gasworld is now including analysis of quarterly performance of a number of engineering, equipment and technology companies. Engineering & equipment business accounts for 14% of Linde Group sales and 3% for Air Liquide and Air Products.
Linde has a broad-based engineering activity with nearly 30% of business in air separation plants, one third in natural gas plants, over 15% in olefins and over 10% from hydrogen and syngas plants. Air Liquide engineering business primarily in air gases and HyCO, but also conversion processes to produce syngas, synthetic natural gas, methanol, propylene, liquid fuels and biofuels. Air Products engineering business historic split indicates around half of sales in air gases and half in LNG heat exchangers. Chart has over 50% of its business in distribution and storage, a quarter in biomedical and under 20% from energy and chemicals.
Total group sales continue to show significant YoY declines of 18%, similar to the last two years. Distribution & storage sales at $133m, appear to be on a rising trend sequentially as three of last four quarters were up YoY. Major weakness across business in energy and chemicals, which continues to show sales down 50% YoY at $31m, in Q4. Biomedical at -10% showed weakest growth performance in nearly two years.
Group operating margin remains at lowest level of last two years – driven by poor profitability on energy and chemicals business. Distribution and storage remains the highest performing business through 2016, although margins slipped again in Q4 to under 10%. The biomedical business also shows a margin which has been trending upwards through to mid-2016. but has slipped back in the last two quarters to below 10% as sales growth has weakened.
Order intake has been relatively stable in both distribution and storage and biomedical, although the former appears to have trended down slightly in the last two quarters. Energy and chemicals order intake is significantly down on its recent peak in mid-2015.
Note: Q1 And Q3 figures are trend.
Haldor Topsoe has annual sales of DK5.8bn ($0.87bn) in performance catalysis and related process technologies (including design, engineering and services). Catalysts account for nearly three quarters of sales with process technologies over a quarter. Key end markets are in chemicals and oil & gas across all geographies. Catalysts sales continue to run below the prior year (impacted by lower raw material costs which feed through to final prices), while technology’s positive sales growth slowed significantly in H2. Reflects decline in market represented by number of plants being built, but Haldor Topsoe have been able to increase technology sales for revamping or optimising plants. Catalyst volumes were down 6% in 2016 with prices down 5%.
Formed new business unit for sustainables.
Full year results for operating margin were nearly back to 13% - however this implies a sequential decline in the second half of the year. Annual results reflected initiatives in 2015 including increasing technology sales and reducing cost base. EBIT margin translates into Return on Capital of over 20%, reflecting the relatively low capital intensity of this business. Ratio of R&D spend to sales maintained at just over 9% - significantly higher than major gas companies.
Worthington group has annual sales of nearly $3bn of which 70% is in steel processing and over a quarter in pressure cylinders. Pressure cylinders business active in four major markets (Industrial close to half of sales, Consumer Products 25%, Alternative Fuels, Cryogenics). Worthington has grown through acquisition with 12 completed in the last six years. The company entered the cryogenics business in 2013 followed by acquisition of cryogenics, LNG, trailer and cryosciences businesses. Group sales are predominantly in North America (90%). Decline in reported sales appeared to bottom out in late-2015 in both group sales and pressure cylinder business, although the latter continues to be down YoY.
Total pressure cylinder volumes continue to show YoY decline although more modest than in previous quarters. Industrial cylinders growth also remains negative YoY although improving on the previous two quarters.
Sales and volume developments imply that pricing of pressure cylinders has remained under downward pressure over the last two years, with the weakening of industrial cylinders pricing development a significant factor.
Total group operating margin and pressure cylinder margins have seen some significant swings in recent quarters and both appear to have settled in a range of 6-8%.
Luxfer has annual sales of over $400m which have been on a declining trend over recent years – this trend continued through 2016 with group sales down 10% YoY in all four quarters. The Gas Cylinder division represents over half of sales with Elektron division around 45%. The former manufactures and markets specialised products using aluminium, magnesium, carbon composites and steel. Elektron division focuses on specialty based primarily on magnesium, zirconium and rare earths.
Gas Cylinders business primarily in North America (over 50%), UK (12%), other EU (20%) and Asia Pacific (13%). Industrial gases account for 10% of sales, healthcare oxygen 10%, while its major markets are protection (40%) and environmental (30%)
Reported sales of both divisions were down around 10% in Q4 representing a significant weakening compared with early 2016.
Operating margin slipped downwards through 2016 towards 6% at group level. This was driven primarily by the collapse of profitability in the Elektron division, whereas margin in Gas Cylinders division remained close to 5% although slipping in Q4. R&D spending severely constrained in recent years and ratio to sales reduced to less than 2% in 2016.
Three new technology companies are monitored who are active in fuel cell related technologies – although the specific mix of target technologies and end-uses varies. Combined annual sales of these three companies have now exceeded $200m. McPhy based on equal split of half yearly results. Plug Power changed accounting treatment of sales from beginning 2016. Plug Power have a long-standing relationship with Air Liquide. The high R&D spend of these companies is typical of technology start-ups – combined spend of these three companies over $40m.
All three companies monitored have continued to make significant operating losses in recent quarters – however Ballard has recently moved towards break-even, while the other two technology companies appear to be on an improving trend. Exceptionally high market valuation of these companies reflects market perceptions of potential size of market and these businesses – typical of many new technology businesses in recent years.