Third quarter 2020:
- Marked recovery in sales across all regions and all business
lines
- 2020 Guidance confirmed
Regulatory News:
Air Liquide (Paris:AI):
Key Figures (in millions of
euros)
Q3 2020
2020/2019 as
published
2020/2019
comparable (a)
Group Revenue
4,980
-8.7
%
-0.9
%
of which Gas & Services
4,777
-8.9
%
-0.9
%
of which Engineering &
Construction
60
-26.3
%
-24.4
%
of which Global Markets &
Technologies
143
+9.6
%
+11.4
%
(a) Change excluding the currency, energy (natural gas and
electricity) and significant scope impacts, see reconciliation in
appendix.
Commenting on the 3rd quarter of 2020, Benoît Potier, Chairman
and CEO of the Air Liquide Group, said:
“This 3rd quarter saw a marked recovery in sales.
Compared with the 2nd quarter of 2020, which was impacted by the
pandemic, all business lines and all regions improved. Group
revenue reached 5 billion euros, -0.9% on a comparable
basis (-8.7% as published, reflecting the negative currency,
energy price and significant scope impacts).
Gas & Services, which represent 96% of Group sales,
were almost flat, with contrasted situations. Momentum in
Healthcare and Electronics remained particularly good;
Large Industries sales recovered, whereas Industrial
Merchant, which showed a marked sequential improvement,
still remained at a level below 2019. By region, sales in Europe
and Asia were stronger than in the 3rd quarter of 2019 on a
comparable basis, and the Americas improved compared with
the 2nd quarter of 2020.
Global Markets & Technologies also saw a return to
growth, whereas Engineering & Construction sales
demonstrated progressive improvement, compared to previous
quarters.
The Group continued its drive to improve its operating
margin, delivering 311 million euros of efficiencies
over the first nine months, in line with its annual target of more
than 400 million euros, and the additional cost containment plan
continued to deliver.
The continued improvement in performance translated into cash
flow from operating activities which reached nearly 24% of
sales. The investment cycle remains well oriented
and the 12-month portfolio of investment opportunities, which is
refocused on growth markets, stands at a high level. Investment
decisions, which ensure future growth, were significant at
2.1 billion euros at the end of September, almost one third
relating to the energy transition.
In a context of limited local lockdowns and progressive
recovery until the end of 2020, Air Liquide is confident in its
ability to further increase its operating margin and to deliver net
profit(1) close to preceding year level, at constant exchange
rates.”
(1) 2020 recurring net profit: excluding exceptional and
significant items that have no impact on the operating income
recurring.
Highlights of the 3rd quarter
2020
- Healthcare:
- Mobilization of Air Liquide Healthcare teams across the world
against Covid-19, in particular to supply medical oxygen.
- Support by the Air Liquide Foundation of 10 scientific projects
and 23 emergency social aid projects as part of its Covid-19
initiative.
- Completion of the disposal of schülke to capital investment
company EQT.
- Industry:
- Finalization of an agreement with Sasol to acquire the world’s
largest oxygen production site, in Secunda, South Africa, for an
amount of around 440 million euros, and to target at least a 30%
reduction in CO2 emissions. This transaction remains subject to
regulatory approvals, notably authorization by the South African
Competition authority, which are expected as of December 2020.
- Long-term contract in the U.S. with Eastman Chemical Company
with an investment of more than 160 million US dollars to modernize
existing assets and build a new air separation unit and a partial
oxidation unit.
- Investment of 125 million euros to build the first world-scale
oxygen production unit adapted to a renewable energy-powered
electric grid in the Port of Moerdijk in the Netherlands.
- Investment of 60 million euros to build an eighth air
separation unit in the Tianjin Port Free Trade Zone, in China.
- Environment: Signature of a long-term renewable
electricity purchase agreement, representing 15% of the current
consumption of the Group’s activities in Spain.
- Portfolio: Completion of the disposal of CRYOPDP to the
French capital investment company Hivest Capital Partners.
Acquisition of 80% of the capital of the French company
Cryoconcept, which specializes in dilution refrigeration.
Group revenue for the 3rd quarter of 2020 totaled 4,980
million euros. The business model has proven its resilience in
recent months in a challenging public health context. Business has
been picking up across all regions with sales at -0.9% on a
comparable basis in the 3rd quarter of 2020, near 2019 levels.
China saw the most dynamic level of recovery, with 3rd quarter 2020
sales up markedly, whereas the situation was more contrasted in the
rest of the Asia-Pacific region. Activity is picking up in Europe,
and posted slight growth compared with 2019. Signs of a more
gradual recovery can be seen in North America and business remains
strong in South America, in particular for Large Industries and
Healthcare. Consolidated Engineering & Construction
sales (-24.4%) reflected the priority allocation of
resources to internal projects. Global Markets &
Technologies returned to double-digit growth, with sales up
markedly by +11.4% during the 3rd quarter. Due to the
materially negative impacts of currency (-3.7%), significant scope
(-2.6%) and energy (-1.5%), Group revenue as published was down
-8.7%.
