Since SOL\\$quot;s establishment in 1927 the company\\$quot;s major shareholders, the Fumagallis and Annonis \\$quot;“ have had the reins tight in hand. Through its three generations of leaders SOL has become one of the most signifi cant players in the Italian. as well as European gases markets.

SOL was initially established in Monza by five shareholders to respond to the need for oxygen and acetylene in cutting and welding. The five decided to build a small plant supporting these applications at nearby shipyards in Livorno, central Italy. However, a few years later the number of shareholders fell to two, with Aldo Fumagalli and Giovanni Annoni remaining equal partners in the business.

According to the company\\$quot;s current chairman, grandson Aldo Fumagalli (48), the business remained very small until the 1960s. "Where our turnover in the early 60s was one, today it\\$quot;s one hundred," Fumagalli said, illustrating the growth.

"When my grandfather Aldo died in 1958, his eldest son Giulio (who graduated in chemical engineering)joined the company and started running it together with the surviving founder Giovanni Annoni. They remained in power and developed the company,taking advantage of the growing technical gases applications,especially in the steel business, until the mid seventies,when Giovanni Annoni resigned.

Largest in Europe

\\$quot;We think that the homecare business is still growing on a European level, and can continue to grow by at least 10 per cent annually. Next year we are going to dedicate investment resources and consolidate our presence in the countries we are already in.\\$quot;

"At that time, Giulio Fumagalli was joined by Alessandro and Renzo Annoni, the two sons of Giovanni,and by his younger brother Ugo. They continued to make SOL grow through the wave of emerging new applications and leveraging the important on-site customers whose contracts Giulio and Giovanni had won over the previous 20 years."

Economic boom
The company\\$quot;s growth in the 60s was partly due to SOL\\$quot;s established practice of supplying gases to steel mills. However, heavy usage of oxygen in the furnaces and steel mills started in the 60s and, as SOL was already a supplier, the company started tests with them. These soon led to important and continuous oxygen supply.

"Our growth was also aided by the economic boom in the construction and steel sectors in Italy and Europe. The region started to produce a lot of steel, which meant they needed huge quantities of oxygen - so we built our first oxygen plant, then a second one and then a larger one," said Fumagalli, describing the company\\$quot;s expansion in Italy.

Homecare grew 15 % last year///

In the late 60s and early 70s another important application emerged: float gas production. SOL decided to build two plants, one in Pisa and a second one in north west Italy, at Cuneo near Turin. Fumagalli continued: " We built air separation units in these two areas for nitrogen and hydrogen, which also explains why we entered the CO2 business, as it is a by-product in hydrogen production."

By the early 80s, SOL was covering the whole of Italy with production of industrial gases. The company had made several investments, built new plants and
entered the cryogenic field.

The families had also decided to carry on independently. Fumagalli explained: "We decided to continue developing internal technology and engineering alone and we put a lot of effort into the development of applications in sectors such as metallurgical, oxy burners, food freezing, water treatment and hospitals."

The 80s also witnessed the company\\$quot;s most significant decision to date: SOL entered the homecare business and started to expand outside of Italy.

The rise of SOL
Indeed that decade saw a series of changes, both in the expansion of the company and in the handover of power to the third generation of Fumagallis and Annonis.

First of all, Fumagalli\\$quot;s third generation member Michele, together with a manager, Mr Matucci, had visited the United States and discovered a new business opportunity. "My brother and Mr Matucci came back and said that they had looked around and discovered a new development: homecare oxygen therapy."

SOL started developing this new business, as did Air Liquide in Europe. "We started in Italy but by the end of the 80s we entered Belgium and northern Europe.
The concept worked well and the market kept growing so in the 90s we started operations in other countries in Europe."

Fumagalli says that the firm also wanted to be in the developed and industrialized heart of Europe. "We started to build filling stations in northern and southern France, Belgium, the Netherlands and northern and western Germany. This also allowed us to build an air separation unit in Belgium which completed this part of

When the Berlin Wall collapsed, SOL among others, decided to have a look at the eastern part of Europe. According to Fumagalli, SOL made some future investments
in countries which were at the time less developed but had higher development rates in the future. "Our first investment was a joint venture with Uljanik in 1992 at Pula, which is a shipyard in Croatia. In 1994 we established a joint venture with the largest steel mill in Slovenia, in 1995 bought a company in Macedonia, and later started with green fields in Bulgaria and Serbia, and bought companies in Greece and Bosnia."

Today SOL has a strong presence in Italy, central and eastern Europe and has diversified in homecare. Still Fumagalli insists his company has grown into the Italian market, but it has also invested a lot to grow out of Italy. "I think the Italian market has always been the most competitive one in Europe and we have a 10 \\$quot;“ 15 per cent share of it.

"The Italian market is not huge, but it\\$quot;s important. However, what\\$quot;s most significant is the remaining part of it, shared by companies like Air Liquide, Sapio, SIAD and Rivoira. All these companies were much bigger than SOL after the Second World War. In addition, Messer, Linde and AGA entered the market, which meant that all the big players with the exception of BOC have had a presence in Italy for quite a long time."

Changing roles

\\$quot;Our industry has changed from last century's manufacturer to today's service supplier and will change again to tomorrow's consultant role\\$quot;.

Lifeline of Vivisol
VIVISOL, \\$quot;˜vivi\\$quot; meaning to live in Italian, is clearly SOL\\$quot;s fastest growing business sector. The homecare business grew some 15 per cent last year and according to Fumagalli this growth trend is expected to continue.

He said: "We think that the homecare business is still growing on a European level, and can continue to grow by at least 10 per cent annually. Next year we are
going to dedicate investment resources and consolidate our presence in the countries we are already in."

