Air Liquide: H1 2023: Solid performance and sustained investment momentum paving the way for the future
PARIS–(BUSINESS WIRE)–Regulatory News:
Air Liquide (Paris:AI):
Key Figures (in millions of euros) | H1 2023 | 2023/2022 as published | 2023/2022 comparable(a) |
Group Revenue | 13,980 | -1.6% | +4.9% |
of which Gas & Services | 13,405 | -1.4% | +5.3% |
Operating Income Recurring (OIR) | 2,481 | +8.5% | +13.0% |
Group OIR Margin | 17.7% | +160 bps |
|
Variation excluding energy impact(b) |
| +80 bps |
|
Gas & Services OIR Margin | 19.3% | +160 bps |
|
Variation excluding energy impact(b) |
| +70 bps |
|
Net Profit (Group Share) | 1,722 | +31.9% |
|
Net Profit Recurring (Group Share)(c) | 1,627 | +4.9% |
|
Variation Net Profit Recurring (Group Share) excluding currency impact(b) |
| +11.3% |
|
Earnings per Share (in euros) | 3.30 | +32.0% |
|
Cash flow from operating activities before changes in working capital | 3,211 | +10.4% |
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Net Debt | €10.6 bn |
|
|
Return on Capital Employed after tax – ROCE | 10.0% | +100 bps |
|
Recurring ROCE(d) | 10.2% | +50 bps |
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(a) Change excluding the currency, energy (natural gas and electricity) and significant scope impacts, see reconciliation in appendix. |
(b) See reconciliation in appendix. |
(c) Excluding exceptional and significant transactions that have no impact on the operating income recurring, see reconciliation in appendix. |
(d) Based on the recurring net profit, see reconciliation in appendix. |
Commenting on the results in the first half of 2023, François Jackow, Chief Executive Officer of the Air Liquide Group, stated:
“In a complex and changing macroeconomic and geopolitical environment, Air Liquide delivered, in the first half of the year, a very solid performance characterized by sales growth on a comparable basis and a new increase in its operating margin excluding the energy impact. This performance highlights the resilience and quality of our business model and is in line with the trajectory of our ADVANCE strategic plan.
Revenue reached 13.98 billion euros, an increase of +4.9% on a comparable basis in the first semester. On an as published basis, the year-over-year comparison was -1.6%, due to the drop in energy prices – whose variations are passed on to Large Industries customers – as well as negative currency impacts. The Gas & Services activity, which represented 96% of the Group’s revenue, was up +5.3% on a comparable basis. Within this activity, all regions saw growth, in particular the Americas and Europe, driven notably by Industrial Merchant and Healthcare.
In line with its ADVANCE strategic plan, Air Liquide continued the steady improvement of its operational performance. The Group generated significant efficiencies of 206 million euros, up +24% despite an inflationary context unfavorable to savings on purchases, and continued the dynamic management of its business portfolio. Its ability to create value allowed it to adjust its prices in Industrial Merchant while preserving sales volumes. As a result, the operating margin increased further, by +80 basis points excluding the energy impact.
Net profit (Group share) amounted to 1.72 billion euros, up +32% as published. Recurring net profit(1) increased by +11.3% excluding currency impacts. Cash flow(2) grew by +13% excluding currency impacts. The balance sheet is strong with a net debt to equity ratio of 39.2%(3). Recurring ROCE (4), which amounted to 10.2% at end-June, remains above 10%, in line with ADVANCE’s objectives.
In terms of outlook, the Group’s investment momentum remained strong, reflecting our commitment to climate and paving the way for future growth. The project backlog, at 3.5 billion euros, remained high. Investment decisions reached 1.8 billion euros this semester. With more than 40% of projects linked to the energy transition, 12-month investment opportunities are numerous and total 3.4 billion euros.
In 2023, Air Liquide is confident in its ability to further increase its operating margin and to deliver recurring net profit growth, at constant exchange rates(5).”
(1) Net profit recurring excluding exceptional and significant transactions that have no impact on the operating income recurring. |
(2) Cash Flow from operations before changes in working capital |
(3) Adjusted for dividend seasonality. |
(4) Recurring ROCE based on Recurring Net Profit. |
(5) Operating margin excluding energy passthrough impact. Net profit recurring excluding exceptional and significant transactions that have no impact on the operating income recurring. |
Highlights
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Group revenue totaled 13,980 million euros in the 1st half of 2023, up +4.9% on a comparable basis. Group revenue as published in the 1st half-year was down -1.6%, impacted by unfavorable energy (-4.7%) and currency (-2.1%) impacts, with the significant scope impact being slightly positive at +0.3%.