Gas & Services revenue for the 3rd quarter of 2020
reached 4,777 million euros, slightly down -0.9% on a
comparable basis. The markedly negative impacts of currency
(-3.8%), significant scope (-2.7%) and energy (-1.5%) affected Gas
& Services revenue as published, which was down -8.9%.
Significant scope impact includes the disposal of schülke in
Healthcare and the reduction of the Group’s participation in a
reseller in Japan during the 3rd quarter 2020, and the disposal of
Fujian Shenyuan in September 2019.
- Gas & Services revenue in the Americas totaled
1,916 million euros in the 3rd quarter, marking a decline of
-3.3% on a comparable basis. North America saw a marked
improvement in sales compared with the 2nd quarter, but these
remained down compared with 2019. Latin America posted sales
growth. Large Industries revenue was up over the quarter (+2.1%).
Industrial Merchant saw a strong sequential rebound, but remained
affected by the public health crisis and lockdown measures with
revenue down -6.8%. Electronics posted strong growth of +6.6%.
Healthcare remains fully committed to the fight against the
pandemic and posted sales growth of +8.0%.
- Revenue in Europe totaled 1,615 million
euros over the 3rd quarter, posting a comparable growth of
+0.5%. Industrial activities saw a significant recovery
across the region, although volumes remained below pre-public
health crisis levels. Large Industries sales (-3.4%) grew
sequentially compared with the 2nd quarter of 2020. In Industrial
Merchant (-4.8%, of which -1.9% from minor divestments), cylinder
gas sales returned to a level near that of the 3rd quarter of 2019.
Healthcare revenue was up +9.5% during the 3rd quarter, driven by
sales of ventilators at cost price that remained exceptionally high
due to the pandemic.
- Revenue in Asia-Pacific reached 1,101 million
euros, up +1.6% on a comparable basis. In
China, momentum was strong across all industrial business lines,
growing at +7.6%. The recovery was slower in the rest of the
region, impacted by the public health crisis. Large Industries
(+3.0%) was driven by demand in China and the ramp-up of a unit in
South Korea. Industrial Merchant (-4.0%) was still sluggish, but
recovered compared with the 2nd quarter. Electronics (+6.3%)
remained very strong with growth exceeding +10% excluding Equipment
& Installation sales.
- Middle East and Africa revenue stood at 145 million
euros, stable (+0.0%) on a comparable basis. In
Industrial Merchant, the Middle East and India improved clearly
compared with the 2nd quarter, with the recovery more contrasted in
Africa. Large Industries sales were up slightly compared with the
3rd quarter of 2019, notably in South Africa and Saudi Arabia.
Healthcare, which continues to be committed to the fight against
COVID-19, posted strong growth across the region.
Healthcare remains highly invested in the fight against
Covid-19 and posted a comparable sales growth of +8.4%.
Sales growth in Electronics was also very solid at
+5.9% and +7.3% excluding Equipment &
Installation, with a sharp increase in Advanced Materials and
Carrier Gases sales. Large Industries sales were stable,
+0.2% compared with 3rd quarter 2019, driven notably by
developing economies and in particular, by the recovery in China.
Industrial Merchant posted a decline of -5.8%,
sustained pricing impacts of +2.6%, growth in China, the eastern
part of Europe and South America were unable to offset the slowdown
from the public health crisis which continues to be strongly felt,
notably in the sales of hardgoods in the United States.
Consolidated Engineering & Construction revenue
reached 60 million euros in the 3rd quarter, with sales to
third-party customers remaining sluggish due to the public health
crisis. Resources were mainly allocated to internal projects in
Large Industries and Electronics.
Global Markets & Technologies revenue was 143
million euros and saw a return to very dynamic growth momentum
of +11.4%, as production capacity was no longer constrained
by the public health crisis. Equipment sales were up markedly, in
particular membrane purification systems. The biogas business
remained strong, notably in Europe where biomethane sales for
transport were up, and in the United States.
Efficiencies amounted to 311 million euros over
the first nine months of the year, in line with the annual
objective fixed at more than 400 million euros. Since the start of
the performance improvement program in 2017, 1.4 billion
euros of cumulated efficiencies have been generated. Moreover,
exceptional cost reductions under the public health crisis
response plan continued but are not, due to their nature,
sustainable over the long term.
Cash flow from operating activities amounted to 3,648
million euros at the end of September 2020, which corresponds
to 23.9% of sales, a marked improvement of +240 basis
points compared with the 3rd quarter of 2019(1). The net
debt-to-equity ratio, adjusted for the seasonal effect of the
dividend payment, reached 58,3% representing a significant
decrease compared with December 31, 2019 (64.0%).
