Air Liquide: Strong Growth in Revenue and Profit in 1^st Half 2008

PARIS--(BUSINESS WIRE)--Regulatory News:

Air Liquide (Paris:AI):

First half highlights

• Good performance in all activities, particularly in Large Industries and Industrial Merchant
• New contracts: hydrogen in Singapore and the Netherlands, oxygen in China and South Korea
• 1^st results of the synergies with Lurgi: hydrogen project in the Netherlands developed with Lurgi’s technology and teams
• Many start ups of new units, particularly in the Middle East
• Strengthened positions in Electronics: new contracts (South Korea and China), investments in the production and supply of silane, acquisition (ultra-pure fluids)
• Innovation in Healthcare: over 100 operations with the LENOXe (xenon anaesthetic) in France in 2008 and over 1,000 in Germany since 2007

Key figures for 1^st half 2008:

				published		excluding currency		comparable*
Group revenue including Gas & Services		€6,370 m €5,343 m		+13.2% +8.8%		+16.7% +12.6%		+8.3% +9.5%
Operating Income Recurring		€950 m		+11.0%
Net profit		€601 m		+8.1%		+11.3%
Diluted earnings per share (EPS)		€2.30		+10.6%
* on a comparable basis: excluding impact of currency, natural gas and the Lurgi acquisition scope effect

Air Liquide’s Board of Directors, chaired by Benoît Potier, Chairman and CEO, met on 1^st August 2008 and reviewed financial statements for the first half of 2008.

1^st half 2008 Group revenue reached €6,370 million, up +13.2% on the previous year (+16.7% at constant exchange rates).

The Group’s 1^st half growth includes a record second quarter for the Gas & Services activity up +9.9% comparable, after continuous acceleration in 2007 and a high level in the 1^st quarter 2008. This growth results from a combination of strong demand for hydrogen and ramp-ups of new units in Large Industries in Europe and Asia, very good progress in Industrial Merchant, a Healthcare business which continued to show strong growth, and sustained sales in Electronics, following several quarters of outstanding growth.

The execution of the ALMA program has advanced significantly. ALMA enables the Group to gain momentum by focusing on capital productivity, cost efficiency and enhanced growth. The performance of the Group in the 1^st half 2008 shows that Air Liquide is on track with the ALMA objectives.

The Gas & Services operating income recurring margin continues to increase, by more than 40 basis points, excluding natural gas impact, to 18.0%. Group Net profit is €601 million, up +11.3% at constant exchange rates.

Commenting on the 1^st half 2008, Benoît Potier, Chairman and CEO of the Air Liquide group, stated:

“The growth in sales of +13.2%, the increase in Gas & Services recurring operating margin and the strong growth in diluted earnings per share of +10.6% in the first half of 2008 illustrate the strength of Air Liquide’s business model, for long term sustained growth.

Given the economic and financial situation in 2008, the momentum generated by the ALMA program is a significant asset for Air Liquide. Thanks to better execution and greater focus of our actions, ALMA should allow us to continue this accelerated growth and improved competitiveness.

In this context, we remain confident in the ability of Air Liquide to achieve double-digit growth in 2008 net profit at constant exchanges rates.”

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First Half 2008 Management Report

H1 2008 Performance

1. Highlights

in millions of euros		H1 2007		H1 2008		H1 08/07
						as published		ex forex		comparable*
Revenue		5 629		6 370		+13.2%		+16.7%		+8.3%
Of which Gas & Services		4 912		5 343		+8.8%		+12.6%		+9.5%
Operating Income Recurring		856		950		+11.0%		+14.1%
OIR margin excluding natural gas impact		15.2%		15.2%
Net profit (Group share)		556		601		+8.1%		+11.3%
Diluted earnings per share (in euros)		2.08**		2.30		+10.6%
Net cash from operations		789		891		+12.9%
Industrial capex		575		791		+37.5%
Net indebtedness at June 30		4 807		5 221		+8.6%
* comparable: excluding impact of currency, natural gas and the Lurgi acquisition scope effect
**adjusted to account for the two-for-one share split in 2007 and the allocation of bonus shares in 2008

The execution of our ALMA program has advanced significantly. ALMA enables the Group to gain momentum by focusing on capital productivity, cost efficiency and enhanced growth. The performance of the Group in the first half of 2008 shows that Air Liquide is on track with the ALMA objectives: to achieve from 2007 to 2011, annual revenue growth of 8-10%, 600 million euros of cost savings and, at the same time, maintaining a ROCE level of 11-12%.

