Third quarter 2017: Accelerating comparable growth in Gas & Services sales 2017 objective confirmed
* Change as published. 2016 restated, Welding and Diving activities reported as discontinued operations.
** Excluding currency and energy (natural gas and electricity) impacts. Variation Q3 2017 vs. restated Q3 2016, adjusted as if on January 1, 2016 Airgas had been fully consolidated and the divestments required by US competition regulators had been completed.
Commenting on the third quarter of 2017, Benoît Potier, Chairman and CEO of Air Liquide, said:
“During this quarter, Gas & Services sales growth accelerated on a comparable basis, supported by strong activity in all business lines. The ramp-up in activity in Industrial Merchant and the high growth in Electronics were confirmed over the period. In terms of geography, growth was driven in particular by developing economies and Asia-Pacific with very strong sales in China. Activity in North America was slightly impacted by the hurricanes which hit the United States, whereas Europe posted solid growth. The third quarter was also marked by a negative currency impact, which offset the positive impact of the first six months of the year.
The Group continued to generate operational efficiency gains, in addition to Airgas synergies which are ahead of our 2017 forecasts. Thanks to a good level of cash flow, debt now stands below 15 billion euros.
The Group can also rely on its 2.1 billion euro investment backlog, as well as on its innovations and new markets, to fuel future growth, as highlighted by the solid performance of the Global Markets & Technologies activity.
Assuming a comparable environment, Air Liquide is confident in its ability to deliver net profit growth in 2017.”
Q3 2017 Group revenue reached 4,944 million euros, an increase of +3.5% on a comparable basis as compared with Q3 2016. Revenue was nearly flat at -0.3% as published, impacted by a currency impact that turned negative this quarter (-4.0%). The positive energy impact softened to +1.0% this quarter.
Gas & Services revenue, which totaled 4,787 million euros, was up +4.0% on a comparable basis versus Q3 2016. This reflects an acceleration in sales growth compared with the previous two quarters, despite the limited impact of the hurricanes in the United States. Excluding this impact, comparable growth reached +4.4%. Gas & Services revenue was stable at +0.1% as published, affected by the negative currency impact.
The developing economies posted strong growth, with Gas & Services revenue up +10.4% on a comparable basis.
Overall, all Gas & Services business lines grew this quarter on a comparable basis:
- The ramp-up in activity continued in Industrial Merchant with growth at +4.3%. Sales, which were up in all regions, were particularly strong in developing economies. In Europe, sales growth of +4.2% was driven by increased bulk and cylinder volumes, as well as a positive price impact. Business momentum was strong in Italy, Iberia, France and Benelux. In North America, the recovery was confirmed, notably with higher volumes. In the United States, sales improved in almost all market segments, whereas in Canada they were driven by the energy and metal fabrication sectors. Asia-Pacific enjoyed strong sales in China, where growth exceeded +15%, due to an increase in both prices and volumes. At the global level, the price impact for the World Business Line was positive at +1.3%.
- Large Industries revenue increased by +2.0%. Excluding the impact of hurricanes in the United States, sales were up +3.2%. The situation in North America was contrasted. Activity in the United States was impacted by customer unit shutdowns due to the hurricanes, in particular refineries, whereas sales growth in Canada was driven by greater demand for oxygen from steel producers. In Europe, hydrogen demand increased at the end of the quarter, however revenue for the region remained impacted by the cessation of operations in Ukraine. Sales in Asia-Pacific grew markedly (+8.1%) due to production unit start-ups in China and strong customer demand in both China and South Korea. Finally, in the Middle-East, growth continued to be driven by the hydrogen production units in Yanbu, Saudi Arabia.
- Electronics sales, which were up +7.2%, saw a strong growth level, thanks in particular to high demand in China and Taiwan. All regions contributed to growth. Carrier gases sales remained robust while equipment and installation sales were up slightly this quarter. Demand for Advanced Materials continued to be sound with revenue growth in this product category of almost +30%.
- Healthcare continued its steady growth, up +4.5%. It benefited from sustained demand in home healthcare services and robust specialty ingredients and medical equipment sales. Activity was particularly strong in developing economies, in particular in South America, which posted double-digit revenue growth. Acquisitions also contributed to growth in countries such as in Canada or Japan.
Engineering & Construction revenue totaled 75 million euros this quarter, down -25.1% on a comparable basis, as a result of the low level of order intake in 2016. Order intake since the beginning of 2017 has improved significantly compared with last year.
Global Markets & Technologies revenue amounted to 82 million euros this quarter. This represented an increase of +13.2% on a comparable basis, in line with the two previous quarters. Sales were particularly strong in the maritime and biogas sectors. Moreover, the Group made an acquisition in the biogas sector in Norway this quarter.
The Group continues to strengthen its competitiveness. Cumulated operational efficiency gains since the beginning of the year reached 229 million euros, in line with the annual target of more than 300 million euros. Airgas acquisition synergies are a few months ahead of annual forecasts thanks to quicker project execution. The Group has therefore revised its synergies target upward for 2017 and now forecasts by year end 2017 a cumulated delivery of 195 million US dollars in synergies since the acquisition, versus the 175 million US dollars previously announced.
Cash flow from operating activities before changes in Working Capital Requirements increased and amounted to 2.9 billion euros at September 30, 2017, allowing the net debt level to be brought back below 15 billion euros.