Industrial investment decisions reached 685 million
euros during the 3rd quarter and close to 2 billion
euros since the beginning of 2020 despite the public health
crisis. Development was very active in Large Industries,
notably with the signature of a takeover in Kazakhstan and a new
Air Separation Unit in Poland.
The 12-month portfolio of investment opportunities
continued to improve and reached 3.0 billion euros. This
excludes the on-going takeover of the 16 Air Separation Units in
South Africa. The change in the portfolio confirms the Group’s
future growth outlook.
The additional contribution to sales of unit start-ups
and ramp-ups totaled 53 million euros over the 3rd quarter
of 2020, and 133 million euros over the first nine months of the
year. This should reach 180 million euros for 2020 as a
whole, at the high end of the estimate range communicated
previously. For 2021, the estimated additional contribution
to sales is reforecast upwards in the range of 320 to 350
million euros despite the postponement of some start-ups and
after taking into account the sales contribution from the 16 Air
Separation Units that are currently being taken over in South
Africa.
_____________________________ 1 Compared with restated 3rd
quarter 2019 following changes in 2019 annual financial statements:
financial costs before taxes linked to IFRS 16 are reclassified in
other financial expenses whereas they were included in net finance
costs on 30 september 2019. A distinction is now made between other
non-cash items under which the adjustment of this cost is
recognized as well as income and expenses under IAS 19 and IFRS 2
and other cash items
Analysis of 3rd 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
Revenue
(in millions of euros)
Q3 2019
Q3 2020
2020/2019
published
change
2020/2019
comparable
change
Gas & Services
5,242
4,777
-8.9
%
-0.9
%
Engineering & Construction
81
60
-26.3
%
-24.4
%
Global Markets & Technologies
131
143
+9.6
%
+11.4
%
TOTAL REVENUE
5,454
4,980
-8.7
%
-0.9
%
Revenue by Quarter
(in millions of euros)
Q1 2020
Q2 2020
Q3 2020
Gas & Services
5,191
4,729
4,777
Engineering & Construction
52
52
60
Global Markets & Technologies
127
122
143
TOTAL REVENUE
5,370
4,903
4,980
2020/2019 Group published
change
-1.3%
-11.0%
-8.7%
2020/2019 Group comparable
change
+0.6%
-6.9%
-0.9%
2020/2019 Gas & Services comparable
change
+1.1%
-6.5%
-0.9%
Group
Group revenue for the 3rd quarter of 2020 totaled 4,980
million euros. The business model has proven its resilience in
recent months in a challenging public health context. Business has
been picking up across all regions with sales down -0.9%
during the 3rd quarter of 2020, near 2019 levels, for both the
Group and Gas & Services. China saw the most dynamic level of
recovery, with 3rd quarter 2020 sales up markedly, whereas the
situation was more contrasted in the rest of the Asia Pacific
region. Activity is picking up in Europe, and posted slight growth
compared with 2019. Signs of a more gradual recovery can be seen in
North America and business remains strong in South America, in
particular for Large Industries and Healthcare. Consolidated
Engineering & Construction sales (-24.4%) reflected the
priority allocation of resources to internal projects. Global
Markets & Technologies returned to double-digit growth, with
sales up markedly by +11.4% during the 3rd quarter. Due to
the materially negative impacts of currency (-3.7%), significant
scope (-2.6%) and energy (-1.5%), Group revenue as published was
down -8.7%.
Foundation
- In response to the Health crisis, the Air Liquide Foundation
launched as early as March 2020 the Covid-19 Initiative. More
than 2 millions euros have been mobilized over two years,
with a double objective: to support scientific research projects
and to reinforce the help given to associations working with the
most vulnerable people to the Covid-19. The Foundation has
already approved 10 scientific projects and 21 social emergency aid
projects on all continents since March 2020.
Gas & Services
Gas & Services revenue for the 3rd quarter of 2020 reached
4,777 million euros, slightly down -0.9%. Healthcare
remains highly invested in the fight against Covid-19 and posted
sales growth of +8.4%. Sales growth in Electronics was also
very solid at +5.9% and +7.3% excluding Equipment
& Installation, with a sharp increase in Advanced Materials and
Carrier Gases sales. Large Industries sales were stable,
+0.2% compared with 3rd quarter 2019, driven notably
by developing economies and in particular, by the recovery in
China. Industrial Merchant posted a decline of -5.8%,
sustained pricing impacts of +2.6%, growth in China, the eastern
part of Europe and South America were unable to offset the slowdown
from the public health crisis which continues to be strongly felt,
notably in the sales of hardgoods in the United States. The major
negative currency (-3.8%), significant scope (-2.7%) and energy
(-1.5%) impacts affected Gas & Services revenue as published,
which was down -8.9%. Significant scope impact includes the
disposal of schülke in Healthcare and the reduction of the Group’s
participation in a reseller in Japan during the 3rd quarter 2020,
and the disposal of Fujian Shenyuan in September 2019.
