Eurobusiness Media (EBM): Benoît Potier, welcome. You are the Chairman and CEO of Air Liquide. You have just published your 2017 annual results. What were the highlights of the year?
Benoît Potier: With revenue surpassing €20 billion and net profit higher than €2 billion, the Group has taken on a new scale.
We are seeing the benefits of the successful integration of Airgas, which has now been consolidated for the full year in our accounts.
We also recorded good organic growth, in a more favorable global economic environment.
Growth accelerated in second half, reaching 4.5% in Q4 on a comparable basis.
The currency impact was unfavorable for the year as a whole, while energy prices had a slightly positive impact.
Overall, our published annual results showed a 12% increase in revenue.
Another highlight of the year was the recovery in our Industrial Merchant business line, whose growth was confirmed quarter over quarter and now accounts for nearly half of the Group revenue.
To sum up, all our Gas & Services activities grew and our sales in Global Markets & Technologies business unit recorded double-digit growth.
EBM: How did you perform last year in your geographies?
Benoît Potier: We achieved growth in all our regions in 2017, especially in developing economies, which grew 8% across the year and moved into double-digit territory in Q4. We also recorded double-digit growth in China, a solid level of activity in the Americas, while the Middle East benefited from Large Industries projects.
EBM: You mentioned the positive contribution of Airgas to Group sales. What can you tell us about synergies?
Benoît Potier: First of all, I want to praise the outstanding work done by our teams. The integration of Airgas is a success, as reflected by the synergies ahead of our forecasts. Overall, we’ve achieved cumulated synergies of $215 million since the acquisition – well ahead of the $175 million we announced in 2016.
And let me remind we’re aiming to deliver a total of more than $300 million by end-2019.
EBM: Looking beyond Airgas, what were the other highlights?
Benoît Potier: We are pursuing our efforts to reinforce competitiveness, achieving €323 million in efficiency gains over the year. Airgas synergies are ahead of our forecasts, and operating margin at Group level grew to reach 16.5%.
Net profit grew by 19.3% to €2.2 billion, while recurring net profit was up by 10%.
EBM: Following the Airgas acquisition your debt ratio had significantly increased. How has the Group’s balance sheet evolved in 2017?
Benoît Potier: Our balance sheet is strong. High level of cash flow, up 15%, enabled us to reduce our debt by €2 billion to €13.4 billion. Our debt to equity ratio now stands at 80%, against 90% at the end of 2016.
ROCE improved in 2017, reaching 8.2% – or 7.7% excluding the non-cash impacts of exceptional items and the US tax reform. For reference, our aim is to achieve ROCE above 10% by 2021/2022.
On the back of these positive results we will propose at the next Shareholders' Annual General Meeting another increase in net dividend per share.
EBM: Your NEOS strategic program, which was launched in 2016, covers the period 2017-2020. What progress have you made?
Benoît Potier: Our strategic program is in motion and many initiatives were launched. Engagement throughout our 65,000 employees is strong to help make NEOS a success.
We’ve identified a number of growth opportunities, related for example to the energy transition, such as hydrogen energy, and biogas. We’re also innovating in healthcare, with for example, the launch of a new connected healthcare solution in France for patients with chronic diseases. And in electronics, developments such as next-generation flat-screen TVs, autonomous smart cars, and more broadly big data, AI and augmented reality are fueling demand for carrier gases and high added-value advanced materials. In this context Air Liquide won contracts with several important manufacturers in the Asian semiconductor industry.
EBM: You mentioned the energy transition. What is the state of play in the hydrogen energy sector?
Benoît Potier: Air Liquide is a founding member of the Hydrogen Council, a global initiative launched in 2017 comprising now more than 30 companies from Europe, Asia and the Americas.
We made significant progress last year. The Investor Day held in New York went well, and more significantly a roadmap showing the potential of hydrogen as an energy source was published.
We’re seeing more and more new projects come to light, both worldwide and here in France. The Hype hydrogen-powered taxi fleet in Paris is an example. We also installed new hydrogen charging stations in 2017, including one at the Orly airport, but also in Dubai, in Japan and Germany. And we’re satisfied with progress of our hydrogen-powered captive fleets such as forklift trucks for example.
EBM: How have things progressed on the investment front?
Benoît Potier: We continued to make substantial, selective investments last year, reaching €2.6 billion for future growth. They are related to new contracts, acquisitions, but also to production facility maintenance and optimization as part of our competitiveness drive. In addition, we have a €2.1 billion of investment backlog to fuel our future growth.
EBM: Is Air Liquide still committed to innovation?
Benoît Potier: Absolutely. Innovation is a key element of our growth strategy. We currently spend around €300 million each year on innovation, including on digitization projects. A good example is our remote operation center in Lyon, which we opened in January 2017 to manage our French production units. We opened a similar center in Shanghai in September 2017, and another in Malaysia at the start of this year.
We’ve also invested in our R&D centers, spending €130 million over three years: our brand-new center in Shanghai opened in 2017; extension and modernization work is close to completion at our flagship Paris-Saclay Research Center, which will be up and running in the second half of 2018, and we’re currently building a new center in Tokyo, which we expect to inaugurate in 2019. And let me also mention, our ALIAD venture capital arm which has invested €80 million in 30 start-ups over the past five years.
EBM: In view of your comments, am I right in saying you sound confident in the Group’s medium-term prospects?
Benoît Potier: Absolutely. We have every reason to be confident.The Group has taken on a new dimension, surpassing €20 billion in revenue.
We have also reviewed our entire business and asset portfolio, further improved operational performance, and made solid headway on our NEOS program.
We are stronger with better positions heading into 2018 and I am therefore confident in the Group’s medium-term growth prospects.
Our goal remains to create value over the long term for all our stakeholders.
EBM: Benoît Potier, Chairman and CEO of Air Liquide, thank you very much.
Benoît Potier: Thank you.
