Business

Few teenagers dream of becoming a chief financial officer (cfo) when they grow up. If things are going well, ceos take the credit (and a fatter slice of the spoils) instead. cfos seldom make the news and, when they do, it is usually preceded by a crisis. Corporate historians and markets alike judge finance chiefs by their ability to juggle the competing demands of capital structure, investor returns and investment. The imperfect scorecard for this game is the balance-sheet, the statement of what a firm owns and owes. Today’s topsy-turvy economic conditions, with soaring inflation and subsiding gdp growth, make managing it far trickier.Since the financial crisis, historically low interest rates have allowed firms to borrow cheaply and plentifully. High profits have been returned to shareholders instead of being used to boost investment. Now the rules are changing. A new economic chapter has begun, marked by squeezed profits and higher borrowing costs. Less than half of big American firms in the s&p 500 index that reported their latest quarterly results last week beat expectations on sales and earnings. On July 19th the share price of Lockheed Martin slid after the aerospace firm announced an earnings miss and a downward revision to its guidance. The same day a similar fate befell Johnson & Johnson, the world’s biggest drugmaker. Wall Street analysts are busily revising down forecasts of future profits. At the same time, new debt issuance has slowed and yields on American corporate bonds rated bbb, the lowest and most frequent investment-grade rating, have risen to 5.1%, up from an average of 2.4% in 2021. All this turns the calculus for what firms should save, spend or return to shareholders on its head.Start with capital structure, a company’s mix of debt and equity. Prudent cfos have at least one eye permanently fixed on this. Firms must constantly weigh the advantages of debt over equity (interest payments are typically tax deductible; dividends owed to the holders of a firm’s equity are not) with the risk of financial distress (it is less advisable to anger creditors than shareholders). A decade of cheap credit has sent firms on a borrowing binge. The size of the market for American investment-grade corporate bonds has tripled, to nearly $5trn. Average indebtedness for members of an index of investment-grade bonds (excluding those issued by financial firms) compiled by Bloomberg, a financial-data firm, has risen to three times earnings before interest, tax, depreciation and amortisation (ebitda), from 1.6 times in 2010. Corporate America is increasingly funded by debt, especially if you exclude cash-rich technology giants (see chart 1). As central banks raise interest rates, the cost of borrowing is rising for the first time in years, and sharply. Even so, big businesses’ cfos remain relaxed about debt, with good reason. Companies had a golden opportunity to fortify their balance-sheets during the covid-19 pandemic, riding a wave of huge issuance at low interest rates. Many grabbed it, locking in low coupons on a record $1trn-plus of investment-grade bonds in 2020. Most firms are still finding it easy to pay interest on those borrowings. At the end of the first quarter of 2022, firms in the Bloomberg bond index had ebitda equal to 15.4 times their interest payments, compared with 11.5 times in 2018. With the maturity of corporate debt pushed into the future thanks to all the pandemic fundraising, and with interest payments still within the bounds of comfort, corporate profits would need to take a huge hammering before cfos begin to lose sleep over debt. According to a survey of American cfos conducted in May and June by Duke University and the Federal Reserve Banks of Richmond and Atlanta, tighter monetary policy ranks eighth on the list of respondents’ worries, behind a litany of operational challenges, from labour shortages to cost pressures. These worries—and levels of corporate sentiment at their lowest levels since the early innings of the pandemic—have not stopped companies from forking money over to shareholders. s&p 500 firms paid out a record $141bn in dividends to investors in the second quarter of 2022, compared with $119bn in the same period in pre-pandemic 2019. That was on top of buying back $281bn-worth of their own shares in the three months before, continuing an explosive growth in share buy-backs (see chart 2). So long as markets remain stormy and investors seek safe harbour in “yield” or “value” stocks with high capital returns, bosses will be reluctant to ditch dividends or buy-backs. All told, big American firms may spend $1trn this year on their own stock. For some companies, this is a no-brainer. The largest technology firms, which executed more than 25% of American buy-backs in the first quarter of 2022, remain flush with cash. Apple alone spent more than $92bn repurchasing shares in the 12 months to March. But less deep-pocketed companies have also been lavishing money on their shareholders. In 2021 more than 80 members of the s&p 500 spent more on dividends and buy-backs than their free cashflow (money left over after operating expenses and capital spending are accounted for). As borrowing gets pricier, growth slows and margins are crimped, their cfos may need to make their capital-returns plans stingier.If the current run of blockbuster shareholder returns is to end, however, the biggest culprit will almost certainly be higher investment. The share of operating cashflows reinvested by American firms in new capital expenditure and research and development has declined during the last decade to 27%, from over 40% in 2009. Firms, investors and governments are all expecting it to rise as businesses meet the demands of the post-pandemic world.In the short term, companies are spending more today to shield themselves from supply-chain chaos tomorrow. The inventories of the largest 3,000 firms globally, excluding real-estate firms, increased from 5.2% to 6.2% of global gdp between 2019 and 2021. This creates additional cash headwinds as working capital (calculated by subtracting what firms owe suppliers from the value of their inventories plus what they are owed by customers) is increased. Companies are also investing for the future. Capital spending for s&p 500 firms rose by 20% in the first quarter of 2022, year on year. Mentions of “reshoring” and “onshoring” have spiked in earnings calls, amid a deepening rift between the West and China, on whose supply chains Western firms have come to depend. Ambitious pledges to cut greenhouse-gas emissions will require energy firms, which are among the most generous with shareholder payouts, to increase their capital spending dramatically. The total bill will be huge: Goldman Sachs, a bank, estimates that $2.8trn of additional “green capex” is needed each year over the next decade.Finance chiefs who dust off their corporate-finance textbooks will be reminded that returning capital to shareholders and investing it are two sides of the same coin: capital which cannot be invested at a rate exceeding the cost of capital should be returned to shareholders, who ought to be able to put it to better use elsewhere. Dividends and share buy-backs are not, on this view, backward-looking celebrations of high profits. They are a forward-looking pursuit of shareholder value. Refocusing from capital returns to investment, while keeping a beady eye on profits and interest rates, will nevertheless require cfos to show off some exquisite juggling skills. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