Revenue by geography and business
line
(in millions of euros)
Q3 2019
Q3 2020
2020/2019
published
change
2020/2019
comparable
change
Americas
2,137
1,916
-10.3
%
-3.3
%
Europe
1,742
1,615
-7.3
%
+0.5
%
Asia-Pacific
1,207
1,101
-8.7
%
+1.6
%
Middle East & Africa
156
145
-7.2
%
+0.0
%
GAS & SERVICES REVENUE
5,242
4,777
-8.9
%
-0.9
%
Large Industries
1,374
1,212
-11.8
%
+0.2
%
Industrial Merchant
2,471
2,217
-10.3
%
-5.8
%
Healthcare
915
866
-5.3
%
+8.4
%
Electronics
482
482
-0.1
%
+5.9
%
Americas
Gas & Services revenue in the Americas totaled 1,916
million euros in the 3rd quarter, marking a decline of
-3.3%. North America saw a marked improvement in sales
compared with the 2nd quarter, but these remained down compared
with 2019. Latin America posted sales growth. Large Industries
revenue was up over the quarter (+2.1%). Industrial Merchant saw a
strong sequential rebound, but remained affected by the public
health crisis and lockdown measures with revenue down -6.8%.
Electronics posted strong growth of +6.6%. Healthcare remains fully
committed to the fight against the pandemic and posted sales growth
of +8.0%.
- Large Industries revenue saw a return to growth after a
decline during the 2nd quarter, and enjoyed +2.1% growth during the
3rd quarter. Air gases and hydrogen volumes recovered in North
America compared with the 2nd quarter, but remained below 2019
levels. The storms which hit the Gulf Coast at the end of the
summer had a limited impact on business. Sales growth was strong in
Latin America, driven mainly by the ramp-up of new hydrogen
units.
- Industrial Merchant sales during the 3rd quarter
(-6.8%) continued to be affected by the decline in activity
due to the public health crisis, but improved markedly compared
with the 2nd quarter which saw a fall in revenue of -15.9%. In the
United States, the Food, Pharmaceutical, Research, and Retail and
Craftsmen markets enjoyed sales that were close to or higher than
during the 3rd quarter of 2019, whereas sales to industrial sectors
such as Metal Fabrication and Energy continued to decline despite a
marked sequential improvement. Sales in Latin America saw a return
to growth and improvement was felt in the various countries.
Pricing impacts remained high in the region at +3.6%.
- Healthcare revenue was up +8.0% during the 3rd
quarter, marking a strong improvement compared with the 2nd quarter
(+1.0%). The United States saw an increase in demand for medical
liquid oxygen to fight Covid-19 and benefited from a recovery in
proximity care. In Latin America, the Healthcare teams remain
highly committed to the fight against Covid-19 with sales to
hospitals up markedly, in particular in Argentina and Brazil. The
number of patients treated at home was also up.
- Electronics revenue was up +6.6%, with very high
Equipment & Installation sales during the quarter.
Americas
- Air Liquide announced a long-term supply agreement with
Eastman Chemical Company to provide additional gaseous oxygen,
nitrogen and syngas supporting Eastman’s growth in Longview, Texas.
Air Liquide will invest more than 160 million U.S. dollars
to modernise existing assets and build a new Air Separation Unit
(ASU) and Partial Oxidation Unit (POX).
Europe
Revenue in Europe totaled 1,615 million euros over
the 3rd quarter, posting growth of +0.5%. Industrial
activities saw a significant recovery across the region, although
volumes remained below pre-public health crisis levels. Large
Industries sales (-3.4%) grew sequentially compared with the 2nd
quarter of 2020. In Industrial Merchant (-4.8%, of which -1.9% from
minor divestments), cylinder gas sales returned to a level similar
to the 3rd quarter of 2019. Healthcare revenue was up +9.5% during
the 3rd quarter, driven by sales of ventilators at cost price, that
remained exceptionally high due to the pandemic.
- During the 3rd quarter, Large Industries sales were down
-3.4% but grew sequentially compared with the 2nd quarter,
which marked the peak of the public health crisis. Demand for air
gases remained weak in the Steel sector. Volumes improved slightly
quicker for Chemicals customers than for Refineries which have
adjusted their production in response to weaker demand for
transportation fuel. Air gases sales were up over the quarter in
Russia and Turkey.
