Credit Investor Presentation - Air Liquide...2019/09/03 · H1 2019 Credit Investor A world leader in gases, technologies and services for Industry and Health Dec 2016 Dec 2017 Dec

Credit Investor Presentation

Sustained Sales Growth Combined with Step-up in Margin

H1 2019

2

Agenda

1 Air Liquide Today

2 H1 2019 Activity

3 Business Development

4 Group Credit Profile

5 2019 Outlook

6 Appendix

H1 2019 Credit Investor A world leader in gases, technologies and services for Industry and Health

3

Air Liquide Today



A New Dimension and Strong Fundamentals

80Countries

66,000 Employees

>3.6 mCustomers

and Patients

>€21 bnof Sales in 2018

>€2bn

>€4bn

>€46bn

Net Profitin 2018

Cash Flow in 2018*

Market Capitalization**

* cash flow from operating activities before changes of working capital** on December 31, 2018

4


A Strong Business ModelElectricity

Natural gas

Water

ESG(d)

Healthcare

Large Industries

Industrial Merchant

Electronics

Air Liquide Activities

Home healthcare

Patient

Filling

center

SMR(a)

ASU(b)

Filling center

On-site (c)

customer

Hospital

Bulk and Cylinder

Customer

Metal

Producer

Refinery

Chemical

Producer ESG(d)

Filling center

Electronics

Customer

ASU(b)

Mutualize assets

Liquefaction piggyback

Distributors, bolt-on acquisitions

1

2

3

(a) SMR: Hydrogen and carbon monoxide production unit (Steam Methane Reformer) (b) ASU: Air gases production unit (Air Separation Unit) (c) On-site: Small local production unit (d) ESG: Electronic Specialty Gases

5


A Balanced Footprint

Gas & Services revenue in 2018

of Group Revenue

96%

6

Large

Industries

28%

Electronics

9%

Healthcare

17%

Industrial

Merchant

46%

Asia-Pacific

22%

Africa

Middle-East

3%

Americas

40%

Europe

35%


0.0

0.5

1.0

1.5

2.0

2.5

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

0.0

1.0

2.0

3.0

4.0

5.0

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Regular and Sustained Performance - 2018

0

4 000

8 000

12 000

16 000

20 000

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

0

1 000

2 000

3 000

4 000

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Revenue (in €m) EPS(1) (in €)

Cashflow (in €m)

(1) Adjusted for the 2-for-1 share split in 2007, for attributions of free shares and for a factor of 0.974 reflecting the value of the rights of the capital increase completed in October 2016. (2) Calculated according to prevailing accounting rules over 30 years.

Dividend(1) (in € per share)

CAGRover 30 years

(2)

+5.8%CAGR

over 30 years(2)

+6.9%

CAGRover 30 years

(2)

+6.5%CAGR

over 30 years(2)

+8.3%

7


Financial Objectives

(1) Including Airgas scope effect in 2017 contributing +2% to the CAGR

+6% to +8%

CAGR 2016-2020(1)

>10%

In 2021-2022

Efficiencies >€300m on average/year(2)

+ Airgas synergies >$300m

(2) Upgraded from >€300m to >€400m as of 2019

Maintain

“A” range rating

Capex/Sales 2017-2020: 10% to 12%

8


A global

approach

Reduce our carbon intensity in 2025 vs. 2015 by

Act for clean industry by developing low-carbon solutions

Contribute to a new low-carbon society

CUSTOMERS

ASSETS

ECOSYSTEMS

Climate Objectives

-30%

AASSETS

CCUSTOMERS

EECOSYSTEMS

9

10

H1 2019 Activity


11

Very Solid Performance in H1 2019


(1) Group and G&S sales growth in H1 19(2) Operating Income Recurring on Sales; including +10bps from IFRS16; no energy impact in H1 2019

Balance SheetOperations

+70bps(2)Step-up in margin

+7.8%Sustained sales growth(1)

+12%(3)Recurring Net Profit growth

+30bps(4)ROCE ramping up

71%(5)Improved gearing at

(3) Excluding exceptional items: Fujian in 2019 and financial gain in 2018(4) Excluding Fujian exceptional impact in H1 2019; see reconciliation in appendix of Activity Report(5) Compared to June 2018 and adjusted for dividend seasonality; excluding lease liabilities (IFRS16)

+4.9%Comparable(1)

Sustained Sales Growth

12 H1 2019 Credit Investor A world leader in gases, technologies and services for Industry and Health

+2.5% FX Impact in H1 Neutral Energy Impact in H1

13

Robust Markets Through H2 2019


Markets

Chemicals

Oil & gas

Steel

Metal Fab.

