Robust Gas & Services sales growth
Acquisition of Airgas accretive as of 2016
Regulatory News:
Air Liquide (Paris:AI):
H1 2016 key figures
H1 2016 highlights
- Group revenue: +8.0%* 8,295 million euros
Excluding
Airgas
- Gas & Services sales: +3.6%*
- Gas & Services operating margin: 19.6%
- Airgas: closing of the acquisition on 23 May, first
refinancing of 3 billion euros via bond issue, sale of assets in
the United States pending FTC approval.
- New contracts in growing markets: flat panel displays
(China), satellite propulsion (France), biogas purification
(Europe).
- Acquisitions in Industrial Merchant (two distributors in
the United States and a specialist in temperature-controlled
logistics) and in Healthcare (hygiene in Brazil).
- Innovation and Technologies: new Research and Technology
Center (Shanghai), use of CO2 to produce sustainable concrete.
- NEOS: communication on the Group’s new corporate program
for the 2016-2020 period.
* Variation H1 2016/H1 2015 excluding currency and energy
impact
Commenting on the first six months of 2016, Benoît Potier,
Chairman and CEO of Air Liquide, said:
“This first half has been characterized by the completion of
the Airgas acquisition, which will be accretive in 2016, and its
first contribution to the Group's performance. In a context of
moderate global growth, Gas & Services sales posted robust
growth. Growth is the result of dynamic Electronics sales, higher
volumes in Large Industries, and rising Healthcare business. This
first half is also characterized by a negative currency impact and
lower energy prices.
All geographies are progressing on a comparable basis,
benefiting notably from the slight improvement in demand in
industry since the beginning of the year. This increase was more
pronounced in Asia Pacific and the developing economies.
The Group continues to generate recurring efficiency gains,
to which will be added the first benefits of synergies with Airgas
in the second half of the year. The operational performance of Gas
& Services is solid, as evidenced by the margin increase and
strong cash flow growth.
The investment backlog, amounting to 2.1 billion euros, and
recently signed new contracts, will contribute to growth in the
coming years.
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 in net earnings per share, including the
effect of the capital increase planned for
September/October.”
Group revenue for the first half of 2016 was € 8,295
million, including € 511 million of Airgas sales
consolidated as of 23 May 2016 (closing date of the acquisition).
Revenue for the first half increased +2.2% on a reported basis and
+8.0%, excluding the currency and energy impact, as compared
with the first half of 2015. Excluding Airgas, comparable growtha
was +1.7%.
Gas & Services sales, at € 7,618 million
including Airgas sales since 23 May 2016, grew by +4.3% on a
reported basis and by +10.6%, excluding the currency and
energy impact, compared with the first half of 2015. Excluding
Airgas, comparable growth is +3.6%. For the first half, the
currency impact (-2.6%) and the energy impact (-3.7%)
are both unfavorable.
The developing economies continued to post strong growth,
with Gas & Services sales up +11.4% on a comparable
basis.
Overall, all Gas & Services activities progressed in
the first half on a comparable basis, with the exception of
Industrial Merchant, which remained contrasted:
- Large Industries revenue,
sharply up +6.2%, saw growth in all geographic zones. It
benefited from the ramp-up of our production units, especially in
Germany, Eastern Europe, North and South America, and China. The
contribution of the two hydrogen production units on the Yanbu
site, which started up in Q2 2015, remained significant this half,
especially in Q1. In the US, growth accelerated in Q2 thanks to the
start-up of a new air separation unit, while in China volumes
remained high throughout the first half of 2016.
- Industrial Merchant, down by
-1.6%, remained contrasted. However, a slight improvement
was noted in Q2. Sales in Europe, positive this first half, were up
+2.7% for the second quarter, due mainly to higher bulk
volumes. In North America, market segments related to energy and
metal fabrication are still affected by weak demand for oil
services and related industries, while the Agri-Food,
Pharmaceutical, and Research markets are growing. This market
dynamic is the same for Airgas, whose gas sales were
slightly up in the first half. The situation is also contrasted in
Asia Pacific, with sales down in Japan while volumes are rising
sharply in China. The overall price effect remains modest at +0.4%
against a global backdrop of low inflation.
- Electronics continued to post
robust growth of +11.2%, driven by strong demand for
equipment and installations and advanced materials sales, which
rose by more than +25%. Activity was particularly strong in
Asia Pacific, with double-digit growth in Japan, China, and
Singapore.
- Healthcare, up by +4.8%,
benefited from sustained high demand for home healthcare services,
from dynamic hygiene sales, which rose by +19%, and from its
expansion in the developing economies, Brazil and Argentina in
particular. Including the contribution of Airgas via its
sales of medical gases to hospitals, global Healthcare revenue in
the second quarter was up +11.5%, excluding the currency
impact.
Engineering and Construction revenue, which stood at €
254 million, fell sharply compared with the first half of
2015, adversely impacted by the slowdown in major projects related
to energy and by the low number of new projects.
Global Markets & Technologies revenue amounted to
€ 146 million. It rose by +10.7% on a comparable
basis, driven by markets related to maritime and space in the first
quarter, as well as by dynamic biogas sales in the second
quarter.
The Group, which continues to reinforce its competitiveness,
generated € 143 million in recurring efficiency gains
during first half, in line with our forecasts for the year. In the
second half, these efficiencies will be enhanced by the first
benefits of the synergies with Airgas, for which the integration
process is progressing well. The Gas & Services operating
margin, which is 19.6%, excluding the impact of Airgas,
is up +20 basis points compared with the first half of 2015.
Net profit (Group share) reached € 811 million for
the first half, € 842 million excluding the impact of the Airgas
acquisition, a comparable basis increase of +1.1%. The first half
of 2016 was impacted by exceptional costs linked to the acquisition
of Airgas totaling around € 100 million before taxes. Once
the proposed sales of assets in the United States are finalized,
which is expected to occur in the second half of the year, the
corresponding capital gain will offset the exceptional costs of the
year related to the Airgas acquisition.
Cash flow (after changes in Working Capital
Requirements), excluding Airgas, is up substantially at
+23%. Net debt is € 19.9 billion as of 30 June
2016, while full payment of the Airgas acquisition has been
completed. The net debt to equity ratio should fall to
around 100% at the end of the year.
________________
a Adjusted for currency, energy and significant M&A impact
(Airgas).
H1 2016 Performance
In millions of euros
H1 2016/2015
Reported
H1 2016/2015
Including Airgas,
excluding currency
and energy
H1 2016/2015
Comparable1
Group revenue 8,295 M€ +2.2% +8.0% +1.7%
Of which Gas & Services
7,618 M€
+4.3%
+10.6%
+3.6%
Operating income recurring
1,382 M€
-1.9%
- -
Net profit (Group share) 811 M€ -4.6% - +1.1%
Net debt as of 30 June 2016 19,860 M€
1 Adjusted for currency, energy, and significant M&A impact
(Airgas).
________
The Air Liquide Board of Directors met on 29 July 2016.
During this meeting, the Board reviewed the consolidated financial
statements for the first half ending 30 June 2016.
Limited review procedures were completed with respect to the
consolidated interim financial statements, and an unqualified
review report is in the process of being issued by the statutory
auditors.
In addition, the Board of Directors confirmed the company’s
intention to proceed with a capital increase with preferential
subscription rights for shareholders, for an amount between 3
billion and 3.5 billion euros, expected in September/October,
depending on market conditions.
It also decided on a special performance share grant to mark the
company’s recognition of the work accomplished by all of the teams
that contributed to the Airgas acquisition, details of which will
be published on the company website.
________
The slideshow that accompanies this release
will be available starting at 8:45 am (Paris time) on the Air
Liquide corporate website: airliquide.com
Follow the announcement of first half
results live on Twitter using the hashtag #ALresults
All year long, follow Air Liquide news on
Twitter: @AirLiquideGroup
UPCOMING EVENTS
3rd quarter 2016 revenue25 October 2016
Actionaria trade show, Paris, France18 and 19 November
2016
2016 annual results15 February 2017
The world leader in gases, technologies and services for
Industry and Health, Air Liquide is present in 80 countries with
approximately 68,000 employees and serves more than 3 million
customers and patients*. Oxygen, nitrogen and hydrogen are
essential small molecules for life, matter and energy. They embody
Air Liquide’s scientific territory and have been at the core of the
company’s activities since its creation in 1902.
Air Liquide’s ambition is to lead its industry, deliver
long-term performance and contribute to sustainability. The
company’s customer-centric transformation strategy aims at
profitable growth over the long term. It relies on operational
excellence, selective investments, open innovation and a network
organization implemented by the Group worldwide. Through the
commitment and inventiveness of its people, Air Liquide leverages
energy and environment transition, changes in healthcare and
digitization, and delivers greater value to all its
stakeholders.
Air Liquide’s revenues amounted to €16.4 billion in 2015, and
its solutions that protect life and the environment represented
more than 40% of sales. On 23 May 2016, Air Liquide completed its
acquisition of Airgas, which had revenues amounting to $5.3 billion
(around €4.8 billion) for the fiscal year ending 31 March 2016.
Air Liquide is listed on the Paris Euronext stock exchange
(compartment A) and belongs to the CAC 40 and Dow Jones Euro Stoxx
50 indexes.
*Following the acquisition of Airgas on 23 May 2016
H1 2016 PERFORMANCE 2
H1 2016 Key figures
3
H1 2016 Highlights
4
H1 2016 Income statement
7
Change in net indebtedness
15 INVESTMENT CYCLE 16 OUTLOOK
17 APPENDIX 18
Q2 2016 revenue
18
Currency, energy and significant scope
impacts
19
Segment information
20
Consolidated income statement
21
Consolidated balance sheet
22
Consolidated cash flow statement
23
Unaudited Pro Forma consolidated financial
information
25
H1 2016 PERFORMANCE
This half-year was marked by the finalization of the Airgas
acquisition and the start of its contribution to the Group’s
performance. Group revenue as of H1 2016 was 8,295 million euros,
including 511 million euros of Airgas sales consolidated from 23
May 2016 (closing date of the acquisition). Revenue was up +2.2% on
a reported basis and +8% excluding currency and energy impacts
year-on-year; on a comparable basis, growth was +1.7%. Gas &
Services revenue was 7,618 million euros, up +4.3% on a reported
basis and +10.6% excluding currency and energy impacts; on a
comparable basis growth was +3.6%. Sales were robust this half-year
notably in Electronics, with dynamic growth, Large Industries and
Healthcare. All regions progressed on a comparable basis in a
context of moderate global growth and with slight improvement in
demand in industry since the start of the year.