- Industrial Merchant revenue was down -4.8%, of
which a -1.9% minor scope impact, due to the balance of small
disposals and bolt-on acquisitions carried out as part of the
portfolio management program. Cylinder gas sales improved and
returned to a level similar to the 3rd quarter of 2019 notably
thanks to the restart of construction activities. The recovery was
slower for liquid gas sales, particularly in Germany. Revenue
growth was strong in the eastern part of Europe, in particular in
Turkey, Russia and Poland. Pricing impacts remained solid at
+1.7%, marking an increase compared with the 2nd quarter
(+1.4%).
- Healthcare revenue was up +9.5% during the 3rd
quarter. Ventilators sales, at cost price, were once again
particularly high, due to the pandemic. Medical gases sales
remained high. Home Healthcare saw a return to more dynamic growth
following the slowdown in new homecare installations during the 2nd
quarter, at the peak of the pandemic. This was notably driven by an
increase in the number of patients treated at home for diabetes in
Germany, France, Spain and Portugal, as well as the contribution
from new bolt-on acquisitions.
Europe
- Air Liquide announced an investment of 125 million euros
in July to build the first world-scale Air Separation Unit
(ASU) for oxygen production with an energy storage system that
helps facilitate more renewable energy on the electricity grid due
to its grid stabilizing capability. This highly efficient plant,
with circa 10% less electricity consumption, will have a
production capacity of 2,200 tons of oxygen per day, and
will be built in Port of Moerdijk in the Netherlands.
This project illustrates Air Liquide’s strategy to grow in
strategic industrial basins, and the Group’s ability to design and
implement innovative solutions contributing to the energy
transition, in line with its Climate Objectives.
- Air Liquide and KGHM Polska Miedź, one of the largest producers
of copper and silver in the world, have signed a new long-term
contract for the supply of oxygen and nitrogen at the
Głogów site in Poland. Air Liquide will invest around 40
million euros in the construction of a state-of-the-art Air
Separation Unit (ASU) which offers high levels of energy efficiency
and reliability. In addition, the extended liquid argon
production will support growth of the Industrial Merchant
business in Poland.
Asia-Pacific
Revenue in Asia-Pacific reached 1,101 million
euros, up +1.6%. In China, momentum was strong across
all industrial business lines growing at +7.6%. The recovery was
slower in the rest of the region, impacted by the public health
crisis. Large Industries (+3.0%) was driven by demand in China and
the ramp-up of a unit in South Korea. Industrial Merchant (-4.0%)
was still sluggish, but recovered compared with the 2nd quarter.
Electronics (+6.3%) remained very strong with growth exceeding +10%
excluding Equipment & Installation sales.
- Large Industries sales were up +3.0% over the
quarter. These were driven by the takeover of an Air Separation
Unit and a strong increase in oxygen volumes for Steel and
Chemicals in China, coupled with the ramp-up of a hydrogen unit in
South Korea. The recovery was slower in the rest of the region,
notably in South East Asia and Japan, where volumes remained
weak.
- Industrial Merchant revenue was down -4.0%, but
grew sequentially compared with the 2nd quarter. Activity in China
improved markedly at +8.3%, driven notably by the Manufacturing,
Construction, Glass, Retail and Craftsmen, and Research markets.
Business remained sluggish across the rest of the zone, held back
by the public health crisis, in particular in Japan and Singapore,
but nonetheless improved compared with the 2nd quarter. Pricing
impacts in the region were marginally negative at -0.5%,
with helium prices stabilizing during the 3rd quarter.
- Electronics sales were up markedly (+6.3%) during
the 3rd quarter and improved by +10.3% excluding Equipment &
Installations. This growth was driven by Advanced Materials and
Carrier Gases, notably with the supply ramp-up of Advanced
Materials in South Korea and of Carrier Gases in China, Taiwan and
Japan.
Asia-Pacific
- Air Liquide China will invest around 60 million euros to
build an Air Separation Unit (ASU) in the Lingang Economic
District, Tianjin Port Free Trade Zone. Air Liquide has been
supplying industrial gases to this major Chinese industrial basin
for more than 25 years. The investment is secured by a new long
term supply agreement with a major customer. This facility will
also incorporate a dedicated capacity to supply liquid and packaged
gases to Industrial Merchant’s customers as well as
hospitals requiring high-purity medical gases. It is
planned to be operational in 2022. Air Liquide China operates seven
ASUs in Tianjin, as well as a multi-sourced pipeline network
that delivers oxygen, nitrogen and hydrogen to adjacent
customers.
Middle East and Africa
Middle East and Africa revenue stood at 145 million
euros, stable (+0.0%) compared with the 3rd quarter of
2019. In Industrial Merchant, Middle East and India improved
clearly compared with the 2nd quarter, with the recovery more
contrasted in Africa. Large Industries sales were up slightly
compared with the 3rd quarter of 2019, notably in South Africa and
Saudi Arabia. Healthcare, which continues to be committed to the
fight against COVID-19, posted strong growth across the region.
