Regulatory News:
Air Liquide (Paris:AI):
2020/2019 as 2020/2019
Key Figures (in millions of euros) Q3 2020 published 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 3(rd) quarter of 2020, Benoît Potier, Chairman
and CEO of the Air Liquide Group, said:
"This 3(rd) quarter saw a marked recovery in sales. Compared
with the 2(nd) 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 3(rd)
quarter of 2019 on a comparable basis, and the Americas improved
compared with the 2(nd) 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 3(rd) 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
CO(2) 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 3(rd) 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 3(rd) quarter of 2020, near 2019 levels.
China saw the most dynamic level of recovery, with 3(rd) 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
3(rd) 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 3(rd) 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 3(rd)
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 3(rd) 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 3(rd) 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
3(rd) 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 3(rd) 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 3(rd) 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 3(rd) 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 3(rd) 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) Q3 2019 Q3 2020 change 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 3(rd) 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
3(rd) quarter of 2020, near 2019 levels, for both the Group and Gas
& Services. China saw the most dynamic level of recovery, with
3(rd) 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 3(rd) 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 3(rd) 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 3(rd) 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 3(rd) quarter 2020,
and the disposal of Fujian Shenyuan in September 2019.
Revenue by geography and 2020/2019 2020/2019
business line (in millions of published comparable
euros) Q3 2019 Q3 2020 change 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 3(rd) quarter, marking a decline of -3.3%. North
America saw a marked improvement in sales compared with the 2(nd)
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 3(rd)
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 2(nd) 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
3(rd) quarter of 2019. Healthcare revenue was up +9.5% during the
3(rd) 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
Mied , 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 G
ogów 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 2(nd) 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 3(rd) quarter of 2019. In
Industrial Merchant, Middle East and India improved clearly
compared with the 2(nd) quarter, with the recovery more contrasted
in Africa. Large Industries sales were up slightly compared with
the 3(rd) 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 3(rd) quarter, with sales to third-party
customers remaining sluggish due to the public health crisis. These
sales were down -24% compared with the 3(rd) 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 1(st) 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 3(rd) quarter of 2020, marking an increase
compared with the 2(nd) 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 3(rd) 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 3(rd) 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 3(rd) 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 CO(2) 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 3(rd) 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 4(th) 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-X(TM) technology allowing to decrease CO(2)
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 CO(2) 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 CO(2) capture and sequestration at large
scale.
The additional contribution to sales of unit start-ups and
ramp-ups totaled 53 million euros over the 3(rd) 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
3(rd) 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 3(rd) 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 3(rd) 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 3(rd) quarter saw a marked recovery in sales. Compared with
the 2(nd) 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 3(rd)
quarter of 2019 on a comparable basis, and the Americas improved
compared with the 2(nd) 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
Q3 Q3
2020/2019 Natural Significant 2020/2019
(in millions of Q3 Published Currency gas Electricity scope Comparable
euros) 2020 change impact impact impact impact 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%
YTD YTD
2020/2019 Natural Significant 2020/2019
(in millions of YTD Published Currency gas Electricity scope Comparable
euros) 2020 change impact impact impact impact 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
YTD YTD
Revenue Published Comparable
(in millions of euros) YTD 2019 YTD 2020 change 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
YTD YTD
Revenue Published Comparable
(in millions of euros) YTD 2019 YTD 2020 change 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.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20201022006108/en/
CONTACT: Investor Relations
IRTeam@airliquide.com
Media Relations
media@airliquide.com
SOURCE: Air Liquide
Copyright Business Wire 2020
(END) Dow Jones Newswires
October 23, 2020 01:35 ET (05:35 GMT)
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