2. H1 2008 Income Statement

2.1. Revenue

in millions of euros		H1 2008		H1 08/07
				as published
Gas and Services		5 343		+8.8%
Engineering & Construction		504		+141.7%
Other Activities		523		+3.0%
Total revenue		6 370		+13.2%

2.1.1 Group

First half 2008 Group revenue reached 6 370 million euros, up +13.2%. On a comparable basis, after adjusting for currency impact, the effect of higher natural gas prices passed through to customers, and the contribution from the acquisition of Lurgi, growth was +8.3%.

2.1.2 Gas and Services

in millions of euros		H1 2008		H1 08/07
				as published		comparable*
Europe		2 972		+11.2%		+9.4%
Americas		1 310		+3.2%		+7.5%
Asia-Pacific		973		+10.4%		+12.4%
Middle East and Africa		88		-0.2%		+12.9%
Gas and Services		5 343		+8.8%		+9.5%
Industrial Merchant		2 270		+3.2%		+6.5%
Large Industries		1 758		+17.9%		+13.8%
Healthcare		833		+8.0%		+8.8%
Electronics		482		+7.3%		+11.4%
*comparable: excluding currency and natural gas impact

All revenue growth figures in the text below are on a comparable basis, excluding currency and natural gas impact.

Driven by a record second quarter growth of +9.9% following a strong first quarter, Gas and Services revenue grew by a robust +9.5% in the first half to 5 343 million euros, delivering the expected acceleration from the ALMA Growth project.

In Industrial Merchant, the strong +6.5% growth was driven by sustained demand in liquid gas volumes in all regions. The +13.8% growth in Large Industries was boosted by significant ramp-ups in Europe and Asia-Pacific. Hydrogen demand was strong in the US and Europe. Electronics grew by +11.4% in the first half with, as expected, slower growth in the second quarter at +4.9% mainly due to a decline in equipment sales. Healthcare performance remained at a high level of +8.8% in the first half, with continued solid contributions from homecare and hygiene.

Europe

Revenue for the first half was 2 972 million euros, an increase of +9.4%.

Industrial Merchant achieved growth of +2.7%, which includes the impact of the divestiture of the Metrology business at the end of 2007. In key industrial segments such as metal fabrication, pharmaceutical and optoelectronics, business remained dynamic. Germany, Northern and Eastern Europe benefited from strong demand and good pricing in both liquid gas and cylinders. In Southern Europe, activity remained stable, with softer demand in Spain due to weakness in the construction sector.

Large Industries achieved a high +20.9% growth in the first half, mainly driven by a significant hydrogen start-up in Antwerp, in Belgium, and the ramp-up of a large air separation unit (ASU) in Russia. Underlying demand from steel manufacturers, refineries and chemical customers remains strong in every country. The cogeneration plant in Rotterdam, in the Netherlands, is in the process of starting-up.

Healthcare grew by +8.6% driven by continued development in homecare and hygiene. Homecare double digit growth includes the contribution from add-on acquisitions made in 2007 and further development in sleep apnea and diabetes treatments. Hygiene growth was back to double digit in the second quarter, after a more modest first quarter. Demand for medical gases continued to grow in a hospital environment, which is subject to budgetary pressures.

Electronics revenue remained stable with lower specialty gases sales compensated by higher Equipment and Installation sales (E&I).

Americas

Revenue for the Americas was 1 310 million euros, an increase of +7.5%.

Industrial Merchant achieved strong growth of +9.7% in the first half, with double digit growth in the second quarter. Both volume and pricing in liquid gas were strong drivers in the US, especially for the energy, mining and metal fabrication markets. South America continued to develop strongly with double digit liquid gas volume growth. Manufacturing demand remained soft in Canada.

Large Industries recorded a rise of +3.4%, with no start-ups. Hydrogen demand remained strong throughout the period, particularly in the second quarter, resulting in growth in the US activities of +8.1%. Oxygen volumes were impacted by maintenance turnarounds at several customer plants.

Electronics posted good growth of +11.6% in the first half due to several contract ramp-ups.

Healthcare sales were up +14.3% boosted by strong liquid and cylinder demand for hospitals in the US and South America.

