Corporate Performance

% change YoY
  • Total Corporate Sales
  • Total Operating Income
,Total Corporate Sales,Total Operating Income 2014 Q1,13.9%,58.7% 2014 Q2,7.5%,15.1% 2014 Q3,8.0%,13.3% 2014 Q4,5.3%,22.3% 2015 Q1,7.3%,0.1% 2015 Q2,7.7%,16.6% 2015 Q3,4.8%,14.1% 2015 Q4,6.3%,25.6% 2016 Q1,3.5%,1.9% 2016 Q2,-5.2%,-7.0% 2016 Q3,-5.8%,22.0% 2016 Q4,-0.5%,6.5% 2017 Q1,3.0%,19.6% 2017 Q2,13.1%,15.8% 2017 Q3,14.5%,10.5% 2017 Q4,12.7%,8.9% 2018 Q1,5.4%,4.3% 2018 Q2,5.2%,-0.7% 2018 Q3,10.3%,-6.9% 2018 Q4,13.8%,-4.1% 2019 Q1,27.2%,53.2% 2019 Q2,32.6%,55.9% 2019 Q3,24.5%,67.2%
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Total reported group sales in CY2019 Q2 at ¥213Bn ($1.98Bn) showed a slowdown in YoY growth to +25% although marginally higher sequentially. Industrial gases sales (according to Spiritus definition) account for around 92% of sales.

TNS displays greater volatility in YoY growth performance by business and country than other majors.

Total Capital Employed has risen substantially due to these acquisitions to nearly ¥1350Bn ($12.5Bn).



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Corporate Operating Margin

%change YoY
  • Total Operating Margin
  • Operating Margin (IFRS basis)
,Total Operating Margin,Operating Margin (IFRS basis) 2014 Q1,6.5%,null 2014 Q2,6.4%,null 2014 Q3,5.8%,null 2014 Q4,7.0%,null 2015 Q1,6.0%,null 2015 Q2,6.9%,9.3% 2015 Q3,6.3%,7.9% 2015 Q4,8.3%,9.6% 2016 Q1,6.0%,7.1% 2016 Q2,null,9.1% 2016 Q3,null,10.2% 2016 Q4,null,10.2% 2017 Q1,null,8.3% 2017 Q2,null,9.3% 2017 Q3,null,9.9% 2017 Q4,null,9.9% 2018 Q1,null,8.2% 2018 Q2,null,8.8% 2018 Q3,null,8.3% 2018 Q4,null,8.3% 2019 Q1,null,9.9% 2019 Q2,null,10.3% 2019 Q3,null,11.2%
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Total Operating Income was significantly up sequentially at nearly ¥24Bn ($221m) and up over +60%. As a result underlying Corporate Operating Margin at over 11% in Q3 continued to trend upwards and reached its highest level in recent years.

The Japanese, N.American and acquired business in Europe each account for over 25% of operating income for the group.



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Gases Revenue Growth Drivers

% change YoY
  • Reported Growth
  • Natural Gas
  • Currency
  • Acquisition/Divest
  • Underlying Growth
,Reported Growth,Natural Gas,Currency,Acquisition/Divest,Underlying Growth 2014 Q1,11.4%,0.0%,6.6%,0.5%,4.2% 2014 Q2,6.9%,0.0%,1.2%,2.7%,3.0% 2014 Q3,8.2%,0.0%,1.6%,2.6%,4.0% 2014 Q4,6.3%,-0.2%,3.7%,2.4%,0.4% 2015 Q1,10.9%,0.0%,4.1%,2.6%,4.1% 2015 Q2,9.4%,-0.3%,5.0%,1.6%,3.0% 2015 Q3,6.0%,-0.5%,4.0%,1.0%,1.5% 2015 Q4,12.0%,-0.5%,2.9%,2.2%,7.3% 2016 Q1,0.9%,-0.6%,-0.5%,1.5%,0.6% 2016 Q2,-4.6%,0.0%,-5.1%,2.0%,-1.5% 2016 Q3,-5.2%,0.0%,-7.5%,1.8%,0.5% 2016 Q4,0.7%,-0.5%,-4.1%,5.8%,-0.6% 2017 Q1,7.5%,0.2%,-1.4%,5.7%,2.9% 2017 Q2,13.9%,0.5%,1.0%,7.0%,5.3% 2017 Q3,14.4%,0.6%,2.8%,7.3%,3.7% 2017 Q4,11.4%,0.4%,1.9%,1.9%,7.2% 2018 Q1,5.3%,0.2%,-0.8%,0.8%,5.1% 2018 Q2,5.8%,0.1%,-0.5%,0.0%,6.2% 2018 Q3,10.8%,0.2%,-0.3%,0.0%,10.7% 2018 Q4,14.7%,0.0%,-0.7%,8.3%,7.0% 2019 Q1,28.6%,0.0%,-0.3%,25.2%,3.7% 2019 Q2,33.1%,0.0%,-0.4%,30.0%,3.5% 2019 Q3,26.0%,0.0%,-1.8%,27.5%,0.3%
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Gases sales at ¥206Bn ($1.92Bn) in Q3 were again up significantly (+25% YoY) in reported terms. This reported growth was again driven substantially by acquisitions (principally Praxair assets in Europe and Linde assets in US) in recent quarters with only minor negative impact from currency.