With increased fears of a possible recession, investors seeking steady income may turn to stocks paying quarterly dividends.
While dividends may be appealing during a flat or down market, it’s important to assess the company before buying.
“People sometimes chase dividends, and they don’t understand the risks,” said Scott Bishop, executive director of wealth solutions at Avidian Wealth Solutions in Houston.

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With increased fears of a possible recession, investors seeking steady income may turn to stocks paying quarterly dividends, which are part of company profits sent back to investors.
Historically, dividends have significantly contributed to an asset’s total return, sometimes providing a boost during economic downturns.

From 1973 to 2021, companies paying dividends earned a 9.6% total annual return, on average, beating 8.2% from the S&P 500 Index, and eclipsing the 4.79% yield from non-dividend payers, according to a 2022 Hartford Funds study.
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Dividends have investors’ attention: Dividend funds have added $43 billion in 2022 as of late June, according to SPDR Americas research.
Still, investors need to scrutinize their picks before adding dividend payers into their portfolios.
“People sometimes chase dividends, and they don’t understand the risks,” said certified financial planner Scott Bishop, executive director of wealth solutions at Avidian Wealth Solutions in Houston.

Here’s what to know.

Why dividends are attractive in tough economic times

“Dividend-paying companies are typically going to have higher levels of free cash flow,” said Dave Sekera, chief U.S. market strategist at Morningstar. And they may be valued more modestly, he said.
“Both of those have definitely been attractive for investors this year as we see the economy softening, interest rates rising and inflation still running hot,” Sekera said.
Dividend payers tend to be large, mature companies, producing products and services still needed during a recession, explained Kashif Ahmed, a CFP and president at American Private Wealth in Bedford, Massachusetts.  