Continued efforts on costs resulted in 143 million euros of
efficiencies, in line with objectives. The first benefits from
Airgas synergies will be added to these recurrent efficiency gains
in the second half of 2016. The Gas & Services operating
margin, excluding integration of Airgas, was 19.6% compared to
19.4% year-on-year, in particular sustained by low energy prices.
Group share of net profit was 811 million euros. It included
92 million euros of exceptional pre-tax costs linked to the Airgas
acquisition. Once the proposed divestments under review by the FTC
are finalized, which is expected to occur in the second half of
2016, the corresponding capital gains will offset the total
exceptional costs of the year related to the Airgas acquisition.
Group share of net profit showed comparable growth of +1.1%, in
line with the outlook announced at the beginning of the year.
Cash flow from operating activities before changes in working
capital requirements was 1,575 million euros, a historic high.
Net cash flow after change in working capital requirements (and
other elements) was particularly robust and grew by +23.6%
year-on-year.
The 12-month investment opportunities portfolio stood at 2.2
billion euros at the end of June 2016. Investment decisions stood
at 1.0 billion euros. The investment backlog was 2.1 billion euros
and should provide a future contribution to annual sales of around
0.9 billion euros, after full ramp-up.
H1 2016 Key figures
(in millions of euros)
H1 2015 H1 2016
2016/2015published
change
2016/2015 change with
Airgas,
excluding
currency
and energy
2016/2015 comparable
change (a)
Total revenue 8,115 8,295 +2.2% +8.0%
+1.7% Of which Gas & Services 7,302 7,618
+4.3% +10.6% +3.6% Operating income recurring
1,409 1,382 -1.9% +0.4% -4.2%
Operating income recurring (as % of revenue) 17.4%
16.7% -70 bps - Other non-recurring
operating income and expenses (6.4) (89.3)
Net profit (Group share)
849 811 -4.6% -2.5% +1.1% Earnings per
share (in euros) 2.48 2.36 -4.8%
Net cash flows from operating activities (b)
965 1,193 +23.6% - Net capital
expenditure (c) 1,188 13,105 -
- Net debt 7,927 19,860 -
- Debt-to-equity ratio(d) 59% 151% -
- Return On Capital Employed – ROCE after tax
10.8% 8.3%(e) - -
(a) Excluding natural gas, electricity, currency and excluding
Airgas.(b) Cash flow from operating activities after change in
working capital and other elements.(c) Including transactions with
minority shareholders(d) Adjusted to spread the dividend payment in
H1 out over the full year(e) Return On Capital Employed after tax:
((net profit after tax before deduction of minority interests - net
cost of debt after taxes) for the periods H2 2015 and H1 2016) /
average of (shareholders’ equity + minority interests
+ net indebtedness) between June 2015, December 2015 and June
2016).
H1 2016 Highlights
A MAJOR ACQUISITION
On 23 May 2016, Air Liquide announced that it had completed
the acquisition of the American company Airgas. The combined
businesses worldwide will generate annual sales of more than 20
billion euros.
- The integration of the two
organizations is progressing: the business lines Large Industries
and Electronics in the United States will be supervised from the
site in Houston, Texas and the business lines Industrial Merchant
and Healthcare from the site in Radnor, Pennsylvania.
- The synergies, which amount to
more than 300 million US dollars, are confirmed. For
approximately 70%, the identified amounts result from optimization
in production and logistics and the alignment of administrative
processes. For approximately 30%, sales synergies correspond to the
deployment of Air Liquide offering through the Airgas network and
of Airgas offers in Canada and Mexico. They also include the
increase in sales of air gases and helium based on the production
capacity of Air Liquide.
- Air Liquide obtained a bridge loan for
the transaction, and the refinancing of the acquisition includes a
capital increase of 3 to 3.5 billion euros, as well as long-term
bonds in US dollars and euros.The first step in refinancing the
Airgas acquisition was successfully completed. On June 6th 2016,
Air Liquide announced the placement of a 3-billion euro bond
issue with a weighted average rate of 0.65%. This transaction
involves the issuances of several bond tranches ranging from 2 to
12 years, with a weighted average maturity of 7.3 years. It enabled
the Group to refinance a portion of the bridge loan of 12 billion
US dollars, and to continue to sustainably finance the Group’s
long-term growth.Air Liquide expects to undertake a capital
raise with preferential subscription rights in September/October
2016, depending on market conditions. A bond issue in US
dollars will take place after the rights issue.
- In accordance with the
divestiture process described in the FTC (U.S.
Federal Trade Commission) press release from 13 May 2016, an
agreement has been concluded with Matheson Tri-Gas, Inc.
(“Matheson”), a subsidiary of Taiyo Nippon Sanso Corporation
(Tokyo, Japan), concerning the sale of certain assets in the United
States.Furthermore, Air Liquide has also signed a sales agreement
of two facilities in Iowa which produce both liquid carbon dioxide
and dry ice, the remaining assets to be divested as ordered by the
FTC in connection with Air Liquide’s acquisition of Airgas.These
foreseen divestitures are aligned with what Air Liquide envisaged
prior to the transaction. They will reduce the annual revenues of
the whole consolidated of approximately 270 million US
dollars. The transaction with Matheson and the sale of
facilities based in Iowa remain subject to the FTC’s final approval
and should be concluded in the third quarter 2016.
THE LAUNCH OF THE NEW CORPORATE PROGRAM 2016-2020:
NEOS
The Group has acquired a new dimension following the acquisition
of Airgas and thus enters a new phase of its development. Air
Liquide’s strategy for profitable growth over the long-term is a
customer-centric transformation. It will be based on
operational excellence and the quality of its investments, on open
innovation and the network organization already implemented by the
Group worldwide. Air Liquide’s ambition is to lead its industry,
deliver long-term performance and contribute to sustainability.
Air Liquide has identified three major trends, which are sources
of growth for all of its businesses. These trends are energy and
environment transition, changes in healthcare, and
digitization.
Air Liquide, as part of its NEOS Program, is aiming for
revenue compound annual growth rate (CAGR), over the 2016-2020
period, of +6% to +8%, including Airgas scope effect in 2017,
corresponding to a +2% CAGR. The Group intends to generate
substantial recurrent efficiency gains of more than 300 million
euros on average per year from 2017, in addition to synergies
related to Airgas for a total amount above 300 million US dollars.
The Group is targeting a return on capital employed (ROCE) in
excess of 10% after 5 to 6 years. Lastly, maintaining a long-term
minimum “A” range rating (from Standard & Poor’s and Moody’s
rating agencies) thanks to the strength of its balance sheet
remains a priority.
As for responsibility, which lies at the heart of its ambition
alongside performance, the Group will reinforce its actions aimed
at improving the air quality for better environment and health. Air
Liquide will pursue an active dialogue with its stakeholders to
contribute to a more sustainable world.
DEVELOPMENT OF INDUSTRIAL ACTIVITY
In Large Industries:
- In China, Air Liquide
signed a new long-term contract with Xinneng Energy Company, a
subsidiary of ENN Ecological Holdings Company (ENN). Under
the terms of the new agreement, Air Liquide will invest more
than 60 million euros in an ASU (Air Separation Unit),
with a total capacity of 2,700 tonnes of oxygen per day. This
new unit is expected to start operations in the second quarter
of 2018.
- Air Liquide also signed a new long-term
contract with Maoming Petrochemical Co. (MPCC), a subsidiary
of China Petroleum & Chemical Corp. (Sinopec Corp.), one of the
largest integrated energy and chemical companies in China.
Under the terms of the new agreement, Air Liquide will invest
around 40 million euros in a new state-of-the-art ASU, with
a total capacity of 850 tonnes of oxygen per day. Expected to start
operations in the second quarter of 2017, the new ASU will supply
industrial gases including oxygen and nitrogen to the customer’s
new ethylene oxide plant as well as to its existing one. MPCC’s
decision to outsource their needs for industrial gases on this new
project demonstrates their confidence in Air Liquide’s capability
to provide innovative solutions and deliver safe operations.
In Industrial Merchant:
- Air Liquide has signed two
multi-year contracts recently for a total worth of 20 million
euros, for the supply of high purity xenon in the
all-electric propulsion satellite market: one with Airbus
Defence and Space, the world leader in high power electric
satellites and one with Thales Alenia Space, leader in High
Throughput Satellites.
- CRYO International, an Air Liquide
group subsidiary specializing in temperature-controlled logistics
solutions, has acquired PDP Couriers, a major player in the
customized transport of highly value-added products for the
pharmaceutical and biotechnology industries. The company
generated revenues of approximately 21 million euros in
2015. PDP Couriers has grown significantly in Eastern Europe, Latin
America and Asia over the past few years.
- Air Liquide’s partnership with US
start-up Solidia Technologies® (Solidia), provides new equipment
for carbon dioxide (CO2) injection for the production
of Solidia Concrete™, which is made with a new sustainable
cement. Due to Solidia’s patented processes which cure concrete
with CO2 instead of water, this next generation of cement will
allow the entire industrial chain to reduce up to 70% the
environmental footprint of pre-cast concrete. The breakthrough
technology results in reduced concrete curing times of less than 24
hours and lower water consumption. In addition to capturing large
amounts of CO2, the quality of the concrete is significantly
improved
DEVELOPMENT IN HEALTHCARE
Air Liquide pursued its external growth strategy in
Healthcare. The Group announced the acquisition by its subsidiary
Schülke, a specialist in hygiene and hospital disinfection, of
Vic Pharma, the second largest independent player in the
Brazilian hygiene market. It offers a broad range of hygiene
products for disinfecting surfaces, instruments and medical
devices, as well as antiseptic solutions for pre- or post-operative
care. Present mainly in the hospital and medical settings, the
company generated revenue of approximately 8 million
euros in 2015.
NEW PROJECTS IN INNOVATION AND TECHNOLOGIES
Air Liquide has inaugurated its new Shanghai Research
& Technology Center (SRTC). This new center will ultimately
host 250 employees, including researchers, experts in customer
applications and business development teams. It will become a major
center for the Group’s innovation in the Asia-Pacific region.