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Gases Underlying Growth Drivers

% change YoY
  • Total Underling Growth
  • Volume
  • Price
,Total Underling Growth,Volume,Price 2014 Q1,4.2%,3.0%,1.2% 2014 Q2,3.0%,0.5%,2.5% 2014 Q3,4.0%,1.1%,2.9% 2014 Q4,0.4%,0.9%,-0.5% 2015 Q1,4.1%,3.6%,0.5% 2015 Q2,3.0%,2.0%,1.0% 2015 Q3,1.5%,1.1%,0.4% 2015 Q4,7.3%,5.0%,2.2% 2016 Q1,0.6%,0.6%,0.0% 2016 Q2,-1.5%,-1.5%,0.0% 2016 Q3,0.5%,0.8%,-0.2% 2016 Q4,-0.6%,-0.2%,-0.4% 2017 Q1,2.9%,2.8%,0.1% 2017 Q2,5.3%,4.8%,0.5% 2017 Q3,3.7%,3.3%,0.4% 2017 Q4,7.2%,6.2%,1.0% 2018 Q1,5.1%,4.2%,0.9% 2018 Q2,6.2%,5.2%,1.0% 2018 Q3,10.7%,9.2%,1.5% 2018 Q4,7.0%,6.0%,1.0% 2019 Q1,3.7%,2.7%,1.1% 2019 Q2,3.5%,2.0%,1.5% 2019 Q3,0.3%,-0.7%,1.0%
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Underlying gases growth slowed further in Q3 to be virtually flat YoY excluding acquisitions and other factors, its slowest rate since late 2016. This was broadly split between a decline in volume and modest positive contribution from pricing.


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Sales Growth by Business ex Europe

% change YoY
  • Bulk & Onsites
  • Packaged
  • Plant & Equipment
  • Total Electronics Related
,Bulk & Onsites,Packaged,Plant & Equipment,Total Electronics Related 2014 Q1,13.1%,23.2%,21.8%,-6.6% 2014 Q2,8.7%,11.1%,-7.0%,3.7% 2014 Q3,14.7%,4.2%,6.4%,1.4% 2014 Q4,10.3%,9.3%,-6.0%,1.7% 2015 Q1,7.3%,17.0%,11.9%,14.2% 2015 Q2,7.5%,15.6%,15.7%,4.1% 2015 Q3,2.1%,8.6%,-5.7%,16.5% 2015 Q4,9.6%,10.6%,12.0%,19.8% 2016 Q1,2.3%,-15.4%,16.2%,14.9% 2016 Q2,-0.8%,-12.7%,5.4%,-5.2% 2016 Q3,-7.3%,-13.1%,13.1%,-1.1% 2016 Q4,8.8%,-8.7%,0.0%,-1.8% 2017 Q1,15.4%,-11.0%,-17.8%,5.2% 2017 Q2,25.7%,4.2%,0.9%,15.0% 2017 Q3,28.9%,2.1%,11.6%,9.3% 2017 Q4,16.0%,12.7%,5.7%,11.2% 2018 Q1,11.4%,9.1%,8.8%,-7.5% 2018 Q2,14.6%,3.3%,-0.8%,-5.5% 2018 Q3,17.4%,8.4%,12.6%,-2.9% 2018 Q4,5.2%,5.1%,13.8%,-0.7% 2019 Q1,2.5%,3.8%,3.2%,2.2% 2019 Q2,5.0%,5.5%,11.8%,0.0% 2019 Q3,2.0%,-2.4%,22.4%,-6.3%
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TNS has changed the business format of its sales reporting from Q2 – historic analysis has been adjusted by Gasworld to reflect these changes. Industrial gases account for over 95% of group sales. Bulk and Onsites now account for over half of gas sales (bulk 34%, onsites 16%) , Packaged Gases over 20% (gases 12%, welding equipment 8%), Electronics related 11% (specialty gases 8%, equipment 3%) with gas production plant around 11%.

