Tier 2 Gas Companies

Gas Company Sales Growth
% change YoY
  • Tier 1 gas companies
  • Tier 2 gas companies
,Tier 1 gas companies,Tier 2 gas companies 2015 Q1,9.7%,6.9% 2015 Q2,4.4%,3.2% 2015 Q3,8.4%,0.8% 2015 Q4,2.4%,-5.0% 2016 Q1,1.0%,-4.4% 2016 Q2,2.4%,-1.9% 2016 Q3,0.2%,0.0% 2016 Q4,2.8%,1.4% 2017 Q1,2.6%,10.4% 2017 Q2,1.7%,13.2% 2017 Q3,2.5%,14.7% 2017 Q4,0.3%,15.6% 2018 Q1,-0.7%,12.1% 2018 Q2,-3.1%,17.0% 2018 Q3,-3.3%,16.3% 2018 Q4,-2.3%,11.1% 2019 Q1,1.4%,14.4% 2019 Q2,7.5%,10.3% 2019 Q3,5.7%,3.1% 2019 Q4,4.2%,12.1% 2020 Q1,0.5%,3.5%
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Gas Company Sales Growth
% change YoY
  • Sol
  • Iwatani
  • Yingde
  • Airwater
  • Hangyang
,Sol,Iwatani,Yingde,Airwater,Hangyang 2015 Q1,7.0%,8.8%,3.4%,12.9%,11.7% 2015 Q2,9.0%,3.8%,3.4%,0.0%,0.4% 2015 Q3,8.8%,-0.1%,1.9%,-4.3%,1.1% 2015 Q4,-0.3%,1.6%,1.9%,-5.3%,-23.7% 2016 Q1,4.4%,-0.5%,9.0%,-6.4%,-23.8% 2016 Q2,4.6%,-2.7%,9.0%,-3.3%,-16.5% 2016 Q3,3.6%,0.2%,3.5%,8.7%,-15.4% 2016 Q4,4.7%,1.2%,3.5%,6.3%,-1.5% 2017 Q1,7.6%,-1.6%,15.0%,-2.0%,22.7% 2017 Q2,5.2%,5.1%,15.0%,1.5%,42.3% 2017 Q3,9.0%,4.3%,28.4%,-6.5%,27.5% 2017 Q4,8.7%,5.2%,28.4%,-2.5%,30.5% 2018 Q1,10.7%,8.7%,19.3%,5.1%,22.5% 2018 Q2,11.6%,7.0%,19.3%,10.7%,29.2% 2018 Q3,8.9%,10.0%,30.7%,7.0%,32.0% 2018 Q4,9.4%,7.1%,30.7%,2.4%,7.3% 2019 Q1,7.1%,8.0%,21.5%,23.1%,13.9% 2019 Q2,9.5%,2.5%,21.5%,7.5%,8.4% 2019 Q3,8.9%,-3.4%,21.0%,7.5%,-16.5% 2019 Q4,17.0%,-1.2%,21.0%,12.2%,13.8% 2020 Q1,8.3%,0.0%,null,null,0.2%
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Tier 2 gas companies typically have annual gas sales in a range of $0.5-2Bn (vs Tier 1 range of $8-24Bn). They range from specialised privately owned specialist gas companies to divisions of large quoted industrial conglomerates with a range of businesses. This analysis primarily focuses on those companies which provide regular quarterly or half yearly financials



Reported growth performance of Tier 2 gas companies is estimated to have trended down towards accelerated towards +3% in Q1 but remained ahead of underlying performance of Tier 1 companies despite being concentrated in some of the slower growth markets in the world (Europe, Japan). However this growth is boosted by inclusion of significant Chinese companies (Hangyang and Yingde)

Exceptional growth maintained at Sol (Europe) and Air Water (Japan) but Iwatani shows little growth YoY while Hangyang sees major swings in growth rate due to the balance of a growing traditional gas business and a cyclical sale of equipment business unit

Sol growth again significantly higher in Healthcare (+15% in Q1) than in Industrial gases (+1%) while growth in its International businesses (60% of Q4 sales) again outperformed (+11% in Q1) its domestic Italian business, although even this domestic business has managed to achieve solid growth (+4%) in recent quarters. Underlying growth in both businesses has been boosted by continued bolt-on acquisitions