This opening follows the celebration of the twentieth anniversary
of the Group’s Engineering & Construction facilities in
Hangzhou, a city of Zhejiang province in Eastern China,
illustrating the long-term commitment of the Group in China.
A first in the industrial gases sector, Air Liquide’s was
certified as a “technological showcase” in France by the Industry
of the Future Alliance. Air Liquide will invest, in Large
Industries, 20 million euros by 2017, in the project
called “Connect”. The Group will create a remote operations
and optimization center in France which is unique in the
industrial gases industry, able to control and optimize the
production, energy, efficiency and reliability of the Large
Industries sites, or carry out predictive maintenance actions.
Air Liquide commissioned 12 biogas purification units in the
last 12 months in Europe and triples its biogas purification
capacity on the European continent. The Group has developed
technologies and expertise that span the entire biomethane value
chain: purification of biogas into biomethane, injection into the
natural gas network, liquefaction, and distribution for clean
transportation fleets. The purification and biogas valorization is
a very promising example of a circular economy, which helps reduce
greenhouse gas emissions and which could contribute to solutions
for the zero emission transportation of tomorrow.
ALIAD, the venture capital arm of the Air Liquide Group,
strengthened its position in future industries with four new
equity investments in technology start-ups: Carmat, Inpria,
Poly-Shape, and Solidia Technologies. ALIAD has made 25
investments since its creation in 2013 for a total commitment of
over 60 million euros. The investment strategy of ALIAD,
coherent with the Group’s strategy, targets sectors linked to the
energy transition, healthcare, and high tech.
H1 2016 Income Statement
REVENUE
Revenue
(in millions of euros)
H1 2015 H1 2016
2016/2015
published
change
2016/2015 change with
Airgas, excluding
currency and
energy
2016/2015 comparable
change
Gas & Services 7,302 7,618 +4.3%
+10.6% +3.6% Engineering & Construction 383
254 -33.5% -31.6% -31.6% Global Markets
& Technologies 132 146 +10.4%
+10.7% +10.7% Other activities 298 277
-7.0% -6.6% -6.6%
TOTAL REVENUE
8,115 8,295 +2.2%
+8.0% +1.7%
Group
Group revenue for H1 2016 stood at 8,295 million
euros, up +2.2% on a reported basis year-on-year, sustained by
the recognition of Airgas sales since 23 May 2016 but affected by a
negative currency impact of -2.5% and by the unfavorable energy
impact (-3.3%). Excluding currency and energy, it was
+8.0%.
Growth was +1.7% excluding Airgas, currency and energy.
It benefited from solid progress in Gas & Services sales but
hit by weak activity in Engineering & Construction.
Revenue by quarter (in millions of euros)
Q1
2016 Q2 2016 Gas & Services 3,548
4,070 Engineering & Construction 124 130
Global Markets & Technologies 65 81 Other
activities 135 142
TOTAL REVENUE
3,872 4,423 2016/2015 published change
-3.1% +7.3% 2016/2015 change with
Airgas, excluding currency and energy +2.4%
+13.4% 2016/2015 change excluding Airgas, currency
and energy +2.4% +1.0%
Currency, energy and significant scope impacts (please refer
to p.36 of 2015 Reference Document)
In addition to the comparison of published figures, financial
information is given excluding currency, energy impact (natural gas
and electricity price fluctuations), and significant scope impact.
As of H1 2016, the consolidation of Airgas financial information
from 23 May represents a significant scope impact.
Since gases for industry and health are rarely exported, the
impact of currency fluctuations on activity levels and results is
limited to euro translation impacts with respect to the financial
statements of subsidiaries located outside the Euro zone.
Fluctuations in natural gas and electricity prices are generally
passed on to customers through price indexation clauses. Natural
gas is an essential raw material for the production of hydrogen and
the operation of cogeneration units. Electricity consumption is
important for air separation units. For example, when natural gas
price varies, the price of hydrogen or steam for the customer is
automatically adjusted proportionally, according to the price
indexation clauses.
(in millions of euros)
Group Gas &
Services H1 2016 revenue 8,295
7,618 2016/2015 published change (in %) +2.2%
+4.3% Currency impact -199 -190 Natural gas impact
-202 - 202 Electricity impact -69 - 69
2016/2015 change excluding currency and energy (in %)
+8.0% +10.6% Significant scope impact: Airgas
consolidated since 23 May 2016 +6.3% +7.0%
2016/2015 change excluding Airgas, currency and energy (in
%) +1.7% +3.6%
Gas & Services
Unless otherwise stated, all the changes in revenue outlined
below are on a comparable basis: excluding currency, energy
(natural gas and electricity) and the Airgas consolidation
impacts.
Gas & Services revenue was 7,618 million
euros, up +4.3% on a reported basis year-on-year. Revenue was
positively impacted by the recognition of Airgas sales since 23 May
2016 but affected by a negative currency impact of -2.6% and by an
unfavorable energy impact (-3.7%). Growth with Airgas, excluding
currency and energy was +10.6%.
Excluding the Airgas contribution, currency and energy impact,
growth was +3.6%, supported by solid growth in sales in
Large Industries, Electronics and Healthcare.
Revenue
(in millions of euros)
H1 2015 H1 2016
2016/2015
published
change
2016/2015 change with
Airgas,
excluding currency
and energy
2016/2015 comparable
change
Europe 3,366 3,225 -4.2% +1.6%
+1.6% Americas 1,799 2,185 +21.4%
+30.5% +2.1% Asia-Pacific 1,892 1,920
+1.5% +6.4% +6.4% Middle-East and Africa 245
288 +17.7% +21.1% +21.1%
Gas &
Services 7,302 7,618
+4.3% +10.6% +3.6% Large
Industries 2,565 2,388 - 6.9% +6.2%
+6.2% Industrial Merchant 2,622 2,964
+13.0% +16.2% -1.6% Healthcare 1,382
1,451 +5.0% +7.9% +4.8% Electronics 733
815 +11.2% +11.2% +11.2%
Europe
Revenue in Europe totaled 3,225 million euros, up
+1.6% and confirming a very progressive recovery. Large
Industries business was affected in Q2 by several temporary
maintenance stoppages of customer units in France and Benelux.
Sales in Industrial Merchant grew over the half-year period with a
highly contrasted evolution by country. Developing economies
continued their progression with double-digit growth.
- Large Industries sales grew
+1.4% over the half-year. Air gas volumes fell in France and in the
Benelux during Q2 due to the temporary maintenance stoppages for
several customers; however, sales showed a staunch growth in
Germany for steel customers. Revenue in Eastern Europe increased
sharply, particularly in Turkey, Poland, and Russia.
- Revenue for the Industrial
Merchant activity showed slight positive growth of +0.7%
over the half-year, with an increase of +2.7% in Q2. The liquid
oxygen and nitrogen volumes were up +5.1% for Q2. However, cylinder
volumes fell within a tough temporary environment for Construction.
Sales increased for Food & Pharmaceuticals as well as Craftsmen
and Distribution, remained stable for Automotive & Fabrication,
but down for Materials & Energy as well as Technology &
Research. In developing economies, sales continued their sustained
growth, especially in Russia and Poland. In Europe, the price
impact was negative over the half-year at -0.7% against a context
of weak inflation and a decrease in prices for customers whose
contracts were indexed to energy costs.
- Healthcare continued to develop
with +3.4% sales growth, inferior to that for 2015 due to a
lower incremental contribution from acquisitions. The Home
Healthcare activity grew with the increase in patient numbers and
the expansion of the portfolio of therapies treated. The Hygiene
activity continued to progress at +19.0%, sustained by acquisitions
made in 2015 and 2016.
Americas
Gas & Services revenue for the Americas region was 2,185
million euros, up +30.5% excluding currency and
energy; excluding the Airgas contribution it was +2.1%.
Large Industries volumes and sales saw strong growth. Industrial
Merchant business was down in an environment marked by weak
manufacturing activity, particularly in North America. In South
America, sales continued to grow, particularly in Large Industries
and Healthcare.
- Large Industries posted a sharp
increase in sales up +8.2% on the half-year with a favorable
comparable base to H1 2015, which was marked by customers’
temporary maintenance stoppages. In North America, the air gas and
hydrogen volumes increased. Start-up of a new air separation unit
in the United States contributed to this growth. In South America,
the activity continued to develop with Brazil and Argentina posting
double-digit growth.
- The Industrial Merchant activity
was up +52.7% excluding currency; it decreased by
-5.4% excluding Airgas. Sales were still affected by the
slowdown in North American manufacturing activity which continued
to adapt to a lower oil price and a strong dollar which limited
exports. Sales in the market segments of Materials & Energy as
well as Automotive and Fabrication have been the most strongly
impacted. With regards to the ex-perimeter Airgas, the performance
was solid in Food, Beverages & Services but was more than
offset by weakness in Energy & Chemical, Manufacturing &
Metal Fabrication and Non-Residential Construction. However gases
sales show a slight increase in the semester. Brazil was also
evolving in a difficult economic environment. However pricing in
the Americas region remained positive at +2.8%.
- Healthcare revenue continued its
dynamic momentum with growth of +36.1% excluding currency
and +12.9% excluding the Airgas impact; the strong
development in Home Healthcare, particularly in South America and
Canada, had a positive effect on sales. Sales of medical gases to
hospitals have been sustained by the volumes and prices in South
America (Argentina, Brazil).
- The Electronics activity grew by
+3.2%. This growth included particularly high sales of
equipment. The Specialty Materials and Advanced Materials continued
to show strong growth.
Asia-Pacific
Revenue in the Asia-Pacific region increased by +6.4% in
H1 to 1,920 million euros. The Electronics activity
continued its dynamic momentum with the rise in sales of +17.7%.
The ramp-up of new units contributed +6% to growth in Large
Industries. A contrast in development between countries remained:
Japan posted revenue growth of more than +2% on the half-year,
sustained by Electronics, while sales in China showed solid growth,
superior to +9%.
- Large Industries sales rose
+5.7% as a result of the ramp-up of new units, particularly
in China. The air gas and hydrogen volumes are growing within the
region.