Business portfolios are broadly similar with and without acquired European businesses but YoY growth rates are lowered with the exclusion of the European business from most recent quarters.

Growth in Bulk and Onsites sales slowed to +2% YoY in Q3, its slowest rate since early 2016 – bulk was down nearly -1% but onsites was up +8% largely due to acquisition of Linde US H2 assets.

Packaged gases were down -2½%, negative for the first time since early 2017, with gases down -3½% and welding equipment down -1% YoY.

Electronics related sales weakened further to -6% YoY with specialty gases down -7% while related equipment was also down -3½%.

Plant & Equipment was the highest growth business in Q3 at over +20%, highest performance in over 5 years.

LPG sales were down -15% YoY.



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Sales Growth by Geography ex Europe

% change YoY
  • Japan
  • N.America
  • Other Asia/Pacific
,Japan,N.America,Other Asia/Pacific 2014 Q1,13.7%,29.4%,-10.4% 2014 Q2,2.6%,17.7%,14.4% 2014 Q3,3.3%,17.4%,19.4% 2014 Q4,-0.5%,24.4%,-1.0% 2015 Q1,-1.6%,27.6%,23.8% 2015 Q2,-3.2%,25.7%,20.9% 2015 Q3,-6.0%,22.1%,19.3% 2015 Q4,-2.7%,18.1%,62.5% 2016 Q1,-2.6%,-5.5%,21.1% 2016 Q2,-3.3%,-14.9%,5.5% 2016 Q3,-0.8%,-16.3%,-5.3% 2016 Q4,-4.1%,11.4%,-6.2% 2017 Q1,0.0%,15.6%,-7.2% 2017 Q2,6.1%,28.5%,23.2% 2017 Q3,0.7%,30.6%,39.7% 2017 Q4,15.9%,8.9%,20.9% 2018 Q1,6.8%,6.3%,4.5% 2018 Q2,5.1%,6.5%,5.3% 2018 Q3,13.3%,10.3%,6.1% 2018 Q4,3.4%,7.2%,4.7% 2019 Q1,1.4%,9.9%,-3.6% 2019 Q2,1.4%,11.6%,4.1% 2019 Q3,1.0%,4.9%,-6.7%
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Japan gases as reported by TNS represent over 40% of gases sales following the European acquisition. N.America and Europe gases now each represent over 20% with Other Asia/Pacific (inc Australia) gases over 10%.

YoY growth in Japan in Q3 slowed further to +1%, its lowest rate since mid-2017.

N.America again showed the highest YOY growth in Q3, despite slowing to under +5%.

Other Asia/Pacific turned negative again at over -6½% vs prior year, continuing the slowing performance since early 2017. 

Europe growth (not shown in chart) appears to have slowed from +3½% in Q2 to under +2½% in Q3 compared with 2018 under Praxair ownership.



