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Air Liquide - SRI bond

Air Liquide - SRI bond

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Air Liquide - SRI bond

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  1. Air Liquide - SRI bond Edouard Neyrand March 13, 2013

  2. Agenda • Overview of Air Liquide • Activities • Recent operational performance • Group credit profile • The Group’s commitment to Sustainable Development • Overview of Healthcare and Home Healthcare • The Healthcare World Business Line • The Home Healthcare division • Description of the SRI Bond • Post-mortem and conclusions SRI Bond

  3. Air Liquide, The world leader in gases for • Group 2012 sales : €15.3bn Gas & Services 90% Industry Other activities 5% Engineering & Construction 5% Health • 2012 ROCE: 11.9% (1) The Environment • 2012 Net profit: €1.6bn (1) pro-forma, including annualized profit impact of LVL Médical and Gasmedi acquisitions. SRI Bond

  4. With a balanced portfolio • Air Liquide 2012 Gas & Services Sales (1) Large Industries= Tonnage • Customer gas supply outsourcing • Huge quantities of gas • Pipeline network / industrial basin strategy Industrial Merchant= Bulk + cylinders • Small to medium gas quantities • 75 countries • Large variety of applications and customers Healthcare • Hospitals / Therapeutic gases • Home healthcare • Hygiene • Specialty ingredients Electronics • Carrier gases (N²) • ESG • Equipment & Installation (1) Gas and Services represent 90% of Air Liquide 2011 total revenue, after extension of Healthcare scope. SRI Bond

  5. Based on basin strategy and mutualization of assets Pipelines • Basin strategy • Product synergies Large Industries O2 N2 1 plant Industrial Merchant O2 N2 Ar Large Industries countries Healthcare Electronics • 8,500 km • O2, H2, CO pipelines O2 N2 SRI Bond

  6. Based on global presence to capture growth • Gas & Services Revenue 2012: €13.9bn Americas • Local production for local distribution • International developmentsince 1907 • Business managed in 80 countries • 23% of 2011 G&S revenue in developing economies Europe Asia-Pacific Middle-East and Africa Europe: €7.0bn Americas: €3.1bn Asia-Pacific: €3.4bn Large Industries Electronics Industrial Merchant Healthcare SRI Bond

  7. 5 main sustainable growth drivers “ $38 trillion of investment to meet projected energy demand.” Developing Economies Health Environment Energy High Technologies “ Non-OECD countries account for 90% of population growth...” “ Chronic diseases become the dominant concern...” “ Spending on consumer technology devices will surpass $1 trillion. ” SRI Bond

  8. Agenda • Overview of Air Liquide • Activities • Recent operational performance • Group credit profile • The Group’s commitment to Sustainable Development • Overview of Healthcare and Home Healthcare • The Healthcare World Business Line • The Home Healthcare division • Description of the SRI Bond • Post-mortem and conclusions SRI Bond

  9. Performance delivered • Gas & Services sales(1) • Efficiencies Annual objective 2012 > € 200 M • Capex • Operating Cash flow(4) Industrial Net financial(3) (1) 2011 figure revised for integration of Seppic in Gas and Services. (2) Published growth. (3) Financial investments, including transactions with minorities, net of divestitures. (4) from operations, before WCR. SRI Bond

  10. Key figures (1) 2011 figures revised for integration of Seppic in Gas and Services. SRI Bond

  11. 2013 Outlook 2013 • Accelerating momentum in new markets • Moderate growth in historical markets • Reinforced competitiveness and innovation 2013 objective Barring a degradation of the environment,Air Liquide is confident in its ability to deliver another year of net profit growth in 2013 SRI Bond

  12. Agenda • Overview of Air Liquide • Activities • Recent operational performance • Group credit profile • The Group’s commitment to Sustainable Development • Overview of Healthcare and Home Healthcare • The Healthcare World Business Line • The Home Healthcare division • Description of the SRI Bond • Post-mortem and conclusions SRI Bond

  13. Net debt stable excluding acquisitions • Net debt In €m WCR + others Net DebtDec 31, 2011 Cash flow NetInvestments(1) incl. Acquisitions Currency + Scope Net Debt, Dec 31, 2012 Dividends(2) (1) Including transactions with minority shareholders, net of divestitures (2) incl. share purchases €104m. SRI Bond