- Industrial Merchant was down by
-1.1% over the half-year with contrasting situations from
country to country. Supported by strong liquid gas volumes, revenue
made strong progress in China and Singapore, while Australia has
returned to growth. Sales are down in Japan where the environment
remains difficult. There was greater price pressure in Q2,
particularly in Japan, and it stood at -1.0% for H1
- Momentum continued in the
Electronics activity with +17.7% sales growth
resulting from double-digit growth in China, Japan, Korea, and
Singapore. All these activity segments are contributing to growth,
in particular Advanced Materials, with sales up by nearly +50%, and
Equipment and Installation.
Middle-East and Africa
Middle-East and Africa revenue totaled 288 million
euros, up +21.1%. Sales benefited again from the ramp-up
of two large-scale hydrogen production units in Yanbu in Saudi
Arabia, which started up as of Q2 2015. South Africa continued to
see sustained growth in Healthcare and benefited from a growing
Industrial Merchant activity. Activity in Egypt is dynamic,
particularly in Industrial Merchant with sales growth reaching
double-digit, driven by strong demand in liquid gases.
Engineering & Construction
Engineering & Construction revenue stood at 254 million
euros, down -31.6% year-on-year, impacted by the
slowdown in major projects related to energy and by the low number
of new projects in a more difficult global environment.
As of H1 2016, total order intake was 126 million euros,
down year-on-year from 521 million euros. The main projects
involved air separation units.
At 3.8 billion euros, the orders in hand are down -6.7% compared
to those at the end of December 2015 and -19,0% to those at the end
of June 2015.
Global Markets & Technologies
At the end of June, the Global Markets & Technologies
activity revenue was up +10.7% at 146 million
euros. Sales were significant in the aerospace and maritime
sectors in Q1 and in the biogas activity in Q2, particularly with
the ramp-up of units in the United States.
The order intake was 189 million euros as of H1.
Other activities
Revenue
(in millions of euros)
H1 2015 H1 2016
2016/2015
reported change
2016/2015 change
excluding currency
Welding 190 174 - 7.9 % - 7.4 % Diving
108 103 - 5.4 % - 5.2 %
TOTAL
298 277 - 7.0 %
- 6.6 %
Other activities revenue was down -6.6% and stood
at 277 million euros as of H1 2016.
- Welding revenue was down
-7.4%, export sales in the oil sector were particularly
impacted.
- The Diving activity (Aqua
LungTM) showed a decrease in sales of -5.2% based on
comparable data. Sales in the United States were penalized by the
difficulties experienced by a significant distributor and the
geopolitical context in certain regions which were not favorable
for increasing diving activity.
OPERATING INCOME RECURRING
The operating income recurring before depreciation and
amortization amounted to 2,106 million euros, stable
year-on-year. This amount includes a 104 million euros contribution
from Airgas. The operating income recurring before depreciation and
amortization and excluding the integration of Airgas fell by -4.8%
and by -2.4% excluding the currency impact.
Depreciation and amortization reached 725 million euros,
up +4.5% and including 40 million euros depreciation and
amortization from Airgas. Excluding the Airgas integration,
depreciation and amortization fell by -1.4% and was up +1.1%
excluding currency impact.
The Group operating income recurring (OIR) was 1,382 million
euros as of H1 2016, down -1.9% year-on-year. This amount
includes a 64 million euros contribution from Airgas. Excluding the
Airgas integration, operating income recurring fell by -6.5% and by
-4.2% excluding currency impact. The operating margin (OIR to
revenue) was down -70 basis points to 16.7%, in particular
due to the low margin in Engineering & Construction (of 4.2%)
and to the Airgas integration, which had an average margin below
the Group’s margin.
Efficiencies amounted to 143 million euros during
the first six months of the year, in line with the annual target of
over 250 million euros. These efficiencies represent a cost saving
of 2.4% over the cost base, relative to 2.1% of the cost base in H1
2015. Half of these efficiencies involve industrial projects
(optimization of production plants, logistics, and maintenance),
one-third involve procurement gains, with the remainder being
mainly due to administrative efficiencies. Industrial Merchant is
the business line which generates the most efficiencies and
represents 36% of the total.
Gas & Services
The operating income recurring for the Gas & Services
activity was 1,459 million euros, up +3.0%, and
includes a 64 million euros contribution from Airgas. Excluding
Airgas and currency impact, it grew by +1.3%. The published OIR to
revenue ratio was 19.2% and stood at 19.6% excluding the
Airgas integration, compared to 19.4% year-on-year. Excluding the
energy impact, the ratio was 18.5% and 18.9% excluding the Airgas
impact.
Within the context of low global inflation, prices rose by +0.2%
mainly due to Industrial Merchant (+0.4%). Prices were almost
stable in Electronics (-0.2%) while pricing pressure in Healthcare
continues in some countries.
Furthermore, efficiencies totaled 130 million euros.
Gas & Services H1 2016 Operating income recurring
Gas & Services Operating margin (a) H1
2015 H1 2016
published
H1 2016
excluding Airgas
Europe 19.5% 19.8% 19.8% Americas 21.2%
19.7% 22.0% Asia-Pacific 17.8% 18.0%
18.0% Middle-East and Africa 17.0% 15.5%
15.5%
TOTAL 19.4% 19.2 %
19.6% (a) Operating income recurring/revenue.
Operating income recurring for Europe amounted to
638 million euros, down -2.8%. The operating
margin (operating income recurring as a percentage of revenue) was
19.8%, up +30 basis points. Excluding energy impact, it was
down -70 basis points, affected by an unfavorable mix in Industrial
Merchant which was partially offset by slight progress in
Healthcare and in Electronics.
Operating income recurring in the Americas amounted to
431 million euros, up +13.1%. The operating
margin was 19.7%, a fall of -150 basis points as a result of the
Airgas integration which had an average margin lower than the
Group's margin. Excluding the impact of Airgas and the energy
impact, the operating margin was stable.
Operating income recurring in the Asia-Pacific region was
345 million euros, up +2.4%. The operating margin was
18.0%, up +20 basis points. Excluding energy impacts, it
fell by -30 basis points, mainly due to the temporary
stoppage of a major Large Industries customer in Singapore. The
Industrial Merchant margin remained stable as a result of
efficiencies which offset price decreases in China and in
Japan.
Operating income recurring for Middle-East and Africa
amounted to 45 million euros, an increase of
+7.0%. The operating margin fell by -80 basis points
excluding energy impacts mainly due to the drop in volumes in
Industrial Merchant in countries where the economy is strongly
linked to oil.
Engineering & Construction
Operating income recurring for Engineering & Construction
amounted to 11 million euros. The operating margin was
4.2%, affected by low volumes of activity in a difficult
environment.
Global Markets & Technologies
Operating income recurring for Global Markets & Technologies
amounted to 16 million euros and the operating margin
was 10.8%. Some of the activities are in the process of being
launched.
Other activities
The Group’s Other activities reported operating income recurring
of 15 million euros, down -34.1%. The operating margin was
5.4%, down -220 basis points year-on-year.
Research & Development and corporate costs
Research and Development and corporate costs included
consolidation adjustments and amounted to 119 million
euros.
NET PROFIT
Other operating income and expenses posted a net
expense of -89 million euros. This amount essentially included
the costs of acquisition and integration of Airgas as well as the
expenses linked to the alignment plans underway, particularly in
Engineering & Construction.
The financial expenses of -175 million euros was up
+11.0% year-on-year because it included the financial costs linked
to the Airgas acquisition. The net finance costs were up
+26.4% due to financing for the Airgas acquisition. The average
cost of the net debt is 3.5%, decreased in comparison to 3.7% in
2015. It reflects the mix between the financing of the Airgas
acquisition at a lower interest rate, the financing in hard
currency for which the interest rates have decreased and the
currency in developing economies where the interest rates remain
high. The fall in financial income and expenses is largely linked
to retirement plan adjustments.
Thus, first half 2016 was impacted by exceptional costs linked
to the Airgas acquisition of 92 million euros. Once the proposed
divestments under review by the FTC are finalized, which is
expected to occur in the second half of 2016, the corresponding
capital gains will offset the total exceptional costs of the year
related to the Airgas acquisition.
Taxes totaled 268 million euros, down -26.1%. The
effective tax rate was 24.0%, clearly weaker than the
29.2% rate in 1st half 2015. It benefited from tax income following
a decision from the European Union Court of Justice as well as
favorable evolution of several tax audits. The effective tax rate
for H2 2016 should be significantly higher due to the non-renewal
of these exceptional items and to the Airgas integration, for
whichthe average effective tax rate over the last 5 years was
36.7%.
The Group’s share of profit of associates was 3.6
million euros compared to 6.5 million euros year-on-year. The
share of minority interests was up +8.1% reaching 42
million euros, the net profit of subsidiaries with minority
shareholders having made progress, particularly in Saudi
Arabia.
The net profit Group share was 811 million euros
as at H1 2016, a decrease of -4.6% and -2.5% excluding
currency impact. Excluding the impact of Airgas integration and
excluding currency effects, the net profit Group share was up
+1.1% year-on-year, in line with the outlook announced at the
beginning of the year.
Net earnings per share were 2.36 euros, down -4.8%
and -2.8% excluding currency impact year-on-year. Excluding
Airgas and excluding currency impact, it was up +0.8%, slightly
less than net profit due to the capital increase reserved for
employees. The average number of outstanding shares used for the
calculation of net earnings per share as of 30 June 2016 was
343,406,891.
Change in the number of shares
H1 2015 H1 2016 Average number
of outstanding shares (a) 342,824,901 343,406,891 (a)
Used to calculate net earnings per share.
Change in net indebtedness
Cash flow from operating activities before changes in working
capital requirements remained stable on a reported basis at
1,575 million euros. It stood at 20% of sales excluding
Airgas, a historic high.
Net cash flow after changes in working capital requirements
(and other elements) was 1,193 million euros, an
increase of +23.6% year-on-year and of +23.0% excluding
the Airgas integration.
The increase in working capital requirements (WCR) was
limited to 335 million euros compared to 578 million
year-on-year. More than half of the WCR increase is due to the
project cycle for the Engineering & Construction activity. The
working capital requirements ratio to sales excluding taxes
improved from 10.6% in the first half 2015 to 7.9% excluding
Airgas as of end of June 2016. For the Gas & Services activity,
it also improved from 10.2% in the first half 2015 to 9.8%
excluding Airgas as of end of June 2016.
