Air Liquide Sees China Investment Pickup as It Signs Major Deal

Air Liquide SA (AI), the French maker of industrial gases, said it booked a “major” order in China, where the country’s recent leadership changes are helping spur investment.

A 15-year contract to provide ammonia and hydrogen to Fujian Shenyuan New Materials Co. will prompt Air Liquide to make an investment “in the same ballpark” as the record $450 million deal signed by the Paris-based company in 2010, Asia Pacific senior Vice President Jean-Marc de Royere said in a phone interview. “It’s a very big project” booked with expected returns in line with the group’s policy, he said.

“China’s doing better than six months ago, but remains a bit soft compared to the very strong economic growth of 2010 and 2011,” the executive said. “Projects are coming back and I think it’s very linked to the new political leadership” that’s trying to revive consumption, he said.

President Xi Jinping has pledged to implement policy changes to improve the economy, while Chinese Premier Li Keqiang has signalled policy makers are reluctant to use stimulus to counter a slowdown in the world’s second-largest economy because the risks outweigh the benefits. China’s economic growth slowed to 7.7 percent in the first quarter and data this month on fixed-asset investment and factory production missed forecasts.

China’s industrial markets are “a bit more solid, though not extraordinary,” the Air Liquide executive said. Steel is “holding up well” and “intermediate products are doing OK,” while makers of solar panels “continue to suffer” because of protectionist measures implemented in its exports markets, he said.

Healthcare Hunt

The French company, which also makes medical gases, is looking for acquisition opportunities in the Chinese health-care market and is working with authorities on a pilot project in this area, de Royere said. Respiratory illnesses caused by pollution, smoking, and coal mining have become the third-biggest cause of death in the country, he said.

Air Liquide, which bought a health-care company in Australia this month, is also looking for acquisition opportunities in South Korea and Japan, the executive said.

Customers in Japan, which include makers of electronics goods that closed plants last year, shows “no signs of rebound yet,” de Royere said. “We would expect the yen drop to percolate into the economy and industry in coming months, and to prompt a Japanese recovery, but we’re cautious so far.”

Gas Growth

Air Liquide first-quarter revenue fell 2.1 percent to 3.7 billion euros, hurt by the effects of natural-gas prices, currency shifts, calendar effects, and customer settlements paid a year earlier, the Paris-based company said April 24.

Comparable sales growth of gases and services, which make up the bulk of the company’s revenue, rose 1 percent in the Asia-Pacific region to 780 million euros, as revenue gained 5 percent in developing Asian economies including China, contrasting with a 4 percent drop in advanced economies such as Japan.

Chief Executive Officer Benoit Potier said in February he may unveil a strategy this December to adapt to the challenges of Europe’s economic woes, growing industrial capacity in emerging markets, cheaper U.S. gas, and rising demand for health-care services and electronic goods such as tablets.

The shares of Air Liquide were up 1.2 percent to 97.31, euros at 1:35 p.m. in Paris. They are 2.6 percent this year, compared to a 8.8 percent gain of the CAC40 Index.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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