“Nobody needs a Rolex every day, but we all need toilet paper,” he said.
Some companies, known as the “dividend aristocrats,” have a history of increasing dividends annually, even during previous recessions. And many companies are slow to cut dividends, providing some investors with reliable cash flow.

Be critical when chasing high dividend yields

While a higher dividend payout may be appealing during a flat or down market, it’s important to assess what you’re buying before adding new assets to your portfolio. As Bishop pointed out, there can be risks.
There are two parts to a company’s dividend yield: the annual dividend per share and the current share price, Bishop explained. If the dividend yield is far above similar companies, the stock price may have dropped for various reasons.

People sometimes chase dividends, and they don’t understand the risks.

Scott Bishop
Executive director of wealth solutions of Avidian Wealth Solutions

“You shouldn’t just look at dividend yield,” Bishop said, explaining why it’s essential to understand the financials of the company.
And for those unwilling to analyze each company, dividend-paying funds may offer more diversification than individual stocks.

Keep dividend payers in tax-friendly accounts

Whether you receive income from stocks or bonds, you’ll need to be strategic with what kind of account you use to hold those assets, Ahmed explained, especially if you’re an investor in a higher tax bracket.
Generally, it’s better to keep income-producing assets, such as dividend-paying stocks, mutual funds with annual payouts or bond coupons, in tax-friendly accounts, like a 401(k) or individual retirement account, he said. Otherwise, you may owe yearly taxes on capital gains.

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Netflix investors were warned by the streaming giant that subscriber losses could amount to about 2 million during the second quarter.
The question remains how Netflix will guide for the second half of the year.
The company is working on a cheaper, ad-supported plan that could aid in boosting sub numbers alongside a packed slate of content.

In this photo illustration the Netflix logo seen displayed on a smartphone screen, with graphic representation of the stock market in the background.
Sopa Images | Lightrocket | Getty Images

Netflix investors already know to expect bad news when the company reports its second-quarter results Tuesday. Now they’ll be looking for guidance on what to expect for the second half of the year.
The streaming service’s executives warned in April that subscriber losses could amount to about 2 million during the second quarter, after slipping by 200,000 during the first three months of the year. At the time, Netflix blamed factors including intensifying competition, password sharing and inflation for the slip in subscribers.

When Netflix reports after the bell on Tuesday, another forecast of subscriber losses for the third and fourth quarters could send the company’s stock spiraling.
Ahead of earnings, analysts on average are forecasting 1.8 million net new subscriber additions during the third quarter, according to Street Account. The company declined to provide full-year guidance last quarter, but noted that it has a stronger slate of content releases for the back half of 2022. It also said that price increases, which may have led some customers to leave earlier this year, would be less of a churn factor.
The company has around 222 million subscribers globally.

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As for the second quarter, analysts are split on whether subscriber losses will be better or worse than Netflix predicted. Some expect the company to lose as many as 4 million subscribers, while others foresee a loss of 1.5 million.
“I do think the 2 million is conservative,” said Michael Pachter, analyst at Wedbush. “I know they try to be conservative, and generally don’t miss by much, so if it’s worse, I’d be surprised.”
Pachter and other analysts who expect smaller subscriber losses have pointed to the streaming service’s popular series “Stranger Things.” The fourth season of the show was released in two parts, one at the end of the second quarter and one at the beginning of the third. Some analysts expect the split may have limited churn or even driven new subscribers to sign up or to return.
“The sooner Netflix can show Wall Street they are releasing new content across multiple quarters, like they did with ‘Stranger Things’ Season 4, and highlight the efforts they are making to reduce churn, we will see more interest from investors looking at the possibility for net new subscribers,” said Dan Rayburn, a media and streaming analyst.
A cheaper ad-supported subscription plan is also in the works and could lure back lapsed customers or encourage new users. No date has been set for the rollout of the option, but more information about its development Tuesday could boost investor confidence. Netflix’s standard plan in the U.S. costs $15.49 a month, making it pricier than other major streaming services.
Netflix also has plenty of titles arriving before year-end that could attract subscribers. In the third quarter, subscribers will have access to the big budget action movie “The Gray Man,” the first season of “Sandman,” Jamie Foxx’s vampire flick “Day Shift,” as well as a comedy called “Me Time” starring Mark Wahlberg and Kevin Hart.
Also on the way are the fifth season of “Cobra Kai,” several romantic comedies and some children’s titles including “My Little Pony: Make Your Mark” and Roald Dahl’s “Matilda: The Musical.”
“I expect they will guide to a gain in Q3,” Pachter said. “The consensus is 1.81 million new subscribers for Q3, notwithstanding the fact that half of the analysts covering downgraded the stock. Most are hedging their bets, and I think a guide to a return to subscriber growth will be positively received.

