Air Liquide: First Half Results

• Outstanding H1 2021 performance:
• increase in sales and operating margin
• strong investment portfolio
• numerous initiatives related to sustainable development

PARIS–(BUSINESS WIRE)–Regulatory News:

Air Liquide (Paris:AI):

Key Figures (in millions of euros)	H1 2021	2021/2020 as published	2021/2020 comparable (a)
Group Revenue	10,846	+5.6%	+9.2%
of which Gas & Services	10,350	+4.3%	+8.0%
Operating Income Recurring (OIR)	1,948	+7.4%	+17.1%
Group OIR Margin	18.0%	+40 bps
Variation excluding energy		+100 bps
Gas & Services OIR Margin	20.0%	+40 bps
Variation excluding energy		+120 bps
Net Profit (Group Share)	1,239	+14.9%
Net Profit Recurring (Group Share) (b)	1,239	+11.3%
Earnings per Share (in euros)	2.63	+14.8%
Cash flow from operating activities before changes in net working capital	2,483	+4.8%
Net Debt	€12.0 bn
Return on Capital Employed after tax – ROCE	9.5%	+120 bps
Recurring ROCE (c)	9.0%	+60 bps

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

(b) Excluding exceptional and significant transactions that have no impact on the operating income recurring, see reconciliation in appendix.

(c) Based on the recurring net profit, see reconciliation in appendix.

Commenting on the 1^st half of 2021, Benoît Potier, Chairman and CEO of Air Liquide, said:

“This first half excellent performance reflects the momentum of our markets and the acceleration in sales in the 2^nd quarter. These exceeded the level seen in 2^nd quarter of 2019⁽¹⁾, across all regions and for all activities. Sales for the half year were close to 11 billion euros, marking strong growth of +9.2% on a comparable basis, versus the 1^st half of 2020.

In Gas & Services, the rebound in industrial activities was particularly strong in the 2^nd quarter, both in Large Industries and Industrial Merchant. Electronics also recorded strong growth at the end of the half year. The Healthcare business line remained at a high level, with teams strongly committed to the fight against the pandemic. Geographically speaking, markets are growing in all regions, although some countries remain vulnerable to the pandemic situation.

Engineering & Construction and Global Markets & Technologies activities posted strong growth.

The Group’s operating margin rose again sharply, by +100 basis points, excluding the energy impact. This improvement reflects the contribution of the structural margin improvement program, through ongoing recurring efficiency programs in the amount of 206 million euros, in line with the annual objective set at more than 400 million euros. It also illustrates the strong pricing policy, in particular in Industrial Merchant, active business portfolio management and is temporarily supported by the effects of the exceptional cost containment plan, which will diminish with the recovery in activity.

Net profit rose significantly by +14.9% to more than 1.2 billion euros. The cash flow to sales ratio also increased and reached 23%. The debt-to-equity ratio was down sharply versus the end of June 2020.

With almost half of the projects linked to the energy transition, 12-month investment opportunities are numerous and total 3 billion euros. Investment decisions for the half year were high at 1.9 billion euros, including the acquisition of the Sasol oxygen production plants in Secunda, South Africa. Solid, diversified and largely focused on the energy transition, the project backlog totaling 3.1 billion euros is particularly promising for future growth.

With a growth model combining financial performance with societal performance, Air Liquide is a major player in a sustainable future and is particularly committed to developing a low-carbon society through the reduction of CO₂ emissions and the implementation of hydrogen solutions.

In 2021, in a context of recovery in the second half of the year, Air Liquide is confident in its ability to further increase its operating margin and to deliver recurring net profit growth⁽²⁾, at constant exchange rates.”

(1) Due to the exceptional impact of the pandemic in the 1^st half of 2020, a comparison with 2019 1^st half sales has been introduced for context in reviewing 1^st half 2021 performance. The comparisons between 2021 and 2019 (over the half year or over the quarter) are calculated by adding 2020 and 2021 comparable effects. They are given as a reference point and do not constitute an alternative performance measure.