Industrial gross capital expenditure was 1,055 million
euros, up +4.9%. Acquisitions of financial assets stood
at 12,100 million euros and included 12,024 million euros linked to
the Airgas acquisition on 23 May 2016. Including transactions with
minority shareholders and proceeds from the sale of assets, the
total net capital expenditure was 13,105 million euros.
Net indebtedness at 30 June 2016 was 19,860 million
euros, up more than 12.6 billion euros compared to end 2015.
This change is mainly due to financing for the Airgas acquisition
(value of securities for 10.7 billion US dollars), the refinancing
part of the Airgas debt (for 0.9 billion US dollars) and the
consolidation of the non-refinanced Airgas debt (1.8 billion US
dollars). Following the acquisition, the net debt to equity
ratio, adjusted for seasonal impact of the dividend, increased
significantly to 151% as at the end of June 2016 (against
57% at the end of 2015). The ratio should fall to around 100% at
the end of 2016.
The return on capital employed after tax and integration of
Airgas was 8.3%.
CAPITAL EXPENDITURE
As at H1 2016, gross capital expenditure including the Airgas
acquisition, was 13,155 million euros.
Asset disposals amounted to 50 million euros.
Group net capital expenditure thus totaled 13,105 million
euros.
INVESTMENT CYCLE
The Group’s steady long-term growth is largely based on its
ability to invest each year in new projects. Investment projects in
the industrial gas business are spread throughout the world, highly
capital intensive and supported by long-term contracts,
particularly for Large Industries.
Investments
INVESTMENT OPPORTUNITIES
The 12 month portfolio of opportunities was 2.2 billion
euros at the end of June 2016, down 100 million euros compared
to March 2016. The new projects coming into the portfolio largely
offset those signed by the Group, won by the competition, or
delayed. In the context of continuous low energy prices, certain
customers have postponed decisions. The global portfolio, made up
of projects which may be signed before or after 12 months, remains
solid, between 4.5 and 5 billion euros.
A little more than half of the investment opportunities at 12
months remain located in developing economies. China still
represents the leading location for opportunities, followed by
North America and Europe at comparable levels.
Half the investment opportunities in the portfolio correspond to
projects of less than 50 million euros of investment; only a few
projects are greater than 100 million euros.
INVESTMENT DECISIONS AND INVESTMENT BACKLOG
The industrial and financial investment decisions were 1.0
billion euros as of H1 2016. The industrial decisions
represented more than 90% of this amount. They particularly
involved projects in Large Industries in China, in the Chemicals
sector and in Electronics.
Furthermore, on 23 May 2016, Air Liquide announced the
finalization of the Airgas acquisition.
The investment backlog represents the total amount of 2.1
billion euros, slightly down as compared to the end of March
2016 (2.2 billion euros). This difference is mainly due to the
start-up of several units, particularly in Brazil and the United
States. The investment backlog after full ramp-ups should lead to a
future contribution to annual sales of approximately 0.9 billion
euros.
START-UPS
Eight new facilities were started-up during H1 2016, four
air separation units in the Americas region, two for Electronics in
China and in Japan, two for Industrial Merchant in Asia.
Over the half-year, the contribution to sales from ramp-ups and
start-ups stood at approximately 160 million euros and is in line
with the Group’s expectations for 2016.
MAIN RISKS AND UNCERTAINTIES
The risk factors were updated over the half-year. They will be
described in the updated Reference Document 2015, pages 10 to
12.
OUTLOOK
This first half has been characterized by the completion of the
Airgas acquisition, which will be accretive in 2016, and its first
contribution to the Group's performance. In a context of moderate
global growth, Gas & Services sales posted robust growth.
Growth is the result of dynamic Electronics sales, higher volumes
in Large Industries, and rising Healthcare business. This first
half is also characterized by a negative currency impact and lower
energy prices.
All geographies are progressing on a comparable basis,
benefiting notably from the slight improvement in demand in
industry since the beginning of the year. This increase was more
pronounced in Asia Pacific and the developing economies.
The Group continues to generate recurring efficiency gains, to
which will be added the first benefits of synergies with Airgas in
the second half of the year. The operational performance of Gas
& Services is solid, as evidenced by the margin increase and
strong cash flow growth.
The investment backlog, amounting to 2.1 billion euros, and
recently signed new contracts, will contribute to growth in the
coming years.
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 in net earnings per share, including the
effect of the capital increase planned for September/October.
Appendix
2nd quarter 2016 revenue
By geography
RevenuesIn millions of euros
Q2 2015
Q2 2016
Published
Change
Change with Airgas,
excluding
currency and energy
Comparable change
(a)
Europe 1,682 1,611 - 4.3 % + 1.7 %
+ 1.7 % Americas 911 1,361 + 49.4 %
+ 59.1 % + 3.0 % Asia-Pacific 956 954
- 0.2 % + 5.7 % + 5.7 % Middle-East and Africa
139 144 + 3.3 % + 3.2 % + 3.2 %
Gas and Services Revenues 3,688
4,070 + 10.3 % + 17.0 %
+ 3.1
% Engineering & Construction 205 130 -
36.3 % - 34.4 % - 34.4 % Global Markets &
Technologies 73 81 + 9.8 % + 10.3 %
+ 10.3 % Other Activities 154 142 - 7.4
% - 6.6 % - 6.6 %
Group revenue
4,121 4,423 + 7.3 % +
13.4 % + 1.0 %
By world business line
Revenues In millions of euros
Q2 2015
Q2 2016
Published
Change
Change with
Airgas, excluding
currency and
energy
Comparable change (a) Large industries
1,301 1,181 - 9.2 % + 4.0 %
+ 4.0 % Industrial Merchant 1,313 1,726
+ 31.3 % + 35.0 % - 0.6 % Electronics
377 407 + 8.1 % + 9.0 % + 9.0 %
Healthcare 697 756 + 8.5 % +11.5
% + 5.4 %
Gas and Services Revenues
3,688 4,070 + 10.3 % +
17.0 % + 3.1 %
(a) Excluding currency, energy and significant scope
impacts.
Currency, energy and significant scope impacts
In addition to the comparison of published figures, financial
information for second quarter 2015 is provided before currency,
energy price fluctuations and significant scope impacts. As of
January 1st 2015, the energy impact includes impacts of natural gas
and electricity. In the future, it may also include other energy
Large Industries feedstocks.
Since gases for industry and health are rarely exported, the
impact of currency fluctuations on activity levels and results is
limited to euro translation impacts with respect to the financial
statements of subsidiaries located outside the Euro zone.
Fluctuations in natural gas and electricity prices are passed on to
customers through price indexation clauses.
Consolidated 2016 second quarter revenue includes the following
impact:
In millions of euros Revenue
Q2 2016
Q2 2016/2015
change
Currency Naturalgas
Electricity
Significant
scope
(Airgas)
Q2 2016/2015
comparablechange
(a)
Group
4,423 + 7.3 % (124) (94)
(32) 511 + 1.0 % Gas &
Services
4,070 + 10.3 % (119) (94)
(32) 511 + 3.1 %
(a) Excluding currency, energy (natural gas and electricity) and
significant scope impacts.
For the Group,
- The currency impact was -3.0%.
- The impact of natural gas price
fluctuations was -2.3%.
- The impact of electricity price
fluctuations was -0.8%.
- The significant scope impact was
+12.4%.
For Gas & Services,
- The currency impact was -3.2%.
- The impact of natural gas price
fluctuations was -2.6%.
- The impact of electricity price
fluctuations was -0.9%.
- The significant scope impact was
+13.9%.