Fumagalli also hopes to increase VIVISOL\\$quot;s presence in some new countries, especially in the Eastern Europe - where possible. He says the company is
always trying to follow opportunities wherever they are. "Eastern Europe is still behind Western in homecare because this business sector develops in line with the countries\\$quot; GDP and healthcare systems. But we want to be ready when the time is right."

Talking to Fumagalli highlights the company\\$quot;s desire to expand and awareness of being ready to move fast when needed. According to him the potential market in Europe is growing and the trend is strongly towards keeping people at home and out of hospitals.

"The evolution of this business is quite clear. At first the only possible service was oxygen therapy. Now the sector is expanding beyond respiratory care. We always try to be at the top of the service of supplying home care services to patients. This means that we try to create new opportunities for our business by giving more services in better ways, in higher quality and for a broader patient base."

Fumagalli also agrees that the growth of the homecare sector is based on an ageing population. He continued: "Firstly, when you become older you naturally get respiratory problems. Secondly, the quality of life is increasing, so people prefer to stay at home. Thirdly, pollution is unfortunately increasing, which again means more respiratory problems - and don\\$quot;t forget the smokers\\$quot; problems. Also, the need to restructure hospitals pushes the case for dehospitalization and increases the need for homecare services.

"Hospitals can reduce cost if they can act more like daily hospitals. As soon as a patient has received surgery he should be able to go home. But the problem is: who is going to follow them home? The doctors want to be sure that a company can effectively supply a high standard of care at home.

"There is a trend to keep people with diseases at home but this requires more companies getting involved. That\\$quot;s why we are trying to increase our level of homecare."

Currently VIVISOL in Italy is growing quite well, but the Italian family business is also producing solid numbers in France, Germany and Austria. Fumagalli says they have grown through green field investments and acquisitions. #34We bought a company in France and a couple in Germany and this has allowed us to cover
both countries quite well."

Today VIVISOL has more than 60,000 homecare patients in Europe, half of them in Italy. Fumagalli stresses that the company\\$quot;s presence outside Italy is growing year on year. "We are not only in homecare oxygen therapy but we do a lot of other important services, such as mechanical ventilation therapy, nutrition, sleep apnoea diagnoses and care, and also advanced homecare services, which means that we supply patients with some other medical services - like nursing and telemetry.

"The European market continues to offer us a great opportunity, however, there\\$quot;s still a lot of differences to the US market, where the number of homecare patients on total population is almost three times that of Europe. That\\$quot;s why the market in Europe can only grow."

Growing out of Italy
The technical gases side of SOL, which still forms the majority of the company\\$quot;s business (67 per cent), has continued growing steadily with an annual growth rate of about seven to eight per cent. Here, again, the company enjoys a good financial position and is ready to make a move when an opportunity arises.

"We are always looking for possibilities both in Italy and outside Italy. Our business is not easy; you must be ready to take advantage of an opportunity, which
may or may not happen in the end. You must be ready when the opportunities are there and just do it."

According to Fumagalli, SOL has lately dedicated a lot of effort outside Italy. He says that although SOL desires to consolidate its presence in Italy the aim
is to continue growth elsewhere. "We want to grow in all those countries in which we are already present because where you are present you have space to expand, have better synergies and more effective distribution. Countries close
to those in which we already have a presence are always potentially of interest for us.

Feluy air separation unit///

"I can\\$quot;t say which country is our next target - but I can say that all the countries that are near might be our target for future expansion," he hints.

Italy, on the other hand, has seen very little consolidation. The market is quite fragmented compared to other markets because of the presence of Air Liquide, Praxair, SIAD,Sapio, Linde and Messer. "In the future there could be a little more consolidation.

"In the past we grew in Italy thanks to positions and acquisitions. In the 70s, for example, we bought SLO, which was an important company in Lombardia and allowed us to be present in a strong way in the cylinder business. We also bought a couple of companies in southern Italy."

Fumagalli says that his company boasts a very good financial situation and keeps growing at 10 per cent pace annually. He also mentions that SOL\\$quot;s debt-equity ratio is only 34 per cent, which allows the company to afford some acquisition if the price is reasonable.

Although SOL went public and made an IPO in 1998, there are no plans to fl oat the company more. Fumagalli explains that previously the money was used to reduce debt to zero, allowing new possibilities and giving financial strength. "The IPO experience was positive for the company, because it gave us stability on growth and also pushed us to increase our knowledge, control and management.

"But we have no plans to float further shares of the company at the moment. The capital that we need for our growth can be generated internally, and at the moment the Fumagalli and Annoni families don\\$quot;t have any intention to sell either."

For the time being SOL will concentrate on Europe. Fumagalli considers the US as a possibility, but a difficult one. "The distance is very large and we would risk a lot because we would need plants and people who would supply our customers. Unless we can find an opportunity which means acquisition of an already structured operator it would be very difficult. This kind of opportunity is not easy to find."

Gas consulting
Furthermore Fumagalli thinks the industry is going through challenging times. "We are providing more and more solutions as an operator in this business.

"Our industry has changed from last century\\$quot;s manufacturer to today\\$quot;s service supplier and will change again to tomorrow\\$quot;s consultant\\$quot;s role. We are trying to come up with solutions to our customers\\$quot; problems and trying to understand
the problems of our potential customers. Then we have to convince them that these problems can be solved thanks to our gas technologies.

"So technology is the key word more than gas. What we are selling to a customer is more and more linked to solutions we provide. We have to be able to put together IT technologies, patents and gases, all the time trying to solve our customers\\$quot; problems.

"We live challenging times. Increased energy costs push our customers to look for new solutions in order to reduce cost, so there are challenges but at the same time new opportunities.

"At the end of the day, it\\$quot;s up to us to find the keys to turn these challenges into opportunities," Fumagalli concludes.