Gas & Services revenue amounted to 13,405 million euros during the 1st half, a comparable increase of +5.3%. Published sales in the 1st half of 2023 were down slightly by -1.4%, impacted by negative energy and currency impacts of -4.9% and -2.1% respectively, the significant scope impact being limited (+0.3%).
- Gas & Services revenue in the Americas reached 5,159 million euros in the 1st half of 2023, representing a comparable increase of +6.7%. Sales in the Industrial Merchant business were up sharply, by +10.0%, driven by a high price effect (+7.5%). Customer shutdowns penalized Large Industries sales (-3.9%) while volumes remained solid overall in the US Gulf Coast. In Healthcare, price increases in Proximity Care in the United States and the dynamism of Home Healthcare in Canada and South America were the main contributors to the very strong increase in sales (+13.5%). Lastly, after very solid growth in 2022, revenue from the Electronics business was down by -5.8% in the 1st half due to the sharp decline in sales of materials in the 2nd quarter, in a context of slowdown in demand from memory manufacturers.
- Revenue in Europe was up +4.8% on a comparable basis during the 1st half of 2023 and reached 4,975 million euros. In Industrial Merchant, the very strong increase in sales of +18.1% benefited from a price effect that remained very high at +19.0%. Healthcare sales were up +5.8%, driven notably by the strong development of diabetes treatment in Home Healthcare and higher medical gas prices in response to inflation. Large Industries revenue was down -3.6% in the 1st half-year, however this was a significant improvement compared to the 2nd half of 2022 heavily impacted by the sharp increase in energy prices.
- Sales in Asia Pacific were up +3.8% on a comparable basis in the 1st half of 2023 and amounted to 2,763 million euros. Large Industries revenue, down -5.9%, was impacted in particular by weak demand and customer shutdowns. In Industrial Merchant, the sharp increase in sales of +12.1% was supported by a price effect of +9.2% and a strong increase in volumes in China in the 2nd quarter. In the Electronics business (+7.3%), after double-digit sales growth in the 1st quarter, revenue growth was more moderate in the 2nd quarter (+4.3%).
- Revenue in the Middle East & Africa region increased by +5.8% on a comparable basis to 508 million euros in the 1st half of 2023. The sales growth in air gases in South Africa and Egypt explained the solid performance of Large Industries. In Industrial Merchant, a high price effect (+8.7%) and the increase in volumes made it possible to fully absorb the impact of the divestiture of businesses in the Middle East and achieve solid sales growth.
Industrial Merchant revenue continued to grow strongly (+12.1%), driven by a high price effect of +10.7% and growing volumes. Large Industries revenue, down -3.6% in a context of weak demand, saw a significant improvement compared to a 2nd half of 2022 which was heavily impacted by the sharp increase in energy prices, in Europe in particular. Electronics sales were up +6.3% in the half-year: following double-digit growth in the 1st quarter, revenue growth was more moderate in the 2nd quarter due to a very high basis of comparison in 2022 and lower demand from memory manufacturers. Lastly, the strong growth in sales in Healthcare (+8.2%) was supported by the increase in the prices of medical gases in an inflationary context and the dynamism of Home Healthcare.
Consolidated revenue from Engineering & Construction totaled 180 million euros in the 1st half of 2023, down -17.3% compared to the high sales to third-party customers in the 1st half of 2022. Consolidated revenue does not reflect the volume of activity carried out with internal projects in Large Industries or Electronics. Order intake amounted to 530 million euros, a slight increase compared to the 1st half of 2022.
Sales in the Global Markets & Technologies business increased by +3.9% on a comparable basis and amounted to 395 million euros in the 1st half-year. Organic growth reached +17%, excluding several divestitures. Order intake for Group projects and third-party customers reached 496 million euros.
The Group’s operating income recurring (OIR) reached 2,481 million euros in the 1st half of 2023. It was up by +8.5% and +13.0% on a comparable basis, which is significantly higher than the comparable growth in sales of +4.9%.
The operating margin (OIR to revenue) stood at 17.7%, a strong improvement of +80 basis points excluding the energy impact.
Efficiencies(1) contributed to this improvement in margin. They amounted to 206 million euros, up sharply by +23.6% compared to the 1st half of 2022 and in line with the annual target of more than 400 million euros.
