Regulatory News:
Air Liquide (Paris:AI):
2020/2019 2020/2019
Key Figures (in millions of euros) Q1 2020 as published comparable (a)
Group Revenue 5,370 -1.3% +0.6%
of which Gas & Services 5,191 -0.9% +1.1%
of which Engineering & Construction 52 -43.2% -44.0%
of which Global Markets &
Technologies 127 +14.4% +13.6%
(a) Change excluding the currency, energy (natural gas and
electricity) and significant scope impacts, see reconciliation in
appendix.
Commenting on 1(st) quarter sales, Benoît Potier, Chairman and
CEO of Air Liquide, stated:
<< The first quarter of 2020 showed modest growth despite
the gradual spread of Covid-19 around the world beginning in
January and the implementation of business continuity plans by
nearly all Group entities.
Sales reached 5.4 billion euros, of which 5.2 for Gas &
Services, an increase of +1.1% on a comparable basis. The
resilience of sales reflects the solid business model of the Group,
characterized by the diversity of its markets and its geographies,
as well as by the significant proportion of long-term contracts in
its business portfolio. Gas & Services and Global Markets &
Technologies progressed, while Engineering & Construction sales
fell sharply, mainly reflecting the postponement of construction
projects for third party clients to a later date.
In Gas & Services, which accounts for 96% of Group sales,
growth was particularly strong in Healthcare (+10%) and
Electronics. From a geographic perspective, Europe and the Americas
continued to post sales growth, while the Asia-Pacific region was
more penalized by the public health situation, particularly in
China.
In the context of a global health emergency, the Group is
mobilized. It is taking an active part in the international support
effort, whether this entails supplying healthcare facilities with
medical oxygen or ventilators, having committed to producing 10,000
ventilators in 50 days in France. In addition, a stepped-up cost
containment program has been initiated to surpass the annual target
of 400 million euros of efficiencies. In the 1(st) quarter of 2020,
91 million euros of efficiencies were generated.
The cash flow is high, at more than 22% of sales. The Group has
also strengthened its position in terms of liquidities with a 1
billion euro bond issue in March that was widely
oversubscribed.
The quarter's investment decisions remain high at more than 700
million euros. The total amount forecast for the year is
maintained, as part of a highly targeted approach. These
investments will contribute to future growth and to reinforcing the
Group's efficiency.
In terms of the health and economic environment, the most widely
held hypothesis today is that the second quarter will be highly
impacted by the crisis, followed by gradual relaxation of lockdown
measures between the end of the second quarter and the beginning of
the third quarter, depending on the continent. Assuming this
hypothesis, and given our solid business model and the additional
measures rolled out in 2020, Air Liquide is nonetheless confident
in its ability to further increase its operating margin and to
deliver net profit close to the 2019 level, at constant exchange
rates. >>
Highlights of the 1(st) quarter Healthcare: Mobilization of Air Liquide
Healthcare teams around the world against Covid-19, notably to supply medical
oxygen. The production of ventilators in France has tripled. Creation of an
alliance spearheaded by Air Liquide with Peugeot SA, Valeo and Schneider
Electric to produce 10,000 ventilators by Air Liquide Medical Systems in 50
days, as part of the fight against the Covid-19 pandemic. In Home Healthcare,
launch of support for diabetic patients in Germany and in Benelux. Large
Industries: Reinforcement of the partnership with BASF in Antwerp with three
new long-term contracts. These new contracts are part of a broad approach to
lower the carbon footprint, in line with Group's Climate Objectives.
Innovation: New contracts signed for cryogenics solutions that use
Turbo-Brayton technology, with around 50 contracts in two years. This
technology helps reduce methane greenhouse gas emissions. Renewal of the
partnership with Solidia Technologies, which is developing CO(2) -based
solutions that reduce the carbon footprint of prefab cement. Environment: The
CDP, a non-profit, awarded a double "A" rating to Air Liquide for its
reporting on sustainable development and clean water initiatives as well as
for its action on the fight against climate change. Publication of a
comparative survey on the performance of hydrogen solutions by the Hydrogen
Council, which now counts 80 members. Corporate: Successful launch of a double
long-term bond issue for a total of 1 billion euros. Exclusive negotiations
began with Hivest Capital Partners focused on the sale of CRYOPDP. Exclusive
negotiations started with Messer for the disposal of Air Liquide entities in
Czech Republic and Slovakia. In April, Air Liquide announced that it was
beginning exclusive negotiations with EQT on the sale of schülke.