Segment information
H1 2015 H1 2016
(in millions of euros and %)
Revenue Operatingincomerecurring OIRmargin
Revenue Operatingincomerecurring OIRmargin
Europe 3,366.5 657.0 19.5 % 3,224.4
638.4 19.8 % Americas 1,799.4 381.2
21.2 % 2,185.3 431.2 19.7 %
Asia-Pacific 1,891.6 336.4 17.8 %
1,919.7 344.8 18.0 % Middle-East and Africa
244.8 41.6 17.0 % 288.1 44.5
15.5 %
Gas and Services 7,302.3
1,416.2 19.4 % 7,617.5
1,458.9 19.2 % Engineering & Construction
382.5 45.7 11.9 % 254.3 10.8
4.2 % Global Markets & Technologies 131.9
17.1 12.9 % 145.7 15.8 10.8 % Other
activities 297.9 22.6 7.6 % 277.1
14.9 5.4 % Reconciliation - (92.9)
- - (118.8) -
Total Group
8,114.6 1,408.7 17.4 %
8,294.6 1,381.6 16.7 %
Consolidated income statement
(in millions of euros)
H1 2015 H1
2016
Published
change
Revenue 8,114.6
8,294.6
+ 2.2 %
Other income 78.8 62.2 Purchases
(3,040.9) (3,056.6) Personnel expenses
(1,521.0) (1,655.9) + 8.9 % Other expenses (1,529.2)
(1,538.2)
Operating income recurring before
depreciation and amortization 2,102.3
2,106.1 + 0.2 % Depreciation and amortization expense
(693.6) (724.5) + 4.5 %
Operating income
recurring 1,408.7 1,381.6 -
1.9% Other non-recurring operating income (2.1)
12.3 Other non-recurring operating expenses (4.3)
(101.6)
Operating income 1,402.3
1,292.3 - 7.8 % Net finance costs
(121.7) (153.8) + 26.4 % Other financial income 5.0
11.2 Other financial expenses (40.7)
(32.1) Income taxes (362.8) (268.2)
Share of profit of associates 6.5 3.6
Profit for the period 888.6
853.0 - 4.0 % - Minority interests 39.2
42.4 - Net profit (Group share) 849.4 810.6 -
4.6 %
Basic earnings per
share (in euros)
2.48 2.36 - 4.8
% Diluted earnings per share (in euros)
2.47 2.35 - 4.9 %
Consolidated balance sheet
ASSETS (in millions of euros)
December 31,
2015 June 30, 2016 Goodwill 5,730.2
13,546.9 Other intangible assets 849.1 1,877.2
Property, plant and equipment 15,706.3 19,543.4
Non-current assets 22,285.6
34,967.5 Non-current financial assets 485.1
513.3 Investments in associates 115.9 127.1 Deferred
tax assets 235.2 318.3 Fair value of non-current
derivatives (assets) 100.1 58.2
Other non-current
assets 936.3 1,016.9 TOTAL
NON-CURRENT ASSETS 23,221.9
35,984.4 Inventories and work-in-progress 980.6
1,434.5 Trade receivables 2,981.1 3,421.9
Other current assets 596.6 744.5 Current tax assets
132.9 295.6 Fair value of current derivatives
(assets) 62.8 50.3 Cash and cash equivalents
965.5 1,315.8
TOTAL CURRENT ASSETS
5,719.5 7,262.6 ASSETS HELD FOR SALE
- 211.8 TOTAL ASSETS
28,941.4 43,458.8
EQUITY AND LIABILITIES (in millions of euros)
December 31, 2015 June 30, 2016 Share capital
1,892.9 1,900.7 Additional paid-in capital
15.6 110.0 Retained earnings 8,861.8 9,269.0
Treasury shares (121.0) (121.0) Net profit (Group
share) 1,756.4 810.6
Shareholders' equity
12,405.7 11,969.3 Minority
interests 365.1 360.4 TOTAL
EQUITY 12,770.8 12,329.7
Provisions, pensions and other employee benefits 2,113.2
2,605.7 Deferred tax liabilities 1,321.8
2,335.2 Non-current borrowings 6,290.7 11,101.8 Other
non-current liabilities 243.8 257.3 Fair value of
non-current derivatives (liabilities) 231.3 265.6
TOTAL NON-CURRENT LIABILITIES 10,200.8
16,565.6 Provisions, pensions and other employee benefits
271.2 236.4 Trade payables 2,269.3
2,345.6 Other current liabilities 1,302.4 1,326.2
Current tax payables 156.8 176.2 Current borrowings
1,912.7 10,073.8 Fair value of current derivatives
(liabilities) 57.4 361.8
TOTAL CURRENT
LIABILITIES 5,969.8 14,520.0
LIABILITIES HELD FOR SALE - 43.5
TOTAL EQUITY AND LIABILITIES 28,941.4
43,458.8
Consolidated cash flows statement
(in millions of euros)
H1 2015 H1 2016
Operating activities Net
profit (Group share) 849.4 810.6
Minority interests 39.2 42.4
Adjustments: • Depreciation and
amortization 693.6 724.5 • Changes in deferred taxes
43.2 42.7 • Increase (decrease) in provisions
(41.7) (29.6) • Share of profit of associates (less
dividends received) 1.4 - • Profit/loss on disposal
of assets (9.9) (16.1)
Cash flows from operating
activities before changes in working capital
1,575.2 1,574.5 Changes in working capital
(578.3) (335.0) Other (31.9) (46.8)
Net cash flows from operating activities 965.0
1,192.7 Investing activities
Purchase of property. plant and equipmentand
intangible assets (1,005.6) (1,054.9) Acquisition of
subsidiaries and financial assets (197.8) (12,099.7)
Proceeds from sale of property. plant and equipment and intangible
assets 27.2 49.4 Proceeds from sale of financial
assets 0.3 0.3
Net cash flows used in investing
activities (1,175.9) (13,104.9)
Financing activities Dividends
paid • L'Air Liquide S.A.
(924.1) (946.7) • Minority interests (19.9)
(48.5) Proceeds from issues of share capital 74.4
102.7 Purchase of treasury shares (177.8) (0.1)
Increase (decrease) in borrowings 1,077.6 13,072.4
Transactions with minority shareholders (11.6) (0.5)
Net cash flows from (used in) financing activities
18.6 12,179.3 Effect of exchange rate changes
and change in scope of consolidation (67.7) 60.5
Net increase (decrease) in net cash and cash equivalents
(260.0) 327.6 NET CASH AND CASH
EQUIVALENTS AT THE BEGINNING OF THE PERIOD 854.9
875.4 NET CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD 594.9 1,203.0
The analysis of net cash and cash equivalents at the end of
period as follows:
(in millions of euros)
June 30, 2015 June
30, 2016 Cash and cash equivalents 693.5 1,315.8
Bank overdrafts (included in current borrowings) (98.6)
(112.8)
Net cash and cash equivalents
594.9 1,203.0
Net indebtedness calculation
(in millions of euros)
June 30, 2015 June
30, 2016 Non-current borrowings (long-term debt)
(6,716.0) (11,101.8) Current borrowings (short-term debt)
(1,904.1) (10,073.8)
TOTAL GROSS INDEBTEDNESS
(8,620.1) (21,175.6) Cash and cash
equivalents 693.5 1,315.8 TOTAL
NET INDEBTEDNESS AT THE END OF THE PERIOD
(7,926.6) (19,859.8)
Statement of changes in net indebtedness
(in millions of euros)
H1 2015 H1 2016
Net indebtedness at the beginning of the period
(6,306.3) (7,238.7) Net cash flows from
operating activities 965.0 1,192.7 Net cash flows
used in investing activities (1,175.9)
(13,104.9) Net cash flows used in financing activities
excluding increase (decrease) in borrowings (1,059.0)
(893.1)
Total net cash flows (1,269.9)
(12,805.3) Effect of exchange rate changes, opening net
indebtedness of newly acquired companies and others (350.4)
184.2
Change in net indebtedness
(1,620.3) (12,621.1) NET INDEBTEDNESS AT
THE END OF THE PERIOD (7,926.6)
(19,859.8)
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION
TABLE OF CONTENTS 25 BASIS OF PRESENTATION 26
UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR THE YEAR ENDED
DECEMBER 31, 2015 UNDER IFRS 28 UNAUDITED PRO FORMA FINANCIAL
INFORMATION FOR THE HALF-YEAR ENDED JUNE 30, 2016 UNDER IFRS 29
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
30 NOTE 1 – ADJUSTMENTS TO THE HISTORICAL INFORMATION OF
AIRGAS 30 1.A. Airgas financial information for the
year ended December 31, 2015 under U.S. GAAP (Airgas presentation)
31 1.B. Airgas financial information for the year ended December
31, 2015 adjusted from U.S. GAAP to IFRS and reclassified under Air
Liquide presentation 32 1.C. Reclassifications of specific
line-items in the financial information of Airgas under IFRS 1.D.
Revaluation of deferred compensation plan assets 33 NOTE 2 –
PRO FORMA ADJUSTMENTS 34 2.A. Preliminary purchase
accounting adjustments 34 2.B. Divestitures 35 2.C. Acquisition and
disposal-related costs incurred by Air Liquide and Airgas before of
at the Completion of the Business combination 35 2.D. Recording of
the interest costs related to the estimated financing of the
acquisition 36
BASIS OF PRESENTATION
The following unaudited pro forma consolidated financial
information contains unaudited pro forma consolidated income
statements and unaudited purchase of property, plant and equipment
and intangible assets for the year ended December 31, 2015 and the
half-year ended June 30, 2016. The unaudited pro forma consolidated
financial information has been established using assumptions
described below and has also been derived from and should be read
in conjunction with the following documents:
- the audited consolidated financial
statements of Air Liquide as of and for the year ended December 31,
2015, prepared in accordance with IFRS;
- the unaudited consolidated interim
financial statements of Air Liquide for the half-year ended June
30, 2016, prepared in accordance with IFRS, which have been
reviewed by the auditors;
- the audited consolidated financial
statements of Airgas as of and for the year ended March 31, 2015,
prepared in accordance with U.S. GAAP;
- the unaudited consolidated interim
financial statements of Airgas as of and for the nine-month period
ended December 31, 2014, prepared in accordance with U.S. GAAP;
and
- the unaudited consolidated interim
financial statements of Airgas as of and for the nine-month period
ended December 31, 2015, prepared in accordance with U.S. GAAP
The unaudited pro forma consolidated financial information has
been prepared in millions of euros and reflects the acquisition and
the financing of Airgas as if it had occurred on January 1, 2015
whereas the effective acquisition date is May 23, 2016. All pro
forma adjustments are directly attributable to the business
combination and only adjustments that are factually supportable and
that can be estimated reliably are taken into account. The pro
forma financial information does not reflect any future
restructuring expenses or integration costs that may be incurred in
connection with the business combination nor does it reflect any
cost savings potentially realizable from the elimination of certain
expenses or from synergies. In addition, the pro forma financial
information does not include the capital gain on divestitures that
shall be realized per the United States of America Federal Trade
Commission (“FTC”) Consent Order as a condition to the closing of
the business combination. Material non-recurring items related to
the acquisition are maintained in the “consolidated pro forma
column” and adjusted in “non recurring items” to present the
“consolidated pro forma recurring column”. For the purpose of
preparing the unaudited pro forma financial information, Airgas
historical financial information has been adjusted for known
differences between US GAAP and IFRS. In addition, certain items
have been reclassified (see note 1 below).
The unaudited pro forma financial information is presented for
illustrative purposes only and is not indicative of the income
(loss) of the consolidated company that would have been achieved if
the business combination had been completed on January 1, 2015, nor
is the pro forma financial information indicative of the future
results of the consolidated company. The pro forma adjustments,
which are detailed below, are based on available information to
date and certain assumptions and estimates that Air Liquide
considers as reasonable. Those adjustments are directly
attributable to the business combination and are factually
supportable:
a. Preliminary purchase accounting: The impacts of the
preliminary purchase accounting on the income statement have been
reflected on a basis consistent with the preliminary purchase
accounting of Airgas reported by Air Liquide in its June 30, 2016
interim consolidated financial statements.
b. Divestitures: Elimination of the estimated contribution of
the assets to be divested per FTC Consent Order as a condition to
the closing of the business combination.
c. Acquisition and disposal-related costs: Air Liquide
acquisition and disposal-related costs incurred in the year ended
December 31, 2015 and in the half-year ended June 30, 2016 in
connection with the business combination are included in the
“Consolidated pro forma” for the year ended December 31, 2015. On
the other hand, Air Liquide acquisition and disposal-related costs
incurred in the half-year ended June 30, 2016 have been eliminated
in the “Consolidated pro forma”. Transaction costs incurred by
Airgas in the year ended December 31, 2015 have been eliminated as
they are reflected, as well as those incurred in the half-year
ended June 30, 2016, in the preliminary purchase accounting as a
reduction of the net assets of Airgas acquired by Air Liquide.
d. Acquisition financing costs: Net finance costs have been
adjusted to reflect in the Unaudited pro forma financial
information the impact of the financing structure in place on June
30, 2016 (i.e. the 11.6 billion US dollars bridge financing after
deduction of the 3.0 billion euros notes issued on June 13, 2016
under the EMTN Program of Air Liquide) as if it had been in place
as of January 1, 2015.