Net profit (Group share) amounted to 1,722 million euros in the 1st half of 2023, with an increase as published of +31.9% and +39.5% excluding the currency impact. Excluding the proceeds from the sale of the stake in Hydrogenics, the impairment of an intangible asset and of assets held for sale, net profit recurring (Group share)(2) amounted to 1,627 million euros. This was up by +4.9% and +11.3% excluding currency, compared to net profit recurring (Group share) in the 1st half of 2022, a significant increase over comparable sales growth of +4.9%. Net earnings per share rose by +32.0% compared with the 1st half of 2022, in line with the increase in net profit (Group share). These stood at 3.30 euros per share compared with 2.50 euros per share in the 1st half of 2022.
Cash flows from operating activities before changes in working capital amounted to 3,211 million euros during the 1st half of 2023, representing a sharp increase of +10.4% and +13.2% excluding the currency impact.
Net debt at June 30, 2023 reached 10,550 million euros, a sharp decrease compared with 12,010 million euros at June 30, 2022 and an increase of 289 million euros compared with December 31, 2022, following the payment of more than 1.6 billion euros in dividends in May.
The return on capital employed after tax (ROCE) was 10.0% for the 1st half of 2023. At 10.2%, recurring ROCE(3) remained above the target of 10.0% in the Advance strategic plan, and was up sharply by +50 basis points compared to the 1st half of 2022.
In order to accelerate the decarbonization of its production units, Air Liquide announced in the 1st half of 2023 the signing of long-term renewable energy supply contracts (PPAs) for more than 1,000 GWh per year. This will equate to a reduction of its annual CO2 emissions by approximately -970,000 tonnes.
In the 1st half of 2023, industrial and financial investment decisions amounted to 1,798 million euros. They were stable compared to the very high level of the 1st half of 2022.
At 3.5 billion euros, the investment backlog remained at a very high level for three quarters and posted a strong increase compared to the 3.0 billion euros in the 1st half of 2022.
The additional contribution to sales of unit start-ups and ramp-ups totaled 139 million euros over the 1st half of 2023. Over full-year 2023, it is expected to be at the low end of the range of 300 to 330 million euros previously communicated.
At 3.4 billion euros, the 12-month portfolio of investment opportunities remained very high at the end of June 2023. This reflects the dynamism of project developments, particularly in the energy transition, representing more than 40% of the portfolio, as well as in the Electronics business.
The Air Liquide Board of Directors met on July 26, 2023. During this meeting, the Board reviewed the consolidated financial statements ending June 30, 2023. Limited review procedures were completed with respect to the consolidated interim financial statements, and an unqualified review report is in the process of being issued by the statutory auditors.
Table of Contents of the activity report | |
H1 2023 PERFORMANCE | 7 |
Key Figures | 7 |
Income Statement | 8 |
Change in Net debt | 18 |
Extra-financial performance | 19 |
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INVESTMENT CYCLE | 20 |
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RISKS FACTORS | 21 |
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OUTLOOK | 21 |
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APPENDICES | 22 |
Performance indicators | 22 |
Calculation of performance indicators (Semester) | 24 |
Calculation of performance indicators (Quarter) | 27 |
2nd quarter 2023 revenue | 27 |
Geographic and segment information | 28 |
Consolidated income statement | 28 |
Consolidated balance sheet | 29 |
Consolidated cash flow statement | 30 |
Sales, operating income recurring and investments key figures synthesis | 32 |
H1 2023 PERFORMANCE
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. |
Key Figures
(in millions of euros) | H1 2022 | H1 2023 | 2023/2022 published change | 2023/2022 comparable change(a) |
Total Revenue | 14,207 | 13,980 | -1.6% | +4.9% |
Of which Gas & Services | 13,600 | 13,405 | -1.4% | +5.3% |
Operating Income Recurring (OIR) | 2,286 | 2,481 | +8.5% | +13.0% |
Group OIR Margin | 16.1% | 17.7% | +160 bps |
|
Variation excluding energy impact(b) |
|
| +80 bps |
|
Other Non-Recurring Operating Income and Expenses | (270) | 33 |
|
|
Net Profit (Group Share) | 1,305 | 1,722 | +31.9% |
|
Net Profit Recurring (Group share)(c) | 1,551 | 1,627 | +4.9% |
|
Variation Net Profit Recurring (Group Share) excluding currency impact(b) |
|
| +11.3% |
