Air Liquide 2021 Annual Results: interview with Benoît Potier, Chairman of the Board

Well, we were present on all fronts. First, in the fight against the pandemic for the second consecutive year, unfortunately, and then inflation which was everywhere and especially the significant rise in energy prices. Without forgetting a long-term challenge which is that of energy transition. So 2021 was undoubtedly another test of resilience. We also showed strong responsiveness and great capacity for adaptation. This translates into financial performance with strong growth in sales and net profit, and the continuation of the improvement in operational margin. And in terms of extra-financial management, major advances in energy transition which translated into numerous partnership agreements, notably in line with the ambitious objectives we had set during 2021. So it was an excellent year given this quite complex environment.

The group first achieved strong sales growth. They reached a record level of 23.3 billion euros, which is a published increase of 13.9% and comparable increase of 8.2% when excluding currency and energy effects. This is the best growth rate in the last ten years. All activities are in growth. Engineering, construction, and global technology markets benefited from projects related to energy transition. And in the gas and services activity, which represents about 95% of our sales, comparable growth is 7.3% with all geographies in sustained growth: Asia at 6%, Europe at 7%, and the Americas at 8% growth. All businesses recorded growth rates between 5% and 8%.

The group's operational margin continued to progress. It stands at 19.2% excluding energy effects, compared to last year, which represents 70 basis points improvement. To improve this margin, we acted essentially on three levers. First, prices, as we compensated for the cost increases which were quite significant, especially in merchant industry, which we reinvigorated to maintain our margin in this context of strong inflation, particularly in the second half. Second lever is efficiency. We achieved 430 million euros in efficiency, and the initiatives were based on four programs: business performance, meaning cost control, purchasing, and transformation programs. Finally, we reviewed our portfolio with eight divestments and one acquisition of roughly complementary size.

We are on a solid performance, and it is a performance that strengthens year after year. First, the margin increase was accompanied by a 13.3% increase in recurring net profit excluding currency and exceptional elements. This net profit stands at 2.57 billion euros, a record level for the group. And as a result, cash flows also progressed strongly by 9.1%. This allows us to achieve a high level of investment, significantly reduce debt below 50% in capital ratio, and of course, pay a dividend to our shareholders. Finally, the return on recurring equity capital stands at 9.3%, close to the 10% objective we had set for 2023-2024. So the group's balance sheet is very solid, and the financial performance is quite remarkable in this context.

I would say that sustainable development is at the heart of the group's strategy and businesses. We must and we know how to combine financial and extra-financial performance. For Air Liquide, it means acting and fighting ourselves against global warming, but also contributing to energy transition in our ecosystems. We have technologies and products that are at the heart of energy transition, and I know this is a chance for us to be positioned like this. So yes, of course, 2021 was very active in terms of initiatives, investment, and partnerships. This translated into investment decisions of 3.6 billion euros. This amount includes the acquisition of Sasol's oxygen activities in South Africa, which is the largest oxygen production site in the world. And it also translated into a portfolio of investment opportunities that remains high at 3.3 billion euros, and what is interesting to note is that a large proportion of these projects, 40%, are energy transition projects.

Quite dynamic indeed. We continued our initiatives in the field of mobility or industrial decarbonization. We signed about thirty agreements, whether for hydrogen development, renewable electricity purchase, or industrial decarbonization. I will take a few examples. First, in Normandy, we started the study of this major infrastructure project for CO2 capture and storage with clients like Esso, Borealis, TotalEnergies, Yara, to decarbonize the Norman industrial basin. In technology, we signed this agreement with Siemens Energy to develop large-capacity electrolyzers in Europe. In aeronautics, we signed two partnerships with Airbus and large airport groups to develop hydrogen uses and accelerate the decarbonization of the air sector. And finally, in heavy mobility, we signed two agreements with Iveco and another with Faurecia. So we managed globally to act in the present and prepare for the future.

I would say that the crisis has accelerated trends on which the group is already well positioned. What are they? First, the acceleration of industrial decarbonization. Then, in health, the digitalization and personalization of healthcare. And finally, the growing use of technologies, especially digital and high technologies. These are future markets, and they are our markets. Next March, we will present our new strategic plan, and you will see how Air Liquide will combine financial and extra-financial performance for society as a whole. Acting for a sustainable future is at the heart of our strategy.

It is a change but in continuity, and it is also a very important step for the group. It is a new governance structure we have put in place for the succession with a separation of the roles of CEO and Chairman of the Board of Directors. François Jackow will be appointed CEO of the group, and I will be proposed to be appointed Chairman of the Board of Directors. I know François well; we have worked together for many years. He has practically 30 years of experience in the Air Liquide group. We share the same values and culture, and I would say that he has my full confidence to lead the group through these challenges, which are as many opportunities with hydrogen, CO2 reduction, health, digital and high technology, but also with new forms of work that must align with the expectations of our employees.

The future is promising, and this applies to 2022 as well. I am confident for several reasons. First, because the women and men of Air Liquide have shown, especially during the health crisis, their commitment, adaptability, and responsiveness, and I would like to thank them warmly for all they have done during these periods. Also because Air Liquide's technologies and solutions are adapted to the emerging market post-COVID, and they are also adapted to the challenges faced by our clients and beyond to the expectations of society as a whole. Finally, because the group and its business model are very solid. We have seen it with the very good results of 2021, which place us in an excellent position to continue the sustainable and responsible growth of the group. This means that in the absence of significant economic disruption, we are confident in our ability in 2022 to again increase our operational margin and achieve growth in recurring net profit at constant exchange rates.

We are starting 2022 well prepared, and beyond that, we have the chance to have very promising markets ahead and a societal transformation to which we can largely contribute. It's an exciting adventure in perspective, and we will continue to invent the future, a sustainable and useful future for all.