Air Liquide: First Quarter 2021: Return to Growth for All Activities in an Improving Environment

PARIS–(BUSINESS WIRE)–Regulatory News:

Air Liquide (Paris:AI):

Key Figures (in millions of euros)		Q1 2021		2021/2020 as published		2021/2020 comparable (a)
Group Revenue		5,334		-0.7%		+3.8%
of which Gas & Services		5,103		-1.7%		+2.8%
of which Engineering & Construction		76		+44.5%		+48.5%
of which Global Markets & Technologies		155		+22.0%		+25.7%

(a) Change excluding the currency, energy (natural gas and electricity) and significant scope impacts, see reconciliation in appendix.

Commenting on sales in the 1^st quarter of 2021, Benoît Potier, Chairman and CEO of the Air Liquide Group, said:

“This first quarter saw solid growth of +3.8% on a comparable basis, confirming the trend recorded in the fourth quarter of 2020.

Sales reached 5.3 billion euros, including 5.1 billion euros for Gas & Services, which grew +2.8% on a comparable basis. This growth confirms the recovery seen in all of our Gas & Services activities. Strong momentum was also seen in the Engineering & Construction and Global Markets & Technologies business lines.

In Gas & Services, which account for 96% of Group sales, growth was particularly strong in Healthcare at +10%. In the industrial sector, the Industrial Merchant activity showed positive growth for the first time since the start of the health crisis, while Large Industries grew, driven by the start-up of new units and the marked recovery in the Steel and Chemicals markets. In terms of geographies, Asia showed very strong growth, led by China, while Europe grew solidly. The Americas region posted contrasted performance, impacted by an exceptional cold wave in the United States.

Regarding efficiencies, the Group continued to take action to improve performance. In the 1^st quarter of 2021, 95 million euros in efficiencies were generated, in line with its target to achieve 400 million euros over the year. In addition, the cost reduction measures linked to the crisis have been largely maintained in the context of the gradual recovery in activity. Cash flow is high and stands at more than 23% of sales, an improvement of +100 basis points.

The investment decisions for the quarter amounted to 600 million euros. The 12-month portfolio of opportunities continued to grow and stands at 3.2 billion euros. The proportion of projects linked to the energy transition has continued to increase and is now at 46%. These investments will contribute to future growth.

Financial performance and sustainable development are at the heart of Air Liquide’s growth model. In a global health context that still differs from region to region, the Group remains committed to supplying healthcare facilities with medical oxygen. In addition, the Group set out particularly ambitious sustainable development objectives last March. A structured plan will allow it to achieve carbon neutrality by 2050 and to accelerate in the field of hydrogen and the deployment of decarbonization solutions for the industry.

In 2021, in a context of limited local lockdowns in the first half of the year and recovery in the second half, Air Liquide is confident in its ability to further increase its operating margin and to deliver recurring net profit⁽¹⁾ growth, at constant exchange rates.”

(1) Recurring net profit: Excluding significant and exceptional items with no impact on recurring operating income. Excluding the impact of a possible US tax reform in 2021.

