In the first fiscal quarter of 2016, not even industrial gas giant, Air Liquide, could escape the impacts of the slowdown in the oil sector. But despite this and other external factors, such as lower exchange rates and energy prices, the French corporation still showed solid revenue growth, largely thanks to various M&A activity.
Overall group revenue in the first quarter of the fiscal year increased, reaching €3.9m ($4.4m) – up by 2.4% on a comparable basis but down by 3.1% on a reported basis – compared to the same period in 2015. Additionally, strong sales in its gas and services unit amounted to €3.55m ($4m), rising by 4.2% on a comparable basis.
Thanks to production ramp-ups across various facilities in Germany, China and Saudi Arabia, its large industries unit showed an increase of 8.6% in revenue. The company particularly highlighted its Yanbu site in the Middle East (left), where hydrogen (H2) production volumes rose significantly.
Electronics showed a record robust growth of 13.4%, which was driven by the strong rise in sales of related equipment and installation, increased demand for specialty gases and a growth in sales of advanced materials of more than 30%. Air Liquide attributed this drastic growth to the North Pacific rim and South Pacific rim regions, especially in Japan, China and Singapore, despite a low inflation environment.
However, the Western side of the world seemed to have the adverse effect for the corporation, with sales across the oil services and related industries in the US down by 2.6% for its industrial merchant unit. Additionally, in Western Europe, manufacturing activity simply remained moderate.
Its healthcare sector continued to excel this quarter, with all geographic zones showing increased revenue growth. Home healthcare benefitted from solid organic growth, whilst the contribution from acquisitions in this sector, such as the attainment of Brazilian hygiene and hospital disinfection specialist, Vic Pharma, in February, was moderate. Hygiene sales continued to increase too, rising by 21.2%.
Excluding the impact of Airgas acquisition and financing, and assuming a comparable environment, Air Liquide is confident in its ability to deliver another year of net profit growth
Its Global Markets and Technologies business was also up 11.1% on a comparable basis, totalling €65m ($73m). The company attributed this growth to markets related to the maritime, energy transition and space sectors. In January, Air Liquide was awarded two contracts worth a combined total of €20m ($22m) to supply high-purity xenon (Xe) in the all-electric propulsion satellite market.
Of course, the acquisition of Airgas has been the biggest merger in recent history in the industrial gases industry, with Benoît Potier, Chairman and CEO of the Tier One player, commenting on the financial impact of the colossal acquisition, “The Airgas acquisition is on track and in line with our expectations, with the preparatory work for integration allowing us to confirm synergies of more than $300m, as announced last November.”
“In addition, the transaction refinancing allows us today to envision a capital increase of between €3-3.5bn ($3.4-3.9bn). Lastly, acquisition timing might shorten, with possible completion by late second quarter 2016.”
Potier remained optimistic for the year ahead and went on to say, “The group continues to generate recurring efficiency gains, strengthen its competitiveness, and invest in its market growth. Excluding the impact of Airgas acquisition and financing, and assuming a comparable environment, Air Liquide is confident in its ability to deliver another year of net profit growth.”