The consolidation of Scott Specialty Gases contributed to the performance in Industrial Merchant, Electronics and Healthcare.

Asia-Pacific

First half revenue in Asia-Pacific was 973 million euros, up +12.4%, with expected lower growth in the second quarter due to lower Electronics equipment sales, particularly in Japan. In all other activities, demand remained buoyant in the region, especially in China.

Industrial Merchant posted a +9.8% growth, mainly driven by strong bulk volume in emerging Asia, notably in China, up +33.3%. Metal fabrication, automotive and optoelectronics were key market drivers.

Electronics recorded +14.0% growth in the first half. The second quarter performance was down from the exceptionally high +23.8% in the first quarter. Second quarter revenue no longer benefited from the impact of the acquisition of the minority interests in the Singaporean subsidiary. The recurring carrier and specialty gases business continued to perform well. However, equipment sales were down in Japan.

Large Industries continued to develop strongly across the region up +18.5%. Several ramp-ups and two start-ups in the steel industry in China were the main growth drivers. Three additional units will start-up in the second half of the year, all in China.

Middle East and Africa

Middle East and Africa revenue increased +12.9% to 88 million euros, mainly driven by a dynamic Industrial Merchant business in South Africa, and the first contribution of the four start-ups in the first half in Oman, Qatar, Kuwait and Egypt.

2.1.3 Engineering and Construction

Third party sales in Engineering and Construction were 504 million euros, up +141.7% due to the Lurgi acquisition. Lurgi sales more than doubled in the second quarter to 229 million euros relative to the first quarter of 95 million euros.

Demand is strong and capacity fully utilized by both internal and third party projects. Total order-intake remained at a high 800 million euros. It was boosted by particularly strong ASU and hydrogen plant (SMR) orders in Europe, China and South Korea. As a result, total orders in hand increased to 5.5 billion euros.

Lurgi’s technology is now integrated into the Group’s Large Industries offering. The Lurgi teams are now fully responsible for designing and building the recently signed SMR in Rotterdam. Furthermore, they are leading the Group’s SMR standardization project.

2.1.4 Other Activities

in millions of euros		H1 2008	H1 08 / 07 as published	H1 08 / 07 comparable*
AL Welding Group		324	+6.1%	+6.5%
Chemicals		120	-1.2%	-1.2%
Diving & others		79	-2.5%	+5.2%
Other Activities		523	+3.0%	+4.4%
*comparable: excluding impact of currency

Other Activities revenue reached 523 million euros, an increase of +4.4% in the first half, boosted by solid demand for welding particularly in the second quarter (+9.5%). Consumables demand is being driven by emerging economies, and the equipment backlog remains high. Chemicals revenue was impacted by temporary supply issues in the first quarter and weaker cosmetics demand.

2.2 Operating Income Recurring

Operating Income Recurring amounted to 950 million euros, up +11.0% as published. Excluding the effect of higher natural gas prices passed through to customers, the operating income recurring margin was 15.2%, stable compared to the first half last year due to the mix effect of more Engineering and Construction sales within the total Group.

Gas and Services Operating Income Recurring margin, excluding this natural gas impact, continued to progress, up +40 basis points to 18.0% fully reflecting the ALMA efficiency and pricing actions which have offset increasing inflationary cost pressures.

In Europe, Operating Income Recurring at 541 million euros, was up +7.6%. The margin at 18.5%, was down -30 basis points, excluding the natural gas impact.

Operating Income Recurring for the Americas grew + 5.8% to 212 million euros, representing a margin of 17.1 %, up +130 basis points relative to the previous period, excluding the natural gas impact.

In Asia-Pacific, Operating Income Recurring reached 161 million euros, up +14.6%. The margin was up +90 basis points at 16.8%, excluding the natural gas impact.

Non-allocated expenses were down 20 million euros due to the reallocation of certain expenses to the Business Lines and sale of assets.

2.3 Net earnings

Net profit (Group share) reached 601 million euros, up +8.1%, or +11.3% excluding the currency impact.

Other non recurring operating items amounted to a negative 7 million euros in the first half, due to continued Industrial Merchant restructuring costs, compared to a positive 25 million euros in the first half last year.

Net financial costs and other financial income and expenses amounted to 114 million euros, versus 105 million euros in the first half 2007 due to higher debt volumes following the acquisitions in 2007.