Construction

Energy

Food & Pharma

Techno & Research

Integrated Circuit

IM

LI

EL

Outlook H2 2019

Strong Carrier Gases & Advanced Materials

Slightly lower E&I sales growth

Contrasted Chemicals

High demand from Oil & Gas in Europe

Active projects signing

Softer markets due to low investments in the short-term

Solid consumption-related sectors

Specific dynamic in China

14

Confirmed Growth Levers in Q2


Main Geographies contributingWBLs

+2%Industrial Merchant

+6%LargeIndustries

Healthcare +7%

+13%Electronics

Asia, Europe, Middle East

Asia, Europe

G&S comparable sales growth

Asia, Americas

Europe, Americas

15

Very Solid Level of Base Business


(1) Comparable growth based on 2016 adjusted sales

G&S quarterly growth analysis

Tech Air acquisition

Q2 - Steady Americas and Strong Europe

SalesH1 2019

€4,217m

SalesH1 2019

€3,611m

Americas – Solid HC, Pricing in IM

Europe – All WBLs Driving Growth



- high H2 for refining in Benelux- Ramp-Ups in Turkey and Kazakhstan

- high pricing- positive underlying volumes

- high organic growth in HHC

LI

IM

HC

EL

LI

IM

HC

- high O2 volumes- H2 Start-Up in Mexico

- strong pricing- contrasted end markets

- solid U.S. - strong HHC in South America

- still solid E&I- high Carrier Gases

Q2 – High Growth in Asia, Dynamic IM in AME

Asia – Strong LI and EL - O2 Ramp-Ups in China for Chemicals

- strong cylinder volumes in China- solid growth in South East Asia

- strong growth across the region- >+15% in Carrier Gases and Advanced

Materials- high E&I

AME – Major LI Turnaround

- major turnaround in South Africa

- continuous high growth in Middle-East,Egypt and India

SalesH1 2019

€2,405m

SalesH1 2019

€303m



LI

IM

EL

LI

IM

18

+70 bps OIR Margin improvement


H1 2019- including +10bps from IFRS 16 - no Energy impact

19 H1 2019 Credit investor A world leader in gases, technologies and services for Industry and Health

Pro-active Management of Pricing and Product Mix

Pricing aligned with cost inflation

Focus of sales teams

Leveraging competitive position on Helium market

Priority to added value services and products

Gas applications in China

Inteliox cylinders in US

IM pricing momentum

2017

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2018 2019

+0.5%

+1.2%

+2.1%

+3.3%

+4.1%

Continuous improvement

14k employees trained out of 30k targeted

Extended procurement scope

Investment in efficiencies

+63% vs. H1 2018


€197m Delivered Efficiencies in H1 19

Transformation

Closing of PG filling centers, logistics

Leveraging on 4 SIO centers

Business Support Centers extended Asia & Europe

Mutualization of WBLs technical teams Europe, Japan

3,000 Airgas trucks with on-board computers

Big data from LI production to IM logistics Italy

Argon production & supply chain US, Canada, France, Vietnam

Optimization of technicians’ time HHC Europe

ExamplesAccelerated momentum

Optimization


Continuous Portfolio Management

Airgas - Refrigerant activity

- Onsite safety services

- Ophthalmic protection equipment

- 1 active project

China- Fujian assets

- IM JV swap

Europe- Intega EL E&I

- 3 active projects

Focus on core business

Densification of operations: swap, bolt-on acquisitions

Accretive impact on margin

Contribution to ROCEimprovement

Divestitures over last 2 years

AME- 2 active projects

*

*

Strong Recurring Net Profit

+12.1%* Recurring Net profit

Excluding one-offs: - Fujian in 2019 - financial gain in 2018


23

ROCE Improvement

H1 2019

6%

8%

10%

Dec. 15 Dec. 16adjusted

Dec. 17 Dec. 18 Jun. 19 2021/222021/2022NEOS

objective

>10%

Airgasacquisition

10.3%

6.9%

ROCE – After tax

(1) Excluding positive impact on 2017 net profit of non-cash one-off items

(2) Excluding Fujian exceptional impact in H1 2019; see reconciliation in appendix of Activity Report