  14. Financing structure At 31 December 2012 • Sources • Maturity(1) • Fixed/variable rates In €m Bank debt Market debt: 72% Fixed rate > 2016 > 2017 Minorities options Bonds 2014 to 2017 Private placements Variable rate 2013 (1) The maturity date for commercial paper coincides with that of confirmed credit lines. SRI Bond

  15. Ratings – strong credit profile • Long-term rating: A positive outlook • Short-term rating: A-1 • Rating confirmation on May 8, 2012 • Positive outlook – rationale: “France-based industrial gas provider L'Air Liquide S.A.'s credit metrics improved in 2010-2011 to levels that we expect to remain sustainable over the next few years. We are revising our outlook to positive from stable |…]. The positive outlook reflects the possibility of a one notch upgrade in the next 12-18 months if L'Air Liquide can sustain adjusted FFO to debt of about 40% and maintain a track-record of supportive financial policies consistent with such a ratio. The positive outlook factors in the group's above-average operating performance in the profitable and predictable industrial gas industry. The ratings continue to reflect L'Air Liquide's "excellent" business risk and "intermediate" financial risk profiles.” • Long-term rating: Not rated • Short-term rating: P-1 • Rating confirmation on March 29, 2012 • “The stable outlook reflects: (i) Moody's acknowledgement of the company being well on track achieving the targets of its "ALMA"- program which strives for growth, increased capital productivity, and cost efficiency (ii) Moody's expectation that this will assist in defending a cash flow coverage to a level of 27-28% (Retained Cash Flow / Net debt) through the cycle, (iii) Moody's positive outlook for the industrial gas industry and (iv) the company's excellent liquidity.” • “Indicated [long-term] Rating from Grid: A.” SRI Bond

  16. Agenda • Overview of Air Liquide • Activities • Recent operational performance • Group credit profile • The Group’s commitment to Sustainable Development • Overview of Healthcare and Home Healthcare • The Healthcare World Business Line • The Home Healthcare division • Description of the SRI Bond • Post-mortem and conclusions SRI Bond

  17. From Sustainable development to Corporate Social Responsibility • Steps of progress Corporate Social Responsibility objectives Responsibility commitment, part of 2015 4 stakeholders+ 3 fields of action 8 objectivesfor 2005-2009period Initial Sustainable development approach 4 domains 2003 2005 December 2010 ALMA 2015 SRI Bond

  18. Corporate Social Responsibility towards… • Stakeholders • Fields of action Shareholders Improve the Environmental footprint Customers & Patients Enhance business practices and governance Employees Innovate relentlessly Communities SRI Bond

  19. Agenda • Overview of Air Liquide • Activities • Recent operational performance • Group credit profile • The Group’s commitment to Sustainable Development • Overview of Healthcare and Home Healthcare • The Healthcare World Business Line • The Home Healthcare division • Description of the SRI Bond • Post-mortem and conclusions SRI Bond

  20. WHO IS AIR LIQUIDE HEALTHCARE? Our expertise covers: Who We Are Home Healthcare Set-up and follow-up of respiratory, infusion and nutrition treatments and services for chronic patients at home Hospital Care Medical gases and related services for hospitals, clinics and ambulances, and hygiene products for hospital disinfection Healthcare Specialty Ingredients Design and supply of specialty products – excipients and active ingredients – for the personal care, pharmaceutical and vaccine markets

  21. INSPIRING STATS Air Liquide Healthcare’s 2012 revenues reached €2.5billion Who We Are Specialty ingredients Home Healthcare Hygiene Medical Gases A dedicated team of 10,000employees around the world influence the lives of 1,000,000patients at home and serve over 7,500hospitals & clinics 21 21

  22. HOME HEALTHCARE OVERVIEW Home Healthcare We take care of chronic patients at home whose treatment requires the use of medical equipment for: Ageing populations are associated with the rise of chronic diseases and multi-pathologies. As a leader in homerespiratory healthcare, Air Liquide was naturally called upon to take care of patients at home in other therapeutic areas, beyond the respiratory field. We aim to improve patients’ autonomy, adherence to treatment, clinical outcomesandquality of life. Ourmulti-disciplinary teams (pharmacists, nurses, nutritionists and technicians) aim to provide this in as cost-effective a way as possible. • Respiratory assistance • Infusion therapy and nutritional assistance 22

