PLATINUM is the priceless thread that links the four divisions of Johnson Matthey, the speciality chemicals company that ascended into the FTSE 100 index only last year. However, there is little evidence of platinum in the company’s rather austere London headquarters, which occupy two floors of a building close to Trafalgar Square.

For decoration, the headquarters boast a series of wooden boards bearing the names of directors past and present — reminiscent of a list of vicars in a parish church. Some of the company’s directors served for several decades, a duration that would test present corporate governance guidelines.

It comes as no surprise that Johnson Matthey is a very old company, whose origins date back to the early 1800s. The company’s boardroom is overlooked by two 19th century portraits, of its founders Percival Norton Johnson and George Matthey (pronounced Matty). The two men started out by assaying the purity of gold for the Bank of England, but the company they created is now much more closely associated with platinum.

Although a conservative company by nature, Johnson Matthey shelters a considerable amount of blue sky in that its involvement with platinum has propelled the company to the forefront of the fuel-cell revolution.

Fuel cells promise to be the non-polluting energy source of the future, offering a viable alternative to fossil fuels. They operate by combining hydrogen and oxygen to produce electricity, heat and water. This process can only happen through the use of platinum as a catalyst.

Chris Clark, Johnson Matthey’s genial chief executive and architect of its rise into the FTSE, plays down the prospects for fuel cells, in keeping with the company’s conservative tradition.

He says: “We’ve hastened to stress to our shareholders that we’re not betting the farm on fuel cells.” Even so, the company has already spent £20 million on the first phase of a fuel-cell manufacturing plant in Swindon in anticipation of considerable demand.

Mr Clark said: “It is being built in readiness for what we expect to be commercial quantities of fuel-cell electrode demand coming in the middle of the decade. We expect this product to bring significant revenues by the middle of the decade and significant profits by the end of the decade.”

Fuel cells are forecast to be the future power supply for homes, cars, buses, mobile phones and almost every other application, although Johnson Matthey believes the first main use will be in medium-sized generators in situations that require an extremely reliable power supply, such as an operating theatre or computer centre.

The widespread use of non-polluting fuel-cell cars would provide both a threat and an opportunity for Johnson Matthey because it is one of the world’s largest suppliers of catalytic converters to the car industry.

“We make something over 30 million car catalyst bricks a year,” Mr Clark says. “A Jaguar has eight bricks whereas a Fiat Uno has just one.”

The auto-catalyst business has been underpinned by ever-tightening environmental legislation, which has turned the car industry into the biggest consumer of platinum group metals, including palladium and rhodium. Even so, analysts are concerned by the potential impact on Johnson Matthey of falling global car sales.

Johnson Matthey’s fuel-cell and catalytic-converter interests are included in its catalysts and chemicals division. The division, which accounted for almost half of the group’s operating profit last year, incorporates the Synetix business that Johnson Matthey bought from ICI for £260 million towards the end of last year.

Mr Clark says: “Synetix is a base-metal catalyst business, which we are putting alongside our precious metals catalyst business, which we think can produce some real synergies.”

Johnson Matthey has three other three divisions: precious metals, colours and coatings, and the recently created pharmaceutical materials division.

The precious metals division, which has an exclusive relationship with Anglo-American to market the platinum from its mines, is also involved in the refining of platinum, gold and silver.

The company’s pharmaceutical interests include producing Cisplatin, the platinum-based cancer drug, for Bristol-Myers Squibb and also include the production of controlled substances for drug companies, including Shire Pharmaceuticals. Mr Clark says: “Our knowledge of catalysis, plus our expertise in control and security — with precious metals you cannot afford to lose any — makes us a natural manufacturer of controlled substances.”

Johnson Matthey bought Meconic, the Edinburgh-based producer of opiates, in 2001. The deal makes Johnson Matthey the world’s biggest purchaser of poppy straw, from which it produces morphine and codeine for supply to the pharmaceutical industry. Analysts have warmed to the pharmaceutical interests as they bring a degree of defensiveness to the company’s spread of businesses.

The colours and coatings business has only a loose connection to platinum, but it does produce the liquid platinum used to decorate the most expensive of tea cups. The division, which makes glazes and pigments, has suffered difficult trading conditions and, even with continued cost-cutting and rationalisation, is unlikely to offer much more than flat prospects this year. Even so, Johnson Matthey has held its position well since joining the FTSE, its traditional qualities such as cash-generation appealing to investors.

Zac Phillips, a chemicals analyst at E-Trade Securities who has raised his share-price target to £10, says: “Recent acquisitions in the relatively less-cyclical pharmaceuticals sector, as well as its exposure to the emissions legislation, make Johnson Matthey’s portfolio relatively defensive.”

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