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Spirit Airlines plans to open a crew base at George Bush Intercontinental Airport in Houston.
The carrier will have 150 pilots and 300 flight attendants based in Houston.
In March Spirit announced crew bases in American Airlines hub Miami and at Delta Air Lines-dominated Atlanta.

A Spirit Airlines aircraft takes off at La Guardia Airport.
John Nacion | LightRocket | Getty Images

Spirit Airlines said Tuesday it plans to open a crew base at George Bush Intercontinental Airport in Houston, a United Airlines hub, the latest expansion as the discounter plots growth at large airports.
Miramar, Florida-based Spirit in March announced crew bases at Delta Air Lines-dominated Hartsfield-Jackson Atlanta Airport and American Airlines hub Miami International Airport.

Spirit says it plans to have 150 pilots and 300 flight attendants based in Houston, starting this fall. The carrier and its rivals have been scrambling to staff up to meet strong travel demand and improve reliability. Last summer, Spirit said thousands of flight cancellations over a 10-day stretch cost it about $50 million.
Establishing a crew base in Houston, where it currently averages 22 departures a day, would mean staff who live in the area wouldn’t have to commute from another city, a common practice in aviation.
Spirit said it would open a maintenance facility in Houston. It already has a maintenance facility in Detroit. The carrier is scheduled to end 2022 with a fleet of 197 Airbus narrow-body jets, after getting 24 new planes this year.
The new base comes amid a bidding war for Spirit. Fellow budget carrier Frontier Airlines and Spirit announced plans to merge in February, but JetBlue Airways swooped in with a rival all-cash takeover bid in April.
While Spirit repeatedly rebuffed JetBlue, the airline has struggled to gain shareholder support for the Frontier combination, according to Frontier, and has postponed an investor vote on that deal four times to continue talks with both carriers, a sign that the Spirit-Frontier deal is under threat. It most recently scheduled a vote for July 27.

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Britain recorded its hottest-ever day Tuesday, with temperatures hitting a high of 40.2 degrees Celsius (104.4 degrees Fahrenheit) in south England, according to provisional data from the Met Office.
Temperatures are forecast to surpass 42 degrees Celsius (107.6 degrees Fahrenheit) in parts of England by the afternoon.
Millions of Brits endured the country’s hottest-ever night Monday, with temperatures remaining above 25C in places.

People turn out to watch the sunrise at Cullercoats Bay, North Tyneside. Britons are set to melt on the hottest UK day on record as temperatures are predicted to hit 40C. Picture date: Tuesday July 19, 2022.
Owen Humphreys | Pa Images | Getty Images

LONDON — Britain recorded its hottest-ever day Tuesday, with temperatures hitting a high of 40.2 degrees Celsius (104.4 degrees Fahrenheit) in south England, according to provisional data from the Met Office.
The figures from the U.K.’s weather service showed Heathrow, near London, hit the new high Tuesday, surpassing the record of 39.1C set earlier in the day. A previous high of 38.7C was recorded in 2019.

It comes as Brits face the second day of an extreme heatwave, which is causing widespread disruption and raising the risk of wildfires.
“If confirmed this will be the highest temperature ever recorded in the UK. Temperatures are likely to rise further through today,” the Met Office said on Twitter.
Temperatures are forecast to hit as high as 42C in parts of England by Tuesday afternoon, according to the Met Office, which issued a red extreme heat warning. Health authorities urged people to take precautions, including staying indoors and drinking plenty of water.
The country is also on high alert for wildfires, with the southeast of England at “very extreme danger,” according to the European Forest Fire Information System.
It comes as many parts of Europe and North Africa are also currently experiencing extreme temperatures, with wildfires breaking out in France, Spain, Portugal, Greece and Morocco.