  23. 2015 MAIN OBJECTIVES : RECENT ACQUISITIONS A significant independent player in the Spanish homehealthcare market Gasmedi specializes in home respiratory assistance The company is the third player in the Spanish home healthcare sector after Linde and Praxair Gasmedi has more than 500 employees and takes care of 125,000 patients in 14 of Spain’s 17 regions In addition to its core business, home healthcare in Spain, Gasmedi has a presence in the Spanish medical gases market and some activity in the industrial gas market as well as in the Portuguese home healthcare market Shareholders: Mercapital (Spanish private equity firm) (69%), Fierro Family (25%), management (6%) 2011 sales: 82m€, with high margins Home Healthcare Gasmedi (Home Healthcare, Spain) LVL Medical (Home Healthcare, France) • A historical player in the home healthcare sector • LVL Medical is a France-based company engaged in the provision of home medical assistance founded 1989 by J-C Lavorel • Listed in the Euronext Paris stock exchange since 1996. Shareholders: Lavorel Family (53%), Malakoff Mederic (15%), Haby Family (3%), Treasury shares (9%) Free float (20%) • Activities provided in France (62% of total 2011 company sales, the German activities have been sold back to the Lavorel family) : • Strong player with positions in home respiratory services (60%) as well as infusion therapy, nutrition and diabetes (40%) • LVL Medical has a national unified presence with a solid reputation and quality of services. • About 750 employees • Over 50000 patients under treatment • 2011 sales: 104m€, EBITDA: 29m€ Total Investment: €316m Total Investment: €330m 23

  24. Home Healthcare CSR OBJECTIVES IN PRACTICE – HOME HEALTHCARE COMMITMENT… Fields of action – Air Liquide commitment to • To Customers and Patients • Protection of patients’ rights: several Home Healthcare subsidiaries signed the "Charte de la personne prise en charge par un prestataire de santé à domicile" which mentions patients’ rights and duties. • Partnerships with patients organizations: engage with all Healthcare stakeholders by performing regular satisfaction surveys and building long term partnerships with patients and healthcare professional organizations. • To its employees • Continuously and durably improving health (e.g., carrying heavy loads) and safety (esp. Road safety) of its employees in the Home Healthcare division is one of Air Liquide’s main priority. • The company aims at keeping on improving the safety of the Group’s employees with a goal of reducing each year until 2015 the frequency rate of lost time accidents. • Training on road safety has been conducted in France and is planned for 2013 for the other European countries. • To communities • Job creation: Because fragile people live everywhere, Home Healthcare is – by • nature – an activity that creates jobs in remote rural and underprivileged areas • Healthcare research: Air Liquide Foundation is supporting scientific research linked to the respiration function 24

  25. Agenda • Overview of Air Liquide • Activities • Recent operational performance • Group credit profile • The Group’s commitment to Sustainable Development • Overview of Healthcare and Home Healthcare • The Healthcare World Business Line • The Home Healthcare division • Description of the SRI Bond • Post-mortem and conclusions SRI Bond

  26. Characteristics and rationale of the Transaction • Air Liquide offered bond investors, and especially SRI investors, an opportunity to support its growth and its CSR ambition in the Home Healthcare division, by investing in SRI Bonds • Characteristics • Rationale • Bond proceeds will be used to refinance the external growth of the Home Healthcare division (LVL Medical and Gasmedi) • An ESG analysis of the Home Healthcare division has been performed by Vigéo (cf. next slides) (first SRI thematic bond1 benefiting from an independent ESG rating) • An annual reporting on the main financial and ESG elements of the Home Healthcare division, including the number of patients served, will be disclosed in the annual CSR report • Tighten the relationship with SRI bond investors • Improve its commitment to transparency on its CSR approach in the Home Healthcare division, through an innovative approach based on a Vigéo rating and an annual reporting • Create an opportunity for investors to invest thematically in the Healthcare Equipment & Services sector with a best in class player from an ESG standpoint • Develop the SRI bond market • Communicate on Air Liquide’s commitment to sustainable development (1)SRI thematic bonds include World Bank Green Bonds, EIB Climate Awareness Bonds, IFC Microfinance Bonds and various sustainability-related bonds issued by agencies and local authorities SRI Bond SRI Bond 26