Highlights of the 1st quarter   Sustainable development: Presentation of ambitious sustainable development objectives, based on three pillars: ACT for a low-carbon society: Air Liquide has set itself the goal of achieving carbon neutrality by 2050, with a 33% reduction in its CO2 emissions by 2035, and of developing a wide range of low-carbon solutions for its industrial customers so that they can reduce their own emissions. Work toward better Healthcare by improving the quality of life of chronic patients in mature economies and by facilitating access to medical oxygen for rural communities in low and middle income countries. Trust as the base to engage with employees and adhering to best governance practices. Memorandum of understanding signed with ArcelorMittal, aimed at implementing solutions to produce low-carbon steel in Dunkirk. The two companies are joining forces to transform the steel production process by developing innovative solutions involving low-carbon hydrogen and CO2 capture technologies. First long-term Power Purchase Agreement for renewable electricity in the Netherlands, for a total capacity of 25 megawatts from Vattenfall, a major European energy supplier. Hydrogen: Memorandum of understanding signed with Siemens Energy to develop high-capacity electrolyzers and sustainably produce low-carbon hydrogen. This European ecosystem of electrolysis and hydrogen technologies, in the framework of a Franco-German joint-venture, is supported by the French and German governments. Inauguration of the world’s largest carbon-free hydrogen production unit based on membrane electrolysis in Canada, with a capacity of 20 MW. Acquisition of a 40% stake in the share capital of H2V Normandy, with a view to building a low-carbon hydrogen electrolyzer complex in France with a capacity of up to 200 MW. Completion of the first phase of the construction of ultra-high purity low-carbon hydrogen electrolyzers in Taiwan. Industry Long-term supply contract signed with BASF for its new battery materials site in Germany. Agreement with BASF to increase hydrogen and carbon monoxide volumes by 20% at the Yeosu industrial complex in South Korea. In Kazakhstan, acquisition and integration by Air Liquide Munay Tech Gases, a 75% subsidiary of Air Liquide, of the industrial gas production plants of the Atyrau refinery, owned by the Kazakh oil company KazMunayGas. ALMTG will operate these production plants for KazMunayGas under a long-term contract. Investment in China to create new production capacities and supply industrial gases to BOE, world leader in flat panels and an Internet of Things specialist, as part of a long-term agreement, in Sichuan province and in the megacity Chongqing. Corporate: Changes to Air Liquide’s Executive Committee: Jérôme Pelletan will join the Executive Committee as Chief Financial Officer as of June 1, 2021. Fabienne Lecorvaisier, Executive Vice-President, will retain responsibility for the General Secretariat and, as of July 1, 2021, will take responsibility for Sustainable Development, Public and International Affairs and Social Programs. François Jackow, Executive Vice-President, will supervise Innovations and Technologies as of July 1, in addition to his current responsibilities. Matthieu Giard, Vice President, has been coordinating and supervising Hydrogen activities since January 1, 2021. He also retains responsibility for the Global Industrial Merchant business line, Purchases and the Group’s efficiency programs.

Group revenue for Q1 2021 totaled 5,334 million euros, in a still challenging but improving global health and economic environment. Sales increased by +3.8% on a comparable basis with Q1 2020, which had been affected by the health crisis in Asia, and more specifically in China, and then in Europe from mid-March 2020. The consolidated revenue of Engineering & Construction recorded strong growth of +48.5% compared to lower activity due to the pandemic in Q1 2020. Global Markets & Technologies activity was up by +25.7%, driven by the ramp-up of biogas units and sales of equipment with high technological added-value. The Group’s published revenue was down slightly by -0.7% due to negative currency (-5.1%) and significant scope (-2.7%) impacts, partially offset by the energy impact (+3.3%).

Gas & Services revenue totaled 5,103 million euros, up by + 2.8% on a comparable basis. Sales as published for Q1 2021 were down -1.7%, penalized by negative currency (-5.1%) and significant scope (-2.8%) impacts, partially offset by the energy impact (+3.4%). The significant scope impact mostly reflects the disposal of Schülke in Healthcare.

• Gas & Services revenue in the Americas region was down by -1.5% on a comparable basis, at 2,003 million euros in Q1 2021. In North America, after a strong month of January, sales were impacted as of mid-February by the historic winter storm on the Gulf Coast, notably in the Large Industries business. In Latin America, sales grew strongly in all businesses. Large Industries revenue was down by -4.2% overall in the region. Industrial Merchant recorded a sequential recovery, with a limited drop in sales of -3.2% compared to -5.2% in Q4 2020. Healthcare remains fully committed to the fight against the pandemic, notably to meet the exceptionally high demand for medical oxygen, and posted +13.3% growth in sales. Electronics revenue was close to stable (-0.6%).
• Revenue for the Europe region reached 1,797 million euros, up by +4.5% on a comparable basis. Industrial activities have returned to growth, with higher comparable sales compared to Q1 2019. Large Industries sales were stable compared to Q1 2020. Industrial Merchant activity showed a strong improvement, with sales growth of +3.6% in Q1 2021 compared to a -1.3% decline in Q4 2020. Representing more than a third of Gas & Services sales in Europe, Healthcare activities remained highly mobilized to fight against the pandemic, with sales up by +8.8%.
• Sales in the Asia-Pacific region grew strongly by +6.7% on a comparable basis, to 1,150 million euros, with all business lines recording growth in Q1. China (+12.8%) contributed significantly, and benefited from a favorable comparison basis with Q1 2020 greatly impacted by the health crisis. In the rest of the region, sales increased by +2.4%. Volumes recorded strong momentum in Large Industries, which posted a +8.7% rise in revenue. The strong sales growth in the Industrial Merchant business (+10.6%) was mainly supported by the momentum in China, with sales in the rest of the region just returning to growth. The Electronics business (+1.3%) benefited from the ramp-up of new carrier gases units but with weaker sales of Advanced Materials and Equipment & Installation.
• Revenue in the Middle East and Africa totaled 153 million euros, up by a strong +17.5% on a comparable basis in Q1. Large Industries sales benefited from a rise in demand from customers connected to the pipeline network in Saudi Arabia and a favorable comparison effect due to a customer turnaround in Q1 2020. Industrial Merchant revenue continued to rise supported by a strong activity in India and Egypt. Healthcare is mobilized in the fight against Covid-19, with strong sales growth across the entire region.

