Air Liquide: Driven by its ability to pass on energy costs, Air Liquide surprises the market

Air Liquide: Driven by its ability to pass on energy costs, Air Liquide surprises the market

(BFM Bourse) – The industrial gases specialist posted quarterly sales that far exceeded expectations on a like-for-like basis. The company also confirmed its recurring net income growth target, at constant exchange rates.

A popular value for small owners with a third of the capital held by individual shareholders, Air Liquide is in the spotlight on Tuesday. The specialist in industrial gases evolves at the head of the CAC 40 gaining 4.2% to 129.38 euros while the flagship index of the Parisian square advances just 0.4% at the same time around 10:40 hours.

The Lee Group satisfied the market by posting sharply rising quarterly sales. During the July-September period, Air Liquide saw its revenue rise 41.3% in one year to €8.25 billion. This figure is above the expectations of analysts, who expected 8,110 million euros, according to a Vara Research consensus available on the company’s website.

Its main division, Gas and Services, which represents 96% of turnover, had a turnover of 7,900 million euros, 41.4% more in the published data.

A historic “energy effect”

This figure is obviously inflated by the “energy effect”, that is, the sharp increases in the costs of natural gas and electricity that Air Liquide passes on to its customers. The group’s medium- and long-term contract invoices are indexed to these variations in the “Large Industries” business line, which includes customers with the largest purchase volumes (in the metallurgy, chemical, refining and energy sectors). ). For smaller customers, those in the so-called “Industrial Trader” segment, Air Liquide must carry out dynamic price management.

This “energy effect” reached an all-time high of 25.6% in the third quarter, with a record 18% in the Commercial Industrial segment. This demonstrates “the ability to manage the exceptionally strong increase in energy prices and inflation,” says Air Liquide.

“Third-quarter growth was fueled by successful price increases,” Stifel Bank said in a note.

Air Liquide also benefited from a positive exchange rate effect of 8.9%. Also taking into account a limited scope effect of 0.3%, the comparable growth of the group in the third quarter was thus 7.2% in the Gas and Services activity.

Air Liquide clearly exceeded analysts’ expectations for this indicator. According to the consensus of Vara Research, the median of their forecasts was only 6% for the growth of the Gas and Services activity in comparable terms.

“Pricing Power”

Air Liquide also indicated that its cash flow stood at 23.8% of its sales between January and the end of September at 4,570 million euros, while its net debt stood at 11,550 million euros at the end of September, it is say, at the same level as a year earlier.

Following this quarter of strong growth, Air Liquide confirmed its outlook for the full year, which sees an increase in the group’s operating margin, as well as growth in recurring net income, at constant exchange rates.

“Overall, Air Liquide has delivered a solid post,” Stifel judges. UBS, for its part, reiterated its purchase recommendation, valuing the group’s “price power”, that is, its ability to increase its prices without losing customers.

Julien Marion – ©2022 BFM Bourse

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