  27. Vigéo rating analysis • Rationale for the rating: • For the investors, it represents an independent and transparent assessment of the ESG performance of the Home Healthcare division • For Air Liquide, it is a useful toolbox for future ESG performance improvements of this division, including the integration of LVL Medical and Gasmedi. • Comments • Air Liquide’s Home Healthcare division is analyzed as a “Health Care Equipment & Services” entity, while Air Liquide is in the “Chemicals” sector. ESG Domains are therefore weighted differently • Air Liquide’s Home Healthcare division is rated among the top 3 companies in Health Care Equipment & Services in Europe  Air Liquide SRI bond therefore provides investors with an opportunity to invest in the Home Healthcare sector with a best-in-class player from an ESG standpoint SRI Bond SRI Bond 27

  28. Details of the Analysis performed by Vigéo NB: Vigéo’s Corporate Governance criteria has been deactivated in the analysis as it is not relevant for the analysis of a company’s business division • The Home Healthcare division demonstrates its best performance when dealing with Human Resourcesmanagement. • Above sector average performances have been also reached in the Business Behaviour, Human Rights, and Community Involvementdomains. • Air Liquide Home Healthcare division performance is in line with its sector with respect to the protection of the Environment. SRI Bond SRI Bond

  29. Agenda • Overview of Air Liquide • Activities • Recent operational performance • Group credit profile • The Group’s commitment to Sustainable Development • Overview of Healthcare and Home Healthcare • The Healthcare World Business Line • The Home Healthcare division • Description of the SRI Bond • Post-mortem and conclusions SRI Bond

  30. Air Liquide SRI bond transaction June 2012 September 2012 October 2012 15 October 2012 March 2013 Discussions with CA-CIB of potential projects that could be financed with an SRI bond Discussions with Vigéo, due diligence of the Home Healthcare business ESG performance Completion of the acquisitions Organization of a roadshow with investors Pricing of the bond Reception of funds, assessment of the SRI investors participation Release of additional Home Healthcare ESG indicators in Air Liquide Annual Report Key steps Ensure the rating from Vigéo is in line with the ESG label Generate interest from the SRI investors Key stakes ESG project, for a significant amount needed to be found Continued commitment to ESG performance SRI Bond

  31. Further CSR improvement for Home Healthcare • LVL Médical and Gasmedi, as recently acquired companies, will apply the same monitoring regarding CSR commitment and objectives in 2013. Synergy objectives do not include layoffs • Constant innovation will contribute to future CSR performance: • The Home Healthcare division also initiated recently the reporting of various environmental and social indicators to improve its environmental footprint during the year 2012 such as: • - Fuel consumption objectives : Given the large importance of individual car transportation in this activity, the Home Healthcare division has set an objective of decreasing its fuel consumption by 8% in 2012 • - A stricter follow up of CO2 emissions or energy consumption will certainly improve the environmental footprint of the Home Healthcare division • At last, the number of patients served in the Home Healthcare division will be reported annually in Air Liquide’s reference document. Investors will then be able to follow up the development of this business over the long term SRI Bond SRI Bond 31

  32. Financing tailored to Home Healthcare acquisitions • SRI Labelled • Euro bond : • 9 years • € 500m • 2.125% coupon rating Reaching out to new investors SRI Investors SRI Bond

  33. Good reception from (responsible) Investors GLOBAL ANALYSIS 6.5x oversubscribed 218 investors in the book >60% of the book made of SRI investors (PRI signatories) FOCUS ON FRANCE 27 investors – 29% of the final book ~90% bought by broad SRI investors (PRI signatories) ~23% bought by SRI funds (~ equivalent to Novethic classification) >15% increased orders by SRI funds Estimates by CA-CIB SRI Bond

