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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