All business lines posted growth compared to Q1 2020. Healthcare sales recorded a strong increase of +10.1% on a comparable basis, with teams still mobilized in the fight against Covid-19. Large Industries revenue grew by +3.0% despite the impact of the winter storm on the Gulf Coast in mid-February, notably supported by the contribution of new production units. Industrial Merchant revenue returned to growth (+0.3%), supported by the pick-up in volumes, solid pricing of +1.6%, and strong activity in China. Sales in Electronics were up by +1.8% and by +2.8% excluding Equipment & Installation sales.

The consolidated revenue of Engineering & Construction stood at 76 million euros, up a strong +48.5%, notably with growth in sales to third-party customers. Total sales, which include internal sales, rose by +19% in Q1 2021. Order intake stood at 285 million euros, with more than 85% of orders corresponding to projects in Asia, notably in Chemicals.

The sales of Global Markets & Technologies totaled 155 million euros, up a strong +25.7% on a comparable basis, driven notably by a strong momentum in the Biogas business. Order intake for Group projects and third-party customers totaled 163 million euros.

Efficiencies⁽¹⁾ reached 95 million euros, increased by close to +5% compared with the 1^st quarter 2020, in line with the annual objective set at more than 400 million euros. Moreover, the exceptional cost reduction plan in response to the public health crisis has continued and was adapted to the progressive recovery in overall activity, as many local lockdown measures are still in place. These cost reductions are not, due to their nature, sustainable in the long-term.

Cash flow from operating activities before changes in working capital totaled 1,243 million euros, representing an increase of +3.9% and +9.7% excluding currency impact, once again underlining the resilience of the business model. This corresponds to 23.3% of sales, a marked improvement of +100 basis points compared with the 1^st quarter of 2020. It allowed, in particular, the financing of industrial capital expenditure, which totaled 688 million euros, representing 12.9% of sales.

Following an extremely high level of investment decisions totaling more than 1 billion euros in the 4^th quarter of 2020, industrial investment decisions in the 1^st quarter of 2021 amounted to 569 million euros. The 12-month portfolio of investment opportunities continues to grow and stood at 3.2 billion euros at the end of March, approximately 100 million euros more than at the end of 2020. The nature of opportunities is changing, with energy transition on the rise, now representing 46% of the portfolio.

The additional contribution to sales of unit start-ups and ramp-ups is high, totaling 65 million euros over the 1^st quarter of 2021. In 2021, the additional contribution to sales of unit start-ups and ramp-ups is expected to reach around 250 million euros, plus the contribution from the 16 units in the process of being acquired in South Africa, pending approval from antitrust authorities, expected by the end of June. The latter is estimated at around 60 million euros for 2021, with Air Liquide not managing energy in a first phase. Revenue should reach over 400 million euros per year in a second phase, when energy management is fully integrated, without any significant impact on operating income.

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¹See definition in Appendix.

Analysis of 1^st quarter 2021 revenue

Unless otherwise stated, all variations in revenue outlined below are on a comparable basis, excluding currency, energy (natural gas and electricity) and significant scope impacts.

