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Umicore ups profit outlook after strong performance in cathode unit

By Olivier Sorgho and Lina Golovnya

(Reuters) -Belgian chemicals and battery materials company Umicore raised a key earnings forecast on Friday on the back of a strong performance in its EST unit which makes cathodes for electric vehicles, boosting its shares more than 7% to a one-month high.

The group said it now sees full-year adjusted operating profit (EBIT) to be "somewhat above" current consensus, which stands at 827.7 million euros ($845.2 million). A previous guidance from April expected it to be "slightly above" 818 million euros.

Shares in the group had fallen sharply last month after it presented a more expensive than expected 5 billion euro plan to bulk up its battery materials business, raising concerns the plan could lead to higher debt and require significant external funding.

The group is betting on supplying carmakers with battery materials to help make up for an expected decline in its lucrative businesses supplying catalytic converters which help control emissions.

"Despite the current challenging market context, I am very positive about the opportunities ahead," the company's CEO Mathias Miedreich said in a statement.

Energy & Surface Technologies (EST), the division responsible for producing cathodes for electric vehicle batteries, saw revenue grow by 21% in the half-year, Umicore said.

Analyst Sebastian Bray of Berenberg noted that margin improvement in the cathode-making segment was driving the rise in Umicore's shares.

Umicore said the improved outlook assumes precious metal prices remain at current levels until the end of the year and there are no further significant economic and geopolitical disruptions.

Prices for precious metals such as palladium and rhodium, which Umicore extracts from spent electronics and car catalysts, peaked over the last year, increasing the company's earnings, though in its latest results showed a 26% percent drop in adjusted operating profit to 461 million euros in what it said was a "less favorable" precious metal price environment.

Its Catalysis division, which makes chemical catalysts to control exhaust emissions in cars, saw half-year operating profit decline by 17%, while a consensus mentioned by KBC Securities had expected a 29% drop.

"2022 proved to be another challenging time for the automotive industry," Miedreich told analysts, pointing to lower production of ICE-powered cars in China and Europe in particular.

He added however that volumes dropped less than the global car market.

The company also announced the departure of CFO Filip Platteeuw, to be replaced from Oct. 1 by Wannes Peferoen, senior vice president of the group’s ElectroOptic Materials business unit, saying Platteeuw was leaving "to pursue other interests" without giving any further detail.

Its shares were up 5.1% at 35.81 euros by 1129 GMT, having risen as high as 36.84 euros, their highest since before the negatively received June statement.

($1 = 0.9783 euros)

(Reporting by Olivier Sorgho and Lina Golovnya; Editing by Barbara Lewis and David Holmes)