Capital expenditure (CAPEX) is the term given to funds that are used by an organisation to acquire or upgrade its assets, such as property or equipment.

In the industrial gas industry, capital expenditure is a way for a company to consolidate its market position and expand into new markets. Below we will take a look at the CAPEX of some Tier One industrial gas companies:


Linde’s three-year efficiency programme ‘LIFT’ aims to lower its CAPEX by reducing its sales ratio from around 13% to between 11%-12% in the coming years. This is because the company believes that the capital expenditure required to capture growth is lower than in previous years. This reduced capital expenditure will in turn increase the return on capital employed and support free cash generation.

Taiyo Nippon Sanso Corporation (TNSC)

TNSC plans to expand its presence in new business areas by increasing its product groups through active capital investment and M&A activity. In Asia and Oceania, TNSC aims to improve its market share in a variety of new regions, including new business ventures in unoccupied regions via the reinforcement of governance through regional holding companies.

In 2015, TNSC announced its Ortus strategy, a medium-term management plan set out to ensure future company growth. In stage two of this strategy, TNSC revealed plans to invest ¥340bn ($3bn) over a four-year period, of which 70% will be allocated to strategic investments. These investments will centre on M&A and large-scale capital expenditures both nationally and internationally.

Air Products

Air Products now reviews every capital investment of more than $3m and has established a minimum hurdle rate of 10% internal rate of return for all new projects. Additionally, the company has significantly reduced its cost through the reorganisation, lowering overhead costs by $300m run rate.

The company also has a detailed plan to achieve an additional $300m of operational cost savings. In fiscal year 2016, Air Products delivered more than $75m of this cost saving initiative, and is on its way to deliver the balance in the next three years.


Praxair’s CAPEX exceeded $390m in Q4 2016, the highest level its been in two years. This trend continued to climb in terms of ratio to sales, but dropped again in Q1 showing a general decline.

Air Liquide

Air Liquide’s gases investment continued to trend lower in Q1. This was the lowest level in recent years both in absolute terms and relative to sales after adjustment for the addition of CAPEX in the acquired Airgas business.

Business plan and finance series

This is the fifth in a series of articles that gets behind some of the business plans and accounting measures of the major industrial gas companies, and the industry itself.