Air Liquide’s Airgas Deal Boosts Sales Amid Energy Slump

  • Revenue drops sharply at engineering and construction division
  • Cost synergies with Airgas to be achieved earlier: Air Liquide

Air Liquide SA third-quarter revenue jumped on the French gas supplier’s acquisition of Airgas Inc., offsetting a decline in sales at its engineering division caused by sluggish demand from the energy industry.

Revenue climbed 27 percent to 5.08 billion euros ($5.5 billion) from the year-earlier period that was prior to the acquisition, the Paris-based company said in a statement Tuesday. Excluding Airgas and adjusted for currency and energy effects, sales fell 1.1 percent, including a 52 percent drop to 105 million euros at the engineering and construction division, which builds large installations for refineries and factories.

“Following the completion of the acquisition of Airgas, Air Liquide is confident in its ability to generate growth in 2016, both in net profit and net earnings per share,” Chief Executive Officer Benoit Potier said in the statement. This outlook includes the effect of the capital increase finalized in early October.

Shares rose 2.1 percent to 94.79 euros at 12:47 p.m. in Paris, giving the company a market value of 37 billion euros.

Air Liquide, which counts soda bottlers and welders among its customers, completed the purchase of Airgas in May amid a slump in industrial output in regions like Europe. The $13 billion acquisition gives the French company a bigger foothold in North America, where it sought to overtake competitors Linde AG, Air Products & Chemicals Inc. and Praxair Inc. Air Liquide expects to generate a total of $300 million of synergies from the deal, while pursuing its plan to cut costs.

Keeps Targets

The company said Tuesday it’s keeping a full-year target of growth in net profit and net earnings per share. Cost synergies will be achieved by the end of 2018, earlier than anticipated, and so-called “efficiency gains” reached 223 million euros in the first nine months of the year, it said.

Revenue at its engineering and construction division dropped due to a slowdown in large-scale projects related to energy and by the low number of new ones, the company said, adding that revenue during the same quarter last year was bolstered by a one-off sale.

“We have been continuously restructuring engineering for the last year or so,” Pierre Dufour, senior executive vice-president, told analysts during a conference call. The company is close to the point where it cannot keep restructuring without losing skills, he added.

“Basically they are going through an oil and gas recession,” Liberum Capital analyst Adam Collins said.

At Airgas, sales of gases are down 1.5 to 2 percent while margins are holding and prices improving, Dufour said, calling the industrial cylinder business “difficult this quarter.”

Revenue at Air Liquide’s division known as “other activities,” including the diving unit Aqua Lung which Air Liquide plans to sell, dropped 10 percent to 116 million euros as welding sales decreased in western Europe.

Sales from gas and services grew 2 percent when the Airgas acquisition was stripped out due to demand from large industries and healthcare. Revenue from the industrial merchant division after the acquisition rose by almost 80 percent in the quarter, but fell 2 percent on a comparable basis.

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