Photographer: Chris Ratcliffe/Bloomberg

Ailing Patients Breathe New Vigor Into Industrial Gas Suppliers

  • Health care is growing fast at Air Liquide, Linde, Praxair
  • “The only human contact a patient has on a given day”

In a cluttered suburban apartment east of Paris, health technician Vincent Mallet adjusts a plastic tube delivering oxygen to an elderly man’s diseased lungs. Sitting at the dining-room table, Mallet tests the equipment while the patient and his wife recount the daily struggles of living with chronic illness.

In the past, the couple would have made frequent visits to a nearby hospital. With Mallet now spending about an hour a week calibrating a bedside machine and writing a report for the man’s doctor as part of his rounds in the town of Fontenay-sous-Bois, those visits have become rare.

Mallet isn’t a nurse or physician. He’s an employee of Air Liquide SA, a French company better known for supplying gases in heavy cylinders and pipelines to industrial sites like refineries and steel plants. The visit to the patient, paid for by France’s state-funded medical system, is part of Air Liquide’s expanding health-care operations.

As factory demand softens and an oil slump hurts new industrial projects, big gas suppliers like Air Liquide SA, Linde AG and Praxair Ltd. have discovered they can profit from aging populations and an increase in chronic illness like asthma and diabetes. Linde serves 1.7 million home patients and says the global market for the kinds of health-care services it offers is on track to double over the 10 years to 2020, to 17 billion euros ($20 billion).

“The potential for health care is huge, both in Europe and in emerging markets,’’ said Benoit Potier, chief executive officer at Air Liquide, which serves 1.3 million patients. “Governments around the world are discovering that health care in the home can be cheaper and more effective than hospital stays.”

The gas companies were started more than a century ago by scientists who figured out how to liquefy and separate gases for industrial uses. Business boomed on demand for oxygen from steelmakers and nitrogen for chemical factories. As early as the 1930s, the companies began supplying hospitals with oxygen and nitrous oxide used as anesthesia. Since the 1980s, that has expanded to include home-health services.

“It’s possible health care will eventually overtake some of these companies’ industrial divisions,” said Baader Bank analyst Markus Mayer.

Air Liquide’s health-care sales have climbed at an average of 8 percent annually since 2011, and last year expanded at double the pace of its industrial operations. At Munich-based Linde, health-care services account for about a quarter of the gas division’s revenue and jumped by 7 percent in 2015 versus 0.5 percent growth for its industrial gas units.

“We will continue to reinforce our position as world leader’’ in home health care, Linde CEO Wolfgang Buechele told shareholders in Munich on May 3. Buechele has been pursuing what he calls an “internationalization” of the business, and the company now operates in 60 countries.

The U.S. has become a key market for Linde, which last December agreed to buy Tennessee-based American HomePatient Inc. for 174 million euros. That followed the 2012 purchase of American health services provider Lincare Holdings Inc. -- an erstwhile subsidiary that was separated from Linde in 1917 -- for $3.8 billion.

The expansion into the U.S. has had its hiccups, exposing Linde to cuts in what Medicare pays for such services. Linde in December clipped its 2017 profit outlook partly due to falling prices in the U.S. Nevertheless, first-quarter earnings got a boost from the American HomePatient acquisition, which helped offset the price cuts that are expected to worsen in July, according to Bloomberg Industries.

Air Liquide has focused on Europe, spending more than $1 billion on a string of acquisitions over the past five years. The company last year booked 2.8 billion euros in revenue from health care, and the business now makes up a third of overall sales in Europe and 17 percent worldwide.

Delivering Baguettes

In the 1990s, Air Liquide began moving beyond gas deliveries, starting with intravenous treatments for AIDS patients and chemotherapy for people with cancer. It later added services such as insulin machines and pain management. And in recent years it’s started selling equipment that concentrates oxygen from ambient air, bypassing the need for deliveries of cylinders. Its technicians have even been known to pick up a baguette or two for patients they visit.

“We’re on the front lines, sometimes the only human contact a patient has on a given day,” Olivier Lebouche, Air Liquide’s vice-president of home health care in Europe, said at a ceremony marking the launch of a new clinic in Paris that teaches people how to use equipment to treat sleep apnea, diabetes, and other diseases.

Air Liquide is making a push into the U.S. with a $10 billion takeover of U.S. gas distributor Airgas Inc. , its biggest deal ever. Though both companies deliver gases to American hospitals and clinics, neither goes into U.S. homes, and the company says it’s not currently planning to enter the business there.

The big gas providers have long said that China and other developing markets are their next big growth opportunity. But Patrick Lambert, an analyst at Raymond James in London, said home health care will be tough for them in places where there’s little tradition of home visits by medical professionals.

“Getting patients to bypass hospitals and seek out home care will be key to growth in these countries,’’ Lambert said.

Praxair, based in Danbury, Connecticut, says health care can offer more stable expansion than that offered by more cyclical industrial businesses. Since January, the company has acquired medical-gas distributors in Italy and Britain as part of a global push in that market.

Health care made up 8 percent of revenue last year, and the company sees growing opportunities for home services in Europe, South America, Mexico and Canada, said Chief Technology Officer Todd Skare. “Home care,” he said, “continues to be an important part of overall business strategy.’’

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