REVENUE

Revenue (in millions of euros)		Q1 2020		Q1 2021		2021/2020 published change		2021/2020 comparable change
Gas & Services		5,191		5,103		-1.7%		+2.8%
Engineering & Construction		52		76		+44.5%		+48.5%
Global Markets & Technologies		127		155		+22.0%		+25.7%
TOTAL REVENUE		5,370		5,334		-0.7%		+3.8%

Group

Group revenue for Q1 2021 totaled 5,334 million euros, in a still challenging but improving global health and economic environment. Sales increased by +3.8% on a comparable basis with Q1 2020, which had been affected by the health crisis in Asia, and more specifically in China, and then in Europe from mid-March 2020. The consolidated revenue of Engineering & Construction recorded strong growth of +48.5% compared to lower activity due to the pandemic in Q1 2020. Global Markets & Technologies activity was up by +25.7%, driven by the ramp-up of biogas units and sales of equipment with high technological added-value. The Group’s published revenue was down slightly by -0.7% due to negative currency (-5.1%) and significant scope (-2.7%) impacts, partially offset by the energy impact (+3.3%).

Gas & Services

Gas & Services revenue totaled 5,103 million euros, up by + 2.8% on a comparable basis. All business lines posted growth compared to Q1 2020. Healthcare sales recorded a strong increase of +10.1%, with teams still mobilized in the fight against Covid-19. Large Industries revenue grew by +3.0% despite the impact of the winter storm on the Gulf Coast in mid-February, notably supported by the contribution of new production units. Industrial Merchant revenue returned to growth (+0.3%), supported by the pick-up in volumes, solid pricing of +1.6%, and strong activity in China. Sales in Electronics were up by +1.8% and by +2.8% excluding Equipment & Installation sales. Sales as published for Q1 2021 were down -1.7%, penalized by negative currency (-5.1%) and significant scope (-2.8%) impacts, partially offset by the energy impact (+3.4%). The significant scope impact reflects the disposal of Schülke in Healthcare and the reduction or sale of the Group’s stake in several non-strategic distributors in Japan in the second half of 2020.

Revenue by geography and business line (in millions of euros)		Q1 2020		Q1 2021		2021/2020 published change		2021/2020 comparable change
Americas		2,122		2,003		-5.6%		-1.5%
Europe		1,791		1,797		+0.4%		+4.5%
Asia-Pacific		1,139		1,150		+1.0%		+6.7%
Middle East & Africa		139		153		+10.4%		+17.5%
GAS & SERVICES REVENUE		5,191		5,103		-1.7%		+2.8%
Large Industries		1,294		1,445		+11.6%		+3.0%
Industrial Merchant		2,402		2,253		-6.2%		+0.3%
Healthcare		982		914		-6.9%		+10.1%
Electronics		513		491		-4.3%		+1.8%

Americas

Gas & Services revenue in the Americas region was down by -1.5% at 2,003 million euros in Q1 2021. In North America, after a strong month of January, sales were impacted as of mid-February by the historic winter storm on the Gulf Coast, notably in the Large Industries business. In Latin America, sales grew strongly in all businesses. Large Industries revenue was down by -4.2% overall in the region. Industrial Merchant recorded a sequential recovery, with a limited drop in sales of -3.2% compared to -5.2% in Q4 2020. Healthcare remains fully committed to the fight against the pandemic, notably to meet the exceptionally high demand for medical oxygen, and posted +13.3% growth in sales. Electronics revenue was close to stable (-0.6%).

• Large Industries revenue was down by -4.2%. In the United States, air gases volumes showed strong momentum in January, but the business was affected by the exceptional winter storm in the Gulf Coast in February, which also led to a peak in energy prices. As a result, the Cogeneration business recorded a strong rise in sales, but this did not offset lower industrial gases sales. In Latin America, oxygen and hydrogen volumes increased, notably with the ramp-up of new hydrogen units in Argentina and Mexico.
• Industrial Merchant sales (-3.2%) continued their sequential recovery that began in Q3 2020 despite the negative impact of the winter storm in the United States. Sales to the Food, Pharmaceuticals, Research and Retail & Craftsmen sectors were up, and sales to Metal Fabrication were improving, while the Construction sector remained sluggish. In North America, liquid gas sales returned to their 2019 level and cylinder gas volumes improved over the quarter. Volumes increased in Latin America, notably for cylinder gas in Brazil and liquid gas in Argentina. Pricing remained solid at +2.3%, with a neutral contribution from helium.
• Healthcare revenue rose by +13.3%, with exceptionally high medical oxygen sales in the region overall. In the United States, proximity care is gradually coming back to normal levels, with a progressive return of non-emergency surgery. Home Healthcare is growing strongly in Latin America across all therapies, and is picking up very gradually in Canada, where the reopening of clinics has allowed home care to be prescribed to new patients.
• Electronics sales were virtually stable at -0.6%: the strong growth of Carrier Gases is masked by weaker sales of Advanced Materials, as the recent price declines have not yet been offset by volume growth.