(2) 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, notably by providing a common basis of care coverage for 100% of its employees and to adhere to best governance practices. Launch of its first green bond issue, raising 500 million euros dedicated to several sustainable development projects, notably in hydrogen and biogas. Partnership with Rothschild & Co and the Solar Impulse Foundation to launch a 200-million-euro investment fund to support the development of high-potential SMEs working on environment-friendly solutions.   Hydrogen: Memorandum of understanding signed with Airbus and Groupe ADP in preparation for the arrival of hydrogen at airports by 2035 as part of the development of the hydrogen-powered aircraft. Memorandum of understanding signed with Siemens Energy to develop high-capacity electrolyzers in Europe and to sustainably produce low-carbon hydrogen. 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. Supply and installation of eight hydrogen distribution units for the Daxing Station in Beijing, China — the largest hydrogen station in the world. Completion of the first phase of the construction of ultra-high purity low-carbon hydrogen electrolyzers in Taiwan.   Healthcare: Continued mobilization of teams to the fight against the pandemic all over the world. Contributing to establishing an airbridge to supply oxygen to Indian hospitals.   Industry & Decarbonization: Completed the acquisition of 16 Sasol air separation units (ASUs) in Secunda, South Africa, with the aim to reduce CO2 emissions linked to oxygen production by 30% to 40% over the next 10 years. Memorandum of understanding signed by Air Liquide, Borealis, Esso S.A.F., TotalEnergies and Yara International ASA to develop a CO2 capture and storage infrastructure and contribute to the decarbonization of the Normandy industrial basin. Memorandum of understanding signed with ArcelorMittal, aimed at implementing solutions to produce low-carbon steel in Dunkirk. First long-term Power Purchase Agreement for renewable electricity in the Netherlands, for a total capacity of 25 MW. 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. ALMTG will operate these production plants for KazMunayGas under a long-term contract. Long-term investments and contracts to supply industrial gases. In China with BOE, a world leader in flat panels and an Internet of Things specialist, as well as with a major producer of flash memory chips, and in steel with Shagang Group. In Russia with the Severstal steel company. Together with the chemicals company BASF, for its new battery materials site in Germany, and in South Korea to increase hydrogen and carbon monoxide volumes by 20% in the Yeosu industrial complex.

Group revenue for the 1^st half of 2021 totaled 10,846 million euros, up +9.2% on a comparable basis with the 1^st half of 2020 which was affected by the public health crisis. Sales posted strong comparable growth of +15.2% during the 2^nd quarter of 2021 and were up +6% versus the 2^nd quarter of 2019. Engineering & Construction consolidated revenue was up +65.9% in the 1^st half on a comparable basis and Global Markets & Technologies was up +34.9%. The Group revenue was up +5.6% as published in the 1^st half despite the strong negative currency impact (-4.8%) and significant scope impact (-2.8%), which were partly offset by the energy impact (+4.0%).

Gas & Services revenue amounted to 10,350 million euros during the 1^st half, representing an increase of +8.0% on a comparable basis. All business lines enjoyed strong growth, and sales in the 2^nd quarter of 2021 were higher than those in the 2^nd quarter of 2019 across all business lines and all regions. Sales as published for the 1^st half of 2021 were up by +4.3% despite the unfavorable currency impact (-4.9%) and significant scope impact (-3.0%), which were partially offset by the energy impact (+4.2%). The significant scope impact reflects the sale of Schülke in Healthcare and the reduction or sale of the Group’s stakes in several non-strategic distributors in Japan. These sales will no longer have an impact during the 2^nd half of 2021.

