Air Liquide Net Debt Rises Following Airgas Acquisition

The Tip Desk · June 30, 2016 · 2 min read

The industrial gas company saw its net debt reach 19,860 million euros in the first half of 2016.

Air Liquide finalized the acquisition of Airgas on 23 May 2016, a move that significantly altered the company's balance sheet and operational scale. The acquisition contributed 511 million euros in sales during the first half of 2016. Total group revenue for the period reached 8,295 million euros, representing a 2.2% increase in published terms compared to the first half of 2015.

Net debt rose to 19,860 million euros by 30 June 2016, an increase of more than 12,600 million euros compared to the end of 2015. The company attributed this trajectory to the financing of the Airgas acquisition, which involved shares valued at 10.7 billion US dollars, the refinancing of 0.9 billion US dollars of Airgas debt, and the consolidation of 1.8 billion US dollars of non-refinanced Airgas debt. This expansion pushed the net debt to equity ratio to 151%, up from 59% in the first half of 2015.

Operational performance remained stable in key segments. The Gas and Services division reported revenue of 7,618 million euros. Excluding the Airgas integration, the operational margin for Gas and Services was 19.6%, compared to 19.4% in the first half of 2015. In Europe, the operational margin rose to 19.8%. In the Americas, the operational margin was 19.7%, a decrease of 150 basis points attributed to the integration of Airgas, which has a lower average margin than the group.

Cash flow after working capital changes rose 23.6% to 1,193 million euros. The company reported 143 million euros in recurring efficiency gains. However, the group's net profit attributable to the group was 811 million euros, which included 92 million euros of pre-tax exceptional costs related to the Airgas acquisition.

Sectoral trajectories diverged during the period. The Electronics activity remained dynamic, while the Health segment grew 4.8%, supported by home healthcare services and hygiene activity, which rose 19%. Conversely, Engineering and Construction revenue fell to 254 million euros due to a slowdown in large energy projects. Other activities, including welding and diving, saw a published revenue decline of 7.0% to 277 million euros.

The company expects to generate growth in both net profit and earnings per share for the full year 2016. Air Liquide intends to bring the net debt to equity ratio down to approximately 100% by the end of the year.