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Japan Gases Growth by Segment

% change YoY
  • Bulk and Onsites
  • Packaged Gases
  • Total Electronics Related
  • Plant and equipment
,Bulk and Onsites,Packaged Gases,Total Electronics Related,Plant and equipment 2014 Q2,4.2%,6.5%,-3.8%,-8.7% 2014 Q3,3.2%,9.4%,-5.8%,8.8% 2014 Q4,1.8%,7.8%,-2.3%,-1.5% 2015 Q1,-1.3%,-2.2%,12.3%,9.5% 2015 Q2,-5.5%,9.5%,-5.2%,12.4% 2015 Q3,-2.3%,-0.1%,0.7%,-14.0% 2015 Q4,-7.0%,6.1%,1.4%,13.4% 2016 Q1,-6.5%,0.2%,-0.4%,20.0% 2016 Q2,-5.1%,-4.9%,1.3%,15.8% 2016 Q3,-5.1%,-5.6%,9.9%,9.0% 2016 Q4,-1.9%,-2.0%,-0.6%,-8.8% 2017 Q1,-0.7%,-2.1%,8.2%,-17.3% 2017 Q2,4.3%,10.4%,7.6%,1.1% 2017 Q3,5.1%,-7.1%,1.1%,4.1% 2017 Q4,19.7%,-1.0%,12.0%,9.7% 2018 Q1,17.2%,0.0%,-1.4%,1.4% 2018 Q2,16.6%,-1.2%,-1.8%,-9.0% 2018 Q3,18.4%,16.7%,-0.6%,8.9% 2018 Q4,2.7%,11.6%,-3.8%,10.8% 2019 Q1,0.8%,9.8%,-2.4%,3.5% 2019 Q2,-1.0%,1.1%,-3.2%,13.9% 2019 Q3,-4.7%,4.0%,-7.8%,34.6%
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Q3 gases sales in Japan were reported at over ¥90Bn ($840m).

Around half of gas sales in Japan are accounted for by Bulk & Onsites (split equally between bulk and onsites) with just over 10% in Packaged gases (split equally between gases and welding equipment) and just over 10% (2/3 in specialty gases, 1/3 in equipment). Third party sales of Plant and Equipment account for over 20% of gas sales in Q3 and drove the overall growth in this region – excluding this gas sales were lower YoY.

Bulk & Onsites growth slipped deeper into negative territory in Q3 – with bulk and onsites down -2½% and nearly -7% respectively.

Packaged gases sales accelerated in Q3 – with gases up +2½% and continued solid rise in the hardgoods business (+4½%).

Electronics related business remained negative YoY with specialty gases flat and equipment sales sharply down.

Air gases decreased primarily due to steel and metal processing markets but medical related business benefited from IMI medical equipment business acquired in late 2018.



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N.America Gases Growth by Segment

% change YoY
  • Bulk and Onsites
  • Packaged Gases
  • Total Electronics Related
,Bulk and Onsites,Packaged Gases,Total Electronics Related 2014 Q2,36.1%,11.8%,13.7% 2014 Q3,72.3%,1.1%,-16.7% 2014 Q4,73.5%,9.2%,-9.5% 2015 Q1,44.1%,24.4%,-3.4% 2015 Q2,44.1%,18.9%,15.9% 2015 Q3,5.3%,16.2%,187.5% 2015 Q4,18.9%,11.3%,96.3% 2016 Q1,19.3%,-21.6%,93.1% 2016 Q2,-5.8%,-15.6%,-20.7% 2016 Q3,-18.3%,-16.1%,-6.5% 2016 Q4,49.2%,-6.7%,-20.0% 2017 Q1,62.7%,-5.8%,-12.1% 2017 Q2,73.7%,3.3%,17.4% 2017 Q3,73.3%,7.1%,3.4% 2017 Q4,0.0%,17.0%,12.5% 2018 Q1,-1.0%,14.8%,-10.3% 2018 Q2,6.1%,6.3%,14.8% 2018 Q3,17.4%,4.6%,0.0% 2018 Q4,8.5%,5.7%,7.4% 2019 Q1,16.3%,4.0%,11.5% 2019 Q2,19.0%,8.1%,-9.7% 2019 Q3,15.9%,-4.3%,-10.0%
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Q3 gas sales in N.America were up over +6% YoY at close to over $455m (¥49Bn).

Half of gas sales in N.America are now accounted for by Bulk & Onsites (40% in bulk) - with nearly half in Packaged Gases (split equally between gases and hardware) and around 5% in Electronics related. 

YoY growth in Bulk and Onsites slowed with Bulk slowing to only rise by +½% although onsites continued to be more than double prior year due to acquisition of Linde’s H2 assets (Feb 2019) and a new chemicals customer.