Group revenue for the 1(st) quarter of 2020 totaled 5,370
million euros. Despite the public health crisis which considerably
affected China, then Europe in mid-March, followed by the Americas
and Middle East and Africa at the end of March, comparable sales
were up +0.6% thanks to a strong business model. Gas & Services
thus posted robust growth of +1.1%. Engineering & Construction
(-44.0%) was impacted by the COVID-19 pandemic which notably led to
the closure of the Chinese engineering and fabrication center and
the postponement by a few months of several projects. Global
Markets & Technologies maintained its excellent momentum and
enjoyed dynamic growth of +13.6%. As the positive currency impact
of +0.8% did not offset the major negative energy impact of -2.5%
and the significant scope impact of -0.2%, Group revenue as
published was down -1.3%.
Gas & Services revenue for the 1(st) quarter of 2020 reached
5,191 million euros, representing comparable growth of +1.1%. Sales
as published were down slightly by -0.9%, with the positive
currency impact (+0.8%) failing to offset the negative energy and
significant scope impacts, of -2.6% and -0.2% respectively.
-- Gas & Services revenue in the Americas stood at 2,122 million euros and
was up +1.3%, driven notably by Healthcare (+10.0%) and Large Industries
(+2.7%), in particular hydrogen sales and cogeneration. Despite the
public health crisis which impacted the region as of the end of March,
Electronics sales were up +0.6% and Industrial Merchant sales were stable
at -0.2%, with price impacts that remained high.
-- Revenue in Europe totaled 1,791 million euros over the quarter, up +2.7%.
Large Industries sales were down slightly by -0.6%. Industrial Merchant,
which was down -2.7%, was the most affected by the public health crisis
that hit the region in mid-March. Healthcare, which represented 39% of
Gas & Services sales in Europe, has been playing a major role in the
fight against COVID-19. Revenue for this business line increased by
+10.8%, driven by strong sales of medical gases in March as well as
medical hydroalcoholic gel produced by its subsidiary Schülke in
Germany.
-- Revenue in Asia Pacific reached 1,139 million euros, down -0.9%. This
region suffered the greatest impact of the COVID-19 pandemic during the
1st quarter, in particular in China where sales were down -2.5%. Large
Industries (-2.1%) benefited from the resilience of its business model,
whereas Industrial Merchant (-5.3%) was hit the hardest. Electronics
momentum remained strong (+4.9%), with several unit start-ups and
ramp-ups and despite an unfavorable comparison effect compared with high
Equipment & Installation sales in 2019.
-- Revenue in Middle East and Africa stood at 139 million euros, a decrease
of -5.8%, particularly marked by a customer maintenance turnaround at a
large hydrogen production unit in Saudi Arabia. To a lesser extent,
Industrial Merchant also slowed due to lockdown measures taken in Persian
Gulf countries and in South Africa, even though sales remained stable
overall in Africa and strong in Egypt and India. The Healthcare activity
continued to grow markedly, in particular in Saudi Arabia.
Healthcare, which has played a major role in the fight against
COVID-19, posted the strongest growth for the Group in the quarter
(+9.9%). Electronics also enjoyed very solid growth of +3.6% (+9.8%
excluding Equipment & Installations), driven by very dynamic
sales in Carrier Gases and Advanced Materials. Industrial Merchant
(-1.5%) was the most impacted by the public health crisis, in
particular cylinder gas volumes, but price impacts (+3.0%) were
supportive. Large Industries (-0.8%) saw increased hydrogen volumes
for Refining but air gases volumes were down, with lower demand in
the Steel sector and, to a lesser extent, in the Chemicals
sector.
Engineering & Construction consolidated revenue stood at 52
million euros, impacted by the COVID-19 pandemic that led in
particular to the one-month closure of the Chinese engineering
center and the postponement by a few months of several
projects.
Global Markets & Technologies revenue reached 127 million
euros, marking a strong increase of +13.6%, even though several
manufacturing sites are provisionally operating with reduced
manpower. Momentum in Biogas remained strong, in particular with
the start-up of biomethane production units in the United States
and the United Kingdom. Order intake for Group projects and
third-party customers totaled 209 million euros, up an impressive
+64.2%, driven by major contracts for helium cryogenic
refrigerators, and Turbo-Brayton LNG reliquefaction units.
The Group's efficiency gains reached 91 million euros and
represented an +18% increase compared with the 1(st) quarter of
2019. This was mainly driven by the increased contribution from the
Americas region. The annual objective which is now fixed at more
than 400 million euros has been maintained for 2020. In response to
the public health crisis, an additional program aiming at
readjusting fixed costs has been set up within the geographies,
with a specific attention given to receivables collection.
Cash flow from operating activities before changes in working
capital requirements reached 1,196 million euros in the 1(st)
quarter, i.e. 22.3% of revenue. It allowed, in particular, the
financing of net industrial capital expenditure, which totaled 714
million euros, in line with the mid-term strategic plan.