The effective tax rate remained more or less stable at 26.5%.

Diluted earnings per share was 2.30 euros, up +10.6% resulting from the increase in net profits and the share buy-back program.

3. Change in net debt

Funds from operations, before changes in the working capital requirement, rose by +7.7% to 1 090 million euros in the first half. The seasonal increase in the working capital requirement was contained at 180 million euros, down from the 195 million euros for the same period last year. As a result, net cash from operating activities increased +12.9% to 891 million euros.

In the first half, industrial capital expenditure increased +37.4% to 791 million euros, or 12.4% of sales, in line with the significant increase in investment decisions over the two preceding years.

Other major elements include the dividend payment of 551 million euros, up +10.8% and share buybacks of 112 million euros, representing 1.29 million shares (at an average of 87.09 euros).

Net debt reached 5.2 billion euros at 30^th June, representing a gearing (net debt to equity) ratio of 82.5%, due to the payment of the full year dividend in May.

4. ALMA gaining momentum

Growth project

Start-ups and ramp-ups are increasing in size and number of units, industrial capital expenditure has increased significantly, up sequentially and year on year. Investment decisions continued to grow during the period, at 1.3 billion euros, and the portfolio of investment opportunities remained strong at over 4 billion euros, up again relative to year end 2007.

This performance is based on numerous events during the period:

In the Energy and Environmental markets, progress was made in hydrogen, with a major plant start-up in Antwerp and the signature of two significant contracts in Singapore and Rotterdam. A major cogeneration plant is in the process of starting-up in Rotterdam, which will contribute to growth in the second half. In the gasification field, two major ASUs were sold for a Coal To Chemicals project in China. An investment has also been made in Sweden for a new industrial-scale research program for the reduction of CO2 emissions by steel producers.

Emerging markets are still booming and development remains strong. There are start-ups, ramp-ups and investment decisions continuing in China. There are liquid and Large Industries investments being made in Poland, Rumania and Bulgaria. In the Middle East, our presence has been considerably enhanced with four new start-ups since the beginning of the year in Oman, Qatar, Kuwait and Egypt.

In Healthcare, after a launch in Germany in 2007, the first operations in France using the LENOXe anesthesia were a success: LENOXe radically reduces recovery time and limits the side-effects of a traditional anesthesia. After these first results, the use of LENOXe will be extended into several other European countries in the second half.

In the High-Tech fields, the Group has continued to win new innovative projects, with in particular a contract for innovative nitrogen-based cryogenic refrigeration for the new super-conductive cable being installed in New York to transport electricity. In Electronics, the Group has significantly reinforced its market presence, particularly in the Asia-Pacific region, with new contracts across the region, decisions to invest in new silane production and sourcing and an acquisition in the US to widen our technological know-how across the spectrum of ultra-pure fluids.

Goal and Capital projects

In the first half 2008, efficiency actions generated 102 million euros of savings, consistent with the objective of 600 million euros over 3 years. This was due to many small local projects across the Group. The larger Goal projects in each of the World Business Lines are all up and running, and will start to deliver progressively.

The Capital project is advancing according to plan, with the first standard ASU range currently in production and the first standard SMR will be used for the new Rotterdam plant in 2010. In Industrial Merchant, the first standard filling stations are running.

Outlook

The first half was strong in terms of demand, revenue growth and profit delivery. The period was also characterized by increasing inflationary pressures, with no signs of slowdown in our end-markets. Therefore, going forward, we will manage our priorities within the ALMA program to deliver capital savings and cost efficiency, and to generate strong top line growth. In this context, we remain confident in our ability to achieve double digit growth in 2008 net profit at constant exchange rates.

Looking further out, demand from Emerging economies, the on-going Energy and Environmental concerns, continued evolution of High Technologies and the steadily growing needs in Healthcare remain our growth drivers. The confirmation of the sustainability of these underlying growth trends and the resilience of our business model give us confidence in our capacity to deliver our ALMA mid-term objectives over the 2007-2011 period.

L’Air Liquide S.A. parent company figures

L’Air Liquide S.A. net earnings reached 251 million euros, compared to 208 million euros in the first half 2007.