7.7%(1)8.0%

+30bps

Credit Investor A world leader in gases, technologies and services for Industry and Health

8.3%(2)

24

Dynamic Business Development

H1 2019 A world leader in gases, technologies and services for Industry and HealthCredit Investor

25

Very Active Business Development

InvestmentOpportunities(1)

12-month portfolio

H1 2019 Investment Decisions(1)

H1 2019Start-up/Ramp-up

Sales Growth Contribution

• Well-balanced by geography

• ~€20m average project size

• >1/3 of projects linked to climate objectives

• High level of signings

- 2 on U.S. pipeline network

- H2 energy

- Biomethane, Norway

• Acquisitions:

- Tech Air, major IM U.S. distributor

- Medidis in HHC Netherlands

• 5 Start-Ups in ELin Asia

• 1 CO2 purification plant in the U.S., circular economy

(1) See definitions in appendix


H1 2018 H1 2019

€2.7bn

H1 2018 H1 2019

€1.8bn

H1 2018 H1 2019

€185m

26

Steady Backlog > €2bn

See definitions in appendix


Dec 2016 Dec 2017 Dec 2018 Decisions Start-ups June 2019

Start-upsDecisions

Yearly Sales Backlogafter full Ramp-ups

€2.1bn €2.1bn

€2.2bn €2.2bn

€ 0.85bn

LIT/O

China


Confirmed Start-Ups Forecast

PemexT/O

Mexico

Major Start-Ups

Sales growth contribution - FY 2019

~€300m

2019

Q1 Q2 Q3 Q4

LIProjects

Middle-East

ELProjects

Asia

ELProjects

Asia

SteelProject

Europe

LIProjectArgentina

ELProjects

Asia

Note: T/O = Take Over

Steady Backlog >€2bn

Yearly Sales Backlogafter full Ramp-ups

€ 0.85bn

Group Credit Profile

H1 2019 Credit Investor A world leader in gases, technologies and services for Industry and Health28


1.61 1.59 1.63 1.70

3.302.60

0.000.200.400.600.801.001.201.401.601.802.002.202.402.602.803.003.203.403.603.804.004.204.404.604.805.005.205.405.605.806.006.206.406.606.807.007.207.407.607.808.008.208.408.608.809.009.209.409.609.8010.00

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

2012 2013 2014 2015 2016 2017 2018

Net Debt Net Debt / EBITDA

Net Debt ratios under control

DEBT/ EQUITY

58%

DEBT/ EQUITY

56%

DEBT/ EQUITY

53%

DEBT/ EQUITY

57%

DEBT/ EQUITY

80%

In €m

DEBT/ EQUITY

90%

Following the acquisition of

13,37112,535

DEBT/ EQUITY

69%

29

2,40x


Solid Cash Flow

A world leader in gases, technologies and services for Industry and Health

CASH FLOW

+14.8%

+8.6%

excl. IFRS 16

Gearing

69%

(1) June 30 gearings adjusted for dividend seasonality(2) Including acquisitions, transactions with minority shareholders, net of divestitures

Gearing(1)

79%

GEARING (1)(4)

71%

(3) Including share purchases and capital increases(4) Net debt excluding lease commitments (IFRS 16)

30

31

A Well-diversified Financing Structure


CurrenciesNet debt (as of Dec 31 2018)

RMB

3% EUR

45%

USD

37%

OTHERS

12%

JPY

3%

Sources Gross debt (as of June 30 2019)

BANK DEBT

7%

PRIVATE PLACEMENTS

OTHERS(1)