|
Net earnings per share (in euros) | 2.50 | 3.30 | +32.0% |
|
Cash flow from operating activities before changes in working capital | 2,907 | 3,211 | +10.4% |
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Net Capital Expenditure(d) | 1,547 | 1,466 |
|
|
Net Debt | €12.0 bn | €10.6 bn |
|
|
Net Debt to Equity ratio(e) | 46.0% | 39.2% |
|
|
Return on Capital Employed after tax – ROCE | 9.0% | 10.0% | +100 bps |
|
Recurring ROCE(f) | 9.7% | 10.2% | +50 bps |
(a) Change excluding the currency, energy (natural gas and electricity) and significant scope impacts, see reconciliation in appendix. |
(b) See reconciliation in appendix. |
(c) Excluding exceptional and significant transactions that have no impact on the operating income recurring, see reconciliation in appendix. |
(d) Including transactions with minority shareholders. |
(e) Adjusted to spread the dividend payment in 1st half out over the full year. |
(f) Based on the recurring net profit, see reconciliation in appendix. |
Income Statement
REVENUE
Revenue (in millions of euros) | H1 2022 | H1 2023 | 2023/2022 published change | 2023/2022 comparable change |
Gas & Services | 13,600 | 13,405 | -1.4% | +5.3% |
Engineering & Construction | 221 | 180 | -18.4% | -17.3% |
Global Markets & Technologies | 386 | 395 | +2.5% | +3.9% |
TOTAL REVENUE | 14,207 | 13,980 | -1.6% | +4.9% |
Revenue by quarter (in millions of euros) | Q1 2023 | Q2 2023 |
Gas & Services | 6,893 | 6,512 |
Engineering & Construction | 87 | 93 |
Global Markets & Technologies | 194 | 201 |
TOTAL REVENUE | 7,174 | 6,806 |
2023/2022 Group published change | +4.2% | -7.0% |
2023/2022 Group comparable change | +6.2% | +3.8% |
2023/2022 Gas & Services comparable change | +6.7% | +4.1% |
Group
Group revenue totaled 13,980 million euros in the 1st half of 2023, up +4.9% on a comparable basis. Sales were up +3.8% during the 2nd quarter of 2023 compared with the 2nd quarter of 2022.
Global Markets & Technologies sales were up +3.9% and showed organic growth of +17%, excluding the impact of divestitures. Consolidated revenue from Engineering & Construction was down -17.3% compared to high sales to third-party customers in the 1st half of 2022.
Group revenue as published in the 1st half-year was down -1.6%, impacted by unfavorable energy (-4.7%) and currency (-2.1%) impacts, with the significant scope impact being slightly positive at +0.3%.
Gas & Services
Gas & Services revenue amounted to 13,405 million euros during the 1st half, a comparable increase of +5.3%.
Industrial Merchant revenue continued to grow strongly (+12.1%), driven by a high price effect of +10.7% and growing volumes. Large Industries revenue, down -3.6% in a context of weak demand, saw a significant improvement compared to a 2nd half of 2022 which was heavily impacted by the sharp increase in energy prices, in Europe in particular. Electronics sales were up +6.3% in the half-year: following double-digit growth in the 1st quarter, revenue growth was more moderate in the 2nd quarter due to a very high basis of comparison in 2022 and lower demand from memory manufacturers. Lastly, the strong growth in sales in Healthcare (+8.2%) was supported by the increase in the prices of medical gases in an inflationary context and the dynamism of Home Healthcare.
Published sales in the 1st half of 2023 were down slightly by -1.4%, impacted by negative energy and currency impacts of -4.9% and -2.1% respectively, the significant scope impact being limited (+0.3%).
Revenue by geography and business line (in millions of euros) | H1 2022 | H1 2023 | 2023/2022 published change | 2023/2022 comparable change |
Americas | 5,017 | 5,159 | +2.8% | +6.7% |
Europe | 5,424 | 4,975 | -8.3% | +4.8% |
Asia-Pacific | 2,746 | 2,763 | +0.6% | +3.8% |
Middle East & Africa | 413 | 508 | +23.0% | +5.8% |
GAS & SERVICES REVENUE | 13,600 | 13,405 | -1.4% | +5.3% |
Large Industries | 4,940 | 4,060 | -17.8% | -3.6% |
Industrial Merchant | 5,510 | 6,050 | +9.8% | +12.1% |
Healthcare | 1,925 | 2,034 | +5.6% | +8.2% |
Electronics | 1,225 | 1,261 | +3.0% | +6.3% |
Americas
Gas & Services revenue in the Americas reached 5,159 million euros in the 1st half of 2023, representing an increase of +6.7%. Sales in the Industrial Merchant business were up sharply, by +10.0%, driven by a high price effect (+7.5%). Customer shutdowns penalized Large Industries sales (-3.9%) while volumes remained solid overall in the US Gulf Coast. In Healthcare, price increases in Proximity Care in the United States and the dynamism of Home Healthcare in Canada and South America were the main contributors to the very strong increase in sales (+13.
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