• Gas & Services revenue in the Americas totaled 4,059 million euros, up +7.3% on a comparable basis with the 1^st half of 2020 which had been down -5.1%. In North America, all the business lines returned to a close or higher level in the 2^nd quarter than the same period in 2019. In Latin America, sales enjoyed strong growth in all business lines in the 1^st half. Across the Americas region, Large Industries revenue was up +7.7% on a comparable basis and Industrial Merchant revenue was up +6.1%. Healthcare sales increased by +16.9% driven by the medical oxygen demand and the pick-up in activity in proximity care and Home Healthcare. Electronics revenue was up +2.7%, thanks to the strong momentum of Carrier gases sales.
• Revenue in Europe amounted to 3,657 million euros and was up +7.4% on a comparable basis. Sales in industrial activities were higher than those in the 1^st half of 2019. Large Industries sales (+4.1%) enjoyed strong activity in the Steel and Chemicals sectors. Industrial Merchant sales were up +11.3% and reached a higher level than in the 1^st half of 2019. Healthcare (+6.4%) remains committed to fighting the pandemic and has seen a pick-up in the Home Healthcare business and surgical activities in hospitals.
• Sales in Asia Pacific increased by +8.7% on a comparable basis and totaled 2,326 million euros. All business lines and regions posted growth in the 1^st half of 2021, thanks to a favorable basis of comparison with the 1^st half of 2020 which was down -2.1% due to the public health crisis. Volumes were strong in Large Industries, which enjoyed an increase in revenue of +9.8%. The strong growth in Industrial Merchant sales (+12.3%) was mainly driven by high activity in China which posted double-digit volume growth compared with the 1^st half of 2019. In Electronics (+4.5%), Carrier gases contributed significantly to growth and benefited from the ramp-up of several units.
• Revenue in the Middle East and Africa region stood at 308 million euros, up by +18.9% on a comparable basis over the 1^st half.

In the 1^st half, Healthcare sales posted significant growth of +9.4% on a comparable basis, with the teams still fully committed to the fight against Covid-19. Large Industries revenue was up +7.3% thanks mainly to the contribution from new facilities and the strong demand from the Steel and Chemicals sectors. Industrial Merchant sales were up +8.5% driven by a pick-up in sales volumes, strong activity in China and a solid +1.9% pricing impact over the half year. Electronics sales increased by +4.7%, with Carrier gases sales driven by the ramp-up of new production units.

Engineering & Construction consolidated revenue were up +65.9% and stood at 169 million euros in the 1^st half of 2021. Order intake totaled 542 million euros, thanks to positive momentum in Asia and the energy transition.

Global Markets & Technologies sales totaled 327 million euros, with strong comparable growth of +34.9% supported notably by the biogas activity and high value added technological equipment sales.

Efficiencies¹ totaled 206 million euros in the 1^st half, up +3.5% and in line with the annual target of more than 400 million euros. Moreover, the exceptional cost containment plan launched in response to the health crisis was extended and adapted to the gradual recovery in activity. The impact of these exceptional measures is expected to fall sharply during the 2^nd half, in line with the expected recovery in activity.

Group Operating Income Recurring (OIR) reached 1,948 million euros in the 1^st half of 2021, an increase of +7.4% and of +17.1% on a comparable basis, which is significantly higher than the comparable sales growth of +9.2% over the half-year.

The operating margin (OIR to revenue) stood at 18.0%, representing a marked improvement of +100 basis points excluding the energy impact compared with the 1^st half of 2020. Gas & services operating margin stood at 20.0%, a significant improvement of +120 basis points excluding the energy impact. On a reported basis, operating margin improvement was limited due to a significant increase in energy prices during the 1^st half of 2021, which was contractually passed through to customers and therefore had a dilutive impact on the published margin.

The net profit (Group share) amounted to 1,239 million euros in the 1^st half of 2021, an increase of +14.9% as published and +23.1% excluding the currency impact. The recurring net profit (Group share)⁽²⁾ increased by +11.3% and +19.3% excluding the currency impact. Net earnings per share stood at 2.63 euros per share and rose sharply by +14.8% compared with 2.29 euros in the 1^st half of 2020.

Cash flow from operating activities before changes in net working capital amounted to 2,483 million euros during the 1^st half of 2021, representing an increase of +4.8% as published and +10.0% excluding the currency impact. This corresponds to a high level of 22.9% of sales compared with 23.1% in the 1^st half of 2020, improving by +70 basis points excluding the energy impact.

Gross industrial capital expenditure amounted to 1,439 million, an increase of +9.0% as published compared with the 1^st half of 2020 and of +14.1% excluding the currency impact. This represented 13.3% of sales, reflecting strong project development. Financial investments were at 569 million euros, including approximately 480 million euros for the acquisition of the 16 Sasol air separation units in South Africa.

The net debt-to-equity ratio, adjusted for the seasonal effect of the dividend payment, stood at 56.1%, down sharply compared with 64.5% at the end of June 2020.