Taking into account the above adjustments, the “Consolidated pro
forma” financial information is presented in accordance with the
European Commission Regulation EC No 809/2004, using the
acquisition method in compliance with IFRS. The “Consolidated pro
forma recurring” columns further reflect the unaudited pro forma
financial information after eliminating the non-recurring impact of
acquisition costs.
1. UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR THE
YEAR ENDED DECEMBER 31, 2015 UNDER IFRS
Published
Air Liquide
Historical
Airgas (a)(b)
Pro forma adjustments (a)(e)
Consolidated
pro forma
Non-recurring
items (c)
Consolidated
pro forma recurring
(in millions of €)
Revenue 16 379,8 4 798,0
(222,5) 20 955,3 20
955,3 Other income 193,5 5,2
198,7 198,7 Purchases (6 164,0)
(2 092,3) 94,6 (8 161,7) (8
161,7) Personnel expenses (3 069,4) (1 156,6)
7,4 (4 218,6) (4 218,6) Other expenses
(3 077,7) (680,0) 87,9 (3 669,8)
(3 669,8)
Operating income recurring before
depreciation and amortization 4 262,2
874,3 (32,6) 5 103,9
5 103,9 Depreciation and amortization expense
(1 371,6) (311,3) (48,8) (1 731,7)
(1 731,7)
Operating income recurring
2 890,6 563,0 (81,4)
3 372,2 3 372,2 Other
non-recurring operating income 38,4
38,4 38,4 Other non-recurring
operating expenses (170,6) (21,7) (32,1)
(224,4) 63,9 (160,5)
Operating income
2 758,4 541,3 (113,5)
3 186,2 63,9 3 250,1 Net
finance costs (227,1) (53,6) (163,4)
(444,1) (444,1) Other financial income
14,7 3,9 18,6 18,6
Other financial expenses (55,6) (3,1) 0,8
(57,9) (57,9) Income taxes
(666,4) (178,7) 102,8 (742,3) (22,6)
(764,9) Share of profit of associates 14,7 2,6
17,3 17,3
Profit for the period 1 838,7
312,4 (173,3) 1 977,8
41,3 2 019,1 - Minority interests
82,3 82,3
82,3 - Net profit (Group share) 1 756,4 312,4
(173,3) 1 895,5 41,3 1 936,8
Purchase of property, plant and equipment
and intangible assets (d) (2 027,7)
(447,8) (2 475,5)
(2 475,5)
(a) All data related to Airgas’s financial information for the
year ended December 31, 2015 and the pro forma adjustments to the
income statement for the year ended December 31, 2015 are
translated into euros using the following average exchange rate:
USD 1 = EUR 0.9016, identical to the exchange rate used by Air
Liquide to consolidate its operations in US dollars.
(b) See Note 1.B for Airgas historical figures in US
dollars.
(c) See “Basis for presentation”.
(d) Purchase of property, plant and equipment and intangible
assets as presented in the consolidated cash flow statement in the
2015 Air Liquide Reference document. See Note 1.A. and 1.B. for the
calculation of Airgas purchase of property, plant and equipment and
intangible assets.
(e) See Note 2 for details.
2. UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR THE
HALF-YEAR ENDED JUNE 30, 2016 UNDER IFRS
Published
Air Liquide
H1 2016
Neutralization of Airgas included in Air Liquide from May
23 to June 30
(-)
Air Liquide
H1 2016
Excluding Airgas
Airgas from
January 1 to June 30 (excl. PPA)
(a)
Pro forma
adjustments (a)(c)
Consolidated
pro forma
(in millions of €)
Revenue 8 294,6 (511,2)
7 783,4 2 334,1 (106,0)
10 011,5 Other income 62,2 62,2
2,1 64,3 Purchases (3 056,6)
215,8 (2 840,8) (980,9) 42,9 (3
778,8) Personnel expenses (1 655,9) 126,7 (1
529,2) (588,5) 3,7 (2 114,0) Other expenses
(1 538,2) 64,6 (1 473,6) (331,4)
43,7 (1 761,3)
Operating income recurring before
depreciation and amortization 2 106,1
(104,1) 2 002,0 435,4
(15,7) 2 421,7 Depreciation and amortization
expense (724,5) 40,3 (684,2) (164,6)
(15,1) (863,9)
Operating income recurring
1 381,6 (63,8) 1 317,8
270,8 (30,8) 1 557,8
Other non-recurring operating income 12,3
12,3 12,3 Other
non-recurring operating expenses (101,6) 73,2
(28,4) (0,3) (28,7)
Operating
income 1 292,3 9,4 1
301,7 270,5 (30,8) 1
541,4 Net finance costs (153,8) 35,0
(118,8) (27,9) (71,5) (218,2) Other financial
income 11,2 (0,2) 11,0 1,0
12,0 Other financial expenses (32,1)
3,7 (28,4) 0,8 0,4 (27,2) Income taxes
(268,2) (17,1) (285,3) (94,7)
35,9 (344,1) Share of profit of associates 3,6
(0,2) 3,4 1,1 4,5
Profit for the period 853,0
30,6 883,6 150,8
(66,0) 968,4 - Minority interests 42,4
42,4 42,4 -
Net profit (Group share) 810,6 30,6 841,2
150,8 (66,0) 926,0
Purchase of property, plant and equipment and intangible assets
(d) (1 054,9) 42,1 (1
012,8) (183,8) (1
196,6)
(a) All data related to Airgas’s financial information for the
six-month ended June 30, 2016 and the pro forma adjustments to the
income statement for the year ended June 30, 2016 are translated
into euros using the following average exchange rate: USD 1 = EUR
0.8966, identical to the exchange rate used by Air Liquide to
consolidate its operations in US dollars.
(b) Purchase of property, plant and equipment and intangible
assets as presented in the consolidated cash flow statement in the
2016 Air Liquide half-year report.
(c) See Note 2 for details.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION
NOTE 1 –ADJUSTMENTS TO THE HISTORICAL INFORMATION OF
AIRGAS
The unaudited pro forma financial information includes
adjustments to Airgas’s historical financial statements for the
following differences between US GAAP and IFRS. Such adjustments
correspond to those that were identified at the time Airgas’s
financial statements were consolidated with those of Air Liquide on
the date of acquisition effective May 23, 2016.
1.A. Airgas financial information for the year ended
December 31, 2015 under U.S. GAAP (Airgas presentation)
April 1st, 2014 - December 31st, 2014 April
1st, 2014 - March 31st, 2015 January 1st, 2015 -
March 31st, 2015 April 1st, 2015 - December 31st,
2015 January 1st, 2015 - December 31st, 2015
3rd Quarter FY2015 (in million $) 4th Quarter
FY2015 (in million $) 4th Quarter FY2015 (in million $)
3rd Quarter FY2016 (in million $) FY2015 (in million
$) (9 months) (12 months) (3 months) (9
months) (12 months) A B B - A =
C D C + D Net sales $4 003,2 $5 304,9 $1 301,7 $4
019,7 $5 321,4 Costs and expenses: - - - Cost of products sold
(excluding depreciation) $1 772,9 $2 355,9 $583,0 $1 751,9 $2 334,9
Selling, distribution and administrative expenses $1 491,5 $1 978,7
$487,2 $1 535,3 $2 022,5 Merger costs - - $21,4 $21,4 Depreciation
$221,4 $297,7 $76,3 $237,3 $313,6 Amortization $23,7 $31,3 $7,6
$25,5 $33,1 Total costs and expenses $3 509,5 $4 663,6 $1 154,1 $3
571,4 $4 725,5 - Operating income $493,7 $641,3 $147,6 $448,3
$595,9 - Interest expense, net $(48,4) $(62,2) $(13,8) $(44,5)
$(58,3) Loss on the extinguishment of debt - - - Other income, net
$1,7 $5,1 $3,4 $5,8 $9,2 - Earnings before income taxes $447,0
$584,2 $137,2 $409,6 $546,8 - Income taxes $(166,7) $(216,0)
$(49,3) $(149,6) $(198,9) - Net
earnings $280,3 $368,2 $87,9 $260,0 $347,9 Capital
expenditures $338,9 $468,8 $129,9 $366,7 $496,6
1.B. Airgas financial information for the year ended
December 31, 2015 adjusted from U.S. GAAP to IFRS and reclassified
under Air Liquide presentation
Airgas format (a) Air Liquide
format
in million US dollars
Adjustments (b)(d) 2015 (in millions of
$US)
Revenue 5
321,4 0,0 5 321,4 Operating expenses(c) (4 378,8)
28,6 (4 350,2)
Operating income recurring before depreciation
and amortization 942,6 28,6 971,2
Depreciation and amortization expense(c) (346,7) 1,5 (345,2)
Operating income recurring 595,9 30,1
626,0 Other non-recurring operating income and expenses(c)
(24,0) (24,0)
Operating income 595,9
6,1 602,0 Financial result(c) (49,1) (6,6) (55,7)
Income taxes (198,9) 0,2 (198,7)
Profit for the period 347,9 (0,3) 347,6
- Minority interests 0,0 0,0 - Net profit (Group share)
347,9 (0,3) 347,6
Purchase of
property, plant and equipment and intangible assets
496,6 496,6
(a) See Note 1.A..
(b) See note 1 – ADJUSTMENTS TO THE HISTORICAL INFORMATION OF
AIRGAS.
(c) See Note 1.C..
(d) See Note 1.D..
1.C. Reclassifications of specific line-items in the
financial information of Airgas under IFRS
Reclassifications in the IFRS pro forma financial information
for the year ended December 31, 2015 and the half-year ended June
30, 2016 are related to:
- Airgas’s accretion expenses of Assets
Retirement Obligations (ARO) that have been reclassified from
“Depreciation expenses” to “Financial result” for -1.5 million US
dollars
- Transaction costs included in “costs”
in the historical Airgas income statement for -21.4 million US
dollars reclassified to “Other non-recurring operating income and
expenses” in accordance with Air Liquide accounting policies.
