Market minnows: Zotefoams

With a stock market valuation of £155 million, Zotefoams is arguably more of a turbot than a minnow.

But it’s still small enough to qualify for this column, particularly as it hasn’t yet been netted by many retail punters.

It should be better followed than it is. For, if you’re wearing trainers as you read this, the soles could well be Zotefoams’.

Sitting in a plane? The padding in your seat could be, too.

On a bus? It may make the insulation in the dashboard. Zotefoams’ products can be used in practically every object needing to be light, insulated, padded or watertight.

It traces its roots back to Charles Marshall, a protégé of Thomas Edison, who started experimenting with pumping gases into rubber to make a solid, puncture-proof tyre in the 1900s.

These days, the technique is to put a sheet of plastic into a steel chamber and pump in nitrogen at super-high pressure. The gas enters the plastic between the molecules, creating a highly uniform honeycomb effect. The uniformity makes it durable and predictable, but also light. Sales of its standard foam blocks have been growing at a steady pace for years.

But its more advanced products are accelerating rapidly, and commanding high profit margins. These are its “high-performance polymers”, which have attributes such as flame retardance or super-strength, and MuCell, a high-tech foam that behaves like solid plastic.

MuCell’s revenue grew at 77% year-on-year over the first six months of the year. Environmentally friendly Unilever is using it for its Dove body wash bottles.

Why? Because MuCell bottles use 15% less plastic than conventional ones.

MuCell’s technology is sold under licence to manufacturers, in the same way that ARM licences its microchip designs to Apple, rather than making them itself. The rest of Zotefoams’ products are made in-house.

A new $30 million (£23 million) facility in Kentucky will broaden its global supply base and should reassure global customers like Boeing that, should an earthquake hit its hometown of Croydon (or another riot), Zotefoams will still be in business. Boss David Stirling looks pretty dependable, too. The Scotsman has been in post for 17 years.

As ever, there are risks. Brexit is a potential problem for its UK clients, although only 19% of its customers are here.

That will fall further with the Kentucky plant.

The most offputting factor is the strong run the share price has had already this year.

In the medium-term, though, green concerns are only going to rise. Zotefoams’ relatively clean technology has a good chance of being a huge winner.

How long before a goliath such as Dow Chemicals comes in with a bid?