Engineering & Construction
Consolidated Engineering & Construction revenue reached
60 million euros in the 3rd quarter, with sales to
third-party customers remaining sluggish due to the public health
crisis. These sales were down -24% compared with the 3rd quarter of
2019, with resources mainly allocated to internal Large Industries
and Electronics projects. The decline in total sales was more
modest at -19%.
Order intake has improved since the end of the summer and
reached 428 million euros, of which more than half was in
Asia. This mainly related to Air Separation Units and ultra-pure
nitrogen production units, with orders for the Group slightly
exceeding those for third-party customers.
Global Markets & Technologies
Global Markets & Technologies revenue was 143 million
euros and saw a return to very dynamic growth momentum of
+11.4%, as production capacity was no longer restricted by
the public health crisis. Equipment sales were up markedly, in
particular membrane purification systems. The biogas business
remained strong, in particular in Europe where biomethane sales for
transport were up, and in the United States.
Order intake for Group projects and third-party customers
reached a record level of 485 million euros, a significant
increase of +34% over 2019 following the signature of several major
contracts during the 1st half of the year. These notably included
major contracts for helium cryogenic refrigerators and
Turbo-Brayton LNG reliquefaction units.
Global Markets &
Technologies
- Air Liquide has acquired 80% of the capital of the French
company Cryoconcept, which specialises in dilution
refrigeration ‒ a technology allowing to reach very low
temperatures. This transaction enables Air Liquide to strengthen
its expertise in the field of extreme cryogenics, or close to
absolute zero, to propose a broader offer and accelerate the
development of Cryoconcept’s activities.
INVESTMENT CYCLE
INVESTMENT DECISIONS AND INVESTMENT BACKLOG
Industrial and financial investment decisions totaled
719 million euros in the 3rd quarter of 2020, marking an
increase compared with the 2nd quarter and taking the total since
the beginning of the year to 2.1 billion euros. This does
not include the takeover of 16 Air Separation Units in South
Africa, which is currently being finalized, and compares with 2.7
billion euros at the end of September 2019 which included the
acquisition of Tech Air in the United States for more than 350
million euros.
Industrial investment decisions reached 685 million
euros during the 3rd quarter and close to 2 billion
euros since the beginning of 2020 despite the public health
crisis. Development was very active in Large Industries,
notably with the signature of a takeover in Kazakhstan and a new
Air Separation Unit in Poland. Investment decisions in
Industrial Merchant included a new Air Separation Unit in a
rapidly expanding basin in China to drive growth, a new nitrogen
on-site generation unit associated with a long-term supply contract
in Vietnam, and investments relating to the roll out of the Qlixbi
offer in Europe for welding. Over the first nine months of 2020,
almost 30% of industrial decisions were related to the
energy transition and more than 13% contributed to improving
margins (efficiencies).
Financial investment decisions totaled 34 million
euros during the 3rd quarter, with several bolt-on acquisitions
in Home Healthcare in Europe and South America, as well as in
Industrial Merchant in the United States, Europe and China. These
compared with a level of decisions of 36 million euros in the 3rd
quarter of 2019.
The investment backlog was up by almost 200 million euros
compared with the end of 2019 and reached 3.0 billion euros.
The Oil & Gas market represented less than 15% of the
investment backlog. These investments should lead to a future
contribution to annual sales of approximately 0.9 billion
euros per year after the full ramp-up.
Investment
- Air Liquide has now entered into a business purchase agreement
with Sasol for Air Liquide to acquire the biggest oxygen
production site in the world located in Secunda, South Africa.
In addition to the benefits this would bring in terms of safety,
reliability and efficiency, the solution provided by Air Liquide
would allow, in coordination with Sasol, a targeted reduction of
30% to 40% in CO2 emissions arising from the oxygen production by
2030.The amount of the initial investment would be
approximately 8.5 billion South African Rand (circa 440 million
euros).
START-UPS
Four units started up during the 3rd quarter of 2020.
These included new units for Electronics in Asia, the
takeover of an Air Separation Unit in China for Large
Industries, and a nitrous oxide production plant to meet the
needs of Industrial Merchant and Healthcare in the
United States.
In the 4th quarter, the Group will start up 2 new units that
align with the core of its strategy regarding energy
transition. The first one is a 20 megawatt electrolyzer using
Proton Exchange Membrane (PEM) technology to produce renewable
hydrogen from hydroelectricity in Bécancour, Québec, to supply
demand in mobility and the industry. The second one is a hydrogen
production unit using Air Liquide’s SMR-XTM technology allowing to
decrease CO2 emissions by -5% thanks to heat recovery. In
the port of Antwerp, Belgium, this unit will supply a customer in
the Chemicals sector who will use part of the CO2 emissions as
feedstock, in a circular economy model. In this same basin,
the Group is a stakeholder in the Antwerp@c consortium, aiming to
develop infrastructure for CO2 capture and sequestration at
large scale.