Industrial investment decisions reached 673 million euros,
representing a significant increase of more than +40% compared with
the 1(st) quarter of 2019. Electronics reached a record level of
investment and represented more than one third of decisions thanks
to the signing of major projects in Asia. The 12-month portfolio of
investment opportunities stood at 2.7 billion euros.
Due to the spread of COVID-19 and based on information available
at the end of the 1(st) quarter, around 25% of start-ups initially
scheduled for 2020 are very likely to be delayed by two to six
months. As a result, the additional contribution to sales expected
for 2020 should range between 150 and 180 million euros, an amount
which is lower than the 230 million euros contribution initially
forecast.
At the end of the 1(st) quarter 2020, the activity is recovering
in China whereas Europe, Americas and Africa & Middle East are
going through the critical phase of the public health crisis, for
which the impact is expected to peak in the 2(nd) quarter.
Indeed, for the 2(nd) quarter, demand for air gases in Large
Industries should weaken in the Steel sector, and to a lesser
extent, in the Chemicals sector. Industrial Merchant should be the
most impacted, in particular cylinder gas volumes, whereas
Electronics should keep a steady pace. Healthcare teams will remain
highly mobilized, notably to ensure supply of medical gases,
ventilators, and hydroalcoholic gel to hospitals and patients. Once
the containment period is over, a progressive recovery is expected,
particularly driven by consumption markets, Electronics and
Healthcare.
In terms of the health and economic environment, the most widely
held hypothesis today is that the second quarter will be highly
impacted by the crisis, followed by gradual relaxation of lockdown
measures between the end of the second quarter and the beginning of
the third quarter, depending on the continent. Assuming this
hypothesis, and given our solid business model and the additional
measures rolled out in 2020, Air Liquide is nonetheless confident
in its ability to further increase its operating margin and to
deliver net profit close to the 2019 level, at constant exchange
rates.
To be noted, 2020 net profit as published should increase
provided that the Schülke divestiture project is completed within
the year. 2020 recurring net profit, meaning excluding the gain
from Schülke divestiture and exceptional and significant items,
should be close to 2019 recurring net profit at constant exchange
rates.
Analysis of 1(st) quarter 2020 revenue
Unless otherwise stated, all variations in revenue outlined
below are on a comparable basis, excluding currency, energy
(natural gas and electricity) and significant scope impacts.
REVENUE
2020/2019 2020/2019
Revenue published comparable
(in millions of euros) Q1 2019 Q1 2020 change change
Gas & Services 5,237 5,191 -0.9% +1.1%
Engineering & Construction 93 52 -43.2% -44.0%
Global Markets & Technologies 111 127 +14.4% +13.6%
TOTAL REVENUE 5,441 5,370 -1.3% +0.6%
Group
Group revenue for the 1(st) quarter of 2020 totaled 5,370
million euros. Despite the public health crisis which considerably
affected China, then Europe in mid-March, followed by the Americas
and Middle East and Africa at the end of March, sales were up +0.6%
thanks to a strong business model. Gas & Services thus posted
robust growth of +1.1%. Engineering & Construction (-44.0%) was
impacted by the COVID-19 pandemic which notably led to the closure
of the Chinese engineering and fabrication center and the
postponement by a few months of several projects. Global Markets
& Technologies maintained its excellent momentum and enjoyed
dynamic growth of +13.6%. As the positive currency impact of +0.8%
did not offset the major negative energy impact of -2.5% and the
significant scope impact of -0.2%, Group revenue as published was
down -1.3%.
Gas & Services
Gas & Services revenue for the 1(st) quarter of 2020 reached
5,191 million euros, representing comparable growth of +1.1%.
Healthcare, which has played a major role in the fight against
COVID-19, posted the strongest growth for the Group in the quarter
(+9.9%). Electronics also enjoyed very solid growth of +3.6% (+9.8%
excluding Equipment & Installations), driven by very dynamic
sales in Carrier Gases and Advanced Materials. Industrial Merchant
(-1.5%) was the most impacted by the public health crisis, in
particular cylinder gas volumes, but price impacts (+3.0%) were
supportive. Large Industries (-0.8%) saw increased hydrogen volumes
for Refining but air gases volumes were down, with lower demand in
the Steel sector and, to a lesser extent, in the Chemicals sector.
Sales as published were down slightly by -0.9%, with the positive
currency impact (+0.8%) failing to offset the negative energy and
significant scope impacts, of -2.6% and -0.2% respectively.
