* Variation Q3 2016/Q3 2015 excluding currency and energy impact
Commenting on the third quarter of 2016, Benoît Potier, Chairman and CEO of Air Liquide, said:
“This quarter has been characterized by the successful refinancing of the Airgas acquisition, the disposal of certain assets in the United States executed under excellent conditions, and the operational merger of Airgas since October 1st. In addition, for the first time, Airgas contributed to the Group's performance over a full quarter.
In the context of continued moderate global growth, Gas & Services sales posted solid growth, primarily driven by ramp-ups of our Large Industries plants, the strength of the Healthcare business and by the developing economies, in particular China. The Group continues to generate recurring efficiency gains, which contribute to operational performance.
Today, a new phase begins. Priorities include delivering Airgas synergies in accordance with our plan and continued implementation of NEOS, our corporate program. The investment backlog, amounting to 2.2 billion euros, and innovations aimed at enriching the customer experience, will contribute to growth in the coming years.
Following the completion of the acquisition of Airgas, Air Liquide is confident in its ability to generate growth in 2016, both in net profit and net earnings per share, including the effect of the capital increase finalized in early October.”
Q3 2016 Group revenue, which includes Airgas sales for the full quarter, reached 5,077 million euros. It rose +23.9% on a reported basis and +26.8%, excluding the currency and energy impact, compared with third quarter 2015. Excluding Airgas and the currency and energy impact, Group revenue fell slightly by -1.1%, impacted by slower sales in Engineering & Construction.
Gas & Services sales, which reached 4,783 million euros, were up +29.9% on a reported basis and +33.1% as adjusted for currency and energy impact and compared with third quarter 2015. Excluding Airgas, comparable1 growth is +2.0%. The unfavorable currency effect (-0.4%) and the negative impact of energy prices (-2.8%) this quarter were attenuated as compared with the first half of 2016.
Developing economies posted solid growth, with Gas & Services sales up +6.7% on a comparable basis.
Overall, the comparable growth in Gas & Services sales was driven by Large Industries and Healthcare in the third quarter:
- Large Industries, up +5.0%, benefited from the ramp-up of our production units, notably in Eastern Europe, North and South America, and Asia-Pacific. Thanks to high volumes, Large Industries sales progressed in China by nearly +10%. Finally, revenue growth was solid in Middle East & Africa.
- Following the acquisition of Airgas, Industrial Merchant sales rose by nearly +80% during the quarter. Excluding Airgas, revenue fell by -2.0% on a comparable basis. Industrial Merchant revenue was contrasted by country and market segments.
Europe, penalized by the negative impact of working days over the third quarter, continued to see bulk volumes progress while the cylinder business remained weak, in particular for acetylene sales. In North America, markets related to energy and metal fabrication are still down, while Agri-Food and Pharmaceuticals sectors continue to grow. The activity in this region posted a slight positive inflection over the third quarter as compared to average sales over the prior 12 months. In Asia Pacific, growth was driven by higher volumes in China and Japan. The overall price effect remains low at +0.2% against a global environment of low inflation.
- Electronics, impacted this quarter by decreased equipment and installations sales, was quasi-stable at -0.5%. Excluding these sales, growth was +3.0%, marked by stable sales of specialty gases after a period of strong increase. Electronics maintains strong fundamentals; sales of carrier gases are solid and benefit from ramp-ups of new units. Demand for advanced materials in Asia remains dynamic, with growth of more than +30% in sales of this product line.
- Healthcare revenue rose +19.1% including the contribution of Airgas via its sales of medical gases to hospitals in the United States, and excluding currency effect. On a comparable basis, growth was robust at +5.2%, boosted by high demand for home healthcare services and strong hygiene and specialty ingredient sales, which rose +12%.
Engineering & Construction revenue reached 105 million euros, a sharp reduction compared with the third quarter of 2015, adversely impacted by the slowdown in large-scale projects related to energy and by the low number of new projects.
For Global Markets & Technologies, revenue reached 73 million euros, an increase of +10.6% on a comparable basis, driven by sales of biogas and maritime markets.
The Group, which continues to reinforce its competitiveness, has generated 223 million euros in recurrent efficiency gains over the first nine months of 2016, contributing to operational performance. In addition to these efficiencies, the first benefits of the Airgas synergies recorded this quarter will ramp-up in the fourth quarter. The Airgas integration process is well underway and the full Airgas cost synergies are expected to be delivered by the end of 2018, earlier than initially anticipated.
1 Adjusted for currency, energy (natural gas and electricity) and significant M&A impacts (Airgas)
Q3 2016 revenue
1 Adjusted for currency, energy, and significant M&A impact (Airgas).