Brits endure hottest-ever night

Millions of Brits endured the country’s hottest-ever night Monday, with temperatures remaining above 25C in places, surpassing the previous nightly record of 23.9C recorded in Brighton in 1990.
It followed a day of extreme heat Monday, during which a high of 38.1C was reached in Suffolk in the east of England — falling just short of the U.K. record.
The high temperatures have been particularly disruptive for a country with little infrastructure or conveniences like air conditioning to cope with hot weather.

The U.K.’s Met Office has said extreme temperatures in the country have been made 10 times more likely by climate change.
Anadolu Agency | Anadolu Agency | Getty Images

Emergency services were on high alert across the country as they faced a surge in weather-related incidents, with several fatalities already reported.
A number of schools closed early Monday, or didn’t open at all, despite government advice to remain open.
Meanwhile, water companies in the south of England reported an “extraordinary” surge in demand due to the weather, which they said could result in low pressure or even interrupted supply.

Infrastructure struggles under the heat

The soaring temperatures also led to travel chaos for commuters and holidaymakers as hundreds of services were halted.
Runways at both London’s Luton Airport and RAF Brize Norton in Oxfordshire were impacted by the heat, causing aircraft to be diverted and flights canceled.
Meanwhile, rail services were heavily affected, with buckled rails reported and overhead wire systems failing. In some areas, cancellations and speed limits of 20 miles per hour were imposed.
Britain’s Transport secretary, Grant Shapps, told the BBC that the country’s rail network could not handle the intense heat, adding that upgrades to help services cope with extreme temperatures would take “many years.”

“Closed 19th Due to the Heatwave” is written on a notice hanging on a closed store. In the London region, the temperature could rise up to 40 degrees.
Sebastian Gollnow | Picture Alliance | Getty Images

“We are building new specifications, creating overhead lines that can withstand higher temperatures. But with the best will in the world, this is infrastructure which has taken decades to build, with some of our railways stretching back 200 years,” he told the BBC on Tuesday.
It comes as heatwaves grow more common and severe because of human-induced climate change. Indeed, the U.K.’s Met Office has said extreme temperatures in the country have been made 10 times more likely by climate change.
Average world temperatures have risen by just over 1C from their pre-industrial levels, and are set to climb by 2.4C to 4C by the end of the century, depending on global efforts to cut CO2 emissions.
Greg Dewerpe, founder and chief investment officer at venture capital firm A/O PropTech, told CNBC on Tuesday that as much as $10 trillion per year needs to be invested in buildings and infrastructure between now and 2050 to help countries deal better with the new climate realities.
“If you look at the built world overall, there is about $10 trillion a year that needs to be invested in retrofitting technologies for housing, for offices, for all sorts of buildings around us, by 2050,” he said.
“Technologies that are going to enable us to transition in terms of decarbonization and resiliency are key,” Dewerpe added.

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Instead of using a cooling tower to regulate temperatures, the Beznau facility uses the river Aare.
A spokesperson for plant operator Axpo says there are “regulations regarding water protection, which restrict the operation of the Beznau nuclear power plant at high water temperatures in the Aare.”
The Beznau plant is made up of two light water reactors that collectively produce roughly 6000 gigawatt hours of electricity annually

Switzerland’s Beznau nuclear power plant photographed in July 2019. The facility uses the river Aare for cooling.
Fabrice Coffrini | AFP | Getty Images

A nuclear power plant in Switzerland is lowering its output in order to prevent the river that cools it from hitting temperature levels dangerous to marine life, in the latest example of how Europe’s current heatwave is having wide-reaching effects.
On Monday, the Swiss Broadcasting Corporation’s international unit, citing the country’s public broadcaster SRF, said the Beznau nuclear power plant had “temporarily scaled back operations” to stop the temperature of the River Aare from rising “to levels that are dangerous for fish.”