Revenue by geography and 2020/2019
business line (in millions 2020/2019 comparable
of euros) Q1 2019 Q1 2020 published change change
Americas 2,069 2,122 +2.5% +1.3%
Europe 1,829 1,791 -2.1% +2.7%
Asia-Pacific 1,194 1,139 -4.5% -0.9%
Middle East & Africa 145 139 -4.5% -5.8%
GAS & SERVICES REVENUE 5,237 5,191 -0.9% +1.1%
Large Industries 1,490 1,294 -13.1% -0.8%
Industrial Merchant 2,365 2,402 +1.5% -1.5%
Healthcare 897 982 +9.5% +9.9%
Electronics 485 513 +5.7% +3.6%
Americas
Gas & Services revenue in the Americas stood at 2,122
million euros and was up +1.3%, driven notably by Healthcare
(+10.0%) and Large Industries (+2.7%), in particular hydrogen sales
and cogeneration. Despite the public health crisis which impacted
the region as of the end of March, Electronics sales were up +0.6%
and Industrial Merchant sales were stable at -0.2%, with price
impacts that remained high.
Americas Gas & Services Q1 2020 Revenue
-- Large Industries revenue was up +2.7%. In North America, demand for
hydrogen for Refining was high and cogeneration increased markedly.
Momentum remained good in Latin America, driven by strong demand and
contribution from new contracts.
-- Industrial Merchant sales were stable (-0.2%). In the United States,
momentum was driven by gas sales growth that offset the decline in
hardgoods, which were hit harder by the slowdown in industrial sectors
such as Construction and Metal Fabrication. Consumption-related markets
such as Food and Pharmaceuticals and the Research sector continued to
improve. In Canada, liquid nitrogen volumes were affected by the slowdown
in oil exploration activities due to the plunging oil price. South
America maintained strong double-digit growth, driven in particular by a
significant increase in liquid gas sales. Price impacts remained high
(+3.9%). The impact of the public health crisis on business in the region
was modest, with an impact only felt as of the last week of March.
-- Healthcare revenue climbed +10.0%, with the sales of Medical Gases up
markedly across the region and in particular in the United States.
Momentum remained strong in Latin America, with a high increase in
volumes notably in Argentina and Brazil, and Home Healthcare posted
double-digit growth.
-- Electronics revenue increased +0.6%. Carrier Gases and Services sales
growth offset the decline in Equipment & Installation sales which were
very high in the 1st quarter of 2019.
Europe
Revenue in Europe totaled 1,791 million euros over the quarter,
up +2.7%. Large Industries sales were down slightly by -0.6%.
Industrial Merchant, which was down -2.7%, was the most affected by
the public health crisis that hit the region in mid-March.
Healthcare, which represented 39% of Gas & Services sales in
Europe, has been playing a major role in the fight against
COVID-19. Revenue for this business line increased by +10.8%,
driven by strong sales of medical gases in March as well as medical
hydroalcoholic gel produced by its subsidiary Schülke in
Germany.
Europe Gas & Services Q1 2020 Revenue
-- Large Industries revenue declined slightly by -0.6%, mainly impacted by
an incident at a production site in Germany. The hydrogen business
enjoyed strong demand from refiners in the Benelux and partly offset
lower demand for oxygen from the steel sector and, to a lesser extent,
the chemicals sector. Eastern Europe saw an increase in air gases sales,
in particular in Poland and Russia.
-- Industrial Merchant sales were down -2.7%. This business line was hit
hard by the public health crisis, in particular in terms of cylinder gas
and liquid gas sales. Sales declined markedly in France and Italy, and to
a lesser extent in Spain. Growth was robust in Benelux and Scandinavia,
as well as in Eastern Europe which maintained double-digit sales growth.
Price impacts remained strong at +1.8%.
-- Healthcare has played a major role in the fight against COVID-19 and
posted an increase of +10.8%, driven mainly by sales of medical
hydroalcoholic gel produced by its subsidiary Schülke, which were up
more than 30%. Medical oxygen sales were up markedly, in particular since
March. Respirators production by the French subsidiary Air Liquide
Medical Systems has also increased substantially. Home Healthcare
momentum remained very strong with, in particular, a marked increase in
the number of patients with diabetes treated in Scandinavia, France and
the United Kingdom.
Europe Air Liquide and BASF, a world-leading chemical company, have signed in
early February three new long-term contracts in the Antwerp basin (Belgium).
Air Liquide has been supplying BASF with gas for over 50 years in this major
industrial basin, and is currently operating five production plants on site.
These new contracts are coherent with a low carbon footprint approach, in line
with the Group's Climate objectives. Faced with the compelling need for more
respirators on its national territory, the French government has asked, on
March 22, a group of French industrial companies led by Air Liquide to study
the possibility of increasing the production of respirators so as to provide
10,000 respirators in 50 days, between the beginning of April and mid-May. In
response, Air Liquide, Groupe PSA, Schneider Electric and Valeo have set up a
Task Force composed of about 30 purchasing and industrialization experts in
order to define an action plan to increase the production of Air Liquide
Medical Systems respirators, which are already referenced by a great number of
hospitals in France and abroad. To meet this industrial challenge, the
exceptional contribution of 100 partner companies will also be sought so as to
provide the 300 essential components that are necessary for the fabrication of
these medical systems.
