Sustainable Athletes and Record Stock Performance Thanks to Air Liquide's Hydrogen
The Group will supply hydrogen of renewable origin to power some of the vehicles of Paris 2024's official fleet. This partnership reflects Paris 2024's ambition to "organize more sustainable Games."
Highlights
Air Liquide's sponsorship at Paris 2024 showcases its hydrogen tech for sustainability, setting a precedent for greener events.
Strong Growth: Air Liquide is making lots of money and expanding to new places, building more factories and businesses around the world.
As hydrogen gains prominence, Air Liquide aims to diversify its business beyond traditional sectors, facing regulatory and market challenges.
This year, the French multinational is debuting as a sponsor of the Paris 2024 Olympic Games. As a local player, Air Liquide is looking to make its mark at the event by showcasing its outstanding hydrogen technology and potential to accelerate the energy transition. Let's explore the company's strategy and what it seeks to gain from its debut as a sponsor of the Olympics.
Air Liquide and Olympic Games: a match made in heaven
Sustainability is the key word for this year's Olympic Games. Many Olympic sponsors, such as ArcelorMittal and Toyota, focused this year on demonstrating how green and sustainable their operations are, and Air Liquide is no exception. A world leader with over 100 years of experience in gasses, technologies, and services for industry and healthcare, Air Liquide operates in 73 countries. Together with Air Products and Linde, it is one of the world's largest players in the production of gasses for industrial use. Over the past 60 years, the company has developed a unique expertise in hydrogen; today, it is a leader in producing and distributing low-carbon and renewable hydrogen and a world leader in liquid hydrogen.
This know-how and the current energy transition context place the group of companies in a privileged position to lead the world's most important decarbonization projects in industry and transportation.
In this edition of the Games, Air Liquide has become an Official Supporter of hydrogen as part of a partnership with Paris 2024 to contribute to reducing the event's carbon emissions. The Group will supply hydrogen of renewable origin to power some of the vehicles of Paris 2024's official fleet. This partnership reflects Paris 2024's ambition to "organize more sustainable Games."
In keeping with the event's environmental ambitions, Air Liquide and the Paris 2024 Organizing Committee for the Olympic and Paralympic Games have signed a partnership to supply hydrogen for vehicles transporting athletes and officials. Several hundred hydrogen-powered Toyota Mirais, the official vehicle of Paris 2024, will be filled with hydrogen supplied by Air Liquide. This hydrogen will be of renewable origin, meaning that it will be produced from water electrolysis or biomethane with guarantees of renewable origin. In other words, it must prove that it is renewable energy.
Air Liquide's marketing campaign emphasizes transport emissions. Since transport accounts for a quarter (24%) of global CO2 emissions, the climate emergency requires a range of solutions, including hydrogen of renewable origin. The company's approach is not innocent, as its objective is to enter strongly into the mobility market to diversify its operations, which are currently heavily concentrated in the industrial sector.
Financial performance and future plans
Air Liquide surpassed the €3 billion revenue threshold for the first time in 2023 by reaching €3.078 billion, up 11.6% from 2022, thanks in particular to operational improvements that have led the French industrial gasses group to revise upwards its financial targets for 2025. The company is meeting its targets in an accelerated and efficient manner, which is reflected in its growing operating margins. Additionally, this publicly-traded company has its shares trading at record highs in mid-March 2024. Everything is rosy for the French giant, which is taking advantage of its good trading results to invest in new industrial plants and grow its operations in Europe and Asia Pacific.
What the future holds: Outlook and challenges
Hydrogen is the most abundant element in the universe and a vast clean fuel source. For investors, it is an equally rich source of hype. As parts of the world get more serious about tackling climate change, hydrogen has emerged as a big part of global decarbonization efforts. Global demand for hydrogen is growing remarkably, and thousands of hydrogen production, infrastructure, and transportation projects are currently underway around the world. According to the Hydrogen Council, hydrogen could supply up to a fifth of global energy needs and generate a market worth US$2.5 trillion by 2050.
In this regard, Air Liquide has a task ahead of it: diversify its business. In its latest results presentation, 95% of its revenue of 27,608 million euros was accounted for by the Gas & Services business. Although the company invests time and money in developing its other business units, such as Healthcare, electronics, and Hydrogen, its business sources are strongly coupled to the traditional industry and, therefore, subject to the swings of the economic tide. Steel, construction, and aeronautics are the main sectors involved in Air Liquide's business, and all are working to modify their technology to reduce their carbon footprint. Times are changing, and suppliers to these industries will have to change with them.
There is a long way to go (and many investments to be made) before hydrogen becomes the star of Air Liquide's product portfolio. Still, the current strong economic performance should not obscure the need to diversify its business model.
On the other hand, the risks involved in controlling a major market with so much potential and significance are worth noting. The French firm Air Liquide, the German company Linde, and the U.S. group Air Products are currently sharing the majority of the world market for the production of industrial gasses and medical oxygen by dint of expansion and the purchase of competitors. There is no shortage of detractors who accuse these companies of oligopolistic practices, just as there were scandals in the COVID-19 pandemic over the production and cost of medical oxygen. Strategic thinking for the future is required to avoid falling foul of the antitrust authorities.
Financial Outlook
In Q4 2023, Large Industries sales rose by +1.9%. In the Americas, revenue was soft in Steel, mixed in Refining and higher in U.S Chemicals. In Europe, Hydrogen volumes for Refining were higher than Q4 2022, and the activity was stable at low level in Steel and Chemicals. In Asia, activity was low and impacted by an extended customer stoppage in China.
Industrial Merchant revenue was up +5.5% in Q4 2023, thanks to resilient volumes and a high +6.1% pricing, although softening, coming on top of +15% in Q4 2022. In the Americas, growth was driven by sustained pricing (+5%) and resilient gas volumes. In Europe, volumes improved compared to Q3 and pricing was at +8%. Asia benefited from +5% pricing and strong volumes in China.
In Healthcare, sales increased +9.9% in Q4 2023, thanks to a well balanced growth between Home Healthcare and Medical gases. Home Healthcare benefited from growth in all therapies. The Americas benefited from strong pricing especially in proximity care in the U.S, and growing Home Healthcare in Canada and Latin America. In Europe, sales were driven by strong Home Healthcare, notably in sleep apnea and diabetes, while pricing was addressing inflation in Medical gases.
In Q4 2023, Electronics revenue grew +2.7%, driven by a solid contribution from project startups and ramp ups in Carrier Gases, partially offset by low activity in Memory, impacting the sales of materials, both in Asia and in the Americas. 1 Consolidated revenue of Engineering & Construction decreased by -25.4% to €101m in Q4 2023. Consolidated sales exclude internal projects for Large Industries and Electronics, which were growing.
Global Markets & Technologies posted sales of €245m in Q4 2023, a decrease of -5.7%. Organic growth reached +2.4% excluding the divestitures of the mobility biogas distribution and the manufacture of small cryogenic tank businesses in Q4 2022.
Air Liquide’s next earnings call for Q1 2024 is scheduled on April 24. Read a preview here.