Europe

Revenue for the Europe region rose by +4.5% to 1,797 million euros. Industrial activities have returned to growth, with higher comparable sales compared to Q1 2019. Large Industries sales were stable compared to Q1 2020. Industrial Merchant activity showed a strong improvement, with sales growth of +3.6% in Q1 2021 compared to a -1.3% decline in Q4 2020. Representing more than a third of Gas & Services sales in Europe, Healthcare activities remained highly mobilized to fight against the pandemic, with sales up by +8.8%.

• Large Industries sales were stable despite oxygen volumes affected by customer shutdowns in Italy. Volumes to Steel and Chemicals customers rose, notably supported by the recovery of the automotive sector, in Germany in particular. Hydrogen volumes to the Chemicals sector increased and benefited from a favorable comparison basis in Germany. Refining demand remained weak despite a marked sequential improvement in the Benelux and Spain. Sales were up in Eastern Europe, benefiting from strong oxygen demand in Poland, the takeover of a hydrogen unit in Kazakhstan, and an exceptional sale in Russia.
• Industrial Merchant revenue grew by a strong +3.6% compared to a -1.3% decline in Q4 2020. Sales recovered to a higher level than in Q1 2019 for liquid gas and cylinder gas, with a strong sequential pick-up in volumes, especially in Italy, the Iberian Peninsula and Germany. Sales to the Metal Fabrication, Construction, Materials & Energy, Retail & Craftsmen, and Research sectors were up. Activity was still dynamic in Eastern Europe, with strong sales growth in Poland, Russia and Turkey. Pricing remained solid at +1.0%.
• Still very involved in the fight against Covid-19, the Healthcare business grew +8.8%. Growth in medical gas sales remained very strong, despite the already high basis of comparison in Q1 2020. Medical equipment sales were still high, but are gradually normalizing and will be compared to exceptionally high 2020 revenue in the coming quarters. The recovery is accelerating in Home Healthcare, supported in particular by the launch of therapies for diabetes in new regions and the development of sleep apnea treatments in Germany and the Iberian Peninsula. Sales from the Seppic subsidiary also grew strongly, thanks to high demand in Specialty Ingredients for the cosmetics sector and adjuvants for avian and swine vaccines.

Europe Air Liquide and BASF have signed a new long-term contract for the supply of oxygen and nitrogen to one of BASF’s largest European sites in Germany. Air Liquide will invest around 40 million euros in the construction of a state-of-the-art Air Separation Unit (ASU) at this flagship site for the production of battery materials for mobility. The ASU is planned to be operational in 2023. Air Liquide and Siemens Energy have signed a Memorandum of Understanding to initiate a European ecosystem for electrolysis and hydrogen technology. This Franco-German cooperation is supported by French and German Governments. Large hydrogen projects have already been identified to lay the groundwork for industrial scale electrolyzer systems. A joint application for funding of a large project under the European Union’s Green Deal was submitted and both partners jointly participate in the German IPCEI-scheme for hydrogen. Air Liquide and ArcelorMittal have signed a Memorandum of Understanding with the objective of implementing solutions to produce low-carbon steel in Dunkirk. The two companies are joining forces to transform the steel production process through the development of innovative solutions involving low-carbon hydrogen and CO2 capture technologies. This partnership is the first step towards the creation of a new low-carbon hydrogen and CO2 capture technologies ecosystem in this major industrial basin.

Asia-Pacific

Sales in the Asia-Pacific region grew strongly by +6.7% to 1,150 million euros, with all business lines recording growth in Q1. China (+12.8%) contributed significantly, and benefited from a favorable comparison basis with Q1 2020 greatly impacted by the health crisis. In the rest of the region, sales increased by +2.4%. Volumes recorded strong momentum in Large Industries, which posted a +8.7% rise in revenue.

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