Asia-Pacific
Revenue in Asia Pacific reached 1,139 million euros, down -0.9%.
This region suffered the greatest impact of the COVID-19 pandemic
during the 1(st) quarter, in particular in China where sales were
down -2.5%. Large Industries (-2.1%) benefited from the resilience
of its business model, whereas Industrial Merchant (-5.3%) was hit
the hardest. Electronics momentum remained strong (+4.9%), with
several unit start-ups and ramp-ups and despite an unfavorable
comparison effect compared with high Equipment & Installation
sales in 2019.
Asia-Pacific Gas & Services Q1 2020 Revenue
-- Large Industries sales were down -2.1% in the region and down -0.9% in
China. The lockdown related to the public health crisis triggered a
slowdown in business, which notably impacted air gases sales in China and
hydrogen sales in South Korea. Sales to Steel customers remained weak in
Japan.
-- Industrial Merchant revenue was down -5.3% and was the most impacted
business line, in particular in China (-11.3%). Cylinder gas and liquid
gas volumes were particularly affected during the peak of the COVID-19
outbreak in China, but business has recovered since the end of March,
returning to 85% of its nominal level. Moreover, momentum was weak in
Japan and helium sales have slowed in the region. Finally, price impacts
remained strong at +1.0%.
-- Against this backdrop, Electronics sales were up a significant +4.9% and
+13.0% excluding Equipment & Installation sales which were exceptionally
high in the 1st half of 2019. Momentum remained strong with a load rate
close to normal levels, even in China (+4.6% and +17.1% excluding E&I) at
the height of the pandemic. The region posted double-digit sales growth
in Carrier Gases and Advanced Materials, driven mainly by the ramp-up of
a major contract in Advanced Materials in South Korea, and Carrier Gases
production plants in China, Japan, Taiwan and Singapore.
Middle East and Africa
Revenue in Middle East and Africa stood at 139 million euros, a
decrease of -5.8%, particularly marked by a customer maintenance
turnaround at a large hydrogen production unit in Saudi Arabia. To
a lesser extent, Industrial Merchant also slowed due to lockdown
measures taken in Persian Gulf countries and in South Africa, even
though sales remained stable overall in Africa and strong in Egypt
and India. The Healthcare activity continued to grow markedly, in
particular in Saudi Arabia.
Engineering & Construction
Engineering & Construction consolidated revenue stood at 52
million euros, impacted by the COVID-19 pandemic that led in
particular to the one-month closure of the Chinese engineering
center and the postponement by a few months of several projects.
This represented a -44% decline of third-party sales compared with
the 1(st) quarter of 2019, but total sales declined by a more
modest -16%, with resources mainly allocated to internal projects
for Large Industries and Electronics.
Order intake reached 83 million euros with almost 60% coming
from Asia. This mainly related to Air Separation Units and
ultra-pure nitrogen production units for the semi-conductor
industry, the Group, or third-party customers.
Global Markets & Technologies
Global Markets & Technologies revenue reached 127 million
euros, marking a strong increase of +13.6%, even though several
manufacturing sites are provisionally operating with reduced
manpower since mid-March due to the public health crisis. Sales of
equipment with high technological added-value enjoyed double-digit
growth, notably those related to the Turbo-Brayton technology,
which reduces greenhouse gas emissions through the reliquefaction
of natural gas when transported by sea in LNG form (Liquefied
Natural Gas). Momentum in Biogas remained strong, in particular
with the start-up of biomethane production units in the United
States and the United Kingdom.
Order intake for Group projects and third-party customers
totaled 209 million euros, up an impressive +64.2%, driven by major
contracts for helium cryogenic refrigerators, and Turbo-Brayton LNG
reliquefaction units.
Global Markets & Technologies Air Liquide is continuing to develop sales of
its Turbo-Brayton cryogenic equipment, with around 50 units sold over the last
two years for a total value of almost 180 million euros. The technology,
developed by Air Liquide and based on the Turbo-Brayton principle, reliquefies
LNG (Liquefied Natural Gas) boil-off on vessels transporting that product,
thereby significantly reducing greenhouse gas emissions during transportation.
This innovative solution is acclaimed by customers and sales are growing
strongly.
