Britain's Most Admired companies: Johnson Matthey - From gold to green

To be voted second Most Admired Company (presented by MT in association with Mercer Human Resource Consulting) by its peers was a pleasant surprise for Johnson Matthey. But the firm, a leader in catalytic converters, has been quietly turning its knowledge of precious metals into profits for nigh on 200 years. Dave Waller examines the alchemy.

by Dave Waller
Last Updated: 09 Oct 2013

What is the most revered company among the UK's business leaders? Tesco? GSK? BP? Every year, MT's Most Admired Awards strives to answer that very question, sending professor Mike Brown out from behind his desk at the Nottingham Business School to scale a mountain of research, and, once the lightning-bolts and clouds of smoke dissipate, to wait for the handover of the stone tablets. Sure enough, when Brown returns to reveal his findings, the plaudits usually go to the Leahys (Tesco) and Roses (M&S) of this world. Last year, however, there was a surprise addition to the front-runners. The ranks of the big boys were joined - and, in all but Tesco's case, beaten - by a less familiar name, Johnson Matthey, which in two years had managed an amazing leap from 35th to second place.

Impressively, the company has achieved all this while keeping its head down and staying quiet about its own success. Chances are you've heard of it - you may even be using its products - but you won't have seen an advertisement by Johnson Matthey or found yourself toting a carrier bag splashed with its logo.

So what does Johnson Matthey actually do, and why is everyone suddenly sitting up and taking notice? After all, this is a business that's been ticking along quietly for nearly 200 years and, through an element of chance, now finds itself on the front line of the fight against global warming.

The story begins in Hatton Garden, a district on the fringe of the City of London, to which Percival Norton Johnson moved his five-year-old precious metals business in 1822 - planting the seed for an area that would soon blossom into the centre of the UK jewellery trade. In those days, the company was an assayer of precious metals, testing gold and silver for purity and guaranteeing its quality by stamping its trusted mark. It was work that demanded traditional values such as honesty and integrity, as well as unrivalled knowledge of the precious metals themselves. The company clearly had the right recipe - it was made the Bank of England's official assayer and refiner in 1852.

A year previously - 1851 - Johnson had been joined as partner by George Matthey, his apprentice since 1838, who proved pivotal in building a company that would remain groundbreaking even into the 21st century. Matthey brought with him a pioneering knowledge of an as yet unexploited resource: platinum. A specialist understanding of the versatile precious metal would be key in Johnson Matthey's stability and progress after 1924, when vast reserves were discovered in South Africa's Merensky Reef. This turned out to be the site of one of the world's largest concentrations of platinum group elements, and spurred the development of mining and processing techniques in which Johnson Matthey played a key part.

The metal's cancer-fighting properties brought it into the pharmaceuticals sector in the early 1980s, while its catalytic expertise pushed it to the forefront of emissions control - through catalytic converters and, potentially in time, fuel cells.

The alchemy of catalysis can also be harnessed to save energy in chemical reactions, by enabling them to occur at much lower temperatures or pressure. And it can help convert a whole range of hydrocarbons, such as natural gas or coal, into petrochemicals. In a time of depleting resources and concerns over the security of oil supplies, these are useful capabilities.

'Platinum is the link, but we change with the times,' says Neil Carson, Johnson Matthey's chief executive since 2004. 'When I joined in 1980, most of our products were made of the raw materials of the platinum metals group. We were really still a metals company. But catalysis has since come to the fore and has made our company more into a chemicals business.'

Opportunity is, of course, key, and it is this very flexibility that keeps Johnson Matthey relevant. Look at its pharmaceutical wing. In the late 1960s, Dr Barnett Rosenburg of the university of Michigan found platinum to be active against certain forms of cancer. The company saw a potential market for its specialist talents, and threw money into R&D. By the mid-'80s, it had helped develop the first-generation anti-cancer drug Cisplatin, and later Carboplatin, making the active ingredients and selling them to pharmaceutical firms. This is now a niche but significant business.

But Johnson Matthey wouldn't be what it is today without the world's rapidly increasing demand for sustainability and all things green. The company seemingly fell by chance into that market too, with the invention in 1975 of the catalytic converter. In the mid-'70s, California had such bad pollution that people with asthma had to stay indoors, and the US government was panicked into introducing legislation to cut car emissions by 20% in five years. At that stage, solutions weren't limited to catalysts, but Johnson Matthey worked closely with car firms to develop a system at its plant in Royston, Hertfordshire, that became the standard model worldwide. Johnson Matthey now provides catalytic converters to a third of the world's cars.

This experience set the pattern for the company's modus operandi: keep an eye on legislation, stay close to your customers, and spend big on R&D - then smile as the demand rolls in. It works. In the early 1990s, Johnson Matthey developed a technology that was to clean up truck emissions. There was no legislation on the matter at the time, but its specialists worked with local authorities that were interested in cleaning up their bin-lorry emissions. Again, Johnson Matthey threw money at the technology, anticipating that, eventually, legislation would come into play.

Sure enough, it did, and Johnson Matthey is, not surprisingly, leading the market. 'We've got 17 years' worth of R&D,' says Carson. 'And we were the only people who could go to the truck-makers and say: "Look, here's one of our products that has been on one of your trucks for half a million miles - and here's the data."'

