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Air Liquide CEO discusses 2015 performance

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Hydrocarbon Engineering,

Air Liquide has released its fiscal year results for 2015. Chairman & CEO Benoît Potier discussed the group's performance with EuroBusiness Media (EBM) in a recent interview.

EBM: How did the group perform in 2015?

Air Liquide achieved a solid performance. The group once again delivered growth in revenue, operating margin, and net profit, in the context of slower global growth in 2015. In addition, we further improved our competitiveness, with efficiency gains of nearly €300 million that contributed to the improvement in margin. Lastly, the group’s balance sheet remains as strong as ever.

Also noteworthy over the period, a positive currency impact on group sales, partly offset by the negative impact of decreased energy prices.

Globally, this resulted in another increase in net profit for the group, in line with our annual objective. Lastly, in addition to performance, the year was marked by major initiatives.

EBM: We’ll come back to that later, but before that can you tell us what the year’s key figures are?

Yes, of course. The reported sales growth, for both the group and G&S, is around +7% versus 2014. On a comparable basis, Gas & Services sales rose nearly +4%. The group’s operating margin increased, reaching 17.6%, an increase of +50 basis points. Net profit above €1.7 billion is up +5.5%. Cash flow before Working Capital Requirement is up +7%. It allowed us to finance capital expenditures of €2.3 billion while maintaining a moderate debt to equity ratio at 57%. So, as you can see, a performance in 2015 and a balance sheet which stay very solid, and allow us to propose another increase in dividend.

EBM: What can you tell us about the different geographies?

From a geographic perspective, sales growth was driven by the progressive recovery in Europe and by the developing economies. Indeed, Europe benefited from the good development of Healthcare and an improvement in certain industrial sectors in the second half of the year. North America was affected by the slowdown in sectors related to the oil and gas production and metal fabrication. Asia Pacific pursued its steady growth, driven by Japan’s resilience and continued sustained growth in China. Africa/Middle East benefited from the startup of Yanbu, our large hydrogen production site in Saudi Arabia.

EBM: Could you please tell us about your activities and your investments?

Growth in Gas & Services sales improved from quarter to quarter, over the year.

Large Industries progressed by +5%, driven by startups and ramp-ups of production units in Germany, Benelux, China, and Saudi Arabia. Volumes of Hydrogen rose substantially in 2015, thanks to Yanbu, and air gas volumes that remain high in Asia.

Industrial Merchant revenue was down -1%, with more contrasted sales: certain industrial sectors improved slightly in Europe in the second half of the year, while in North America, sectors linked to oil and gas production and related services slowed down. In Asia, Chinese demand remains robust, notably for air gases.

Healthcare sales were solid, up +8%, with progression observed in both advanced and developing economies. Home healthcare demand remained strong, and hygiene sales were particularly dynamic. Targeted acquisitions also contributed to this solid performance.

Finally, growth remained robust in Electronics, +11%, with vigourous demand in Japan, China, and Taiwan. All our product lines grew, in particular advanced molecules at +30%.

Engineering & Construction revenue was stable compare to last year.

Lastly, the new Global Markets & Technologies activity, one of the year’s major initiatives, progressed +11% on a comparable basis.

EBM: And regarding investments?

Investment-wise, the group pursued its development initiatives. In 2015, we decided €2.4 billion in investments in growing markets notably thanks to new contract wins for industry and to new acquisitions in Healthcare and we took initiatives in innovation and technologies, with some world premieres, in particular in the environment field.

So all in all, the year 2015 was solid, in terms of revenue growth as well as projects that hold promise for future growth.

EBM: Earlier you mentioned major initiatives, could you tell us more about them?

Of course. In 2015, we have taken two important initiatives for the future of the group, which are fully consistent with our strategy for profitable growth over the long term. The first, internally, concerns the reinforcement of our innovation strategy, with the creation of the Global Markets & Technologies business. This new activity will enable the acceleration of innovation and make its rollout more efficient. It focuses on new markets that require a global approach, such as the energy transition, and on markets such as space, aerospace, extreme cryogenics or the maritime sector.

The second major initiative is, of course, the signature of the merger agreement for the acquisition of Airgas, the leading provider of packaged gases and associated products in the United States. This acquisition is major for several reasons: above all, the industrial and market rationale is very strong. So, once the acquisition is completed following the approval process, Air Liquide will be ideally positioned to serve our customers efficiently, in a competitive way thanks to a stronger presence in the US market, the world’s largest market for industrial gases. Second, we will enlarge our customer base, adding more than a million new customers. Third, we will benefit from a unique platform, for accelerating the digital transformation of our Industrial Merchant business, and deploying our innovations and technologies in the United States. And lastly, this acquisition will reinforce the global leadership of Air Liquide, with a number 1 position in North America, a position we already hold in Europe, in Africa/Middle East, and in Asia Pacific. Once completed, this acquisition will be the most important in the group’s history and will constitute a milestone in its development and transformation.

EBM: And finally what is your roadmap for 2016 and what is the outlook for the medium term?

For 2016, our priorities are to complete the acquisition of Airgas, then the integration process; to successfully execute our current projects, including the reinforcement of our competitiveness; to launch our new company programme for 2016 - 2020; and to materialise our innovation efforts in our offers. All the above in order to generate profitable growth and achieve our objectives.

The level of investment, the numerous projects under way, the group’s strong capacity to innovate, and the commitment of all our employees around the world – all these factors allow me to be confident in the group’s growth prospects over the medium term.

Adapted from press release by Rosalie Starling

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