. Which enabled us to be ready when our customers needed enhanced solutions to win market share. And we're doing that again now in both diesel and gasoline to build in that flexibility. So just to give you a quick example of what we're working on to reduce emissions. One of the things we're working on is cold start. They're a larger prevalence of, start stop vehicles out in the marketplace today. And with real world driving conditions, you know, the cold start portion of how we do the testing is a is makes a bigger impact on let on emissions. So coming up with new cold start technologies is is critically important. For the Euro7 legislation going forward. So we have 3 new flexible and efficient plants in Poland, China, and India, which should come on stream next year. We the next next calendar year. So we've already focused on maximizing the outputs of our existing plants to minimize the need to add further capacity and improve our returns. And our overall output in Macedonia by over 30%. On top of this asset leverage, our our aim has been to add sufficient capacity to support our growth so that is that they provide standardized manufacturing assets, allowing us to move products all over the world, a truly flexible manufacturing base. This will allow us to drive further efficiencies from our footprint moving forward. My new baby here. So Rob Roberts allowed me to go a little bit. What do you whatever you call it? Off peace. Yeah. So you've been hearing about me talk about these factories for a long time now. So today, I wanted to do a little bit more than talk about these factories. I wanna at least show you, you know, why I'm so proud of these facilities. So this is a recent picture of our Poland plant. So one of the things that I pioneered in my 35 year career at Johnson Matthew was color coded floors. Alright. So living in Japan and having the honor of spending a month working with Masaki Amay, who's the author of the Gamba Kaizen books, and understanding the importance of cleanliness and orderliness in a factory was invaluable to me. So when I reviewed this with one of our analysts before this presentation, they said they couldn't understand why clean floors were important. So I okay. Let let me try and start over and explain this to you. So so clean floors do matter. Because they're the early early warning system for leaks in a chemical plant and maintenance issues show up because you can see anything that's leaking on these clean floors. So Mr. Amay would be very proud of these floors. So we've already had several European customers visited the plant and they all have been very impressed with what they saw. These three new factories are the best of the best that we built in all my years in Johnson Matthew. And you've heard me say how efficient the Macedonian plan is. Well, this Poland factory will be more efficient than Macedonia and in particular, on larger sized parts. So we can run larger sized parts through the Macedonian plant at either at the same efficiency or improved efficiency over Macedonia. So the throughput through this plant will be truly impressive. The noise levels inside the factory and on the perimeter boundaries are the lowest that we've ever had. We use gravity. You can't really see that in the details of the picture, but we use gravity to move our slurries around the plant. So we've eliminated 50 pumps on this level of the plant. Light duty, heavy duty, flow through, and filters. So everything every product that we make, we can make in these new factories. Robert only gave me 20 minutes for the whole sector. So I I'm sorry I'm gonna have to cut this short because I could have used all my time to talk about this. So in the interest of time, I'll I'll leave it there. But I encourage you to get out and see these factories. So I'm proud of them, and I'm sure that you'll be impressed. Procurement. Seems like a little letdown coming to procurement after that, but Anyway, procurement procurement is an integral is integral to our strategy, and the savings are driving value to clean air, which accounts for 60% of all the group procurement savings that Anna put up on the board there. But it's more about just lowering costs. Procurements increasingly becoming part of our strategic decision making, for example, in our new product introduction area and clarity on how and where we source materials will increasingly improve our ability to design optimal solutions for our customers. This is becoming even more important with tariffs starting to show up everywhere. So, sourcing of raw materials is critically important to our strategy. In addition to direct efficiency benefits procurement is also helping to build agility into the business. Improved logistics flows offer the opportunity to improve service and security, a supply to our customers. In the event of Brexit, Our procurement of logistics will be a critical enabler of our supply strategies. And finally, we're working hard to improve our key supplier relationships to ensure we deliver excellent service and quality to our customers. As an example, we're committed to working with substrate manufacturers to deliver great products to our customers. So to close, in summary, I've gone through the drivers of growth over the next decade, with the main driver being Asia, where our business will more than double in size. What you're also seeing are the changes that we're making to clean air where we're building a flexible and agile business, which is fit for the future and can navigate the challenges that the changing world presents to us. So I'm confident in the future and proud to hand over a world leading business to Joan. Thank you, John, and I'm sorry to have cut you short from your, opportunity to talk about how wonderful these new plants are. I haven't been out of Poland yet but I'm looking forward to seeing the shiny floors in full production, which will be coming out soon. But good morning again, I'm going to talk about battery materials strategy and the progress that we've made on the development of this business over the last couple of years. If you recall in 2017, we introduced our ultra high energy dense the cathode materials, ELN O. And we also explained how excited we were about the potential that ELN O offers to enable the development of the market for long range pure battery electric vehicles. 