AirWater’s YoY growth has also been boosted by recent acquisitions, particularly the Praxair east India and south-west Indian business of Linde businesses in 2019 which adds nearly 10% to its gases business. Underlying growth in the business was helped by strong price gains in liquid CO2 combined with expansion in sales of semiconductor related equipment

Iwatani’s sales of major industrial gases have shown weaker growth in the last 4 quarters than the overall Industrial Gases and Machinery business unit reported in the chart above



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Tier 2 gas company operating margin % of sales

%
  • Sol
  • AirWater
  • Iwatani
  • Hangyang
,Sol,AirWater,Iwatani,Hangyang 2015 Q1,9.3%,6.7%,5.5%,2.8% 2015 Q2,10.0%,6.5%,2.4%,3.5% 2015 Q3,9.8%,5.8%,5.1%,3.1% 2015 Q4,9.8%,8.9%,5.8%,1.9% 2016 Q1,10.9%,7.9%,5.1%,-2.8% 2016 Q2,11.2%,8.1%,1.7%,-2.0% 2016 Q3,11.9%,6.5%,5.6%,-7.4% 2016 Q4,11.9%,9.6%,3.9%,-1.9% 2017 Q1,8.9%,9.2%,4.6%,6.7% 2017 Q2,9.7%,7.9%,2.8%,8.1% 2017 Q3,10.7%,8.9%,7.1%,15.3% 2017 Q4,10.8%,12.6%,6.0%,17.3% 2018 Q1,11.7%,11.2%,5.9%,13.1% 2018 Q2,11.2%,8.2%,4.7%,14.8% 2018 Q3,11.9%,8.0%,5.6%,13.5% 2018 Q4,11.9%,10.7%,5.5%,11.7% 2019 Q1,10.0%,10.5%,7.7%,12.6% 2019 Q2,10.3%,11.1%,4.8%,12.7% 2019 Q3,11.7%,8.5%,6.2%,9.0% 2019 Q4,11.7%,9.8%,6.6%,7.4% 2020 Q1,null,null,7.2%,9.8%
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Operating Margins at selected Tier 2 companies are lower than Tier 1 majors, although profitability of the leading Japanese Tier 2 companies is broadly similar to TNS. 

Margins maintained or on rising trend sequentially at all four Tier 2 companies, except for major swings at Hangyang which are probably driven by the substantial sale of equipment business in its portfolio




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Welding Companies

Reported sales growth by company
% change YoY
  • Lincoln
  • ESAB
  • ITW
,Lincoln,ESAB,ITW 2015 Q1,-4.0%,1.8%,-6.6% 2015 Q2,-8.8%,-17.4%,-9.4% 2015 Q3,-9.9%,-18.8%,-13.7% 2015 Q4,-17.0%,-16.4%,-13.6% 2016 Q1,-16.3%,-9.3%,-10.0% 2016 Q2,-10.0%,-9.0%,-12.2% 2016 Q3,-12.0%,-8.4%,-8.9% 2016 Q4,-0.7%,-10.6%,-8.6% 2017 Q1,5.5%,3.6%,-0.6% 2017 Q2,5.8%,4.5%,2.9% 2017 Q3,17.9%,8.1%,4.8% 2017 Q4,32.5%,14.5%,7.4% 2018 Q1,30.4%,15.9%,9.4% 2018 Q2,26.0%,13.4%,14.3% 2018 Q3,10.1%,8.7%,9.4% 2018 Q4,-0.4%,14.9%,6.7% 2019 Q1,0.2%,5.1%,1.0% 2019 Q2,1.7%,5.7%,-4.2% 2019 Q3,-0.9%,2.9%,-3.0% 2019 Q4,-0.8%,-3.4%,-6.4% 2020 Q1,-7.5%,-6.2%,-12.8%
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Underlying sales growth by company
% change YoY
  • Lincoln
  • ESAB
  • ITW
,Lincoln,ESAB,ITW 2015 Q1,-0.5%,-6.4%,-3.3% 2015 Q2,-0.9%,-7.8%,-6.0% 2015 Q3,-9.7%,-4.4%,-10.3% 2015 Q4,-14.4%,-4.8%,-10.8% 2016 Q1,-15.0%,-1.9%,-8.5% 2016 Q2,-10.6%,-4.2%,-11.3% 2016 Q3,-8.6%,-5.8%,-8.5% 2016 Q4,-1.2%,-8.7%,-7.9% 2017 Q1,5.0%,1.1%,-0.3% 2017 Q2,5.8%,2.1%,3.3% 2017 Q3,5.6%,2.9%,3.9% 2017 Q4,10.0%,6.9%,6.1% 2018 Q1,9.4%,6.4%,7.6% 2018 Q2,9.3%,8.1%,13.3% 2018 Q3,7.5%,10.1%,10.3% 2018 Q4,1.6%,10.5%,7.6% 2019 Q1,8.1%,4.5%,2.8% 2019 Q2,-3.5%,3.7%,-2.4% 2019 Q3,-4.7%,-0.5%,-1.6% 2019 Q4,-3.5%,-1.5%,-3.7% 2020 Q1,-9.5%,-2.2%,-9.0%
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Lincoln, ESAB and ITW are the three largest suppliers to the $22Bn global market for welding equipment and consumables – but in contrast with industrial gases the three leading companies only have around 30% share of the market