Packaged Gases and Hardgoods were lower for the first time since early 2017 with falls of -5% and -3% respectively.

The small Electronics business again showed negative performance due to lower specialty gas sales in Q3.



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Other Asia-Pacific Gases Growth

% change YoY
  • Bulk and Onsites
  • Packaged Gases
  • Total Electronics Related
  • Plant and equipment
,Bulk and Onsites,Packaged Gases,Total Electronics Related,Plant and equipment 2014 Q2,0.1%,18.2%,31.1%,-0.7% 2014 Q3,19.7%,10.3%,36.4%,-2.2% 2014 Q4,-24.2%,14.4%,21.0%,-22.5% 2015 Q1,13.8%,30.4%,26.5%,28.1% 2015 Q2,16.2%,7.4%,28.5%,27.0% 2015 Q3,50.0%,-13.1%,29.3%,-16.0% 2015 Q4,156.9%,19.0%,56.0%,5.8% 2016 Q1,27.0%,-14.3%,43.9%,3.1% 2016 Q2,45.2%,-12.9%,-12.0%,16.0% 2016 Q3,7.0%,-13.8%,-18.7%,33.3% 2016 Q4,-12.7%,-36.8%,2.4%,42.9% 2017 Q1,8.2%,-46.3%,5.0%,-20.0% 2017 Q2,41.0%,-7.4%,30.1%,0.0% 2017 Q3,67.2%,-4.0%,31.1%,41.7% 2017 Q4,43.5%,33.3%,9.3%,-6.7% 2018 Q1,17.1%,0.0%,-18.9%,40.6% 2018 Q2,26.7%,-4.0%,-17.9%,24.1% 2018 Q3,13.7%,12.5%,-8.2%,23.5% 2018 Q4,8.1%,-18.8%,3.2%,25.0% 2019 Q1,-13.8%,-17.2%,10.5%,2.2% 2019 Q2,-1.3%,0.0%,7.8%,4.8% 2019 Q3,1.3%,-12.5%,-2.6%,-16.3%
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Q3 gas sales in Other Asia/Pacific (excluding Japan) were over ¥25Bn ($235m).

Around 30% of gas sales in Other Asia/Pacific are now accounted for by each of Bulk & Onsites (virtually all in bulk) and Electronics Related. LPG accounts for 15% of region sales, similar to sales of Plants & Equipment.

YoY growth in Bulk returned to +1½% in Q3 while Onsites were flat.

Packaged Gases saw double digit declines in Q3 sales in both cylinder gases and welding equipment.

Electronics Related sales were down over -2% due to deepening decline in specialty  gases which was only partly offset by higher electronic equipment sales.

Plant sales and LPG sales both turned significantly negative in Q3.



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Gases Profitability

% change YoY
  • OROS
  • EBITDA Margin
  • OROCE
,OROS,EBITDA Margin,OROCE 2014 Q1,6.4%,12.9%,6.0% 2014 Q2,6.1%,13.5%,5.7% 2014 Q3,6.1%,13.2%,5.8% 2014 Q4,6.8%,13.9%,6.0% 2015 Q1,6.9%,13.1%,6.5% 2015 Q2,7.5%,15.0%,6.3% 2015 Q3,6.2%,13.4%,5.5% 2015 Q4,7.7%,15.0%,6.9% 2016 Q1,5.5%,12.6%,5.8% 2016 Q2,7.3%,14.2%,7.0% 2016 Q3,8.9%,15.8%,8.5% 2016 Q4,8.8%,16.4%,7.8% 2017 Q1,7.3%,13.9%,7.4% 2017 Q2,8.3%,15.6%,7.6% 2017 Q3,8.6%,15.6%,7.9% 2017 Q4,9.1%,15.7%,8.9% 2018 Q1,7.7%,14.0%,8.2% 2018 Q2,8.0%,15.2%,7.6% 2018 Q3,7.0%,13.9%,6.9% 2018 Q4,7.2%,14.7%,5.9% 2019 Q1,9.2%,17.9%,5.8% 2019 Q2,9.7%,19.5%,5.7% 2019 Q3,10.5%,20.3%,6.4%
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Gases EBIT is estimated to have risen substantially YoY to over ¥21Bn ($200m) in Q3 – nearly double the previous year’s performance significantly helped by acquisition of the European business from Praxair.