  34. Some examples of reactions from SRI investors (showing how diverse this universe is) Example #1 Investor behavior on this SRI deal Deal overcame a below-threshold ESG rating of Air Liquide by investor(Best in class fund) Example#2 SRI deal appreciated and bought despite reservations on the price (Best in class fund) New investorscapacity for Air Liquide Bought more than normally Example#3 Deal purchased with the view to transform a large bond portfolio into SRI (Non-SRI asset owner) Example#4 This deal improved Air Liquide ESG rating (i.e., positive impact for all Air Liquide Bonds) (SRI asset owner) Example#5 Bought normally Deal had no impact on Air Liquide’s ESG rating Deal purchased normally (ESG-integration asset owner) No change for Air Liquide Example#6 Deal was appreciated, but not sufficiently to modify financial analysis (Best in class fund) Did not buy Estimations by CA-CIB SRI Bond

  35. Appendices SRI Bond

  36. Margin preserved… 2011 2012 Change 12 vs 11 In €m Revenue Purchases Personnel expenses Other net income and expenses 14,457 (5,762) (2,481) (2,650) 15,326 (6,099) (2,667) (2,768) +6.0% +5.8% +5.9% Operating profit before depreciation 3,564 3,792 +6.4% Depreciation and amortization Operating Income Recurring (OIR) (1,155) 2,409 (1,232) 2,560 +6.7% +6.3% OIR marginOIR marginexcl. natural gas effect 16.7% 16.7% = 16.7% SRI Bond

  37. …supported by close to 30% efficiency retention • G&S OIR margin (1) OIR = Operating Income Recurring, revised for integration of Seppic in G&S (2) Excluding natural gas. As published: 18.8%. SRI Bond

  38. Net Profit up +4.9% In €m 2011 2012 Change 12 vs 11 Revenue Operating Income Recurring Other non-recurring operating income & expenses 14,457 2,409 28 15,326 2,560 (27) +6.0% +6.3% Operating Income 2,437 2,533 +4.0% Net financial costs and other net financial expenses (298) (312) Income taxes (576) (566) Tax rate 27.0% 25.5% Share of profit of associates 32 20 Minority interests (60) (66) Net profit (Group share) 1,535 1,609 +4.9% Earnings per share (in €) 4.93 (1) 5.17 +4.9% (1) adjusted for the free share attribution in May 2012. SRI Bond

  39. Confidence in the medium term 12-month portfolio of opportunities Investmentdecisions(1) Net capex(1) Start-ups(2) In €bn In €bn In €bn FY 2012 (1) Industrial and financial investments, including transaction with minority shareholders, net of divestitures (2) Industrial projects > €10m SRI Bond

  40. Consolidated Balance Sheet In €m * including fair value of derivatives SRI Bond

  41. Cash Flow statement * property, plant and equipments SRI Bond

  42. Major trends are shaping our markets Industrial production Natural resources Demography Urbanization Appetite for Innovation SRI Bond

  43. Updating ALMA to meet new Challenges “To be the leaderof our industry through performance and responsibility over the long term.” Ambition “Strengthening our competitivenessand innovationfor profitable growth over the long term” Strategicobjective SRI Bond

  44. Competitiveness Price Non-price  • Market focus • Streamlining • Efficiencies    Update 2011-2015 efficiency objective boosted from € 1bn to € 1.3bn SRI Bond

  45. Boosted efficiency objective • Efficiencies OPAL ALMA GOAL ALMA 2015 € 1.3 bn +30% vs initial objective € 390 m € 845 m Cumulatedefficiencies Annual objectives SRI Bond

  46. Innovation • Electronics volumes driven by innovation • New H2 mobility market “ Key world manufacturers joining forces on fuel cell vehicles”- Jan 24 & 28, 2013 “1.6m H2 powered vehicles on UK roads in 2030 ” - UK H2 mobility estimates Feb. 3, 2013 • New inventions patented during the year Public H2 filling station in Germany SRI Bond

  47. Regular and sustained performance • Revenue (in €m) • EPS(1) (in €) • Cashflow (in €m) • Dividend (1) (2) (in € per share) (1) Adjusted for the 2-for-1 share spilt in 2007 and free share attributions. (2) To be approved by the AGM on May 7 2013. (3) Calculated according to prevailing accounting rules over 30 years. SRI Bond