Investment cycle
INVESTMENT DECISIONS AND INVESTMENT BACKLOG
Industrial and financial investment decisions totaled 719
million euros in the 1(st) quarter of 2020. This compares with an
exceptionally high 862 million euros in the 1(st) quarter of 2019,
which included the acquisition of Tech Air in the United States for
more than 350 million euros.
Industrial investment decisions reached 673 million euros,
representing a significant increase of more than +40% compared with
the 1(st) quarter of 2019. Electronics reached a record level of
investment and represented more than one third of decisions thanks
to the signing of major projects in Asia. Close to 30% of
industrial decisions contribute to the Climate objectives and 15%
support margin improvement (efficiencies). The Group continued to
invest in digital transformation, in particular in Home Healthcare
and Large Industries. Nevertheless, investment momentum slowed at
the end of the quarter due to the spread of the public health
crisis to Europe and then the Americas.
Financial investment decisions totaled 46 million euros and
mainly included bolt-on acquisitions in Home Healthcare in Europe
and in Industrial Merchant in the United States and China.
The investment backlog was stable at 2.8 billion euros, with new
investment decisions offsetting the start-up of new units. The Oil
& Gas market represented less than 15% of the investment
backlog and the share from the Electronics business was up. These
investments should lead to a future contribution to annual sales of
approximately 0.9 billion euros per year after full ramp-up of the
units, which is stable compared with the 4(th) quarter of 2019.
Partnership renewed After a successful pilot phase, Air Liquide renewed in
late-January its partnership with Solidia Technologies, a developer of
solutions to reduce the environmental footprint of precast concrete
manufacturing. The carbon footprint of Solidia Concrete is up to 70% lower
than traditional concrete.
START-UPS
Eight new units started up during the 1(st) quarter of 2020.
These included a new hydrogen production unit for Large Industries
supplying a pipeline network in a major industrial basin in South
Korea, ultra-pure nitrogen production units in Asia for
Electronics, and biomethane production units in the United States
and the United Kingdom for Global Markets & Technologies.
Moreover, a krypton and xenon production unit was started up in
South Africa to meet the strong demand for rare gases, in
particular in the electronics and aerospace sectors. This unit is
part of the world's largest oxygen production plant, which is
managed and operated by Air Liquide.
The additional contribution to sales of unit start-ups and
ramp-ups totaled 32 million euros over the 1(st) quarter of
2020.
Due to the spread of COVID-19 and based on information available
at the end of the 1(st) quarter, around 25% of start-ups initially
scheduled for 2020 are very likely to be delayed by two to six
months. As a result, the additional contribution to sales expected
for 2020 should range between 150 and 180 million euros, an amount
which is lower than the 230 million euros contribution initially
forecast.
INVESTMENT OPPORTUNITIES
The 12-month portfolio of investment opportunities stood at 2.7
billion euros.
Europe remained the leading region within the portfolio with
around one third of opportunities, closely followed by Asia, then
the Americas and the Middle-East & Africa with similar levels
of opportunities.
Opportunities mainly came from Large Industries, which
represented almost two thirds of the portfolio, and new growth
projects in the cylinder gas business for Industrial Merchant in
Eastern Europe.
The investment was lower than 50 million euros for more than
half the projects and, for five of them, it exceeded 100 million
euros. More than 25% of the portfolio's amount corresponded to
projects supporting the Climate objectives.
The spread of COVID-19 has led to a decrease in the number of
new projects entering the portfolio, as well as to several projects
being delayed beyond the next 12 months, which has resulted in
their removal from the portfolio. The combination of these two
factors explains the decrease of around 200 million euros in the
12-month portfolio of investment opportunities compared with the
end of 2019, from 2.9 billion to 2.7 billion euros.
Operating Performance
The Group's efficiency gains reached 91 million euros and
represented an +18% increase compared with the 1(st) quarter of
2019. This was mainly driven by the increased contribution from the
Americas region. The annual objective which is now fixed at more
than 400 million euros has been maintained for 2020 despite the
public health crisis.
Around 50% of these efficiencies related to industrial projects
that aim to reduce logistics costs, in particular in the United
States and Japan, and to optimize the operation of production
units, notably their maintenance. The contribution of all
initiatives relating to the roll-out of digital tools continued to
increase with, in particular, the start-up in Brazil of a new
remote operation center (Smart Innovative Operations, SIO) for
Large Industries production units in Latin America. More than 25%
of efficiencies related to purchasing gains, principally of
transportation in Industrial Merchant in the United States, of
equipment for Healthcare in Europe, and of molecules in
Electronics. The remaining efficiencies mainly related to
administrative efficiencies and restructuring, in particular the
roll-out of shared service centers.
In response to the public health crisis, an additional program
aiming at readjusting fixed costs has been set up within the
geographies, with a specific attention given to receivables
collection.