COMMERCIAL PAPER

BONDS

MARKET DEBT

93%

77%

8%

7%

1%

32

Visibility of Financing costs


Average cost of net debt

2.00%

3.00%

4.00%

5.00%

2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019

Constant3,0%3,0%

Fixed /Variable rates

(gross debt)

FIXEDRATE

88%

VARIABLERATE

12%

33

Diversified Market Debt Well Spread over Time

As of June 30, 2019


2038

2046

34

Enhanced Liquidity Profile

As of June 30, 2019


Group gross debt maturity profile

€4.6bn

Available liquidity

CONFIRMED CREDIT LINES

78%

• Holdings’ Confirmed Credit Lines are a mix of bilateralfacilities for €1.6bn and a €2bn Revolving Credit Facility

• “Adequate” liquidity profile (S&P)

- 1 syndicated credit line : €2bn

CASH ANDCASH EQUIVALENT

22%

- 12 bilateral facilities : €1,6bn

35

“A” Long Term Credit Rating Commitment


■ Long-term rating: A-

■ Short-term rating: A-2

■ Outlook: Positive on 22 July 2019

■ Rationale:

○ “L’Air Liquide has achieved internal cost savings andsynergies quicker than we expected following the Airgasacquisition. Moreover, the market environment forindustrial gases is supportive and the company hasimplemented a disciplined financial policy and thusimproved its balance sheet credit profile in the past years.”

○ “The outlook is positive because we may raise the rating inthe next 12-24 months, should we see adjusted FFO to debtimproving sustainably above 30%”.

■ Long-term rating: A3

■ Short-term rating: P-2

■ Outlook: Stable on 28 June 2019

■ Rationale:

○ “Air Liquide’s A3 rating reflects its leading position in theoligopolistic industrial gas market with a high degree ofrevenue visibility from long-term take or pay contracts. […]The rating furthermore benefits from a well spreadexposure across different customers, industries andgeographies as well as solid and stable profitability levels.”

○ “The stable outlook reflects our expectation that Air Liquidewill continue to reduce its leverage, albeit at a slow pace,and generate substantial cash over the next 18 months.”

36

2019 Outlook


37

2019 Outlook

Sustained sales growth

Step-up in margin

ROCE improvement

Very active business development


“Assuming a comparable

environment, Air Liquide is

confident in its ability

to deliver net profit growth

in 2019, calculated at

constant exchange rate”

2019H1 2019

38

Appendix


39

H1 2019 G&S Revenue Breakdown by Region

Americas

€4.2bn

Europe

€3.6bn Asia-Pacific

€2.4bn

Large Industries ElectronicsHealthcareIndustrial Merchant


€10,536m

40

Americas

Q2 Gas & Services Sales: €2,148m

INDUSTRIAL MERCHANT LARGE INDUSTRIES HEALTHCARE ELECTRONICS


(1)

(1) Refer to appendix for definitions(2) Excluding energy impact

(2)

• Strong pricing +4.8%

• Helium contributing to growth

• Contrasted end-markets:

- strong Food & Pharma

- lower Construction and Metal Fab in U.S., remaining solid in Canada

• High O2 volumes in U.S.

• Strong cogen in U.S. and Canada

• Start-up of T/O in Mexico

• Robust Metals in Canada

• Very solid medical gases in the U.S. for Proximity care

• Strong HHC in South America

• Very limited M&A

• High growth in Carrier Gases

• Still solid E&I

Note: T/O = Take Over

41

Europe


INDUSTRIAL MERCHANT LARGE INDUSTRIES HEALTHCARE


(1)

(2)


• High H2 sales for refining in Benelux

• Softer O2 volumes from steel customers

• Ramp-Ups in Turkey and Kazakhstan

• Further accelerated pricing at +3.8%

• Positive underlying volumes

• All major geographies contributing to growth

• High organic growth in HHC with strong diabetes activity in Nordics

• Very solid Hygiene

• Limited M&A

42

Asia-Pacific


INDUSTRIAL MERCHANT LARGE INDUSTRIES ELECTRONICS


(1)

(2)