Lincoln has historic annual welding sales of over $3Bn. ESAB has around $2.2Bn and ITW Welding nearly $1.5Bn

Growth in reported welding sales for major companies moved further into negative territory in Q1 as the global economy weakens after slowing steadily from peak growth in late 2017/early 2018

This pattern was also reflected in underlying sales growth with all three major welding companies again showing further deepening of negative performance in Q1 ranging from -2% to -9%. 

Lincoln showed lower negative growth in the Americas business (-9%) in Q1 than internationally (-15%) although in the latter case this again partly offset by positive acquisition impact (+8%) in the three latest quarters. ITW indicates similar pattern with International business substantially more negative than in N.America with both welding consumables and equipment significantly lower YoY




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Welding operating margin by company %

%
  • Lincoln
  • ESAB
  • ITW
,Lincoln,ESAB,ITW 2015 Q1,14.3%,11.7%,26.9% 2015 Q2,14.9%,10.4%,26.1% 2015 Q3,15.1%,8.7%,24.7% 2015 Q4,15.5%,9.1%,22.5% 2016 Q1,13.7%,10.3%,23.9% 2016 Q2,13.9%,11.5%,25.1% 2016 Q3,14.4%,10.9%,26.3% 2016 Q4,15.0%,10.7%,24.4% 2017 Q1,14.0%,12.1%,27.6% 2017 Q2,14.0%,12.3%,27.3% 2017 Q3,12.2%,11.7%,26.5% 2017 Q4,12.1%,10.3%,26.5% 2018 Q1,12.8%,12.0%,27.7% 2018 Q2,14.1%,12.7%,29.3% 2018 Q3,14.0%,10.6%,28.3% 2018 Q4,13.0%,10.3%,26.8% 2019 Q1,12.9%,12.6%,28.1% 2019 Q2,14.1%,13.7%,28.9% 2019 Q3,12.3%,13.5%,28.1% 2019 Q4,12.4%,14.1%,25.3% 2020 Q1,12.6%,13.1%,29.3%
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Pricing trend for Lincoln may indicate that the industry is seeing relatively low growth contribution from this driver in recent quarters reflecting market weakness

Profitability appears to be broadly stable across the three leading welding companies

ITW appears to be highest margin performer on their reporting basis, significant higher than Lincoln and ESAB (after allowing for D&A component of EBITDA)

Lincoln continues to show significantly higher operating margins in its Americas business than internationally (17% vs 3% in Q1)




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Engineering & Sale of Equipment