2 years and are now well and truly in the commercialization phase for this business. We're therefore delighted to announce a couple of weeks ago that Christian Guenter will be joining us Chief Executive of Battery Materials on 4th November. Kristin joins us from Tazni, a Saudi Arabian Industrial company where he held a number of senior roles. He's a strong background in science and a successful track record in the development and leadership of large global technology businesses. An ideal skill set to lead the further developments and commercializations of this business. Christian is with us today and will be joining me in some of the Battery Materials breakout sessions this afternoon, so you'll have a chance to meet him there. Over the last 2 years, few years, the external environment continued to drive at pace towards electrification. The energy transition is well underway and consumers are changing their buying behaviors as they have become more aware of air quality and climate change concerns and hence are demanding options from OEMs to enable them to make a difference. In addition, legislation, not only emissions legislation, but also carbon dioxide regulation remains a further key driver for change. Ambulatory vehicle adoption is also being further enabled and influenced by government subsidies and incentives as we've seen in China. So irrespective of how a battery electric vehicle adoption will develop It's clear that there will be significant demand for cathode materials in the future. And as the pace of electric vehicle adoption grows, Our ambition is to successfully commercialize a business and build a business of scale. To enable higher penetration of electric vehicles, consumers are demanding that OEMs solve a number of issues. And while solving each on their own is relatively simple, doing them all together is complex. Range Anxiety And Total Cost of ownership, particularly for larger electric vehicles, remains a key barrier to mainstream ownership. This will require innovations in cathode materials as well as across the entire lithium ion battery supply chain. At JM, we're focusing our efforts on leveraging our science to develop solutions that address these concerns and reduce the total cost of ownership He also has a portfolio of ultrahighnickel cathode materials, which offer a step change in energy density as well as overall performance. I'll talk more about the specific benefits of ELNO shortly, but high nickel is where the market is heading. Furthermore, as the industry continues to evolve, OEMs are demanding the best cathode materials to enable them to satisfy ever increasing consumer demands. But just as importantly, they are all pursuing different strategies to solve these problems, and this as a result requires greater customization of the Battery Materials for each customer. Our initial focus within our Battery Materials business is in cathode materials, This is the part that has the greatest impact on performance and cost of the sell, but it's also the most complex part of the value chain. Like we do across all of JM, we've targeted the most difficult area as this is where our science can really translate into value. But that's not the only complexity. I've already talked about the need for customized solutions where technology remains a key differentiator But in addition, OEMs require strong and secure supply chains, something that through our long involvement within the automotive industry, we truly understand. And there are long lead times with many testing procedures to go through before platform qualification. All of this means high barriers to entry, which plays exactly to our strengths. E L and O is the next generation cathode material. We said before that compared to the current automotive commercial benchmark, NMC-six twenty two, EL and O is around 20 to 20 5% higher energy density. And it's also better compared to the next generation NMC material, NMC 811. That is not currently widely used. As all materials develop, ours and those of our competitors, we will continue to maintain our competitive advantage and evolve the family of materials that we call E LNO. But to enable long range, the industry is, like we've already done, moving to ultra high energy nickel materials where Illinois already outperforms. Today's current materials are not able to deliver the necessary performance at an acceptable cost. To give consumers what they demand, OEMs are over specifying the size of the battery, and hence the quantity of battery materials, which significantly adds to the cost of the vehicle. With better performing materials, with higher energy density customized to meet the other requirements of customers, OEMs can either increase the range of the vehicle by using the same size battery or substantially reduce the size of the battery and hence cost to deliver the same range. It is this market that EL and O is there to address. Long range, pure battery electric vehicles, particularly with those OEMs that are performance focused. And it is that market that we are targeting. And our goal is to capture value by being a provider of leading cathode materials that delivers value to our customers. But to be clear, Smaller potentially shorter range battery electric vehicles may well use other materials