• O2 Ramp-Ups in China

• High volumes for Chemicals

• Strong cylinder volumes in China

• High helium volume and priceacross the region

• Solid activity in South East Asia

• Strong growth in China, Korea, Singapore, Taiwan and very solid Japan

• >+15% sales growth in Carrier Gases and Advanced Materials

• High E&I sales, in particular in Singapore and China

43

Q2 - Resilient IM, High Growth in LI

SalesH1 2019

€2,904m

SalesH1 2019

€4,827m

Large Industries – High contribution from Ramp-Ups

Strong Oil & Gas in Benelux with high H2 volumes

Chemicals driven by Ramp-ups in China

Softer Metals in Europe

Industrial Merchant – Solid Performance



Stronger pricing at +4.1%

Contrasted end markets:- Strong Food & Pharma - Flat automotive- Construction and Metal Fab

. lower in the U.S.

. solid in Europe and Canada

. strong in China

44

Q2 - Strong HC, High Growth in EL

Healthcare – Organic Growth Strong HHC across all of Europe,

diabetes therapy in Nordics

Solid Medical Gases in Americas

Electronics – High Carrier Gases & Advanced Materials

>+13% growth in Carrier Gases; 2 Start-Ups

Double digit growth in Advanced Materials

Solid sales to Integrated Circuit Memory market

Strong FPD in China

SalesH1 2019

SalesH1 2019

€984m

€1,821m



45

Industrial Merchant Pricing


Americas

Europe

Asia-Pacific

Africa Middle-East

Q2 2019

H1 2019

+3.7%

+5.4%

+1.4%

+3.5%

+4.3%

+4.1%

+5.4%

+1.5%

+3.8%

+4.8%

TOTAL

INDUSTRIALMERCHANT

Q2 2019 – E&C and GM&T Activities


E&C

Sales to third parties

-12%

Order Intake

-8%

GM&T

+7%

+27%

Sales

Order Intake

€233m €134m

€83m €129m

47

Consolidated P&L


48

Consolidated Balance Sheet Simplified - In €m

* Including fair value of derivatives (1) Excluding lease liabilities (IFRS16) (2) Adjusted for dividend seasonality


(1)

(1)

(2)

49

Cash Flow Statement

* PPE: Property, plant and equipment.


50

Investment Cycle – Definitions

● Investment opportunities at end of the period

– Investment opportunities under consideration by the Group for decision within 12 months.

– Industrial projects with investment value > €5m for Large Industries and > €3m for other business lines.

– Includes asset replacements or efficiency projects. Excludes maintenance and safety.

● Investment backlog at end of the period

– Cumulated industrial investment value of projects decided but not yet started.

– Industrial projects with value > €10m, including asset replacements or efficiency projects, excluding maintenance and safety.

●Sales backlog

– Cumulated expected sales per year generated by the current investment backlog after full ramp-up.

●Decisions of the period

– Cumulated value of industrial and financial investment decisions.

– Industrial, growth and non-growth projects including asset replacements, efficiency, maintenance and safety.

– Financial decisions (acquisitions).


For further information, please contact:

Investor Relations

Aude Rodriguez + 33 (0)1 40 62 57 08

Ludmilla Binet + 33 (0)1 40 62 57 37

Muriel Légeron + 33 (0)1 40 62 50 18

Joseph Marczely + 1 610 263 8277

Group Financing and Rating

Jacques Molgo + 33 (0)1 40 62 57 75

Aude Revel + 33 (0)1 40 62 56 64

Thomas Lemée + 33 (0)1 40 62 58 25

www.airliquide.com Follow us on Twitter @AirLiquideGroup

L’Air Liquide S.A.

Corporation for the study and application of processes developed by Georges Claude

with registered capital of 2,361,913,658.50 euros

Corporate Headquarters:

75, Quai d’Orsay

75321 Paris Cedex 07

Tel : +33 (0)1 40 62 55 55

RCS Paris 552 096 281

A world leader in gases, technologies and services for Industry and HealthH1 2019 Credit Investor51

Credit Investor Presentation - Air Liquide...2019/09/03 · H1 2019 Credit Investor A world leader in gases, technologies and services for Industry and Health Dec 2016 Dec 2017 Dec

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