Cash flow from operating activities before changes in working
capital requirements reached 1,196 million euros in the 1(st)
quarter, i.e. 22.3% of revenue. It allowed, in particular, the
financing of net industrial capital expenditure, which totaled 714
million euros, in line with the mid-term strategic plan.
Operating Performance Air Liquide announced at the end of January it has
entered into exclusive negotiations with Messer regarding the divestment of
its entities in Czech Republic and Slovakia that total 53 employees. This
decision illustrates Air Liquide's strategy to review its asset portfolio
regularly and focus its geographic expansion on key regions in order to
increase density and therefore enhance performance. Air Liquide announced in
early March it has entered into exclusive negotiations with French private
equity firm Hivest Capital Partners for the divestment of its subsidiary
CRYOPDP that has more than 250 employees in 12 countries. CRYOPDP provides
global innovative temperature-controlled logistics solutions to the Clinical
Research and Cell & Gene Therapy Communities. This decision illustrates Air
Liquide's strategy to regularly review its asset portfolio in order to focus
on key businesses and geographies so as to maximize its performances. Air
Liquide announced early April that it has entered into exclusive negotiations
with EQT, a global investment organization, for the potential sale of its
subsidiary Schülke & Mayr GmbH, a global leader in infection prevention
and hygiene. This potential sale illustrates Air Liquide's strategy to review
its business portfolio regularly and to focus on its core gases and healthcare
businesses, thereby enhancing Air Liquide's performance. Late-March, Air
Liquide successfully launches a EUR1 billion long term bond issuance. Proceeds
from this issuance will allow the Group to refinance its June 2020 bond
maturities in advance and will secure financing to support long term
profitable growth. This issue has been rated << A- >> by Standard & Poor's and
<< A3 >> by Moody's.
Outlook
The first quarter of 2020 showed modest growth despite the
gradual spread of Covid-19 around the world beginning in January
and the implementation of business continuity plans by nearly all
Group entities.
Sales reached 5.4 billion euros, of which 5.2 for Gas &
Services, an increase of +1.1% on a comparable basis. The
resilience of sales reflects the solid business model of the Group,
characterized by the diversity of its markets and its geographies,
as well as by the significant proportion of long-term contracts in
its business portfolio. Gas & Services and Global Markets &
Technologies progressed, while Engineering & Construction sales
fell sharply, mainly reflecting the postponement of construction
projects for third party clients to a later date.
In Gas & Services, which accounts for 96% of Group sales,
growth was particularly strong in Healthcare (+10%) and
Electronics. From a geographic perspective, Europe and the Americas
continued to post sales growth, while the Asia-Pacific region was
more penalized by the public health situation, particularly in
China.
In the context of a global health emergency, the Group is
mobilized. It is taking an active part in the international support
effort, whether this entails supplying healthcare facilities with
medical oxygen or ventilators, having committed to producing 10,000
ventilators in 50 days in France. In addition, a stepped-up cost
containment program has been initiated to surpass the annual target
of 400 million euros of efficiencies. In the 1(st) quarter of 2020,
91 million euros of efficiencies were generated.
The cash flow is high, at more than 22% of sales. The Group has
also strengthened its position in terms of liquidities with a 1
billion euro bond issue in March that was widely
oversubscribed.
The quarter's investment decisions remain high at more than 700
million euros. The total amount forecast for the year is
maintained, as part of a highly targeted approach. These
investments will contribute to future growth and to reinforcing the
Group's efficiency.
At the end of the 1(st) quarter 2020, the activity is recovering
in China whereas Europe, Americas and Africa & Middle East are
going through the critical phase of the public health crisis, for
which the impact is expected to peak in the 2(nd) quarter.
Indeed, for the 2(nd) quarter, demand for air gases in Large
Industries should weaken in the Steel sector, and to a lesser
extent, in the Chemicals sector. Industrial Merchant should be the
most impacted, in particular cylinder gas volumes, whereas
Electronics should keep a steady pace. Healthcare teams will remain
highly mobilized, notably to ensure supply of medical gases,
ventilators, and hydroalcoholic gel to hospitals and patients.
Once the containment period is over, a progressive recovery is
expected, particularly driven by consumption markets, Electronics
and Healthcare.
In terms of the health and economic environment, the most widely
held hypothesis today is that the second quarter will be highly
impacted by the crisis, followed by gradual relaxation of lockdown
measures between the end of the second quarter and the beginning of
the third quarter, depending on the continent. Assuming this
hypothesis, and given our solid business model and the additional
measures rolled out in 2020, Air Liquide is nonetheless confident
in its ability to further increase its operating margin and to
deliver net profit close to the 2019 level, at constant exchange
rates.
