Air Liquide: Growth Capex Overshadows Strong Free Cash Flow Performance

Summary

• Air Liquide is one of the world's largest producers of medical and industrial gases.
• This ensures a smooth operation even during a very disruptive 2020.
• Air Liquide generates about 4B EUR per year in adjusted operating cash flow, and the company uses a substantial portion to invest in itself.
• A 2.75 EUR dividend has been declared for FY2020, while shareholders will receive a 10% bonus stock dividend in 2022.
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Introduction

Air Liquide (OTCPK:AIQUF) is a French industrial group focusing on the production of industrial and medical gases which represent about 96% of its revenue. The remainder of the revenue is generated through engineering and construction activities related to the construction of production facilities for the gases mentioned above. Trading at an EV/EBITDA of approximately 12, Air Liquide isn’t cheap, but I think the company is well worth its premium valuation.

Source: Yahoo Finance

While Air Liquide does have a secondary listing in the US, its primary listing is on Euronext Paris as Air Liquide, a French company. The ticker symbol in Paris is AI, and with an average daily volume of 870,000 shares per day (for a dollar volume of almost $150M) investors should clearly look at the Paris listing for their trading needs. As the main listing is in Paris and Air Liquide reports its financial results in EUR, I will use the EUR as base currency throughout the article. Where applicable, I'm referring to the primary listing in Europe.

Air Liquide’s long-term view allowed it to keep its investment levels very high

As you can see on the share price chart in the introduction, Air Liquide was just gaining momentum at the end of 2019 and in the first few months of 2020 but the increasing share price was abruptly knocked down by the outbreak of the COVID-19 pandemic. But thanks to its important position in the world market, Air Liquide’s share price rapidly recovered the lost ground as the market realized the impact on its financial results would be minimal.

Indeed, although the revenue decreased by about 7%, the operating expenses decreased by approximately the same amount which means the operating income remained virtually unchanged (down just a fraction of a percent). As the depreciation and amortization expenses remain almost

Analyst’s Disclosure:I am/we are long AIQUF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.