Sales by Company
$m
  • Chart
  • AP
  • AL
  • Linde
,Chart,AP,AL,Linde 2015 Q1,205.1,149.0,191.1,721.4 2015 Q2,230.3,159.4,221.4,737.6 2015 Q3,224.0,168.8,236.5,703.0 2015 Q4,220.8,175.8,187.9,639.3 2016 Q1,153.8,149.6,133.9,613.4 2016 Q2,207.1,207.2,140.4,558.3 2016 Q3,163.9,207.2,113.4,706.3 2016 Q4,174.4,180.6,124.2,660.9 2017 Q1,164.1,239.9,56.4,690.1 2017 Q2,198.2,201.8,102.3,620.5 2017 Q3,202.7,183.2,87.7,698.2 2017 Q4,269.4,147.3,134.3,682.0 2018 Q1,244.1,123.3,104.4,663.0 2018 Q2,277.9,125.4,113.1,778.0 2018 Q3,272.2,124.1,121.8,635.0 2018 Q4,290.1,83.8,168.2,716.0 2019 Q1,281.0,76.2,106.0,636.0 2019 Q2,309.6,94.7,92.9,752.0 2019 Q3,357.8,124.6,90.0,641.0 2019 Q4,342.4,127.0,78.9,770.0 2020 Q1,321.1,146.4,57.8,608.0
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Orders by Company
$m
  • Chart
  • AL
  • Linde
,Chart,AL,Linde 2015 Q1,287.3,302.4,159.5 2015 Q2,275.4,479.5,171.1 2015 Q3,185.7,436.3,192.9 2015 Q4,262.4,1475.2,171.2 2016 Q1,78.8,334.8,139.3 2016 Q2,57.2,440.6,210.3 2016 Q3,128.5,938.4,141.2 2016 Q4,155.5,723.5,124.0 2017 Q1,114.0,486.7,149.7 2017 Q2,244.2,784.4,192.6 2017 Q3,204.7,934.5,198.0 2017 Q4,265.0,495.9,247.8 2018 Q1,234.6,653.0,288.2 2018 Q2,302.4,1390.0,316.4 2018 Q3,249.4,1143.0,263.8 2018 Q4,175.2,646.0,273.3 2019 Q1,167.6,565.0,724.9 2019 Q2,260.9,581.0,322.0 2019 Q3,133.3,806.0,286.2 2019 Q4,375.6,1475.0,343.5 2020 Q1,92.2,392.0,304.3
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Engineering & Equipment business makes varied contribution to top line across companies monitored. Accounts for around 10% of Linde plc group sales and 3% for each of AL Group and AP Group while Chart is a specialist engineering and equipment companies. 

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. Quarterly sales in range of $6-800m

AL engineering business primarily in air gases (60%) and Hyco but also conversion processes to produce syngas, synthetic natural gas, methanol, propylene, liquid fuels and biofuels. Quarterly sales under $100m

AP engineering business historic split indicates around half of sales in air gases (along with smaller sales of helium equipment) and half in LNG heat exchangers although this varies significantly in short term. Quarterly sales currently around $125m

Chart has 60% of its business in distribution and storage with around 40% from equipment for energy and chemicals market. Quarterly sales now around $300-350m







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Equipment & Engineering operating margin % of sales

%
  • Linde
  • Chart
  • AP
  • AL
,Linde,Chart,AP,AL 2015 Q1,7.2%,6.1%,-11.8%,11.9% 2015 Q2,6.9%,9.9%,-33.8%,11.9% 2015 Q3,7.1%,7.4%,-1.9%,5.6% 2015 Q4,5.7%,5.4%,-18.5%,5.6% 2016 Q1,6.5%,2.1%,-12.6%,4.2% 2016 Q2,6.6%,15.0%,-9.2%,4.2% 2016 Q3,7.3%,2.7%,14.5%,-2.6% 2016 Q4,9.2%,3.3%,5.5%,-2.6% 2017 Q1,6.9%,2.4%,10.5%,-3.8% 2017 Q2,6.2%,6.3%,14.9%,-3.8% 2017 Q3,7.5%,8.6%,7.2%,-9.4% 2017 Q4,10.5%,8.0%,7.1%,-9.4% 2018 Q1,9.2%,6.4%,11.8%,-8.2% 2018 Q2,10.0%,8.9%,19.6%,-8.2% 2018 Q3,10.9%,12.7%,12.5%,4.4% 2018 Q4,10.8%,9.4%,5.7%,4.4% 2019 Q1,12.3%,4.2%,-22.7%,11.8% 2019 Q2,13.2%,9.6%,-16.6%,0.1% 2019 Q3,18.7%,9.0%,7.6%,6.3% 2019 Q4,12.1%,6.8%,3.9%,5.7% 2020 Q1,15.0%,7.3%,-25.0%,5.7%
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Reported equipment sales in Q1 were lower sequentially for all companies except AP. Total equipment sales were higher YoY in Chart and AP but lower in Linde and AL partly driven by project timing and the balance of internal vs third party business 

Chart shows a weaker growth performance in distribution equipment than in energy & chemicals

However these weaker patterns do not fully reflect the broader economic downturn since they are driven by earlier investment decisions. Engineering order intake appears to be moving downward in Q1 although these are subject to significant short term seasonal fluctuation