In the 1^st half of 2021, industrial and financial investment decisions totaled 1,908 million euros, up sharply compared to 1 331 million euros in the 1^st half 2020.

The investment backlog remained high at 3.1 billion euros, evenly distributed across various business sectors and geographies.

The additional contribution to revenue of unit start-ups and ramp-ups increased, totaling 130 million euros over the 1^st half of 2021. For the year 2021, this contribution is estimated at 320 million euros, including 70 million from the acquisition of the 16 Sasol units in South Africa.

The 12-month portfolio of investment opportunities stood at 3.0 billion euros at the end of June 2021. The energy transition represents 45% of this portfolio and includes several projects for low-carbon hydrogen production by electrolysis, hydrogen liquefaction and carbon capture and storage (“CCS”) in Large Industries.

The return on capital employed after tax (ROCE) was 9.5% for the 1^st half of 2021. Recurring ROCE³ stood at 9.0%, an increase of +60 basis points compared with the 1^st half of 2020.

Table of Contents

H1 2021 PERFORMANCE 7

Key Figures 7

Income Statement 8

Change in Net debt 16

INVESTMENT CYCLE 17

RISK FACTORS 19

OUTLOOK 19

APPENDICES 20

Performance indicators 20

Calculation of performance indicators (Semester) 21

Calculation of performance indicators (Quarter) 24

2^nd quarter 2021 revenue 24

Geographic and segment information 25

Consolidated income statement 25

Consolidated balance sheet 26

Consolidated cash flow statement 27

H1 2021 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.

Due to the exceptional impact of the pandemic in the 1^st half of 2020, a comparison with 2019 1^st half sales has been introduced for context in reviewing 1^st half 2021 performance. The comparisons between 2021 and 2019 (over the half year or over the quarter) are calculated by adding 2020 and 2021 comparable effects. They are given as a reference point and do not constitute an alternative performance measure. The comparable growths mentioned below are calculated compared to the same period of 2020 except when 2019 is mentioned.

Key Figures

(in millions of euros)	H1 2020	H1 2021	2021/2020 published change	2021/2020 comparable change (a)
Total Revenue	10,273	10,846	+5.6%	+9.2%
Of which Gas & Services	9,920	10,350	+4.3%	+8.0%
Operating Income Recurring (OIR)	1,813	1,948	+7.4%	+17.1%
Group OIR Margin	17.6%	18.0%	+40 bps
Variation excluding energy			+100 bps
Other Non-Recurring Operating Income and Expenses	(92)	(40)
Net Profit (Group Share)	1,078	1,239	+14.9%
Net Profit Recurring (Group Share) (b)	1,113	1,239	+11.3%
Earnings per Share (in euros)	2.29	2.63	+14.8%
Cash flow from operating activities before changes in net working capital	2,371	2,483	+4.8%
Net Capital Expenditure (c)	1,309	1,913
Net Debt	€13.2 bn	€12.0 bn
Net Debt to Equity ratio (d)	64.5%	56.1%
Return on Capital Employed after tax – ROCE	8.3%	9.5%	+120 bps
Recurring ROCE (e)	8.4%	9.0%	+60 bps

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

(b) Excluding exceptional and significant transactions that have no impact on the operating income recurring, see reconciliation in appendix.

(c) Including transactions with minority shareholders.

(d) Adjusted to spread the dividend payment in 1^st half out over the full year.

(e) Based on the recurring net profit, see reconciliation in appendix.

Income Statement

REVENUE

Revenue (in millions of euros)	H1 2020	H1 2021	2021/2020 published change	2021/2020 comparable change
Gas & Services	9,920	10,350	+4.3%	+8.0%
Engineering & Construction	104	169	+61.9%	+65.9%
Global Markets & Technologies	249	327	+31.6%	+34.9%
TOTAL REVENUE	10,273	10,846	+5.6%	+9.2%

Revenue by quarter (in millions of euros)	Q1 2021	Q2 2021
Gas & Services	5,103	5,247
Engineering & Construction	76	93
Global Markets & Technologies	155	172
TOTAL REVENUE	5,334	5,512
2021/2020 Group published change	-0.7%	+12.4%
2021/2020 Group comparable change	+3.8%	+15.2%
2021/2020 Gas & Services comparable change	+2.8%	+13.7%