The additional contribution to sales of unit start-ups
and ramp-ups totaled 53 million euros over the 3rd quarter
of 2020, and 133 million euros over the nine first months of the
year. This should reach 180 million euros for 2020 as a
whole, at the high end of the estimate range communicated
previously.
For 2021, the estimated additional contribution to sales
is reforecast upwards in the range of 320 to 350 million
euros despite the postponement of some start-ups and after
taking into account the sales contribution from the 16 Air
Separation Units that are currently being taken over in South
Africa. The latter is estimated at approximately 100 million euros
in 2021 as Air Liquide will not initially be responsible for
managing the energy. Sales should exceed 400 million euros per year
during a second phase, when energy management will be fully
integrated, without significant impact on operating income.
INVESTMENT OPPORTUNITIES
In a context where our customers are refocusing on growing
markets, the 12-month portfolio of investment opportunities
continued to improve and reached 3.0 billion euros. This
amount excludes the on-going takeover of the 16 Air Separation
Units in South Africa. The change in the portfolio confirms the
Group’s future growth outlook, including new opportunities which
exceed investment decisions and the removal from the portfolio of
several projects that were either postponed beyond 12 months or
awarded to the competition.
Asia became the leading region within the portfolio with more
than one third of opportunities, closely followed by Europe, then
the Americas and the Middle East & Africa with similar levels
of opportunities.
Investment opportunities mainly came from Large Industries and
included several takeover projects that may have a faster
contribution to growth. Electronics was also very active, with an
increasing number of new opportunities, particularly in Asia.
Developments relating to the energy transition, such as
hydrogen projects for industry and biomethane for clean mobility,
remained dynamic.
Seven projects have an investment amount of more than 100
million euros and almost a quarter of the opportunities
correspond to projects supporting the Climate
objectives.
Operating Performance
Efficiencies amounted to 311 million euros over
the nine first months of the year, a slight increase of +0.6%
compared with 2019 despite a decline in volumes, and in line with
the annual objective fixed at more than 400 million euros. These
efficiencies represent cost savings of 2.6%. Industrial
efficiencies accounted for close to 50% of total efficiencies
and were notably the result of supply chain optimisation
projects in Industrial Merchant and Healthcare, as well as
energy efficiency and maintenance optimisation in
Large Industries. The implementation of digital tools
continued, notably with the acceleration of the roll-out of remote
operation centers for Large Industries production units (Smart
Innovative Operations, SIO) and digital platforms for Healthcare.
Since the start of the performance improvement program in 2017,
1.4 billion euros of cumulated efficiencies have been
generated.
Moreover, exceptional cost reductions under the public
health crisis response plan continued but are not, due to their
nature, sustainable over the long term.
Cash flow from operating activities amounted to 3,648
million euros at the end of september 2020, a sharp increase of
+4.8% excluding currency impact, which demonstrates the
resilience of the business model as well as the efficiency of
structural performance improvement program and the cost reduction
plan in response to the public health crisis. This corresponds to a
high level of 23.9% of sales, a marked improvement of
+240 basis points compared with the 3rd quarter of
2019(2).
At the end of September 2020 and despite the public health
crisis, gross industrial capital expenditure amounted to
1,933 million euros, an increase of +3.6% compared
with 2019. They represented 12.7% of sales.
Portfolio management was quite active during the 3rd quarter. It
included 4 divestitures: schülke and a small dry ice business in
Germany, CRYOPDP in France, as well as the reduction of the Group’s
participation in a reseller in Japan. In addition, 7 acquisitions
were completed, including 3 in Industrial Merchant in Europe, the
United States and China, 3 in Healthcare including 2 in Europe and
one in South America, and one acquisition in extreme cryogenics for
Global Markets & Technologies.
Net debt totaled 11,745 million euros, a strong
decrease compared with 13,176 million euros at June 30, 2020,
benefiting from high cash flow from operating activities and
proceeds from the disposal of activities. The net debt-to-equity
ratio, adjusted for the seasonal effect of the dividend
payment, reached 58.3% representing a significant decrease
compared with December 31, 2019 (64.0%).
Operating Performance
- Air Liquide signed a long-term power purchase agreement
(PPA) to source renewable electricity equivalent to 15% of the
Group's current consumption for its activities in Spain.
This contract is the first PPA for renewable energy in Europe and
illustrates Air Liquide's commitment to lower its carbon
footprint, in line with the Group’s Climate Objectives
to increase purchase of renewable electricity by nearly 70% by 2025
(in comparison with 2015).
- In accordance with the agreement initially announced on March
2, 2020, Air Liquide has closed the sale of its subsidiary
CRYOPDP to French private equity firm Hivest Capital Partners.