To be noted, 2020 net profit as published should increase
provided that the Schülke divestiture project is completed within
the year. 2020 recurring net profit, meaning excluding the gain
from Schülke divestiture and exceptional and significant items,
should be close to 2019 recurring net profit at constant exchange
rates.
Appendices - Performance indicators
Performance indicators used by the Group that are not directly
defined in the financial statements have been prepared in
accordance with the AMF position 2015-12 about alternative
performance measures.
The performance indicators are the following:
-- Currency, energy and significant scope impacts
-- Comparable sales change
Currency, energy and significant scope impacts
Since industrial and medical gases are rarely exported, the
impact of currency fluctuations on activity levels and results is
limited to euro translation impacts with respect to the financial
statements of subsidiaries located outside the euro zone. The
currency effect is calculated based on the aggregates for the
period converted at the exchange rate for the previous period.
In addition, the Group passes on variations in the cost of
energy (electricity and natural gas) to its customers via indexed
invoicing integrated into their medium and long-term contracts.
This indexing can lead to significant variations in sales (mainly
in the Large Industries Business Line) from one period to another
depending on fluctuations in prices on the energy market.
An energy impact is calculated based on the sales of each of the
main subsidiaries in Large Industries. Their consolidation allows
the determination of the energy impact for the Group as a whole.
The foreign exchange rate used is the average annual exchange rate
for the year N-1. Thus, at the subsidiary level, the following
formula provides the energy impact, calculated for natural gas and
electricity respectively:
Energy impact =
Share of sales indexed to energy year (N-1) x (Average energy
price in year (N) - Average energy price in year (N-1))
This indexation effect of electricity and natural gas does not
impact the operating income recurring.
The significant scope effect corresponds to the impact on sales
of all acquisitions or disposals of a significant size for the
Group. These changes in scope of consolidation are determined:
-- for acquisitions during the period, by deducting from the aggregates for
the period the contribution of the acquisition,
-- for acquisitions during the previous period, by deducting from the
aggregates for the period the contribution of the acquisition between
January 1 of the current period and the anniversary date of the
acquisition,
-- for disposals during the period, by deducting from the aggregates for the
previous period the contribution of the disposed entity as of the
anniversary date of the disposal,
-- for disposals during the previous period, by deducting from the
aggregates for the previous period the contribution of the disposed
entity.
Comparable sales change
Comparable changes for sales exclude the currency, energy and
significant scope impacts described above. For the 1(st) quarter
2020, the calculations are the following:
Q1 Q1
2020/2019 Natural Significant 2020/2019
(in millions of Q1 Published Currency gas Electricity scope Comparable
euros) 2020 Growth impact impact impact impact Growth
Revenue
Group 5,370 -1.3% 42 -103 -31 -13 +0.6%
Impacts in % +0.8% -1.9% -0.6% -0.2%
Gas & Services 5,191 -0.9% 40 -103 -31 -13 +1.1%
Impacts in % +0.8% -2.0% -0.6% -0.2%
The slideshow that accompanies this release is available as of
9:00 am (Paris time) at www.airliquide.com.
Throughout the year, follow Air Liquide on Twitter:
@AirLiquideGroup.
UPCOMING EVENTS
Annual General Meeting of Shareholders:
May 5, 2020
Dividend Ex-coupon Date:
May 11, 2020
Dividend Payout Date:
May 13, 2020
2020 First Half Revenue and Results:
July 30, 2020
A world leader in gases, technologies and services for Industry
and Health, Air Liquide is present in 80 countries with
approximately 67,000 employees and serves more than 3.7 million
customers and patients. Oxygen, nitrogen and hydrogen are essential
small molecules for life, matter and energy. They embody Air
Liquide's scientific territory and have been at the core of the
company's activities since its creation in 1902.
Air Liquide's ambition is to be a leader in its industry,
deliver long term performance and contribute to sustainability. The
company's customer-centric transformation strategy aims at
profitable, regular and responsible growth over the long term. It
relies on operational excellence, selective investments, open
innovation and a network organization implemented by the Group
worldwide. Through the commitment and inventiveness of its people,
Air Liquide leverages energy and environment transition, changes in
healthcare and digitization, and delivers greater value to all its
stakeholders.
Air Liquide's revenue amounted to 22 billion euros in 2019 and
its solutions that protect life and the environment represented
more than 40% of sales. Air Liquide is listed on the Euronext Paris
stock exchange (compartment A) and belongs to the CAC 40, EURO
STOXX 50 and FTSE4Good indexes.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20200423005756/en/
CONTACT: Media Relations
media@airliquide.com
Investor Relations
IRTeam@airliquide.com
SOURCE: Air Liquide
Copyright Business Wire 2020
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April 24, 2020 01:35 ET (05:35 GMT)
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