Group

Group revenue for the 1^st half of 2021 totaled 10,846 million euros. This represented an increase of +9.2% on a comparable basis with the 1^st half of 2020 which was affected by the public health crisis. Sales posted strong growth of +15.2% during the 2^nd quarter of 2021 and were up +6% versus the 2^nd quarter of 2019. Engineering & Construction consolidated revenue was up +65.9% compared with an activity level which was slower due to the pandemic during the 1^st half of 2020. Global Markets & Technologies was up +34.9%, mainly driven by strong momentum in the biogas business. The Group revenue was up +5.6% as published despite the strong negative currency impact (-4.8%) and significant scope impact (-2.8%), which were partly offset by the energy impact (+4.0%).

Gas & Services

Gas & Services revenue amounted to 10,350 million euros during the 1^st half, representing an increase of +8.0% on a comparable basis. All business lines enjoyed strong growth, and sales in the 2^nd quarter of 2021 were higher than those in the 2^nd quarter of 2019 across all business lines (Large industries +6%, Industrial Merchant +1%, Healthcare +16% and Electronics +8%) and all regions (Americas +4%, Europe +7%, Asia-Pacific +6%, Middle-East and Africa +8%). Healthcare sales posted significant growth of +9.4%, with the teams still fully committed to the fight against Covid-19. Large Industries revenue was up +7.3% thanks mainly to the contribution from new facilities and the strong demand from the Steel and Chemicals sectors. Industrial Merchant sales were up +8.5% driven by a pick-up in volumes, strong activity in China and a solid +1.9% pricing impact over the half year. Electronics sales increased by +4.7% and by +5.2% excluding Equipment & Installations sales, with Carrier gases sales driven by the ramp-up of new units. Sales as published for the 1^st half of 2021 were up by +4.3% despite the unfavorable currency impact (-4.9%) and significant scope impact (-3.0%), which were partially offset by the energy impact (+4.2%). The significant scope impact reflects the sale of Schülke in Healthcare and the reduction or sale of the Group’s stakes in several non-strategic distributors in Japan. These sales will no longer have an impact during the 2^nd half of 2021.

Revenue by geography and business line (in millions of euros)	H1 2020	H1 2021	2021/2020 published change	2021/2020 comparable change
Americas	3,975	4,059	+2.1%	+7.3%
Europe	3,440	3,657	+6.3%	+7.4%
Asia-Pacific	2,236	2,326	+4.0%	+8.7%
Middle East & Africa	269	308	+15.0%	+18.9%
GAS & SERVICES REVENUE	9,920	10,350	+4.3%	+8.0%
Large Industries	2,430	2,916	+20.0%	+7.3%
Industrial Merchant	4,509	4,595	+1.9%	+8.5%
Healthcare	1,959	1,835	-6.3%	+9.4%
Electronics	1,022	1,004	-1.7%	+4.7%

Americas

Gas & Services revenue in the Americas totaled 4,059 million euros in the 1^st half of 2021, up +7.3% compared with the 1^st half of 2020 which had been down -5.1%. In North America, all the business lines returned to a close or higher level in the 2^nd quarter than the same period in 2019. In Latin America, sales enjoyed strong growth in all business lines. Across the Americas region, Large Industries revenue was up +7.7%, while Industrial Merchant revenue was up +6.1%. Healthcare sales increased by +16.9% driven by exceptionally high medical oxygen demand due to the pandemic and the pick-up in activity in proximity care in the United States and Home Healthcare in Canada and Latin America. Electronics revenue was up +2.7%, thanks to the strong momentum of Carrier gases sales.

Americas Gas & Services H1 2021 Revenue

• Large Industries revenue increased by +7.7% during the 1^st half. In the United States at the end of June, air separation units were operating at full capacity, driven by the strong oxygen demand for Steel and Chemicals following the slowdown caused by the winter storm on the Gulf Coast in February. Hydrogen demand for Refining increased during the 2^nd quarter and volumes returned to levels close to those seen in the 2^nd quarter of 2019. In Latin America, oxygen and hydrogen volumes were up markedly, due mainly to the ramp-up of new hydrogen units in Argentina and Mexico.
• Industrial M

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