where that higher performance is not particularly valued by the consumer and our customers. As I've just talked about, ELNO is a high performing next generation cathode material. It has higher energy density compared to other current and next generation materials, but it has other characteristics too. Good power performance, which means faster charge times and good stability or cycle life, which is another key differentiator. Good cycle life is important because OEMs must ensure that batteries in their cars will last for many years and many miles. They don't want, nor can afford to replace the battery if its performance degrades too quickly. So made and hence, Once again, if the cycle life wasn't good enough, then the OEMs would have to over specify the battery again adding to the overall cost. Another way that we help to address cost is through managing the quantity of Cobalt. Our ability to thrift Cobalt, similar to what we do with auto catalysts and PGMs, is attractive to our customers. Our materials contain considerably less than 10% cobalt. I'm sorry, but I'm not really going to I'm not going to disclose at all exactly how much, but again, this lowers the cost. And we continue to lower the cobalt content for those customers who choose to optimize on this requirement, but they don't all do that. Whether we look at energy density, range power or stability, it's the overall performance of ELN O and our ability to optimize for the specific characteristics that may matter most to our customers which is attractive to them. As the electric vehicle market evolves and we progress through customer testing, is becoming increasingly apparent that our ability to customize is and Different OEMs are pursuing differing strategies and the ability to provide a customized solution that meets their specific requirements will enable us to capture value. The chart on the left hand side shows how we tailored Elano to meet a specific customer requirement. And this is one of the customers that's taking us through to full cell testing. The first formulation is the base, but our customer asked us to lower the cobalt content We did so while slightly increasing energy density but at the expense of cycle life. However, after further tailoring, we were able in the 3rd formulation to recover some of that cycle life at even lower cobalt content. This is an example of how our technology expertise enables rapid development and customization to meet the needs of our customers. It demonstrates how we're able to meet a multitude of demands through the application of our clever chemistry and our customers are very supportive of this as you can see from the quote on the slide. To support our ability to customize, we are building best in class application and testing facilities. And this photograph shows our first application center, which is now in place in the northeast of England. Our centers will include a range of facilities from laboratories to demonstration cell manufacturing capability, and they are critical to delivering the tailor solutions that our customers are asking for. These centers are crucial to support new process and material development, ensure that we have the right quality assurance and quality control of our new materials and perhaps most importantly provide capability to fabricate and test large format cells. This will be crucial to support new product development and provide customer specific performance data. Understanding exactly how our materials form within our customer applications is essential to enable us to more accurately customize our materials to meet their requirements. And this is entirely analogous to the testing centers that we have within our Clean Air business. These application and testing facilities are at the heart of our strategy. And we will scale our business accordingly. We will not be playing at the commodity part Overall, I'm really pleased with the progress we've made in Battery Materials over the last few years. There's a huge amount of work technology, build customer relationships and people of whom around 80 are in research and development, and the recent appointment of Christian as sector CEO was another important step in our Battery Materials journey. Customer feedback from both OEMs and cell manufacturers remains positive, with 2 of these customers. This essentially is where we move from testing coin cells to larger format cells, which is equivalent to A samples, that we've talked about previously. And as I mentioned, the move to full cell testings means that they've down selected to only a few potential suppliers and they're now starting to put more investment in on their side to further develop, formulate and test ELNO. This will be an iterative process over the next year or so as we will jointly further customize the material in their to their specific requirements and applications. This is another significant point of validation, which gives us significant endorsement of our technology. We're therefore confident to continue to invest in assets to support our commercialization efforts, and I'll talk through the timeline for this on the next slide. And we're also making progress on sourcing key raw materials. You'll recall that we secured our first supply agreement with Namaska lithium for lithium hydroxide And whilst we haven't announced any other long term sourcing agreements yet, we are actively working in this area in preparation for our first commercial plant. And alongside all of this, we're evaluating the best options for scale up, which I'll come to shortly. To support our commercialization, we're building several key assets. These investments are essential to succeed in battery materials and they enable us to prove that ELN O is a leading cathode material, and we won't be able to win customer platforms without