Investment Column: Fuel cells could power Johnson Matthey's future

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The soaraway oil price and conflicts in the Middle East have concentrated the minds of those - especially in the car industry - who are working on alternative sources of energy.

Fuel cells, which turn hydrogen into power, are the technology of tomorrow, and Johnson Matthey, which makes parts for experimental fuel cells, is enjoying more revenues from its work than ever before. Losses in the division have been reduced by government funding and, in a few years' time, this will be a significant contributor of value to the business.

For now, though, JM is in a period of more pedestrian growth, with a weak dollar weighing further on prospects. Its main business for now is catalysts - chemicals used in things like emissions-reducing catalytic converters for cars - where figures yesterday were disappointing. Its main customers are Ford and Chrysler, who have been losing market share in the US. Global car production is improving, though, and in two years' time there are tougher new rules on emissions from heavy duty diesel vehicles, which should drive demand.

JM is also establishing a strong position as a supplier of ingredients to the pharmaceuticals manufacturers, particularly the growing producers of generic, or off-patent, drugs. A 15 per cent rise in profits at this division to £42.3m was the highlight of yesterday's results, which showed a 3 per cent rise in group pre-tax profits to £178m for the year to 31 March. The sale of its colours and coatings business, for about £150m, is due within the next few months.

The shares fell 19p to 875.5p and are below the level where we tipped them in November. That was a long-term call, though, and they are still worth tucking away.