The Beznau plant is made up of two light water reactors that collectively produce roughly 6,000 gigawatt hours of electricity annually. This, plant operator Axpo says, “corresponds to around twice the electricity consumption of the city of Zurich.”
Instead of using a cooling tower to regulate temperatures, the Beznau facility uses the River Aare. Through its operations, the plant heats this water, which is eventually funneled back to the river.
According to Axpo, the plant heats the water by 0.7 to 1 degree Celsius when it’s in “full load operation,” adding that this is dependent on water conditions. With Switzerland currently experiencing high temperatures, the decision has been taken to reduce output.

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In a statement sent to CNBC via email, a spokesperson for Axpo said there were “regulations regarding water protection, which restrict the operation of the Beznau nuclear power plant at high water temperatures in the Aare.”
The spokesperson added that Axpo adhered to these requirements. “We are currently monitoring the situation on an ongoing basis and have already taken initial measures,” they said.

The output of the Beznau plant was, the spokesperson said, “regulated during the course of the day depending on the current temperature of the Aare, so that the requirements are met at all times.”
“This is a routine procedure that becomes necessary from time to time during the hot days of summer,” they added. “Due to the heat, we assume that further power reductions will be necessary over the next few days.”
The news out of Switzerland comes as parts of Europe grapple with a significant heatwave that has caused wildfires, delays to travel and death. Last Friday, the U.K. issued a “Red Extreme” heat warning for this week.   More

Dubbed a “heat apocalypse” by one French meteorologist, many nations in Europe are sweltering under record temperatures, causing devastating wildfires in some parts of the continent.
Spain and Portugal have seen over 1,000 deaths in the last week attributed to the weather, according to Reuters. Firefighters in France and Greece have also been out in force to try to combat huge wildfires in rural areas.

Heat records have been broken in many parts of Western Europe, with Britain recording its hottest-ever day Tuesday, with temperatures hitting a high of 39.1 degrees Celsius (102.4 degrees Fahrenheit).
In Germany, fears are growing over falling water levels in the Rhine River, a vital shipping route in Europe’s economic heart.

Firefighters try to extinguish a wildfire next to the village of Tabara, near Zamora in northern Spain

Firefighters try to extinguish a wildfire next to the village of Tabara, near Zamora, northern Spain, on July 18, 2022.
Miguel Riopa | AFP | Getty Images

Paramedics help a patient into an ambulance during a heat wave in Barcelona, Spain

Paramedics help a patient into an ambulance during a heat wave in Barcelona, Spain, on Monday, July 18, 2022.
Angel Garcia | Bloomberg | Getty Images

Firefighters take positions as smoke rises from a forest fire near Louchats, in the Gironde region of southwestern France

Firefighters take positions as smoke rises from a forest fire near Louchats, as wildfires continue to spread in the Gironde region of southwestern France, July 18, 2022. 
Philippe Lopez | Reuters

Firefighters operate at the site of a wildfire in Pumarejo de Tera near Zamora, northern Spain

Firefighters operate at the site of a wildfire in Pumarejo de Tera near Zamora, northern Spain, on June 18, 2022.
Cesar Manso | AFP | Getty Images

Firefighters respond to a wildfire that broke out in woodland at Lickey Hills Country Park on the edge of Birmingham, England

Firefighters respond to a large wildfire that has broken out in woodland at Lickey Hills Country Park on the edge of Birmingham.
Jacob King – Pa Images | Pa Images | Getty Images

A helicopter works during a forest fire in Cebreros in Avila, Spain

A helicopter works during a forest fire in Cebreros on July 18, 2022 in Avila, Spain.
Pablo Blazquez Dominguez | Getty Images News | Getty Images

Firefighters try to control a forest fire near Louchats in Gironde, southwestern France