them. We must have the ability to manufacture at scale to win substantial contracts, but in addition before finalizing a contract with us we expect that the OEMs will require us to produce validation scale quantities of materials from the plant that will produce a commercial scale. This is our short term limiting factor. Today, our pilot plant in Chilton is fully operational It's a research development and small scale production facility with a capacity of 10 tons per annum. Our pilot plant is the first step in demonstrating scalability of the ELNO process to customers, which is vital to access the EV market. And it also allows us to manufacture the quantities of materials required for our customers' full cell testing that I talked about a minute ago. We're also making good progress with our first commercial plant in Poland. This plant will have a capacity of 10,000 tons per annum but the land that we have purchased has the capacity to expand to up to around 100,000 tons per annum. We aim to break ground in Poland this fiscal year and it should be operational in 2022. It is from this plant that we will be qualified and awarded customer contracts and it will allow us to be supplying platforms in production by 2024. Our investment in battery materials across JM is significant, and we anticipate by the time we have commercial production from our plant in Poland, we will have invested around 1,000,000 in the business since and since That includes our investment in the pilot plant, application and testing facilities, the first commercial plant itself, as well as the R and D and management that it will that will have taken us to get there. Additional investments in scaling up our business beyond that will be made with a knowledge that our ELNO materials are successful in the market. So as you can see, we've been incredibly busy over the last 2 years in developing our Battery Materials business. This is a significant growth opportunity for us and we're confident we can build a successful scalable business. I spent the last few minutes talking about what we have been doing to enter this market, developing our products and building our manufacturing capabilities, And at the same time, we've been working through our plans to scale up beyond our first commercial plant. Further expansion is likely to be phased adding capacity probably in units of 20,000 tons per annum at a time. And alongside our R and D efforts to further enhance the LNO We are already working on process improvements that will enable us to reduce the capital intensity and operating costs for future plants. In addition, the learnings that we will take from the pilot and 1st commercial plant from both a science and engineering perspective will help us to enhance performance still further. We are thoughtful in how we will choose to invest and we're aligning ourselves with the pace of growth of the cathode market. Through a modular scale up type scale up, we'll be able to effectively manage risk in what is still a very nascent market We will be able to move quicker or slower depending on how the market develops, but also how we see pricing and value. From all that we know today and what we've learned over the last couple of years, we absolutely believe that the strategy that we are adopting for this market has the capacity to deliver returns in line with our requirements, but of course our first investment will not achieve it. We will continue to assess the market as evolves and of course allocate our resources in a disciplined manner in line with our capital allocation framework. So to conclude, we've made some really good progress here developing our technology leadership the core of J. M. We have developed and continues to enhance the best in class high energy cathode material and we are pleased that we progressed to full cell testing with 2 of our customers, which demonstrates the value of customization. We're investing today to build a commercial and scalable business and we remain confident about our future in this market. Where our goal is to that enable long range pure battery electric vehicles. So that's includes this section for today. We've now got some time for question and answers with myself and John, but of course, as you know, there'll be more time for questions and answers during the breakout sessions. So Sean's going to join me up on the, on the stage, stage, plinth, and we'll take any questions that you have. So if we get one, right by you there, Carl. Hi there. Yes. It's Alex Stewart from Barclays. Two hopefully simple questions. Talked about China 6 light duty from 2021, but I thought that roughly half of the provinces were introducing it from the 1st July this year. Is that pre fitment? Can you just explain the difference there, please? And then secondly, on the ELNO CapEx level, which is obviously higher now than it was 2 years ago. Could you just walk us through some of the investments that you've had to make that perhaps you weren't anticipating at the time would be very well, thank you. Okay. Shell, John, do you wanna go first on China 6? So China China 6a starts in July of 2020. Then there's the 2nd phase of legislation, which comes in 2 years later. So what I would the legislation affects both light duty and heavy duty, But the bigger impact for the 1st phase of the legislation for us is in heavy duty. And then the 2nd phase is when gasoline particulate filters come in. I don't think I said 2021 in my side, but yeah. It's okay. And on ELNO, I don't think we've changed our number because, what we talked about before, what I'm talking about this time is 1,000,000 is the it includes everything, it includes the operating cost includes the pilot plant, the application centers, the R and D effort that will capitalize, etcetera, as well as the first commercial plant. I