Operating Margin performance has been erratic, partly due to exceptional charges as restructuring programmes have been implemented, but appears to have been around 6-7% in Q4 at Chart and AL with Linde plc trending at a higher level (around 12%). Recent swings at AP reflect increasing project development costs, probably associated with a number of major new projects




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Pressure cylinder sales growth by company

% change YoY
  • Worthington
  • Luxfer
,Worthington,Luxfer 2015 Q1,6.3%,-11.6% 2015 Q2,-4.8%,-4.9% 2015 Q3,-9.9%,-1.9% 2015 Q4,-20.4%,-11.8% 2016 Q1,-19.1%,1.2% 2016 Q2,-13.1%,-3.5% 2016 Q3,-8.5%,-10.2% 2016 Q4,-3.2%,-9.8% 2017 Q1,-1.1%,-8.0% 2017 Q2,5.9%,-7.4% 2017 Q3,31.5%,0.9% 2017 Q4,54.6%,6.0% 2018 Q1,48.9%,9.0% 2018 Q2,46.8%,7.9% 2018 Q3,11.3%,13.1% 2018 Q4,-2.1%,2.6% 2019 Q1,-1.6%,-1.5% 2019 Q2,-5.2%,-3.8% 2019 Q3,1.3%,-12.9% 2019 Q4,-1.5%,-5.9% 2020 Q1,-6.8%,-9.9%
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Worthington group sales are nearly $4Bn of which over 30% in pressure cylinders. Cylinders business in 3 major sectors (Industrial including cryogenics over 50% of sales, Consumer Products nearly 40% and Oil and Gas Equipment). Has grown through acquisition with 13 completed in the last 6 years. 

Luxfer has annual group sales of around $480m of which approximately half in Gas Cylinders division

Both companies saw further deepening of their previous negative performance in Q1. Worthington and Luxfer pressure cylinder sales were down by -7% and -10% respectively in Q1.  Worthington reported sharper falls in overall pressure cylinder volumes and industrial cylinder volumes, in the latter case negative YoY for the seventh successive quarter

Luxfer reported cylinder sales were again negative in Q1 as they have been for the last five quarters- primarily volume driven with all key end markets showed significant declines in sales




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Pressure cylinder operating margins by company %

%
  • Worthington
  • Luxfer
,Worthington,Luxfer 2015 Q1,7.5%,2.2% 2015 Q2,4.1%,2.7% 2015 Q3,7.5%,5.1% 2015 Q4,-5.1%,4.4% 2016 Q1,4.5%,5.1% 2016 Q2,5.9%,5.5% 2016 Q3,6.9%,5.5% 2016 Q4,5.8%,4.1% 2017 Q1,5.1%,6.3% 2017 Q2,8.0%,6.1% 2017 Q3,3.9%,4.2% 2017 Q4,8.2%,1.3% 2018 Q1,5.9%,6.9% 2018 Q2,7.0%,5.1% 2018 Q3,4.9%,6.8% 2018 Q4,5.0%,8.2% 2019 Q1,6.5%,5.3% 2019 Q2,6.6%,9.8% 2019 Q3,9.7%,9.2% 2019 Q4,5.4%,7.2% 2020 Q1,5.3%,9.3%
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Luxfer operating margin in cylinders continued on a gradually improving trend in recent quarters and marginally above Worthington due to product mix and underlying performance 

Worthington cylinder operating margins consistently 6-8% in recent years

Luxfer continuing action programme (and associated restructuring costs) to further reduce cost base – total cost of over $45m in 2018 to 2021 to achieve annual cost reduction of $24m 




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Electronic Materials Suppliers

