A Look Back at the 2003 Fuel Cell Industry

Public companies in the fuel cell sector enjoyed a 20 percent increase in revenues in 2003, up to US$243 million from US$203 million in 2002. For the first time in more than three years, revenues exceeded research and development (R&D) spending, which dropped 11 percent to US$204 million. But, according to PricewaterhouseCoopers’ (PwC) 2004 Fuel Cell Industry Survey, the sector continued to experience operating losses, R&D spending, and technical, marketing and financing challenges.

The PwC 2004 Fuel Cell Industry Survey focused on the 2003 year-over-year financial results of the world’s 18 publicly traded companies whose primary business is in the areas of fuel cell production, system integration and related fueling infrastructure. Key findings are summarized as follows: – The top two revenue earners in 2003 were Ballard Power Systems (US$120 million) and FuelCell Energy (US$34 million), accounting for 63 percent of the total revenues of companies in the survey. – Market capitalization (The total dollar value of all outstanding shares) for the companies surveyed increased by 50 percent to US$3.6 billion in 2003 from US$2.4 billion in 2002 — outperforming the Dow Jones Industrial Average growth of 25 percent during the same period. – Cash flow from operations was negative during 2003 at minus US$222 million, an improvement over minus US$311 million in 2002. – None of the companies surveyed were profitable. Net losses decreased slightly to US$367 million from US$384 million in 2002. “While the financial results for the fuel cell sector were mixed for 2003, there are encouraging signs that the industry may soon find its feet,” says John Webster, leader of PwC Canada’s fuel cell practice. “The next two or three years are critical for the sector to launch successful products as micro fuel cells begin to trickle into the marketplace to meet the increasing power demands of portable and hand-held electronic devices, largely driven by consumer demand for greater functionality. This includes cell phones, lap tops, PDAs and cameras.” The majority of the companies surveyed by PwC were focused on developing proton exchange membrane (PEM) fuel cell technology and related fueling infrastructure. Primarily designed for use in the transportation market, PEM-powered products are expected to reach large-scale commercial production after portable and stationary applications. “The PwC survey revealed a continued trend towards consolidation and strategic alliances within the fuel cell sector,” said Alastair Nimmons, PwC’s 2004 Fuel Cell Industry Survey co-author. “Deals remained within the same technology field as fuel cell companies strive to rationalize R&D and administrative costs and consolidate financial, technological and intellectual property. We also saw most fuel cell companies expand their customer base and develop new supply chain relationships.” Environmental and economic factors continue to drive the need to develop fuel cells, including the price of oil, energy security, climate change and air quality. The growing energy demands of developing nations such as China and India, conflicts in oil-producing regions, and governments’ desire to protect their citizens from the polluting effects of industrial development all play a role in the fuel cell sector’s evolution. “We are seeing investment in fuel cells by large, well-funded multi-nationals on all continents, with strong government support in Canada, the United States, Japan, and a number of European Union countries,” Webster said. “With this public and private support, progress toward commercially viable technical solutions will continue and fuel cells should become more competitive with incumbent technologies.” Copies of the full survey are available on-line at the following link.
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