Operating margin exceeded 10% in Q3, a new record for TNS – substantially due to the acquisition of relatively higher margin business in Europe – but overall this remains significantly below the performance of Tier 1 peer companies.

EBITDA margin also appears to have exceeded 20% for the first time.

Capital Employed is estimated to have doubled YoY to ¥1350Bn ($12.6Bn) in Q3 reflecting the impact of recent major acquisitions on the balance sheet. Therefore ROCE appears to have only recovered marginally to over 6% in Q3, substantially below the average for peer companies.



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Operating Margin by Geography

%change YoY
  • Japan
  • N.America
  • Other Asia/Pacific
  • Europe
,Japan,N.America,Other Asia/Pacific,Europe 2014 Q1,7.3%,6.9%,0.5%,null 2014 Q2,6.8%,4.4%,5.0%,null 2014 Q3,6.9%,4.2%,4.9%,null 2014 Q4,8.0%,2.7%,5.8%,null 2015 Q1,7.3%,6.3%,0.9%,null 2015 Q2,7.2%,5.4%,5.5%,null 2015 Q3,7.7%,3.4%,4.2%,null 2015 Q4,9.8%,2.8%,5.7%,null 2016 Q1,8.4%,0.3%,3.3%,null 2016 Q2,8.2%,6.3%,6.5%,null 2016 Q3,10.4%,8.3%,7.2%,null 2016 Q4,10.1%,8.3%,7.7%,null 2017 Q1,8.1%,9.4%,3.3%,null 2017 Q2,9.5%,7.5%,8.5%,null 2017 Q3,8.7%,7.7%,11.0%,null 2017 Q4,10.1%,8.2%,9.6%,null 2018 Q1,8.1%,8.0%,6.9%,null 2018 Q2,7.4%,7.0%,13.2%,null 2018 Q3,7.4%,8.0%,11.2%,null 2018 Q4,9.2%,7.7%,8.3%,null 2019 Q1,8.7%,10.5%,2.2%,14.2% 2019 Q2,6.8%,10.6%,9.9%,15.7% 2019 Q3,7.4%,13.1%,10.9%,15.3%
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Europe is now the major profit source for TNS, accounting for over a third of gases profits – Japan and N.America now each represent less than 30% of gases profits with Other Asia/Pacific at less than 15%. Less than 10% of corporate income now comes from non-gas businesses.

Margin performance remains mixed in Q3 – however the higher performance of the new European region compared to more established regions within TNS’ portfolio is clear.

N.America gas businesses margin appears to have continued its upward trend at over 13% but Japan remained close to its recent low at under 8%.

Other Asia/Pacific margins at nearly 11% appears to be continuing on an improving trend, although highly seasonal.



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Capital Expenditure

$M
  • Capex Spend
,Capex Spend 2010 Q1,127.0 2010 Q2,41.3 2010 Q3,70.3 2010 Q4,109.2 2011 Q1,136.3 2011 Q2,104.9 2011 Q3,104.2 2011 Q4,97.0 2012 Q1,84.1 2012 Q2,98.7 2012 Q3,101.8 2012 Q4,99.0 2013 Q1,84.1 2013 Q2,71.6 2013 Q3,66.5 2013 Q4,80.6 2014 Q1,105.1 2014 Q2,69.4 2014 Q3,75.1 2014 Q4,60.3 2015 Q1,112.7 2015 Q2,105.3 2015 Q3,102.4 2015 Q4,107.2 2016 Q1,140.8 2016 Q2,95.9 2016 Q3,83.6 2016 Q4,93.9 2017 Q1,129.1 2017 Q2,119.7 2017 Q3,125.4 2017 Q4,139.8 2018 Q1,180.1 2018 Q2,163.6 2018 Q3,151.1 2018 Q4,158.2 2019 Q1,218.5 2019 Q2,179.0 2019 Q3,156.9
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Capex reported again indicated a lower spend sequentially in Q3 at less than $160m but it continues to trend upwards due to the impact of acquisitions and business growth.

Capex as a % of sales at less than 9% remains below to the average for gas majors.



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