1.D. Revaluation of deferred compensation plan
assets
Airgas has a deferred compensation plan that is a non-qualified
plan. The deferred compensation plan allows eligible employees and
non-employee directors, who elect to participate in the plan, to
defer the receipt of taxable compensation. Participants may set
aside up to a maximum of 75% of their base salary and up to a
maximum of 100% of their bonus compensation or directors’ fees in
tax-deferred investments. Airgas’s deferred compensation plan
liabilities are funded through an irrevocable rabbi trust. The
assets of the trust funds cannot be reached by Airgas or its
creditors except in the event of Airgas’s insolvency or bankruptcy.
In consequence, under IFRS, the deferred compensation plan assets
cannot be considered as plan assets and it must be recognized in
accordance with IAS 39 as available-for-sale financial assets. As
such, gains and losses on the deferred compensation plan assets
must be recognized in other comprehensive income rather than
through profit or loss. Pro forma adjustments were made accordingly
to Airgas consolidated income statements for the year ended
December 31, 2015 and the half-year ended June 30, 2016. The effect
on the net profit is -0,3 million euros in the 2015 pro forma
financial information and -0.4 million euros in the 2016 pro forma
financial information.
NOTE 2 – PRO FORMA ADJUSTMENTS
2.A. Preliminary purchase accounting
adjustments
The preliminary purchase price allocation is presented in Note 1
of the unaudited consolidated interim financial statements of Air
Liquide for the half-year ended June 30, 2016 (Chapter 2 of the
Reference Document update). The Acquisition has been accounted for
as a business combination in accordance with IFRS 3 Business
Combinations which requires that identifiable assets acquired and
liabilities assumed be measured at their fair values as of the
acquisition date. Air Liquide has appointed an independent
appraiser expert to perform the valuation of some of Airgas assets
and liabilities. The excess of the consideration transferred, over
the fair value of the identifiable assets acquired and the
liabilities assumed has been recognized as goodwill. At this stage,
this purchase accounting is preliminary. In accordance with IFRS 3,
the measurement period shall not exceed one year from the
acquisition date. The Group’s management estimates, based on its
review of the information available to it as of the date hereof,
that the final purchase price allocation will not materially differ
from the preliminary assessment, although no assurances can be
provided that this will be the case.
2.A.1. Amortization of Intangible Assets (Trademarks,
Customers’ Relationships)
The fair value of Airgas’s trademarks and customers’
relationships recognized as part of the preliminary purchase
accounting is based upon the report of the external appraisal
expert. The valuation is based on different valuation techniques,
such as respectively the Royalty Saving Method and the Multi-period
Excess Earnings Method.
An adjustment has been made to record the amortization expense
related to trademarks and customers’ relationships and was
accounted for in “Depreciation and amortization expense” for -19.8
million euros and -11.7 million euros for the year ended December
31, 2015 and the half-year ended June 30, 2016 respectively.
2.A.2. Depreciation of Property, Plant and
Equipment
The fair value of Airgas’s Property, Plant and Equipment is
based upon the final report of the external appraisal expert. The
valuation is based on different valuation techniques, such as the
Depreciated Replacement Cost New (“DRCN”), the income and the
market approaches.
An adjustment has been made to record the depreciation expense
related to property, plant and equipment and was accounted for in
“Depreciation and amortization expense” for -49.7 million euros and
-13.7 million euros for the year ended December 31, 2015 and the
half-year ended June 30, 2016 respectively.
2.A.3 Unfavorable suppliers contracts
Unfavorable contracts related to the supply of certain liquid
gases from various suppliers resulted in a liability to be
recognized in the opening balance sheet. This liability is to be
reversed in the income statement based on the respective maturity
of each contract and was reflected in “other expenses” for +25.6
million euros and +12.7 million euros for the year ended December
31, 2015 and the half-year ended June 30, 2016 respectively.
2.A.4. Fair value of financial indebtedness
The fair value adjustment of Airgas financial indebtedness was
included in the Effective Interest Rate (EIR) of Airgas’ senior
notes and resulted in a decrease in net finance costs for +2.8
million euros and +1.4 million euros for the year ended December
31, 2015 and the half-year ended June 30, 2016 respectively.
2.A.5. Deferred Taxes
Deferred taxes were computed on the above adjustments using the
statutory applicable tax rate for +15.9 million euros and +4.4
million euros for the year ended December 31, 2015 and the
half-year ended June 30, 2016 respectively.
2.B. Divestitures
The FTC cleared the acquisition of Airgas by Air Liquide subject
to certain conditions, including the sale of certain assets. Air
Liquide announced on June 24th, 2016 that it had entered into an
agreement to sell certain assets in the United States to Matheson
Tri-Gas, Inc. (“Matheson”), a subsidiary of Taiyo Nippon Sanso
Corporation of Tokyo, Japan. Upon closing, Matheson will acquire
the following assets from Air Liquide:
• Eighteen air separation units in sixteen locations;
• Two nitrous oxide production facilities;
• Four liquid carbon dioxide production facilities in four
states, including two dry ice production facilities;
• Three Airgas retail packaged welding gas stores in Alaska.
Under the terms of the purchase agreement, Matheson would
acquire production facilities, equipment, inventory, distribution
assets, and customer contracts.
Furthermore, Air Liquide has also signed a sales agreement of
two facilities in Iowa which produce both liquid carbon dioxide and
dry ice, the remaining assets to be divested as ordered by the FTC
in connection with Air Liquide’s acquisition of Airgas.
The divestiture process is not yet finalized. The Matheson
transaction and the sale transaction for the Iowa plants remain
subject to FTC approval and are expected to close in the third
quarter of 2016.
The estimated contribution to the income statement of the assets
to be divested was neutralized in the pro forma financial
information for the year ended December 31, 2015 and the half-year
ended June 30, 2016 and resulted in a decrease in sales
respectively for -222.5 million euros and -106.0 million euros and
a decrease in operating income recurring before depreciation and
amortization respectively for -58.1 million euros and -28.4 million
euros.
The capital gain on the to-be divested assets is not included in
the pro forma financial information as the FTC approval is still
under process. The capital gain on the disposal would have been
accounted for under “Other non-recurring operating income” as a
material non-recurring transaction. It would offset in particular
in 2016, the non-recurring acquisition, integration and financing
costs related to the transaction.
2.C. Acquisition and disposal-related costs incurred
by Air Liquide and Airgas before or at the Completion of the
Business combination
The estimated costs related to the acquisition of Airgas,
including costs related to the divestitures requested by the FTC
mainly include banking, legal, and consulting fees.
The acquisition-related costs incurred by Airgas before or at
completion of the business combination have already been excluded
of the H1 2016 Airgas pro forma financial information for an amount
of +99.7.million euros before tax.
The estimated costs related to the acquisition of Airgas,
including costs related to the divestitures requested by the FTC
incurred by Air Liquide during the half-year ended June 30, 2016
are included in the “Consolidated pro forma” column of the pro
forma financial information for the year ended December 31, 2015
for an amount of -51,4 million euros before tax. Acquisition costs
incurred in 2015 are already included in the historical financial
statements of Air Liquide and amount to -12.5 million euros before
tax.
Acquisition and disposal costs are recognized as Other
non-recurring expense. By their nature, they are not expected to
have a recurring impact on the Group performance going forward and
as such are eliminated in the ‘Consolidated pro forma
recurring’.
2.D. Recording of the interest costs related to
the estimated financing of the acquisition
An adjustment has been made to record the finance costs related
to the financing of the acquisition for an amount of approximately
-171 million euros for the year ended December 31, 2015 and -77
million for the half-year ended June 30, 2016, before tax. These
finance costs were computed based on the current financing
structure. i.e. euro-denominated bonds for 3 billion euros which
were issued on June 13, 2016 and a bridge loan financing for the
balance.
The interest rate assumed for purposes of computing the finance
cost to be included in the unaudited pro forma financial
information related to the bridge loan financing varies from 1,55%
to 1,75%. These rates comprise the 12-month LIBOR rate of 1,30% as
of May 20, 2016, plus certain margins specified in the bridge
facility agreement depending on maturities.
A 1/8 % increase or decrease in interest rates would result in a
change in net finance costs of approximately -9.4 million US
dollars for the year ended December 31, 2015 and -4.7 million US
dollars for the half-year ended June 30, 2016, before tax.
Air Liquide intends to refinance the bridge financing through a
capital increase in the range of 3 billion to 3.5 billion euros and
U.S. dollar long-term bonds for the balance, i.e. in the range of 4
to 5 billion US dollars.
The effect of the future financing structure of the deal is not
reflected in the unaudited pro forma financial information. Based
on current market conditions, the future financing structure would
result in an increase in net profit compared to what has been
reported in the pro forma financial information respectively in the
range of 10 to 35 million euros for the year ended December 30,
2015 and between 0 and 15 million euros for the half-year ended
June 30, 2016, before tax. The future net cost of debt that will
result from the issue of U.S. dollar long-term bonds will be
subject to movements in interest rates between the date of
publication of the half-year report and the completion date of the
operation. A sensitivity analysis is provided in the table
below.
SENSITIVITY TO INTEREST RATE FLUCTUATIONS ON US BONDS
Cost of debt sensitivity analysis (in millions of
euros)
-10bp 2,769%(a)
+10bp $4 billion -100,6 -104,2 -107,8
$4,5 billion -108.3 -112.3 -116.4 $5 billion
-116,0 -120,5 -125,0
(a) Blended interest rate calculated based on:
- Maturities of 3 years (17%), 5 years
(22%), 7 years (17%), 10 years (27%) and 30 years (17%);
- Interest rates were hedged for ca. 72%
of the nominal amount to be issued;
- Variable interest rates depending on
maturities for the remaining unhedged amounts.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160731005028/en/
Corporate CommunicationsCaroline Philips, + 33 (0)1 40 62
50 84Annie Fournier, + 33 (0)1 40 62 51 31orInvestor
Relations+33 (0)1 40 62 51 50
C3 AI (NYSE:AI)
Historical Stock Chart
From Jun 2024 to Jul 2024
C3 AI (NYSE:AI)
Historical Stock Chart
From Jul 2023 to Jul 2024