From catalysts to diesel filters - and, in the fullness of time, NOx traps that remove nitrogen oxides from diesel emissions - one can see the demand for its specialist kit stretching out for years ahead. When the environmental approach on cars and trucks is extended to off-road engines such as bulldozers, cranes and perhaps marine diesel, it's easy to see the market expanding. Each area that isn't yet legislated for will be at some point. It's just a matter of being ready.

But with such rich spoils to be seized, surely companies are falling over each other to get a piece of the action? Not so. Such are the high barriers to entry in the market - you have to know your rhodium from your ruthenium (both transition metals of the platinum group), and your customers must trust that you do - that you can count Johnson Matthey's global competitors on one hand.

Success in the catalytic arena is therefore dictated by technology rather than price. You get further having a better product rather than a cheaper one. Says Carson: 'If you can do the catalytic reaction 5% more efficiently, that's a massive benefit if your customer is a plant running 365 days a year. Similarly, if you're selling a £100 catalyst to a car company, £40-£50 of that is precious metal. If we can make a more active catalyst, and can take out 10% of the platinum, that's a fiver's saving. For a car company buying a million catalysts, that's a lot of money.'

Hence its R&D spend, currently eating £60 million a year - a hefty sum for a firm of its size (£4.7 billion revenue in 2006). As long as it's aligned closely to customer needs, R&D is a vital part of the business. 'If you do R&D in an ivory tower you create some fantastic products,' says Carson. 'It's just that you can never sell them.'

But the precious metals company with the Midas touch is not immune to the odd golden cock-up. Johnson Matthey had a disastrous dalliance with banking. In 1984, its manufacturing wing was experiencing a lull, so the company thought it would use its banking licence - a remnant of its gold assaying days - to lend some money. It proved a foolhardy diversion. The bank crashed, the Bank of England stepped in, and the company was suddenly saddled with a serious amount of debt. 'It was a near-death experience,' says Carson. 'Don't get involved with things you don't understand.'

You won't see the company repeating that mistake in a hurry. For one, it's got enough on its plate with the markets it knows. Growth is almost uniquely organic, with money being scrambled into building production capacity to keep up with global demand. 'Its investment is not speculative any more,' says Peter Cartwright, an analyst at the Evolution Group. 'Few companies invest as hard as Johnson Matthey for growth. BA, for example, hasn't bought a plane in four years.'

If Johnson Matthey has the near future pretty much sewn up, the longer game has more of a question mark over it. For many, the fuel cell, which mixes hydrogen and oxygen to generate electricity, is the clean fuel technology of the future, its only by-product being water. The company has been manufacturing catalysts for fuel cells since the early '60s, even supplying them to the Apollo space missions.

Unsurprisingly, it wants a big slice of future developments in fuel cells. 'It's bang in the middle of our court,' says Carson. 'Being first in will be much better than trying to get in second.' Fuel cells may be a long way off - Carson talks of a prototype fuel cell car that handled nicely but cost £5 million - but, true to form, Johnson Matthey is pumping money into R&D now, on the assumption that it will pay off eventually.

If it works, the management will be laughing. 'There are 63 million cars made a year, all with internal combustion engines,' says Carson. 'One day, a million of them may be fuel cells, and we'll be making a decent sum out of it.'

Whatever happens, for the foreseeable future the firm can sit happily in the stream of new emissions legislation, satisfying a healthy flow of orders, all while keeping its head down and getting on with its business. And, of course, basking in the golden glow of praise from its peers.

'We're not a household name,' says Carson. 'No-one buys a car because it has a Johnson Matthey catalyst. So we were very proud to appear in Most Admired, next to the Tescos and Glaxos and other companies that spend a lot of money on being known to the world. We've just never seen the need to make a big noise about what we do.' Indeed. Why bother when you don't have to?


1817 Percival Norton Johnson establishes his gold assaying business on 1 January, the same day as his wedding. George Matthey, who joins in 1838 as an apprentice, will become a partner in 1851.

1852 The company, now Johnson & Matthey, becomes the official gold assayer and refiner for the Bank of England.

1924 Vast platinum reserves are discovered on South Africa's Merensky Reef, inspiring the company to pioneer methods for extracting and processing the metal.

1942 Johnson Matthey's ordinary shares are listed on the London Stock Exchange.

1950s The company embarks on rapid expansion in Europe.

1960s The Apollo space missions use the firm's catalysts in fuel cells supplying electricity and drinking water.

1974 The world's first automotive catalytic converters are produced at Johnson Matthey's plant in Royston, Hertfordshire. By 2007, the company has about 30% of the global market.

1983 Cisplatin, a platinum-based anti-cancer drug developed by Johnson Matthey, goes on sale.

1984 A disastrous foray into money-lending. Its bank crashes, the Bank of England steps in and the company is hit with debt. But it learns its lesson.

1990 Johnson Matthey begins designing and producing diesel filters for trucks and buses.

1992 Catalytic converters become compulsory on new cars in the UK.

2004 Neil Carson is appointed chief executive, 24 years after joining Johnson Matthey as a graduate trainee.

2007 Europe and North America introduce legislation on heavy-duty diesel emissions, creating a huge new market for Johnson Matthey's filters and vindicating its long-term R&D.

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