Industry key note speaker Steve Angel has been at the helm of Praxair for the past 10 years and has served as a key executive there for the past 16 years. Angel joined the company in 2001 as its executive Vice-President. In February 2006, he became its President and CEO. He was then appointed Chairman in April 2007.
Angel began by giving an overview of Praxair’s strategy, its philosophy and its relationship with independent distributors.
He said, “First of all, 2016 sales were at $10.8bn. We have suffered roughly a 20% decline in revenues and profits in the past few years due to negative currency translations. We do business all around the world and in local currencies we are doing well,”
“We peaked at $12bn in sales a few years before. Currency seems to have stabilized at this point. You can see that North America is very important to Praxair. The US is about 40% of our overall sales.”
In 2016, Praxair had $4.2bn in revenues in the US. The packaged gases business in the US is about 30% of that total and it operates with 4.5 million cylinders and delivers 45 thousand cylinders per day. Around the globe, Praxair has 1,500 drivers on the road everyday carrying merchant liquids, it operates about 300 plants and has around 1000 miles of pipeline.
“Let’s look at packaged gases, including hard goods, in the US. We estimate a $12bn sized market with national players accounting for about half of that business. We view ourselves as a leading player in the packaged gas industry in the US and we’re also a very strong player in Canada.”
“If you look back over the last 17 years, in North America, we’ve made about 100 acquisitions of independent distributors. We’ve also formed some joint ventures.”
“We view ourselves as a leading supplier of merchant liquids to the independent distributor industry. It’s a key channel for Praxair and I believe it has also been key for Linde. It will continue to be an important channel for us going forward in the new company – which will also be named Linde.”
Angel explained how Praxair as a company operates. He said he leads the company through its vision, mission, strategy and its core values.
“I really think about this in terms of, where are you going? Where do you want to be? That’s your vision. Your strategy is how you get there. Your core values are what you stand for.”
“As a corporation, we need to be a good steward of our resources. We need to be more energy efficient, we need to limit our waste, we need to limit our water usage. Secondly, we need to develop applications that help our customers reduce their environmental foot print and solve their environmental challenges, and their productivity challenges. We have developed product applications that do just that.”
”We’re not in every geography. We’re not in Japan, we’re not in Africa, we’re not in Indonesia, we’re not in Australia. Our belief is you need to select where you’re going to participate and for us that means, choosing which countries we can we go into and really establish a strong base business that’s scalable, that can deliver the kind of return on investment that we expect and that our shareholders expect.”
Angel explains that he prefers flat organizations with fewer layers, as it enables him to communicate directly with the source.
He said, “I don’t like matrix organizations. Typically, large corporations like matrix. You should beware of anybody that comes to you and the first thing they want to talk about is the organizational structure. I can tell you, I have worked in the matrix, I’ve worked outside of the matrix, I’ve lead companies, and anybody who works inside of a matrix hates it.”
How is Praxair Run?
Praxair’s focus is on profit and loss (P&L) at the lowest geographic level.
“That’s where I think the rubber meets the road. That’s where I spend the most time thinking about getting the right people in the right jobs. We’re a locally managed business and we want to make sure we put the most important things first, and that’s P&L’s and excellent leaders who can optimize the assets on the ground.
Angel believes that business owners shouldn’t get carried away with business trends and technology. He says it’s important to understand what is, or could be, relevant to your business.
“Don’t fall in love with process. If it doesn’t deliver the results the business needs, it’s not working.”
“What we do isn’t rocket science, but if we can do every aspect of running an industrial gas company a little better every day, and a little better than the industry at large, then that will compound to a sizeable difference.”
Angel went on to discuss the Praxair and Linde merger of equals which is making considerable headway. He explained that the rationale behind the deal strategically, is that it leverages the unique strengths of two strong companies across a much larger global footprint.
“We will have very strong positions in all key geographies and markets. This will create a more balanced and diverse portfolio that will be more resilient to any future macro-economic shocks.”
“The combination provides greater flexibility to any exposure to long-term macro growth trends. Emerging markets, clean energy and digitalization are macro themes that as a combined entity, we will be in a much better position, than if we were separate.”
“Each company has a very strong balance sheet and strong cash flow. In terms of revenues, Praxair and Linde are close to $30bn collectively and have a $79bn market value combined as of today.” Clearly, there will be some erosion to this total as the newly merged business will have to divest some assets to obtain necessary regulatory approvals.
What does this mean for you?
Angel explains that Praxair is committed to serve the independent distributor channel just the same as before. However, the new company will have expanded capabilities across a larger national footprint which will put it in the position to provide better service levels and better reliability.
In the Q&A, Angel was asked what will happen to those assets that are likely to be divested. He said, “We must apply to the regulatory authorities in some 26 countries around the world. The US is important, Europe is important. We would have not gone down this path or gotten this far if we didn’t think we would obtain regulatory approval from the authorities around the world.”
“There is a lot of interest in industrial gas assets, not just in the US but all over the world. We expected there would be a lot of interest in those assets. When we have a clearer picture, from the regulatory authorities in terms of what they will accept we will let you know as and when we are able to, and as we are prepared to have more serious discussions with those who are interested in buying the assets. The US will probably be the most significant divestiture we will have to make based on scale and size.”
“In the meantime, there are certain groups within Praxair and Linde who can work together on things like integration planning. You should keep in mind, we’re still competitors, the deal has not yet been approved, nor have the other closing conditions of the Business Combination Agreement between the companies been met, and our lawyers continually try to remind us that. We have to operate with that in mind until we close the deal. We can do preliminary planning and have discussions, but as far as making final decisions about anything like that, we’re still in a holding pattern.”
Election of the new GAWDA president
Ned Lane, President at Cee Kay Supply, the largest independent supplier of industrial gases, welding and cutting equipment and supplies in Missouri was welcomed to the stage by his wife and three children.
He said, “I’ve got to spend a lot of time with Mark over the last year and he’s been a great leader for our association.”
“My goal as president over the next year is to make things better every day. For our staff, for the distributor members and for the supplier members. You must communicate the benefits to your organization, focusing on the three P’s: people, process and plan.”
“My responsibility is to leave the association better than when I started, with progress and perfection.”