Electronics Suppliers Growth
% change YoY
  • Versum
  • Entegris
  • AL
  • Merck
,Versum,Entegris,AL,Merck 2015 Q1,16.0%,5.0%,14.4%,null 2015 Q2,18.0%,0.0%,11.9%,null 2015 Q3,-9.0%,-1.0%,12.8%,null 2015 Q4,-4.0%,-1.3%,7.5%,null 2016 Q1,-9.8%,1.4%,13.4%,null 2016 Q2,-7.7%,8.0%,9.0%,null 2016 Q3,7.0%,9.8%,-0.5%,null 2016 Q4,10.0%,15.6%,-3.5%,null 2017 Q1,16.0%,18.9%,-0.4%,-0.9% 2017 Q2,19.8%,8.6%,1.2%,-3.2% 2017 Q3,19.0%,16.5%,7.2%,-1.5% 2017 Q4,22.0%,13.6%,7.4%,-1.2% 2018 Q1,26.0%,15.7%,5.7%,-4.0% 2018 Q2,20.4%,16.4%,7.6%,0.4% 2018 Q3,19.0%,15.3%,8.5%,3.4% 2018 Q4,3.0%,14.6%,17.7%,7.8% 2019 Q1,-4.0%,6.5%,13.7%,3.2% 2019 Q2,-7.0%,-1.1%,13.2%,-2.0% 2019 Q3,null,-1.1%,5.8%,-10.6% 2019 Q4,null,6.3%,0.0%,-16.6% 2020 Q1,null,5.4%,3.6%,-5.4%
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Electronic Suppliers' Operating Margin
%
  • Versum
  • Entegris
  • Merck
,Versum,Entegris,Merck 2015 Q1,null,10.5%,null 2015 Q2,null,14.0%,null 2015 Q3,null,11.5%,null 2015 Q4,null,7.5%,null 2016 Q1,29.1%,11.1%,null 2016 Q2,27.8%,15.3%,null 2016 Q3,25.4%,11.7%,null 2016 Q4,29.2%,14.6%,null 2017 Q1,25.8%,16.0%,28.0% 2017 Q2,27.9%,18.0%,28.0% 2017 Q3,23.8%,17.6%,28.0% 2017 Q4,26.9%,20.3%,28.0% 2018 Q1,26.2%,21.4%,24.1% 2018 Q2,27.5%,19.6%,22.4% 2018 Q3,28.3%,17.1%,22.8% 2018 Q4,29.0%,17.8%,15.6% 2019 Q1,25.3%,12.1%,15.8% 2019 Q2,25.0%,14.5%,16.9% 2019 Q3,null,13.4%,16.8% 2019 Q4,null,19.7%,1.8% 2020 Q1,null,19.6%,12.9%
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A number of companies related to the electronics sector are monitored and can be considered indicative of ongoing demand for gases, electronic chemicals and equipment from electronics and related production while their other businesses are indicative of development of customer investment in this sector

Entegris is a US headquartered $1.6Bn global business providing products and services to semiconductor and other advanced manufacturing markets. 3 major business segments each around one third of business – Specialty Chemicals & Advanced Materials, Microcontamination Control and Advanced Materials Handling

Versum was formerly Air Products’ Electronics Materials business and was spun off in 2016 as a specialty materials supplier to the semiconductor industry. Three quarters of its $1.2Bn business were in Materials (Advanced and Process) with the rest in Delivery Systems & Materials. 

In 2019 Versum was acquired by Merck Performance Materials (part of Merck group), previously a $2Bn + business within Merck corporation supplying display solutions (60%), semiconductor solutions (25%) and surface solutions (15%) – combined sales of Merck business in this sector is now $3Bn annually


Both Entegris and Merck (along with AL Electronics) indicate some stabilisation of the electronics sector despite the importance of the Covid impact in the key Asia market

In the case of Merck the underlying decline of -17% YoY in performance materials in the previous quarter was reduced to a combined underlying decline of -5% in Q1. Sales reductions of around -10% YoY in Display Solutions and Surface Solutions were significantly offset by underlying growth in Semiconductor Solutions where Versum was also a major addition. A significant fall in Asia Pacific sales was only partially offset YoY by growth in the smaller US business

Entegris showed strong growth in its Specialty Chemicals and Engineered Materials business (+16% YoY) but sales were flat in Advanced Materials Handling and Microcontamination Controls businesses

Entegris’ operating margin continues to run at close to its 20% peak seen in 2017/8 in recent quarters. Merck’s margin has been slightly lower at around 15% up to Q1 when exceptional costs associated with the Versum acquisition are excluded. Versum’s operating margin had previously exceeded its competitors at around 25% while Merck Performance Materials had also shown a similar margin