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 has closed the sale of its subsidiary
schülke to EQT, a global investment organization. The total
value of the transaction, which is subject to an earn-out
provision, is between 925 million euros and 1.0 billion euros
excluding debt.
________________________ 2 Compared with restated 3rd
quarter 2019 following changes in 2019 annual financial statements:
financial costs before taxes linked to IFRS 16 are reclassified in
other financial expenses whereas they were included in net finance
costs on 30 september 2019. A distinction is now made between other
non-cash items under which the adjustment of this cost is
recognized as well as income and expenses under IAS 19 and IFRS 2
and other cash items
Outlook
This 3rd quarter saw a marked recovery in sales. Compared
with the 2nd quarter of 2020, which was impacted by the pandemic,
all business lines and all regions improved. Group revenue
reached 5 billion euros, -0.9% on a comparable basis (-8.7%
as published, reflecting the negative currency, energy price and
significant scope impacts).
Gas & Services, which represent 96% of Group sales,
were almost flat, with contrasted situations. Momentum in
Healthcare and Electronics remained particularly good;
Large Industries sales recovered, whereas Industrial
Merchant, which showed a marked sequential improvement,
still remained at a level below 2019. By region, sales in Europe
and Asia were stronger than in the 3rd quarter of 2019 on a
comparable basis, and the Americas improved compared with
the 2nd quarter of 2020.
Global Markets & Technologies also saw a return to
growth, whereas Engineering & Construction sales
demonstrated progressive improvement, compared to previous
quarters.
The Group continued its drive to improve its
operating margin, delivering 311 million euros of
efficiencies over the first nine months, in line with its annual
target of more than 400 million euros, and the additional cost
containment plan continued to deliver.
The continued improvement in performance translated into cash
flow from operating activities which reached nearly 24% of
sales. The investment cycle remains well oriented
and the 12-month portfolio of investment opportunities, which is
refocused on growth markets, stands at a high level. Investment
decisions, which ensure future growth, were significant at
2.1 billion euros at the end of September, almost one third
relating to the energy transition.
In a context of limited local lockdowns and progressive
recovery until the end of 2020, Air Liquide is confident in its
ability to further increase its operating margin and to deliver net
profit(3) close to preceding year level, at constant exchange
rates.
________________________ 3 2020 recurring net profit:
excluding exceptional and significant items that have no impact on
the operating income recurring.
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
Definition of 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
(in millions of euros)
Q3 2020
Q3 2020/2019
Published
change
Currency
impact
Natural
gas
impact
Electricity
impact
Significant
scope
impact
Q3 2020/2019
Comparable
change
Revenue
Group
4,980
-8.7%
(202)
(61)
(19)
(143)
-0.9%
Impacts in %
-3.7%
-1.1%
-0.4%
-2.6%
Gas & Services
4,777
-8.9%
(198)
(61)
(19)
(143)
-0.9%
Impacts in %
-3.8%
-1.2%
-0.3%
-2.7%
(in millions of euros)
YTD
2020
YTD 2020/2019
Published
change
Currency
impact
Natural
gas
impact
Electricity
impact
Significant
scope
impact
YTD 2020/2019
Comparable
change
Revenue
Group
15,253
-7.0%
(191)
(300)
(80)
(188)
-2.4%
Impacts in %
-1.1%
-1.9%
-0.5%
-1.1%
Gas & Services
14,697
-6.8%
(188)
(300)
(80)
(188)
-2.1%
Impacts in %
-1.1%
-1.9%
-0.6%
-1.1%
Year to date revenue
By Geography
Revenue
(in millions of euros)
YTD 2019
YTD 2020
YTD
Published
change
YTD
Comparable
change
Americas
6,354
5,891
-7.3
%
-4.5
%
Europe
5,353
5,055
-5.6
%
0.3
%
Asia-Pacific
3,612
3,337
-7.6
%
-0.9
%
Middle East & Africa
459
414
-9.9
%
-4.8
%
GAS & SERVICES REVENUE
15,778
14,697
-6.8
%
-2.1
%
Engineering & Construction
257
164
-36.4
%
-36.0
%
Global Markets & Technologies
371
392
5.7
%
6.1
%
GROUP REVENUE
16,406
15,253
-7.0
%
-2.4
%
By Business Line
Revenue
(in millions of euros)
YTD 2019
YTD 2020
YTD
Published
change
YTD
Comparable
change
Large Industries
4,278
3,642
-14.9
%
-1.6
%
Industrial Merchant
7,298
6,726
-7.8
%
-7.3
%
Healthcare
2,736
2,825
+3.3
%
+8.6
%
Electronics
1,466
1,504
+2.6
%
+3.3
%
GAS & SERVICES REVENUE
15,778
14,697
-6.8
%
-2.1
%
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
2020 Full Year results:
February 10, 2021
Sustainability Day:
March 23, 2021
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.
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Media Relations media@airliquide.com
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