think last time we talked about around about $200,000,000 for the first commercial plant. We now think it will be a bit higher, maybe $200,000,000 to $300,000,000 in that sort of range. I'm not going to give you the specific answer, but in that sort of range. But we the demonstration scale plants that we previously talked about, we've decided with further work we've done, we've concluded we don't need that to do those demonstration scale plants. So we've put more into the we're focusing absolutely on the 1st commercial fund. So the number of investments are broadly the same as we talked about 2 years ago. Yeah. So can I go back to that clean air question? Because on slide 44, It does say China 6 a nationwide from 2021. I just wanted to understand that. Like in 44, but I'm not gonna go look at it. Oh, you might have it. You got it as a Right. We may I tell you what, are you able to answer that quickly, John, do you think, or we'll have to, maybe take it offline afterwards? Take it in the breakout sessions, but Okay. That's fine. Yeah. We'll take another breakout sessions. Sorry. I want to go back to the slide. So I think I had question in the front here. Carl, do you mind if we come into the front? Oh, so I can't I can't answer that. So you can't answer now. Yep. No. No. So that's nationwide. You know, the legislation is starting in some of the bigger, metropolitan areas and from July of 2020. But nationwide from 2021. So that's just the difference in the in the roll out of the legislation. Because I like Unlike, Europe and America, where it tends to be sort of automatically, go across the whole region. In China, it tends to be sort of scaled up over time. Adam? Yeah. It's a it's a question on the on the comments you made about loss momentum in, light duty gasoline. Am I am I right in thinking that's a Europe only problem, or does it relate to to other regions? And you talked about it being, to some extent, due to the ebb and flow of of customer share. Your customers are are are currently in a phase where they're losing share. Are there any other sort of technology issues around that that you need to address or is it really just the, the customer mix that you've got? I think the technology and gasoline is is pretty competitive. I would say that, you know, right now, we're probably not a clear number one So I think where there's work, the reason that we're allocating more R and D money to gasoline is because we do feel that we have the capability to improve our gasoline technology. You could argue that with, in Europe, an eightytwenty split of diesel to gasoline, maybe we had over egged our activities in in diesel. But one of the things that's gonna be happening over time is as the diesel to gasoline ratio continues to decline, the opportunities for Johnson Matthew to participate in more gasoline bids will increase as customers start to rebalance their portfolios as us as the leader in diesel declines over time. Okay. Right. There's 3 all, all of you together, and I think, we'll go right first. It's a straight follow-up to that. Yeah. Peter Cartide at fierce a master of launch, what they're calling their spark controlled compression ignition gasoline engine. Now is this again, or if it's for real, what other what other companies for, and what implications would it have for your gasoline business? So, you know, more efficient combustion is what you're saying. Yeah. But more diesel like as well. So more and more diesel like. You know, I I think I think it would play into our hands, you know, a little bit, you know, our our our specialty and leaner technologies would be something that would give us probably a little bit of an advantage with some of that. What I would have guessed here? Okay. Martin? Yeah. Cheers. Just on the ELNO plant, again, the the 2 to 300,000,000 think you referred to, Robert. And obviously, it's a nascent technology and evolving all the time. How versatile is that plant such that if you got to that 2022 period. If it became apparent for whatever reason, the technology wasn't being accepted or it needed to be modified. Can you can you react to that, or is it sort of a one product, plant basically? Well, that's sort of half empty question. I'm much more half full, of course. And I'm very optimistic and confident in our business, in our technology. But to answer your question directly, we are putting in, in this first plant, much more sort of flexibility on our manufacturing than we would do perhaps in a normal sort of more mature market where you take John's shiny forward plant. We know exactly what to produce and we're not exactly how we're going to produce it. So we are putting a bit more flexibility in that, not just in case in your half empty approach that ELNO wasn't successful, but actually, ELNO will continue to evolve and develop. And so we need to make sure we have ability in it for that. And at the same time, as our process technology improves as well, we're making sure that we have the the flexibility to adapt and evolve that going forward. So it has definitely got more flexibility in it. Oh, that row is dominating the, the questions. Market share is not allowed to dominate market share. It's the main questions you are. Just a question, Robert, on the on the battery business. I know you're not there yet, but if you wind forward to invoicing, your battery customers, in 2024, are you confident that this will be like the catalyst industry and you can invoice with a pass through arrangement on metal prices because we ask this question to all of the cathode guys and we don't get any straight answers So it'd be great if you could give us that straight answer. Look, it is a very nascent market. So I'm not sure you can give a definitive yes or no at this stage, but we, as a business, are not going to be able to take as a