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New technology companies

Sales by New Technology business
$m
  • Ballard
  • Plug Power
  • McPhy
  • Fuel Cell Energy
  • Hydrogenics/Cummins
,Ballard,Plug Power,McPhy,Fuel Cell Energy,Hydrogenics/Cummins 2015 Q1,9.3,9.8,1.0,null,null 2015 Q2,11.2,24.0,1.0,null,null 2015 Q3,16.0,31.4,1.1,null,null 2015 Q4,20.0,38.4,1.1,null,null 2016 Q1,16.3,15.3,1.2,null,null 2016 Q2,17.6,20.5,1.2,null,null 2016 Q3,20.6,17.6,2.9,null,null 2016 Q4,30.7,32.6,2.9,null,null 2017 Q1,22.6,15.2,3.0,20.4,8.7 2017 Q2,26.5,22.6,3.0,10.4,7.5 2017 Q3,31.9,61.4,2.5,47.9,12.1 2017 Q4,40.2,31.1,2.5,38.6,19.7 2018 Q1,20.1,26.4,1.9,20.8,8.1 2018 Q2,26.4,35.2,1.9,12.1,7.6 2018 Q3,21.6,57.4,2.4,17.9,7.8 2018 Q4,28.5,59.8,2.4,17.8,10.5 2019 Q1,16.0,21.6,2.3,17.8,8.1 2019 Q2,23.7,57.1,2.3,22.7,10.5 2019 Q3,24.8,57.4,3.8,17.9,9.0 2019 Q4,41.9,91.7,3.8,17.8,18.0 2020 Q1,24.0,40.8,null,16.3,10.0
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Operating Margin for New Technology business
%
  • Ballard
  • Plug Power
  • McPhy
  • Fuel Cell Energy
  • Hydrogenics/Cummins
,Ballard,Plug Power,McPhy,Fuel Cell Energy,Hydrogenics/Cummins 2015 Q1,-77.6%,-129.9%,-283.3%,null,null 2015 Q2,-68.3%,-41.1%,-283.3%,null,null 2015 Q3,-28.3%,-39.0%,-209.5%,null,null 2015 Q4,-27.4%,-62.8%,-209.5%,null,null 2016 Q1,-59.7%,-84.5%,-231.8%,null,null 2016 Q2,-28.1%,-65.4%,-231.8%,null,null 2016 Q3,-18.3%,-75.5%,-73.6%,null,null 2016 Q4,1.2%,-36.6%,-73.6%,null,null 2017 Q1,-10.6%,-128.8%,-54.5%,-56.3%,-15.5% 2017 Q2,-3.4%,-124.2%,-54.5%,-138.3%,-61.1% 2017 Q3,-2.9%,-59.3%,-73.9%,-17.1%,-18.0% 2017 Q4,-1.6%,-56.9%,-73.9%,-14.4%,-2.5% 2018 Q1,-30.1%,-79.3%,-114.3%,-61.1%,-20.6% 2018 Q2,-11.9%,-65.2%,-114.3%,-119.5%,-36.8% 2018 Q3,-24.8%,-22.0%,-111.1%,-66.4%,-37.9% 2018 Q4,-21.9%,-21.6%,-111.1%,-85.7%,-28.2% 2019 Q1,-53.2%,-94.9%,-95.3%,-85.7%,-24.7% 2019 Q2,-19.4%,-21.7%,-95.3%,-4.7%,-46.1% 2019 Q3,-27.3%,-22.0%,-28.2%,-66.4%,-422.2% 2019 Q4,-17.7%,-8.2%,-28.2%,-85.7%,-283.3% 2020 Q1,-43.8%,-63.5%,null,-19.3%,-470.0%
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Five new technology companies (Ballard, Plug Power, McPhy, Fuel Cell Energy and Hydrogenics) who are active in fuel cell related technologies are monitored are monitored – although the specific mix of target technologies and end-uses varies between companies and over time. Combined annual sales of these five companies now exceed $400m p.a. 

It appears that reported sales fell sequentially across this sector in Q1 – although up significantly YoY – however this reflects the continued swing in quarterly sales and growth seen in this emerging market

All companies continue to gain new contracts and add new products and services to their offerings which are intended to significantly enhance growth, with particular focus and China and US markets

High R&D spend of these companies typical of technology start-ups – combined spend of these companies has risen further and is estimated to be equivalent to over 20% of sales

All five companies monitored have continued to make significant operating losses in recent quarters and the trend towards underlying break-even position appears difficult to sustain

High stock market valuation of these companies relative to sales (at least 4 times) despite negative profitability reflects market perceptions of potential size of market and these businesses – typical of many new technology businesses in recent years. The acquisition of Hydrogenics by Cummins in 2019 appears to reflect these high valuations and also the impact of goodwill and large company overheads in such circumstances. AL retains a minority shareholding position in Hydrogenics reflecting continuing potential interest from industrial gas companies in this sector with implications for hydrogen growth 




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