Firefighters try to control a forest fire near Louchats in Gironde, southwestern France on July 17, 2022.
Thibaud Moritz | AFP | Getty Images

Tourists look at the plume of dark smoke over the Dune of Pilat from Cap Ferret due to a wildfire in a forest near La Teste, southwestern France

Tourists look at the plume of dark smoke over the Dune of Pilat from Cap Ferret due to a wildfire in a forest near La Teste, southwestern France.
Olivier Morin | AFP | Getty Images

A puddle of water amid the nearly dried-up river bed of the Rhine in Cologne, western Germany

A photo taken on July 18, 2022 shows a puddle of water amid the nearly dried-up river bed of the Rhine in Cologne, western Germany, as many parts of Europe experience a heatwave.
Ina Fassbender | AFP | Getty Images

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London-listed Johnson Matthey says the facility will be able to produce 3 gigawatts of proton exchange membrane fuel cell components per year.
According to the U.S. Department of Energy’s Alternative Fuels Data Center, fuel cell vehicles emit “only water vapor and warm air.”
Johnson Matthey is one of several firms working on technology related to hydrogen fuel cell vehicles.

A sign for a hydrogen fuel pump at a train refueling station in Germany. Hydrogen has a diverse range of applications and can be used in a number of industries.
Krisztian Bocsi | Bloomberg | Getty Images

A U.K.-headquartered firm said Monday it was building an £80 million ($95.9 million) “gigafactory” specializing in the manufacture of hydrogen fuel cell components, with operations planned to start in the first half of 2024.
In a statement, London-listed Johnson Matthey said the facility in Royston, England, would be able to produce 3 gigawatts of proton exchange membrane fuel cell components per year. Also known as polymer electrolyte membrane fuel cells, the U.S. government says PEM fuel cells in automobiles “use hydrogen fuel and oxygen from the air to produce electricity.” PEM fuel cells are made from a number of different materials.

The idea is that the components will be used by hydrogen vehicles, with the announcement referencing road freight. Earlier reports about JM’s plans for a hydrogen gigafactory were published by The Sunday Times in Nov. 2021.
Johnson Matthey’s plans have received backing from the U.K. government via the Advanced Propulsion Centre’s Automotive Transformation Fund, a funding program focused on large-scale industrialization.

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The idea behind fuel cell vehicles is that hydrogen from a tank mixes with oxygen, producing electricity. According to the U.S. Department of Energy’s Alternative Fuels Data Center, fuel cell vehicles emit “only water vapor and warm air.”
In its own announcement on Monday, the Advanced Propulsion Centre said it was forecasting that U.K. demand for fuel cells would be roughly 10 GW by 2030, rising to 14 GW by the year 2035. This, it added, would be “equivalent to 140,000 vehicles.”
The APC said fuel cell vehicles were “as quick to refuel as a standard combustion engine and have a range and power density to rival diesel engines.” This made them “perfect for heavy duty applications” such as heavy goods vehicles, or HGVs.

“Decarbonising freight transportation is critical to help societies and industries meet their ambitious net zero emission targets – fuel cells will be a crucial part of the energy transition,” Liam Condon, chief executive of Johnson Matthey, said.

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JM is one of several firms working on technology related to hydrogen fuel cell vehicles. At the end of June, Tevva, another company based in the U.K., launched a hydrogen-electric heavy goods vehicle.
The same month saw Volvo Trucks announce it had begun to test vehicles that use “fuel cells powered by hydrogen,” with the Swedish firm saying their range could extend to as much as 1,000 kilometers, or a little over 621 miles.
While some are excited about the potential of fuel cell vehicles in the years ahead, their current market share remains small compared to battery electric vehicles.
According to the International Energy Agency’s Global Electric Vehicle Outlook 2022 report, the world’s fuel cell electric vehicle stock stood at around 51,600 in 2021.
The IEA says electric vehicle sales — that is, sales of battery electric and plug-in hybrid vehicles — hit 6.6 million in 2021. In the first quarter of 2022, EV sales came to 2 million, a 75% increase compared to the first three months of 2021. More