business, take the swings on metal prices and take them and absorb them within our within our, our business. It just will not work. Because the swings on metal prices could massively swing the profitability, both one way and the other. And it won't work. So it will have to be shared through the supply chain, how much it will be ours and whether it's a pure pass through, how much of it will be the cell manufacturers or the OEMs themselves, we will have to wait and see how the market develops. But what we've been doing in clean air We've got that experience. We understand how to do it. We certainly believe that that's the way we'll be pushing it. Well, we will be pushing it that way. We'll see how the market evolves. Question at the, we got somebody right at the back as well. Nancy, when we get there? No, you don't know, your first. Yeah. Sorry. Just a just a quick one. In thinking about, obviously, the Poland plant, the 10,000 tons has come out stream and the customers that you're currently running with and the 2 full cell tests. If is that enough to fill those plants, I. E. What you're currently guiding us to in terms of customer testing, would those let's say they come to fruition, is that more than enough to fill the 10,000 tons, you know, or or do you require further wins down the line to fill to fill the 1st phase of capacity? I'm not worried about filling capacity. I think the issue is around because so so to answer your question, absolutely, we'd be able to fill the capacity very quickly. It's more around getting platforms, getting proof of proof of technology, proof of of the commercialization of that technology in the market, and then rapidly scaling up as we further demonstrate the adoption in the business sorry, in the market So I wouldn't worry about filling up the costing. And actually, we don't want to fill it up because you can fill up with, low margin poor performing, poor returns us. We want to fill it up with high return business as much as we possibly can, but absolutely, we don't have a problem there. That's good. Oh, Carl, you've made it up there. Well done. This is Sanjay Jahar from Tanya Gordon. I just have two questions. First of all, on one of the present, page 43. I think you mentioned that the BV penetration, you know, is 3% by June 25 in United States. Is this US or you're talking sort of the whole of Americas? I'm just because my numbers I have suggest that US is already 2% in the 1st 7 months of this year. So I'm just trying to understand why you're so low on BB penetration in America. And secondly, on the ELNO, you mentioned that it's focused on long range. I know that from the the European manufacturers have struggled to catch up with Tesla. I think there's about 80 miles difference within the range. Is this a sort of market you're talking about 3300 plus mile range, or are we talking about sort of slightly lower? So battery electric vehicle penetration and it's a North American comment. North American comment, yeah. So it's the entire Well, he's only 3% because they're already nearly 2% in 2019. So I'm just wondering, you're expecting things to slow down dramatically? It's an assumption. And if you look at the range of assumptions we've looked at, you know, that range that we had on that chart I'm sorry, I've got the chart in front of us here, but battery electric vehicle penetration. There's a range there. And we've looked at what people are forecasting and taking as sort of a conservative element of the range. By region, I have to be honest, the data, I don't recognize the date, not that I'm saying you're wrong, it's just I haven't seen the data or that level of detail by region or by country. But certainly for what we're hearing, it feels like that's a sort of reasonable place to assume for, for North America as a whole, by 2025. I just think it's odd because U. S. And Europe today is virtually nearly 2%, yet you have a much higher assumption for Europe than for U. S. And that just seems slightly bizarre anyway. That's just on my second question. Sorry. Your second question was around ELNO and sorry. I've forgotten it already. Yeah. So the so my question is, is the problem for most manufacturers, their technology is not really good enough to catch up with Tesla? And is this what is this the gap you're trying to capture? It's really around range at acceptable costs. So because you can get range by just putting a very, very large battery on the, on the, in the car. So it's around how you get the range at the same time as you get the appropriate and effective total cost of the sale and the performance in all the criteria that we were talking how each OEM is going to compete with each other. And obviously, with Tesla as an example, that's up to them. What we're working on is how we enable them to really drive the cost down because you're upping the performance of the cell and how they decide to configure their their, their battery and therefore, the performance of their vehicle is kind of up to them. But we expect that the ELNI really enables that lower cost total range dynamic together, to be successful and it allows that wider scale adoption of longer range, larger, longer range vehicles. Right. We're coming back to the front here, but we're who's going first? Should we go Hi. Good morning, Jean Baptiste Rolland Bank of America Merrill Lynch. I have two questions. The first one just coming back on the diesel share in Western Europe. I just wanted to know if you could briefly comment maybe on the trajectory that you're forecasting on on slide 40, you seem to be an to see an acceleration in the decline past 2025 and a sort of slowdown in the decline, just 2019. I just wanted to understand the rationale behind this, sorry. And then one question on the ultrahighenergy density market that you expect by 2030? On my