APPENDIX (1)

Revenue in millions of euros

Q1 2008

Q1 08/07

Q2 2008

Q2 08/07

as published

comparable*

as published

Comparable*

Europe

1 481

+9.6%

+8.3%

1 491

+12.7%

+10.6%

Americas

635

+1.1%

+6.5%

675

+5.3%

+8.5%

Asia – Pacific

491

+13.9%

+15.3%

482

+7.1%

+9.7%

Middle East and Africa

42

-0.2%

+11.2%

46

-0.1%

+14.4%

Gas and Services

2 649

+8.0%

+9.1%

2 694

+9.5%

+9.9%

Industrial Merchant

1 133

+3.8%

+6.5%

1 136

+2.6%

+6.5%

Large Industries

857

+12.4%

+10.6%

901

+23.6%

+17.2%

Electronics

245

+14.2%

+18.7%

237

+1.0

+4.9%

Healthcare

414

+7.8%

+8.2%

420

+8.2%

+9.3%

* excluding currency and natural gas impact

APPENDIX (2)

In addition to the comparison of published figures, financial information is given excluding currency, the impact of fluctuations in natural gas price and excluding significant scope effect when applicable.

Since industrial and medical gases are rarely exported, the impact of currency fluctuations on revenue and results are limited to the translation effects of the accounting consolidation in euros of the financial statements of our subsidiaries outside the Euro-zone. Fluctuations in natural gas prices are generally passed to our customers through indexed pricing clauses.

Consolidated first half 2008 revenue includes the following elements:

in millions of euros

Revenue

H1 08/07 as published

Currency

Natural gas

Scope

H1 08/07 comparable*

Group

6 370

+13.2%

(199.0)

150.8

324.2

+8.3%

Gas and Services

5 343

+8.8%

(187.8)

150.8

0.0

+9.5%

* comparable: excluding impact of currency, natural gas and the Lurgi acquisition scope effect

For the Group,

• The currency effect represents an impact of -3.5%
• Natural gas price pass-through represents an impact of +2.7%
• The acquisition of Lurgi represents a scope effect of 5.8%

In Gas and Services,

• The currency effect represents an impact of -3.8%
• Natural gas price pass-through represents an impact of +3.1%

APPENDIX (3)

1^st Half-year 2008 Accounts

1. Consolidated Income Statement

In millions of euros		2007		1st half 2007		1st half 2008		Variation H1 08/ H1 07
Revenue		11 801.2		5 628.6		6 370.2		+13.2%
Purchase		(4 547.9)		(2 181.6)		(2 658.6)
Personnel expenses		(2 037.8)		(1 008.9)		(1 072.1)
Other income & expenses		(2 485.5)		(1 118.2)		(1 204.8)
Operating Income Recurring before depreciation and amortization		2 730.0		1 319.9		1 434.7		+8.7%
Depreciation and amortization expense		(935.9)		(463.5)		(484.4)		+4.5%
Operating Income Recurring (1)		1 794.1		856.4		950.3		+11.0%
Other non-recurring operating expenses		(5.3)		24.7		(6.7)
Operating Income		1 788.8		881.1		943.6		+7.1%
Net finance costs		(179.4)		(82.1)		(93.1)
Other net financial expenses		(54.3)		(22.4)		(21.0)
Income taxes		(411.8)		(211.0)		(219.7)
Share of profit of associates		26.7		15.8		14.0
Profit for the period		1 170.0		581.4		623.8		+7.3%
- Minority interests		46.9		24.9		22.4
- Net Profit (Group share)		1 123.1		556.5		601.4		+8.1%
Basic earnings per share (in euros) (1)		4.26		2.10		2.32		+10.5%
Diluted earnings per share (in euros) (2)		4.22		2.08		2.30		+10.6%
(1) : calculated on the adjusted average weighted number of shares outstanding during the period (excluding treasury shares) (2) : calculated on the adjusted average weighted number of shares, assuming the exercise in full of all share subscription options granted to employees.

2. Consolidated Balance-Sheet (summarized)

in millions of euros		Dec 31, 2007		June 30, 2008
ASSETS
Goodwill		3 642.7		3 680.7
Fixed assets		9 098.2		9 224.9
Other non-current assets		718.5		646.6
Total non-current assets		13 459.4		13 552.2
Inventories		795.9		808.5
Trade receivables and other current assets		3 240.0		3 567.9
Cash and cash equivalents including fair value of derivatives		796.4		744.1
Total current assets		4 832.3		5 120.5
Total assets		18 291.7		18 672.7