calculation, it sounds that you're minimum, you're expecting an 18% market share for ultra high density market. I'm wondering if you could maybe tell us where you think this market share is today and how you think this market share can improve in the market? What gives you confidence that consumer adoption will follow ultra high energy density markets in terms of adoption? Okay. So we start off with the diesel share. John, do you So the the this is an hour view. This is this is market information from people like IHS, LMC. So this is a consolidated view of the range that we've had similar to what we produced in in 2025. So, you know, that that's not, you know, us saying our view is that we went to the low end of this range. In 2030. So the 2030 data by LMC and IHS, I guess, was just published a month or 2 ago. So it's relatively new information. I think a lot of a lot of the automotive teams of of the people in this room we'll be extending their forecast out to that, to 2030 in the not too distant future. So that will be evolving over time. So I don't know exactly what the number is going to be, but, you know, that, that is what the range similar to how we describe it. In 2025. Thank you. And certainly what we're seeing is, you know, the trajectory is kind of in line with where we expected it to be, 2 years ago. And what all we've done now is extended it out through to 2030, and we expect that continue to decline to happen to 10% of vehicles in 2030, which is equivalent to 5% of cars and another 5% for sort of commercial, commercial vehicles. And on the L and O, look, ultrahighenergy density today is very limited. There's very limited 811 type material. And that's the sort of way where we're sort of characterizing Ultra High Energy Dense 811 and beyond has very little of it today. Exactly how quickly it penetrates the market exactly what the the adoption is is kind of a little bit hard to tell, because as we talked about, it's a nascent market. But we certainly believe that, it will, it can enable, some of the, requirements that, as we talked about already, that the consumers demand, but the adoption of the whole supply chain, requires significant investment, significant further, validation testing, etcetera, before it can move forward. And so exactly what the pace of take up is is hard to judge. We move over to Jacqueline again? Yes, can I just say this, if we can take this as the last question and then we'll have lunch and there's plenty of time afterwards still to catch up with John and Roberts on bad or some clean air after it? But if this can be the last question, then we'll break for lunch. Thanks. Last two, sorry. That's allowed, I think. So first question is we've been hearing more about auto OEMs trying to come together for development of certain platforms to to cut costs for them. Does that have an implication for for JM in terms of more competitive probably bidding process in general given that there are more limited platforms now to bid for? And the second question is on just to understand this phasing of China and India sort of legislation changes. So is next year going to be significant year for GM from that ramp up or changes in legislation or is it more 20222023? Thank you. So I'll take the take the second question first. The, next year, we'll see the beginnings of the impact in in our P and L. But the a bigger year will be the 2nd year, as you say. That was the first question. Automotive's combining to be Oh, so as we're in this big automotive transformation, what we're seeing is, you know, both with automotive tie up and within a particular, OEM just by themselves, as they're starting to allocate their resources, to multiple platforms, be it internal combustion engines and and battery electric vehicles. What we're finding is that they're starting to depend more on us to deliver some of the solutions for them. So, you know, I think the trick there is to, for us to find value in that because the flexibility that we're going to have to have, which is why we talked about agility so often, as this transformation is happening, depending on how electric car sales are going, you know, we're gonna have to be pretty flexible in that transition period to be able to, to adapt to that. So, we'll be looking for value out of that transition. Anything I would expect is the dynamic. I mean, the OEMs have been tough on John for. He used to be, 7 feet when he started J. M. It's tough on John year after year after year. They're always batting you, batting you down. And something else is going to change materially because ultimately it's about the technology and the technology advantage that you have. If you can enable value for them, they're happy to share some of that with us. So look, I think we're stopping for lunch, Martin, jointly. We are just a couple of quick things. Firstly, can you remove all your belongings from the room? Our session because the room's going to get broken down for the breakout session. So all the tables, everything's going to be removed. So if you can take all your belongings with you, And secondly, the breakout sessions begin at 1 pm. So please be prompt for those because we're inevitably on quite a tight timetable running around all of those. If you can check the back of your badge for the color, which will tell you which group you're in and the groups and the timetables we've posted on the doors outside, and you can also pick up timetables from reception. It's a fairly strict military operation. So if you look at all that, then hopefully it will work quite well. But, lunch now, which is downstairs, outside and downstairs, I think to the left and downstairs, if I'm right, for people will show you where to go and be back in the breakout sessions for 1 PM. Thanks.

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